House of Commons

Wednesday 9th February 2011 Commons Chamber

Wednesday 9 February 2011

The House met at half-past Eleven o’clock

Prayers

Wednesday 9th February 2011 Commons Chamber

[Mr Speaker in the Chair]

business before questions

Wednesday 9th February 2011 Commons Chamber

New Writ

Ordered,

That the Speaker do issue his Warrant to the Clerk of the Crown, to make out a new Writ for the electing of a Member to serve in this present Parliament for the Borough Constituency of Barnsley Central in the room of Eric Evelyn Illsley, who since his election for the said Borough Constituency has been appointed to the Office of Steward or Bailiff of Her Majesty’s Three Chiltern Hundreds of Stoke, Desborough and Burnham in the County of Buckingham.—(Ms Rosie Winterton.)

Oral Answers to Questions

Wednesday 9th February 2011 Commons Chamber

The Secretary of State was asked—

[Bridget Phillipson (Houghton and Sunderland South) (Lab)]

1. What assessment he has made of the effect on economic growth in Northern Ireland of the increase in the basic rate of value added tax.

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

Before answering, may I pay tribute to Ranger David Dalzell of the 1st Battalion the Royal Irish Regiment? He came from Bangor, but he was also stationed with his regiment in my constituency at Tern Hill. I am sure the whole House will join me in offering our condolences to his family and friends, and thanking this brave young man for his service to his country after he was killed in Helmand this week.

The reckless years of debt and spending made the VAT rise a necessary step for national economic recovery. Forecasts from the Office for Budget Responsibility show that the Government’s plans will deliver sustainable growth for each of the next five years, with employment rising by 1.1 million by 2015, and the deficit falling.

[Bridget Phillipson]

When will the Secretary of State set out his paper on rebalancing the Northern Ireland economy? That is particularly crucial at a time when the VAT rise is damaging local retailers.

[Mr Paterson]

The hon. Lady is correct. We need to bring the paper forward as a team effort, working with local Ministers. I will come to that in response to later questions. We had a very satisfactory meeting with the Exchequer Secretary earlier this week, and we hope to publish the paper as soon as possible.

[Mr Laurence Robertson (Tewkesbury) (Con)]

Further to that answer, how long will the consultation period on the document be when it is released?

[Mr Paterson]

I am grateful to the Chairman of the Select Committee on Northern Ireland Affairs for his question. That has to be finally decided, but I would estimate that we should have a public consultation period of two to three months.

[Jim Shannon (Strangford) (DUP)]

I associate myself with the comments of the Secretary of State on Ranger Dalzell. Across the House we are all well aware of the bravery and courage that all those young men show. We sympathise with his family at this time.

On VAT, shoppers from the Republic of Ireland coming across to Northern Ireland contribute greatly to the economy of Northern Ireland. The VAT increase has impacted directly on Northern Ireland, leading to a 10% reduction in sales and a 28% reduction in exports. What will the Secretary of State do to address that?

[Mr Paterson]

I am grateful to the hon. Gentleman for his comments on Ranger Dalzell.

Cross-border taxation is an issue that we will consider as part of the paper. We are acutely aware of the ability of consumers to move their spending rapidly either way, depending on taxation.

[Mr Peter Bone (Wellingborough) (Con)]

Can the Secretary of State put into context the changes in taxation? Basic rate taxpayers in Northern Ireland have had their personal allowance increase, which has taken many of them out of the tax net.

[Mr Paterson]

We regard Northern Ireland as an integral part of the United Kingdom. Northern Ireland taxpayers pay their tax and receive public spending in return.

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

I join the Secretary of State in his tribute to Ranger Dalzell and his family.

The Secretary of State has made it clear that he wants to be Northern Ireland’s man in the Cabinet. As he knows, following the rise in VAT instituted by his Government, a litre of fuel in Northern Ireland is the most expensive in any part of the UK. Can he tell the House why it is more expensive in Belfast than in North Shropshire, and what a litre of fuel costs in Belfast this morning?

[Mr Paterson]

Prices vary from 120p to 133p for petrol or diesel, but the right hon. Gentleman should remember that it was his Government who increased the rate of duty on fuel. He was in the bunker with the great incompetent for Kirkcaldy and Cowdenbeath (Mr Brown), who got the country into this mess in the first place.

[Mr Woodward]

I am glad that the Secretary of State managed to find an answer in his folder. The First Minister and Deputy First Minister are asking him urgently for help in Northern Ireland now. He has been in the job for nearly a year, but so far there has been no real help on the economy, just a promised paper on the economy that is still stuck in the printing press. Meanwhile, VAT is up, fuel prices are up and private sector business activity is reporting the biggest fall in 26 months. Hundreds are losing their jobs at Belfast Metropolitan college, 4,000 more are due to lose their jobs in health and social services and tens of thousands more jobs will go in the public sector. In Dublin, demand evaporates. Now we learn that he is losing his battle with the Chancellor for a future grab on end-of-year funding from the Executive. We can all see that it is hurting. When are people in Northern Ireland going to see it is working?

[Mr Paterson]

I do not know how the right hon. Gentleman has the nerve. When he was sitting in the bunker in Downing street shoring up his former boss, who overruled the right hon. Member for Edinburgh South West (Mr Darling) when he wanted to raise VAT, the Belfast News Letter found out that I was in Northern Ireland more than he was. We were in the danger zone in May, but thanks to the measures that we have taken, everyone in the UK, including in Northern Ireland and Lancashire, are in a better place as we establish stability in the public finances. We cannot go on spending £120 million a day on debt interest.

[Grahame M. Morris (Easington) (Lab)]

2. What his policy is on the use of stop-and-search powers by security forces in Northern Ireland.

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

My right hon. Friend the Secretary of State updated the House this morning on plans to make amendments to powers of stop and search in Northern Ireland. These powers are essential in Northern Ireland for tackling the threat from terrorism. They have prevented attacks, saved lives and led to arrests and convictions. The Police Service of Northern Ireland uses all available legislation to deal with the terrorist threat. Oversight and accountability mechanisms are in place to ensure that powers are used properly.

[Grahame M. Morris]

I thank the Minister for that response and for the statement that has been placed in the Library. The use of section 44 powers has undoubtedly saved lives in Northern Ireland, along with powers under the Justice and Security (Northern Ireland) Act 2007. What assurances can he give the House that the PSNI will in no way be hampered in its efforts to disrupt and prevent terrorist activities?

[Mr Swire]

That is an entirely legitimate question. The changes that we are making are to bring legislation in Northern Ireland into line with changes to section 44. The hon. Gentleman should be reassured, because, as he would imagine, we have been discussing these matters closely with the PSNI. It has a range of other powers at its disposal, but I agree that it would be a retrograde step to limit its powers at what is a difficult time in Northern Ireland. The proposed amendment will not do that.

[Lady Hermon (North Down) (Ind)]

Will the Minister kindly confirm the precise details of the Army’s powers of stop and search if deployed in Northern Ireland?

With your leave, Mr Speaker, I would like to take this opportunity to thank colleagues on both sides of the House for their generous tributes to my young constituent—only 20 years of age—David Dalzell, who fought alongside his fellow Rangers in 1st Battalion the Royal Irish Regiment with great courage, enthusiasm and pride, but sadly lost his life in a tragic accident in Afghanistan at the weekend. I thank all Members for their comments today.

[Mr Swire]

I associate myself with the hon. Lady’s comments. I can confirm that there are no plans to change the powers of stop and search for the military in Northern Ireland.

[Mark Durkan (Foyle) (SDLP)]

How can the Minister justify not changing the Army’s powers of stop and search in Northern Ireland, which exceed those granted to the police under the 2007 Act? They are not subject to annual renewal by Parliament as emergency provisions, as they were throughout the years of the troubles, and are now permanent and not subject to any of the accountability checks that apply to police powers?

[Mr Swire]

The hon. Gentleman will be aware of the rising terrorist threat in Northern Ireland, and he will recognise the part played by the military’s bomb disposal units and the need to go about their business, not least in his own city of Londonderry, where unfortunately we had an incident recently.

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

When the police in Northern Ireland have used stop-and-search powers, they have used them when there is a reasonable suspicion of terrorist activity. Will the Minister reassure the House that that will continue to be the case? Dissident republican activity is on the rise, and those powers are required principally and forcibly by the police to thwart that terrorist threat.

[Mr Swire]

Look, we want to make those powers watertight; we do not wish to water them down. It is because the PSNI has used those powers proportionately that we are where we are with section 44, and the Home Secretary was clear in saying that. She went to Northern Ireland and specifically said that the PSNI had been behaving properly, but we do not want anything we do in Northern Ireland to be subject to a possible challenge. That is why we are taking that action, and why a code of practice will be worked out in conjunction with the PSNI—as I say, to make the powers that we have watertight, not to water them down.

[Mr Wayne David (Caerphilly) (Lab)]

3. What arrangements he has made to ensure that the Police Service of Northern Ireland has the resources to meet threats from dissident activity.

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

Funding for the PSNI is primarily a matter for the Northern Ireland Executive. However, this Government are committed to ensuring that the Chief Constable has the necessary resources to counter the threat posed by terrorist groups. The Northern Ireland Justice Minister has made a strong case to the Treasury for access to additional resources, but discussions are continuing at the highest level, and I am confident that we will have a satisfactory outcome soon.

[Mr David]

The Chief Constable of the PSNI has requested an extra £200 million to deal with the perceived dissident threat in Northern Ireland. Yesterday the Chancellor of the Exchequer said that he was “interrogating the request”. Surely we should have had a proper response by now.

[Mr Paterson]

The hon. Gentleman is quite right: the Chief Constable and the Justice Minister have made that request, and we are taking it extremely seriously. The bid is, of course, for money over four years, which is probably unprecedented for the reserve, and it is not an easy matter, given the national economic circumstances that we face. I remind the hon. Gentleman, however, of the Chancellor’s words yesterday. He said:

“We will treat the request with due diligence, but I am clear that security comes first. That will be my priority.” —[Official Report, 8 February 2011; Vol. 523, c. 148.]

[Patrick Mercer (Newark) (Con)]

The Secretary of State will no doubt be as delighted as I am by the proposed visit of the Queen down to Dublin, but he will have seen the news on republican websites that there is likely to be dissident activity. What assistance will be given to the PSNI during that difficult period?

[Mr Paterson]

My hon. Friend will know that no visit has formally been confirmed, although everyone in the House would welcome one. I should like to confirm that we have the closest possible collaboration with the Garda Siochana out in Dublin. A couple of weeks ago I met the new commissioner, Martin Callinan, and I am delighted to say that he is absolutely as robust and as determined to face down those terrorists as his predecessor, Fachtna Murphy.

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

Given the continuing perceived threat from dissident activity, the disruption to normal human and economic activity two weeks ago in Belfast, and the calculating callousness of leaving a booby-trap device on a child’s bicycle, will the Secretary of State now take action to ensure that intelligence is transferred from MI5 to the Police Service of Northern Ireland, which has all the accountability mechanisms in place?

[Mr Paterson]

I agree with the hon. Lady about the disgusting nature of those terrorists: booby-trapping a child’s bicycle is absolutely revolting. I know that her strong belief is that the regime should be changed, but at this moment it would be crazy to move the furniture around. Let me make it very clear that Lord Carlile, who conducted an independent review of the matter, said that MI5 and the Police Service of Northern Ireland are working very closely together, and that we could not do more work, or do it more energetically, to deal with what is a very difficult threat. I am afraid that we just have to disagree on this matter, but I do agree that we have to do everything that we can to bear down—

[Mr Speaker]

Order. I am immensely grateful to the Secretary of State, but we must move on.

[Mel Stride (Central Devon) (Con)]

Although PSNI funding is rightly the responsibility of the devolved Administration, will my right hon. Friend reassure the House that, in the event that dissident activity becomes much stronger, resources may be made available from the UK Government?

[Mr Paterson]

I thank my hon. Friend for that question. We made it clear that a bid has been made by the Justice Minister, whom I met on Monday and talked to this morning on the phone. We are raising this at the highest level of government and we are determined to stand by Northern Ireland and do the right thing.

[Stephen Pound (Ealing North) (Lab)]

It would be churlish of me to let this occasion pass without congratulating the right hon. Gentleman, the Minister of State, on his elevation to the Privy Council, and I do so with pleasure.

It would be negligent of me—

[Mr Speaker]

Order. Let me say to the hon. Gentleman that there is real pressure on time, so let us get on with the question.

[Stephen Pound]

It would be negligent of me, Mr Speaker, not to remind the Secretary of State that the request for additional funding has been with the Treasury since last year—for months. The signal that we send to dissident terrorists is the most important thing here. Will the Secretary of State fight for Ulster, fight against the dissidents and fight with the Treasury to get this money, which the PSNI needs now?

[Mr Paterson]

I thank the hon. Gentleman for his congratulations to my right hon. Friend. He is not quite right about the request—[Interruption.] No, he is not right to say “months”. The Minister of Justice has negotiated within the Executive and got a significant increase from his fellow Ministers, which we welcome. Having resolved where he stood with the Executive, he then wrote to me with a request calling on the reserve. That letter came to me in January.

[Graham Evans (Weaver Vale) (Con)]

4. What recent assessment he has made of the level of threat to security in Northern Ireland posed by residual terrorist groups; and if he will make a statement.

[John Woodcock (Barrow and Furness) (Lab/Co-op)]

6. What recent assessment he has made of the threat to security in Northern Ireland from dissident groups.

[Glyn Davies (Montgomeryshire) (Con)]

9. What recent assessment he has made of the level of threat to security in Northern Ireland posed by residual terrorist groups; and if he will make a statement.

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

The threat level in Northern Ireland remains at severe. So far this year there have been 15 arrests and three persons charged with terrorist-related offences. This follows 210 arrests and 80 persons charged in 2010. The severity of the threat was highlighted by the recent Antrim road incident, for which there have been three arrests in the past 48 hours. This attack not only endangered lives but also caused major disruption to local communities and businesses.

[Graham Evans]

I thank my right hon. Friend for that answer. Does he agree that cross-border co-operation between the north and the south is essential to address the level of threat posed by terrorist groups?

[Mr Swire]

In a word, yes. My hon. Friend will have heard my right hon. Friend the Secretary of State say that he has now met the new chief of the Garda Siochana, Martin Callinan. We continue to work very closely with the Garda, which has had some very lucky finds and some finds as a result of its hard work and co-operation with the PSNI. We applaud the work—

[Mr Speaker]

Order. We are very grateful.

[John Woodcock]

The Minister has made it clear that he is in negotiation with the Treasury over the extra funds needed to tackle dissident groups. Can he say at this stage whether he agrees with the assessment of the Chief Constable that this money is required?

[Mr Swire]

Clearly we do, because we have endorsed it. These things do not come out of the blue. We are working very closely with the PSNI. We continue to work with the Department of Justice and David Ford, and we continue to work with the Treasury. The hon. Gentleman needs to think about the sums of money that are involved in all these things. He would surely agree that it is only fit, right and proper that the Treasury looks at all applications for funding very closely so that we do not find ourselves in the same hole that we were in when we came into power in May last year.

[Glyn Davies]

The recent third annual report of the independent reviewer of the Justice and Security (Northern Ireland) Act 2007 states:

“So far as terrorism is concerned, the activities of the residual terrorist groups have been dangerous and disruptive.”

What steps is my right hon. Friend taking to help Northern Ireland to combat this threat?

[Mr Swire]

The threat in Northern Ireland is extremely serious. The majority of people in Northern Ireland are against the residual terrorist groups, which have no support in the community and are disrupting businesses. In the case of the Antrim road incident, they put about 100 people out of their houses on one of the coldest nights of the year. We continue to work extremely closely with the PSNI. The PSNI works with the Garda in the Republic of Ireland to bear down on these terrorists. We are certain that we can do that and drive them out. They have no place in modern Northern Ireland—

[Mr Speaker]

Order. I thank the Minister for his answer.

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

Intelligence agencies tell us that a republican group in County Tyrone is planning to announce its appearance with a bombing wave in Northern Ireland. One hundred members of the Provisional IRA have seemingly pledged their allegiance to this new group. Can the Minister assure the House that any republican prisoner released under the Belfast agreement who becomes a member of this group will immediately be returned to prison?

[Mr Swire]

I can reassure the hon. Gentleman that the Secretary of State and I keep under constant review the possibility of recalling those who have been released earlier. It is under constant review.

[Naomi Long (Belfast East) (Alliance)]

I thank the Minister and the Secretary of State for the work they have been doing with the Treasury to address the problems that are faced with dissident terrorist activity. Is the Minister concerned that the current to-ing and fro-ing is giving succour to those dissident terrorists when what the Treasury needs to do is to stand by commitments made?

[Mr Swire]

No, I do not believe that. I do believe, as I said to the hon. Member for Caerphilly (Mr David), that the PSNI has made a good case to the Treasury. We have worked on that with the PSNI and the Department of Justice. It is now up to the various bodies involved to negotiate an outcome. I can only repeat what the Chancellor said yesterday in answer to the hon. Member for Ealing North (Stephen Pound):

“I am clear that security comes first.”—[Official Report, 8 February 2011; Vol. 523, c. 148.]

I have no reason to suppose that the Chancellor has changed his mind in the intervening 24 hours.

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

Will the Minister comment on the assessments that have been made of the intentions of dissident republicans here on the mainland with regard to the preparations for the Olympics? What might that activity mean in terms of future terrorist attacks here?

[Mr Swire]

The right hon. Gentleman asks that question 15 years to the day since the Canary Wharf bombing, which heralded the end of the IRA ceasefire. It is therefore a timely question on a date that we all remember. Of course, there is a threat here from Northern Ireland-related terrorism. That is why, for the first time ever, the Home Secretary raised the threat level. I assure hon. Members that all services are working closely together to ensure that any attempt to disrupt the Olympics or any other occasion of national importance in the coming months or years—

[Mr Speaker]

Order. We are grateful to the Minister.

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

5. What recent discussions he has had with Ministers in the Northern Ireland Executive on economic development in Northern Ireland.

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

The Minister of State and I met last week with the Exchequer Secretary and Northern Ireland’s First Minister, Deputy First Minister, Minister of Finance and Personnel, and Minister of Enterprise, Trade and Finance to discuss the Government paper on rebalancing the Northern Ireland economy and promoting investment and growth.

[Greg Hands]

Given the coming corporation tax cut, the national insurance contributions holiday for small businesses and the avoidance of Labour’s national insurance tax increase next month, does the Secretary of State agree that this Government are restoring Northern Ireland’s reputation as a destination for inward investment, which was badly damaged by the previous Government?

[Mr Paterson]

I endorse my hon. Friend’s comments. We had an excellent meeting at Hillsborough only last week with a number of major businesses, at which we saw significant investment coming in from Denmark. I am pleased to say that our plans were endorsed by a coalition of significant business organisations last week.

[David Simpson (Upper Bann) (DUP)]

Will the Secretary of State outline his assessment of the potential impact on the Northern Ireland economy of the reduction in corporation tax, and of its cost?

[Mr Paterson]

The coalition of businesses that I mentioned gave an estimate last week of 94,000 jobs, and the Northern Ireland Economic Reform Group published a report yesterday with an estimate of 90,000 jobs. On the costs, the hon. Gentleman should consider the case of Canada, where corporation tax has been reduced over recent years and revenue has increased. He will have to be patient and wait for the publication of our paper, which I hope will happen soon.

[Dr Alasdair McDonnell (Belfast South) (SDLP)]

Does the Secretary of State agree that Northern Ireland urgently needs meaningful action on creating economic opportunity? Has there been any discussion about how we might create the authority for the Northern Ireland Executive to create bonds, thereby creating private funding to boost our construction industry and build the necessary schools and infrastructure that are missing?

[Mr Speaker]

Order. There is far too much noise in the Chamber. [Hon. Members: “Hear! Hear!”] Agreement is one thing; abiding by it is another. Ministers cannot even hear what is being asked. A bit of order please.

[Mr Paterson]

I am grateful to the hon. Gentleman for his question. We will have a consultation period once the paper is published. He made an interesting suggestion, which the Chancellor will have heard. I hope that he will put it through formally in the consultation process.

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

7. When the Government expect to publish their proposals for rebalancing the Northern Ireland economy.

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

The Exchequer Secretary, the Minister of State and I continue to work intensively with Northern Ireland Ministers on the Government’s consultation paper to set out measures aimed at rebalancing and growing the Northern Ireland economy. We hope to complete our work and publish the paper soon.

[Chris Evans]

Does the Secretary of State accept that the Northern Ireland economy needs to stimulate the private sector? How do the Government propose to do that?

[Mr Paterson]

The hon. Gentleman is right. According to one report, Northern Ireland’s economy depends on public spending for 77.6% of its gross domestic product. That is wholly and totally unsustainable. I have been visiting Northern Ireland for three and a half years now and visiting businesses, and we are considering a whole range of measures for rebalancing the economy and helping to promote the private sector, which will be published in our report. There are excellent private businesses in Northern Ireland, just not enough.

[Ian Paisley (North Antrim) (DUP)]

The Secretary of State will be aware that to travel from Aldergrove airport in Northern Ireland on a transatlantic flight, a passenger has to spend an additional £150 in tax. If he travelled from the south of Ireland, 90 miles away, as of 1 March he would pay €3 in tax. What is the Secretary of State going to do about that to encourage people to travel on transatlantic flights from Northern Ireland?

[Mr Paterson]

The hon. Gentleman raises an important issue. I discussed it with Declan Kelly, the US envoy, 10 days ago, and it was also discussed at our meeting with local Ministers and the Exchequer Secretary earlier this week. My right hon. Friend the Minister of State is working on it with colleagues in the Treasury.

The Prime Minister was asked—

[Roger Williams (Brecon and Radnorshire) (LD)]

Q1. If he will list his official engagements for Wednesday 9 February.

[The Prime Minister (Mr David Cameron)]

I am sure the whole House will wish to join me in paying tribute to Ranger David Dalzell, from 1st Battalion the Royal Irish Regiment, who died on Friday, and Warrant Officer Class 2 Colin Beckett, from 3rd Battalion the Parachute Regiment, who died on Saturday. They were both highly respected soldiers who served with the utmost dedication and pride. They will be hugely missed by their colleagues and by all who knew them, and our deepest sympathy should be with their family and their friends.

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

[Roger Williams]

I know that the whole House will want to join the Prime Minister in his expression of sympathy for the recent loss of life in Afghanistan. Training establishments in my constituency, such as the Sennybridge ranges and the infantry battle school, have built up very good relationships between the community and the military, which are ongoing and strengthening.

UK universities have a worldwide reputation for teaching and research. Many foreign students wish to attend those universities, and they are important not least because of the £5 billion that they contribute to the national economy. Many universities are very concerned that Government proposals—

[Mr Speaker]

Order. A short, sharp question, please.

[Roger Williams]

Can the Prime Minister give an assurance to the universities that any proposals will not discourage the recruitment of genuine students?

[The Prime Minister]

The hon. Gentleman makes an extremely good point. Our universities in this country are world-class, and we want students from around the world to come to those universities to study, not just for the contribution that they bring financially but because of the links they will make between our country and their country in years to come.

I can tell the hon. Gentleman that we are not currently looking at limits on tier 4 immigration visas, but I make this point to anybody who is concerned about the issue: I profoundly believe that we can have excellent universities, open to foreign students, and control immigration at the same time. The reason I am so confident is that last year there were about 91,000 students who did not go to the trusted universities but went to other colleges—some 600 colleges. I am sure that the extent of the abuse is very great, and if we crack down on that abuse we can make sure that there are many students coming to our excellent universities.

[Edward Miliband (Doncaster North) (Lab)]

I join the Prime Minister in paying tribute to Ranger David Dalzell, from 1st Battalion the Royal Irish Regiment, and Warrant Officer Class 2 Colin Beckett, from 3rd Battalion the Parachute Regiment. We should all remember both men for their heroism, their dedication and their sacrifice, and our deep condolences go to their family and friends.

Can the Prime Minister tell us, how is his big society going?

[The Prime Minister]

I actually believe that almost every single Member of this House of Commons backs what we are talking about. Let me just explain what it is. The idea of devolving power to local authorities, and beyond to communities, was in his manifesto, in my manifesto and indeed in the Liberal Democrat manifesto. I think we all support it. The idea of opening up public services to more local involvement and control, again, was in all our manifestos, and we support it. I believe that probably every single Member of the House spends time in their own constituency encouraging volunteering and philanthropic giving, and wants people to play a bigger part in a bigger society. I think the whole House is united on that.

[Edward Miliband]

We all support thriving communities, which is why there is such concern from charities up and down the country. Why does the Prime Minister not listen to people who know a lot about volunteering, such as Dame Elisabeth Hoodless, the chief executive of Community Service Volunteers, which is the largest volunteering charity in Britain, who says that his policies are “destroying the volunteer army”?

[The Prime Minister]

Obviously, I do not agree with what Dame Elisabeth Hoodless has said, but I want to work with all those involved in charities and voluntary bodies to encourage them to play a strong part. We are putting £470 million into charities and voluntary bodies across this spending review. We are also establishing a £100 million transition fund to help charities that are affected by cuts. I can today tell the right hon. Gentleman for the first time that because of our deal with the banks the big society bank—[Interruption.] Wait for it. The big society bank will be taking £200 million from Britain’s banks to put into the voluntary sector. Labour would have got nothing out of the banks, so I am sure that he will want to stand up and welcome that.

[Edward Miliband]

The Prime Minister does not mention that he is cutting billions of pounds from voluntary sector organisations up and down this country. Let us take an example of where parents volunteer and of a crucial part of local communities: Sure Start. Before the election, he promised to protect Sure Start, but in fact he decided to cut funding by 9%, and the Daycare Trust says that 250 Sure Starts are expected to close. Can he tell us how that is helping the big society?

[The Prime Minister]

First, let me just say this: Labour put money into the banks; we are taking money out of the banks and putting it into the big society.

The right hon. Gentleman asks specifically about Sure Start and the Daycare Trust. I must say that, not for the first time, he has not done his homework, because the chief executive of the Daycare Trust, Anand Shukla, said:

“The Government has allocated sufficient funding for the existing network of Sure Start Children’s Centres to be maintained”—[Interruption.]

[Mr Speaker]

Order. These exchanges are excessively rowdy—[Interruption.] Order. Again, I must ask Members on both sides to consider what the public think of this sort of behaviour. The Prime Minister—[Interruption.] Order. Questions will be heard, and the answers from the Prime Minister will be heard.

[The Prime Minister]

I look forward to the answer to this one. We have maintained the money for Sure Start and the money for children’s centres, and the head of the Daycare Trust backs our view rather than the right hon. Gentleman’s.

[Edward Miliband]

No, the Prime Minister has cut the funding and we will judge him on whether Sure Start centres close over the coming months.

The problem with the Prime Minister’s argument on local government, and with the nonsense peddled by the local government Secretary, is that they say they can make 28% cuts in local government funding and not affect any front-line services. What does the Conservative head of the Local Government Association say about that? She says that the local government Secretary is “detached from reality”.

Let us ask about libraries. Four libraries are threatened with closure in the Prime Minister’s own constituency, and hundreds are threatened up and down the country. Can he explain to people who are concerned about that how he expects people to volunteer at the local library if it is being shut down?

[The Prime Minister]

Let me just deal with the right hon. Gentleman’s question on Sure Start. I know he got that wrong—[Interruption.] We will come to libraries in a minute. On Sure Start, the budget is going from £2.212 million to £2.297 million. That budget is going up. That is what is happening.

The right hon. Gentleman gave a particular example, so let me put one to him—[Interruption.] We will come to libraries. Let me take the case of one council: Liverpool council. The cuts will mean that, by 2013, Liverpool council will go back to the level of grant it received in 2009, so what we are seeing is politically motivated moves by Labour councils. I remember the times when Labour leaders stood up to Labour councils that made those decisions.

On the issue of libraries, because we are taking council spending back generally to the level of the grants in 2007, I see no reason why they should not continue with a very well funded network of libraries. We all know a truth about libraries, which is that those which will succeed are those that wake up to the world of new technology, the internet and everything else, and investment goes in. That is what needs to happen. Should councils look at community solutions for other libraries? I believe that they should. Instead of sniping and jumping on every bandwagon, the right hon. Gentleman should get behind the big society.

[Edward Miliband]

Only this Prime Minister could blame the libraries for closing. He needs to understand why his big society idea is in such trouble. It is because libraries, Sure Start centres, citizens advice bureaux, community centres—including in Hammersmith and Fulham, his flagship council—which are at the heart of our society, are threatened with closure up and down the country. If it is going so well, why does his big society adviser, Paul Twivy, say that this idea

“is increasingly loathed by the public”?

[The Prime Minister]

We were all waiting for the right hon. Gentleman’s big idea, and we have now got it. Labour has published its fresh new ideas. The tree was chopped down, but there is nothing in the book. We all knew that we wanted a blank page, but no one thought that he would publish a whole book of them. What are his plans? What are his great ideas? He has not got a single idea for making this country a better place. Instead of sniping, why does he not join in and work out how we could build a bigger society in our country?

[Edward Miliband]

The Prime Minister should not get so angry: it will cloud his judgment. He is not the first Prime Minister I have said that to—[Hon. Members: “Oh.”] Did not the right hon. Member for Haltemprice and Howden (Mr Davis) get to the truth behind the Prime Minister’s motives? The right hon. Gentleman said:

“If you talk about the small state, people think you’re Attila the Hun. If you talk about the big society, people think you’re Mother Teresa.”

After what the Prime Minister is doing to charities up and down this country, no one will think he is Mother Teresa. Is not the truth being exposed day by day—he is cutting too far and too fast, and society is becoming smaller and weaker, not bigger and stronger?

[The Prime Minister]

The problem with everything that the right hon. Gentleman has said is that all the cuts that we are having to make are because of the complete mess that he made of the economy. That is the background for this whole debate. We now know what they think of the inheritance that they left us, because the shadow Chancellor has said:

“I don’t think we had a structural deficit at all in that period”.

The Institute for Fiscal Studies says:

“By the eve of the financial crisis…the UK”

had

“one of the largest structural budget deficits in the developed world.”

May I advise the right hon. Gentleman that the first stage of recovery is to recognise that you have a problem? The truth about the Opposition is that they doubled the debt, let the banks rip and bankrupted the country, and their only message is, “Let us do it all over again.”

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

Q2. My constituent, Rifleman Jack Otter, lost both his legs and an arm while serving in Afghanistan more than 15 months ago. I am sure that the Prime Minister and the whole House understand the debt that we owe Jack and others like him who have served our country. With the number of British soldiers losing limbs having increased by 40% from 2009 to 2010, does the Prime Minister agree that it is important that we find access to new resources to ensure that patients and staff at Headley Court can continue their excellent standard of work, which is sadly coming under greater pressure?

[The Prime Minister]

My hon. Friend makes an incredibly important point about what is happening in terms of the number of people returning as single, double and sometimes treble amputees, and about what we as a society must do to support them. I have visited Headley Court, and I know that many others have done so. It is an absolutely magnificent facility. A new ward opened in September last year and it now has a capacity of 111 trauma beds. Because of what Help for Heroes has done, there is a 25-metre swimming pool, a Battle of Britain gym with a sprung sports floor and a centre for mental and cognitive health. But we must go on ensuring that that magnificent facility is continually improved and that we do everything for our brave returning soldiers.

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

Just over a year ago the Prime Minister visited a maternity unit and found our midwives to be overworked. As a result, he promised that, with a Conservative Government, he would bring about 3,000 more midwives. A year on, could he tell us how he has gone about that?

[The Prime Minister]

The first thing that we have done is ignored the advice from Labour and increased the NHS budget. We would not be making progress on any of these health issues if we had followed the advice of the hon. Lady’s party and cut the NHS. We do need more midwives and more resources; we are making sure that those are going in.

[Mr Christopher Chope (Christchurch) (Con)]

Q3. Will the Prime Minister reflect on the decision taken in the House of Lords on Monday, which was supported by many senior Conservatives and Cross Benchers, to enable Parliament to have a review in the event of fewer than four in 10 people participating in the AV referendum? Will my right hon. Friend consider this compromise to be a reasonable one and to be consistent with the coalition agreement? Failing that, will he trust his own Back Benchers in a free vote to make their own judgments?

[The Prime Minister]

I have to say to my hon. Friend that we have not had thresholds in previous referendums, but I do not think that he should be so down on this. I am sure—[Interruption.]

[Mr Speaker]

Order. The Prime Minister’s answer must be heard. All this noise is—[Interruption.] Order. All this noise is damaging colleagues’ chance of getting in.

[The Prime Minister]

I am sure that my hon. Friend will work with me to get the turnout up, particularly for the no vote.

[Jessica Morden (Newport East) (Lab)]

Last week a cross-party Welsh Affairs Committee report criticised the Government’s proposal to close Newport passport office, which will see the loss of 250 jobs, be devastating for the economy of Newport and does not appear to be saving any money. Will the Prime Minister agree to meet me and my hon. Friend the Member for Newport West (Paul Flynn), so that we can put the case to him personally?

[The Prime Minister]

I am looking at this decision. It is an important decision, and I know that there is great work being done in reflecting on what jobs can be saved in Newport and Liverpool, where the two competing offices are. I am very happy to arrange for the hon. Lady to meet my hon. Friend the Minister for Immigration, because he is the one who will have to make the decision, so that he can hear from her and the hon. Member for Newport West (Paul Flynn) directly.

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

Q4. What assessment he has made of the effect of coalition politics on the future of the UK’s nuclear deterrent.

[The Prime Minister]

We have made it clear that we are committed to maintaining a nuclear deterrent based on Trident. That is why it was excluded from the strategic defence and security review, and why we commissioned a separate value-for-money study. The replacement of Trident is going ahead, and initial gate will be passed soon. As set out in the coalition agreement, the Liberal Democrats will continue to make the case for alternatives.

[Dr Lewis]

When the coalition was being formed, my right hon. Friend promised a meeting of all Conservative MPs that the Liberal Democrats would support the replacement of Trident. As we know, the key decision has been postponed until after the next election, and the Liberal Democrats, from their president downwards, have been boasting that this was their achievement. Will the Prime Minister give a pledge to this House and to the country that in the event of another hung Parliament, if the Liberal Democrats demand as the price for another coalition the scrapping of Trident, he will refuse to pay that price?

[The Prime Minister]

First of all, let me make this point. The replacement of Trident is going ahead. The investment is going in; the initial gate will soon be passed. The reason for the delay is that we had a value-for-money study because we desperately need to save some money in the Ministry of Defence, so that we can invest in front-line capability. That is the argument there. In terms of the future, all I can say to the hon. Gentleman is that I am in favour of a full replacement for Trident, a continuous at-sea deterrent and making sure that we keep our guard up. That is Conservative policy; it will remain Conservative policy as long as I am the leader of this party.

[John Woodcock (Barrow and Furness) (Lab/Co-op)]

But with due respect, the Prime Minister chose to break his word on the education maintenance allowance and matters such as reorganising the NHS, so why will this pledge prove any different?

[The Prime Minister]

I have visited the hon. Gentleman’s constituency and I know how important this issue is for him. I profoundly believe that we should maintain our independent nuclear deterrent. I have looked at all the alternatives over the years, and I am completely convinced that we need a submarine-based alternative—a full replacement for Trident—in order to guarantee the ultimate insurance policy for this country. That is my view, the view of my party and the view of most of the people sitting opposite me. I believe that there is all-party support for the move.

[Mr James Clappison (Hertsmere) (Con)]

Q5. Lord Carlile, the official reviewer of terrorism legislation, said last week that this country had become a “safe haven” for terrorists. Will my right hon. Friend give the House an assurance that this Government will do all that they possibly can to deport foreign nationals who are suspected of involvement in terrorism?

[The Prime Minister]

My hon. Friend is absolutely right to raise this point. I have been concerned for many years that we have not been able to deport people we suspect of plotting against us in the way that we should be able to. Lord Carlile has spoken and written about this extremely clearly. We have negotiated return agreements—so-called deportation with assurance agreements—with Algeria, Jordan, Ethiopia, Libya and Lebanon, but I want us to negotiate many, many more. In the end, we must do whatever is necessary to ensure that we can keep this country safe.

[David Simpson (Upper Bann) (DUP)]

Q6. Northern Ireland is still being held back by some dissident republican groups. To deal with this, the Chief Constable has asked for up-front access to the reserve allocation over the next four years. Does the Prime Minister agree that, if the threat is not dealt with, it will quickly spread to the rest of the United Kingdom? Will he grant the Chief Constable’s request?

[The Prime Minister]

I have met the Chief Constable on several occasions since becoming Prime Minister. He came to the meeting of the National Security Council at which we discussed the security situation in Northern Ireland. We will do what is necessary to ensure that security, the police and everything else are properly funded. I think that it is right, now that these issues are devolved, that there is greater decision making and greater efforts to put money into the front line in Northern Ireland itself, but of course we always stand ready to help where necessary.

[Mr David Nuttall (Bury North) (Con)]

The Prime Minister might recall visiting the maternity department at Fairfield hospital in Bury when he was Leader of the Opposition. Last week, despite our pledge to keep it open and despite the very useful new criteria issued by the Department of Health, the NHS in the north-west decided to continue with the closure decision that was taken by Labour. Will my right hon. Friend discuss with the Secretary of State for Health the ways in which we can keep our pledge on this matter?

[The Prime Minister]

I am very happy to discuss that issue with my hon. Friend and with the Secretary of State for Health. As he knows, we have introduced far tougher steps before these decisions can be taken, to ensure that local needs, and the views of patients and local GPs, are respected. The whole point about the new system, which is GP-led, is that hospitals will thrive when local people use and value them.

[David Cairns (Inverclyde) (Lab)]

Q7. In the past few weeks, the Government have rebranded antisocial behaviour orders as criminal behaviour orders, renamed control orders as terrorism prevention and investigation measures, and rechristened curfews as overnight residence requirements. Does the Prime Minister not realise that no amount of rebranding will disguise the fact that a Government preparing to cut police numbers by 10,000 will be seen as nothing other than weak on antisocial behaviour, reckless on terrorism and soft on crime?

[The Prime Minister]

I notice that the Labour party is going a long way to rebranding new Labour as old and irresponsible Labour, and I have to say that the project is going very well.

[David Rutley (Macclesfield) (Con)]

Does my right hon. Friend believe that the quality of the debate on the future of Britain’s debt burden is enhanced by the deficit denial on the Opposition Front Bench?

[The Prime Minister]

My hon. Friend makes an extremely good point. The Opposition were beginning to understand that they had left us with a debt burden, and beginning to own up to it, but now, with the new shadow Chancellor, they are in complete and utter deficit denial. They have not even taken the first step to being a responsible Opposition.

[Mr Mike Weir (Angus) (SNP)]

Q8. Around the country, driving test centres such as those at Arbroath and Forfar in my constituency are being closed without any consultation whatever with the local community or instructors. Surely that is the complete opposite of localism. Will the Prime Minister lean over and instruct his Transport Secretary to put a stop to such closures until there has been at the very least consultation with the local community and consideration of alternative ways to provide the service?

[The Prime Minister]

I understand the importance of these facilities in rural communities. As I understand it, the chief executive of the Driving Standards Agency has said that she will explore further how to continue to offer facilities in these locations. I will ask the Under-Secretary of State for Transport, my hon. Friend the Member for Hemel Hempstead (Mike Penning), to contact the hon. Gentleman to discuss this important issue with him.

[Richard Graham (Gloucester) (Con)]

Last week, there was a memorial service in Gloucester cathedral for Tom Walkinshaw, a constituent of the Prime Minister and a legend in my city for all he did to revive Gloucester rugby. Does the Prime Minister agree that Tom, and many others like him who have invested so much of their own money in our great sports, have done a lot to increase self-belief and pride in our cities?

[The Prime Minister]

My hon. Friend speaks very well of someone who lived in my constituency and invested not only in rugby, but in Formula 1, which has been an absolutely world-beating industry for our country. We should celebrate that, particularly in my region, where so many people are employed in this incredibly high-tech endeavour.

[Angela Smith (Penistone and Stocksbridge) (Lab)]

Q9. Does not the Prime Minister’s plan to sell off the forests show once again that he knows the price of everything but the value of nothing?

[The Prime Minister]

Let me say to the hon. Lady and to all hon. Members who I know are very interested in this subject that we are having a consultation; we are listening to people’s views. Let me make a couple of things clear. First, we will not do what happened under the last Government, which was the sale of forests with absolutely no guarantees of access. [Interruption.] Yes, that is exactly what they did. We also have a good opportunity to bust a few myths about this situation. The idea that all Forestry Commission forests are open to the public and do not charge is simply not true. Many forests, such as the New Forest, are not owned by the Forestry Commission and have much better access, no parking charges and very good records on habitat. While we are having this consultation, we should bust some of the myths that have been put around about this idea.

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

The latest US Department of Defence report to Congress states that the Taliban’s strength lies in the Afghan people’s perception that the Taliban will ultimately be victorious. Is it not now time for fresh thinking on Afghanistan, which must include getting the Americans to open talks with the Taliban, because as we proved in Northern Ireland it is possible to talk and fight at the same time?

[The Prime Minister]

I would say two things to my hon. Friend. First, of course there has to be a political process; almost every insurgency in history has ended through some combination of military might and a political process. I accept that, but where I disagree with my hon. Friend is that I think that this year the Taliban will see that there is no meaningful removal of US forces from Afghanistan. This will be another year in which the Taliban are going to be heavily defeated on the battlefield, which will make a political solution more rather than less likely.

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

Q10. Why is the Prime Minister cutting benefits and pensions for the armed forces? Does he intend to honour the agreement with our armed forces?

[The Prime Minister]

I do not accept what the hon. Gentleman says. Indeed, the armed forces are excluded from John Hutton’s report, which is looking at increasing people’s contributions. Let me remind the hon. Gentleman of what we have done for the armed forces. We said we would double the operational allowance for people serving in Afghanistan, and we have done that. We said that we would introduce a pupil premium, for the first time, for soldiers’ children who go to our schools, and we have done that. We have said that leave for the armed forces should start when they land back in the UK, not when they leave Afghanistan, and we are doing that. This Government are very pro our armed services and their families, and want to ensure that we give them a good deal.

[Ian Swales (Redcar) (LD)]

The whole House will regret the regular reports of tragic knife-crime incidents in this country. Does the Prime Minister agree that anyone who takes to the streets carrying a knife does so with the capability to commit grievous bodily harm or murder? What sort of punishment does he feel that these people should receive?

[The Prime Minister]

My hon. Friend makes an extremely important point. We must ensure that people who carry knives know that the result of that is likely to be a prison sentence. We must get tougher on what happens in terms of knife crime. Under the last Government, knife crime after knife crime was met with a caution rather than with proper punishment in courts. Labour Members can talk about knife crime as much as they like, but they were as soft as anything on it.

[Valerie Vaz (Walsall South) (Lab)]

Q11. The provisions of the Health and Social Care Bill were not costed before or after the election. Given the extension of commercial providers, is it the case that the NHS is not safe in the hands of the Government, but that the hands are in the safe of the NHS?

[The Prime Minister]

On the NHS, I can do no better than quote the shadow Secretary of State for Health. This is what he said about our plans:

“No-one in the House of Commons knows more about the NHS than Andrew Lansley… Andrew Lansley spent six years in Opposition as shadow health secretary. No-one has visited more of the NHS. No-one has talked to more people who work in the NHS than Andrew Lansley… these plans are consistent, coherent and comprehensive. I would expect nothing less from Andrew Lansley.”

That was said by Labour’s shadow Health Secretary. I could not have put it better myself.

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

Q12. Last week the Government committed more than £100 million of investment to the M6 Heysham Port road link, promising to bring much-needed new jobs and businesses to my part of Lancashire. Can the Prime Minister reassure me that, despite our economic difficulties, the Government will continue to invest in major capital schemes, particularly in northern areas such as mine, which were much neglected by the last Labour Government?

[The Prime Minister]

My hon. Friend makes a very good point. We have prioritised, in a difficult spending round, spending on capital infrastructure, including the scheme that he mentions. It is important, as we go for growth in our country, that we put capital expenditure into our roads and railways, and things that will help our economy to grow. That is exactly what we are doing in my hon. Friend’s constituency, and in many other constituencies across the country.

[Ian Austin (Dudley North) (Lab)]

Q13. The Prime Minister insists that the financial crisis was caused by a lack of regulation, but even after the collapse of Northern Rock he complained that the last Government had subjected the banks to excessive bureaucracy and too much regulation. He promised to give them an easier ride, saying,“government needs to do less taxing and regulating”.Is that why donors in the City have given the Tory party so much money?

[The Prime Minister]

I remember a time when the hon. Gentleman used to write the last Prime Minister’s questions. Given what he has said, I think that the last Prime Minister is writing his questions. The fact is that Labour left us the most indebted households, the most bust banks, and a deficit—[Interruption.]

[Mr Speaker]

Order. The Prime Minister’s answer will be heard, and with some courtesy. That is what the public want to see. They are sick to death of this sort of behaviour.

[The Prime Minister]

Thank you, Mr Speaker. Let me just make one point. The person who was the City Minister when the City blew up is now your shadow Chancellor. Great pick.

[Priti Patel (Witham) (Con)]

Q14. Can the Prime Minister give an assurance that Parliament will have the final say on whether prisoners will have the right to vote? In view of the public’s disdain for the unelected bureaucrats in Strasbourg, will he defend our country from any further sanctions from Europe on the issue?

[The Prime Minister]

I think the hon. Lady knows that I have every sympathy with her view. I see no reason why prisoners should have the vote. This is not a situation that I want this country to be in. I am sure that you will all have a very lively debate on Thursday, when the House of Commons will make its views known.

Petition

Wednesday 9th February 2011 Commons Chamber

Duncan Hames (Chippenham) (LD)

- Hansard - - Excerpts

I wish to present a petition opposing the proposed withdrawal of the mobility component of disability living allowance from those living in state-funded care homes. The petition is signed by 135 members of Chippenham Gateway club in my constituency, a volunteer-run social club for those with long-term learning difficulties or mental health problems.

The petition states:

The Petition of members, volunteers and supporters of the Chippenham Gateway Club,

Declares that the Petitioners are opposed to the Government’s proposal to stop paying the Mobility Component of the Disability Living Allowance for disabled adults in residential care; and notes their concern that this proposal would have a devastating impact on the Chippenham Gateway Club and similar clubs for members with learning difficulties/mental health issues throughout the UK.

The Petitioners therefore request that the House of Commons urges the Government not to stop paying the Mobility Component of the Disability Living Allowance for disabled adults in residential care.

And the Petitioners remain, etc.

[P000884]

Flood Defence Allocations

Wednesday 9th February 2011 Commons Chamber

[Mr Speaker]

Before I call the hon. Member for Wakefield (Mary Creagh), let me appeal to right hon. and hon. Members who are leaving the Chamber to do so both quickly and quietly so that the question can proceed in a reasonable atmosphere. I ask Members what they would want if they were asking or answering the urgent question.

12:33

[Mary Creagh (Wakefield) (Lab)]

(Urgent Question): To ask the Secretary of State for Environment, Food and Rural Affairs if she will make a statement on the Government’s flood defence allocations for 2011-12.

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Richard Benyon)]

The coalition Government are committed to protecting people and property from flooding and coastal erosion where it is sustainable and affordable to do so. Today, the Environment Agency is setting out detailed plans for proposed capital investment projects in the 2011-12 financial year. When completed, these schemes will provide better protection to over 112,000 homes in England. As already announced, a total of £521 million will be allocated by the Department for Environment, Food and Rural Affairs to the Environment Agency next year for flood and coastal erosion risk management in England. That will be roughly half revenue funding and half capital investment. The capital funds will take forward 109 schemes which are already under construction, and in addition to these, a further 39 new flood and coastal defence projects will go ahead. Of these, 21 projects will provide better protection to 13,000 households at risk. The remainder relates to repairs and safety enhancements to existing defences.

The list of new schemes includes a £5.7 million project to protect 182 households in Keswick from flooding of the river Derwent. In total, over the next four years DEFRA intends to spend at least £2.1 billion and increase protection for at least 145,000 homes.

Inevitably, it has been necessary to find savings in all areas of Government expenditure, but we have protected flood and coastal erosion risk management as much as possible. The reduction is 8% compared with the previous four-year period. We have protected front-line services such as forecasting, warnings and incident response, and the maintenance of existing defences.

As I have said previously, no schemes will have been cancelled. All defences already under construction—the 109 projects I have mentioned— will be completed. It is the nature of flood and coastal defence investment that there are always more projects than national budgets can afford at any one time. Funding has always needed to be prioritised. Nevertheless, I understand the concerns of people and hon. Members who are worried that a particular scheme is not on the indicative list for funding. I should stress, however, that this does not amount to the Government cancelling schemes or saying any particular scheme cannot go ahead in the future. The method of Government funding for schemes starting in 2012-13 and beyond is currently under review. That follows recommendations made by Sir Michael Pitt after the widespread flooding of 2007. Transparency and greater local involvement are at the heart of the new proposals.

Whatever the amount of funding available, we cannot expect the national taxpayer to completely fund all the costs of each and every scheme; that has been a long-accepted understanding on both sides of the House. Difficult decisions must be made, and we must ensure that public investment delivers the most in terms of outcomes and benefits per pound spent.

Under the new proposals for funding flood and coastal erosion risk management, local ambitions in terms of protection no longer need be constrained by what national budgets can afford. We want to use every £1 wisely and make sure that as many people as possible have the opportunity of benefiting from new or enhanced flood defences. With the funding allocations announced today, 112,000 properties will benefit from improved protection. Going forward, closer working with local communities and more opportunities for outside contributions will mean that more people will ultimately be protected.

[Mary Creagh]

I am grateful to the Minister for that reply, but I am surprised that the Secretary of State, to whom this question was put, did not deem the House worthy of an answer in person from her.

We know that the Environment Agency board met last Thursday to decide this year’s flood defence allocations, and that the press were invited to a briefing today at noon. We heard from journalists that DEFRA would issue a press release today at noon, but without this urgent question—which you kindly granted, Mr Speaker—Members would have read of the total nationwide flood allocations from the media this evening rather than debating them fully in Parliament today. Can the Minister tell the House why a written ministerial statement on the flood allocations was not even laid in the Library or on the Order Paper today?

Following the comprehensive spending review, Parliament has not had any chance to debate the flood budget for 2011-12, yet this is arguably the part of the DEFRA budget which most affects our constituents. The amount was revealed in a written answer on 20 January this year, which said that the capital funding for flood defences to protect our constituents’ homes has fallen from a baseline figure last year of £354 million to £259 million. Will the Minister confirm that this is a 27% cash cut to the budget, and a 32% real-terms cut when inflation is taken into account, and not the bizarre 8% cut that he insists on briefing in the media?

We know from the Environment Agency’s own figures that,

“On average, every pound invested in improved flood protection…reduces the long term cost of flooding and coastal erosion by £8.”

Has the Minister calculated that this £95 million cut to flood defence spending this year will actually cost the nation more than three quarters of a billion pounds—£760 million—in lost future value? We know that certain schemes have been cancelled, because MPs in those areas have been briefed. The Minister mentioned 39 new schemes going forward, but 59 flood defence projects are due to start over the next four years. How many of those will be completed in the next four years, and what steps is he taking to protect areas affected by these reductions in flood defence spending?

In the past, the Government allocated flood defence money for two or three years, as large construction projects take several years to plan and complete. We have heard from the Minister today about his plans for a flood levy. Again, this is the first time we have debated that on the Floor of the House, but the consultation is on the DEFRA website. Can he reassure the House that any proposals for future flood defence funding are not skewed away from areas of high need and towards areas where people have deeper pockets?

Can the Minister say what conversations he has had with the insurance industry about its consternation at these funding cuts? Labour’s statement of principles guaranteed universal flood insurance coverage for homes in affected areas. It runs out in 2013 and was based on the understanding, following the Pitt review, that Government should have

“above inflation settlements for future spending rounds.”

Is the Minister aware of the comments of Steve Foulsham, technical service manager of the British Insurance Brokers Association, who said in Insurance Professional Magazine in January 2011:

“When the Statement of Principles comes to an end, it will be devastating for consumers”?

Has the Minister had any contact with David Williams, managing director of claims at Axa Commercial Lines, who says,

“Now that spending has been reduced…all bets are off. The Government is in breach of its side of the bargain, so if insurers wanted to stop providing cover, they would probably be able to”?

What contact has the Minister had with the industry to ensure that homes do not become uninsurable, or insurance premiums simply unaffordable? Does he agree with me that if insurance is too expensive, the Government become the insurer of last resort for those who simply cannot afford it?

Finally, may I ask that the Minister place a copy of his statement in the Library of the House, so that hon. Members in all parts of the House can communicate first with their constituents, and not be trumped once again by the newspapers?

[Richard Benyon]

I am grateful for those questions and I am sure I can reassure the hon. Lady on a number of them. First, my right hon. Friend the Secretary of State has just returned from a meeting at Water UK. This is an urgent question, she came to the House a short time ago, and I have been available to prepare for it. Secondly, we have a debate this afternoon in Westminster Hall when we will have the opportunity to discuss these matters in detail, and I look forward to that. Thirdly, on the hon. Lady’s question about a written statement, there is nothing different in this method of announcing funding compared with previous years. Last year, there was no written statement. These are indicative budgets put forward by the Environment Agency. Where Ministers were, rightly, held and continue to be held to account was on the overall budget, which was announced in the autumn. There are plenty of opportunities for the hon. Lady—Opposition day debates and other circumstances —to raise this issue and hold Ministers to account. The Environment Agency is publishing its indicative list of schemes that are due to go ahead in the coming year, and that goes to regional flood defence committees for approval. So we are at that stage of the process, and that is no different from previous years, and no written statement was made last year—I checked before I came to the House.

On capital spending, really, the hon. Lady has got to change her tack, because she is not comparing apples with apples; these are two very different circumstances. Rightly, the former Chancellor in the previous Government announced a 50% cut in capital spending. If the hon. Lady were sitting on the Government side of the House, she might—rightly, as we have—favour flood spending and reduce the amount of saving accordingly, as we have done. But she cannot say that as if the spending last year and this year are the same, because they are not; the economic situations are completely different. She knows that and she really needs to change her tune.

The hon. Lady asked about communities with a high deprivation index, where there is a need to protect people on low incomes. I can assure her that the system will be skewed, as it is and always was, in favour of areas where a large number of people are on low incomes; that will remain through the payment-for-outcomes scheme.

On insurance, we are working closely with the Association of British Insurers. The statement of principles was always going to end in 2013, and it is always going to require important and careful negotiation to ensure that we get a scheme that protects people and their homes and so that they can get insurance. A good working party has come out of a flood summit that we held in September, which was attended by a number of hon. Members. The ABI is optimistic that it can find a scheme that will offer the kind of protection that households will need in the future, and I hope that that will be the case.

[Several hon. Members]

rose—

[Mr Speaker]

Order. There is considerable interest in this subject, but there are two important statements, and other demanding business, to follow. There is pressure on time, so short questions and short answers are essential.

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

The House will not be taken in by the crocodile tears of the hon. Member for Wakefield (Mary Creagh), whose Government changed the points system in 2005, depriving many towns such as Thirsk of protection from floods. Will the Minister give the House an assurance that any local levy he seeks to raise will not trigger the 2.5% increase that would lead to a local referendum? Will he work with the insurance industry to see whether local resilience measures for houses could be extended to business properties and whether a lower insurance premium could then be attracted?

[Richard Benyon]

We very much want to gear things towards a system where the benefits can be understood by people. That is why the payment-for-outcomes scheme offers so much potential; it offers clarity, for the first time, where the current system is opaque. It will allow communities such as my hon. Friend’s to see where they are in the pecking order, why they are constantly overtaken as our understanding of flood risk management gets better and where they are missing out. Thus, when people and businesses are benefiting, they may choose to contribute and get their scheme above the line. This approach offers her and her constituents a great opportunity.

[Mr Ben Bradshaw (Exeter) (Lab)]

Can the Minister please explain how the cuts that he is being forced to confirm to the House today are consistent with a very clear assurance given by the Prime Minister to this House during Prime Minister’s questions on 17 November? He said that flood defence spending would be “protected” and would be “roughly the same” as under Labour.

[Richard Benyon]

I hope that we will be able to prove at the end of this process that the spending is broadly the same: an 8% cut compared with the previous four years, but with 15% efficiency savings that we think we can get out of the Environment Agency and a greater understanding of how we can deliver. The right hon. Gentleman must agree that what really matters is the outcome: households protected from flooding. I am really confident that at the end of this process we will be able to produce outcomes that are no worse than those in the past and perhaps even better.

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

Will the Environment Agency continue to work with local organisations and local people on small-scale engineering improvements, which have helped to protect for the future areas such as Glendale and the Ingram valley in Northumberland, as well as considering issues such as those relating to Morpeth?

[Richard Benyon]

I can guarantee that to my right hon. Friend. I can also tell him that our understanding and the software now available to guide on things such as surface water flooding mean that a small and relatively low-cost building of defences can have an enormous effect in delivering precisely the amount of protection we want. I can assure him that the Environment Agency will continue to work with local people.

[Barry Gardiner (Brent North) (Lab)]

In the north-west London basin, 2,000 people have been subjected to repeated flooding in the Mogden catchment area. That was to be addressed through the sustainable urban drainage scheme and the investigations that were going on into that catchment area. Can the Minister assure me that that scheme will go ahead?

[Richard Benyon]

I do not want to mislead the House or the hon. Gentleman. If he will meet me, I will be happy to give him exact and firm details about that scheme.

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

Parts of my constituency were devastated by the floods in 2007. May I thank the Minister, on behalf of the people of Alcester, for allowing the project there to go ahead? May I also, on behalf of the people of Broom, come and see him about an innovative idea that we have had, with the Environment Agency, for mitigating flooding in Broom?

[Richard Benyon]

I am all for innovation. The carpet in my office is wearing thin from colleagues on both sides of the House coming to see me, but I will certainly meet my hon. Friend. I am keen to hear about new plans and I am happy to involve the Environment Agency, which perhaps has greater technical understanding than I do.

[John McDonnell (Hayes and Harlington) (Lab)]

The Minister mentioned the Pitt review and that the Government have protected incident response. One of the review’s recommendations was to place a statutory duty on fire and rescue authorities. The Government supported that in opposition and the Select Committee on Environment, Food and Rural Affairs supports it now. Can he give us a time scale for the implementation of that statutory duty?

[Richard Benyon]

The hon. Gentleman is absolutely right to raise this issue, which is the one area of the Pitt review about which we have qualms. I am happy to discuss it because I know that he has a lot of contact with members of the fire service. I am not sure that placing a statutory duty on fire and rescue services will make any difference to the services I have seen. We are really going to be testing them through Exercise Watermark. Some of them tell me that they would like a duty, but quite a lot tell me that it would not make a blind bit of difference to how they operate and how they integrate with other emergency services. However, I have an open mind and I will listen to him.

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

I want to take this opportunity to thank the Minister for meeting my constituents and because the schemes for Felixstowe and Thorpeness are on the national list. That has yet to be confirmed by the regional flood and coastal committee, but I am sure that it will do so. Will he tell us a little more about how the funding will help people who help themselves and how it will protect those in vulnerable households and areas?

[Richard Benyon]

I have been impressed by innovative schemes in my hon. Friend’s constituency, which we are using as a basis from which to take forward a number of ideas. I can confirm that the central Felixstowe beach management works will proceed under the next year’s budget.

[Diana Johnson (Kingston upon Hull North) (Lab)]

What assessment has the Minister made of the impact that the cuts will have on my constituents in Hull who were badly flooded in 2007 and who still find the insurance market partly closed?

[Richard Benyon]

The statement of principles relates only to properties built before 2009, so for a large number of households it already does not apply. That is a major concern. We have debated this issue in the House, and the hon. Lady’s constituents who were flooded in 2007, like mine, have a right to see the road ahead on this issue. Not only are their premiums rising but their excess charges are rising too. Some of my constituents, frankly, have no insurance because they have excess charges of £10,000. She is absolutely right to ask about this issue, which we will take forward in our negotiations with the ABI. The most important thing is that we are talking. There is a lot of agreement and I believe we can find a way forward and find solutions. The insurance industry is in a state of change and we will see more specialist providers coming through this process.

[Stephen Gilbert (St Austell and Newquay) (LD)]

One of the lessons from the flooding in Cornwall before Christmas was that community flood plans and community flood wardens can make a real difference in protecting people and property. Can the Minister assure me that there is money within the settlement to continue the establishment of such groups in vulnerable areas?

[Richard Benyon]

We really value those measures and we are impressed with what has been happening in my hon. Friend’s constituency and elsewhere, so we will certainly encourage that. It is not just us doing that: there is also the work of Mary Dhonau and her organisation. They are trying to provide local flood forums with a toolkit they can pick up not only when a disaster happens, as with my hon. Friend’s constituents, but in areas that we know are at risk of flooding, which can be forewarned and better able to cope with flooding in future.

[Ian Lavery (Wansbeck) (Lab)]

May I reiterate that Morpeth is in my constituency? I made that point last week, but I think I need to re-emphasise it. Having listened to the Minister’s statement, can he reassure me that the Morpeth flood alleviation scheme, in its entirety, will still take place?

[Richard Benyon]

The hon. Gentleman and I met yesterday and I explained to him the complexities of the scheme, which is not going ahead in the current proposals, but will, I am sure, in future. The scheme requires further work and consideration about areas where it can be provided and give better value for money. [Interruption.] Some hon. Members are chuntering, but if we allow a scheme that does not stack up as well as others to go ahead, other hon. Members will quite rightly come to the House and try to hold me to account by asking, “Why isn’t our scheme going ahead?” That has always been the case for Ministers standing here. It is important to understand that we have to give best value for money. The hon. Gentleman’s scheme is good and I hope that it will go ahead in time.

[Greg Mulholland (Leeds North West) (LD)]

Given the constraints on the public finances, can my hon. Friend confirm that the criteria for judging the schemes before him include not only the risk but the costs of flooding? In Leeds, which is the second-biggest financial centre in the country, those costs would be £500 million. Do the criteria also include the economic benefits of putting in the flood alleviation scheme? In Leeds, the scheme is supported by all the Leeds MPs because it would attract more development to the city.

[Richard Benyon]

I am well aware of the concerns of the people of Leeds, which have been well articulated by the Members who represent that city. That scheme is hugely expensive and I do not doubt that it will bring benefits to the city. I am happy to meet Members on both sides of the House to discuss it. We want to work with the local authority and other agencies to find parts of the scheme with which we might proceed sooner than others. It will not go from conception to commissioning in one year because it is such a massive scheme, but we want to bring it forward as quickly as we can. We have to make sure that we have value for taxpayers’ money at the heart of what we are doing so that we can protect as many homes as possible across the country.

[Mr George Mudie (Leeds East) (Lab)]

I am grateful for those words from the Minister, but is he aware that Leeds city centre came within centimetres of being flooded in 2000, according to Environment Agency information, and that it had numerous near misses in 2004, 2007 and 2008? Will the Minister agree to meet Leeds MPs to discuss this? Leeds is the largest city in the north and we cannot allow it to be knocked out by flooding or to be prioritised below households. It is the major economic centre of west Yorkshire.

[Richard Benyon]

I absolutely understand that. The hon. Gentleman can come to meet me if he wishes to hear more details about this. The scheme will cost £250,000 or thereabouts per household it protects. That is an enormous amount of money and I do not deny its importance, particularly to the people of Leeds, but we have to look at it from the perspective of the whole area. If it can unlock regeneration or benefits to that city there might be opportunities under the new payment-for-outcomes scheme.

[Geraint Davies (Swansea West) (Lab/Co-op)]

You know, Mr Speaker, that I headed up flood risk management for the Environment Agency Wales between 2005 and 2010, so I appreciate the relationship between climate change and flood risk, which we have seen in New Orleans. What has happened in Queensland, Australia and in England is not a laughing matter. Will Ministers undertake to visit victims and communities who have been devastated by flooding that could have been avoided had the Minister not cut the revised budget for flood defences, which was made after the 2007 floods, and say sorry to them?

[Richard Benyon]

We have visited places that have been flooded since we came into government. The hon. Gentleman must understand that I have waded through houses reeking of sewage and have looked into the eyes of families whose houses have been flooded. He does not have to tell me about the misery that flooding causes those communities—2,500 households in my constituency were flooded in 2007. We understand how important this issue is and he knows that we cannot protect every house. There are 5.2 million houses at risk.

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

Will the Minister take this opportunity to correct the record and confirm that my right hon. Friend the Member for Leeds Central (Hilary Benn), when he was the Secretary of State for Environment, Food and Rural Affairs, ring-fenced flood defences so that in the last round of cuts there was no cut in the funding? That is why this year’s cut is a 27% cut.

[Richard Benyon]

A 50% cut and ring-fenced funding for the future could not have been defended. That is absolutely impossible. I honestly urge the hon. Gentleman to look at the realities of the situation. There is a 50% capital cut. Whichever party had been in government now would have had to take difficult decisions. We have protected the floods budget as best we can, and he should recognise that.

[Hugh Bayley (York Central) (Lab)]

Has the Environment Agency’s flood defence scheme for Water End and Leeman road in York, which defends more than 300 low-income households, been cancelled? It was due to go ahead this year and was funded to go ahead this year. If it has not been cancelled, when will it go ahead?

[Richard Benyon]

The scheme has not been cancelled. It has been deferred. There are technical difficulties with it.

[Hugh Bayley]

How long?

[Richard Benyon]

We will shortly debate the matter in Westminster Hall, when I will be happy to give the hon. Gentleman more details. I can assure him that the scheme has not been cancelled.

Banking

Wednesday 9th February 2011 Commons Chamber

13:00

[The Chancellor of the Exchequer (Mr George Osborne)]

The near-collapse of the British banking system more than two years ago still generates today deep feelings of anger and cries for retribution. I understand that, for the link between risk and reward that underpins our free market was completely broken.

Bankers who had made the most catastrophic mistakes walked away with huge payouts and pensions. Those entrusted by us to regulate those bankers and run our economy washed their hands. Meanwhile the rest of the country is left paying every day for their failures. The new coalition Government must pick up the pieces. Let me set out how we will do that.

First, we will make sure that this never happens again. We are replacing entirely the tripartite system of regulation that was introduced by a previous Chancellor and his advisers in 1997, and which completely failed. Next week we will publish the detailed proposals to give the Bank of England responsibility for prudential regulation, and to create a new consumer protection and markets authority that will protect the interests of bank customers. We will then undertake pre-legislative scrutiny, as requested by the House, before introducing the Bill. I hope it will command support from both sides.

Later this year we will receive the interim and final reports of the Independent Banking Commission that this Government established, and which I asked Sir John Vickers to chair. Sir John and his fellow commissioners are asking the difficult questions that need to be asked about how we protect the British taxpayer from future bank failures so that never again is a bank too big to fail. We look forward to receiving their recommendations. I should make it very clear that nothing that I will say today about the settlement that we have reached with Britain’s banks, including references to a level playing field, in any way prejudges the outcome of the commission. That includes both the commission’s recommendations and the Government’s response.

The second task facing the Government is to make sure that we get the maximum sustainable tax revenues from the financial sector. Her Majesty’s Revenue and Customs confirms that the one-off bank payroll tax introduced in the dying months of the previous Government raised £2.3 billion net, but as my predecessor—the Chancellor who introduced the tax—has pointed out, it could not be repeated without massive tax avoidance. I agree with him and we will not repeat the bank payroll tax.

Instead, we have implemented a new and permanent bank levy, and that is why yesterday I announced an increase in that levy so that it raises £2.5 billion this year. This will bring the total raised by the new bank levy to £10 billion over the Parliament, and it means that in each and every year of this Government we will raise more in bank taxes than the previous Government raised in any single year. We have also required all the major banks operating in the UK to comply in spirit and by the letter with the code of practice on taxation. The code was announced with a fanfare by the previous Government, but I discovered that when they left office only two banks had signed up to it. Today all the major banks have signed.

The third task facing the new Government was to reach a new settlement with the banks so that they could contribute to Britain’s economic recovery. Some prominent people in the House were predicting just 24 hours ago that my tax announcement meant that our discussions with the banks on lending were falling apart. The House will be pleased to know that that prediction was completely wrong. This morning the heads of the major British banks—Barclays, RBS, Lloyds and HSBC—reached a new settlement with the Government. I want to thank John Varley, the former chief executive of Barclays, for the huge amount of time and personal commitment that he has given to this project.

The essentials of the new settlement are exactly as I set out last month, and I am today publishing an exchange of letters between John Varley and myself. The banks will lend more money, especially to small business; pay more taxes; pay less bonuses; be more transparent about the bonuses that they do pay; and make a greater contribution to our regional economy and society. In return the Government commit to the success of a strong, resilient, stable and globally competitive financial services sector in which UK banks can compete with the best banks in the world on a level playing field, and in which London is a world centre for finance. That is good for jobs and growth in our country.

Let me go through each part in detail, starting with pay and bonuses. Most of us find the levels of pay in financial services to be completely out of kilter with what the rest of society would regard as fair or reasonable. We are determined to bring responsibility and constraint, and make sure that pay is properly taxed. Four years ago, at the height of the banking boom, the City paid £11.5 billion in banking bonuses, most of which was in cash, most of which could not be recovered when the banks collapsed, and too much of which went untaxed. The new remuneration code introduced last month and the tax avoidance measures that we are taking will change that.

Today I can tell the House that the four major British banks have also agreed that total bonuses for their UK-based staff will be lower than last year and lower than they would have been without today’s settlement. The independent non-executive director who chairs each bank’s remuneration committee will have to confirm personally in writing to the Financial Services Authority that their pay deal conforms with today’s commitments. For the first time, the banks have agreed to seek explicit approval from their board’s remuneration committee for the pay of the 10 highest paid employees in each of their main business units. That did not happen in banks such as the Royal Bank of Scotland before the crisis, where the board was ignorant of what was going on.

We have also insisted that the banks be far more transparent about who and how they pay. From this year onwards, the four major banks have committed to disclose the pay details not just of their executive board members, but of the top five highest paid executives not on the board. This will mean that the salary details of at least seven executives at each bank will be published this year. That compares with five individuals in the United States of America and Hong Kong, and only board executives in Germany and Japan. By disclosing individual pay levels the settlement goes further than the Walker report recommended, on which we are seeking international agreement.

We will consult on whether to make it a mandatory requirement from 2012 on all large UK banks to publish the pay of the board plus the eight highest paid senior executive officers. That would mean that Britain had the toughest and most transparent pay regime of any major financial centre in the world.

Let me provide an update on the situation at the Royal Bank of Scotland and Lloyds. The previous Government signed an agreement with RBS that explicitly said that it would in 2010

“enable pay arrangements in line with the market”.

Despite that constraint, which we inherited from the previous Government, United Kingdom Financial Investments Ltd, the arm’s length body which manages the Government’s stake in those two banks, has agreed the following: for all staff at RBS and Lloyds, the maximum up-front cash bonuses will be limited to a maximum of £2,000 this year; all executive directors, including the chief executives, have agreed to receive this year’s bonuses entirely in the form of shares; and directors will have to wait until 2013 to convert these shares into cash.

As the Prime Minister made clear last month, the bonuses at RBS and Lloyds will in total be smaller than they were last year under the previous Government and so, crucially, will the compensation ratios be. They will backmarkers in the industry, instead of the front runners that they once were.

Let me turn from pay to the additional support that the British banks have committed today to provide to the regional economy. At the end of last year the industry pledged £1.5 billion to a new business growth fund, which will invest in the kinds of expanding small businesses that hold the key to Britain’s more balanced economic future. Today they commit to make an additional £1.2 billion contribution to society. The four major banks commit to an additional £l billion for the fund and an additional £200 million to capitalise the big society bank. The business growth fund contribution will be front-loaded over the next couple of years, so that more help can be given to businesses sooner. This money will be in addition to the lending commitments and additional to any funding already allocated from dormant bank accounts.

Finally, at the heart of today’s settlement is a commitment from the four major banks, as well as Santander, to make much more money available for lending to small and medium-sized business. Last year these banks lent £66 billion to such businesses. Today the banks commit to lend £76 billion this year. That is £10 billion more gross new lending to small and medium-sized businesses, a massive 15% increase, materially higher than they had been planning to lend this year and materially higher than anyone who has followed these discussions would have expected. It comes alongside a very welcome commitment from the banks greatly to improve their customer service to small businesses, with a free mentoring service, published lending principles, transparent appeals and improved access to trade finance. Overall, gross new lending to all businesses, large and small, will increase from £179 billion to £190 billion, and the banks will make a commitment to lend even more if demand materialises.

Absent this deal, the banks were actually expecting lending to fall this year. To ensure that progress against these lending commitments can be monitored, the Bank of England has agreed to collect the relevant data and publish them quarterly. To help to ensure that today’s agreement is honoured, for the first time the pay of the chief executives of each bank, as well as of the relevant business area leaders, will be linked to their performance against these SME lending targets. Of course, if the banks fail even then to live up to their promises, the Government reserve the right to return to the issue and take further measures, but I sincerely hope that will not be necessary.

The anger at the terrible mistakes of the banking industry and the failure of those who regulated it will long remain, and rightly so, but let us as a country confront this hard truth: anger and retribution will not bring one percentage point of economic growth or create one single new job. The anger will remain, and I understand that, and we must never make the same mistakes again, but Britain needs to move from retribution to recovery. Today we get the banks to commit, with more lending—£10 billion more for small businesses— for our regional economies and society, £10 billion more in bank taxes, lower bonuses and the most transparent pay regime in the world. In return, let us build a banking industry that creates jobs for hundreds of thousands of our citizens and that competes in the world. Above all, let us ensure that the economic catastrophe that befell this country can never be repeated. That is how this new Government will clean up the mistakes of the previous Government. I commend this statement to the House.

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

Given that this statement was not on the Order Paper, I thank the Chancellor for the eight minutes’ advance notice he gave me of it. Yesterday, he confirmed in his “Today” programme mini-Budget that he is cutting taxes for the banks this year, compared to last year. [Interruption.] Today we find out what the Chancellor has got in return from the banks, after weeks and months of negotiations with the UK banking industry, culminating in the complete shambles of the past 24 hours, and the result is: precious little. From a Chancellor who talked so tough in opposition and who even yesterday continued to promise much, this is a pitiful outcome and an embarrassing climbdown. [Interruption.]

[Mr Speaker]

Order. Earlier I made it clear that heckling and abuse of the Prime Minister when he was answering questions should not take place and that his answers would be heard. I say to hon. Members who are now heckling the shadow Chancellor, stop it. It is a disgrace. The public loathe it. Do not imagine for one moment that while screaming abuse you have the slightest prospect of being invited to ask a question. Behave and get the message.

[Ed Balls]

Thank you, Mr Speaker. They tend to heckle when they are worried.

A “damp squib” is defined in the dictionary as something potentially explosive but that fails to perform because it has got wet. That is this Chancellor all over. This negotiation has turned from Project Merlin into “The Wizard of Oz”: the curtain has been pulled back and there is nothing there. Of the leading players on the Government Front Bench, who is the one without courage, who is the one without a brain and who is the one without a heart?

Let us review what the Chancellor has achieved. On lending, he claims to have secured an agreement with the banks to lend £190 billion this year, but financial experts are clear that the deal he has announced is vague, toothless and unenforceable and not a proper substitute for proper competition. How will he be able to measure in detail whether the deal is delivered? Can he tell us the detail of how it will be enforced? Is there a sanction if the lending does not materialise? Was not a senior banker right when he told the Daily Mail on Monday that this lending agreement is “meaningless”? Is not the Financial Times right to say today:

“With much noisy showmanship, the Conservative-Liberal Democrat coalition is puffing demands that are little more than cosmetic”?

Is not that the truth?

On pay transparency, again we have a damp squib. The Chancellor claims that we will now have the most open regime in the world, but what does it actually add up to? The answer is transparency for pay and remuneration of only the seven most senior bank executives, whose anonymity is still fully protected. The Government are demanding that local authorities publish the salaries of anyone in local government earning more than £58,200, but he is allowing a taxpayer-owned bank and publically quoted companies in the financial sector to continue to pay staff millions of pounds in pay and bonuses with no transparency at all.

Why is the Chancellor not activating the legislation that we put on the statute book that would require the publication of the remuneration of any individual paid more than £1 million? It is there on the statute book and ready to go, so why not just sign the order and get on with it? Why has he failed so abjectly to make any progress in international negotiations with European and global Governments on transparency? There has been no progress because there is no sign that he has even tried.

On bonuses, I am afraid that the country will conclude that the Chancellor has thrown in the towel in the face of extensive lobbying by people with whom he and his Conservative colleagues have just become too close and too cosy. Does he remember what the Prime Minister said just two years ago—when Leader of the Opposition—when attacking the previous Government? He said:

“Because of this dithering we could see bonuses paid out for a second year to executives in taxpayer owned banks, which is unacceptable.”

After months of dithering from this Chancellor, what will we see over the next fortnight? We will see exactly that: bonuses running into millions of pounds, in cash and shares, paid to executives in taxpayer-owned banks. What he should be doing today is announcing proper reform of corporate governance and taking up our proposal to repeat last year’s £3.5 billion bank bonus tax, in addition to his levy, and use the money to support jobs and growth to kick-start his stalled recovery.

I have told the Chancellor that I will support him on long-term banking reform, enforceable lending agreements and proper statutory action on transparency and pay. Our economy badly needs a reformed, transformed, vibrant and globally competitive financial services industry for the future. He is right that hundreds of thousands of jobs depend upon it. However, this is not an agreement to secure the long-term future of our economy, but a short-term and shabby political deal. There have been talks that dragged on for weeks, a mini-Budget on the “Today” programme, crisis conference calls with the banks yesterday afternoon, a hasty compromise cooked up overnight and a Chancellor finally coming to the House with little to offer in return for his tax cuts for the banks.

I have to say that this is a Chancellor who, as the former CBI head has said, puts politics before economics. He talked tough in opposition, but in government he looks increasingly out of his depth and out of touch. We have rising VAT, rising fuel prices, rising unemployment and deep spending cuts hitting living standards of families, and yet his first priority is a tax cut for the banks. Millions of families up and down the country will now be asking, whose side is this Government on?

[Mr Osborne]

Well, that has to be one of the feeblest replies to a statement that I have heard. The only person who seems to be out of his depth at the moment, rather surprisingly, is the shadow Chancellor. There was one thing missing from that rant: an apology. He was the City Minister. I will move on to all the things that we need to do to regulate the City, but I will first remind him that he stood at this Dispatch Box for two years as City Minister and could have done any of the things that were either in my statement or in his reply, but he did not. The truth is that he is man with a past, and we will not let him forget it—even if he does. I took the opportunity to look at his website on which he lists all his achievements in politics, but he does not mention the fact that he was City Minister. He does not mention the fact that he invented the system of City regulation that failed so spectacularly. He might have forgotten what he did not do in government; we will not.

Let me deal specifically with some of the right hon. Gentleman’s questions. He asks how the lending targets will be monitored. I told him in the statement that the Bank of England is going to monitor them. [Interruption.] “How are they going to be enforced?”, Opposition Members cry. The chief executive’s pay will be linked to the targets, and I made it very clear in the statement that, of course, if the deal is not met we will return to the issue.

The right hon. Gentleman talks about transparency. In 13 years, the previous Government never implemented transparency in the City of London. Some £11.5 billion of bonuses were paid in the year in which he was the City Minister, but we are introducing the most transparent regime of any major financial centre in the world.

The right hon. Gentleman continues deliberately—because I know he must know the numbers—to get the sums wrong on the bank payroll tax and bank levy. Her Majesty’s Revenue and Customs confirmed that there is a £2.3 billion net receipt from the bank payroll tax, and that is spelled out in the March 2010 Budget book, which the Labour Government published. We are raising £2.5 billion every year from a bank levy that he opposes— right?—unless he has changed his mind on that. [Interruption.] He now supports it. Well, that is good news.

Perhaps, then, the right hon. Gentleman will listen to the right hon. Member for Edinburgh South West (Mr Darling). The right hon. Member for Morley and Outwood (Ed Balls) quoted quite a lot from the newspapers in his reply. Well, this is from The Daily Telegraph: “Bankers’ bonus tax failed, admits Alistair Darling,” who said:

“I think it will be a one-off thing because, frankly, the very people you are after here are very good at getting out of these things and...will find all sorts of imaginative ways of avoiding it in the future.”

That is from the then Chancellor who actually introduced the tax on which the right hon. Gentleman now pins his entire economic prospects.

Let me end by saying this: the right hon. Gentleman calls for things that he simply did not do in government. On pay and bonuses, he says control them in the nationalised banks; he did not do that last year when he was in the Cabinet, and he did not do it at all when he was in the Treasury. He calls for transparency; he did not introduce it when he was in the Cabinet or in the Treasury. He talks about reforming the banking system; he is the person who designed the banking regulatory system that failed, but he does not admit it. He talks about the bank levy; he wrote 11 Budgets and never put one in. And on lending, he tried as a member of the Government to secure lending agreements throughout the banks, and he completely failed. The truth is this: he is a man running away from his past, with no plan for the future.

[Mr Andrew Tyrie (Chichester) (Con)]

Anybody looking reasonably at the settlement will have to agree that it is a welcome step in the right direction. In normal times, Governments should not intervene to force banks to lend or to reveal commercial details of pay, and I very much hope the Chancellor will confirm that it is a one-off, with one exception. Does he not agree that, without further transparency on bonuses, we will never know whether banks are fuelling risks and mistakes for which one day, as a result of the way they misallocate risk, we may have to pay? Will he also support the Treasury Committee’s initiative, outlined in a letter to the Financial Services Authority, and supported by Sir David Walker, to secure that much higher level of transparency?

[Mr Osborne]

I thank the Chair of the Treasury Committee for the welcome that he gives to the package. Of course, in any normal times one would not want to have to negotiate lending agreements with the banks or, indeed, be in a situation where half our banking sector was in part in the public’s hands, but that is the situation that we inherited as a Government and why I felt that the agreement with the banks was necessary, as well as the additional tax that we are levying on them.

My hon. Friend specifically raises the issue of transparency and his proposals that I know he has put to the FSA. As I said in my statement, we have a voluntary agreement this year on disclosure, which already goes beyond those of other financial centres in the world, but, having consulted, we will legislate in the coming year, and his proposals will deserve close attention.

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

Will the Chancellor confirm that, as a result of his Herculean efforts in this struggle with the banks, the names of the traders who are still going to be awarded the greatest bonuses will not be made public?

[Mr Osborne]

The disclosure will be of those senior executives not on the board, but in the Walker proposals there was not even a proposal to identify individual salaries. So it is the senior executives who will be identified.

[Stephen Williams (Bristol West) (LD)]

I welcome what the Chancellor says about the levy, the extra lending, the transparency on bonuses and, in particular, the restraint shown by the two banks that are effectively under state control. On the banks that are not under our control, however, does he agree that, at a time when families throughout the country face difficulties, some banks seem to have lost their moral compass and really ought not to award themselves extravagant bonuses on a level that families could only dream of?

[Mr Osborne]

I agree with my hon. Friend that the banks should show restraint and an appreciation of the society in which they operate, the challenges that we face with the economy and, indeed, the squeeze on families’ incomes, in part due to the high prices of things such as oil and food. I make this observation: the bonuses this year will be lower than those in the last year of the Labour Government; and, as a result of this agreement, they will also be lower than they would have been, a point that will be confirmed by the independent non-executive director of the individual bank.

[Mr Dennis Skinner (Bolsover) (Lab)]

Why should anybody believe that the Chancellor of the Exchequer has got the guts to take on the banks, when today it is revealed that he and his friends in the Tory party—those on millionaires’ row—have picked up £44 million from those bankers in the City? Why should we believe all this rubbish?

[Mr Osborne]

I thought that the hon. Gentleman might ask a question like that, so I did a bit of research and discovered that one of the biggest donors to the shadow Chancellor’s party leadership campaign was a Michael Sanzone, who started off at ABN Amro, moved to RBS and ended up at Lehman Brothers before supporting his campaign. They are probably the four most catastrophic decisions of recent years.

[Charlie Elphicke (Dover) (Con)]

That gentleman was probably expecting a knighthood and a peerage, like so many of them had in the past. Have we not moved on from excessive bonuses to an emphasis on lending more money to small and medium-sized enterprises? Are we not seeing £10 billion for SMEs and £2.5 billion in total for the new growth fund?

[Mr Osborne]

My hon. Friend is absolutely right. For me, in these discussions the absolute key has been the additional commitment to lend to small and medium-sized businesses. Over the past couple of years, all Members have had people in our constituencies come to us with very difficult stories about the failure of banks to lend to such businesses, and we now have a commitment to increase the lending available by 15%, which is a substantial increase. Alongside that—I did not have time to go into all the detail, but it is being published this afternoon—there will be a new code of practice for the banks to treat their customers much more fairly: for example, they should engage with small businesses a full year before an overdraft comes up for renewal. For me, dealing with that crucial area of the economy—getting credit to small and medium-sized businesses—has been one of the most important parts of the new settlement.

[Simon Danczuk (Rochdale) (Lab)]

We now have the big society shrinking before our eyes, and voluntary organisations seeing their budgets cut left, right and centre. At the same time, we still have bankers’ bonuses well beyond most people’s dreams, and on top of that we learn today that the City and organisations in it, as my hon. Friend the Member for Bolsover (Mr Skinner) pointed out, have been stuffing money into the Tory party’s coffers. Is this a series of coincidences, or should the public be more suspicious?

[Mr Osborne]

I just pointed out that a Lehman Brothers executive was one of the biggest donors to the shadow Chancellor’s campaign, and I think the hon. Member for Bolsover (Mr Skinner) shouted at that point, “Well, I didn’t vote for him.” [Interruption.] He repeats it; in fact, he probably did not vote for the Labour party leader, because as far as I can tell virtually no Labour MP did. That brings me to this point: the key thing about the Labour party and its fundraising is that it gets money from the trade unions and changes policy as a result.

[Nicky Morgan (Loughborough) (Con)]

On behalf of the small businesses and voluntary sector in my constituency, may I thank the Chancellor for his announcements about the business growth fund and the big society bank? Is not the reason why the shadow Chancellor’s statement was so empty that the Opposition realise that they did nothing so constructive during their 13 years in government?

[Mr Osborne]

My hon. Friend makes the very good point that we need to see more support for small and medium-sized businesses in our constituencies and in our economy. The regional business fund that I talked about, to which the banks have today made a commitment of an additional £1 billion, is very important because it addresses one of the weaknesses in the British economy—the absence of support, particularly equity support, for small, expanding businesses. I think that this will make a significant contribution to that.

[Stewart Hosie (Dundee East) (SNP)]

I thank the Chancellor for his statement and for the early advance sight of it. I agree with what he said about the public’s response to the high levels of pay, which are not fair and reasonable and are not seen to be so. I welcome the very low cash bonuses for RBS and Lloyds staff and the decision for executive bonuses to be paid in shares only. May I suggest that that should rolled out to every bank every year as a matter of course? On the new bank lending, will he confirm that it will really be new, that it will go to the businesses that need it most, and that we will not be locked into excessive fees and charges?

[Mr Osborne]

I thank the hon. Gentleman for the support he has given to important parts of this package. I understand how important the banking industry is to Scotland, where many thousands of people are employed in it, and the impact that the failure of RBS and HBOS had in Scotland. On his specific point about bonuses, the new code of practice that came in last month forces all banks to pay a much greater proportion of their bonuses in shares and in deferred packages. Of course, none of this existed when Labour was regulating the City. As I have said, I would urge the banks to show restraint and reflect the fact that they are operating in a society with economic challenges brought about by the deepest recession and the biggest banking crisis of our lifetimes.

[Jason McCartney (Colne Valley) (Con)]

Let me tell the hon. Member for Bolsover (Mr Skinner) that my constituents and I can only dream of living in the £1.6 million house that his party leader lives in.

I welcome the Chancellor’s statement on lending to small businesses and curbing banking bonuses. However, with Lloyds TSB closing its last remaining branch in Meltham and Barclays closing its branch in Milnsbridge, when he next meets the banking bosses will he please stress the importance of community banking and the fact that not all constituents have access to internet banking?

[Mr Osborne]

When I next talk to the banking chiefs, I will certainly communicate to them, or my office will do so, the specific issues that my hon. Friend raises about the two banks in his constituency. One of the challenges we have at the moment is that RBS and Lloyds are trying to de-lever because of the enormous mess they got into under the previous Government. More generally, he makes a very good point about the importance of community banking. The four banks that have reached this settlement today are committed to extending that and thereby, to a degree, rolling back what happened in recent years. There are also those who want to enter the banking sector. Of course, they have to comply with the FSA requirements, but I know that some of them are offering a return to the kind of community banking that he talked about.

[Anas Sarwar (Glasgow Central) (Lab)]

The Chancellor compares the funding given to the Labour party by trade unionists with the 50% of donations to his party from the City, but I remind him that it was the bankers who caused this crisis, not millions of hard-working trade unionists.

An FSA report found that RBS had 1.1 million customer complaints, more than 50% of which were not dealt with appropriately, resulting in a £2.8 million fine. Does the Chancellor think it is right to reward failure with lavish bonuses, whether in cash or in shares?

[Mr Osborne]

It was the last Labour Government who were responsible for the economic mess that we got ourselves into, and the sooner Labour Members face up to that, the better. One example of that was the arrangements put in place regarding RBS, to which the hon. Gentleman referred. That is the contract that we inherited from Labour; this is what the then Ministers who now sit on the shadow Front Bench signed up to: they explicitly told RBS that from 2010 it should pay in line with the market rate. We have now got it to be at the back of the market, not the front.

[Brandon Lewis (Great Yarmouth) (Con)]

Like other Members, I welcome the move on lending to small businesses. The Federation of Small Businesses, the chambers of commerce and independent businesses have been arguing for some time that good businesses that are viable but have cash-flow problems have been struggling as a result of the policy of the banks under the previous Government. Given that this new move will allow those businesses to survive, and indeed grow, to the benefit of the economy, does the Chancellor agree that it is somewhat surprising, if not disappointing, that the shadow Chancellor and Labour Members have not welcomed it?

[Mr Osborne]

It is surprising. I noticed that in the shadow Chancellor’s rather extraordinary response there was no mention of lending. Indeed, I am not even sure what the Labour party’s plan is to get the banks to lend more and whether Labour Members welcome this move or not. I know for a fact that the previous Labour Government tried to negotiate a cross-bank agreement on gross lending, and failed. One would have thought, therefore, that they would welcome this, but they have not done so. My hon. Friend makes the good point that the key is to get lending to small businesses going, which is where the market failure has been over the past couple of years. That is absolutely crucial to our economic recovery.

[Mr George Mudie (Leeds East) (Lab)]

Now that the Chancellor is into transparency on salaries, can he, as the largest shareholder in RBS, the bailed-out bank, tell the House whether it is true, as the Financial Times has suggested, that 100 bankers are earning more than £1 million? If not, how many are?

[Mr Osborne]

The transparency arrangements are the ones that I have set out, and the arrangements for managing RBS are the ones put in place by the Government of whom he was a Whip.

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

Many hard-working families and people in my constituency will welcome today’s announcements. Does the Chancellor agree that the banks have a moral responsibility to invest in areas such as the west midlands and the black country, where we need the private sector jobs growth that is vital for the future?

[Mr Osborne]

I absolutely agree with my hon. Friend. There is a preponderance of small and medium-sized manufacturing businesses in the west midlands and the black country, as I know from my various visits there. These are precisely the sort of firms that we need to help and assist, and this agreement means that more lending will be available to them. As I say, there is also a commitment to a regional business support fund that will provide equity investment to help those small and medium-sized firms to become bigger firms, which is what the British economy needs so that we do not, as we did in the past 10 years, depend on one sector, in one corner of the country, for our economic growth.

[John Mann (Bassetlaw) (Lab)]

Is the Chancellor confident enough to predict that as a consequence of this package there will be more small businesses on the high streets of Retford, Worksop and Harworth at the end of this year?

[Mr Osborne]

I am confident about saying that the situation for small and medium-sized businesses in the hon. Gentleman’s constituency and elsewhere will improve. The situation is not going to be transformed overnight—[Interruption.] The hon. Member for Vale of Clwyd (Chris Ruane) and others seem to have complete amnesia about the fact that Labour presided over the biggest banking crisis and the deepest recession since the 1930s. Labour Members got elected on the slogan crafted by the shadow Chancellor, “No more boom and bust”, and then gave us the biggest boom and the biggest bust, and we are recovering the economy from the mess that they left.

[Several hon. Members]

rose—

[Mr Speaker]

Order. There is clearly a great deal of interest. May I gently remind the House that Members who came into the Chamber after the statement began should not expect to be called? The position on this is very clear and long established, and it must be adhered to.

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

Thank you, Mr Speaker.

“If the City is doing well, the country is doing well. When it prospers, we all prosper”.

They are not my words but those of the shadow Chancellor. Did my right hon. Friend take any advice from him?

[Mr Osborne]

No, instead I learned from the example of all the things that went wrong when the shadow Chancellor was City Minister. As one does on these occasions, I came into the Chamber armed with many of his quotes about what a golden legacy he was leaving in the City, how bonuses were at the appropriate level, and how he was going to resist all calls in Parliament to toughen up regulation. It would take a couple of hours to read them all out, but no doubt over the next few years we will have plenty of opportunities to remind him that he is a man with a past.

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

I understand that the business growth fund will have a network of regional offices throughout the UK. Will there be such an office in Northern Ireland to work with the banking sector, the business community and the Northern Ireland Executive?

[Mr Osborne]

Yes, I will ensure that there will be a presence in Northern Ireland. We are seeking to ensure that there is co-ordination between the business growth fund and the Government’s regional fund. As I have said on many occasions to Members from Northern Ireland, we are acutely aware of the challenges in Northern Ireland. The Secretary of State for Northern Ireland has produced a paper on how we might revive the Northern Ireland economy, which is now with the devolved Government. I am taking a close personal interest in that and I hope shortly to come forward, with my right hon. Friend, with some concrete proposals.

[David Rutley (Macclesfield) (Con)]

I welcome the announcement on the increase in funding for the business growth fund and the new lending agreements. Does my right hon. Friend agree that those steps will help to establish a new generation of wealth creators, which is an urgent priority in regions such as the north-west, where private sector growth has to be the focus?

[Mr Osborne]

My hon. Friend is right, which is good as he is my local MP. One of the weaknesses in the British economy over recent years has been that small and medium-sized businesses have not had access to venture capital and other sources of funding, as they have had in countries such as the United States and Germany, so that they can become larger companies. The regional business growth fund that I have spoken about will provide more access to such funding. I will also return to this issue in the Budget.

[John McDonnell (Hayes and Harlington) (Lab)]

I believe that I was the first MP to raise the issue of bankers’ bonuses in this House five years ago, and I was critical of the previous Government. I say to the Chancellor directly that referring pay to remuneration committees, which is a largely toothless and ineffective rubber-stamping exercise, and allowing bankers at RBS to convert their shares into cash bonuses within two years will not assuage the anger of the British people.

[Mr Osborne]

First, I respect the hon. Gentleman’s consistency on this issue. Secondly, I said explicitly that I did not think that the anger would disappear any time soon; memories will be long of what has gone wrong in recent years. It will help that bank boards will at least be aware of the some of the salaries that are being paid in their organisations, which they simply were not under the previous regime. That is one thing that clearly went wrong at the Royal Bank of Scotland.

[Mr Aidan Burley (Cannock Chase) (Con)]

A man named Tom Bell set up a charity in my constituency to improve the quality of life for tens of thousands of disabled and disadvantaged kids. He was awarded the OBE for his efforts. In assessing the rewards given to bankers, what does the Chancellor make of the five peerages, eight knighthoods, seven CBEs, four OBEs and four MBEs that were given to bankers by the Labour Government?

[Mr Osborne]

The statistics speak for themselves. Of course, the shadow Chancellor used to be the chief economic adviser and, given that almost everything at the Treasury was signed off by him, he presumably signed off the knighthood for Sir Fred Goodwin. Perhaps in one of our future encounters we will hear the truth about that.

[Mr Ronnie Campbell (Blyth Valley) (Lab)]

Some £125 billion was put into the banks by the last Labour Government to bail them out in the crisis. Will the Chancellor tell us when the taxpayer will get that money back?

[Mr Osborne]

Unfortunately, if we sold those shares today, we would lose money as a country. Of course we want to return those banks to the private sector. That is clearly an objective of this Government, and I suspect that it will be an important issue in this Chamber during this Parliament. The hon. Gentleman makes a very good point: a huge sum of money was put in to bail out the banks and no conditions were attached. With all the things that I have talked about today and all the things that the shadow Chancellor asked about, such as pay and transparency, when the previous Government had the leverage, they did not use it. Unfortunately, we have to deal with that inheritance.

[Matthew Hancock (West Suffolk) (Con)]

Yesterday, before the Public Accounts Committee, Treasury civil servants explained that the previous Government had the opportunity to seek to put constraints on this year’s bonuses at the partly state-owned banks, but that they chose not to. Is the Chancellor disappointed by that?

[Mr Osborne]

I am not only disappointed by it; it has been a constraint in what we have been dealing with. It is very explicit—[Interruption.] The shadow Chancellor says this is rubbish, but that was the agreement that he and his colleagues signed up to. That is the problem on this issue, and I think that that is beginning to dawn on them. They have a past—they have a record. It is a record of letting the City get away with murder, and of the rest of us having to pick up the pieces.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

Following the statement on bankers’ bonuses, how would the Chancellor respond to the one in ten of my constituents who are unemployed and looking for work; the many low-paid workers who face real reductions in their living standards over the next few years; and the many public sector workers who face the possibility of redundancy? Please do not respond by saying, “We’re all in this together.”

[Mr Osborne]

To repeat what I said in my statement, I completely understand the anger and resentment felt by the many people who have lost their job or faced their income being squeezed because of the mess that was created in the British economy by the banking system and those who were regulating it. That is the situation we are dealing with. My priority today has been to put the economic recovery first and to ensure that we get banks to lend to small and medium-sized businesses, so that they can take on the people the hon. Gentleman is talking about. Small and medium-sized businesses are the engine of job creation in the British economy and they are crucial to our revival. It is also crucial that we rebalance the economy so that we are not as dependent as we were on the success of the financial services sector.

[Mr Marcus Jones (Nuneaton) (Con)]

I congratulate the Chancellor on securing the banks’ commitment to increased lending to small and medium-sized enterprises. However, the banks’ aggressive treatment of SMEs, many of which are almost being bullied into accepting new lending terms, fees and charges, is still an issue that is damaging the potential for growth in our economy. Has the Chancellor discussed that issue with the banks during this process, and what do the banks intend to do about it?

[Mr Osborne]

I assure my hon. Friend that that issue has been at the heart of the discussions. As I have said, that is why we have put such an emphasis on getting a commitment to increased lending to small and medium-sized businesses. There will be a new code for banks, under which they will have to treat their customers much more fairly, be more reasonable and transparent about the terms that they offer, and engage with customers long before overdrafts and the like need to be renewed.

[Naomi Long (Belfast East) (Alliance)]

I thank the Chancellor for the reassurance he gave to the hon. Member for South Down (Ms Ritchie). As he knows, Northern Ireland has a very discrete banking sector, which has been heavily affected by the Irish banking crisis, as well as by the UK banking crisis. Will he ensure that businesses and individuals in Northern Ireland benefit from the announcement he has made today with regard to both lending and regulation?

[Mr Osborne]

As I said to the hon. Lady’s colleague from Northern Ireland, I am paying particular attention to the Northern Ireland economy, partly because of what has happened in the Republic of Ireland. I am also paying particular attention to the Northern Ireland banking system, because there is the potential for a knock-on effect from what has happened in southern Ireland. As I said, I am working closely with the Secretary of State for Northern Ireland on what we can do to stimulate growth in Northern Ireland. Finally, despite their questions, I welcome the support I have received from some Opposition parties in the House. That reflects on the fact that although the statement does not contain everything that people want, it is a positive step forward. It also shows how opportunistic the opposition of the former Labour Government is.

[Amber Rudd (Hastings and Rye) (Con)]

Does the Chancellor welcome, as I do, the assessment of the Centre for Economics and Business Research that for the first time ever, bankers will pay more in tax than they take home from their bonuses?

[Mr Osborne]

I do welcome that research. We need to ensure that we get the tax revenues up. We have introduced the permanent bank levy, which was opposed by the Labour party. We have forced the banks to sign up to the code of practice, which Labour announced in a fanfare from this Dispatch Box, but managed to get only two banks to sign up to—we have got all the banks to sign up. We are looking at the tax avoidance measures that have been used, such as disguised remuneration, which the previous Government had 13 years to address, but failed to do.

[Kate Green (Stretford and Urmston) (Lab)]

Not every worker in a bank is on a multi-million pound salary. Clerical, back office and counter staff frequently earn well under £20,000 a year. Is the Chancellor confident that these measures will begin to reduce pay inequality in the banking sector, and will he have discussions with senior bankers about worker representation on remuneration committees?

[Mr Osborne]

I am certainly happy to raise the issue about representation that the hon. Lady mentions, but—[Interruption.] These people seem to forget that they were running the country for 13 years and had every chance to do the things that they complain about now, and they completely failed.

To return to what the hon. Lady said, I will raise the specific issue of the representation of workers within the banks. As I have said, most people, including myself, find some of the levels of pay in the financial services sector extraordinary. We are seeking to start to constrain them, although we obviously have greater control over the semi-nationalised banks. I hope that we are also ensuring that we get the tax revenues required to help pay off the nation’s credit card, the budget deficit.

[Neil Parish (Tiverton and Honiton) (Con)]

Like many hon. Members, I welcome the Chancellor’s getting greater lending from the banks for small businesses, but can he assure us that there is proper competition within the banking sector, so that money is lent at competitive rates? That is one of the problems that businesses in my constituency are having: they cannot get the money at the proper rate.

[Mr Osborne]

My hon. Friend is right that competition in the banking industry is very important. In the past two or three years we have seen a massive consolidation of the banking industry, with many of the building societies being folded into the larger banks. HBOS disappeared, for understandable reasons, Northern Rock had to be nationalised and so on. One of the remits of the Vickers commission, the Independent Commission on Banking, is to examine competition in the sector, and of course John Vickers himself has personal experience of competition issues. That was one reason why I asked him to take up the post. The commission is examining the specific issue that my hon. Friend raises.

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

On the Chancellor’s aspiration to have an extra £10 billion lent by the banks to UK SMEs, may I ask him how that figure was arrived at? Is it what he considers is lacking in the economy, or is it all he could prise from his friends? Is it gross or net?

[Mr Osborne]

The number is gross, like the lending targets agreed by the previous Government for the nationalised banks, but this is, of course, an agreement across the banking sector. The number was part of the hard negotiations that we had in order to get the amount up. The banks were anticipating reducing lending in the British economy over the coming year, and we have reversed that and got a 15% increase in small and medium-sized business lending.

[Christopher Pincher (Tamworth) (Con)]

In the light of his statement and what he has heard from the Opposition Front Bench, will my right hon. Friend give any further consideration to the warning offered by a certain soi-disant financial journalist who said that nothing must be done to endanger a light-touch, risk-based regulatory regime? [Interruption.]

[Mr Speaker]

Order. I must just say to the hon. Member for Vale of Clwyd (Chris Ruane) that I do not know what he has for breakfast, but I think I am going to avoid it.

[Mr Osborne]

I must say that it is a slightly depressing thought that the appointment of the hon. Member for Vale of Clwyd as shadow Parliamentary Private Secretary means that this will be a constant feature of the encounters in the House between me and the shadow Chancellor, but there we go.

My hon. Friend the Member for Tamworth (Christopher Pincher) makes a very good point. There are, of course, legions of quotes from former Labour Ministers including the shadow Chancellor about the light-touch regime, how they were resisting calls in Parliament to strengthen it and all of that. Quite a few of them, of course, have gone off to work in the banking sector since leaving Parliament.

[Mark Durkan (Foyle) (SDLP)]

Does the Chancellor not accept that he may be overselling as transparency something that is really just temporary and limited translucency on bonuses, credit and lending to business? What guarantees are there that the Bank of England will not just report on the aggregate of the money available but will examine the prices and conditions involved? Will he also guarantee that if businesses are relieved by credit granted, they will not be floored by tax demanded?

[Mr Osborne]

First, on transparency, at the moment we have a voluntary commitment by the largest British banks, and we are going to turn that into a legislative requirement on all the major banks operating in the UK. We will bring forward proposals over the coming year to consult on that, as we have to do under the statutory procedures, but my intention has been made clear.

Bank charges and so on are properly not a responsibility of the Bank of England at the moment. It is going to focus on collecting the numbers. However, we are creating a strong consumer protection and markets authority—there will be legislation before the House on that, and a very good chief executive-designate has been hired. He will ensure that the customer gets a fair deal as well.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Will the Chancellor put a cap on the value of the shares that bank executives give themselves as bonuses, or will shares now be seen as a Trojan horse for bankers to give themselves still greater bonuses in future?

[Mr Osborne]

As I have explained, bonuses are actually going to be lower this year than they were in the last year of the Labour Government, who had an opportunity to do something about them.

Yes, bonuses will increasingly be paid in shares, and for a very good reason—so that when the bank goes bust, people will not walk away with a huge payment. We remember not just Fred Goodwin’s knighthood but the pension that the Labour party awarded him. It was completely unable to deal with the fact that the bankers in the banks that went bust walked away with their money. One of the reasons for paying bonuses in shares, and why we have introduced the code, is so that the bankers, too, will pay a price if the bank in which they are involved fails.

[Alex Cunningham (Stockton North) (Lab)]

The education maintenance allowance costs £580 million a year, a fraction of the cash that the Chancellor could be raising from the banks. Why is he taking more money from young people’s EMA and other things affecting their lives than he is taking from the banks?

[Mr Osborne]

First, we are taking £2.5 billion from the banks each year, which is more in each year than in any of the Labour Government’s 13 years. Of course, the context of all this is the enormous budget deficit. It is worth reminding Opposition Members that in eight weeks’ time, the Darling plan would have started to take effect—the halving of the budget deficit in four years, which they kept repeating in the election and which the shadow Chancellor was apparently forced to sign up to. In eight weeks’ time the big cuts would have come, which would have been £2 billion less than the cuts being undertaken by the coalition Government. We have eight weeks to hear Labour’s plan for where the cuts would fall.

Trade and Investment for Growth White Paper

Wednesday 9th February 2011 Commons Chamber

13:57

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

Today I turn to one of the main building blocks of economic recovery—achieving growth through international trade and by attracting inward investment. Britain makes up just 4% of the global economy, and without aligning ourselves to faster growth elsewhere, we cannot hope to prosper. But to do that, we have to do better than in the past. In the past few decades, we have consumed too much and exported too little. While our competitors were sending manufactures across the globe, we were building a property bubble. Now, with Germany exporting more than three times as much as the UK, it is vital to turn the situation round.

We have done better in attracting inward investment. We are one of the top three recipients of foreign investment in the world, and we are home to more European headquarters of overseas companies than all other European countries put together. Inward investors provide not just jobs but 30% of our research and development, but there is no room for complacency in an environment that is increasingly competitive.

The trade and investment for growth White Paper therefore sets out a strategy for creating opportunities, providing the conditions for the private sector growth through trade and investment that will help to rebalance our economy, and securing the benefits of trade and investment openness for the world’s poorest people.

The Government want to focus on small and medium-sized enterprises, which are much less engaged in trade than bigger companies. They have told us that they want to take advantage of the opportunities that exist especially in emerging markets but cannot always access the trade credit insurance or finance needed to take the risk. They have also told us that since the economic crisis, they feel that it has become much harder to get cover from private credit insurers at reasonable rates. The Government will therefore create several new schemes and extend one existing scheme, which will be launched in the coming months.

First, the Department for Business, Innovation and Skills will launch an export enterprise finance guarantee scheme offering export finance valued at up to £1 million for SMEs. The Export Credits Guarantee Department will launch several schemes, including: an export working capital scheme for those who are ineligible for the EEFG scheme, offering export finance of more than £1 million; a bond support scheme under which the Government will share risk with lending banks on the issue of contract bonds; and a foreign exchange credit support scheme, which will support banks offering foreign exchange hedging contracts to SMEs by sharing credit risk. The ECGD will also extend its short-term credit insurance scheme to cover a broader range of exporters, including SMEs. In addition, UK Trade & Investment will increase its focus on emerging markets and on helping SMEs, and launch a new online service offering access to sales leads around the world.

All Ministers have been asked to support our trade diplomacy. I have led, or supported the Prime Minister in, high-level delegations to Brazil, India, China and Russia with business representatives, promoting exports and seeking inward investment. We will be doing more of the same this year and beyond.

However, half our exports are to the EU, and consequently we have a strong interest in ensuring that the EU grows. That makes the completion of the European single market even more vital. Recent analysis suggests that trade between the UK and other EU member states could be as much as 45% below potential, largely because of significant non-tariff barriers. Completion of the single market could translate into 7% additional income per head per UK household. We therefore strongly support efforts to remove barriers to trade, particularly for SMEs, in fields such as e-commerce and low-carbon products, and in professional and business services, for which there are currently an estimated 3,000 regulatory requirements. We will also press for energy and agriculture liberalisation.

At the international level, completing the Doha round is one of our top objectives. Finishing those trade negotiations could deliver a £110 billion boost per year to the global economy. We have spent 10 years negotiating and now need urgent action to agree the key elements of the Doha deal this year, so I am glad that momentum towards a deal seems to be building again. Britain will do its utmost to get the World Trade Organisation past the finishing line this year. Doha is the top priority, but we will also pursue an ambitious programme of EU free trade agreements with our main trading partners, including India, Canada, Singapore and the south American Mercosur countries and, I hope, with Japan following the recent agreement with South Korea.

Finally, the UK is committed to assisting poor countries to take advantage of the opportunities presented by an open global trading system. International trade is one of the most important tools in the fight against poverty and research evidence shows that per capita incomes grow three times faster in countries without trade barriers than in other developing countries. We will therefore ensure that trade is a central theme across our bilateral aid programme, and promote regional integration, notably in Africa through our Africa free trade initiative. Helping the developing world in that way is the right thing to do on moral grounds, and it is in Britain’s economic national interest.

This White Paper sets out an ambitious direction for the UK and will guide the Government’s work on trade and investment. We will implement it vigorously and actively, and I urge British business to seize the opportunities that it will present. In that way, we will all benefit from the vision it sets out: an open trading system and a competitive British economy, driving jobs and growth.

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

I thank the Secretary of State for sending me a copy of the White Paper earlier today and for notice of his statement. I welcome the broad thrust of the statement so far as it goes, but may I remind him that exports alone will not deliver without a credible plan for growth across our economy? Putting new tyres on the car will not make it perform better if the engine has not been fixed.

We welcome the importance given to exports and export support, and support the increased focus on the major emerging markets such as Brazil, China and India, without neglecting our longer-established markets. We also welcome the commitment to opposing protectionism and promoting free trade. Subject to the detail, we will support the particular measures that the Secretary of State proposes to develop export support for SMEs, although I hope he can give us a timetable for their implementation. I hope the Secretary of State acknowledges that all those measures build on work done by the previous Labour Government.

Like the previous Government, this Government are committed to the completion of the Doha round of global free trade talks. Given the difficulties that those talks have had in the past, can the Secretary of State tell the House what specific new initiatives he will take in the coming year to ensure that talks are completed successfully? His predecessor and my right hon. Friend the former Prime Minister played an active and engaged role in trying to move the WTO towards agreement. What personal role has the Secretary of State played and what commitment has he gained from the Prime Minister about his personal involvement in securing an agreement this year?

Does the Secretary of State accept that the Doha round must foster development, and will he respect and build on the work of his Department and the Department for International Development under the previous Government to ensure that trade agreements support poorer, developing countries?

The White Paper recognises the potential benefits of completing European free trade agreements. What specific new initiatives will the Secretary of State take within the Council of Ministers to get things moving forward? Finally on Europe, what specific measures will he take to broaden and deepen the single market, as the White Paper puts it?

There appear to be some significant problems underlying the White Paper. Can the Secretary of State assure me that the cap of £25 million does not create a gap in export support for mid-range companies? Will he confirm that the UKTI budget will be cut by 19.5% in real terms? Given the expansion of activities in the White Paper, where and how will cuts be made without damaging support for exporters? What role will the science and innovation network play in supporting the export strategy?

Does the Secretary of State recognise that a successful export drive depends fundamentally on having goods and services to sell, and on having the companies that can provide and sell those goods and services? Does he therefore also recognise that the Government’s reckless approach to deficit reduction is damaging the prospects for growth and jobs? Can he tell the House why the strategy for growth has still not been published when he promised it in October? Does he acknowledge that the new director-general of the CBI has now joined the previous director-general in criticising the Government for having no plan for growth? Without a clear vision for the economy and a plan for growth, we will not have enough companies to export or the products to sell.

Will the Secretary of State confirm that pharmaceuticals and the life sciences are one of the knowledge-based industries by which we can hope to earn our way in the world? Last week, Pfizer announced the closure of its Sandwich plant. Is it not a chilling message that one of the world’s leading pharmaceutical companies looked at its global activities and decided that it no longer needed to be in the UK, and that it could afford to the leave the UK outside its global research strategy? How much more investment will we lose before this complacent Government produce a credible plan for growth?

The White Paper says that the Government will invest in UK infrastructure. Will the Secretary of State confirm that the introduction of universal broadband has been delayed by three years, and that there is no credible plan for fast broadband? Does he accept that those failings make the UK a less attractive place for investment by companies that support the digital economy?

Does the Secretary of State recognise that a recent report by Experian and the National Endowment for Science, Technology and the Arts concluded that there are companies with the potential to grow and export in every region of the country and in many different sectors of the economy? Does he recognise that regional development agencies often worked with UKTI to support exporters? He has abolished RDAs, but can he explain why the White Paper contains only one passing mention of regional support for exporters and support for exporters in the regions? How will he ensure that potential exporters get the right support in every part of the country?

The White Paper praises higher education as a gross export earner of £5.3 billion, so why has the Secretary of State supported changes to student visa policies that will do real harm to the country’s seventh biggest export earner and undermine our long-term trade and development interests? The White Paper speaks of investing in science, but does the Secretary of State recognise that with science investment cut in real terms and other countries increasing their science investment, we are in danger of losing world leadership in this area?

I welcome the recent performance of manufacturing exports, which have taken advantage of a competitive pound. Will the Secretary of State confirm that the strength of the manufacturing sector has been supported by the previous Government’s support for science, research and development tax credits and capital allowances, and that—in the worst of the global recession—the scrappage scheme, time to pay and flexible tax credits all helped manufacturers to retain more of their work force? Does he recognise that we now have a unique opportunity to use manufacturing exports to strengthen the supply chain companies and develop the next generation of world-beating export products? What is he doing to ensure that we take advantage of that opportunity?

There is much common sense and continuity in the White Paper and no need for artificial arguments about it, but the Secretary of State must recognise that its impact will be limited without a credible plan for growth.

[Vince Cable]

First, may I respond to the right hon. Gentleman’s positive comments? He is right that, compared with, say, the United States or France, there is a significant degree of consensus about trade policy. Probably one of the best statements on the relationship between trade and globalisation was set out by Clare Short, a few years ago when she was Secretary of State. There is a lot of common ground.

The right hon. Gentleman asked about Pfizer. As it happens, I chaired the task force this morning, which—with the leader of Kent county council and the Minister for Universities and Science—is seeking actively to try to save as many jobs as we can on that site and to mobilise other pharmaceutical companies. Its work is coming along well, but these are early days.

The right hon. Gentleman asked specifically what I have been doing in relation to international trade initiatives. In each of the major BRIC—Brazil, Russia, India and China—countries that I have visited, I have engaged with the Trade Ministers, especially the key ones in India and China, which are critical to the success of the Doha round, and tried to persuade them of the importance of making good offers. We have had useful discussions about that. I have had several meetings with Mr Barnier about how we can progress the single market, and only a week ago I was in extensive discussions with my opposite number from India about the European Union free trade agreement. These are works in progress, but progress is undoubtedly being made.

The right hon. Gentleman asked about some of the concrete measures on trade promotion and resources. He appreciates that export credit guarantees are underwriting bank lending—they are not a cash contribution and there is no resource implication. He asked about timetables, and these schemes will be introduced in the next two to three months on a pilot basis. They are, in fact, imminent.

The right hon. Gentleman rightly mentioned the fact that there is some reduction in the UKTI budget, but he should recall that, under the RDA system that he extols, there was a ludicrous duplication of resources. We had British trade ambassadors from each of the RDAs posted in overseas countries, competing with each other and wasting resources. We will get more from less when it comes to trade promotion.

On the wider issue of the state of the economy, we earlier had an extraordinary display of amnesia from the shadow Chancellor, who forgot his role in the last Government. The shadow Secretary of State now tells us about the decline in manufacturing. He may have forgotten the debate last week when we had to point out to him that the decline in the manufacturing sector in the UK economy from 20% to 12% of GDP was far in excess of any other developed country, and that is the rebalancing problem that we are now trying to address. Of course, trade by itself will not solve the problem—it is 30% of GDP—but it is important, especially for some areas such as the north-east of England. Rebalancing is about manufacturing, exports and private sector investment.

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

Now that the Secretary of State has been in situ for some time, does he recognise—as we on the Business, Innovation and Skills Committee recognise—that UKTI is a bureaucrat’s vision, not a business man’s vision, evaluates itself on process and not on outcomes, and has a variable performance dependent on the quality of personnel in post? Does he also recognise that not one trade ambassador comes from the entertainment or music industry, which are among the major earners for Britain in the world at large? Will he have a root and branch review of UKTI, using business input, to ensure those outcomes?

[Vince Cable]

The business people whom I meet—and I meet a great many—frequently make a positive assessment of the support that UKTI gives them. There are some criticisms, but not many. To answer the hon. Gentleman’s final point, he will know that Lord Green is now the Trade Minister. He has a business background and is applying precisely the disciplines that the hon. Gentleman feels—and I agree with him—are necessary.

[Joan Walley (Stoke-on-Trent North) (Lab)]

Nothing is more important than creating jobs in the part of north Staffordshire that I represent. Because so many jobs are at risk because of public sector cuts in that area, the statement that the Secretary of State has just made is perhaps the most important statement that we will receive from this Government. Will the right hon. Gentleman work with us to ensure that that trade diplomacy that he mentioned will embrace making the case for investment at every level, including in the new environmental technologies, and the support needed for SMEs? The chamber of commerce in north Staffordshire tells me that the business initiative does not have the funding that it needs.

[Vince Cable]

The hon. Lady is right to say that trade is crucial in her part of the country, and I have had discussions with her and her neighbours about the ceramics industry, which is clearly one of our success stories, and we should promote it. I also met the chairman of her local enterprise partnership, who was a good deal more sanguine about its prospects than she is.

[Lorely Burt (Solihull) (LD)]

I warmly welcome this statement, particularly the measures for SMEs. The previous Government were very good at helping with weapons and the aerospace industry, but this is one sector that really needed some help. What can my right hon. Friend do to publicise the scheme to ensure that all SMEs that are thinking of exporting can benefit fully from the measures that we are taking today?

[Vince Cable]

I would not completely deprecate efforts to promote the aerospace industry—I am doing the same—but my hon. Friend is right to say that the key message of the statement is about SMEs. Compared with countries such as Germany, the number of our small businesses that export is relatively small, and we have to publicise that help through bodies such as the Federation of Small Businesses and the chambers of commerce, as well as through our website. We will be active in doing that.

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

As Chair of the Business, Innovation and Skills Committee, I wish to make it clear that previous reports from the Committee are slightly less critical of UKTI than may have been suggested by a Member earlier. I broadly welcome the thrust of the White Paper, especially in connection with export credit finance, which is obviously of crucial importance. It is good that that is being seen to be addressed. The White Paper and the Secretary of State both refer to the potential for further trade with the EU, and the removal of non-tariff barriers will have the potential to boost this country’s export income. Can the Secretary of State be more specific about what policies he will pursue in that area and give us assurances that those will have the support of the European Scrutiny Committee?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Can we have very short questions? There are many Members who wish to contribute, and I want to try to fit everyone in.

[Vince Cable]

As far as the single market is concerned, I meet Mr Barnier regularly, and there is now a real momentum behind trying to implement the Monti report, which sets out how the single market can be deepened. There are key areas where Britain can do well—such as low-carbon products and services in general, where there are enormous obstacles to trade—and we will focus on those.

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

May I thank my right hon. Friend, on behalf of small and medium-sized enterprises in Stratford-on-Avon, for the White Paper? His focus on exports and tackling some of the problems with the ECGD is absolutely right. I would like to bring to his attention the fact that export finance through banks is under threat from gold-plating by the Financial Services Authority and parts of Basel III. Such finance is a safe way of financing exports for our SMEs, and indeed all our businesses. The failure rate is 0.002%, yet it is in danger of being put in the same bracket as long-term finance, which would act as a disincentive for banks to fund export finance.

[Vince Cable]

As far as the ECGD is concerned, one of the things that we discovered when we investigated this matter is that Britain is far behind countries such as France—which has COFACE and other such agencies—in providing trade finance. That is the gap—the market failure—that we are trying to fill. I hear my hon. Friend’s point about banks in general—a point that the Chancellor dealt with a few moments ago. There is clearly an issue about the extent to which the FSA has overreacted in its interpretation of international rules.

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

I am sure that the whole House will welcome measures to help small and medium-sized businesses to export more, but how are small businesses helped to export by the abolition of the grants for business investment scheme? The figures from the Secretary of State’s own Department show that this money produced £10 of private sector investment for every £1 of public money spent. The money was directed overwhelmingly at small and medium-sized businesses, and overwhelmingly at manufacturing companies, and it was available only in the assisted areas that the Government say they want to help. Does not the abolition of the scheme show that there is now a widening gulf between the rhetoric about rebalancing the economy and the reality of the policies that the Government are pursuing?

[Vince Cable]

We want to help small businesses, but we intend to do so in a more cost-effective way, and in a more effective way overall. The support for trade finance that I have described is specifically directed at small enterprises. As for the other schemes, such as mentoring, which the right hon. Gentleman will know about through my colleague the Minister of State, Lord Green, we are putting in place a whole series of measures that are focused specifically on the SME community.

[Margot James (Stourbridge) (Con)]

I congratulate the Secretary of State on extending the remit of the Export Credits Guarantee Department into small business support, but will he review the department’s performance and structure further? I refer in particular to the fact that 90% of the support that it provides goes to the aerospace industry. That shows a real imbalance, and there are other problems with the functioning of that department too.

[Vince Cable]

I accept the general argument. We accept that the ECGD is an agency of Government that needs reform. It has been heavily constrained in recent years by judicial reviews of some of its export activities. Of course we have to respect the courts, but the ECGD clearly needs to do more and perform a wider range of functions. What we are announcing today for small-scale enterprises is a key step forward.

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

The latest figures from Her Majesty’s Revenue and Customs indicate that Welsh exports fell by 6.3% in the previous four quarters. Considering that UKTI has no presence in Wales, what is the Secretary of State doing to ensure that my country, traditionally an exporting nation, is at the heart of this strategy?

[Vince Cable]

I did not totally follow the hon. Gentleman’s point about the statistics. Just to go over what the most recent statistics from a couple of days ago tell us, exports actually grew by 6% in the last quarter of last year, compared with the previous quarter. We should not read too much into that, because we are in abnormal conditions, but exports, along with business investment and manufacturing, are now growing. Wales, as a manufacturing and export centre, as he says, should be benefiting from that, and I hope that it will.

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

The Secretary of State’s statement was strong on specific measures for encouraging trade and exports. However, it was less detailed when it came to inward investment, which is equally important when it comes to creating jobs and growth in the UK. What specific measures is he proposing to boost inward investment into the UK?

[Vince Cable]

It is right to say that inward investment is enormously important. We start from a position of strength, as a major host country for inward investment. One of the specific actions that we are taking is giving the Trade Minister, Lord Green, personal responsibility for developing close relations with our major inward investors, in order to build up the flow of capital into this country.

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

One way to make our businesses, both large and small, more internationally competitive is to ensure that we have the skilled work force that we need for growth. Does the right hon. Gentleman agree that a vital tool in that is using public procurement, at both local authority and Government level, to increase the number of apprenticeships available? That tool was widely used by the Labour Government, and is successfully used by our European counterparts. Given that my Bill—the Apprenticeships and Skills (Public Procurement Contracts) Bill, which is due to receive its Second Reading this Friday—is supported by the Federation of Small Businesses and the British Chambers of Commerce, will the Secretary of State now lend his support to it?

[Vince Cable]

As it happens, I launched apprenticeship week on Monday, and visited several parts of the country to promote apprenticeships and raise their status. Indeed, Government support has increased, as the hon. Lady knows, with 75,000 new apprenticeships this year. There are good elements in her Bill, and I know that she is talking to the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton (Mr Davey), who is sitting beside me now, about how we can take those positive elements forward.

[Richard Harrington (Watford) (Con)]

I commend the Secretary of State for today’s statement on the White Paper. Last week I visited a company called Davin Optronics in Watford, which employs about 50 people. The company is really keen to expand into exports, yet it does not have the resources to fund a major campaign abroad. Can he assure me, first, that the measures in the White Paper for small businesses will assist them through UKTI, and secondly, that he, one of his colleagues or an official from UKTI will visit the company, help it, and get the publicity that this drive deserves?

[Vince Cable]

I hear many stories of that kind; indeed, I have small businesses in my constituency that are in exactly the same position. If I can meet the company, I shall be happy to do so, and certainly one of my colleagues will. With the additional support that we have given, along with our additional competitiveness through the exchange rate, for example, my hon. Friend will find that large numbers of SMEs will move forward over the next year, and he has identified one such company.

[Dr Alasdair McDonnell (Belfast South) (SDLP)]

Is the Secretary of State aware that SMEs and exports are the lifeblood of the Northern Ireland economy? Can he tell us whether he has had any discussions with the devolved Governments and the regions? Will there be easy access for companies? We have had a particular difficulty in the past with exports from the food and meat industries. There is also a need to deal with cross-border trade with the Irish Republic, which could be boosted considerably. Will he pay special attention to those issues?

[Vince Cable]

My colleague the Trade Minister, Lord Green, was in Northern Ireland only a few days ago, meeting Bombardier and other key investors. The hon. Gentleman is quite right to stress the importance of trade with the Irish Republic; somebody pointed out to me recently that our trade with Ireland is worth more than our trade with the BRIC countries put together. Clearly we must not forget that.

[Mr Marcus Jones (Nuneaton) (Con)]

There are many SMEs, particularly manufacturers, in my constituency that are capable of taking on the export opportunities that my right hon. Friend mentions. Often they do not readily receive the relevant information on how to take up those opportunities. How will the information about those opportunities be disseminated to grass-roots SMEs in constituencies such as mine?

[Vince Cable]

My colleague the Minister of State, Lord Green, is developing a support package for SMEs that involves a much more accessible website that I hope will give the information that such companies require. I totally accept the basic point that, because of a lack of information, there is often a gap between what is available and what is accessed.

[Mr Denis MacShane (Rotherham) (Lab)]

Does the Secretary of State share my concern—and, I am sure, that of the right hon. Member for Sheffield, Hallam (Mr Clegg)—at the letter that I received this week from the vice-chancellors of Sheffield university and Sheffield Hallam university that said that the cut in permits for foreign students will cost Sheffield £25 million in the next year? The Secretary of State has been involved in international education; he is an internationalist; he is intellectual. We are putting up the shutters to foreign students in Britain, which is slowing us down and will cost South Yorkshire a lot of money. Can he talk to the monoculturalists in the Tory party and get some more sense on this issue?

[Vince Cable]

I am certainly talking to my colleagues in the Home Office and making exactly the case that the right hon. Gentleman has just made. [Hon. Members: “Oh!”] This is a major export industry—worth over £5 billion, quite apart from the other benefits that we derive from having overseas students—and in the universities there is almost no problem. As he knows, there is an issue with some English language schools, but those schools are also a feeder for students going to university here. It is important that we remain as open as possible, while dealing with the undoubted abuses that occur in some cases.

[Julian Smith (Skipton and Ripon) (Con)]

In this transition year between regional development agencies and local enterprise partnerships, will the Secretary of State ensure that the regions, especially Yorkshire, fully benefit from this excellent White Paper?

[Vince Cable]

Yes; my hon. Friend has raised the wider point about ensuring that the LEPs are as effective as possible. As he will know, the Minister of State, Department for Business, Innovation and Skills, my hon. Friend the Member for Hertford and Stortford (Mr Prisk) has announced that most of Britain, including all our major conurbations, is now covered. I now expect them to get to work, and to address the kind of problems that my hon. Friend has brought to our attention.

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

Before the statement, I attended an event here in the Commons organised by Heriot-Watt university to highlight the university’s very successful international strategy. The principal pointed out in his speech, however, that the biggest obstacle was the proposed changes in student visas and work permits, which will affect Edinburgh university as well. Those universities, and others, hope that the Secretary of State will be successful in the battle that he is apparently having with the Home Office. This is not just a question of the effect that the changes will have on universities here and now; it is also about the image that this country will have if it sends out an unwelcoming message, as well as the possibility of undermining our export potential. I hope that the Secretary of State will take all these points to the Home Secretary when he has his discussions with her in Cabinet.

[Vince Cable]

The hon. Gentleman makes the same point as his colleague the right hon. Member for Rotherham (Mr MacShane), and I do not think that I need to reply again at length. I totally accept the importance of having a liberal system for the admission of students—subject to the need to deal with abuses.

[Elizabeth Truss (South West Norfolk) (Con)]

Food and farming is now the UK’s largest manufacturing sector, and enterprising companies such as Heygates flour in Downham Market are exporting their products to the middle east. I am concerned about the level of regulation, and about whether BIS sees food and farming as a mainstream industry. The industry is often caught up in regulations both from Europe and from the Department for Environment, Food and Rural Affairs. I have worked in international business, selling overseas, and I received a lot of support at that time from embassies and high commissions, under the auspices of the Foreign Office. What is BIS doing to link up with those people who can provide valuable assistance on the ground to people wanting to sell into those markets?

[Vince Cable]

My colleague is right to emphasise the importance of that industry. Food and drink represents more than 10% of the manufacturing sector. On the various trade missions that I have been on, companies in the sector are often at the top of the list in pushing for better access. In the European Union there are many obstacles to trade, both within the Union and across borders. It has a very illiberal and unsatisfactory system for dealing with agriculture, and we want to open it up.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

Will the Secretary of State confirm press reports earlier this week that his flagship policy of a national insurance holiday for new start-up businesses outside the south-east is failing? According to the figures only 1,500 businesses have come forward, yet the Government expect 400,000 to do so over the next three years. Does he not consider that a flop?

[Vince Cable]

I do not recognise the hon. Gentleman’s numbers. I get a great deal of feedback, particularly from small companies outside London, telling me that they are benefiting from taking advantage of the national insurance contribution relief. The Chancellor will announce the progress of the scheme in the Budget, and tell the House how he is going to develop it.

[Mr Rob Wilson (Reading East) (Con)]

May I add my welcome for the focus on SMEs? The Secretary of State is making absolutely the right judgment on this, because they will be the engine of growth and jobs in the economy. Last Friday I visited Moog, a first-class company in my constituency that is involved in advanced manufacturing and a strong exporter of components. As the Secretary of State knows, that is a very important sector. What more can he do to support advanced manufacturing and companies like that?

[Vince Cable]

My diary would be seriously oversubscribed if I offered to visit all the companies that have been mentioned this afternoon, but I am happy to talk to my hon. Friend about the specifics. Indeed, a key element of the growth strategy that the Government are working through relates specifically to the development of advanced manufacturing, and key support for that will be provided by the technology centres, for which we have obtained additional funding, and which will be rolled out over this year.

[Mr William Bain (Glasgow North East) (Lab)]

On a day when the Office for National Statistics has revealed that the UK’s trade deficit widened in December to its highest level since August 2005, and the chief economist of the British Chambers of Commerce has said that

“Britain’s trading position is not improving”,

will the Secretary of State concede that it was a big mistake to slash investment in capital allowances, which help manufacturing exporters?

[Vince Cable]

I do not think that the hon. Gentleman has studied the figures carefully. If he does, he will see that the trade deficit narrowed slightly in the last quarter of last year, as against that quarter in previous years. The figures are not good, and they have not been good for many years. We have had very poor trade performance; that is what I said at the start of my statement. We have a massive legacy of underperformance in exports, and particularly in manufactures, that we have to overcome, and the White Paper represents a clear step in the direction of remedying that problem.

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

I welcome the Secretary of State’s statement. Does he agree that it is important for UKTI to develop co-ordinated relationships with the new local enterprise partnerships, especially in the black country, in order to ensure that local businesses have proper access to export markets?

[Vince Cable]

Yes, indeed, and that is the case. UKTI will continue to delegate people to work in the regional areas. In the past there has been an enormous amount of duplication and waste, and those people will continue to work in exactly the way that my hon. Friend describes, but more effectively than in the past.

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

We have just heard that the Secretary of State supports efforts to remove barriers to trade, particularly for commodities such as low-carbon products. Will he therefore update us on when his Department plans to release details of the green investment bank, and how much money will be made available for it?

[Vince Cable]

I gave evidence to the Environmental Audit Committee about 10 days ago on the timing of the green investment bank. As I explained then, the business plan will be available in May. We assume that staff will be hired by the end of this year, and that loans will be made next year. I set out the programme and the road map when I was interrogated by the hon. Lady’s colleagues.

[Neil Carmichael (Stroud) (Con)]

I certainly welcome this statement, but I would like to probe the Secretary of State on the question of the European single market in connection with the ability of small businesses to form alliances and joint ventures with other small businesses in Europe. In addition, I would simply observe that SMEs in my constituency have a more than passing interest in capital allowances.

[Vince Cable]

I continue to hear strong representations about the value of capital allowances from, among others, the Engineering Employers Federation. That is clearly one of the things that the Chancellor will be mulling over before the Budget.

[Tristram Hunt (Stoke-on-Trent Central) (Lab)]

In Stoke-on-Trent we welcome the emphasis on small and medium-sized enterprises and manufacturing exporters, but as my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) said, there seems to be a dissonance between the rhetoric and the reality. Business Link has announced that it is no longer funding two enterprise agencies in north Staffordshire, Business Initiative and Stafford Enterprise. The local chamber of commerce is very worried about the effect that that will have on local start-ups and their ability to export. There does not seem to be very much joined-up thinking here.

[Vince Cable]

As many people on this side of the House who have run small businesses will know, the problem with Business Link was that it was a very ineffective system of business support. It has now been replaced, and in future small businesses will have access, through mentoring, to other business people, rather than to those who serviced Business Link, which was not a successful scheme.

Point of Order

Wednesday 9th February 2011 Commons Chamber

14:38

[Grahame M. Morris (Easington) (Lab)]

On a point of order, Mr Deputy Speaker. May I seek your guidance on what recourse is available when a ministerial answer to a written question is not only incorrect but directly contradicts the Government’s own impact assessment of the Health and Social Care Bill? When asked about the cost distortions involved in the private sector providing health care services, compared with an NHS provider, the Minister of State, Department of Health, the hon. Member for Sutton and Cheam (Paul Burstow) said in his written answer:

“it has not been possible to determine, on balance, whether NHS bodies or private providers of NHS services are systematically advantaged or disadvantaged relative to the other.”—[Official Report, 4 February 2011; Vol. 522, c. 1007W.]

And yet, Mr Deputy Speaker—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. That is not a point of order, or a matter for me. I would advise the hon. Gentleman that the Table Office is the place to take this matter up, and I am sure that it will be very helpful in trying to put it right. If he takes the matter to the Table Office, I am sure that it can be sorted out quickly.

Former Metal Mines

Wednesday 9th February 2011 Commons Chamber

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

14:39

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

I beg to move,

That leave be given to bring in a Bill to give the Coal Authority responsibility for preventing adverse environmental impacts from former metal mines; and for connected purposes.

At present, 9% of rivers in England and Wales are impacted by contaminated water discharging from orphan metal mines. These impacts represent one of the greatest obstacles in achieving water framework directive objectives, along with the problem of gaining back the loss of amenity and areas of ecological value. Metal mines are excluded from the Coal Authority’s duty to remediate similar water pollution emanating from coal mines—a position established under the memorandum of understanding with the Environment Agency in 1999. I propose that orphan metal mines should come under the same supervised expertise of the Coal Authority.

At present there is no legal responsibility for any party to maintain a disused orphan metal mine. This state of affairs is largely down to historical timing, because mining of iron ore largely stopped in the ’60s, as it did in other metal mines—yet coal mining persisted, in the main, into the early ’90s. Work in Wales, the south-west and Northumbria has identified more than 3,700 sites, although not all are causing serious pollution. No metal mines are still in use; the largest tin mine in Cornwall closed in 1998. Deep mines are still working, especially in my constituency at Boulby, where the tradition of mining is kept alive at the Cleveland Potash mine.

I came into contact with the issue of abandoned metal mines through the Saltburn Gill action group. Saltburn Gill is a narrow wooded stream valley leading directly off Saltburn’s famous surfing beach to the historic pier, hydraulic cliff lift and other tourist attractions of that popular Victorian resort town. Much of the Gill is a nature reserve and is designated as a site of special scientific interest as a relic of post-glacial native woodland. It is a popular walking area, and local wildlife attractions include kingfishers and visiting otters. It is also situated near the 82 shafts that access the historic networks of iron ore.

Mining in Teesside began in the 1850s, following the discovery by John Vaughan and John Marley of the main seam outcrop in Cleveland, thereby beginning a 150-year history of iron and steel making on Teesside. The iron ore from those hills, forged on the river Tees, was integral to the Victorian obsession with cast iron, the construction of the Tyne bridge and the building of Sydney harbour bridge.

Unfortunately, both Saltburn Gill and Skelton Beck began to see significant impacts from ochreous mine water appearing overnight on 18 May 1999. That quickly turned this otherwise high-quality watercourse bright orange, devastating the downstream ecology. Saltburn Gill and Skelton Beck are perfect examples of how a local river or stream can be severely impacted by mine water discharging from disused orphaned ironstone mines.

As a result, Saltburn Gill and Skelton Beck are classified as moderate and poor respectively under the water framework directive. Over 330 kg of iron ochre is deposited on the stream bed every day, contributing to 100 tonnes of iron hydroxide ochre delivered straight into the North sea each year. The pollution reduces oxygen in the stream, stops sunlight and smothers the bed, with a devastating effect on the ecology. A biological impact survey of the stream showed that the pollution had reduced the quality of the beck from grade B, which is good, to grade F, which is bad, in the 1.5 km stretch from the discharge to the sea.

Nationally, abandoned mines are the second biggest diffuse water pollutant, after agriculture. In 1992, one of the UK’s biggest pollution incidents took place when 45 million litres of heavily contaminated water burst from the recently closed tin mine at Wheal Jane in Cornwall. The mine water, loaded with cadmium, arsenic, zinc and iron, flooded into the Carnon river, causing a vast plume of polluting orange water in Falmouth bay. In the end, it was decided that a chemical treatment plant was needed to deal with the scale of the problem, allow treated water to flow to the river and block pollution.

That was all achieved by direct Government action at the time after a major incident—not via legislation giving powers to an agency to take preventive measures to avoid such incidents occurring in the first place. For Saltburn Gill action group, assistance was given by the Environment Agency, Teesside university, the local wildlife trust, Saltburn, Marske and New Marske parish council and others, to try to find a solution to the problem.

In 2009, in partnership with the Coal Authority and with funding from the Department for Environment, Food and Rural Affairs, the Environment Agency undertook a number of investigations to establish the feasibility of building a treatment plant for the mine water at Saltburn. Three boreholes were drilled into the workings and a pumping test was run for three months to help the Environment Agency and Coal Authority to design a treatment plant.

One of the first things discovered was that the mine water level was 10 metres higher than the discharge point. This has raised concerns that there is a risk of a significant outbreak. The pumping test also demonstrated to the Environment Agency and the Coal Authority that the recharge area for the mine was much larger than expected. Laboratory and field-scale tests have shown that up to 99% of the iron could be removed in a treatment plant. Furthermore, there are also industrial economic benefits to be gained from existing coal mine water treatment plants, which could be expanded if metal mines were adopted by the Coal Authority.

About 50,000 tonnes of ochre are collected every year from existing coal mine water treatment plants. The vast majority of this ochre is transported for landfill, despite the fact that it could be used for phosphate removal in sewage treatment works, could provide a pigment in the dye and paint industry, and could be used as a bulking agent and dye in the cement industry, or as feedstock for the iron and steel industry. The UK currently imports 250,000 tonnes of ochre from Australia, while sending to landfill the vast bulk of the 50,000 tonnes that it collects via the Coal Authority. Indeed, some mine waters contain significant quantities of valuable metals, and the potential for extracting them, and other chemicals, both from the mine water and from the ochre is a subject that requires further research.

There are also heritage issues to be considered in the maintenance of abandoned metal mines. A great many mines are protected as scheduled ancient monuments, and some, such as the tin and copper mining areas of Cornwall and west Devon, have UNESCO world heritage site status. Although protection of the heritage of certain sites means some treatment methods are not suitable, it can be a driver for remediation. A good example is at Parys mountain, Anglesey, where remediation activities are led as much by the local industrial heritage trust as by the Environment Agency. Another good example is at the National Coal Mining Museum for England at Caphouse colliery near Wakefield. Rising mine water posed a threat to the underground workings that were open to visitors, as well as to the River Dearne. Through work with the Coal Authority, the mine water was controlled by pumping and treated at the surface. The treatment plant is now part of the visitor attraction, with hides for birdwatching built into wetlands.

Of course, the impact of climate change could make the problem of abandoned mine pollution worse. Increased and heavier rainfall intensity will increase the erosion of contaminated spoil heap material, and sediments and deposition on agricultural land in downstream floodplains.

Legally, the Water Resources Act 1991 is the most important piece of pollution legislation in England and Wales. It outlines the principal offence that a person contravenes the Act if he or she

“causes or knowingly permits any poisonous, noxious or polluting matter or any solid waste matter to enter any controlled waters.”

Until 31 December 1999, section 89(3) of the same Act contained a defence:

“A person shall not be guilty under Section 85 by reason only of his permitting water from an abandoned mine to enter into controlled waters.”

Consequently, there has only ever been one successful prosecution. Even for the Wheal Jane tin mine, and in other high-profile cases, prosecutions were not brought, following legal advice that “causing” could not be proven because of the long and complicated history. That defence was removed in 1999, but the removal could not be applied retrospectively. This presents difficulties, as the European mining waste directive will mean a new regulatory regime to control waste facilities at working mines and quarries. Crucially, it has implications for abandoned mines. By 2012, member states have to

“ensure that an inventory of closed waste facilities, including abandoned waste facilities...which cause serious negative environmental impacts or have the potential of becoming in the medium or short term a serious threat to human health or the environment is drawn up and periodically updated.”

For all these reasons—litigious, historical, ecological and economic—I move that the Coal Authority be given the legal go-ahead to take over such abandoned metal mines, so that rivers and streams like Saltburn Gill, Saltburn Beck and Skelton Beck are returned to their former glory.

Question put and agreed to.

Ordered,

That Tom Blenkinsop, Ian Swales, Mr Iain Wright, Alex Cunningham, Ian Lavery and Mrs Jenny Chapman present the Bill.

Tom Blenkinsop accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 4 November 2011, and to be printed (Bill 145).

Police

Wednesday 9th February 2011 Commons Chamber

14:48

[The Minister for Policing and Criminal Justice (Nick Herbert)]

I beg to move,

That the Police Grant Report (England and Wales) for 2011-12 (House of Commons Paper No. 771), which was laid before this House on 31 January, be approved.

As well as seeking the House’s approval for the grant, I want to explain why this settlement for the police is necessary, challenging but manageable, and how the Government are helping the service to meet the challenge.

On 13 December, I laid before the House the Government’s proposed allocations of grants to police authorities in England and Wales. Following that, the Government held a six-week consultation on the proposed allocation of funding, during which 34 representations were received from across 20 force areas. I would like to thank hon. Members, members of police forces, police authorities and other policing organisations across the country for taking the time to share their views on the provisional settlement. Their comments have been considered carefully and fully.

Having inherited the largest peacetime deficit in Britain’s history, the Government had no option but to reduce public spending, and a police service that spends more than £13 billion a year cannot be exempt from a requirement to save public money. The October spending review set the overall cut in funding at 20% in real terms over four years, and it set the profile of the reduction. I accept that the settlement is challenging, but the Government believe that it is manageable, and that if savings are made in the right areas the service to the public can be maintained and, indeed, improved.

[Stephen Twigg (Liverpool, West Derby) (Lab/Co-op)]

The Minister says that the settlement is challenging. Does he accept that it is more challenging for some forces than for others, and that a force in Merseyside depends far more on central Government grant than a force in Surrey, which raises half its funds locally? Will he consider, for the purpose of future years, looking again at an issue that is causing great concern in my constituency?

[Nick Herbert]

I absolutely understand the hon. Gentleman’s observation that different forces raise different amounts from local taxpayers, and I shall deal with it shortly. I remain open-minded about the issue, given that the report relates to allocations for the next two years.

[Robert Halfon (Harlow) (Con)]

Is my right hon. Friend aware that over the past few years Essex police have made efficiency savings of 25%? Helicopter, payroll and legal services are now being shared, but Harlow police station remains open 24 hours a day, and our front-line services have been protected.

[Nick Herbert]

I welcome my hon. Friend’s comments. There are examples throughout the country—and I intend to provide some—of police forces that are making significant efficiency savings, and working in a smarter way that improves the service to the public even when funds have been reduced. It is clearly possible to achieve that.

It has been said that the profile of the cuts is front-loaded so that forces must find the biggest savings at an early stage. The profile reflects the need to make early progress on reducing the deficit, and it is set, but we must view the grant reductions in context. The biggest cut does not fall in the first year. The average cash reduction in grant is 4% in the first year, 5% in the second, 2% in the third, and 1% in the fourth.

It is also important to remember that a 20% reduction in Government funding in real terms does not mean a 20% reduction in force spending power. Forces do not receive all their funding from central Government; on average they receive about a quarter of it from the council tax component of precept, which is determined locally. If police authorities and, thereafter, elected police and crime commissioners choose to increase precept at the level forecast by the Office for Budget Responsibility, the settlement represents a 14% real-terms reduction in overall funding over four years. Of course I recognise that the local contribution to police spending varies considerably between forces, and I shall deal with that aspect shortly.

[Helen Jones (Warrington North) (Lab)]

Why does the Minister think that a force such as that in Cheshire should lose 200 front-line police officers while the Government are spending money on an unnecessary switch to political police commissioners? My constituents would much prefer that money to be spent on putting officers on the beat.

[Nick Herbert]

I have explained this to the House before, but I am happy to do so again for the benefit of the hon. Lady. If she looks at the allocations that we have made, she will see that the additional cost of holding an election for police and crime commissioners will not come from force budgets, but has been provided separately by the Chancellor of the Exchequer.

The argument that, because a cost is involved in the holding of an election, that election should not take place is a very foolish one, and a particularly odd one for an elected Member of Parliament to advance. When the Labour party proposed five different referendums in its manifesto, I did not notice its advancing the argument that a cost would be involved. I should also point out that it is now Labour’s policy for police authority chairs to be directly elected, and that the cost of holding those elections would arise every four years. Perhaps the hon. Lady should remonstrate with those on her party’s Front Bench if she considers that that is not money well spent. There is now agreement on both sides that there should be direct elections, and a cost is involved in that policy. If the Opposition did not believe that a cost was involved, they should not have advanced the policy and voted for it, as they did in Committee just a few weeks ago.

Let me return to the real effect of the funding reductions on forces. Humberside’s force raises the average 25% of its revenue through precept. If we assume that it chooses to adopt the freeze in council tax next year, its total funding will then fall by £5.5 million, or 2.9% of its total income of some £190 million. That is challenging, but it is not unmanageable. As Opposition Members have pointed out, the reductions in years three and four will be smaller.

Some forces, and some Members, have argued that the amount that each force raises in precept should be taken into account in the determination of funding reductions. I understand their argument, because forces that raise very little from precept will face a larger cut than those that raise a great deal. After careful consideration, however, I decided that there would be a number of objections to such an adjustment. First, it would be said that we were penalising council tax payers in other areas who already pay far more for their policing services, and who have experienced a big increase in council tax in previous years. That would certainly be unfair. Secondly, by subsidising forces in that way—including large forces with greater capacity—we would be asking others to take a larger cut in central grant than 20%, and that too would have been regarded as unfair. The fair solution, and the one that was expected by forces and authorities, was to treat all forces the same by making equal cuts in grant.

[Hazel Blears (Salford and Eccles) (Lab)]

The Minister appears to have borrowed that very doubtful concept of spending power from his right hon. Friend the Secretary of State for Communities and Local Government, and I am afraid that it is no more reputable in his hands than it was in those of his right hon. Friend. The truth is that there will be a 20% cut in grant, and the truth is that Her Majesty’s inspectorate of constabulary has said that a cut of more than 12% will affect police availability. Why does the Minister disagree with HMIC—which has said that a cut of 12% is possible, but that anything beyond that will cut into the front line—and with the chief constable of Greater Manchester, who has said that there will be an effect on front-line policing?

[Nick Herbert]

There are two answers to that. First, forces on average receive a quarter of their funding from local taxpayers, so it does not make sense to consider only the amount that they receive from central Government. What matters to a force is its total spending power, and it is hardly disreputable to take that into account. Secondly, although I do not disagree with the conclusions of the important report of the inspectorate of constabulary—with which I will deal shortly—I think it possible, as I will explain, to make savings that were beyond the remit of its report.

I am pleased that Opposition Members apparently agree with the policy of the inspectorate of constabulary that forces can save more than £1 billion a year without affecting the front line and while protecting visibility, because that is very important.

[Stephen Twigg]

I understand the Minister’s explanation, which, in a sense, constitutes a fuller response to my earlier point, but may I urge him to reconsider in future years? The main reason for the contrast between the sources of funding for forces in, say, Merseyside and Surrey is the fact that Merseyside has a higher level of social and economic deprivation. In recent years, council tax payers in my constituency have paid more for the police and have not experienced a freeze, but in practice they will experience a much bigger cut than those in Surrey.

[Nick Herbert]

I said to the hon. Gentleman earlier that we must remain open-minded about the impact in future years, and we will. I think that this is the fairest approach, and it is the approach that I am taking in relation to the cut in central Government funding. Most of the funding that a force receives through the grant will result from the application of a formula that recognises local need. I know that this raises issues, but ultimately I decided that the right approach to the cut in central Government funding was to treat each force fairly. That is why I decided to apply damping at the level of the average cut.

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

May I remind the Minister that Northamptonshire police’s grant funding will decrease by 5.1% next year, when it should have decreased by only 0.9%? That is due to the damping formula, under which Northamptonshire police will lose £3.4 million in 2011-12 and a further £3.7 million in 2012-13. They are subsidising forces throughout the country. Will the Minister promise to look at this matter for next year’s grant?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

May we have shorter inventions too, please? Will the hon. Gentleman give me that promise for the future?

[Nick Herbert]

I have met my hon. Friend and his local chief constable. He knows that I consider this matter very carefully, and he made his points very well on behalf of his constituents. I will discuss damping in a moment, but my hon. Friend’s comments reflect the fact that there will always be differences of view in this House between Members whose police forces benefit from damping and who therefore do not wish to see any change in its application, and Members whose forces have, effectively, paid out under damping and who desperately wish there to be a change. It is therefore not possible for the Government to satisfy everybody. We have had to take decisions in the round, and in accordance with what we consider to be the best and fairest way to address the totality of policing in this country.

As I have said, I decided to apply damping at the level of the average cut. As a result, each force will face an equal percentage reduction in core Government funding in 2011-12 and 2012-13, thereby ensuring that no one force will face an unacceptably large reduction in its budget. This mirrors the approach we took in the in-year savings following the emergency Budget and, importantly, it is what police forces were expecting and planning upon.

I appreciate that different forces have different views on this decision, as do hon. Members, and I understand why forces such as the West Midlands and Dorset—and, indeed, Northamptonshire—are keen to see damping phased out or removed entirely, while others such as Cumbria and Cheshire welcome its retention. As I have said, in making decisions such as these I must, of course, think about policing as a whole. I also appreciate the wider case against damping, and there is a strong argument for moving at the right time to a full application of the formula, recognising the policing needs of each area, but doing so now would have created real difficulty. I should also point out that the vast majority of funding that forces receive is allocated according to the formula. Therefore, force level allocations will remain as I announced in December.

Historically, there have been a number of ring-fenced grants to police forces. The Government’s general approach has been to remove ring-fencing and to roll funding into the main grant so that forces have greater local flexibility in determining how resources are spent. That has been the case for the rural policing fund. From 2006-07, it had already been amalgamated with four other specific grants to create what is known as rule 2 grant, but we are now rolling that into the police main grant. I want to emphasise, especially to Members representing rural constituencies, that as result of my decision on damping levels the decision on rolling this grant into the main grant means that no force will be worse off.

In some instances, I believe the case for ring-fencing grants remains strong. Outside London, the neighbourhood policing fund will be ring-fenced for the next two years to ensure the continuing funding of police community support officers, who play a valuable role in community policing. When police and crime commissioners are introduced, it will be up to them to make decisions over funding. In London, where the Mayor can already exercise this local determination, the ring fence is being lifted now, but the fund is being maintained at £340 million next year and £338 million the following year. When some Members make their allegations about cuts in front-line policing, they might like to note that that ring-fenced fund has been maintained.

The counter-terrorism specific grant has been relatively protected with a 10% cut in real terms over four years. This is a cut of just 1% in cash terms, and must be seen against a very rapid increase in resource and capital spending—some 49% in the last four years. The Government and the police service are confident that there will be no reduction in police effectiveness in this crucial area, where savings can be made but where well over £500 million will continue to be spent each year.

[Keith Vaz (Leicester East) (Lab)]

The Minister has rightly put the emphasis on the local areas, because it is their budget in the end. Does he not agree, however, that there is a responsibility on the Home Office to show leadership in respect of local forces? That is especially the case for procurement; the Home Office should encourage local forces to collaborate and pool resources in order to procure.

[Nick Herbert]

I strongly agree with the right hon. Gentleman, who chairs the Select Committee on Home Affairs, and I will address that issue later, as I intend to set out the savings that I believe can be made. The Home Office has a role to play in driving that, and in asking for the leadership of forces to share services and collaborate so that we can realise the considerable savings that are possible in procurement.

I was talking about funding to ensure national security. Similarly, funding for Olympic security has been prioritised. Up to £600 million will remain available if required for the safety and security programme, as originally pledged, although we expect that that should be delivered for rather less, at £475 million.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

If it transpires that the Minister can pay for Olympic security at the lower figure as he hopes, what will he do with the extra money? Will it be reinvested to make up for some of the police cuts?

[Nick Herbert]

Well, I think it is important that up until the Olympics the pledged sum remains in place in order to ensure security. Such decisions can be taken afterwards.

The Metropolitan police will continue to receive a national, international and capital city grant, recognising the unique duties they perform. It will be worth £200 million next year, although it will be reduced in subsequent years on the same basis as the police main grant.

The Government’s absolute priority is to ensure that the England and Wales police service retains and enhances its ability to protect and serve the public. Understandably, there has been much focus on the impact of the settlement on police numbers. Given the need to reduce public spending, we cannot guarantee the number of police and staff, which had reached record levels—almost 250,000 people—and neither, of course, could the previous Government.

[Yasmin Qureshi (Bolton South East) (Lab)]

The Minister says that the number of police officers will be reduced. Recently, he is supposed to have said that there is no link between the commission of crime and the number of police. Does he still stand by that statement?

[Nick Herbert]

I did not say that; I said there was no simple link, and there is not.

All parties agree with Her Majesty’s inspectorate of constabulary that police forces can make savings of over £1 billion a year while maintaining police availability. However, that will mean smaller police work forces in order to support the £1 billion a year of savings HMIC says can be made, which I do not think the Opposition have understood. That is why I regard it as so unacceptable that the Opposition should campaign on the issue of police numbers when they are committed to cutting spending by over £1 billion a year, which will lead to a reduction in police numbers.

The challenge for the service is to improve efficiency, drive out waste and increase productivity so that front-line policing is prioritised and the service to the public is maintained or improved.

[Philip Davies (Shipley) (Con)]

I agree that the police can save money, and they might start to do so by addressing some of the equality and diversity politically correct drivel on which they waste millions of pounds each year. If the Government were simply cutting the police budget and savings could be found, that would be fine. However, the problem with the Government’s argument is that they are doing this against the backdrop of restricting the police’s ability to use the DNA database to catch criminals and trying to restrict further the use of CCTV cameras which also help the police catch criminals, and they are releasing people from prison and having fewer criminals in prison. They cannot do all those things with fewer police.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

As I have already said, we must have much shorter interventions.

[Nick Herbert]

I always know it is a mistake to take interventions from my hon. Friend, but no doubt it is a mistake I will continue to make. I enjoy his interventions, but I note that, although it seemed to me that Opposition Front-Bench Members were giving lots of nods to what he said, they have still not understood the importance of ensuring a proper balance between security and liberty in this country. In spite of everything the new leader of their party has said, they have still not understood that.

There are also areas beyond the HMIC’s report—this comes directly to the point made by the right hon. Member for Salford and Eccles (Hazel Blears)—where savings can be made by forces working together. There are 2,000 different IT systems across the 43 police forces, and some 5,000 staff. We estimate that savings of some £330 million could be found through joint procurement of goods, services and IT. The vast bulk of these savings —around a third of a billion pounds or more—will be additional to the savings identified by HMIC.

The time for just talking about IT convergence, collective procurement, collaboration, sharing and outsourcing services is over. We cannot afford not to do these things, and we cannot afford to delay, so, where necessary, the Government will mandate the changes required. That is why I am about to lay regulations before Parliament to require the police service to buy certain IT vehicles, and so on, through specified national framework arrangements.

[Keith Vaz]

I am most grateful to the Minister for giving way a second time. I welcome very much what he has just said. This issue has been the subject of much discussion in the Home Affairs Committee, driven by its former member, the hon. Member for Cannock Chase (Mr Burley). There is a need for central procurement: a list, a book, a catalogue—not quite like Argos, but something that can be used as a template for various police forces to choose from.

[Nick Herbert]

I am grateful for the right hon. Gentleman’s support and I hope this approach will command support across the whole House, because it does make sense for the 43 forces to procure together where that will make savings; and the savings are quite considerable.

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

Pursuing that point, if there is some rationalisation among the 2,000 IT systems, would that not also lead to significantly more effective policing and a reduced risk, for instance, of systems being out of synch and data getting lost between different systems?

[Nick Herbert]

I agree with my hon. Friend that making these efficiencies and improvements in business processes is about not just saving money, but improving the quality of the service. Those two things are not incompatible, and it is time we stopped talking as though they were.

[Robert Halfon]

Will my right hon. Friend give way?

[Nick Herbert]

I want to make a little more progress, if my hon. Friend will forgive me.

The inspectorate’s report focuses on reducing police force costs to average levels, but why should forces not be able to go further by matching the performance of the best, rather than merely the average? If forces improve productivity and adjust to the level of spend typical of the more efficient forces, that could add another £350 million to the savings calculated in HMIC’s report.

Pay, too, was outside the scope of the report. It accounts for the bulk of total police spending—some £11 billion last year. Any organisation in which the majority of the cost is pay, and which is facing tough times, has to look at its pay bill. The Government have announced a policy for a two-year pay freeze across the public sector. Subject to any recommendations from the police negotiating board and agreement on staff pay, this might save some £350 million. We have asked Tom Winsor to review the remuneration and conditions of service of police officers and staff. The Government have asked the review to make recommendations that are fair to, and reasonable for, both the taxpayer and police officers and staff. I want to emphasise the importance of fairness to police officers, who cannot strike and who often do a difficult and dangerous job on the public’s behalf. Tom Winsor’s first report is due to be published in February, with the second part due in June. Taken together, we believe there are potential savings of some £2.2 billion a year by 2014-15, which is greater than the real reduction in central grant.

These changes require a fundamental redesign of policing, with far greater collaboration, shared services and the potential use of outsourcing. However, this does not mean a worse service to the public. Savings must be driven in the back and middle-offices of police forces—areas where functions are important, even if invisible to the public, but could be done more efficiently. These functions have grown disproportionately as the money rolled in and bureaucracy predominated. As Peter Fahy, chief constable of Greater Manchester police, told the Home Affairs Committee earlier this month,

“some of our headquarters operations had got too big.”

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

Does the Minister not accept that there is a danger that if forces cut back such staff—for instance, North Wales police is cutting one in four back-room staff—all that happens is that front-line officers have to be pulled off the beat to do that job?

[Nick Herbert]

No, I do not accept that at all. The challenge is to ensure that those functions are done more efficiently; it is not simply a question of handing the function to someone else. No one is saying that back and middle-office functions can or should be abolished, but they can become much leaner.

Furthermore, protecting the front-line service does not mean setting it in aspic. Productivity at the front line can be improved, too, so that resources are better deployed in order to maintain or improve the service to the public. For example, West Yorkshire police have significantly reduced the time taken to investigate a crime. Improving the standard of initial investigation, they reduced the average time taken to investigate low-level crime by 85%. Wiltshire police have significantly reduced the time neighbourhood and response officers spend in custody centres, and off the streets, from an average of 27 minutes to an average of 10 minutes. That is worth 3,000 extra hours of street policing.

In Brighton, Sussex police have put in place a dedicated team for secondary investigations, reducing the amount of paperwork that response officers have to complete and allowing them to return quickly to the streets after answering a call. This saved nearly £1 million, improved response times and sped up the time it takes to complete an investigation.

Surrey police have changed their arrangements in order to co-locate some officers in council buildings, rather than their remaining in little-used police buildings, thereby saving money. That has helped to fund the recruitment of additional constables.

[Hazel Blears]

The Minister will be aware that the area-based grants that many deprived local authorities have received to date have been used, as with my own council in Salford, to tackle antisocial behaviour in exactly that way—by having co-located teams dealing with the same families. That area-based grant has now been completely abolished—by his right hon. Friend the Secretary of State for Communities and Local Government. If there is any thought of joined-up government, clearly, this is not it.

[Nick Herbert]

I simply do not accept the right hon. Lady’s contention that it is somehow not possible for services to work together because they are receiving less money; that is a strong incentive for them to work together and to save resources.

[Robert Halfon]

I thank my right hon. Friend for giving way to me for a second time. Given what I said earlier about Essex police collaborating successfully with police forces in the south-east, such as Kent, on payroll services and on procuring helicopters and other vehicles, and given what he said about passing regulation for those who do not collaborate, will he look favourably on forces that are collaborating in future funding formulas?

[Nick Herbert]

Of course we will continue to look at all these issues, and I welcome the collaboration that has taken place in my hon. Friend’s force. HMIC was clear that collaboration has to proceed at a faster pace, and we will look at all the potential incentives to ensure that that is the case.

[Mr David Ruffley (Bury St Edmunds) (Con)]

My right hon. Friend said something terribly important about mandating collaboration, which I have long argued for, particularly through the Policing and Crime Bill in 2009. He talked about collaboration in the context of procurement. What about mandated collaboration in the context of protective services?

[Nick Herbert]

There is strong potential for forces to collaborate on protective services, and again, we want to see such things happen. We have ensured in the Police Reform and Social Responsibility Bill, which is currently in Committee, that strong duties will be placed on police and crime commissioners to collaborate. It is very important that forces do that. Indeed, in a speech I gave a couple of weeks ago, I said that the age of police fiefdoms is over. There is a need for police forces to work together more effectively. The Government do not believe in forced mergers of police forces, but we cannot have 43 forces doing things all on their own when there are great savings and efficiencies to be made in exactly the sort of area that my hon. Friend represents by working together.

[Henry Smith (Crawley) (Con)]

I am glad that the Minister mentioned some of the collaboration taking place between the Sussex and Surrey forces, and the better working with local authorities, which relates to an earlier point. He will know that from 1 April West Sussex is to have one division, which is a way for police administration to be more efficient, and it also leads to better front-line services.

[Nick Herbert]

I strongly agree with my hon. Friend. I also gave the example of Surrey, where co-location has proved possible despite the funding reductions that have taken place. It shows that with innovation it is possible to think afresh about how these services are delivered to the public.

The key to the changes that I have outlined is service improvement from the same or less resource. As Derbyshire’s chief constable said last month:

“People won’t really see much difference in terms of neighbourhood policing, emergency response and uniformed patrols—we’ll still have a huge amount of people in the front line.”

We must also tackle the bureaucracy, which has tied up police time. It is no use focusing only on police numbers if too much police time is spent on inefficient or unnecessary tasks. Every hour of police time we save by cutting red tape is an hour’s more potential time spent on front-line duties. Scrapping the stop form and reducing the stop- and-search form, which officers have to complete, could save up to 800,000 hours of officer time.

I recognise the challenge facing policing. I also appreciate that many in the police work force are worried about their remuneration and indeed their jobs. I certainly do not belittle that concern, but my first priority must be to ensure that the best service is provided to the public within the financial constraints that we all face. Every chief constable I have met has impressed upon me his or her determination to do everything possible to protect front-line services while dealing with the reduction in funding. The Government are determined to work with the police service to ensure that that is the case.

15:22

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

Today the House is being asked to approve a 20% cut in Government funding for the police force in England and Wales. The deputy chief constable of Devon and Somerset, Shaun Sawyer, has said that these are

“the biggest…cuts for a generation”.

The deputy chief constable of Cambridgeshire has said that the cuts are “unprecedented” and will have a

“real impact on people's lives and families.”

The House is being asked to vote for 20% cuts, a reduction of more than 10,000 police officers, and substantial cuts to police community support officers and critical support staff. The choice for MPs today is whether to back those cuts to the police in their own constituencies or to stand up, defend their communities and tell the Government to think again.

[Henry Smith]

rose—

[Yvette Cooper]

I will give way to the hon. Gentleman if he will tell me whether he is prepared to support the cuts to the police in his constituency.

[Henry Smith]

May I ask the right hon. Lady whether she supports the Darling deficit reduction plan, which I understand the new shadow Chancellor also supports and which would have seen £9 of every £10 of the Government’s proposed cuts to the police service going ahead?

[Yvette Cooper]

The hon. Gentleman is simply wrong, and I just say to him that he will be voting today to support 500 police officers being cut from the Sussex police force. I wonder whether he will put that on his leaflet when he campaigns at the next election—it will certainly be on ours.

Chief constables across the country are being put in an impossible position. Of course they are working hard to reassure the public, to do everything they can to improve policing, to manage with the budgets that the Minister has given them, and to deliver the best possible service and keep reducing the level of crime, but they are having the rug pulled from beneath them by the crazy scale and pace of these cuts. He can try all the smoke and mirrors he wants—he talks about cash cuts and hypothetical council tax increases—but the facts are very clear: there are to be more than 7% of real cuts in the police grant for next year and more than 8% the following year. The total cut is more than 20% in real terms, which is more than £2 billion, as the Minister has admitted.

What are the consequence of that? They are: 100 fewer police officers in Cumbria; 258 fewer police officers in Cheshire; 256 fewer police officers in South Wales; 114 fewer police officers in the Thames Valley; more than 1,000 fewer officers in the West Midlands; and more than 1,000 fewer police officers in London. The result is more than 10,000 fewer police officers in England and Wales. They are not our figures, but the figures from the chief constables and police authorities across the country. This means 10,000 police officers gone, which is the equivalent of every police officer in Hampshire, Kent and Sussex put together, or every police officer in the entire east midlands. That is the reduction that these areas are having to face and that is just the start.

[Mr Aidan Burley (Cannock Chase) (Con)]

rose—

[Yvette Cooper]

I will give way if the hon. Gentleman can say whether he will be putting the police cuts in his area on his leaflet at the next election.

[Mr Burley]

The right hon. Lady cited a figure of 10,000 police officers, but can she tell the House how many of them are front-line beat officers?

[Yvette Cooper]

Perhaps I should ask the hon. Gentleman what he means by the “front-line”. He may think that trained police officers can just be got rid off without that having any impact on the communities they serve, but that is not what his constituents think and it is not what the people of Staffordshire will think when 70 police officers are cut as part of the planned cuts that his Government are introducing.

[Nick Herbert]

The right hon. Lady is committed to cutting police funding by more than £1 billion a year. Is she saying that that can be done without reducing the size of the work force? How many of the 10,000 police officers that she has said are to go are front-line officers?

[Yvette Cooper]

I will come back to the point that the Minister raises about what Labour’s plans would be, because that is important, but first let me address the issue about the front line. The Prime Minister promised to protect the front line and he promised to carpet any Minister putting forward front-line cuts. The Home Secretary said that it is possible for the police to make significant reductions in their budgets “without affecting front-line policing.” But officers are being lost from the front line every single day—their number has reduced by 2,000 since the election alone. London is losing 300 sergeants from the safer neighbourhood teams, Birmingham has already lost police from its community teams, and the plans of the Hertfordshire and Bedfordshire forces have already troubled residents. Thanks to budget cuts, those forces have told gun owners that they will not be doing home visits and people can renew their gun licence by phone. The police have said in response:

“Unfortunately in the current climate policing is having 20% removed from its budgets we have to make the best use of that money and we are adopting a risk based approach.”

Those police have been put in an impossible position. What is more front line than keeping neighbourhoods safe or preventing gun crime? What is more front line than 10,000 trained police officers?

We have asked the Government what they mean by protecting the front line. In the other place in December, they were asked for their definition of the front-line policing that the Home Secretary said she would protect. It took more than two months for Baroness Neville-Jones to reply:

“There is no formally agreed definition of frontline police services.”—[Official Report, House of Lords, 8 February 2011; Vol. 725, c. WA50.]

Now we know why they will not protect those services—they do not even know what they are. But crime victims and communities across the country know exactly what front-line services are and they can see that they are under threat every day from this Government.

[Nick Herbert]

rose—

[Yvette Cooper]

If the Minister can define them now, I will give way to him.

[Nick Herbert]

I am grateful to the right hon. Lady for giving way. If she cannot define front-line services, how does she know that officers are going from the front line? Will she answer the question I asked? As she is committed to cutting police funding by more than £1 billion a year, will she admit that that would mean a smaller police work force?

[Yvette Cooper]

The Minister has tried to claim that police officer jobs would go under Labour’s plans. Let us be clear: our view is that we should be giving the police enough money to protect police officers and police community support officers across the country because we believe they are doing a good job. My right hon. Friend the Member for Kingston upon Hull West and Hessle (Alan Johnson), the former Home Secretary, did indeed announce plans for just more than £1 billion to be made in efficiency savings over this Parliament and yes, we have made it clear that we would have cut the police budget in line with those efficiency plans. He set out measures through which that could be done, such as greater collaboration, procurement savings and better management of staff and shifts to save money on overtime. We agree that the police service should continue to do more of what it has already been doing to improve efficiency. However, the Minister is cutting not £1 billion but £2 billion. Her Majesty’s inspectorate of constabulary identified 12% of efficiency savings, not 20%, and it said:

“A cut beyond 12% would almost certainly reduce police availability”.

[Mr Burley]

Will the right hon. Lady give way?

[Yvette Cooper]

I will give way if the hon. Gentleman will say whether those 70 officers will now be on his leaflet.

[Mr Burley]

The right hon. Lady mentioned Staffordshire police: perhaps I can explain to her what their front line might be. Staffordshire police have committed to retaining every police officer in their neighbourhood police teams, but they are still cutting 250 back-office staff. Will she join me in congratulating Staffordshire police on keeping all the front-line officers in their neighbourhood police teams?

[Yvette Cooper]

Staffordshire police, like other police forces across the country, are having to work immensely hard to keep the police working to do everything they possibly can to fight crime while they are faced with massive cuts. Staffordshire police are faced with a 7.5% cut in their budget next year alone, followed by an 8.7% cut the following year. Those steep cuts in the first year will have consequences in relation to the 70 police officers being lost, specialist teams and the work being done across the police force.

The Government are cutting more from police budgets in two years than the former Home Secretary proposed over a Parliament. If the Home Secretary and the Minister think that can all be done through efficiency savings, what do they have to say to the chief constables across the country who are cutting officers? Are they all wrong? Are they all profligate? Are they all inadequate in meeting efficiency challenges? Or is the truth that they are doing their best to manage in the face of very difficult cuts? Is not the truth that the Home Secretary and the Minister have broken with more than a century of Tory tradition? They are not looking for efficiency savings as an alternative to police officer cuts—they think that efficiency savings are the police officer cuts. They think that the best way to improve police productivity is to cut the number of police working across Britain.

[Mark Tami]

We could probably take the Government more seriously if the Minister had not, when in opposition, attacked Labour for not putting enough money into policing.

[Yvette Cooper]

My hon. Friend is right about the huge difference between the claims that those on the Government side made before the election and the reality of what they are doing now.

We now have the first Home Secretary and Policing Minister in Tory party history to want fewer police working to fight crime across Britain. The Minister is the first Policing Minister in Tory party history to believe there is no link between the number of police and the level of crime, ignoring the evidence of recent history—the 43% drop in crime in the Labour years alongside the 17,000 extra police and the 16,000 police community support officers.

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

Is my right hon. Friend aware that more than 2,000 police officers will go in the west midlands under the proposals?

[Yvette Cooper]

My hon. Friend is right: West Midlands police are being heavily affected and are set to lose a large number of police officers. That is already having an effect on communities across the area, with some police officers reporting considerable difficulties as a result of the recruitment freeze that has had to be implemented and the consequences that is having on their ability to go to neighbourhood meetings and to respond to concerns that are raised with them.

[Steve McCabe]

Is not one of the problems that the West Midlands police suffer from the gearing effect? Although the Minister has given the impression that the cuts were modest—I think he quoted £5 million in Hull—the gearing effect in the West Midlands police means they are losing 17.2% of their total resources. That is nearly £100 million, and they cannot lose that without cutting front-line staff.

[Yvette Cooper]

The situation in the west midlands is clear. The number of police officers is being cut and that is having an impact on the area.

The latest research on the links between police and crime from Civitas, which the Minister presumably regards as a bastion of left-wing profligacy—he shakes his head to indicate that he disagrees with Civitas—shows that there is a

“strong relationship between the size of police forces and national crime rates”.

That report states:

“A nation with a larger proportion of police officers is somewhat more likely to have a lower crime rate. A nation with fewer police is more likely to have a higher crime rate.”

More importantly, perhaps, those on the Government Benches are ignoring the public. Today’s poll shows that two thirds of people believe that crime will rise as a result of the Home Secretary’s cuts. People do not want the cuts to the police that the Government are introducing.

The Minister often resorts to the claim that it is Labour’s red tape which is responsible for the fact that only 11%—to quote the figure that he uses—of force strength is visible and available. He fails to point out, in a misrepresentation of the HMIC analysis, that that figure for a 24 hours a day, seven days a week service does not take account of the officers on late shift, night shift or rest day, or of the officers working on serious investigations, counter-terrorism, drugs, cyber crime or child protection.

The right hon. Gentleman should consider for a moment what would happen if his own efficiency were measured in the same way. Let us imagine that the test of Ministers’ efficiency was the amount of time in a 24/7 period that they spent speaking in the House of Commons. The amount of time that the Policing Minister spends sleeping, eating and working on knife crime, counter-terrorism or long-term planning would not be counted, as the Government do not count comparable time for the police.

On the basis of the Minister’s week in the Chamber for debate and in the Bill Committee—he has been busy —he gets to an average visibility 24/7 of not 11%, which the police manage, but 3.27%, and that includes the radio time that he was forced to do on Sunday. His visibility is not as good as that of the police, but I am sure he has some efficiency plans to share his red boxes across Departments. His boss, the Home Secretary, is at 0%. Where, by the way, is the Home Secretary?

[Keith Vaz]

I commend my right hon. Friend for her great interest in what the Minister has been doing. It is a fascinating study. I know that she is making a powerful point, but perhaps she could be a little charitable to the Minister. It may be that the Home Office did not envisage the kind of cuts that she has been talking about. Does she agree that Ministers should go back to the Treasury to explain that the effects of the cuts are very severe indeed, and that an additional special grant ought to be given to the Home Office to deal with that?

[Yvette Cooper]

My right hon. Friend makes an important point. It may well be that Ministers believed the figures they were given by the Treasury and believed that front-line services would not be hit. However, the pace and the scale of the cuts are indeed hitting front-line services. They are having an impact on police forces across the country. Ministers ought to go back to the Treasury to discuss that again.

[Hazel Blears]

As my right hon. Friend knows, a consultation was launched this week on tackling antisocial behaviour. Whatever the Government do to rename the orders and introduce some kind of cosmetic change, is it not the truth that in order to reduce antisocial behaviour, we need PCSOs and police officers on the front line in our communities, where it matters?

[Yvette Cooper]

My right hon. Friend is exactly right. She worked to tackle antisocial behaviour over many years and initiated some extremely important work. She is right that all the powers in the world will make no difference if we do not have the police in place to work closely with communities in local areas to implement those powers in practice.

[Mark Tami]

What is my right hon. Friend’s view of the idea that five people should have to phone the police? That sounds a bit like red tape to me. It sounds like bureaucracy that we do not need. How much will that cost?

[Yvette Cooper]

My hon. Friend raises an interesting point. If four people ring up and then one rings a second time, does that person count as a fifth person? Presumably the Home Office will set out guidance and red tape for local communities and police to follow.

Where is the Home Secretary today? That is an important question, because I understand that she has been sighted in the building. I know that such debates are normally attended by Ministers of State, but normally Home Secretaries do not cut the police grant by 20%. The Secretary of State for Communities and Local Government is coming here to defend his cuts, so why will she not defend hers? Could it be because she knows that she got stitched up in the spending review and so will not defend it? She left the Minister out on his own—a very thin blue line—and will not join the police cuts front line.

The Government are taking a gamble with crime and policing, just as they are taking a gamble with the economy.

[Nick Herbert]

The right hon. Lady is being generous in giving way, which I thank her for. Will she please answer my question, which I will now ask a third time? Will she admit that the cuts of more than £1 billion in policing to which she has committed could only be achieved by making the police work force smaller?

[Yvette Cooper]

We have said very clearly that we believe that the police should have the money to protect the number of police officers and police community support officers. Those are the numbers of staff that we believe ought to be protected across the country, in contrast to the cut of 10,000 in police officers. We think that we should have 10,000 more than the number the Minister is now pursuing right across the country. It is wrong for Britain and wrong for communities, and the public know it. No matter how many games he plays with smoke and mirrors, the public know it and want the extra police officers.

We will support those extra 10,000 police officers and would provide the funding to support them, because we think that that is the right thing to do. The Government are taking a gamble with crime and policing, just as they taking a gamble with the economy. They are cutting too far and too fast. They are risking economic growth and jobs and now are risking public safety and the fight against crime. Their Back Benchers should think again.

The Liberal Democrats are voting for a cut of 10,000 police officers, instead of the increase of 3,000 that they promised, and the Conservatives are ripping up hundreds of years of supporting the police in order to cut the front line. I say to Members of both parties that if they vote for these cuts today, they are badly out of touch with what their constituents want and are turning their backs on the fight against crime. Britain was not broken, but the Government are doing their best to break it now. Those Members should join us in telling the Government to go back, think again and come back with a better plan.

15:42

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

I have a sense of déjà vu in this debate, partly because we had a dry run of it a few weeks ago, and partly because I heard an excellent opening speech from the Minister during that debate. I am afraid that mine will suffer because other Members may have the same sense of déjà vu when they hear some of my points.

My starting point for the debate is the same as the Minister’s, which is that there are some inconvenient facts: we have the worst deficit in the G20 and the largest peacetime deficit since the second world war, and we are spending £120 million a day on the interest alone on our debt. Those are inconvenient facts, but they are givens, or known knowns, as Donald Rumsfeld might say.

[Mark Tami]

I seem to remember that the Lib Dem manifesto promised 3,000 extra police officers on the streets, so the cut equates to 13,000 fewer than they promised. Does that indicate how we should treat Lib Dem manifestos?

[Tom Brake]

I thank the hon. Gentleman for his rather predictable intervention, but immediately before it I was explaining—he clearly was not listening—why the Government are having to take these decisions. He and the former Ministers on the Opposition Front Bench must accept responsibility for that.

I listened carefully to the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper), because we expect the Opposition to come forward with some solutions, but during her speech I detected only one sentence in which she referred to the £1 billion of cuts that they would make and said that they would do something about back-office functions and procurement. So that is the Opposition’s solution. That is the one sentence that the Opposition’s spokesperson provided, stating how they, if in government, would have resolved the problems that we face.

[Stephen Twigg]

Will the hon. Gentleman not acknowledge that, in that one sentence—I think it was more than one sentence—of my right hon. Friend’s speech, she referred specifically to the report of Her Majesty’s inspectorate of constabulary? The figure is not one that we have plucked off the top of our heads; it is based on the HMIC’s view of the savings that can be made without damaging front-line services.

[Tom Brake]

I thank the hon. Gentleman for that intervention. Of course he is right, and the Government have based their measures on the HMIC report as well, but people who read and listen to this debate will want to hear exactly what impact HMIC’s recommendations, if implemented, will have on, for example, staff numbers, a point to which the official Opposition’s spokesperson did not respond. She ducked and dived on that point.

The Opposition can pretend that the £40 billion of cuts that they intended making, including 20% cuts throughout Departments, would have gone unnoticed, would have had no impact on front-line services and would have left police forces throughout the country unscathed, but we know, they know and people outside know that that is completely untrue.

There is no point disguising the fact that the settlement is tough. That is true, and it impacts on police budgets. As the Minister said, in 2011-12 there is a 4% reduction in cash terms. In 2012-13, there is a 5% reduction, but, thanks to the HMIC report and the measures that police forces are already taking throughout the country, much of the reduction can be made through greater efficiency.

Police forces are already delivering many examples of such efficiency. In one local example, Sutton and Merton police forces are looking at sharing a custody suite, and if successful in those two force areas, the idea might be rolled out across the whole Met police force area and in others further afield. That is exactly the sort of measure that police forces and police authorities should pursue.

The Minister quite rightly identified what is possible through IT systems savings and, as I said in an intervention, we can derive not only cash savings from that source, but great improvements in efficiency and the likelihood of resolving cases, as the communications problems between different systems are addressed.

One issue that I raised in the previous debate, and on which I hope the Minister has had time to do some work, is training for senior officers. The HMIC report identifies that there was no commonly held belief that those officers needed a detailed understanding of how to ensure that the efficiency savings—the mergers—took place effectively. The Government, HMIC or others might be able to assist with training to ensure that officers are equipped to take such tough decisions, because there are real differences between forces’ proposals.

Some forces are coming forward with a headline figure for the number of officers they are going to cut, while others are coming forward with a range of options—particularly on back-office and procurement—that could identify significant savings without the need to cut staff numbers, which some forces seem to have gone for as the first rather than the last resort.

I want to raise some specific Met issues. The Minister will be aware that the force has not yet taken a decision to cut sergeant numbers by 300; it is considering the idea, but it says it

“will be directed by final analysis and must reflect operational delivery.”

I urge the Met to maintain those officer numbers, but if that is not possible, to look at some of the proposals that I mentioned, particularly on sharing back-office functions, joint custody suites and the like to ensure that the number of police officers in the safer neighbourhood teams is maintained at the level at which it is currently set.

Equally, as I said earlier, safer neighbourhood teams may be undertaking tasks that are not their responsibility. I mentioned the example of drive-outs from petrol stations, which are taking up an inordinate amount of time in the case of at least one of my safer neighbourhood teams. After I raised that case, the local force have asked to meet me to discuss it as a wider issue, so it clearly affects not just one safer neighbourhood team but several in the borough. If a large proportion of their time is spent trying to deal with a problem that the petrol companies should be able to resolve technologically, we should look at the issue carefully to try to free up officer time to concentrate on things that really do need police intervention.

[Mr Burley]

If we want to help the police with their finances, does the hon. Gentleman agree that perhaps now is the time for premiership football clubs to start thinking about making a greater contribution to the costs of policing their football matches instead of all those police being deployed purely at taxpayers’ expense?

[Tom Brake]

I entirely agree. Given the stringent financial circumstances in which the Government are operating, that is exactly the sort of thing that needs to be considered.

The Minister referred to the review of staffing and overtime arrangements. Although I agree that very high levels of overtime are costly, and that needs to be looked at, such overtime often allows the police to undertake special tasks that they could not do otherwise and can do without the need to grow the number of full-time police officers. This requires some flexibility. Simply saying “No more overtime” would severely constrain some of the activities that the police are undertaking and that people clearly welcome and want to happen.

There are clearly many measures that the police can take to cut back to ensure that they are making the right level of efficiency savings. If the police undertake such actions, which are documented in the HMIC report, and if they look at the best practice that exists in police forces around the country, they can make the savings that they are being required to make without an impact on front-line services.

15:53

[Stephen Twigg (Liverpool, West Derby) (Lab/Co-op)]

I am pleased to have the opportunity to speak in this debate.

No Labour Member would argue with the contention that there is always scope for efficiency in public services, including the police service. My right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper) spoke about the HMIC report, as did the Minister. Our opposition to what the Government are planning is based on the sheer scale of the cuts to the police service that are set out. My additional argument, on which I will elaborate and on which I intervened on the Minister, is that there is unfairness in the allocation of those cuts as between different police forces around the country.

I should like to comment on the work that Merseyside police are doing. As in the case, I imagine, of most, if not all hon. Members on both sides of the House, crime and antisocial behaviour are consistently the biggest issues that my constituents raise with me on the doorstep, in surveys, in correspondence and at surgeries. In recent years, Merseyside police have faced some very serious challenges. Merseyside is No. 1 of any police force in the country in terms of the number of drug offences. I am therefore very concerned about the impact of cuts that are being made to the UK Border Agency, as well as cuts to local government and voluntary sector services for those with drug addiction.

In other areas, Merseyside has made truly remarkable progress in recent years. In 2005-06, it was the third highest police force in the country for violent crime, with a rate of 25.6 offences per 1,000 population. Thanks to the hard work of the police, including their work with the local community, that rate has halved over the past five years to 13 per 1,000, putting us 22nd in England, which puts it in the lower half of police forces. That is truly remarkable progress. Every indication that I have is that Merseyside police are determined to continue that progress, even in the context of the cuts that we are discussing.

Almost four years ago in what is now my constituency, there was the tragic murder of Rhys Jones. His death provided the context for a greater focus on crime, including violent crime, in Liverpool and across Merseyside. In considering the way forward for Merseyside and the fairness, or rather unfairness, of the proposed cuts, everyone in my constituency is concerned to ensure that never again do we see the tragedy of what happened to young Rhys. The police responded brilliantly and with great professionalism in that case, which resulted in serious convictions by the courts for those who murdered Rhys Jones.

Already in 2010-11, 200 police officer jobs and 80 police staff jobs are being lost in Merseyside. There is a moratorium on further recruitment, which will continue into next year. The police have estimated that by March 2012—in just over a year’s time—we will have lost almost 10% of police officer posts in Merseyside. The hon. Member for Carshalton and Wallington (Tom Brake) talked about chief constables making every effort to ensure that losing police officer posts is a last resort. I think I wrote down correctly that he said that some chief constables were treating it as their first resort. I very much doubt that that is the case in any authority. I can say with certainty that it is not the case in Merseyside, where the chief constable, whom I and other Liverpool MPs met in the House a couple of weeks ago, has made every effort to maximise efficiencies and minimise the direct impact on local people through the loss of police officers.

[Andrew Gwynne (Denton and Reddish) (Lab)]

The hon. Member for Carshalton and Wallington (Tom Brake) spoke about inconvenient facts. Last year, the Liberal Democrats in Greater Manchester, and no doubt in Merseyside, went into the election knowing about the deficit and promising more, not fewer, police. Does my hon. Friend agree that the Liberal Democrats have a duty to apologise to our constituents for giving a false impression of what they would do in office?

[Stephen Twigg]

Absolutely; I concur with my hon. Friend. Of course, that is not the only promise that the Liberal Democrats made to the British people last May that they have broken. They made that promise knowing, as my hon. Friend said, what the Budget position was. It was a deeply irresponsible pledge to make.

[Tom Brake]

Does the hon. Gentleman not also agree that it would have been appropriate for the Labour Government to announce that the structural deficit was £12 billion higher than they led the public to believe?

[Stephen Twigg]

The figures were very much in the public domain. To be fair to the Conservative party, it did say that it would prioritise cuts. There is a specific issue about the Liberal Democrats having said one thing in opposition and saying the complete opposite now that they are part of the coalition Government.

[Mark Tami]

With the Liberal Democrats, the issue is not just about the police. I remember many Opposition days on which the Liberal Democrats argued that we were not spending enough money in a host of areas.

[Stephen Twigg]

My hon. Friend makes his point powerfully. I will not focus the rest of my speech on Liberal Democrat broken promises, but the case has been very well made.

I intervened on the Minister to raise the question of the fairness of the distribution of the cuts. He set out the consultation process in some detail, and entirely understandably set out that the forces and authorities that would lose out if there were some attempt to protect those that were more reliant on central Government funding had lobbied against that. I appreciate what he said about the nature of the formula and the difficulty of changing it, and clearly the cuts relate to the original formula. Unfortunately, I am not suggesting that that can be changed quickly, but I repeat what I said in my intervention: I hope that the Government will consider the matter as we move forward.

Looking at the estimated police budget figures that the Library has produced, we see that in the forthcoming financial year, 2011-12, Merseyside’s estimated police budget, taking into account local revenue raising as well as central Government funding, will be cut by 5.8% whereas Surrey’s cut will be 3.7%. There is every indication that that gap will apply again in the following year and therefore have a cumulative effect.

In Merseyside, there have consistently been increases in the police authority precept over recent years. The local police authority has not thought, “We’re getting all this money from central Government, so we can let our council tax payers off and freeze the precept or have only a modest increase.” There have been significant increases in the amount contributed by council tax payers in Merseyside to the funding of the police. The basic reality is that on average, people in Merseyside are poorer than people in Surrey. The reason why Merseyside’s local police depend more on central Government funding than others is primarily to do with deprivation. That point applies also to other authorities, and when there are cuts on the scale that we are seeing, it is a cause for great concern. To his credit, the Minister undertook earlier to consider the matter again in future. Perhaps I might ask that he meet Merseyside MPs at his early convenience to discuss those concerns.

[Nick Herbert]

indicated assent.

[Stephen Twigg]

The Minister nods, so I am delighted to accept that we can have that meeting.

Clearly, the cuts will have an impact on forces right across the country, but that impact will differ. When there are spending cuts on such a scale, it is incumbent on the Government to consider the unfairness of those different impacts. There is clearly a need for savings in public expenditure on the police, and HMIC has considered the matter in great detail and come up with the quoted figure of 12%. My contention today is, first, that by going so significantly above that figure, the Government will inevitably damage the police service across the country; secondly, that the effects are not fair or consistent but differ for the reasons that I have given; and thirdly, that those effects are compounded by the impact of other cuts in public spending, particularly local government cuts.

Merseyside police receives direct funding from Liverpool and other local authorities for aspects of its work on antisocial behaviour. I hope that the councils will be able to protect that funding, but I am not confident that they will be fully able to do so. On top of the cuts that we are discussing today, Liverpool’s police force and others around the country will therefore lose further funding for some of the important partnership work that they do on tackling antisocial behaviour.

I urge the Government to think again, and I urge Home Office Ministers to press the Treasury to give policing and law and order the priority that the Government have given schools and the national health service. Voters—our constituents—would expect us to give the police service that priority, and I hope that in the light of today’s debate, the Government will do so.

16:04

[Mr Aidan Burley (Cannock Chase) (Con)]

A big meeting is happening in my constituency today. The Staffordshire police authority is meeting to discuss the proposals for the future of nine police stations across the force area. In “plain speak”, at some point in the future, some of those stations could close, including one in Rugeley in the heart of my constituency. Chief Constable Mike Cunningham and the chairman of the police authority, David Pearsall, have stated that Staffordshire police have made no final decision to close any particular station in the county. Crucially, they have also said that they will close no stations unless and until alternative bases have been found within the localities concerned.

That reassessment of resources is doubtless owing in part to the Minister’s announcement, and it is worth Government Members remembering that these are not cuts of choice, but cuts to correct overspending by Labour in the boom years, which has left this country with one of the biggest deficits in the world. I did not come into politics to cut police numbers, having worked with the police for many years before becoming a Member of Parliament, but the reality is that when we are spending £120 million every day just to service the interest on our debt, something has to give.

It is also worth remembering that during the election campaign, the then Home Secretary declined to guarantee police numbers or individual police stations. When the right hon. Member for Morley and Outwood (Ed Balls) was shadow Home Secretary, he agreed with Her Majesty’s inspectorate of constabulary—an independent body—that £1 billion efficiency savings could be made without hitting the front line. However, I wonder whether he knew how that would have come about. When he came before the Select Committee on Home Affairs, I asked him whether he thought it would be better if the police spent more time on patrol than they spend on paperwork. He responded:

“I think that is a too simplistic question for me to give a sensible answer”.

Perhaps in her winding-up speech the new shadow Home Secretary will give us a sensible answer to that short, simple question, which her husband failed to answer.

The changes in police stations in Staffordshire are not just about saving money; they are also about changing shift patterns. Proposals for briefing response teams at fewer locations from April 2011 are currently being considered. That is an independent operational matter designed to improve the briefing process of sergeants, and to improve communications and intelligence sharing. It follows from that operational decision that some of the nine stations under review may become underused. Even if that happens, it would not automatically mean that any of those stations would close.

However, it could mean Staffordshire police beginning to share buildings with partner agencies such as schools, church halls, libraries and shops. In fact, the police already share a base in Stafford with a Territorial Army recruiting base. I have opened an office in a former shop in Cannock town centre with a no-appointments-necessary culture. People can drop into the “MP help zone”, as it is known locally, any time from 9 to 5, Monday to Friday, to get help with their problems. Most of my staff—three of the four people whom I employ—work in the help zone rather than down here in Westminster, helping local people who come through the door with their problems. I should like to take this opportunity to pay tribute to their important work.

Other people also use the help zone, including local charities, voluntary groups, schools and—guess what?—the police. The police use it for surgeries with local people, to organise neighbourhood watches and as a general base. Is that not the model for the future, with police in existing locations in the community such as shops, supermarkets, MPs’ offices, libraries and schools, rather than in underused old police buildings, which are increasingly expensive to run?

The nine stations under review cost £1 million a year to run. How could that money be better spent on the front line—on officers on patrol, or on specialist officers to deal with domestic violence and child protection, rather than simply on bricks and mortar? Why not look to use cheaper, more front-line locations for use by the police as a front-desk base and a home for neighbourhood officers, and release the money for more police on our streets?

I pay tribute to Staffordshire police force, which is one of the most forward-looking forces in this country. As I said earlier, it has committed to retaining all police officers in neighbourhood teams and front-line staff, rather than wedding itself to a public service housing estate. The aim of this Government is to cut bureaucracy, and to enable the police to be crime fighters, not form writers. It is not the size of the work force that counts, but how it is deployed. It is not the number of police stations in Staffordshire that matters, but keeping police embedded in the community, visible and accessible, with bases that do not cost more than they need to. Without more effective deployment, modernisation of shift patterns and improved productivity, the number of local police officers engaged in local policing can still increase, despite cuts overall.

Labour has the brass neck to criticise the police grant settlement announced today, but it was its mishandling of the economy that brought this country to the brink of bankruptcy, so that we are paying £120 million a day to service the interest on our debt. That money is going to foreign investment bankers to pay for their own police services, rather than ours. But we have brought this country back from the brink. If the exam question today is “How do we maintain a visible police presence even while we have to cut police spending?” the answer is that, with barely one 10th of the police available on the streets at any one time, we know that there is room to make them more visible, more available and more effective as crime fighters.

The years of top-down bureaucratic accountability have broken the relationship between the police and the public. The police are not responsive enough to the public, and the public do not trust enough in the police. That is not the police’s fault; it is the truth of Labour’s legacy. I want to take this opportunity to thank every officer in Staffordshire for everything that they do to keep us safe, day in and day out. This Government supports them, despite the dreadful economic legacy. With our reforms and their hard work and bravery, we will not let Labour’s mishandling of the economy put our communities in danger.

16:11

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

I am grateful to be called to speak in this important debate, especially as cuts in policing will impact so greatly on my constituents. We heard earlier from my hon. Friend the Member for Liverpool, West Derby (Stephen Twigg) about how Merseyside police force is heavily reliant on funding from central Government, and I shall reiterate some of the important points that he made.

Some 82% of the force’s budget comes from the formula grant. Only the City of London, Northumbria and West Midlands forces are more reliant on formula grant funding. Can the Minister explain to the people of Liverpool why the real-terms percentage cut facing Merseyside in the 2011-12 financial year is 5.8%, while Surrey— which receives only 51% of its funding from central Government—is receiving a cut of just 3.7% in real terms?

The Minister for Policing and Criminal Justice said to the Liverpool Echo on October 15 last year:

“The priority is...helping police officers working on the front line.”

Merseyside police chief constable, Jon Murphy, has said that his force is doing, and will do, everything it can to maintain front-line policing. In fact, since 2004 Merseyside police have made maximising police numbers on the streets a priority. As a result of rigorous efficiency savings, which have been recognised nationally by the Department, and reinvestment in frontline policing, Merseyside police have increased police numbers by hundreds of officers. But we are very concerned that the Government have made no allowances for the extensive efficiency savings already made, before cutting the formula grant so harshly. It will now be impossible to maintain front-line police levels when Merseyside police will see real-terms funding cuts of 7% in 2011-12 and 8.8% in 2012-13.

Merseyside police are having to cut 200 police officers and 80 police staff by March of this year. In addition, a moratorium on police recruitment is continuing until 2012, and this will result in roughly another 200 police officers going in that financial year. That means that Merseyside police will lose close to 10% of its police officers by March 2012. Tough choices have already had to be made, including the closure of the dedicated antisocial behaviour unit.

To substantiate those savage cuts, the Policing Minster has said that there is no simple link between police numbers and crime levels. However, I would like to bring to his attention a number of studies that contradict that. A study of crime rates and police numbers across Europe published on 7 January by the think-tank Civitas—I mention Civitas because it is a think-tank that the Government are normally inclined to listen to—suggests that there is indeed a clear link. Using the most recent data from the “European Sourcebook of Crime and Criminal Justice Statistics”, Civitas compared the number of police officers per 100,000 of the population and recorded offences per 100,000 of the population. Civitas said that the data suggest

“an association between police officers per head of population and crimes per head. A nation with a larger proportion of police officers is somewhat more likely to have a lower crime rate. A nation with fewer police is more likely to have a higher crime rate.”

However, that is not the only study to suggest such a link.

[Tom Brake]

Is it not also true, however, that the Civitas report says:

“police numbers and resources are far from the only contributor to police effectiveness”?

[Luciana Berger]

Having spent a lot of time meeting the Merseyside police authority, I know that the vast proportion of its funding is taken up by staffing costs, which are a massive element. I accept that other factors can contribute to efficiency savings, but when such a high proportion of the funding goes on staffing, there are only so many efficiency savings that can be made. Indeed, a number of other studies have confirmed the link. A study published in The British Journal of Criminology in 1999, a 2005 study by the university of Cambridge and, more recently, a study last year by the university of Birmingham all evidenced the link between higher policing levels and lower crime rates. Civitas concluded by saying:

“Members of the public are at greater risk of crime in the coming year.”

I know that it is not just academics who are deeply concerned about the effect that the cuts will have, because my constituents have told me that they are, too. I recently conducted a survey in my constituency, and was astounded by the number of responses that I received—more than 800. Some 77% of those respondents told me that they were concerned about the effect that a reduction in police numbers would have on the policing of their neighbourhoods. The Minister might not see a simple link between the cuts and people’s safety in their communities, but I do, and most importantly, so do my constituents. It is time the Minister came clean and admitted what we all know: that these reckless cuts will take police off our streets and make our communities less safe. I urge him to think again.

16:17

[Mr David Ruffley (Bury St Edmunds) (Con)]

It is worth reminding ourselves and the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper)—after her, if I may say so, commendably feisty speech—that public spending constraint in this country is inevitable, because of record debt and record peacetime borrowing. The police services of this country cannot be exempt from the tough decisions that the Government make. Frankly, a Government who did not make those decisions would not be worthy of the name.

The police grant report before us shows that central Government funding for policing will fall by 20% in real terms by 2014-15. If the precept rises that are forecast in the Office for Budget Responsibility report to 2014-15 take effect—we have no reason to think that they will not—the real-terms cut will be 14%. In considering those stark figures, we should also have regard to two statistics. The first is that there was a 5% increase in police numbers between 2004 and 2009. In 2004, when there were 5% fewer police officers, I do not recall the world or the ceiling caving in.

We also know that police services in this country since 1997 have been incredibly well resourced. I must pay a debt of honour to the hon. Member for Gedling (Vernon Coaker), who was my opposite number when I was the shadow Policing Minister. He was part of a Labour Home Office that invested in the police service over the years, and from 1997 there was a 20% real-terms increase in policing. I do not recall our ever voting against those measures on police grants. So let us recall that a huge amount of money has been put into the police service in recent times.

I should like to place on record what the Suffolk police authority is receiving this year, compared with previous years. The Home Office principal formula police grant in 2008-09 was £40.2 million. In 2009-10, it was £41.5 million. The figure for 2010-11 is £42.8 million, and for 2011-12, the first year of this grant settlement, it is £45.9 million. It is forecast to fall in 2012-13 to £42.8 million for the county of Suffolk. The total formula grant, which includes moneys from the Department for Communities and Local Government settlement, was £69.2 million in 2008-09, rising to £71 million in 2009-10, to £72.7 million in 2010-11 and to £73.2 million in 2011-12. The total formula grant for policing in the county of Suffolk will fall to £68.3 million in 2012-13.

I will meet the chief constable of Suffolk, Simon Ash, shortly to discuss how those numbers will impact on policing on the ground. Here, today, we need to ask ourselves what Ministers are going to be able to do to ensure that these funding constraints do not undermine crime prevention and detection. In short, how will law-abiding citizens be kept safe from crime and from the fear of crime? The answer must be that the police will have to do more with less, and there should be scope for that.

Again, I pay tribute to the previous Labour Government to the extent that they managed to increase the number of police posts to 147,000—a record in this country’s history. Sadly, however, they did not ensure that those officers spent more time on patrol. I will not repeat the statistic from Her Majesty’s inspectorate of constabulary that the right hon. Member for Normanton, Pontefract and Castleford used earlier. Instead, I will use one that the hon. Member for Gedling gave me when I was shadowing him. He told me that patrol officers themselves—not all police officers, and not CID—spent an average of 14% of their time on patrol. That was the statistic at the time of the last general election. Most of my constituents would find that not only utterly unbelievable but utterly unacceptable.

I am not going to lay the blame for that on the previous Labour Administration. The problem of police bureaucracy has been going on for a lot longer than that. This bureaucratic mindset is certainly not the fault of police officers, who, in my experience, especially of Suffolk constabulary, are professionals dedicated to protecting the public from harm. It is the fault of the many-headed hydra of bureaucracy, with its so-called police “doctrine”, paperwork, process and systems, that has been building up over decades. It embeds a risk-averse culture, and it stifles any can-do approach in policing.

Bureaucracy is wasting police time. I contend that, if we are to ask the police to do more with less, we have to take an axe to the bureaucracy and mean it. Unfortunately, under successive Governments of both political stripes, Ministers have too often reached for the political rhetoric of “a bonfire of regulations” and so forth. Rarely has that rhetoric been followed up with tough ministerial action to repeal unnecessary secondary legislation and unnecessary primary legislation to allow the police to get on with the job.

If we are to ask the police to do more with less, it seems incumbent on the Government of the day to reduce the burden on ordinary, hard-working police constables—an issue that has implications for the police officer numbers debate. Commenting recently on the spending reductions that were in prospect under the previous Government as much as they are under the present one, Chief Superintendent Steve Hartley of the Bolton force in Lancashire said:

“We have got to be clear—success isn’t just founded on numbers. It’s how we use people. This is not just about cuts. It’s about how we get our officers in the right places at the right time for the right reasons.”

As my hon. Friend the Member for Cannock Chase (Mr Burley) suggested, counting the number of police officers in uniform is not a realistic measure, in the current climate, of what constitutes good and effective law and order, or good and effective policing. Surely, as a matter of logic—I have a great deal of respect for the right hon. Member for Normanton, Pontefract and Castleford, who is an extremely bright parliamentarian and understands numbers—it is not beyond the wit of man or all of us in the House to understand that what counts is the number of visible police hours delivered by a constabulary, not just the uniformed officers it has. If one hour out of every seven of a patrol officer’s time is spent on patrol, surely we can agree that, in principle, that one hour could be increased to two, three or even four hours if we cut the bureaucracy on the police.

The role of Ministers comes into play here. That bureaucracy cannot be cut by the Police Federation or by the Association of Chief Police Officers, and it certainly cannot be cut by the police constable on the street. It has to come from the top. Bureaucracy reduction must come, in the first instance, from Policing Ministers.

Since the general election, I have heard that 800,000 police hours have been saved by the current Government as a result of the abolition of the stop and account form and the streamlining of stop-and-search procedures. That is a paltry amount if we realise that there are more than 147,000 police officers—we have got to do better than that. I would be grateful if the Minister for Policing and Criminal Justice set my mind at rest on this point in his concluding speech.

Two reports by Jan Berry were commissioned by the previous Labour Government—quite sensibly, as she is a well-respected and intelligent former chair of the Police Federation, which had representation on her working body, as did ACPO, members of the public, clever civil servants and others. The task was to produce a list of measures to reduce bureaucracy and red tape on our hard-working, front-line police officers. I would like to rattle through some of the bigger ticket items that struck me as important, on which I believe we should take action. I am citing from the list of conclusions in the final report produced by her reducing bureaucracy taskforce, which said:

“Consider evaluation of the Modernising Charging Pilots with a view to rolling out improved arrangements where charging decisions are taken by the appropriate person according to the complexity and seriousness of offence.”

My right hon. Friend the Minister has done some work on that, as indeed have I. The idea was that we should look again at the statutory charging regime that the previous Government introduced in 2004, and establish whether a charging sergeant could charge people with more offences in the “triable either way” category without the need for an automatic reference to the Crown Prosecution Service beforehand.

It is a thorny issue. We can see the logic behind the introduction of statutory charging—it was intended to reduce the number of cracked trials and discontinuances, which were extremely expensive for the Courts Service and for Government generally—but there is a definite sense that it has reduced the rapidity with which charging sergeants in custody suites can charge someone who is pretty likely to plead guilty, having been caught red-handed. We do not need sergeants in custody suites hanging around waiting for the CPS. All too few police stations have a CPS lawyer on site to give a quick and simple instruction or approval to the sergeant in question; most do not benefit from that luxury.

The second suggestion by Jan Berry’s team that struck me, because I have some experience of it as well, was that we should remove the requirement to complete disclosure schedules—which must be written out laboriously by uniformed officers because that is what is provided by the relevant primary legislation, although we all know that they must be checked by the CPS eventually in any case—prior to first hearing in the magistrates court. It was also suggested that we should consider shifting the trigger point for more serious offences in the Crown court to the point at which a not guilty plea is entered.

Another hardy annual is, of course, the Regulation of Investigatory Powers Act 2000— “the grim RIPA”, as it is sometimes called—and the way in which it is applied to relatively routine direct surveillance operations. For instance, a police constable may wish to carry out surveillance of a supermarket car park because he has reasonable grounds for believing that a great deal of breaking and entering is taking place. Some police forces, amazingly—although not all—interpret the RIPA guidance and the statutory codes as meaning that a constable must obtain a RIPA written authorisation from his superiors, which can be extremely time-consuming, before he can go to the car park and hide behind a wall to see whether any villains are going to start breaking into cars. We must do something about that kind of ridiculous approach to applying RIPA and observing the statutory codes. One option would be to rewrite the codes. The hon. Member for Gedling said that he was interested in that option. I hope that my right hon. Friend the Minister can confirm that action is being taken in regard to RIPA and similar procedures.

Let us talk about this. Let us tell the police officers on the ground what we are doing for them: what the House of Commons is doing to cut the nonsensical amount of bureaucracy under which they labour. They have had enough, the public have had enough, I have had enough, and I am sure that the Minister has had enough—not of what I am saying, but of the ridiculous, endless use of rhetoric and the absence of action. Let us see the Home Office get a grip.

The next issue that I want to raise has been discussed with me by the esteemed Chair of the Home Affairs Committee, the right hon. Member for Leicester East (Keith Vaz). At the beginning of 2009, there were four pilot schemes in Leicestershire, the west midlands, Staffordshire and Surrey. I do not want to be too “anoraky” about the subject, but the gist of the objective was to slim down the crime and incident recording part of the duty of a police officer who arrests someone for, say, shoplifting in a store. Could not the information simply be written on a side of A4, or the equivalent on a hand-held device? It would be useful to know whether those pilots have been rolled out to every single police force in the country; and, if not, what powers does the Minister have to ensure that that is done? On many occasions, I have been wearily told that this is a matter for chief constables. The time has come for a bit of centralisation that works, in order to ensure that police forces adopt sensible common-sense procedures to reduce bureaucracy.

One key element of reducing bureaucracy and saving police time—so that officers can spend more time on patrol, apart from anything else—is getting rid of the double or treble keying of information. That is the phenomenon by which sometimes a single piece of information, such as a suspect’s address, name or date of birth, has to be keyed into different forms even if they are online because of the incompatibility of certain IT systems. It is all very easy to say, “Well, let’s just get better IT,” but the fact is that this is a very difficult and complicated issue. There are also huge resource implications in junking legacy systems, and although having one national computer system might speed things up in theory, it is not really an idea of this world. I would be grateful if the Minister gave a short answer to the question of what we are doing about having a national set of police forms available on one IT platform.

Reducing bureaucracy is the most important thing this House and Government can do to ensure the money set out in this grant goes further and is spent in a smarter way. But there is another area that should also be addressed: the general efficiency agenda, which my right hon. Friend the Minister spoke about so compellingly and, I know, from a deep well of knowledge. I just want to strike a note of caution. Having worked in the Treasury under my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke) and having also done the policing job as a shadow Minister in the previous Parliament, I got rather tired of the alphabet soup of consultants from PWC, KPMG and Deloitte who would regularly—and for huge sums of money, so far as I could work out—pile into a constabulary, do a report stating the mind-numbingly obvious about how the police could speed things up, and then promptly decamp. The police might follow the recommended procedures for a year or two, but the lessons they had been taught by these highly paid consultants were often forgotten, and even if not forgotten were not able to deliver the serious efficiency gains of the magnitude my right hon. Friend the Minister is talking about in the context of this settlement. We need smarter procurement, shared back-office services and, most importantly, mandated collaboration.

In concluding, I want to ask the Minister two final questions that are key to those of us who want this police grant to represent value for money so we get the most bang for our buck. First, I echo a point made by my hon. Friend the Member for Harlow (Robert Halfon) about police authorities and chief constables needing to do the right thing by getting on with collaborating to save money and to squeeze efficiencies out of their budgets. In my experience—and history tells us this, too—the likelihood is that they are not going to do that if left to do so on an ad hoc basis. Therefore, when the Minister starts mandating, will he also consider imposing financial penalties on police authorities that do not mandate and do not deliver police efficiencies?

My final and most important plea is this: if we are to be taken seriously as a Government who are keen to achieve our goals, for public interest reasons and because we want the police to spend more time on patrol and less time behind their desks, we have to show that we are serious about tackling bureaucracy. Will the Minister undertake to produce an annual report to Parliament setting out the procedures, forms and processes he has abolished with an estimate by each item of the number of police hours saved as a result of those cuts in bureaucracy? I hope that my right hon. Friend will take the opportunity to use mandated collaboration and attach penalties to it, and to make a report to Parliament telling us how many police hours he has saved each year he has been the Minister, and I hope he is the Minister for a very long time.

16:40

[Keith Vaz (Leicester East) (Lab)]

It is always a pleasure to follow the hon. Member for Bury St Edmunds (Mr Ruffley), and given the risk of having the hon. Member for Lichfield (Michael Fabricant) make throat-cutting signs at me, as well, I will try to be as brief as possible; we started off talking about police cuts, but I think we will soon have cuts to this debate. We have heard excellent speeches and I am sure that the House, eager to get on to the next business, will not want me to detain it for too long on this subject.

This is a very important subject, however, and I want to pay tribute to the hon. Member for Bury St Edmunds, who made a thoughtful and eloquent speech. It was right for him to praise the work of the previous Government, in particular my hon. Friend the Member for Gedling (Vernon Coaker), and the fact that there was such investment in the police service. He was right to praise them for the amount of money they spent, which has resulted, of course, as he then told us, in the economic problem that is affecting the country, and the need, in this Government’s view, to try to cut that expenditure.

What was important about the speech of the hon. Member for Bury St Edmunds is that he concentrated on the bread-and-butter issues that sometimes elude us when we discuss these matters in the House. Front-Benchers are rightly concerned about numbers; indeed, the police grant debate is getting very much like a debate on immigration, in which Front-Benchers rightly concentrate on numbers. However, to the public, the real issue is, how does this affect them in their constituencies? How does it affect the local police force? Are they going to get less of a service than they had before the suggested changes?

The hon. Member for Cannock Chase (Mr Burley), whom we in the Home Affairs Committee greatly miss, has his own version of dealing with these cuts. He has set up a help zone, so if anyone needs a policeman, they do not necessarily have to go to the local police station; they can visit the hon. Gentleman’s staff. I am glad he paid tribute to his staff, because the number of calls they get will probably increase as a result of his contribution today.

Chief constables have rightly taken up the challenge set by this Government, and their tone has changed enormously since the proposals were announced. Certainly, the tone of the chief constable of Manchester, in his latest press release of 9 February, is quite different from the one he adopted before, when he lamented the number of police officers who would be taken off his payroll. Now he is saying that he welcomes the need for collaboration; indeed, I think he said in the final sentence of his press release that he was “upbeat” about the cuts. Of course, that contrasts with what he has said before, and certainly contrasts with the quotes given to this House by my right hon. Friend the Member for Salford and Eccles (Hazel Blears), who has quoted other chief constables who are very concerned. I am not sure whether it is because one chief constable is starting off their career and another is ending theirs; but the fact is that they are in a very difficult position.

The Minister is going to have to accept that, during his term as Minister for Policing and Criminal Justice—the Select Committee has always found him extremely helpful and courteous in providing us with information—there are going to be fewer police officers. It is difficult for him to say that, and certainly difficult for someone like me, who, in debates such as this in 23 years in this House, has always expected Conservative Ministers and shadow Ministers—and, indeed, Liberal Democrats—to ask for more police officers, rather than fewer. However, fewer officers is the inevitable consequence, and whether the figure is the 10,000 talked about by my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper), the smaller figure mentioned by the Government—we do not have a precise figure from them—or the 20,000 referred to by the Police Federation, the fact is there will be fewer police officers.

This is, therefore, a big challenge, which is why I welcome what the Minister said about procurement.

[Mr Alan Campbell (Tynemouth) (Lab)]

Will my right hon. Friend give way?

[Keith Vaz]

Of course. Unless it is to tell me that I have to stop, I will certainly give way to my hon. Friend.

[Mr Campbell]

As if I would. My right hon. Friend talks about the work of his Committee. The Minister said that although the damping mechanism was applied this time, it may not be in the future, at a cost of a further £30 million of cuts to Northumbria police. Will my right hon. Friend undertake to seek to work very closely with the Government should those changes to that formula and mechanism ever come to fruition?

[Keith Vaz]

The Select Committee is always keen to work with the Government. I do not wish to prejudge the report on police finances that we will be publishing in a fortnight’s time. The Minister gave good evidence to the Committee, providing some interesting figures, and the House will have to wait for that report to see what members of the Committee have had to say.

The Minister is right to focus on procurement. He is also right to say that 80% of the budget relates to staffing, but that does not mean that we should not examine the issue of procurement. The hon. Member for Harlow (Robert Halfon), who is not in his place, talked about this issue, and Essex and Kent police, along with other police authorities, are working together. One of the real questions for the previous Government is why we had 13 years of record expenditure but perhaps not the challenges that ought to have been made by Ministers about how the money was spent—that is not a criticism of my hon. Friend the Member for Gedling. I am not saying that the money was misspent, but it is important to examine what happened to that expenditure.

The hon. Member for Bury St Edmunds discussed bureaucracy. I think that he will find agreement on that issue across the whole House but, as he said, we tend to talk about these things but what really matters is implementation. That brings me to my third and penultimate point, which relates to the new landscape of policing. I say to the Minister that we do not yet have a narrative on crime and crime reduction from this Government. We have had some ambitious plans. The Select Committee has never worked so hard to keep up with the number of changes that the Government are envisaging, first with the police and crime commissioners, then with changes on police financing and then on the new landscape of policing. However, we needed to have some kind of a template before we embarked on those major changes.

We know that the Government want to abolish the Serious Organised Crime Agency and that the National Policing Improvement Agency is going to go, but it should have been up to the NPIA to give leadership to local police forces on procurement. What is going to happen now? It seems that individual forces will be charged for access to the databases of the new national crime agency. What worries me about the budget is that that has not been factored in. It is vital that we know what extra charges will fall on local police forces as a result of the creation of the national crime agency.

My final point is that whatever budgets a local police authority puts in place, a police and crime commissioner will be elected. As the House knows, the previous Government changed their position on the election of members of police authorities. Now that the Government have decided that this is what they want to do, people should allow police and crime commissioners the opportunity to manage the local police force. However, they will be inheriting a budget that has been set by a previous police authority, and the demands from the newly elected police and crime commissioners for more police officers will be much more important to the Government than even the demands from Labour Members.

So there is still much work to be done on the landscape of policing and I do not think we can accept the current situation as being the end. Many right hon. and hon. Members, including some from Liverpool and Staffordshire, and the hon. Members for Carshalton and Wallington (Tom Brake) and for Bury St Edmunds, have pointed out that there will be fewer officers, and that does mean a reduction in service. How local police forces deal with that depends on the leadership of Ministers, which I hope will be forthcoming.

16:49

[Nick Herbert]

With the leave of the House, I shall respond briefly to the points that hon. Members have made. First, I have listened to the points made by the hon. Members for Liverpool, Wavertree (Luciana Berger) and for Liverpool, West Derby (Stephen Twigg) and I understand the implications for forces that raise less money from local council tax payers. I have explained why the decision we took was fair, I have said that we will continue to discuss these issues and the impacts on forces, and I am happy to have a meeting.

I always pay attention to the views of the right hon. Member for Leicester East (Keith Vaz), who chairs the Select Committee on Home Affairs. I believe we have set out in clear terms how the police landscape must change, but his remarks will no doubt move me to make a further speech on the issue, a copy of which I will of course send to him, to clarify the position. I draw his and the House’s attention to the speech I gave to the City Forum two weeks ago when I set out in terms how the savings that we need to achieve could be made.

I commend the speeches of my hon. Friends, particularly that of my hon. Friend the Member for Bury St Edmunds (Mr Ruffley), who admonished the House about the drive to reduce bureaucracy. I took every word he said seriously. The Government will say more about this and we are driving this issue, as is the leadership of the police service. We have made progress but there is more to do. I shall write to my hon. Friend regarding his additional points about how we should secure the very important reductions in the bureaucratic burden on the police.

I particularly welcomed the speeches of my hon. Friends the Members for Cannock Chase (Mr Burley) and for Carshalton and Wallington (Tom Brake), who has had to leave the Chamber. They focused on how resources are deployed rather than just on the amount of money.

Both sides, including the Opposition, admit that police funding has to be cut, so both sides must recognise that that must mean the overall police work force will fall. What is totally disreputable about the Opposition’s attack is that they would cut funding and they know that that would mean a smaller work force, but they still mounted that political attack. The public will see through it. In dismissing the finding in the HMIC report that police availability and visibility is too low, the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper) shows that she is new to the job and has homework to do. The report says:

“The fact is that general availability, in which we include neighbourhood policing and response, is relatively low.”

She should pay attention to the inspectorate’s recommendations rather than dismissing them so lightly after just a few weeks in her job.

[Yvette Cooper]

Will the Minister withdraw his claim that the 11% figure was entirely due to Labour’s red tape, as opposed to the fact that some police officers are on night shift or late shift and that some of them are doing work on the drugs force, organised crime and a whole series of other things that are not included in that 11%?

[Nick Herbert]

The right hon. Lady should start quoting people accurately. I made no such claim. Let me read the second part of what the inspectorate said in the same paragraph:

“Several factors have combined to produce this ‘thin blue line’ of which shift patterns, risk management, bureaucracy and specialisation are the most significant.”

Visibility and availability are too low, they can be improved and she is foolish to dismiss that report.

[Yvette Cooper]

On that point, will the Minister look again at the answer he gave to my hon. Friend the Member for Gedling (Vernon Coaker), in which he said the figure was because of Labour’s red tape, and will he withdraw it?

[Nick Herbert]

It is, in part, because of Labour’s red tape that visibility is too low. The right hon. Lady should understand that and should not dismiss the inspectorate’s report. The situation could be improved by dealing with all these issues.

The Opposition are in an untenable position, because they would cut police funding and they know that that would mean a smaller police work force.

Question put,

16:54

Division 197

Ayes: 302

---

Conservative: 252
Liberal Democrat: 49

Noes: 216

---

Labour: 207
Democratic Unionist Party: 3
Independent: 2
Conservative: 1
Social Democratic & Labour Party: 1
Plaid Cymru: 1
Alliance: 1

Resolved,

That the Police Grant Report (England and Wales) for 2011-12 (House of Commons Paper No. 771), which was laid before this House on 31 January, be approved .

Local Government Finance

Wednesday 9th February 2011 Commons Chamber

17:08

[The Secretary of State for Communities and Local Government (Mr Eric Pickles)]

I beg to move,

That the Local Government Finance Report (England) 2011-12 (House of Commons Paper No. 748), which was laid before this House on 31 January, be approved.

[Mr Deputy Speaker (Mr Nigel Evans)]

With this we shall discuss the following motion:

That the Limitation of Council Tax and Precepts (Alternative Notional Amounts) Report (England) 2011-12 (House of Commons Paper No. 774), which was laid before this House on 31 January, be approved.

[Mr Pickles]

Over recent weeks, my coalition colleagues and I have had many conversations with local government. We have spoken to individual authorities, the Local Government Association, London Councils and other representatives, and let me say how much I respect the mature and responsible attitude that all have taken throughout those discussions. They know that we are sailing in choppy economic waters, and that cutting Labour’s massive budget deficit is the responsible and the right thing to do—and many have planned ahead.

Only the most blinkered could have failed to see tough times coming. The House will recall that the right hon. Member for Edinburgh South West (Mr Darling) said in March 2010 that if Labour were to remain in power we would see spending cuts “deeper and tougher” than those of the 1980s—I suppose that that is one Labour pledge we are able to deliver—so let us not pretend that anyone thought that we could spend, spend, spend indefinitely.

[Tony Lloyd (Manchester Central) (Lab)]

Even if the Secretary of State sets the context in terms of a cuts agenda for local government, why have this Government chosen to hit most harshly local authorities such as my own, the fourth most deprived in the country, while not inflicting the same level of cuts on authorities that are politically from a coalition background and socially in a much more advantaged position?

[Mr Pickles]

If the hon. Gentleman will forgive me, I will come to that point in a moment. If I do not satisfy him, I will happily give way to him again.

Thanks to Labour, the nation’s credit card is maxed out. The longer we leave it before we start to pay it off, the worse it will be and the more we will have to pay. Unless we tackle Labour’s borrowing, interest—just the interest—on its toxic legacy of debt will hit £70 billion a year by 2014-15. That is more than we currently raise from council tax, business tax, stamp duty and inheritance tax combined.

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

The Secretary of State mentions the business rate. Could he tell the House how much, in billions, the Treasury contribution will be in the coming year over and above the yield from the business rate, which has to be redistributed to local government in any case?

[Mr Pickles]

Last time we discussed this, the hon. Gentleman made some interesting suggestions about the level of the business rate with regard to the surplus. I am happy to confirm to him what I said last time: that the process of distribution from the Government is based largely on the uniform business rate, and any surplus—[Interruption.] The hon. Gentleman needs to understand that the settlement is made within a defined period and that business rate income goes up and down. The Treasury puts money in and takes money out according to the buoyancy of the business rate. The hon. Gentleman is a distinguished Member of the House who is very familiar with these matters, and he should know these things.

[Ian Austin (Dudley North) (Lab)]

He is right honourable, and he knows a lot more about it than you.

[Mr Pickles]

The hon. Gentleman is quite right to correct me; I beg the right hon. Gentleman’s pardon. He is indeed a very distinguished gentleman, and of course he knows a lot more than a lot of people in this House, including, I suspect, the hon. Gentleman. [Hon. Members: “Hear, hear!”] It is obvious from my hon. Friends’ reaction that I do not need to put that to a vote.

[Ian Austin]

rose—

[Mr Pickles]

I will give way in a few moments.

The phasing of the settlement will be challenging. Councils can choose how they respond. Some have chosen to wring their hands and say that it is all too hard, or to play politics with front-line services. Others have chosen to step up and to protect vital local services, reducing every trace of waste, protecting the most vulnerable and reforming services to deliver better results for less.

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

rose—

[Hazel Blears (Salford and Eccles) (Lab)]

rose—

[Ian Austin]

Will the Secretary of State give way?

[Mr Pickles]

The hon. Gentleman must pay more attention. When I say that I will give way in a few moments, that is exactly what I mean, but there is a queue, and he is a little way behind.

Hammersmith and Fulham, Kensington and Chelsea and Westminster councils are merging their back offices to save £35 million. West Norfolk is freezing council tax and car park charges, as well as councillors’ allowances. Reading borough council has decided not to cut but to increase funding for voluntary groups. We have heard today that Ribble Valley borough council has also decided to protect voluntary groups and not to cut front-line services.

I am grateful that many councils have brought the same constructive attitude to discussions about the funding settlement. They have helped us to put the finishing touches to a settlement that is sustainable, fair and progressive. We have focused resources on the most vulnerable communities. We have given more importance to the levels of need within each council. We have grouped councils in four bands. The most dependent on Government funding are seeing proportionately lower falls in grant. The more deprived places will receive far more funding per head than the better-off places. For example, Hackney will receive £1,043 per head and Wokingham will receive just £125 per head. These changes have made the system fairer and more progressive than ever.

[Hazel Blears]

The Secretary of State knows that I have raised the issue of business rates in this House on a number of occasions. To pursue the point made by my right hon. Friend the Member for Sheffield, Brightside and Hillsborough (Mr Blunkett), the Office for Budget Responsibility has forecast that the business rate take will be £24.9 billion for 2010-11 and £26 billion for 2011-12. The Secretary of State has distributed £3.5 billion less in 2010-11 and will distribute £7 billion less in 2011-12. Is he saying that the OBR forecasts are out of sync by £3.5 billion and £7 billion? Surely the rising trend in business rates means that there is more money in the pot. If he distributed more money, we would not have to have the cuts that we face.

[Mr Pickles]

I am most grateful to the right hon. Lady. What she needs to understand is that two figures have been suggested—one by the Office for Budget Responsibility. Following those figures, we decided to move some things from ring-fenced grants into the general grant. That accounts for the difference between the two sizes. With regard to the level of potential surplus, there is a possible notional surplus in 2013 and 2014. As I explained to the right hon. Member for Sheffield, Brightside and Hillsborough (Mr Blunkett), what happens is that within the total sum available for grant, if there is a surplus, all is redistributed. However, as happened under the right hon. Lady’s Government and under previous Governments, the amount in the revenue support grant is reduced on a compensatory basis, because the level of the total settlement is fixed. There is no difference; it is just a different way of calculating.

[Ian Austin]

rose—

[Mr Pickles]

How can I turn down the hon. Gentleman? He has been up and down like Tigger.

[Ian Austin]

I am very grateful to the Secretary of State. Nobody disputes that savings have to be made by local authorities. [Interruption.] Well, nobody does. The Government cannot have it both ways. On the one hand, they say that we were planning cuts slightly smaller than those that they are imposing, and on the other they say that we were not planning any cuts at all. I am not sure what their argument is.

On the sorts of cuts that local authorities are making, is the Secretary of State aware that the axe hangs over Dudley’s benefits shop, which is helping people who have been made redundant during the recession and hard-pressed home owners who face the risk of repossession to sort out their finances? It seems an utterly ludicrous decision when it costs £300,000 a year to run and brings £2 million into the local economy, of which £1.5 million is spent on supporting local businesses. In the light of what he said about local authorities making inappropriate cuts that target the most vulnerable, will he join me in pleading with Dudley council not to close the benefits advice shop?

[Mr Pickles]

I feel a certain degree of camaraderie and fraternal friendship with the hon. Gentleman, because unlike his party’s Front Benchers, he has said that Labour’s cuts would have been just slightly less than those that we are presenting. I think that is probably true, but the challenge facing local government means that just a couple of million quid would not make all the difference. There are very challenging circumstances.

[Joan Walley (Stoke-on-Trent North) (Lab)]

Will the Secretary of State give way?

[Mr Pickles]

In a moment—I need to respond to the hon. Member for Dudley North (Ian Austin) first.

Let us consider a number of local authorities. Some have been talking about thousands of redundancies. I do not want to appear partisan, but Sheffield is talking about 250. Sunderland, a Labour council, is not planning percentage cuts in its Supporting People provision. Walsall is not planning to make an overall cut in its voluntary sector funding. It is possible to deal with the situation.

[Joan Walley]

Will the Secretary of State give way?

[Mr Pickles]

In a moment.

The hon. Member for Dudley North has to understand that these are local decisions. We have ensured that there are sufficient funds to protect the vulnerable, but ultimately local councils have to make local decisions.

[Charlie Elphicke (Dover) (Con)]

Does the Secretary of State agree that we are hearing a confused argument from the Opposition, but that it seems to involve a spending commitment of about £7 billion? That money would surely have to be made up through about 2p on income tax, would it not?

[Mr Pickles]

My hon. Friend is of course perfectly right. The Opposition seem to think that it is magic money, but it would actually come out of people’s pockets through business rates or income tax. The reason why we are in this position is that the guilty people on the Labour Benches allowed things to get out of hand.

[Mr Mark Field (Cities of London and Westminster) (Con)]

Will my right hon. Friend go into some detail for the benefit of the House about his commitment to the vulnerable through the transition grant allocations? I have had a cursory look at them, and they seem reasonably generous and seem to take account of the need to look after some of the most vulnerable parts of the country.

[Mr Pickles]

We have done three significant things. First, we moved the relative needs threshold to 83% from 73%, which makes a considerable difference and is far more than the Labour Government ever offered poorer communities. We then divided up authorities based on their level of funding, from the most dependent on grant to the least dependent, and ensured that the most dependent received smaller cuts. Then we managed to find an additional transitional amount to ensure that no authority loses more than 8.9%. I will have a further announcement to make about that.

[Joan Walley]

My constituents do not want the House to make politics of what is happening. Everybody understands the situation in respect of the cuts as a whole, but in areas such as Stoke-on-Trent, where we have deprivation and people out of work, we have made representations to the Secretary of State and his Ministers to say that we want time: we want time to plan how we can keep what is most important. This finance settlement gives us no encouragement whatever that this is anything other than the Government blaming local councils for what is happening.

[Mr Pickles]

The hon. Lady and her councils were given quite a lot of time. The former Chancellor, the right hon. Member for Edinburgh South West, made it clear that changes were going to be made, and a number of the most vulnerable areas were hit by the fact that it was made clear that the working neighbourhoods fund was going to end in March this year. It seems to me that a number of councils did not make any provision for that and blithely assumed that the money would continue, despite the fact that the Labour Chancellor made it perfectly clear that it was ending. Ladies and gentlemen on the Labour Benches who cheered his Budget announcement did not raise any objection at the time.

[Mr Clive Betts (Sheffield South East) (Lab)]

rose—

[Mr Pickles]

I will give way in a few moments, but I shall make a little progress, if the Chairman of the Communities and Local Government Committee will forgive me.

The changes make the system fairer and more progressive than it has ever been. The second thing that we did is try to marry the need to tackle the deficit with the need to help councils to adapt, as I told my hon. Friend the Member for Cities of London and Westminster (Mr Field). In December, I said that no council would face more than an 8.9% reduction in spending power and that we would provide a grant to cushion councils that would otherwise have had a sharper fall. Today, we are going further by increasing the transition grant to councils from £85 million to £96 million next year, which means that the average reduction in spending power is just 4.4% and that no council will see a reduction of more than 8.8%.

Let us look at one of the problems that we faced. Concessionary bus travel is a classic example of how the previous Government did things—they made a grand promise without any clue about how it would be funded. Administration of concessionary bus travel under Labour was a shambles. I do not think that councils should have to pay for the misjudgment of the Labour Government, so I am topping up the formula grant by a further £10 million next year to compensate shire districts.

Thirdly, we are committed to protecting local taxpayers. Council tax bills more than doubled under Labour, while front-line services such as bin collections halved. It is only right that we give hard-working families a helping hand.

[Caroline Flint (Don Valley) (Lab)]

Does the Secretary of State agree with the sentiments of his colleague, the Under-Secretary of State for Communities and Local Government, the hon. Member for Hazel Grove (Andrew Stunell), who in writing to Liberal Democrat councillors about the final settlement, says:

“This final settlement certainly does not solve all problems, nor does it add significantly more money into the pot. I know it will still be very disappointing for many councillors.”

[Mr Pickles]

Of course the settlement is very disappointing, but the Government would not do what we are doing had we not found the nation’s finances in chaos and with a record budget deficit. The only reason that we are doing this is that the right hon. Lady failed to control her party.

[Mr Betts]

rose—

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

rose—

[Mr Pickles]

I would give way to my right hon. Friend, but I feel like I have been persecuting the Chairman of the Communities and Local Government Committee.

[Mr Betts]

The Secretary of State said that this is a matter for local decision, and that there is no need for any council to make cuts to front-line services. Can he name one single council in the country that has so far managed to reach a budget decision without any cuts to front-line services?

[Mr Pickles]

Yes, I can—Reading and Ribble Valley have done so. We have a list, but the hon. Gentleman is ascribing words to me that I did not say. I said that before authorities touch front-line services, they should look at sharing back offices, chief executives and top offices, move back services and improve procurement. That is what I said. There is a very big difference—right across the country—between councils that have attempted those things and those that have decided to cut deep into public services.

[Mark Pawsey (Rugby) (Con)]

rose—

[Sir Alan Beith]

rose—

[Mr Pickles]

I will give way to my right hon. Friend, but then in a few moments I will of course do so for my hon. Friend the Member for Rugby (Mark Pawsey).

[Sir Alan Beith]

Does the Secretary of State accept that it was almost impossible to introduce the required degree of fairness to areas of low council tax income given the historical settlement that many local authorities, such as Northumberland, have suffered over the years and the financial crisis that faced the country? Do we not need to approach fairness again in a more fundamental review of local government finance?

[Mr Pickles]

My right hon. Friend is absolutely correct. I certainly hope that this year’s settlement and next year’s are the last ones to be put together on the current corrupt, useless and incomprehensible system. It is the Government’s intention fundamentally to review the local government financial system, and I hope to bring proposals to the House later in the year.

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

The Secretary of State has praised some local authorities for planning ahead for cuts, but he did not mention Manchester, which was planning to make cuts of £50 million. However, because he singled out one of the neediest cities in this country for one of the worst settlements, the council is now having to save £110 million next year and £170 million over two years. When a council has to lop off £39 million from adult services and £45 million from children’s services, how can he say that he is protecting the most vulnerable?

[Mr Pickles]

There does seem to be a big difference between how Sheffield and other large authorities are going about this, and how Manchester is going about it. The reduction purely in grant is some 15% over the period, but the council is choosing to cut 25%—above and beyond the reduction in grant. But those figures only really stack up if we completely ignore the level of council tax revenue. That is why we are able to say that no authority is receiving a reduction in their spending power of more than 8.8%. That remains an absolute fact, on a measurement that those on the Labour Front Bench urged us to use. The Local Government Association also suggested that measurement, and it is a very sensible way of doing things.

[Henry Smith (Crawley) (Con)]

My constituency has some of the most deprived areas anywhere in the region, but for the last eight years we have received among the lowest local government settlements there have been. My local authority has been preparing for the even tougher times we face because of the economic crisis that we were bequeathed. Why does the Secretary of State think that other areas of the country have not?

[Mr Pickles]

It appears that there are two kinds of authority. There are Conservative and Liberal Democrat authorities that seem to be making a genuine attempt to protect the front line, as are a significant number of Labour authorities, but there are several that are simply grandstanding. They have perhaps made one or two financial mistakes in the past and are seeking to hide them by claiming that the financial settlement is the problem.

[Mark Pawsey]

My right hon. Friend spoke about the need for councils to control executive salaries. Does he have some words of comfort for Rugby borough council, which has chosen to save £100,000 by not replacing its chief executive and devolving the responsibilities to deputies and the elected leader of the council?

[Mr Pickles]

Hammersmith and Fulham is obviously the apple of my eye in London, but the decision taken by my hon. Friend’s council is a very sensible one. I am delighted that chief executives have taken a cut in salary, and I am even more delighted that the salaries advertised for chief executives have gone down considerably.

It is only right for hard-working families to be given a helping hand. We are providing an extra £650 million so that local authorities can freeze council tax for a year from April without local services losing out. We give each council that freezes or reduces council tax the equivalent of a 2.5% increase instead. More than 130 councils have already said that they will take this offer and more will follow as they finalise their budgets. No council should think that it can get away with squeezing its residents.

In the long term, local people should have the power to veto excessive council tax rises, but for the time being the Government will use their capping powers to protect them. Today I have laid before the House a written statement explaining the principles that we are using to define what excessive council tax means. An authority will be liable to be capped if it couples an increase in council tax of more than 3.5% with a reduction in its budget requirement of less than 7.5%. However, for most council tax payers, I very much expect this to be largely an academic exercise, because I believe that every local authority will freeze council tax in this difficult period.

The public will be helped in that process by increased transparency. I am pleased to announce to the House that every council in the country has now agreed to publish every amount over £500, so that their council tax payers can judge whether cuts in services or decisions about those services are just. I say “every council in the country”, but I mean “every council in the country with the exception of Nottingham”. The Labour deputy leader in Nottingham says that the council has

“no intention of publishing the data unless it is forced to do so by law.”

He says:

“We have said that we will publish accounts over £500 if it becomes a legal requirement to do so,”

before adding, rather peculiarly:

“We are happy for information to be”

transparent. Well, information cannot be transparent unless it is published. How come every council tax payer in England can look on their council’s website and see how it is spending their money except for those in Nottingham? Is there something peculiar about people in Nottingham that means that they cannot be trusted with that information?

[Mr Blunkett]

Will the Secretary of State give way?

[Mr Pickles]

I shall give way in a moment, once I have made this point. The right hon. Gentleman is a senior Member of the House, but I would be grateful if he extended me the courtesy of allowing me to make a few points.

The deputy leader of Nottingham city council is a gentleman called Graham Chapman, which is obviously the same name as the late and long-missed member of “Monty Python’s Flying Circus”. It seems to me that the right hon. Member for Don Valley (Caroline Flint) should get on the phone to that gentleman and tell him, as his namesake’s mother did in “Life of Brian”, that he might be the deputy leader of Nottingham city council, but he is a very naughty boy. If it is necessary for me to use the powers that I have to force Nottingham, I will, but why should this process be held back by one obdurate council that simply wants to play politics with transparency?

[Hazel Blears]

Let me take the Secretary of State back to his assertion that no council will lose more than 8.9% of its grant. Is he not completely ignoring the fact that the poorest authorities get area-based grant? Some 11% of my council’s budget in Salford is ABG, because we are deprived and poor, and we need extra help. Slashing the area-based grant means that our cuts next year will be 15%, which is a massive amount in the first year.

[Mr Pickles]

I can bring better news to the right hon. Lady, because the figure will not be 8.9%, but 8.8%, which I hope she finds helpful. She arrives at those figures only if she completely ignores the figures for council tax, which are such that we can give her a guarantee that her council’s spending power will not be reduced by more than 8.8%. Because I have enormous respect for her, I shall make just one further point. I thought about this issue seriously, in a situation where money was clearly being reduced, and I came to the conclusion that if I increased relative need, the best way to help authorities such as hers in taking the money down would be to put it into the block grant. That is because the block grant has such a distributive effect. I accept that there is a degree of swings and roundabouts involved, but her authority came out of that process better than it might otherwise have done.

[Mr Blunkett]

This issue of transparency is absolutely crucial. Is it not a fact that the 8.9% and the distribution of grant took place after the area-based grant—and therefore the specific funding for specific deprivation—had already been taken out?

[Mr Pickles]

The right hon. Gentleman will forgive me for correcting him: it is not 8.9%; it is 8.8%. We have put some additional sums into the process—[Hon. Members: “Answer!”] I am sorry that he perhaps did not hear the answer that I gave to the right hon. Member for Salford and Eccles (Hazel Blears). I took a view, which I think was correct, that his authority, Sheffield, would have lost out more had we not put those sums into the block grant. He seems to forget that we have moved relative need to 83%.

Thanks to the constructive approach of many councils, we have arrived at a funding settlement for the next two years that is progressive, fair and sustainable. It is important to see this settlement in context. This coalition Government are committed to an historic shift of power and influence. We are seeking to restore real responsibility and authority to councils. We are ending the regional spatial strategies, comprehensive area assessments and local area agreements, and we have made a bonfire of the three-letter acronyms.

The general power of competence in the Localism Bill will give councils confidence to get on with the job. We have already ended grant ring-fencing, with a few exceptions, so that councils can decide for themselves how to spend their money. I am determined that we will continue to push back the tide of bureaucracy, end once and for all the micro-management from Whitehall, and give councils the space to show the ingenuity, ambition and leadership that local people expect. The settlement shows that this coalition Government will not shy away from the tough decisions needed to tackle Labour’s public sector deficit, and we will continue to do everything possible to support local councils as they protect and improve front-line services over the years to come.

17:42

[Caroline Flint (Don Valley) (Lab)]

We have heard it all this afternoon. We have heard every possible excuse and cop-out, but we have not heard a single word of apology to the thousands of councillors up and down the country who give up their evenings and weekends, and much else besides, to make their community a better place to live and who are now being forced to implement the Secretary of State’s cuts. We have heard no apology for the fact that this Government have chosen to impose huge front-loaded cuts on local councils the length and breadth of the country. Those cuts will be deeper and faster than those made by almost any other Whitehall Department, and they will fall hardest on the poorest places. They will cost jobs and threaten vital front-line services.

Today the Secretary of State has tried to pull a fast one, but he has not convinced our own Labour councillors, or even many Tory or Liberal Democrat councillors. In fact, I do not think that he has convinced anyone at all. Once again, he has come up with a whole host of reasons why this finance settlement—which, by common agreement, is the worst funding settlement for local government in living memory—is not as bad as it sounds, but he is not fooling anyone.

Over the past few months the Secretary of State and his team have given us reasons why local authorities should not have to tackle difficult decisions about front-line services in their communities. They have told us that there are other ways in which local authorities can make savings. We have heard that councils are sitting on piggy banks with £10 billion-worth of reserves, yet 70% of that money is already reserved for specific projects, so the figure is nowhere near as high as £10 billion.

More to the point, the cuts to local councils go so deep and fall so heavily that three quarters of single-tier and county councils have less in their reserves than the cuts to this year’s funding. Even if they took up the Secretary of State’s suggestion and spent all their reserves trying to mitigate the damage the Government’s cuts have caused, it would still not be enough. And when next year came, councils would face an even worse funding crisis—but this time with no reserves to call on. That, Madam Deputy Speaker, is

“the economics of the madhouse”.

Those are not my words; they come from a letter from the Conservative leader of Derbyshire county council, Andrew Lewer, who chastised the Secretary of State for peddling “misleading” myths about council reserves. We all know that the right hon. Gentleman likes to talk about bins, but when even his own colleagues tell him that he is talking rubbish, perhaps he should sit up and listen. If he will not listen to them, he should at least take note of his Front-Bench colleagues. However loyally the Under-Secretary of State for Communities and Local Government, the hon. Member for Hazel Grove (Andrew Stunell) nods his head in agreement this afternoon, we know what he really thinks from a private letter he sent to Liberal Democrat councillors. He freely admits that in some cases the figures quoted by the Department for Communities and Local Government were rejected as inaccurate. As I mentioned earlier, another quote from the letter reveals the Under-Secretary’s disappointment that so little has been put into the pot, despite the representations of his Liberal Democrat colleagues.

Another area Ministers have looked at is how to plug the gap by dealing with executive pay. Councils were told that if they could not use their reserves, they could cut executive pay. If they did that, they were told, it would be enough to protect jobs and services. I have made it clear time and time again that local councils have a duty to find the best deal for council tax payers—and that includes ensuring that council executives are not paid over the odds and cutting down the size of management teams at the top of councils. In fact, we have gone further than the Secretary of State’s proposals on pay and transparency in the Localism Bill, and I urge him again to include consultants and contractors hired by local authorities when pay details are published.

The suggestion, however, that simply trimming executive salaries by a few thousand pounds here and there is enough to plug a funding gap of £6.5 billion is just fanciful. If every chief executive of every local authority took an immediate 50% pay cut, it would yield less than 0.5% of the savings that need to be found. Even if the entire senior management team of every council in England reduced salaries by 25% overnight, 97% of the cuts would still need to be made.

[Charlie Elphicke]

Does the right hon. Lady agree that it is not simply a question of excessive pay, but of excessive pay-offs? Nottingham council was mentioned, and a brief piece of research shows that Sallyanne Johnson received a £250,000 pay-off, Michael Frater £230,000, Adrienne Roberts £500,000, and Tim Render £200,000—all in recent times. Will she condemn the administration of Nottingham council for wasting that money?

[Caroline Flint]

We can all trade examples, so let me provide the hon. Gentleman with one from Hammersmith and Fulham council—one of the Secretary of State’s favourites. Is it acceptable to hire for £1,000 a day a consultant who has already been retired, on a £50,000-a-year pension, on grounds of ill health from another council?

Value for money and accountability for senior pay are important, which is why we supported those elements in the Localism Bill—but we are going further than the Government suggested, and we hope to gain support for that. However, the reality is that for all the grandstanding on this issue, it does not make a dent in the amount that councils have to find to deal with the front-loaded cuts that the Government have chosen to impose on them.

[Graham Stringer (Blackley and Broughton) (Lab)]

My right hon. Friend mentioned the letter sent by the Under-Secretary to Lib Dem councillors on Stockport council; she will be aware that his postage bill will go down quickly, as Lib Dems are leaving the Lib Dem group because they know the truth about this settlement. Does my right hon. Friend agree that the Secretary of State is talking nonsense when he speaks about giving power to local authorities and being fair, because local democracy is, in fact, taking a much bigger cut than his own central Government Department?

[Caroline Flint]

My hon. Friend has made a very good point about the unfairness of the cuts. The Government are passporting the blame on to local councils, and that is not fair. My hon. Friend, like other Labour Members, has long experience of local government that can inform our debate. We are in touch with local government, which is one of the big differences between us and those on the Government Benches.

[Chris Heaton-Harris (Daventry) (Con)]

The right hon. Lady suggests that cuts in executive pay constitute a mere pinprick in the savings required. Yet according to a press release from Hampshire county council that I received yesterday, the council expects to save some £7 million in executive pay in the current year. That is just shy of 20%—[Interruption.] Opposition Members suggest, in sedentary interventions, that £7 million in a single year may be an unlikely figure, and that may be so, but even if it is over three years—[Interruption.]

[Madam Deputy Speaker (Dawn Primarolo)]

Order. The hon. Gentleman must resume his seat.

[Chris Heaton-Harris]

Even if it is over three years, it still amounts to 7% or 8% of the total savings required. Does the right hon. Lady regard that as insubstantial?

[Madam Deputy Speaker]

Order. The hon. Gentleman must resume his seat.

[Chris Heaton-Harris]

I am sorry, Madam Deputy Speaker.

[Madam Deputy Speaker]

I know that the hon. Gentleman heard me earlier; he clearly saw me. Interventions must be short.

[Caroline Flint]

I do not know how to follow the hon. Gentleman’s intervention, because it is a good example of the grandstanding that has been going on. I should love the hon. Gentleman to send me the figures from Hampshire county council. Seven million pounds a year? I should very much like to see those figures, because I am not sure that they relate only to senior executive pay.

I have made it clear that I am not standing up for those who pay over the odds. [Interruption.] I have made that very clear, as the Minister for Housing and Local Government will see if he consults Hansard. What I am saying is that it is a distraction to suggest that the sort of cuts in executive pay that I have described, whether they involve 50% of chief executives or 25% of the senior management team, can make a significant dent in the savings that councils are having to find.

We are often told that if councils cannot use their reserves and if cuts in executive pay are not enough, they can make their savings by sharing services or merging back-room functions. Let us leave aside the fact that more than 200 councils are already sharing services or facilities, or are planning to do that. If creative service redesign could protect services and stop unnecessary job losses we would support it, as would our local Labour colleagues, but by front-loading the cuts as the Secretary of State has chosen to do, the Government have given councils no choice other than to find immediate savings, which will actually mean cuts in services and jobs.

We have heard a great deal today about Westminster, Kensington and Chelsea, and Hammersmith and Fulham, but as ever, the devil is in the detail. When we go beyond the headlines, we find that although those councils will lose more than £50 million in funding this year, savings for this year amount to only £5 million. We can only conclude either that the Secretary of State is so detached from the real world that he does not understand that, or that this is a deliberate tactical attempt to distract attention from the problems created by the Tory-led Government. In either event, councils and the communities that they serve deserve better.

[James Morris]

Is not one of the remarkable aspects of the settlement the fact that, in these difficult times, the Supporting People grant has been relatively protected by the Secretary of State? He has done precisely what I think the right hon. Lady wants to do, which is to ensure the protection of the most vulnerable. Should not the right hon. Lady be celebrating that?

[Caroline Flint]

I am not sure that there is anything to celebrate. Whether we are talking about the Supporting People grant or Sure Start, one thing is certain: neither has not been ring-fenced, and therein lies danger. Manchester city council, for instance, faces a 35% cut in its Supporting People grant.

[Mr Pickles]

I am sure that the right hon. Lady would not want to put an incorrect statement on the record. Will she confirm that the Supporting People fund was not ring-fenced under the Labour Government?

[Caroline Flint]

Unlike the Secretary of State’s hon. Friends, we put money into the Supporting People grant to support local initiatives. Now councils face cuts in their Supporting People funding, and have no alternatives to the decisions that they are having to make.

[Mr Andy Slaughter (Hammersmith) (Lab)]

I will talk about the myths of Hammersmith and Fulham later if I have the opportunity, but for now may I correct my right hon. Friend by pointing out that £2.9 million is the saving for the three boroughs next year—£500,000 from Hammersmith and Fulham—out of £27 million in total savings? The sum the Secretary of State said the three councils would save when he launched the initiative last October was £100 million. That is the sort of voodoo economics we are dealing with here.

[Caroline Flint]

My hon. Friend always enlightens us as to the true nature of what is happening in Hammersmith and Fulham. Only in the last week we have heard about a building that houses some 30 charities, from which many of the charities are being evicted. I heard only the other day that Hammersmith and Fulham council is so in touch with the big society that refugees from Afghanistan who were seeking support were directed to an Afghan society that happened to be an Afghan hound society. That shows how in touch those people are with the concerns of their residents, and the extent of their knowledge of the charitable and voluntary sector.

[Mr Betts]

In the last Parliament the Communities and Local Government Committee conducted a report on Supporting People. It accepted the removal of the ring fence, but said that spending on Supporting People should be monitored. Perhaps as a result of that, the day after the Secretary of State appeared before the Select Committee in December, Westminster city council announced a £1 million cut in its Supporting People services.

[Caroline Flint]

I always bow to the experience and knowledge of my hon. Friend. This will all come to light in the weeks and months ahead as the budgets are set, and I think we will see that no Members on the Government Benches will stand up for Supporting People. We know that the losses on the ground are affecting people, and the services they have relied on for so long.

As all the excuses have fallen away, and as the reality of the pace and depth of the Government’s cuts hits home, so Ministers’ accusations and attacks on local government have become more desperate and outlandish. The real impact of these cuts is becoming clearer day by day. Some 450 libraries around the country are under threat of closure, including four in the Prime Minister’s constituency, 250 Sure Start centres serving 60,000 families look set to close by the end of this year, and despite all the Secretary of State’s exhortations, because of the cuts he has imposed half a million British home owners have had their weekly bin collections scrapped. As for housing, his cuts in the housing budget mean that, for all the current Government’s criticism of the last Government’s record, once the homes that Labour started building are completed no new social homes at all will be built for the duration of this Parliament.

When 70p out of every pound councils spend goes on staff, it is madness to believe that people will not lose their jobs. The only advice we have from the Government comes from their big society guru, Lord Wei, who this week told council workers to cut their hours and their pay and spend more time volunteering. That will be of little comfort to the tens, if not hundreds, of thousands of people who lose their jobs this year. According to Unison, 100,000 people in council, health, police, fire and education services have already been warned their jobs are at risk. The GMB has kept a running tally of the number of workers who have been told their jobs are under threat, and, as of last week, it suggests more than 155,000 posts are at risk.

Let us talk about the organisation that has actually conducted some research in this area: the Local Government Association. It believes that 140,000 council workers will lose their jobs this year. I saw the Minister for Housing and Local Government on TV only last night attempting to argue otherwise, but the LGA’s figures are based on evidence—on research covering 202 councils employing 1.85 million people. The Minister’s arguments are based on the hope that, “If we say something enough times, eventually people will start to believe us.”

[Gordon Birtwistle (Burnley) (LD)]

Why is Liberal Democrat-controlled Sheffield city council making only 250 people redundant, yet the figures for Labour-controlled Manchester city council and Liverpool city council are 2,000 and 1,500 respectively? Could it be that the Labour councils are not interested in making proper savings, whereas the Liberal Democrat and Tory councils are?

[Caroline Flint]

Well, so far as Sheffield is concerned, part of the problem is that the Liberal Democrats are running scared. They have deferred the decisions because they think they can pull the wool over the eyes of the people of Sheffield, but I have to say to the hon. Gentleman that that is not going to work.

I want to say something about back-room staff in local government. Efficient administration: yes, of course we need that, but every organisation needs people in the back-room as well—even the Secretary of State’s Department. It is a pretence to believe that administrative jobs are not necessary. Worst of all is the unfairness. The communities who rely the most on the services that their council provides will be hardest hit. Every time the Government hit the airwaves we are told how progressive this settlement is—but I am afraid that they do not know the meaning of the word. What is fair about the most deprived communities facing cuts four times as deep as those in the most prosperous areas? What is progressive about a finance settlement in which every resident in Hackney loses £180, while people in the Prime Minister’s constituency lose only a fiver? Even Liberal Democrat and Conservative councillors know that that is neither fair nor progressive.

The Tory leader of Blackpool council, Peter Callow, told the BBC that this Government had “let down poorer areas”. Perhaps that is why David Faulkner, the Liberal Democrat leader of Newcastle council—the Liberal Democrats’ flagship council in the north-east—agreed that the Secretary of State is

“the worst Secretary of State we have had”.

Perhaps that is why, in a private e-mail sent to Liberal Democrat councillors from the Local Government Association just last week, we learnt that—[Interruption.] I know that the Secretary of State does not want to listen to this. We learnt that

“concerns about the weakness of the Secretary of State have been raised within all three of the main political groups at the LGA and the message has been heard loud and clear by leading figures in the Government. The situation has been likened to having a republican in charge of the monarchy.”

As for the big society, with every day that passes it looks more and more like a big sham. We have heard from Volunteering England, which accused the Government of undermining charities. Last week Liverpool City council had to pull out of the big society pilot because it saw how ridiculous it was for the Government to laud the virtues of the voluntary sector on the one hand, while pulling the rug from underneath it on the other. Just this Monday, Dame Elisabeth Hoodless of Community Service Volunteers warned that the “draconian” cuts to local government were “destroying volunteering”. But as the Prime Minister said earlier this afternoon, what does she know? She is only the mother of the big society, the executive director of Britain’s largest volunteering charity.

Up and down the country, as a direct result of the choices of this Government, councils are being forced to cut back funding to community groups and voluntary organisations. If they cannot pick up the reins, who will take responsibility for providing the services that this Government have dismantled?

However, Ministers’ most insidious claim is that councils that have built up good services to help poor, elderly or vulnerable people will deliberately cut those services, rather than bureaucracy, in order to cause suffering for political gain. That is an outrageous slur, and it is beneath the dignity of Ministers to level the claim. It is a sure sign of how empty the Government’s arguments are that they drag out that myth in order to slander the reputations of decent councillors.

The blame for all this lies solely and squarely with this Tory-led Government, because the biggest myth of all is that there is no alternative. Madam Deputy Speaker, there is an alternative. We do not deny that there is a deficit and that it needs tackling, but the Government’s decision to eliminate the deficit over this Parliament is a choice, not a necessity. Labour’s plan was to halve the deficit over four years. That would have meant local government cuts, but not cuts as deep as this. The Government’s decision to front-load the cuts, so that the heaviest reductions fall in the first year, is a choice, not a necessity. We would have spread the cuts more evenly over four years, giving councils time to plan where savings could be found. The Government’s decision to skew the funding system so that the poorest councils are hardest hit is a choice, not a necessity. We would have shared the cuts much more fairly, ensuring that those with the broadest shoulders bore the greatest burden. The Government have made their choice, and they must take responsibility for the consequences.

Flush with cash from their chums in the City, this Government may be laughing all the way to the bank, but local councils and the communities they serve are crying out for more help and more time. In every part of the country and in all communities, people are rallying together, standing side by side, shoulder to shoulder, against this Government’s reckless cuts. They are the real big society, and they are telling this Government that they are going too far, too fast. The teaching assistants, social workers and street cleaners marching for their jobs: they are telling this Government that they are going too far, too fast. The pensioners occupying their local libraries and clearing the shelves of books: they are telling this Government that they are going too far, too fast. The families going door to door with petitions to save their local Sure Start centre: they are telling this Government that they are going too far, too fast.

The Government are not listening but we are, and that is why, today, Labour will vote against a local government settlement that reflects none of the concerns of councillors and communities about going too far, too fast. I urge all Members to stand up for their communities and the services they hold dear, and join us in the Lobby tonight.

[Madam Deputy Speaker (Dawn Primarolo)]

I have to announce the results of the Divisions deferred from previous days. In the Division on the question relating to the financial stabilisation mechanism, the Ayes were 297 and the Noes were 45, so the Ayes have it. On the question relating to police, the Ayes were 501 and the Noes were 18, so the Ayes have it. On the question relating to taxation of the financial sector, the Ayes were 295 and the Noes were 223, so the Ayes have it.

[The Division lists are published at the end of today’s debates.]

[Andy Burnham (Leigh) (Lab)]

On a point of order, Madam Deputy Speaker. I am sorry to interrupt the House, but this is on a matter highly relevant to this debate. At Prime Minister’s questions earlier today, the Prime Minister gave an inaccurate picture about Sure Start funding to this House. He said:

“On Sure Start, the budget is going from £2.212 million to £2.297 million. That budget is going up. That is what is happening.”

There are two problems with that statement. First, those figures do not refer to the Sure Start budget; they refer to the early intervention grant, which pays for 21 separate programmes in addition to Sure Start. Secondly, the budget is not going up. The Prime Minister’s figures compared 2011-12 with 2012-13. If he had compared this year’s budget of £2.483 million with that in 2012-13, he would have found that there is a cash cut of £186 million.

Councils are making some very difficult decisions on these matters right now, and it is only fair to them to put the correct figures on the record and in the public domain. I wonder whether you might ask the Prime Minister to set the record straight, Madam Deputy Speaker.

[Madam Deputy Speaker (Dawn Primarolo)]

That is not a point of order for the Chair. The right hon. Gentleman is very experienced, and I am sure that he will find other ways to pursue those particular points about statements that have been made in this House. He is right to say that this is a very important debate on the question of local government funding. Perhaps other hon. Members might wish to reflect on what he has said, but we will move on and continue that debate.

18:07

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

I shall keep my comments relatively brief, Madam Deputy Speaker. I wish to start by thanking the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Bromley and Chislehurst (Robert Neill) for receiving a pre-Christmas delegation from Isle of Wight council. During the meeting, the council accepted that it must play its part in tackling the massive structural deficit left by the Labour party. It also accepted the vast majority of the figures and calculations in the draft local government settlement. The council queried only one point in it with him. The argument was solely about the baseline figure used for local transport and concessionary fares. The council contends that a miscalculation has denied it additional grant of almost £900,000, which obviously has an effect on the council’s overall spending power. The Government say that in 2011-12 Isle of Wight council will have £6 million less to spend than in the current year, whereas the council suggests a figure of £7.5 million.

The Government’s spending power figure covers all the council’s income available for it to spend. That is clearly the best way of presenting the figures: looking at the picture as a whole, rather than taking any single figure in isolation. The council has given me details of the notional figure, the effect of damping, schedule D, the transfer of functions between authorities and the baseline figure that it believes is wrong.

I do not, however, intend to go over all that again. Doubtless the council’s view on all those points was put very eloquently during its meeting with the Minister. Figures can be presented in many ways, and they certainly have been, both on the island and nationally, but I am speaking today because I see the very real distress caused to my constituents at proposals that will affect services they value and the fabric of our life on the island. Among other things, island communities might lose libraries and public lavatories unless, in some cases, those services are taken over by town and parish councils, thus putting up the local precept—the town and parish rates. The changes should have been made separately from the Budget, preferably in the period between last June and December. After all, we won the election in May and there was time to do it then rather than making these changes in a last-minute rush. However, we are where we are, as they say.

I understand that the arguments about the draft settlement report have been considered and that decisions have been made, but the council says that the baseline figure that it says has been miscalculated will affect the settlement for future years. We all know that the complete financial mess the coalition Government inherited from the Labour party is the real problem and that neither councils nor the Government can go on as they have in the past, but I urge the Minister to consider the technical arguments that Isle of Wight council put to him. He and the Secretary of State should consider whether those arguments have merit and, most importantly, whether my constituents are losing out because of the way in which the figures have been calculated. I hope that the Minister can assure me that if there is any doubt about that he will enter into further dialogue with the council so that the effects can be addressed as soon as possible.

18:12

[Mr Clive Betts (Sheffield South East) (Lab)]

The Secretary of State has obviously listened to many representations in the past few weeks, but the question is whether he has actually heard what people have been saying and whether he is prepared to act. Today, we have found out that, presumably after prostrating himself on the floor before the Chancellor, he has come away with a further £10 million.

[Mr Pickles]

No, it is entirely from the Department’s budget.

[Mr Betts]

Local authorities are going to get a further £10 million on top of the settlement they were previously promised. Even if that £10 million was given to one authority, such as Salford, instead of its reduction in total spend being cut from 8.9% to 8.8%, there would hardly be dancing in the streets. Authorities such as mine in Sheffield are getting nothing extra out of that small amount of additional money: they will still get a cut of more than 8%.

[Mr Pickles]

The figure is £10 million extra to district authorities. That is why the cut for authorities is no longer 8.9% but 8.8%. Extra money has gone in—not a lot, but we have been able to drop the cut a little.

[Mr Betts]

The Secretary of State’s words are very apposite—it is not a lot of money, but there are an awful lot of reductions up and down the country that local government is having to deal with.

My first point, which I made in a Westminster Hall debate but still have not received an adequate response to is that the overall cuts in Government expenditure over the four-year period are 19%, whereas the cuts for local government are 26%. Why is local government experiencing higher cuts than the overall average cuts to Government spending? We know that the services delivered by local government are important to our constituents. Some of those services go to those in most need—social services provision for aids and adaptations and for looked-after children. Some of them concern quality of life—for example, libraries, parks, playing fields and sports centres—and others are essential, such as refuse collection, street repairs and street lighting.

Most local authorities are doing all they can to protect their social services provision and to protect looked-after children and children with particular disadvantages, so it should come as no surprise that even when they have looked at back-room services and sharing services with other authorities, councils throughout the country of all political persuasions are cutting services such as libraries and bus services and changing their methods of refuse collection.

[Henry Smith]

Will the hon. Gentleman acknowledge the billions of pounds added to social care budgets in the comprehensive spending review?

[Mr Betts]

There were ear-marked allocations, including some transferred money from NHS funding, but even so local authorities are facing severe reductions. Westminster, a flagship Conservative authority, is cutting £1 million from its Supporting People budget. Hammersmith and Fulham was named for cutting eight community centres, I understand. Gloucester and Somerset councils are cutting libraries and closing them. Those are cuts in front-line services. Even authorities that are sharing services and cutting management costs still have to cut front-line services. Why has local government been singled out for bigger cuts than the rest of central Government combined?

[Brandon Lewis (Great Yarmouth) (Con)]

Does the hon. Gentleman acknowledge that local authorities across the country, such as my own in Great Yarmouth—we are a deprived area that has been hit with cuts—have said that they can deal with the changes without affecting front-line services? They are looking to do that through back-office savings and cross-working with other authorities.

[Mr Betts]

All I can say is that the hon. Gentleman’s authority must have had a much more favourable settlement than many others that are making those cuts. That is not happening on a party political basis. Conservative and Lib Dem authorities are making cuts as well. I am more than happy to receive a list from the Secretary of State of all the authorities that are managing the process without any cuts in front-line services. It will not include many Conservative and Lib Dem authorities, which are presumably making cuts not to spite the Government, but because of the position that they have been put in by the Government.

[Brandon Lewis]

rose—

[Mr Betts]

I am sorry, but I must make progress. Other Members want to speak in the debate.

My next point is one made by the Local Government Association on a cross-party basis. Why are the cuts front-end loaded? Will someone explain? Even if the Government feel that they have to make the cuts over the four-year period, why are they front-end loaded?

[Simon Kirby (Brighton, Kemptown) (Con)]

rose—

[Mr Betts]

There is an answer coming.

[Simon Kirby]

Does the hon. Gentleman think it is right that this country is paying £120 million per day to service the interest on the debt that his Government ran up?

[Mr Betts]

That is not the intervention that I was expecting. I thought that as those on the Front Bench could not help me, the Back Benchers would.

Why are the cuts front-end loaded? Why do nearly half the cuts come in the first year? I was in Croydon council on a Select Committee visit on Tuesday. Croydon council is a flagship Tory authority. It has participated in Total Place, it has community budgeting, it is part of the big society project and it is enthusiastic about it. The leader of the council sat across the table and said to me, “The thing that is really affecting us and may stop us delivering on projects like community budgeting and the big society is the front-end loading of the cuts, which is making it impossible for us to deal with them in a planned and organised way.”

That is a Conservative authority, and the Local Government Association is saying exactly the same. The front-end loading is forcing the cuts up front, which makes it harder to reorganise and to provide services in a different way. It means more money being spent on compulsory redundancies. It is a major problem, and nobody will explain why the cuts must be front-end loaded. Why?

[Charlie Elphicke]

rose—

[Mr Betts]

Is an answer coming?

[Charlie Elphicke]

Do not many local authorities have substantial reserves? The reason for having reserves is to provide a cushion. Manchester, I believe, is cutting 2,000 staff, yet it is sitting on £100 million of reserves. How can that be justified?

[Mr Betts]

I cannot identify the reserves of each authority, but the total figures provided by the Government include items such as school reserves—

[Mr Pickles]

No.

[Mr Betts]

—over which authorities do not have discretion. The figures include the housing revenue account and working capital that is needed to manage the cash flow of an authority, and they probably include identified sums in the authority’s capital accounts for major projects. All those things tend to get lumped together. The Secretary of State says that is not true. If he produced a list of figures for each local authority that extracts all those sums, that would be very interesting to see. I look forward to a copy of that being placed in the Library.

[Paul Goggins]

My hon. Friend might like to comment on the claim made by the hon. Member for Dover (Charlie Elphicke), because Manchester city council will have to spend £60 million of its reserves simply making people redundant as a result of the cuts.

[Mr Betts]

The Secretary of State has had an exchange of letters with the Conservative chair of the Local Government Association, who has complained bitterly that if more than £200 million is required nationally in capitalisation to pay for redundancy costs, that will result in a further cut in the grant to pay for it.

I will move on to the spread of the cuts. It is undoubtedly true that local authorities in the most deprived areas are getting the biggest cuts. Government Members will say that those authorities have the biggest grants, which by and large is true, but that is because they have the biggest needs and the most deprivation. The reality is that my local authority is getting more than an 8% reduction in its spending powers and Dorset county council is getting an increase. That is simply not fair.

[Brandon Lewis]

Will the hon. Gentleman give way?

[Mr Betts]

I have already given way to the hon. Gentleman and think that that is reasonably fair. The spread of the cuts is simply not fair. I accept that the Government have provided an element of transitional grant to help those authorities with most deprivation, but they simply have not gone far enough to protect those with the most needs and the most deprivation. That is why those areas now face the biggest cuts in services.

[Ms Louise Bagshawe (Corby) (Con)]

Does the hon. Gentleman think that it is right that only months before announcing these job loses, Manchester city council spent £150,000 on a statue, which could have funded nine junior posts for a year?

[Mr Betts]

Manchester city council has to make its own local decisions, and I am not here to support or defend every action of every local authority. I thought that leaving such matters to local councils was what localism was all about. We must not put them in the position where they have to make cuts in front-line services, as Somerset, Gloucester and other authorities are having to do.

I support what the Government are doing on ring-fencing. I believe, as I have been saying for many years, that abolishing ring-fencing as far as possible is the right thing to do so that local authorities have more discretion in how they spend the money available to them.

On the question of business rates, I followed up with the LGA the issues I raised with the Minister for Housing and Local Government in my Westminster Hall debate. It has received legal advice on the matter from Bevan Brittan solicitors, which states that in this instance the Secretary of State has not set the distributable amount as a sum equal to the difference, but has chosen to budget for a surplus and set the distributable amount some £100 million lower at £19,000 million. That is simply unlawful, and that is the legal opinion the LGA has received—[Interruption.] I am raising the issue with the Secretary of State and giving the advice that the LGA has given me. If it is inaccurate, will he publish a precise assessment on whether he intends to budget for a surplus on the business rates and whether he believes to do so is lawful so that Members have the full and proper picture?

[Mr Pickles]

The hon. Gentleman occupies a senior position and so should know that all business rates have to be redistributed to councils by law. It is not possible to do what he is suggesting we are doing, because nothing can be done with a surplus other than giving it back to local authorities. He does not seem to appreciate that total public expenditure is within an envelope, but revenues from business rates go up and down, so councils are compensated by central Government.

[Mr Betts]

I understand that revenues from business rates go up and down, so when they go up more should be distributed to local authorities as a result. [Interruption.] Rather than engaging in further debate on this, I am happy to pass on to the Secretary of State the legal advice that the LGA has given me and ask him, if he believes that it is wrong, to issue a detailed correction. That seems an appropriate way to proceed.

[Mr Pickles]

Send me the letter.

[Mr Betts]

I will of course send the letter to the Secretary of State, and I look forward to his response.

On the question of putting salaries above £58,000 into the public domain, the point made by my right hon. Friend the Member for Don Valley (Caroline Flint) ought to be pursued. If the Secretary of State is right, and he encourages local authorities to put more and more services out to the private sector, to the voluntary sector and to social enterprise, he will find that fewer people on those salaries are employed in the local authority sector. Somebody with responsibility for a service might be “TUPE’d” outwith that service to the private sector or to a social enterprise, in which case his transparency will therefore decline. So, when services are contracted out, could the requirement for transparency about salaries of more than £58,000 be transferred as well, and applied to contractors across the piece? That would be a way forward for the Secretary of State, and his Cabinet colleagues might like to look at it as a good example of transparency in practice.

The figures on Sheffield are misleading. The figures that have been quoted are for those redundancies that have been announced so far. Many vacancies in Sheffield are being held unfilled, and they are going to affect services. We know of several hundred posts that will not be filled by one means or other, and we also suspect that the Lib Dem administration there is trying to delay and avoid decisions, waiting to pass them on to the new Labour administration that will take office in May. The budget has not yet been finalised, however, so no one can quote a figure of 250. Several hundred jobs are likely to be lost as a result of the budget—many times the figure given today.

There are real problems with the settlement, but the fundamental question that comes across from local councils and the Local Government Association is, “Why are the cuts front-loaded?” Can the Government please provide an explanation? That fundamental problem is causing chaos in local authorities and massive cuts to services throughout the country.

18:24

[Bob Blackman (Harrow East) (Con)]

We meet today to review the local government settlement, and no doubt councils throughout the country are looking at their budgets, examining how much they are going to spend and making local decisions. We have at last started to hear from Opposition Front Benchers the recognition that reductions in public expenditure would have happened regardless of which party won the last general election. It has been a long time coming. We have been waiting for that view to creep forward, and slowly but surely the recognition is dawning that reductions would have had to be made regardless of who won the election.

We have inherited a legacy: local government council tax has doubled, but services have not really improved at all. Under the Labour Government, there was a transfer of responsibility to local government but a transfer of funding to the council tax, and that forced local people to pay for those services, which were not really delivered.

Authorities were also inspected and monitored to the absolute maximum, and part and parcel of the settlement before us is a reduction in that monitoring and inspection, all of which can be translated directly into savings that local authorities can make.

[Charlie Elphicke]

Does my hon. Friend agree that, extraordinarily, all that monitoring and inspection never seemed to include the over-inflated salaries of chief executives or the ridiculous pay-offs that occurred?

[Bob Blackman]

I thank my hon. Friend for that intervention, which refers to another thing that took place under the Labour Government. In all those organisations, pay is determined from the top, so as chief executive pay has rocketed, so has senior pay, while the large numbers of people who work for local authorities and do a brilliant job are paid relatively small amounts of money. There is no doubt, however, that the pay of middle management and senior management exploded, and I applaud the Secretary of State’s decision to publish the figures so that the public can see what type of jobs are involved.

We also saw an explosion in the creation of non-jobs, each of which required administrative support, departments and offices, all of which are costs to the taxpayer, specifically the council tax payer. We had a multitude of different grant regimes and ring-fencing so that if local authorities wanted to take decisions, they could not. I therefore welcome the merger of the different grant regimes and the removal of ring-fencing, which allows for local decision making at the right sort of level.

What Labour did was not all bad. The decision to tell local authorities what level of funding they were getting for three years was a good thing because it allowed them to plan ahead. I hope that in future times the settlement from the Front Bench will be offered not just for three years but for four or five years so that there is certainty for local government in planning ahead.

[Henry Smith]

Does my hon. Friend think that as well as certainty in terms of the amounts received by local authorities, it is also important that there is transparency as regards the formula for the way that those settlements are decided?

[Bob Blackman]

My hon. Friend anticipates a matter that I was going to come to later. The outdated Barnett formula, which has transferred money to all parts of the country with no transparency whatsoever, must go and be replaced with a formula that delivers money on a fair and transparent basis that we can all see and understand. Even Lord Barnett himself cannot believe that his formula, which has existed for some 40 years, was not removed or transformed under 13 years of Labour Government, but they did not do it. That is one of the things that has to go.

We should deal with issues relating to the front-loading of reductions in expenditure. The reality is that the Government are having to deal with a deficit inherited from the Labour Government. We get maximum benefit from making public expenditure reductions early because we get four or five years-worth of reductions as a result. That is precisely the reason for doing it.

[James Morris]

As the right hon. Member for Don Valley (Caroline Flint) said, Labour was committed to reducing the structural deficit in four years, which implied that 20% cuts in public expenditure would have been applied to local government. However, we did not hear a single thing from the Opposition about what they would have cut.

[Bob Blackman]

Indeed; my hon. Friend makes a fair point. We have heard the starting point of the apology and a little about what Labour would have done, but we do not know the detail. If the result of the election had been somewhat different, we would probably be arguing about money around the margins as regards the expenditure reductions.

I ask Front Benchers to consider the area cost adjustment. That is quite a serious issue for London and areas of deprivation, where higher costs are incurred. It appears that the area cost adjustment has not been dealt with reasonably in this settlement, and that needs to be looked at again. There are parts of the country where higher costs apply, and that is particularly true in London.

Capitalisation is just putting off paying today until tomorrow and doing it on a deferred basis. It means having to borrow or spend money on capital that could otherwise be employed. It is a wasted opportunity and the wrong way of dealing with redundancies. If councils wish to make redundancies, they should recognise that they will make savings on their revenue budget and they should use that budget to pay for the costs of those redundancies, not defer them through the capital programmes.

I applaud this Government for introducing the pupil premium. However, it will be equally applied across the country, and there are higher costs in London. Surely it must be right that in high-cost areas we increase the premium per pupil to recognise that fact. I ask Front Benchers to consider that.

We need to look at the data that are used to formulate the grant settlements. Certainly in London, those data are hopelessly out of date and inaccurate and therefore money is transferred in an unfair way. That has been true for many years, and I hope that we can put it right.

I will talk about two local authorities that I know well. The first is the London borough of Harrow, which has at last received a reasonable settlement from central Government. It is the third best in London and the 23rd best in the country. The Labour council that came in after the election inherited a transformation programme that reduces costs and safeguards services. We await its budget decisions. It should be satisfied with the settlement, after years of poor settlements from a Labour Government. In London, 27 of the 32 boroughs were on the floor under the Labour Government, receiving below inflation increases year after year. London has had to put up with draconian settlements before, and it knows how to deal with them.

The second is the London borough of Brent, where the Labour council inherited a transformation programme that would have saved £100 million over four years. Instead, it has decided to close six libraries and all the day care centres, to slash the voluntary sector programme, and to decimate services for the weak and vulnerable. That is a political decision. I suspect that that is precisely what is going on all over the country. Certain people are making decisions to close libraries, day care centres and other centres that affect the weak and vulnerable in advance of the Localism Bill, which will give local communities the opportunity to take them over and run them.

[Brandon Lewis]

My hon. Friend is talking about London, but does he agree that what he describes is mirrored outside London? The hon. Member for Sheffield South East (Mr Betts) spoke about areas that are deprived and hard-hit. Great Yarmouth, which is one of the most deprived areas in the country and is the hardest hit by these cuts, has said that it can deal with this situation without it affecting front-line services. It is doing so through shared services, thereby proving that this work can be done by councils that are prepared to be positive and think outside the box.

[Bob Blackman]

My hon. Friend makes a good point. The reality is that the councils that planned ahead, knowing that reductions would take place, however draconian, are coping best. The councils that put their heads in the sand and said that it would never happen are being caught out. They are now being called to account. If councils have not planned ahead, they will suffer.

[Heidi Alexander (Lewisham East) (Lab)]

Like the hon. Gentleman, I represent a London constituency. My local authority faces cuts of £87 million over the next four years, out of a budget of £271 million. It is finding that difficult, having decided to protect care for the elderly and child protection, which amount to £109 million of the budget. It is a disgrace for him to suggest that it is a political choice for councils to look at other front-line services. Does he not agree that the scope for finding savings is limited, should councils choose to protect essential services for the vulnerable?

[Bob Blackman]

I thank the hon. Lady for that intervention. It leads me on to my menu of what councils should do. Have they eliminated unnecessary monitoring? Have they eliminated duplication and multiple handling of applications for grants and other such services? Have they reviewed senior officer pay? Have they co-operated with other local authorities to reduce costs by combining back-office services? Have they cut their communications budgets, or have they chosen to send out publications to the community on a regular basis? Have they removed vacant posts that are unnecessary? Have they rationalised their office space and found office space that is no longer required? Have they taken their efficiency savings seriously and delivered them year after year, or have they continued on the same basis as before? Have they got into smarter procurement and come together with other local authorities to use their buying power to reduce their costs? Have they considered a long-term plan anticipating all the reductions? If authorities have done all those things and still have problems, then it is right that they approach the Secretary of State for help and advice on how to construct their budget at local level, but not until then.

This Government and our Front-Bench team have produced a set of figures and budget proposals that can be supported and that will be recognised in the years to come as a dramatic step forward in ensuring that people get proper value for money in the local services that are delivered to them. I ask that we consider how more money can be raised locally through the transitional business rates and in other such ways, and I ask that we consider how to deal with deprivation in future. It is a disgrace that has gone on for far too long that the deprived areas of the country have consumed more and more money, yet continued to be the deprived areas. That cannot be right, and we have to put it right.

I also urge Ministers to continue the process of helping councils to freeze council tax not just for one or two years but on a continuous basis, so that hard-pressed tax payers do not suffer any penalty as a result of the actions of the councils that operate their services. We can all applaud our Front-Bench team for the work that they are doing.

18:41

[Steve Rotheram (Liverpool, Walton) (Lab)]

When I spoke on local government funding in December, Government Members accused me of pre-empting the final settlement and of scaremongering. They superciliously lauded my passion but suggested that I await the Government’s definitive announcements before jumping to conclusions regarding how Liverpool would fare. Well, I have done that.

The formula has been decided, the figures have been published, the maths has been done, and I repeat vociferously now what I said back then. Not only will the scale, pace and nature of these draconian measures imposed in the name of fiscal restraint have a devastating impact on Liverpool, but in the wider scheme of things, the cuts will prove an utterly false economy.

I stated in December that Liverpool would be disproportionately hit, and I repeat that claim today. I should declare at this point that I am still a sitting Liverpool city councillor, at least until May. At Prime Minister’s questions earlier, a Tory Member had the temerity to say “Shame on Labour councillors” when the Prime Minister tried to blame Liverpool for his big society failures in the city. It did not take long for the malevolent Tories to revert to type and put the boot in to Liverpool, did it?

That comment shows the Conservatives’ lack of understanding, because it is not just Labour in Liverpool that is saying that the Tory cuts will savage our services. The whole council—Labour, Green and Liberal and even the Liberal Democrats, who used to run the council—is up in arms. The books are there for all to see, so I am happy to invite the Secretary of State to come and have a look at them to see the dilemma that he alone has created. We in Liverpool now know that we will have to save a budget-busting £92 million in the financial year ahead, and the council has very little, if any, room for manoeuvre. For all its valiant efforts to balance the books, both jobs and front-line services are to go. As we have heard, some 1,500 redundancies are predicted over the next two years.

Before hon. Members shout me down, I fully acknowledge that Liverpool is not alone. Local authorities up and down the country are facing crippling cuts, but I shall explain what is particularly galling about the situation in which Liverpool city council finds itself. In December, the Minister for Housing and Local Government was reported as pontificating:

“If councils share back office services, join forces to procure, cut out the crazy non-jobs and root out the wild over-spends then they can protect frontline services.”

The implication was clear: profligate and irresponsible local authorities needed to get their act together. The Minister was preaching to the converted in Liverpool. Having long been tightening its purse strings, it has achieved a total of £70.4 million of savings in the last three years, about £40 million of which was saved in the current financial year under a Labour-controlled council.

How Liverpool managed that might be of interest to the hon. Member for Harrow East (Bob Blackman). Liverpool did it by making proven efficiency savings in management, administration and back-office services, and through economies of scale achieved by sharing, outsourcing and collaboration. Simultaneously, the authority has managed to reduce and stabilise council tax. In fact, our approach was commended in this very House by the Secretary of State.

Liverpool has been there and done all that, and is both able and willing to continue in the same vein, but it cannot perform miracles. That is why the Prime Minister was wrong today, and why Liverpool city council was absolutely right last week to refuse any longer to prop up the Government’s sham, big society agenda, which was always a cover for a cynical exploitation of community and voluntary tradition to obtain public services on the cheap.

What is most objectionable is the way in which Ministers have banged on about protecting the most vulnerable communities, believing, it seems, as my right hon. Friend the Member for Don Valley (Caroline Flint) says, that if they say something often enough, people will eventually believe it to be true. Well, not in Liverpool they won’t.

Our city is a city transformed. We are a great city do a business in, and once again I make the offer to the Tories to hold their party conference in Liverpool so that they can see what a great city it is first hand, just as the Lib Dems did last year and the Labour party will do this year.

[Andrew Bridgen (North West Leicestershire) (Con)]

The hon. Gentleman has told the House of his scepticism in respect of the future of the big society. However, does he believe that the previous Government’s policy of big government has served either the people of Liverpool or this country very well, considering the devastating economic landscape and legacy that they left for the coalition Government?

[Steve Rotheram]

Dear me. It’s the same old mantra, isn’t it? We have had the debate on the deficit and the argument about whose responsibility it was. The hon. Gentleman will say one thing—I think Government Members get brownie points if they stand up and mention £120 million, and the Whips must be going, “That’s a good girl, that’s a good lad. They’ll go far in the Government”—but I am not going to rehearse the same argument today. That is why I confined my argument and contribution specifically to what is happening in my city. The Government cannot keep cutting without social consequences. My contention is that the formula that is being used is unfair to Liverpool, and the cumulative effect will be devastating.

I have explained the transformation of our city, and I hate to acknowledge this, but it is common knowledge: Liverpool is the most deprived local authority in England. I wish it was not. Seventy per cent. of its areas are classed as falling within the most deprived 10% nationally in terms of health and disability, and 57% of the population has been assessed as “employment deprived”.

What is more, the city relies disproportionately heavily on the now-threatened public sector. If that does not make Liverpool extremely vulnerable in these difficult times, I do not know what does, yet the Government persist in hiding behind averages. The Government told us earlier that the average spending power reduction is around 4.4% nationally. Okay. I will state now—without, by the way, the authority of my local council—that we will accept the national average cut. We will take that now. If we are all in this together, we will take our fair share of the pain, but Liverpool is faced with a maximum spending cut of almost 9%, even after receipt of the transition grant moneys.

It is absurd that while the most deprived community in the country faces the maximum level of spending reduction, the least deprived, Wokingham, faces a cut of just 0.63%. The Government can bandy around per capita figures until they are blue in the face, but the bottom line is that the areas facing the biggest spending squeezes—Liverpool, Manchester and Knowsley—are the poorest. So much for protecting the vulnerable. And so much for facts—not only did the Secretary of State have the audacity to claim on television recently that spending power in Liverpool would not be affected any more adversely than anywhere else, but he said that funding for supported people would be “entirely protected”. That simply is not the case. Liverpool city council has advised that its Supporting People funding has been slashed by 30%. But why let facts get in the way of an unsound policy and a soundbite?

Despite all this, Liverpool city council has sought to work with Ministers in a bid to comply with Government diktat. In a spirit of collaboration and compromise—allegedly so de rigueur with the Tory-led Government—the council has requested flexibility on two specific fronts. First, we are asking the Government to grant us capitalisation permission to help to meet the estimated redundancy costs of £45 million. The council does not hold out much hope, however. As we heard earlier, capitalisation permissions have been capped at £200 million for the whole of England, and a recent letter circulated to local authority leaders held out little promise of a relaxation in that limit. That leaves Liverpool city council in the invidious position of being unable to afford to keep employees on or to let them go. Believe me, it is with a heavy heart that we are making these proposed redundancies—it is not a political game.

Secondly, the council asked Ministers to rethink and recalibrate the front-loaded spending cuts, allowing it to spread them less abruptly and less painfully over the four-year spending review period. The Government are not prepared to budge on this, apparently. Instead, they will magnanimously reduce the maximum spending power cut from 8.9% to 8.8%. Thanks for the crumbs. This is a parlous state of affairs. Those who challenge the severity of local government cuts are the ones who are deficit deceivers. The so-called localism agenda is looking less and less like an experiment in local autonomy and more and more like a monumental exercise in fiscal buck passing—a wily move, but transparent.

It is becoming increasingly apparent that, for all the slick rhetoric, this is not a reconstructed Tory party, but the same old nasty Tories with a Lib Dem human shield. This Government do not give two hoots about poverty, disadvantage or inequality.

18:52

[Charlie Elphicke (Dover) (Con)]

I shall try to keep my remarks brief.

The Secretary of State has set out our position in relation to debt and the public finances. We all know that we have a structural deficit of £109 billion, and we all know how much interest per day is being paid—£120 million. The hon. Member for Liverpool, Walton (Steve Rotheram) made an impassioned plea on behalf of his city and said that we had had the discussion about the deficit and we should now move on. But that is the problem: we have had the discussion about the deficit and now we are seeing the consequence of years of overspending. We cannot get away from it. I wish we could. I did not stand for election and get sent to this House to be part of the difficult decisions that we have made. All of us as politicians love to hand out lollipops, kiss babies, cut the ribbon at the fête and do the nice things, but the sad reality is that we also have to take the difficult decisions when the nation is in the most difficult position it has been in for years.

Mr Speaker, you will recall that some years ago you sat on Lambeth council when it was under Labour control. At that time, you were a powerful advocate for the Conservative party. After your period in office, I was elected when it was a hung council. You were not able to influence events dramatically in Lambeth as you were in a minority under a majority Labour administration. In a hung situation, things were much more discursive—

[Mr Speaker]

Order. May I say very gently to the hon. Gentleman that although I am sure his advertisement of my curriculum vitae is well intentioned, it is on the whole undesirable for right hon. or hon. Members to invoke the past positions or experience of the Chair in support of their own arguments? I feel sure that he is dextrous enough to advance his own argument without any assistance from me.

[Charlie Elphicke]

I meant no discourtesy, Mr Speaker.

Moving quickly to my own history, when I was elected in 1994 we had a hung council. We had a mess to sort out. All three parties worked positively together to do that and, frankly, to look at how to un-bankrupt a council that by then had £1 billion of debt. Difficult decisions were made. The emphasis was very much on ensuring better front-line services. My experience was that although we made difficult rebalancing decisions, we were able not only to protect front-line services but to improve them quite dramatically. People on the doorstep were saying that they were now getting front-line services, as opposed to excessive bureaucracy and—I regret to say in the case of Lambeth in those times—in some cases corruption, so positive changes can be made when difficult decisions are taken and things are reworked.

One thing that I particularly welcome is the council tax position. Council tax has been increased in the last decade or so—I believe that it has doubled—to the current level of £1,439. That is an awful lot of money and a massive increase. We know that, because of the deficit, it is not possible to increase local government spending on the grant settlement side of things. We also know that people have been flayed alive for over a decade, given the amount of council tax that they have been asked to pay. I therefore particularly welcome the Government’s decision to work positively with local authorities to freeze council tax. That is important to constituents such as mine who live in deprived circumstances. Many of them are elderly, and many are poor. Stopping council tax rises benefits them massively, particularly those on fixed incomes. Therefore, on the one hand, we have a set of tough decisions aimed at ensuring that we make those efficiencies, and on the other, we have managed to stop council tax rising, which is important.

I totally agree with the Secretary of State when he says that we need smarter procurement. We are doing that in Kent, with the Kent Buying Consortium. He has said that we need better asset management, too. Many people are more than aware of the position in Newham, where there is a new, flashy building that has cost an awful lot of money. We have to be much more cute about using asset management. We have the streamlining and merging of operations, and in Dover and Shepway we increasingly have shared services, so that there will be a shared chief executive and shared back office. That agenda has been embraced in Kent, which is important. It is also important to consider how best to deliver services. Suffolk county council has at times been a bit over the top with its chief officers, but it has led the way on how services can be run, with care homes operating as social enterprises. In my constituency, I am promoting the case for a care home in Deal to be transferred to a community interest company when the local authority feels unable to continue running it.

That is the right way forward. I do not think that this is a debate in which we should necessarily be partisan or throw rocks at each other, because we know the financial position. I could quote the figures showing that Labour was going to cut the budget by £5 billion—that was in Labour’s pre-Budget report—and all the rest of it, but would that help matters? No, because we know the position of the nation’s finances.

[Andrew Bridgen]

Does my hon. Friend agree that the fact that my local council in North West Leicestershire is facing budget cuts of 10% somewhat undermines the complaints made by the previous speaker, the hon. Member for Liverpool, Walton (Steve Rotheram), about Liverpool’s budget being cut by 9%? Does that not prove that we are indeed all in this together? We all know who put us in it, and we should not let them forget it for one moment.

[Charlie Elphicke]

My hon. Friend makes a fair point. Just as when all parties in Lambeth worked together positively in the local authority’s interest, it would be best if we all worked together in the national interest to ensure that all councillors, from all parties, did not try to score political points, which we have seen far too much of lately, but instead worked positively, thinking not about advancement, aggrandisement or the headlines that they might be able to get, but about their constituents. At the end of the day, we were all sent here by our constituents—whether in Liverpool, which is seeking a bit of attention, or anywhere else, it does not matter. All local authority leaders have a responsibility to give their constituents the best possible services and assistance in these extraordinarily difficult conditions.

19:00

[Hazel Blears (Salford and Eccles) (Lab)]

I shall keep my remarks brief, because I know that many Members want the debate to wind up. I shall have the opportunity tomorrow afternoon to meet the Minister for Housing and Local Government together with my hon. Friends the Members for Manchester Central (Tony Lloyd) and for Blackley and Broughton (Graham Stringer). I can tell the Minister that I am looking forward enormously to looking him in the eye as I make my points on behalf of my community, which I feel incredibly strongly about.

Today, I have a terrible feeling of déjà-vu. When I came into the House 13 years ago, it was at the end of almost 20 years of Conservative Government. Before that, I was a local councillor in my community for eight years. I had spent every one of those eight years as a councillor under a Tory Government cutting budgets year on year. When I came here, our public services were on their knees. Two of my inner-city wards had 50% male unemployment, and we had 70% youth unemployment. My local council had been absolutely decimated. That was the reality of being in local government under a Tory Government, and I am sorry to say that it feels as though history might be about to repeat itself. All the progress that we have made over the past 10 to 15 years is in the process of being unravelled; we are going to go backwards instead of forwards.

Recently, I had a meeting with my chief constable, Peter Fahy, to talk about the police cuts, which we discussed here earlier today. I have a huge amount of time for him; he is an extremely good officer. He told me that what worried him most was that we would go backwards and undo all the progress that had been made. He was particularly worried that the advances that we have made for young people would be undone, because young people are the foundations for the future.

I put it to the Secretary of State that the cuts that he is imposing are unfair. They are unfairly targeted at the poorest communities, and they will undermine the foundations that we have built for the future. The education results in my city are now immeasurably improved, crime has gone down dramatically, and housing and regeneration have gone forward apace. We have Media City at Salford Quays, and we have the opportunity to build a fantastic future. This year, however, we are facing £47 million of cuts in Salford. Next year, it will be £48 million, and the year after, it will be £55 million. Those are not political choices. I do not know how the hon. Member for Harrow East (Bob Blackman) can stand up in the Chamber and make the outrageous claim that councillors who are doing their best to protect their communities are making deliberate, unnecessary political choices to cut services. That is an insult not only to Labour councillors but to Conservative and Liberal Democrat councillors. I have been a councillor, and I know how hard it is to make the kind of choices that are having to be made now.

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

Does my right hon. Friend agree that some of these grant choices are not simply about fairness? For example, some of the settlements for the fire and rescue authorities could be very dangerous. In Nottinghamshire, the number of fire tender appliances is apparently going to be reduced from 36 to 30. These funding decisions are creating really serious risks.

[Hazel Blears]

My hon. Friend is absolutely right; we share the same concerns. The Greater Manchester fire and rescue authority has had to make even further cuts because the figures changed halfway through its budget process.

I want to make just a few observations about the position that Salford is in. The Chancellor of the Exchequer said, “We will not balance the books on the backs of the poor.” However, Salford is one of the poorest authorities. We are in a consultation process with our community, and I spoke to my leader this afternoon. We are looking at the possibility of having to close libraries and one of our sports centres, as well as taking £1 million out of our youth service and £500,000 out of adult social care. Unlike many local authorities, ours has said that it still wants to provide services to elderly people who have moderate, as well as critical, needs. That has always been a priority for Salford, but we are still going to have to take £500,000 out of that service. We will also have to make a 42% cut in the Connexions service. I want my youngsters to get the skills and to have the ambition to get those jobs in Media City, but how can they aspire to that kind of future if they do not have a proper careers guidance service?

We are having to cut the citizens advice bureaux by 15%—it is the minimum we can do, but we know that people will be out of work, as we are looking at losing 450 jobs in the city. People will have debts and will need advice, so what do we have to do? We have to cut the CAB and the 60-odd independent financial advisers that we funded through the financial inclusion fund, which is about to be slashed. The amount of advice left available will be absolutely minimal. Our voluntary organisations will have to be cut perhaps by 10% to 15%. Again, Salford council is really trying to make sure that it protects those voluntary organisations, but they cannot be immune from the cuts that the rest of the service has to take.

I mentioned area-based grants. I feel strongly about them because area-based grants were specifically directed at poor and deprived areas that had extra needs. The slashing of area-based grants has disproportionately affected those living in the poorest parts of our community. In Salford, it was 11% of our total budget, and much of that money was used to tackle crime and antisocial behaviour, to provide youth services and diversion schemes and to keep young people off the streets and make the community safer. All that is about to disappear.

I genuinely feel that these cuts are unfair, despite the Secretary of State’s smoke and mirrors about spending power, his new definitions and all his obfuscation of the real situation. The cuts in spending power in his area are of less than 1% next year, yet we are looking at 15% cuts in Salford. For the area of the Leader of the House, the cuts are less than 1%; for the Home Secretary’s area, less than 1%; for the Culture Secretary’s, the Transport Secretary’s and the Education Secretary’s areas, less than 1%. These are some of the most affluent parts of the country. I believe that if cuts have to be made, which they do, they must be fair—but they are simply not fair.

I say to the Secretary of State that I have a huge amount of respect for the people of this country: they are not stupid; they understand that hard decisions have to be made, but they also have a well-developed sense of justice and fairness. They will see right through what the Secretary of State is doing. Transparency will come for the Tory party’s actions; people will see right through them.

I commend the campaign launched in the Manchester Evening News. It is a massive campaign against the cuts, urging local people to sign a petition. The Manchester Evening News is not a partisan paper; it represents people right across the conurbation. They, too, can see the unfairness. Nine of our 10 boroughs in Greater Manchester have cuts higher than the national average. The only borough that does not is in the constituency of the Under-Secretary of State for Communities and Local Government, the hon. Member for Hazel Grove (Andrew Stunell); that has a below-average amount of cuts. People across Greater Manchester—people in Rochdale, in Oldham and in places right across the area—know that these cuts are deeply unfair. I have no doubt that action will be taken at the ballot box in May.

My final point is about what else could be done. We heard a lot from the Secretary of State about community budgets. As he well knows, I started off my time in the Department with Total Place, which meant bringing together and pooling budgets, co-location, integrated services, systems engineering, and service redesign—all those things that Government Members have talked about. However, for major service redesign, time for planning is necessary—it cannot be done at the drop of a hat, because different skills and competences are involved and people might have to be made redundant. We have heard about the lack of capitalisation for that sort of project; it cannot be done all at once. I echo the points made by my hon. Friend the Member for Sheffield South East (Mr Betts), the Chairman of the Select Committee. Why are these cuts front loaded, which makes it so much more difficult to do the systems redesign that could result in efficiencies without the need for front-line cuts?

The Secretary of State will tell me otherwise, but I genuinely believe that the reason for having the cuts early on is that more freedom to manoeuvre—and to be more generous—will be possible in the two years leading up to the next general election. The Government will hope to reap the rewards from that. I hope that it is not the Secretary of State’s intention to make a partisan political budget in this way. I would like some reassurance that he is trying to be fair rather than to seek political advantage. When we reach the two years before the election and we will have had these massively front-loaded cuts in the first two years, I will be amazed if we do not see the Secretary of State seeking some room for manoeuvre for electoral advantage.

[Mr Pickles]

I am grateful to the right hon. Lady who, as always, is giving a thoughtful speech. I can assure her absolutely that that it not the intention, and I can assure her absolutely that that is why we have put in extra protection for the most vulnerable.

[Hazel Blears]

I think that if the Secretary of State came to Salford—as the Minister for Housing and Local Government did recently—and said that he had given extra protection to the most vulnerable members of our community, he would receive the sort of typically robust Salford reply that I could not possibly use in the House.

Over the last couple of weeks, we have heard a great deal about the big society. Apparently Lord Wei is unable to do quite as much as he used to because he no longer has time to volunteer, which I thought was a wonderful irony. As the Secretary of State will know, I strongly support the underlying principles of involving the community, devolving power and introducing more plurality to the provision of public services. However, as has been pointed out by Dame Elisabeth Hoodless of the Community Service Volunteers, Thomas Hughes-Hallett, chief executive of Marie Curie Cancer Care, Sir Stuart Etherington of the National Council for Voluntary Organisations, and Sir Stephen Bubb of the Association of Chief Executives of Voluntary Organisations—none of whom are partisan people—while the Government talk of the need to empower voluntary organisations and local communities, they are making massive, deep, draconian cuts in the voluntary sector. That simply does not add up. It is totally contradictory, and it is increasing the sense of cynicism and disempowerment that exists in our communities.

If the Government have any genuine commitment to giving people the power to change their own lives, they must recognise the total incoherence and inconsistency that lies at the heart of their so-called big society. This is not community action; it is do-it-yourself. The Government are telling people, “You are on your own, with no back-up and no ability to take on roles of this kind.” I know that some Members genuinely support these principles, but I fear that, given the cuts that we are seeing, they are going absolutely nowhere except into the sand.

My final plea to the Government relates to community budgeting. For goodness sake, let us get on with it more quickly. We will be able to ameliorate some of the pain that our communities will feel only if we can re-engineer our services, pool the budgets, achieve the necessary co-location, and start to address many of our current problems. At present that programme is minimalist. I think we have been told that four areas in the country might adopt community budgeting. We know what happened with the four big society areas. I ask the Secretary of State to enable us to support many more areas, so that they can provide services in a new and, I believe, more integrated way that could lead to a transformation in the provision of local government services.

19:12

[Tessa Munt (Wells) (LD)]

I do not wish to rehearse arguments that have been presented by Members on both sides of the House. Instead, I shall focus on the case of Somerset county council.

Before any funding announcements had been made, Somerset county council’s leader announced to local people that he wished to make cuts amounting to £43 million. Then, in early January, he announced that he wished to make a further tranche of cuts amounting to £20 million. He said that he would close some libraries, cut bus subsidies, cut the community safety budget by 100%—which would mean the loss of our wonderful police community support officers—cut funds for the Duke of Edinburgh award and the youth clubs by nearly 100%, and cut arts funding and the voluntary sector by 100%. He also said that he would sell the county farms, which seemed ludicrous to me given that they provide a return of some 6% or 7%—more than could be obtained from any bank.

The leader of Somerset county council seems obsessed with the idea of clearing debt. He does not seem to understand that for most businesses it is quite all right to have a mortgage or a loan. They know what the repayments will be, and they schedule them. There is nothing extraordinary about that. I do not think that I know a farmer or small business man who has saved up all his money before buying stock. Such people go to the bank and take out a loan. They know how long it will take them to repay the loan, and it is scheduled. They increase their assets, and tuck the money back into the business. That is what has happened over many years in Somerset under the Liberal Democrats.

The leader of Somerset county council has said that he wishes to make his cuts over three years rather than four, which strikes many people as a frantic attempt to clear debt. It is a bit like people paying off their mortgage or their car or fridge loan and realising that actually they do not have any money and they cannot buy food because they are so obsessed with clearing their debt.

[Chris Leslie]

The hon. Lady is making an important point about how politicians who are obsessed with debt reduction at the cost of everything else may well find themselves in jeopardy. Does that not remind her of the Chancellor of the Exchequer’s attitude, whom I think she is supporting?

[Tessa Munt]

I disagree, because the situation here is that the county council has £29 million in reserves, excluding the money attached to schools, yet we have a man who wishes to put aside £15 million for redundancies, which is going to decimate the council staff, and to make cuts over three years instead of four. If he was to reschedule his debt over four years, it would be a lot less difficult for people in Somerset. Happily, as a result of campaigning by local people, three libraries have been saved: Shepton Mallet, Glastonbury and Cheddar. However, the library in Highbridge, an area that probably needs a library more than any other because there are so few facilities in that town, is still under threat.

I approached one of the Secretary of State’s Ministers because I wanted to understand. There is so much confusion among local people about what is actually involved, because there is one grant and another grant, and little bits of money get thrown back and forth in conversation, and nobody really understands what is happening. I asked the Minister in question to explain to me in simple terms the situation facing Somerset. In simple terms, this year—the year ending on 31 March—Somerset has £368 million to spend, and next year, starting on 1 April, it has £360 million. That is a difference of only £8 million in spending money, which amounts to 2%. Somerset has had a fantastic deal therefore, so I do not understand the obsession that this gentleman has. Moreover, the Government have been generous in granting £42 million in capital grants. That means we can fix the roads, which are in a shocking state, and do something about school buildings. As far as I can see, the county is £20 million better off than it ever has been, and, as I understand it, the capital grant is cash, and that £42 million is about £41 million more than anyone ever expected to have.

As far as I can see therefore, Somerset has an increase in funding from central Government, and that funding is relatively generous in the current economic circumstances. I therefore do not understand why the county council leader is going to announce a series of cuts next Wednesday. If those cuts proceed and he makes those announcements on Wednesday, I will ask the Secretary of State to give me an appointment so I can come along with the leader of Somerset county council to ask that gentleman to explain himself and his actions.

19:18

[Mr Andy Slaughter (Hammersmith) (Lab)]

Hammersmith and Fulham council is closing nine of its 15 children centres this year, and by doing so it will generate about £2 million in savings. That is part of the £6 million savings in children’s services, which in turn are part of the £13 million savings in social services, which in turn are part of the £27 million that the council aims to save in the coming financial year. The total over the three years is £65 million, or about a third of its budget.

Because of the policies the Secretary of State is pursuing, many councils are having to make unimaginable cuts of this kind. I want to focus on two points in respect of Hammersmith and Fulham council. First, in making those very difficult decisions it has chosen to target the most vulnerable people, and the services that all parties represented in this House say that they wish to be preserved. Secondly, it maintains a charade, with which the Secretary of State has colluded and continues collude, that it is doing this in a new way—that these are new cuts that will not affect front-line services.

In particular—this picks up the point just made by the hon. Member for Wells (Tessa Munt)—the council says that it will pay off debt, and in that way generate revenue income. It says that it will merge back-office services and in that way avoid affecting front-line services. I will break the spell immediately by saying that even if those two ideas—the merger and the disposals to pay off debt—are both successful, which is by no means certain, the total amount of money generated would be about £1 million, or 4% of the total cuts. That is what we are being led to believe is the new way of making cuts.

Before I came to this debate, I had two meetings this afternoon about Sure Start. The first was of an all-party group, to which the Minister with responsibility for children came to speak. He is an honourable man, as well as being an hon. Gentleman, and I believed what he said, which is what I have heard all the Education Ministers repeat. They believe that there is sufficient money to maintain the network of children’s centres and that there is no need to attack their budgets, particularly the phase 1 centres that serve the most vulnerable groups.

That appears to be Government policy, but this is what is happening in Hammersmith and Fulham. First, the closure of the nine centres was announced between Christmas and new year—on page 34 of a report called “Family Support”. Secondly, when that report came up for decision—by that time, thanks to the Daily Mirror and other great organs of state, a lot of the local population had been alerted to the situation—the council said, “You’ve misunderstood what we’re doing. We’re not closing any children’s centres,” but it then proceeded to vote through, on 10 January, the 50% budget cut that meant that those centres had to close. Having made that decision, it then began a consultation process—but that process identifies phase 1 children’s centres, the budget for which is to go down from £473,000 to £19,000. Threats were made to the staff, who were not informed before the closure of their centres was announced in the press. Heads of centres were told that they could not talk to me, or even to the Government, about what was happening.

To her credit, the Minister of State, Department for Education, the hon. Member for Brent Central (Sarah Teather), did say during a Westminster Hall debate that she was concerned about, and was monitoring, what was happening in Hammersmith and Fulham. If the Government want to hold their line on Sure Start, they need to address the situation in Hammersmith and Fulham. It is not just Sure Start centres; youth clubs are closing too. I received a deputation representing 1,000 young people who use a youth club just outside my constituency that is closing, and I am told that all but one of the youth centres will close. Council estates are being demolished.

I went to a meeting at an old people’s home last Friday where, in order to raise £250,000, the air rights over the car park are being sold to a private school next door, so that no light will reach the old people’s home. Some of those old people spend 100% of their time in that home. This is what is happening in a Conservative-controlled council in London at the moment. This is the reality of the “painless” cuts.

Those are the things that we do not hear about in Hammersmith and Fulham. What about the things we do hear about? What about the paying off of debt—that prudent way of reducing debt? That happened on Monday, when, at a meeting of the council’s cabinet—I believe that the Chairman of the Select Committee, my hon. Friend the Member for Sheffield South East (Mr Betts), referred to this earlier—the disposal of nine community buildings was agreed to. Those buildings include four community centres used by more than 100 voluntary groups, all of which will be made homeless, and alternative provision will not be made for them. Those buildings include Palingswick house, an imposing building in central Hammersmith in which 22 voluntary groups occupy space. My right hon. Friend the shadow Secretary of State alluded to one of those earlier: the Afghan refugee group.

Because councils have to produce equality impact assessments when they are booting voluntary organisations out on to the street, Hammersmith and Fulham did that. It produced one for the Iranian Association, which caters mainly for refugees from the oppressive regime in Tehran: the Iranian Association was told that the alternative provision was to go to the Iranian embassy. The Kurdish Association for Refugees is also based in the building, and runs not only a cultural advice centre but a museum—one promoted by Boris Johnson on his tourist trail of London. It was told that the alternative to being booted out on to the street was to go to an organisation for the south Asian population based somewhere in east London. The Afghan refugee association was told that there were two alternative sources of provision for Afghan refugees in London, one was an Afghan restaurant and the other—as my right hon. Friend the Member for Don Valley (Caroline Flint) has already said—was the southern Afghan club, for the promotion of Afghan hounds. That is how my local community in Hammersmith is being treated by a Conservative council.

Three other community centres all came up with viable business plans that would have allowed them to continue operating from their community centres and pay a commercial rent, which would have meant that over a period of two or three years, the council would not have lost money. Without listening any further to those ideas the council voted through the proposal, and all these buildings will be sold off to produce an income of about £500,000 a year. The opportunity cost for the tens of thousands of people who will no longer have those facilities available to them, including the elderly people and the 750 kids from deprived backgrounds who go to dancing classes at one of these places, is unimaginable. But this is what the council is proud of.

The other thing that the council is proud of is the merger with Westminster city council and Kensington and Chelsea borough council, which was announced yesterday. I alluded in an earlier intervention to the Secretary of State’s claim last October—he associated himself with this claim—that the move would save £100 million. When the report was published yesterday, it said that in the dim and distant future—no detail was provided—this would save about £34 million between the three councils. That is already only a third of the sum that was claimed some two to three months ago. The actual quantified savings for next year, between the three councils, was less than £3 million, and the actual sum for Hammersmith and Fulham council was £500,000. That is the big new idea. [Interruption.] I hear the hon. Member for Ealing Central and Acton (Angie Bray) making a sedentary comment. She represents my previous seat, and I always give her credence. She is absolutely right that £500,000 of genuine saving of back-office cost is well worth having, but it is not £27 million, £10 million or £100 million.

That sum is worth having, save for the fact that what those merger proposals envisage is not what hon. Members would like to hear—which is that the savings would come from economies of scale, procurement, and other such administrative matters. We would all support that, but instead the proposals are about creating a new entity that is not Hammersmith and Fulham, not Kensington and Chelsea, and not Westminster. It will be entirely unaccountable to the citizens of any of those boroughs, and it absolutely flies in the face of devolution and localism. No proper risk assessment has been done of the proposal, and £20 million of the notional £35 million will come from cuts in social services. I hate to think about the number of baby Ps that there will be, and the number of elderly people who will be put at risk as a result of these crazy, ill-thought-out and half-baked proposals.

There is no accountability in the arrangement. Two of the authorities have traditionally been Conservative and one has traditionally been Labour. The clear intention is to bind the hands of that authority, so that when it returns to Labour control, as it will doubtless do in three years’ time, it will no longer have jurisdiction over its own spending, because that will be centred in a holding company over which none of the individual councillors has control. Is that really the future of localism in this country? That is the brave new world that the Secretary of State’s favourite council has in store for us.

[Mr Pickles]

indicated dissent.

[Mr Slaughter]

The Secretary of State may shake his head, but he is very welcome to intervene. He has called the council the apple of his eye, but it is a rotten apple of his misty eye. He needs to have a closer look and clear his vision a little.

The next time people hear about Hammersmith and Fulham council they should think not about the white heat of efficient local government, but about those Sure Start buildings that now stand empty, and the community buildings being sold to property developers or used for pet Government schemes such as Toby Young’s free school. They should think, as my right hon. Friend the Member for Don Valley has said, about the old mate of the chief executive being paid a total of £700,000 over three years to manage an arm’s length management organisation at the council. They should think of the six chief officers who are paid more than £150,000 a year and the £250,000 they wasted because they could not be bothered to turn off the lights at the town hall for five years.

That is the reality of Tory local government. They do not care when they waste money, and they take pride in cutting services such as the nine Sure Start centres. The second meeting I went to this afternoon was with the heads of those Sure Start organisations, who met here to campaign to keep open one of the Labour Government’s great achievements. The Conservatives say they are committed to Sure Start, but the reality of Tory local government on the ground means that those services will be shut down before we can draw breath.

19:31

[Tony Lloyd (Manchester Central) (Lab)]

I have spent almost my whole political life not wanting to personalise politics, but I must say to the Secretary of State that he should be ashamed of himself for losing the battle in the Cabinet and the spending review so that local government has become the victim of his incompetence. He should be ashamed of himself because the settlement is divisive within the local government family. It will inflict damage on vulnerable authorities while, as we have heard from my hon. Friend the Member for Hammersmith (Mr Slaughter) and the hon. Member for Wells (Tessa Munt), some local authorities are feather-bedded and treated with kid gloves. This political decision of his is an outrage because in cities such as mine it will be the most vulnerable people who suffer, as my right hon. Friends the Members for Wythenshawe and Sale East (Paul Goggins) and for Salford and Eccles (Hazel Blears) and my hon. Friend the Member for Liverpool, Walton (Steve Rotheram) have pointed out. [Interruption.]

The Secretary of State chunters from a sedentary position. The reality is that, like previous Tory Secretaries of State for local government, he has no compassion or consideration for those who will lose their home help or for the children who will lose the life chances that people in his constituency will take for granted. What we have had from him and his Ministers is a campaign of ridiculous disinformation such as the nonsense that has been repeated by Tory Members today about £150,000 going on statues in Manchester or about the Twitter tsar who was an invention of the Minister for Housing and Local Government. [Interruption.] The Minister says something from a sedentary position that I cannot hear, but I am happy to give way to him if he wants to make his point. [Interruption.] He indicates that he will reply when he winds up. No doubt that will allow him to peddle his ridiculous fantasies again.

[The Minister for Housing and Local Government (Grant Shapps)]

Is the hon. Gentleman saying that an advert for a new media expert for £38,000 was not placed by the council?

[Tony Lloyd]

I have checked and there is a communications officer, whom, the House might be interested to know, was asked to have competence in new technologies such as Twitter and is equivalent to a number of people in the Minister’s Department who have the same role, the same salary band and the same competences. His Twitter tsars massively outgun Manchester’s ability to communicate. He should think very carefully, because trading insults at this level does nothing for the people who are going to lose adult social services. [Interruption.] Does the Secretary of State want to intervene?

[Rory Stewart (Penrith and The Border) (Con)]

Will the hon. Gentleman give way?

[Tony Lloyd]

I will give way to the Secretary of State. I hope the hon. Gentleman will forgive me.

[Mr Pickles]

Some of the problems that the hon. Gentleman is talking about relate to the working neighbourhoods fund, which was cut by the Labour party. Where was he then? Why was he not lecturing the Labour party about those cuts? He criticises us but he was silent on his constituents’ behalf then.

[Tony Lloyd]

I invite the Secretary of State to come to my constituency any day of his choosing. We will walk around and talk to local people, and we will ask them about the record of local government under a Labour Government and under previous Conservative Governments. As my right hon. Friend the Member for Salford and Eccles said, when the Labour Government came into power in 1997, Manchester had seen services consistently destroyed. They were fragile and vulnerable. Under a Labour Government there was an improvement in standards in education, health—a much more difficult task—housing and crime and disorder. All those improvements strengthened our communities and put the cement back into our society.

That Secretary of State, who chunters away to his friends, is putting all that at risk and he is doing so deliberately. There was choice. There was choice in the Budget process that he lost with his friends in Cabinet. There was choice when he decided to put money into local authorities such as Somerset, and not to put money into local authorities such as Manchester. That is a particularly cruel cycle of choice and a cruel deception.

The Prime Minister stood at the Dispatch Box earlier today and told the House that he was guaranteeing that Sure Start centres would continue to operate. Let us talk about the reality in a city such as Manchester, which is having to cut children’s services by some 25%. It has had to say that it will give up control of those Sure Start centres, and it hopes that the running of them will be taken over by the voluntary sector or possibly schools. There is no guarantee for the young people in Manchester that the Sure Start centres, which are praised by everyone on the Government Benches, will continue to operate.

My hon. Friend the Member for Hammersmith says the political choice of the Tory council is to cut the Sure Start centres. In Manchester, a Labour council has to put those Sure Start centres at risk because of the actions of the Secretary of State and his friends.

[Charlie Elphicke]

The hon. Gentleman talks of political choices. Yes, we can talk about statues, Twitter tsars, creative directors and the junket in the south of France, but the key political choice in Manchester is to axe 2,000 jobs while there is £100 million in reserves. How can the hon. Gentleman justify that?

[Tony Lloyd]

I think the hon. Gentleman is either a little hard of hearing or not too fast at understanding. My right hon. Friend the Member for Wythenshawe and Sale East made the point earlier. Those balances that the Secretary of State and his Ministers have traded and which they said are there as some luxury cushion are, in the case of Manchester, allocated money.

[Grant Shapps]

Does the hon. Gentleman recognise that there is £108 million of non-schools money held by his local authority? Earmarked does not mean the same as allocated.

[Tony Lloyd]

The £64 million that will now be allocated will be for the redundancies that the Government are forcing the council to make. That is the answer to the hon. Member for Dover (Charlie Elphicke). It is a disgrace that Manchester must spend such a huge amount of money making good local government workers redundant. That is the responsibility of the Secretary of State. As a result, the things that the Housing Minister described as being merely earmarked will now not go ahead, so Manchester will lose provision and facilities because of the Government’s decision.

[Charlie Elphicke]

The hon. Gentleman speaks of the £64 million earmarked for redundancies. What we did in Lambeth, what happens in most authorities, and what the Government are doing, is to examine the possibility of natural wastage and introduce a slower programme of voluntary redundancies, which would not mean as great a shock as the hon. Gentleman is talking about.

[Tony Lloyd]

Let me try to bring the hon. Gentleman forward a little in his thinking. Manchester would love to have done that. Manchester has not made compulsory redundancies—possibly it is true to say—in my lifetime. Manchester is now having to do that because the pace of the cuts that his Secretary of State is making is so rapid that it has no choice. For an authority such as Manchester, 25% of the budget cannot be taken out of the pot without that resulting in compulsory redundancies.

[Paul Goggins]

Does my hon. Friend agree that the comments, remarks and challenges coming from Government Members reveal a complete lack of understanding of the nature of a city like Manchester? Manchester is a world leading city. It is founded on two things—first, a strong partnership with the private sector and secondly, over recent years, having the money to invest in the communities that need it. Does my hon. Friend share my concern that their ignorance and arrogance mean that the progress that we made is put at risk?

[Tony Lloyd]

The only thing I disagree with is that my right hon. Friend’s words are too mild, because what the Secretary of State is doing is the result of political malice. It is political malice because the simple reality is that he chose not to exercise the options that were available to him. He chose to make a local government settlement that puts at risk not only money—if it was only money perhaps we would move on—but the resources on which people depend for living their lives. It puts at risk those things that saw crime and disorder diminish in Manchester and that began to give young children in inner-city areas like mine opportunities in life that he would take for granted—the Secretary of State smiles. He is smiling while I talk about children being denied the opportunity to get on in life, because that does not matter to a Conservative Government, or to their Liberal Democrat friends and supporters. It does matter enormously, because they are brutalising our society.

[Andrew Gwynne (Denton and Reddish) (Lab)]

Earlier, the Secretary of State mentioned extra resources for the concessionary fares for shire district councils, yet two weeks ago the Conservative and Liberal Democrat-led Greater Manchester transport authority scrapped the young people’s concession and the peak-time pensioners’ concessionary fare. That is the reality on the ground, and is it not another example of the unfairness?

[Tony Lloyd]

My hon. Friend makes an important point, because all of this is about political choice, and we have to face that squarely. The Secretary of State knows that it is about political choice, because he has form in local government. I remember when he was a national figure in local government; he is now a national figure in national government, but sadly the rhetoric and the reality have not changed. I believe that local government is fundamentally important to the lives that my constituents live. I believe that things such as swimming pools and leisure centres really do matter as part of the process of making our society more decent and more liveable and of properly giving our young people some stake in that society and some opportunity for the future. Frankly, he does not share the view that local government is the answer to our nation’s problems; he regards it as part of those problems.

I must admit that I genuinely like the Housing Minister—I am sorry if I damage his future by saying so—because he is a nice man. He said that he was going to Manchester next week, so I hope that he will come and talk seriously with the people in my town hall, and perhaps in the other local authorities around Greater Manchester, because he needs to recognise that the Government have simply got it wrong. If he wants to stand at the Dispatch Box, as he will in a moment, and tell me that the cuts are not the result of brutal, cynical, malicious and political choices, he can offer to come to my city and talk through the finances. If I am right and he is wrong, and Manchester cannot possibly manage without making serious cuts in public services, perhaps he will have the good grace to admit that the Government must change their minds. I hope that that will happen, but I fear that it will not.

19:43

[The Minister for Housing and Local Government (Grant Shapps)]

It must have been an incredible experience to stand at this Dispatch Box for the local government finance settlement in any of the past few years and announce on a whim yet more money being piled up and sent around the country in various directions. Unfortunately, we do not live in that kind of world today, and the sad thing is that we did not live in that kind of world even then. The previous Government thought that they had money to spend, but the truth was that it had long since been spent. A year ago, all they were doing was standing here and spending money that had never been raised, that was not available and that would actually have to come from the children of every Member of the House and of all our constituents for many years to come.

At the election, people had a choice, and their decision was to elect a Government who were primarily going to get on with cutting the deficit. Today, however, there has been not a word of apology from the Opposition for getting us into that enormous financial mess that meant that this country had the highest deficit of any country in the western world—of any OECD top 20 country. Do they recognise that as a fact? Do they understand where things went wrong? Are they here today to apologise and to show that they are going to set a new path? Absolutely not, because as we saw at lunchtime the policy vacuum on the Opposition Benches is quite literally a booklet with empty blank pages inside.

There has been no response and no sense of where those cuts would fall. The Opposition do say that there would be some cuts; it is just that we are not allowed to know where they would fall. The Opposition accept that local government spends a quarter of all government money, but it seems that none of those cuts would be in any way painful under their budget, which, they say, would halve the deficit over this Parliament.

Halving the deficit, however, is not enough. I believe there is a fundamental misunderstanding of how this country’s accounts work. Indeed, perhaps that was the problem over 13 years: the previous Government did not understand that, if we only halve the deficit, we will still pile up debt. The figure of £44 billion, which we are currently spending at record interest rates just on repaying the interest alone, would have gone up to £70 billion and more, yet the Opposition have not a single answer—not a single penny—to offer up to this debate. Therefore, their contribution has been all but pointless.

[Mr Betts]

The right hon. Gentleman refers to past debates. Can he point to any occasion over the years when the Opposition Front-Bench spokesperson said that the Government were providing too much money to local councils? Can he provide one example of a Conservative MP saying, “My council’s getting too much money in this settlement”?

[Grant Shapps]

The Chairman of the Communities and Local Government Committee is absolutely right: my colleagues and I have been reflecting over the past few weeks, when the representatives of many local authorities throughout the country have been to see us, on what it must have been like to have been in a previous Administration, when one could believe that money was no object—that one could simply get this thing from the money tree and spend it as one wished by giving higher and higher settlements to every authority that came to visit. How wonderful it must have been, but I am afraid that the truth, the reality, has come home to roost, and once again we are left to sort out the mess that Labour has left us with.

Having accepted that there should be some reductions, it was not as if the right hon. Member for Don Valley (Caroline Flint), who shadows the Department, was able to agree with any of the methods that might be used to make reductions without harming front-line services. In fact, she went so far as to ridicule my hon. Friend the Member for Daventry (Chris Heaton-Harris) because he mentioned in an intervention that Hampshire council has just announced that it will cut £7 million next year by cutting the senior management salaries and work force. That was pooh-poohed as impossible. Well, for the sake of clarity, I have managed to get hold of a copy of that detailed information, and my hon. Friend was wrong: it is not £7 million that will be saved by cutting senior management; in fact, it is £7.9 million.

The idea that money cannot be saved or that leadership cannot be shown by example when senior people take a cut, as Ministers in this Government have with a five-year pay freeze, or that that does not have an impact further down the line on the rest of senior and middle management, has been blown apart. The authorities that have taken such steps have found it much easier to sell to the rest of the authority the difficult decisions that have had to be made.

Nor is the right hon. Lady correct when she talks about the £10 billion of reserves. There are £10 billion of reserves for local authorities, as has already been pointed out in an intervention, but the right hon. Lady says that 70% of it has been earmarked, and, in that, she makes a fundamental mistake, which I am surprised about, because she was in this Department when in government. The reality is that “earmarked” is not the same as “spent” or “allocated”. “Earmarked” does not mean that the money cannot be used in the intervening period to ensure that front-loaded reductions, which we have heard a lot about, can be handled in a much better way.

My hon. Friend the Member for Isle of Wight (Mr Turner) raised a serious technical issue that he had already come to ask us to look at again. We did do that, but we could not find in favour of his local authority. However, I say to him and to all other hon. Members that we thought that the concessionary fares mess that had been left by the previous Government required some assistance to sort out between the two tiers of government. I hope that that is helpful.

The Chairman of the Select Committee, the hon. Member for Sheffield South East (Mr Betts), referred particularly to front-loading. As I said to the right hon. Member for Don Valley, it is possible to use earmarked funds that are in the reserves. I invite the hon. Gentleman’s Committee to look at this again, as there seems to be some misunderstanding. I welcome the fact that he welcomes the end of ring-fencing, which had been called for very widely across government and the Local Government Association. Ring-fencing has been un-ring-fenced by some £7 billion, and that has given local authorities a lot more flexibility. We have taken 90 separate budgets and combined them into just 10, meaning that local authorities that are savvy and understand that the situation has changed are able to move much more quickly.

The issue of business rates was raised by the hon. Member for Sheffield South East and others. There is a suggestion out there, which is gaining some credibility, that if business rates were collected at a higher level than the entire local government finance settlement, then the difference could be redistributed somewhere down the line. People need to understand that if business rate collection goes up or down, the amount that goes to local authorities is identical; it makes no difference. The amount that goes to local authorities is set out in the spending review envelope; it is insured by the Treasury, as it were. I hope that that clarifies the situation.

[Caroline Flint]

There is huge concern up and down the country that there will be a future Tory policy to localise business rates, which would not deal with the inequalities in terms of opportunities to raise funds through businesses. Can the right hon. Gentleman assure me that that will not be a policy of this Government?

[Grant Shapps]

I am pleased to be able to provide the right hon. Lady with the reassurance that she needs. A redistributive approach will have to remain in whatever system is put in place. I will return to that in a few moments.

My hon. Friend the Member for Harrow East (Bob Blackman) made several good, intelligent points. He called for a settlement that is more predictable because it is provided for more years in a row. As the House knows, we have made a settlement for this year and for next year, after which time we intend entirely to reform the system to do what everyone has called for, which is to dump the failed redistributive formula grant system in which, as the Chairman of the Select Committee pointed out, everybody, even in the good years, complains that it has been poor for them.

My hon. Friend provided a very useful list of different things that local authorities could do before they start savagely cutting the front line, as in the case of some authorities in the past couple of days. Members will do well to refer back to that list in Hansard to see all those different methods. Until an authority has run through each one of the ideas that he presented, it has no right to be cutting the services of the most vulnerable in society.

The hon. Member for Liverpool, Walton (Steve Rotheram) made a very impassioned speech. I have seen some of the things that his local authority has done; the £4.5 million that it saved by cutting some of the senior management is of course the right way forward. However, he says that his council is still incredibly badly off. Let me make this simple point to him: while Liverpool is experiencing a reduction in its funding formula of 11.3%, my Hertfordshire council is experiencing a reduction of 16.1%. This Government have gone out of their way to try to protect the most vulnerable, and it is about time it was recognised that the spending formula was designed to do that.

The hon. Gentleman made another claim that was extraordinary and, as much as he may not realise it, untrue—inadvertently, I am sure. He said that his local authority is cutting Supporting People by 30%. If that is true, his local authority is getting it wrong. Supporting People is one of the budgets that we have protected way more than the general picture. There is a reduction of less than 1% in cash terms on average in the Supporting People budget over the next four years. I will give way to the hon. Gentleman so that he can put pressure on his local authority not to slash it, given that the Supporting People budget is largely protected at national level.

[Steve Rotheram]

If I can prove that it is 30%, will the Minister give us back the other 29% so that we suffer only a 1% cut, which is the national average?

[Grant Shapps]

As the hon. Gentleman knows, the grant formula—[Interruption.] Members would do well to listen to this point because it affects many constituencies. The simple fact is that Supporting People is paid for through the formula grant. Given that we know for a fact that there is not a reduction in spending power of more than 8.8% in his constituency, it cannot be the case that the Supporting People budget has fallen by the claimed 30%, so I take him up on his challenge.

My hon. Friend the Member for Dover (Charlie Elphicke) made the worthwhile point that local authorities have been protected from having to raise council tax by the £650 million from central Government.

The hour is late and I do not want to detain the House. There is a clear division between authorities that have taken the necessary steps and those such as Manchester city council, which yesterday claimed that it has to make a 25% reduction.

[Caroline Flint]

Will the right hon. Gentleman give way?

[Grant Shapps]

I was going to conclude, but I will give way on this point.

[Caroline Flint]

I am aware of the time and I appreciate the right hon. Gentleman giving way. The person who stated that 25% of the net budget of Manchester city council will go over the next two years was its treasurer—a statutory officer of Manchester city council. I suggest that when the right hon. Gentleman is up there, he speaks to that gentleman, because I believe that that gentleman is right and that the right hon. Gentleman is wrong.

[Grant Shapps]

Here is a simple fact for the right hon. Lady: the reduction in spending power over the next two years is 15.5%. Yesterday, Manchester city council called a press conference to say what it will not do over the next two years. It says that it is going to cut the budget by 25% over that period, when the reduction is only 15.5%.

To conclude, it is that side of the House and those authorities that are failing to protect the most vulnerable in society. Thank goodness for the coalition Government.

Question put.

19:57

Division 198

Ayes: 292

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Conservative: 250
Liberal Democrat: 42

Noes: 197

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Labour: 189
Democratic Unionist Party: 4
Alliance: 1
Independent: 1
Plaid Cymru: 1

Resolved,

That the Local Government Finance Report (England) 2011-12 (House of Commons Paper No. 748), which was laid before this House on 31 January, be approved.

Local Government Finance

Resolved,

That the Limitation of Council Tax and Precepts (Alternative Notional Amounts) Report (England) 2011-12 (House of Commons Paper No. 774), which was laid before this House on 31 January, be approved.—(Mr Dunne.)

Business without Debate

Wednesday 9th February 2011 Commons Chamber

Delegated legislation

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Immigration

That the draft Immigration and Nationality (Fees) Order 2011, which was laid before this House on 24 January, be approved.—(Mr Dunne.)

Madam Deputy Speaker’s opinion as to the decision of the Question being challenged, the Division was deferred until Wednesday 16 February (Standing Order No. 41A).

European Union Documents

Motion made, and Question put forthwith (Standing Order No. 119(11)),

Terrorist Finance Tracking Program

That this House takes note of European Union Documents No. 11048/10, relating to a draft agreement, No. 11173/10, relating to a draft Council Decision on the signature of the agreement, and No. 11172/10, relating to a draft Council Decision on the conclusion of the agreement between the European Union and the United States of America on the processing and transfer of financial messaging data from the European Union to the United States for the purposes of the Terrorist Finance Tracking Program; agrees that the programme is an extremely important tool in the global counter-terrorism effort, providing valuable contributions to numerous high profile cases; and notes that the programme has achieved an appropriate balance between counter-terrorism and data protection.—(Mr Dunne.)

Madam Deputy Speaker’s opinion as to the decision of the Question being challenged, the Division was deferred until Wednesday 16 February (Standing Order No. 41A).

Mobility Component of Disability Living Allowance

Wednesday 9th February 2011 Commons Chamber

20:10

[Duncan Hames (Chippenham) (LD)]

I wish to present a petition opposing the proposed withdrawal of the mobility component of disability living allowance from those living in state-funded care homes. The petition is signed by 135 members of Chippenham Gateway club in my constituency, a volunteer-run social club for those with long-term learning difficulties or mental health problems.

The petition states:

The Petition of members, volunteers and supporters of the Chippenham Gateway Club,

Declares that the Petitioners are opposed to the Government’s proposal to stop paying the Mobility Component of the Disability Living Allowance for disabled adults in residential care; and notes their concern that this proposal would have a devastating impact on the Chippenham Gateway Club and similar clubs for members with learning difficulties/mental health issues throughout the UK.

The Petitioners therefore request that the House of Commons urges the Government not to stop paying the Mobility Component of the Disability Living Allowance for disabled adults in residential care.

And the Petitioners remain, etc.

[P000884]

Domestic Heating Oil

Wednesday 9th February 2011 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Mr Dunne.)

20:12

[Pat Glass (North West Durham) (Lab)]

Mine is a large constituency. I have urban areas to the north-east and a very large rural area running right up to the Cumbrian border. It includes two areas of outstanding natural beauty and many areas of special scientific interest. Very many of my constituents are “off gas” and rely on heating oil and bottled gas, and some of these would be classified as the rural poor or living in fuel poverty.

I have been made aware in recent months that there are issues in the domestic oil fuel market—rising prices and a lack of regulation and competition—but it has become clear from the level of constituency contact and from the level of desperation expressed that a crisis has been building up since summer last year.

[Mr Kevan Jones (North Durham) (Lab)]

Does my hon. Friend agree that in a constituency such as mine, which is a rural constituency next door to hers, many people do not have a choice about whether to use oil, because there is no access to gas or another alternative fuel?

[Pat Glass]

I agree, and that is true in many constituencies.

When I contacted the office of the Secretary of State for Energy and Climate Change on this issue in early December, I was told that it did not believe that there was a problem and that it did not intend to do anything about it. This contrasts sharply with the experience of my constituents. Mr Kimber, who contacted me on 6 December, told me that the price of heating oil back in early October was 44p a litre. He said:

“Yesterday I obtained a quote online and was shocked to see the price had risen to 65 pence per litre. Today I obtained another quote from the same company and the price has gone up to 79 pence a litre today. How can this be now that the roads are free of snow and passable in nearly all areas locally?”

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

My constituency is similar to my hon. Friend’s and also has a rural part to it. People have told me not only that the price has gone up, but that an extra transport cost is loaded on if people want delivery within a short period of time.

[Pat Glass]

Absolutely. Indeed, another constituent, Mrs Green, told me:

“The cost of heating oil is now nearly 100% higher than just two months ago yet oil prices have increased by just 10%. How can this be justified?”

The answer is that it simply cannot be justified. Indeed, when I and other Members started to ask questions about this issue, I was contacted by a number of people working in the heating oil industry who told me that their employers were telling them to refuse to accept orders of less than 1,000 litres. That meant that members of the public were being refused deliveries unless they were prepared to pay £800, plus the cost of delivery, and let us remember that this was just before Christmas.

[Tessa Munt (Wells) (LD)]

I am grateful to the hon. Lady for giving way. Does she agree that that also applies in rural Somerset? We even have oil co-operatives in rural Somerset, members of which were running out of heating fuel as the winter months came on and the weather got bad, yet they were being charged the same excessively high prices when they were taking the trouble to drive on snowy roads to collect the oil, in containers that they had to purchase for £6 or £7 a piece. Therefore, even people who were not paying delivery charges were paying the equivalent sum, which did not include delivery.

[Pat Glass]

Absolutely.

[Mr Mark Williams (Ceredigion) (LD)]

. I also congratulate the hon. Lady on securing this debate and on reiterating how important it is to rural areas. The problem that she described, where oil companies deliver much larger quantities, was compounded by the fact that a lot of them were not telling the customers that they were doing so until the invoice arrived. People who were expecting bills of £200, which is bad enough, were then hit with bills of £800.

[Pat Glass]

Absolutely, and I am happy to give way to hon. Members from across the House, because this debate is about an issue that affects all our constituencies.

When I first started to investigate the domestic heating oil industry, it became clear to me that it operates in a completely unregulated market, where suppliers can do exactly what they choose. A number of takeovers and mergers in recent years have led to the supply industry being owned by two or three companies. All that has happened quietly, without reference to the Office of Fair Trading or the Competition Commission. Prices are being driven up not by world shortages or global increases in the price of oil, although there is some of that. Rather, prices in this country have gone up by 100% in a very short space of time largely because suppliers have been clearly taking advantage of people in desperate need during the coldest winter in a generation.

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

I am grateful to the hon. Lady not only for allowing me to intervene, but for bringing this issue to the House. Does she agree that one of the fundamental issues in this debate is the fact that people in rural areas often do not have a choice? The problem with the market is that people do not have a choice over either the oil that they use or the suppliers available to them.

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

rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. The hon. Member for North West Durham (Pat Glass) should get a word in edgeways before she gives way to another Member, if only to help me remember whose Adjournment debate this actually is.

[Pat Glass]

I absolutely agree with the hon. Lady, and I want to give way to as many Members as possible.

[Sarah Newton]

I appreciate the hon. Lady’s generosity in giving way to so many of us, because this debate is clearly about a huge problem across the country. I represent a part of Cornwall where, just as the hon. Member for Banff and Buchan (Dr Whiteford) said, there is no choice for people who are off gas. There is no choice of distributors, given what has been happening in the market.

[Pat Glass]

I am happy that the Minister will be able to speak for himself when the time comes. No doubt he will give us his wisdom on that.

Customers are in the worst possible situation; it is a perfect storm. The market is completely unregulated. Added to that is a lack of competition in the market, where many suppliers are owned by just one or two companies, and suppliers are prepared to charge exorbitant prices simply because they can. On top of all that is the fact that we have just had the coldest winter in living memory.

The biggest supplier is DCC Energy, an Irish company that says it supplies a quarter of this country’s domestic market. It owns 41 heating and oil distribution companies and five price comparison websites. The websites of those 41 wholly DCC-owned companies state that they are independent, and none discloses the extent of DCC’s hold on the British market. DCC has recently been on a spending spree, buying up regional companies. It owns five price comparison websites, including BoilerJuice.

When I and others first raised this issue in the House, The Sunday Times carried out an investigation. It found that BoilerJuice, which is owned by DCC, only compared prices between DCC-owned companies, and that its so-called best deals were up to 65% higher than those of genuine independents. If that is not a deliberate intention to mislead customers, I am not sure what is. Since The Sunday Times outed BoilerJuice, prices have dropped by as much as 63%, which DCC has said was due to “fluctuating market prices”, but neither The Sunday Times nor I could find anything fluctuating in the market other than DCC’s panic.

Energy experts have advised me that DCC might actually control up to 50% of this country’s domestic heating oil market. GB Oils, another big company that is seemingly independent, is in fact a subsidiary of DCC Energy. NWF Fuels is another big player. It markets 14 different brands, including Pace, Fuelcare and WCF Fuels. On the surface, this looks like a market in which there are many suppliers and in which competition will work to keep down prices, but it is quite the opposite.

[Jim Shannon (Strangford) (DUP)]

The hon. Lady has been very generous in giving way to Members on both sides of the Chamber. She said that she wanted to get input from right across the House and across the United Kingdom, and I should like to give her an example from Northern Ireland. Oil comes through the port of Belfast and is then farmed out to all the different areas across the Province. It is the same oil, yet the price fluctuates between £20 and £30 per 800 litres. Does she agree that that is another example of why regulation is much needed?

[Pat Glass]

I certainly do.

[Roberta Blackman-Woods (City of Durham) (Lab)]

The whole House will be concerned by the points that my hon. Friend is making, not only about prices and the way in which these companies operate, but about the fact that they seem not to have been considered at all by the Competition Commission? Does she intend to refer the matter to the commission?

[Pat Glass]

I want to hear what the Minister has to say. Then I will make a decision on that.

In its recent investigation, The Sunday Times found that, on any given day, those price comparison sites quoted exactly the same price, right down to two decimal points. DCC and the other companies that control large parts of the market deny that they are exploiting their market share unfairly to raise prices, or that a cartel is operating to fix prices, but I suggest that the Minister look at the evidence. If he does, he will be able to draw his own conclusions, as I did.

As a new Member, I have been really pleased that we can come to the House and raise issues such as these, when we see a clear injustice in the market, and that they are taken up by the press. These debates are a really powerful tool. Once I and other hon. Members started to raise this issue and the press picked up on it, I was contacted by many people from all across the country. Their interest is echoed by the interest shown here tonight. People were contacting me from places as far apart as south Kent and Northern Ireland. This is not just about my constituency; it is about all our constituencies.

I am grateful that the Government have finally agreed that there is a problem with this market. They have reluctantly and, I have to say, tardily referred these matters to the Office of Fair Trading. There are several questions that I would like the Minister to answer today. When I and others contacted the Department in early December to ask what it intended to do about this, why were we told that the Department did not believe there was a problem and that it did not intend to do anything about it? Why did it take a crisis and investigation by the press before the Minister was prepared to refer this to the Office of Fair Trading? Will he ensure that I and other hon. Members who have raised these issues are able to feed into the OFT investigation? When does he intend to regulate this market either by extending the role of Ofgem or by creating a regulator for the domestic oil and gas industry? Finally, what messages can I give to the many people who have contacted me and other MPs about the actions that the Government intend to take now and in the future to ensure that they are exploited no further?

20:25

[The Minister of State, Department of Energy and Climate Change (Charles Hendry)]

I congratulate the hon. Member for North West Durham (Pat Glass) on securing this debate and on the persistence that she has shown in raising this matter over a number of weeks, both before Christmas and subsequently. I thank her for the correspondence I have received from her. She is absolutely right that this matter affects not just one part but every part of the United Kingdom—very much including Northern Ireland, because of the number of off-gas grid customers who live there. Every part of the country is affected, which is why we take the issue so seriously.

Speaking as a Member with a heavily rural constituency, I am sure that the hon. Lady will understand that I am sympathetic to the plight of many off-grid energy consumers—many living in rural areas, but not exclusively so—who were hit hard by high domestic heating prices and serious supply problems during the severe weather this Christmas. Many of them are fuel-poor, as the hon. Lady says, and as the hon. Member for Banff and Buchan (Dr Whiteford) said, many have no choice but to be off the gas grid because the gas grid simply does not exist where they live.

[Tessa Munt]

I would like to draw attention to some of my constituents who took the trouble to join an oil co-operative in a rural area, but still got hit by this problem. I was contacted, and I would like the Minister to look at the letter that I forwarded to his office. It was from a couple of pensioners who wrote to point out that they would have had to spend between three and three and half months’-worth of their pension money on fuel over the year. That makes a mockery of what is happening in this market.

[Charles Hendry]

I will certainly look into those matters, and I hope that the hon. Lady has also referred them to the Office of Fair Trading, because that would provide exactly the sort of evidence that it is looking for to contribute to its investigation of this market.

I have been extremely concerned about the many representations that I have received from hon. Members on both sides of the House over the past few weeks, which clearly showed me that the market was not working as we would expect it to do. People who could not afford to pay those bills simply had to make a choice about whether to go without heating or without something else at a very difficult time of the year.

[Alex Cunningham (Stockton North) (Lab)]

rose—

[Charles Hendry]

I will give way now, but not again, as I am keen to address the points raised in the debate.

[Alex Cunningham]

I am grateful to the Minister. Millions of people have been taken out of fuel poverty over the last decade or so, with the help of a massive investment, but it strikes me that with the demise of the Warm Front scheme in particular, the Government are now doing less about fuel poverty. I hope that the Minister will reassure us that more will be done in future.

[Charles Hendry]

I am sorry that that introduces a political note into a debate that has been non-partisan thus far. The Labour Government were committed by law to remove all vulnerable households from fuel poverty by 2010—and their record was one of dismal failure. In fact, the number was up by 3 million on the previous year. That is not exactly a record on the basis of which the hon. Gentleman should be preaching to us.

Underlying many of the complaints are concerns about the challenges of supplying energy to rural communities, and about whether the current market structure provides the reassurance that consumers can get fuels for heating at a price they can afford. There is a specific commitment in the coalition programme to help those in remote rural areas with their fuel costs, as well as to extend protection and support to off-grid energy consumers.

As a shadow Minister last year, I raised many of the issues that the hon. Member for North West Durham has raised now, and I was told that this was how the market had always worked. I am pleased that as a Minister, I have now been able to act on some of those concerns.

As I noted in the fuel poverty debate in January, a significant amount of concern has been expressed by the public, as well as by this House, about the domestic heating oil market. That is clear from the numerous parliamentary questions on the subject, and the issue has featured prominently in my postbag both as a Minister and as a constituency Member of Parliament.

As we all know, the price of heating oil is influenced by a range of factors. They include refinery capacity, stock levels, distribution costs, retail margins and exchange rates. Crude oil prices—which increased by 24% between the end of September the end of January—and seasonal factors also play a role. There were additional costs this winter because of the extra overtime that resulted from our relaxation of drivers’ hours.

The United Kingdom has traditionally operated an open and competitive market for oil and petroleum products, which we believe provides the best long-term guarantee of competitive prices for the consumer. In the light of that, the Government cannot and should not seek to control or influence oil prices, but safeguards exist through the Office of Fair Trading and the Competition Commission to ensure that competition is fair.

As an independent and professional organisation, the OFT plays the leading role in promoting and protecting consumer interests throughout the United Kingdom, ensuring that businesses are fair and competitive. Its tools to carry out that work are the powers granted to it under consumer and competition legislation. It has a wide range of enforcement tools at its disposal. For instance, under the Competition Act 1998 it can impose heavy financial penalties on companies guilty of breaching competition law, and can refer them to the Competition Commission for closer examination. I urge Members to raise their concerns and those of their constituents directly with the OFT if they have evidence of market abuse. I know that many Members have already done so. They should note that the OFT never confirms or denies the existence of investigations of specific companies, so that it can do its work as independently as possible.

On 21 January I made a written ministerial statement on the off-grid energy market. I noted that the OFT had been consulting on its annual plan to help to determine its work programme for 2011-12. That included proposals to prioritise markets affected by high, rising and volatile commodity prices. The off-gas grid energy market is clearly one such affected market. I am keen for the reasons for the high prices and supply issues affecting domestic consumers to be investigated thoroughly by an independent professional authority such as the OFT.

The recent winter also raised various questions about the minimum volume for heating oil orders. I thank the hon. Lady for the attention that she has given to that issue. Bulk supply by tanker is the most economic form of delivery for heating oil. According to the Federation of Petroleum Suppliers, the meters fitted to most road tankers used to deliver heating oil have a minimum delivery volume of 500 litres, and below that volume the meters are not sufficiently accurate to meet regulation on weights and measures. A while ago, the hon. Lady expressed concern to me about a requirement to take 1,000 litres. That should undoubtedly be investigated, because it does not appear to be borne out by our technical investigations. Pre-packaged smaller volumes of heating oil in containers are available, although the price per litre is often significantly higher than tanker delivery prices, owing to the additional packaging, storage and distribution costs.

As I said in my written ministerial statement, in response to the OFT’s consultation on its annual work programme I wrote to John Fingleton, the chief executive of the OFT, on 19 January asking him to bring forward its competition and consumer study of off-grid energy. The issues involved became particularly acute during the immediate run-up to Christmas. When I tried to order oil for my own home in early December the price was 40p a litre. Three weeks later it was 70p a litre. The severe weather compounded the problems, making a difficult situation potentially catastrophic. We owe a debt of gratitude to the delivery companies and their drivers, who worked long hours, often in difficult conditions, to try to ensure that they reached every home that was running out of oil before Christmas. They did not quite reach everyone, but they improved the position massively.

I also suggested to John Fingleton that the study should explore longer-term consumer issues such as lifetime payback, consumer standards, and labelling for alternative energy sources or supplies. Such a study would provide an independent assessment of the off-grid market, and would be immensely helpful in establishing what further action might be necessary to ensure that it worked properly.

Following my letter and other discussions with my Department, I was pleased when the OFT announced on 25 January that it had brought forward its study to allow time to consider any recommendations before the next winter, and in the light of increasing public concerns about aspects of the market. There will be a market study under powers granted by the Enterprise Act 2002 to examine all issues concerning energy supply to off-grid customers. The OFT is now consulting on the precise terms and scope of its study before the investigation itself formally begins in March.

The OFT proposes that the study should cover the whole of the UK, and has suggested a number of themes including the following: how well competition provides choice for consumers at a local and regional level, in respect of which the monopolistic issues to which the hon. Lady referred are clearly relevant; whether the terms and conditions of supply provide consumers with clear information, competitive prices and fair terms and conditions, which should include addressing the issues the hon. Lady raised in relation to websites which the public would assume are independent; and the experience of customers. The OFT proposes to survey the views of off-grid energy users around the UK. In addition to the Department of Energy and Climate Change, the Scottish Government, the Welsh Assembly Government, the Northern Ireland Executive, the Department for Business, Innovation and Skills, the Department for Environment, Food and Rural Affairs and trading standards departments will be involved in this work, to ensure that the full range of concerns are taken properly into account.

The OFT will work closely with Ofgem where issues overlap with those within Ofgem’s jurisdiction. While the study’s focus is not specifically on access to, or use of, the gas and electricity networks, the OFT will be working closely with Ofgem to assess the interaction between access to networks and the development of the off-grid renewables market. The OFT proposes that the market study should consider the supply of off-grid energy, to cover a wide range of domestic energy sources including heating oil, liquefied petroleum gas and renewable energy from a range of sources.

As the Competition Commission completed an in-depth investigation of the LPG market in 2006, with market orders from 2009 to enable switching between suppliers, the OFT also proposes to focus on the effect of those orders so far. The OFT retains an ongoing statutory duty to consider from time to time whether the orders are being complied with. Market studies by the OFT involve an analysis of a particular market with the aim of identifying and addressing any aspects of market failure, from competition issues to consumer detriment, and the effect of Government regulations. This can result in a range of different outcomes. There can be enforcement action by the OFT. There can be a reference to the Competition Commission. There can be recommendations for changes in laws and regulations. There can be recommendations to regulators, self-regulatory bodies and others to consider changes to their rules. There can be recommendations to specific businesses. There can be campaigns to promote consumer education and awareness. Alternatively, a clean bill of health can be issued. It is at this point that we will need to decide whether additional regulatory powers are necessary.

The consultation by the OFT closes on 28 February. The OFT has asked to receive representations from interested parties on the planning scope and issues for the study before formally carrying out its investigation of the off-grid energy market. I reiterate that a market study is distinct from an investigation. A market study is not about any particular company or business, but instead considers the overall market structure. Investigations into specific companies will be prompted by direct evidence of market abuse, and be undertaken separately.

I therefore encourage hon. Members on both sides of the House to participate actively in the investigation, and to raise their constituents’ concerns directly with the OFT. We have listened to the concerns expressed from every part of this country, from every political party and from all types of different communities, and we have decided that a full investigation into the way this market is working is now appropriate.

I am very pleased that the OFT is going to take forward that work formally. I believe that it will enable us to ensure that we can learn from the problems experienced this winter and go forward into next winter with a market that is more fit for purpose, so that all our constituents can benefit as we would wish them to do.

Question put and agreed to.

20:39

House adjourned.

Division 194

Ayes: 297

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Conservative: 234
Liberal Democrat: 48
Scottish National Party: 6
Plaid Cymru: 3
Labour: 2
Independent: 1
Alliance: 1
Green Party: 1

Noes: 45

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Labour: 21
Conservative: 19
Democratic Unionist Party: 5
Social Democratic & Labour Party: 3

Division 195

Ayes: 501

---

Conservative: 261
Labour: 184
Liberal Democrat: 48
Democratic Unionist Party: 5
Independent: 1

Noes: 18

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Labour: 12
Social Democratic & Labour Party: 3
Plaid Cymru: 3
Independent: 1
Alliance: 1
Green Party: 1

Division 196

Ayes: 295

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Conservative: 241
Liberal Democrat: 48
Labour: 2
Independent: 1
Alliance: 1
Plaid Cymru: 1

Noes: 223

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Labour: 196
Conservative: 11
Scottish National Party: 6
Democratic Unionist Party: 5
Social Democratic & Labour Party: 3
Plaid Cymru: 2
Green Party: 1
Independent: 1