House of Commons

Monday 14th February 2011 Commons Chamber

Monday 14 February 2011

The House met at half-past Two o’clock

Prayers

Monday 14th February 2011 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Monday 14th February 2011 Commons Chamber

The Secretary of State was asked—

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

1. What assessment he has made of the likely effects of the proposed change in the state pension age for women.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

We published a full equality impact assessment as part of the White Paper on our proposals to bring forward the increase of the state pension age to 66, which sets out the effect on women of those changes.

[Tom Blenkinsop]

The coalition agreement states that the parties agree to

“hold a review to set the date at which the state pension age starts to rise to 66, although it will not be sooner than 2016 for men and 2020 for women.”

Will the Minister explain why he saw fit to U-turn on that promise and to start to increase the women’s state pension age to 66 from 2018?

[Steve Webb]

If the hon. Gentleman looks at the process of raising the state pension age to 66, he will find that early in 2020, the age will still be 65 and some months. It will not start to rise to 66 until April of that year.

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

Although I welcome the equalisation of the pension ages, does the Minister agree that a small group of women born, like me, in the middle months of 1954—a vintage year—will be affected disproportionately by the way in which it is being phased in? Will he look again to see what can be done to help that group of women?

[Steve Webb]

My hon. Friend is right that of the 2.6 million women who are affected, 33,000 were born in the vintage months that he describes. That group will have to delay for up to two years before they receive their state pension. One reassurance I can offer is that those women—and indeed he, should he find himself in that situation—will be eligible to apply for jobseeker’s allowance or employment and support allowance, so they will not be left destitute.

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

The Turner commission recommended a 15-year lead-in for such changes. Those women who were born in 1954 will not benefit from that. Does the Minister think that fair?

[Steve Webb]

The hon. Lady raises the important point that notice periods are important. The challenge we faced was that the time scale for raising state pension ages that we inherited was staggeringly leisurely. The Conservative party manifesto and the coalition agreement made it clear that we would move faster. The state pension age for men was set at 65 a century ago—I think we need to move faster.

[Andrea Leadsom (South Northamptonshire) (Con)]

A constituent of mine who has worked all her life and has saved for her own pension falls into the vintage year of 1954. She cannot bring herself to be on jobseeker’s allowance at the end of a hard-working career. It seems a little harsh to suggest that as the only outcome.

[Steve Webb]

I am grateful to my hon. Friend. Jobseeker’s allowance and employment and support allowance are available as safety nets, but I appreciate that that is not what many people will want. The vast majority of the women in this birth cohort are still working. In the world that we are going into, we anticipate that more people will work into their 60s—that is part of the change. Many of them will be able to support themselves, perhaps through a part-time job, to cover the gap in years.

[Rachel Reeves (Leeds West) (Lab)]

The Minister’s response is inadequate. The Government’s coalition agreement is clear. Under the Government’s plans, the state pension age will start to rise to 66 in 2018, not in 2020 as promised in the coalition agreement. Some 33,000 women, currently aged 56, will have to wait exactly two years longer to get their pension, with little time to prepare. The average retirement savings of those women will provide them with just £11 a week in retirement. They simply do not have the savings to draw on to accommodate these moving goalposts. Does the Minister honestly believe that these changes for women are fair and proportionate?

[Steve Webb]

I have common ground with the hon. Lady on two points. First, I deplore the fact that the pensions policies of the previous Government have left women in this group with so little pensions savings to draw on. Secondly, she is right that we could go more slowly. We could, as she has proposed, delay until 2020 before doing anything, but we would then have to find an additional £10 billion that the present schedule provides for us. I have not yet had the letter or parliamentary question from her suggesting where that £10 billion might come from.

[Mark Pawsey (Rugby) (Con)]

2. What discussions he has had on changes to the work capability assessment for those with variable conditions.

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

We are, as the House knows, committed to improving the work capability assessment so that it is as fair and accurate as possible, including for people with variable conditions. It currently provides for variable conditions, but we are implementing all the recommendations of Professor Malcolm Harrington’s independent review. I have asked Professor Harrington to take forward the next review, which will include a detailed look at how the assessment deals with fluctuating conditions, to see whether we can make further improvements.

[Mark Pawsey]

The Minister will be aware of the concerns of people who have conditions such as chronic fatigue syndrome, who have good days and bad days. They are anxious to ensure that they receive fair treatment through the work capability assessment, taking account of their ability to complete activities on a regular basis. Can the Minister provide an assurance that the variable nature of such conditions will be fully considered, and that the assessment will identify the appropriate level of support for individuals to enable those who can to get back into work?

[Chris Grayling]

I can absolutely give my hon. Friend that assurance. Indeed, I have asked Professor Harrington to work with people who specialise in ME as part of his review. I do not want us to write off everybody with a particular condition. It is important to identify who can potentially work and who cannot, and to provide them with the appropriate support. That is the goal of our policy and what we will seek to do, and I am mindful of the concerns that my hon. Friend raises.

[Stephen Timms (East Ham) (Lab)]

The sharp increase in job losses forecast this morning by the Chartered Institute of Personnel and Development will make it harder still for people with health conditions to find jobs. Last week, the Minister tabled regulations that modify the mental health descriptors in the work capability assessment, but at the same time, following his acceptance of Professor Harrington’s recommendations, to which he has referred, an alternative set of descriptors is being drafted by Mind, Mencap and others. Should he not wait until he has received their advice before he makes changes?

[Chris Grayling]

As the right hon. Gentleman knows, we ourselves had one review carried out last year by Professor Harrington, and we also inherited a set of recommendations from an internal review carried out by the previous Government. I considered carefully the recommendations left to us by the right hon. Gentleman and his party, and the internal review recommended changes that would increase the number of people with mental health problems who go into the support group and receive unconditional support. His party was right to make that recommendation, and I am pleased to accept it, but we will take all further steps necessary to ensure that people with mental health problems are treated fairly and properly by the system.

[Bob Blackman (Harrow East) (Con)]

3. What assessment he has made of the likely effect of the introduction of universal credit on the level of the couple penalty.

[Mr Stewart Jackson (Peterborough) (Con)]

6. What assessment he has made of the likely effect of the introduction of universal credit on the level of the couple penalty.

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

The couple penalty is often slightly misunderstood. It is normally created when a higher benefit rate for single people means that couples are materially disadvantaged by living together. It is generally recognised internationally that a saving is made when two people live together, and the figure given by the OECD and others is about 75% at most. In the UK, under the benefit system left by the last Government, workless couples received only 60% of the benefits received by two single workless people, which I believe put us in the bottom four OECD countries. Simultaneously, the proportion of people forming couples is at its lowest at all income levels, about 15% down against other countries. The Institute for Fiscal Studies recognises that the universal credit will start to make inroads into that problem.

[Bob Blackman]

I thank my right hon. Friend. Does he agree that it cannot be correct that two people who choose to live together as a couple should be penalised by £30 a week in benefits? Surely it is better for people to stay together as a family and be able to care for their family together.

[Mr Duncan Smith]

From the figures that I have just given and those that we have looked at, there is no question but that the disparity between where the last Government left us and where it is generally accepted that couples should be is the real cause of the problem that is making people live apart, particularly those on lower incomes. I draw attention to the right hon. Member for Birkenhead (Mr Field) and his interesting “Panorama” programme. He is to be congratulated on his work in this area, and he has made the very good point that it is madness that the system drives people apart rather than keeping them together.

[Mr Stewart Jackson]

There is a welcome across the House for the universal credit, not least because of the impact it will have on low-paid couples in my constituency and across the country. Will my right hon. Friend, on this particular day, reaffirm his commitment to supporting and advocating fiscal incentives for the institution of marriage?

[Mr Duncan Smith]

My hon. Friend knows very well that the issue of fiscal incentives is one for the Chancellor, and I will certainly pass his comments on to the Chancellor and the Prime Minister. When it comes to the benefits system, Members of all parties should recognise the invidious position that even though we know children and elderly people do better where families with two parents work together for them, the system is driving couples apart. That surely cannot be right, and I hope that the matter will unite Members on both sides of the House, as I am sure the right hon. Member for Birkenhead does.

[Mr Frank Field (Birkenhead) (Lab)]

Does the Secretary of State accept that perhaps the most significant social security reform that he could introduce, if we are concerned with the safe nurturing of children, would be the elimination of the penalty against couples?

[Mr Duncan Smith]

I agree that that is an objective that we want to work towards. Clearly, any such change has financial implications, as the right hon. Gentleman knows. As I said, the good thing about universal credit is that it starts the process of eradicating the couple penalty, particularly for people on low incomes. I pay tribute to him, because he has gone on about this for longer than anybody else—perhaps everybody is now listening. He is absolutely right that we must surely not force couples apart, but help them to stay together.

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

Does the Minister accept the findings from the Institute for Fiscal Studies that the incentives for lone parents to work more than 16 hours per week will be reduced under the universal credit?

[Mr Duncan Smith]

I welcome the IFS report, which was a fair one. The IFS was positive about the universal credit—most of all, it said that the universal credit is a progressive measure, because it helps the people who are worst off, many of whom, of course, are lone parents. The answer to the hon. Lady is that, yes, some further up the income scale will see a slight change in their marginal deduction rates, but those down in the lower deciles will see a net benefit to their take-home pay.

[Mr Speaker]

Michael Connarty? Not here.

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

5. What support he plans to provide to help older people remain in or return to work.

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

People are living longer, healthier lives, which is good news. The state pension age, as the hon. Gentleman has heard, is set to increase over the coming years. I believe that older workers bring a wealth of talent and enterprise, which we should welcome. From April, jobcentres will have more flexibility to help older people, but the key thing is that in getting rid of the default retirement age, we will strike a blow for older people, which should be welcomed.

[Grahame M. Morris]

Notwithstanding the excellent work carried out by organisations such as the Shaw Trust in my constituency, which helps people with disabilities into the labour market, the Office for National Statistics has found that the number of retired people aged under 65 increased by 39,000 between September and November on the previous quarter. Does the Secretary of State share the concerns of Ros Altmann, the director-general of the Saga group, who said that the Government risk consigning older people to unemployment benefit by increasing the retirement age in such a tough jobs market?

[Mr Duncan Smith]

I believe not that Ros Altmann is materially wrong, but that the jobs market will improve. That improvement will create greater incentives for people. People have a tendency to think that it is a simple fact that older people entering the work force somehow take jobs away from younger people, but there is no evidence internationally that that happens. The reality, in fact, is that older people staying in the work force increases work flexibility and improves the number of jobs that are available, and helps younger people. The Government have done a lot for pensioners, and we will do more, but ending the default retirement age is about giving older people the right to work for longer, and the responsibility to employers to deal with them as human beings and not just figures on a piece of paper.

[Mark Lancaster (Milton Keynes North) (Con)]

As part of a back-to-work programme provided by A4e, one of my constituents, who was a senior building site manager, was asked to add £1 to £4.75, which he did not feel was particularly constructive in helping him to get back to work. When will we move away from that one-size-fits-all back-to-work programme?

[Mr Duncan Smith]

My right hon. Friend the Minister of State is doing that just now. The Work programme will be tailored to people’s needs and not implemented flatly. If people have a problem, the programme will deal with them. Jobcentres will be given more flexibility to ensure that they match employment to the person as necessary. My hon. Friend should therefore welcome the changes that we are making.

[John Howell (Henley) (Con)]

7. What steps he is taking to reduce levels of pensioner poverty.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

We have restored the earnings link for the basic state pension and given a triple guarantee that the basic state pension will increase by the highest of earnings, prices or 2.5%. We are also protecting key benefits for older people and working to ensure that older people receive the help to which they are entitled.

[John Howell]

My hon. Friend may recall the “Tackling Pensioner Poverty” report produced by the Select Committee on Work and Pensions in the previous Parliament. The Committee was concerned that many pensioners who are entitled to pension credit are simply not claiming it. What measures are the Government taking to ensure that support reaches those who need it most?

[Steve Webb]

One thing we are considering is whether the data we hold about people can be used better. We are therefore undertaking a modest research study, drawing on data that my Department and Her Majesty’s Revenue and Customs hold to see whether we can identify people who look as if they ought to be getting pension credit but who are not doing so. We will then make automatic payments to them, and test how that works over a pilot period, on which we will report in the summer.

[Emma Reynolds (Wolverhampton North East) (Lab)]

Rumour has it that the Minister believes that introducing a universal pension will be a solution to many of the problems in the pension system. If that is the case, why has he not published the Green Paper we were promised in December? Is it because he is facing some resistance from the Treasury?

[Steve Webb]

I am grateful to the hon. Lady for raising that point. I can do no more than quote my right hon. Friend the Chancellor, who told the House in November:

“The Treasury is working with the Department for Work and Pensions on potential pension reform that could simplify pensions and provide a boost to pensioners for many years to come.”—[Official Report, 16 November 2010; Vol. 518, c. 726.]

How right he was.

[Kevin Brennan (Cardiff West) (Lab)]

8. What steps he is taking to increase the number of apprentices employed by his Department.

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

The Department continues to be actively supportive of the apprenticeship programme and believes that it represents excellent value for taxpayers’ money and helps people progress in their career. There are 316 people currently working towards the qualification in the Department. Last year, we adapted our recruitment processes to target young unemployed people without work experience and created 23 apprenticeships in our corporate IT directorate.

[Kevin Brennan]

The Minister will be aware of the great work done by the last Government, which led to that programme of bringing young apprentices in, and rescued apprenticeships from withering on the vine. Will he commit the Department to carrying on the work that I undertook as apprenticeships Minister, along with people such as Lord Knight of Weymouth—as he is now—to ensure that young people, and not just those in work, are recruited to the Department and given apprenticeship opportunities?

[Chris Grayling]

I very much agree with the hon. Gentleman. One of the sad things about the previous Administration was that they never actually supported the number of apprenticeships that they announced. We intend to make a difference and to deliver more apprenticeships—we have announced an extra 50,000 already this year. I can give a clear commitment that the Department will continue to support the apprenticeship programme, both practically and through our relationship with the Department for Business, Innovation and Skills.

[Laura Sandys (South Thanet) (Con)]

I have been written to by a 16-year-old who has done the right thing by taking an apprenticeship, but having done so, she has found that her family’s benefits have been reduced by £90 a week. Will the universal credit address such discrepancies and this discrimination against those who want to work and take up apprenticeships?

[Chris Grayling]

My hon. Friend highlights the chaos that we inherited in the benefits system that can lead to perverse incentives that often mean that work does not pay. The universal credit is designed to ensure that work always pays. I would be interested to meet my hon. Friend to talk about her constituent’s case, so that I may understand more clearly what has gone wrong, but we are clear that work must always pay.

[Mr Liam Byrne (Birmingham, Hodge Hill) (Lab)]

The recession has now been over for a year. Unemployment should now be falling, and the whole House is worried that it is in fact rising, especially among young people. One of the ways in which we tackled that was with the “Backing Young Britain” campaign, which created thousands of job opportunities for young people, including apprenticeships and internships. One of those schemes was a paid internship in the private offices of every Minister in the Department. Is that scheme still in place?

[Chris Grayling]

As I have said, we already have 300 apprenticeships throughout the Department and we intend to continue to deliver that support to apprentices. We inherited from the previous Government a collection of programmes that simply were not working. The future jobs fund, for example, cost twice as much as apprenticeships. We believe that expanding the number of apprenticeships—50,000 extra this year and 75,000 extra by the end of the Parliament, plus additional apprenticeships for 16 to 18-year-olds—will move us to the place we should be, and out of the mess that we inherited from the previous Government.

[Mr Byrne]

I am grateful for that answer and I will try to decipher it later.

I was interested to hear the Minister talk about how he is now using the Department’s resources wisely. At some point, he will no doubt tell us why in December his Department spent more on stationery than it did on employment zones or access to work programmes. I wonder whether that is part of an innovative new approach that includes getting more people into study by cutting education maintenance allowances and getting more young people into work by cutting the future jobs fund. I see now that the Conservative party is piloting new ways of helping young people get into internships, by auctioning them for £5,000 a time to Tory party donors. Did the right hon. Gentleman choke on his pudding when the auctioneer’s hammer came down, and when will this worthwhile scheme go nationwide?

[Chris Grayling]

I will not take any lessons on spending from a previous Administration who spent money like there was no tomorrow. We were shocked to discover how the Department for Work and Pensions under the previous Administration spent money as if there were no limits. This Administration have removed the absurd restrictions on work experience that meant that young people lost their benefits if they did more than two weeks’ work experience. We have changed that and are actively finding experience opportunities for young people, not standing in their way and preventing them from accessing those opportunities.

[David Rutley (Macclesfield) (Con)]

9. What assessment he has made of the likely effect of universal credit on incentives to work.

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

The objective of the universal credit is that work should definitely pay for the majority of people—as many as possible—but certainly it should pay most significantly at the highest levels for those on the lowest incomes.

[David Rutley]

The vast majority of people on benefits do not want to stay there for the rest of their lives. Will my right hon. Friend confirm that the universal credit, with support from the Work programme, will help people in Macclesfield to get back to work, and ensure that it pays for them to go on working?

[Mr Duncan Smith]

Absolutely. The interaction between the universal credit and the Work programme is critical. In a sense, one without the other will not work as effectively. The purpose of the universal credit is to ensure that entering the world of work becomes much easier, because people will retain more of their own money: we will be lowering marginal deduction rates. In some cases, on average, those in the bottom two deciles will see an increase in their weekly pay of about £25 a week after they enter work—a significant increase. The Work programme, which my right hon. Friend the Minister of State was talking about, will help with those who are more difficult to place. For the first time, they will get a tailored programme that helps them to deal with their problems, and gets them into work and maintains them there for up to a year, and in some cases more.

[Ms Karen Buck (Westminster North) (Lab)]

Will the Secretary of State confirm that the Government intend to save £1.3 billion between now and 2015 by reducing the child care element of the tax credit? Will the universal credit be sufficiently resourced to ensure that no working parent out of the 488,000 households that stand to lose anything up to £30 a week will be any worse off than at present?

[Mr Duncan Smith]

We are returning the levels on the child issue that the hon. Lady is talking about to the levels left by the previous Government in 2006. It is all very well for the Opposition to nit-pick and say that they are desperately in tune and on side with all those people who are going to feel the squeeze, but in reality the Labour party now has a leader who was responsible, with his colleagues, for spending money like there was no tomorrow. That has left us with a major deficit, and now we have to get that money back. If she does not like what we are doing, please can she tell us where she would intend the money to come from?

[Pamela Nash (Airdrie and Shotts) (Lab)]

10. What recent discussions his Department has had with disability organisations on the removal of the mobility component of disability living allowance from those in residential care homes.

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

12. What recent discussions his Department has had with disability organisations on the removal of the mobility component of disability living allowance from those in residential care homes.

[Sheila Gilmore (Edinburgh East) (Lab)]

13. What recent discussions his Department has had with disability organisations on the removal of the mobility component of disability living allowance from those in residential care homes.

[The Parliamentary Under-Secretary of State for Work and Pensions (Maria Miller)]

My officials and I have discussed the proposals with regard to the mobility component of disability living allowance with a wide range of disability organisations, and disabled individuals and their families. This has included visiting and discussing the proposals with care home residents. These discussions have taken place in the context of the wider public consultation on DLA reform that is currently under way.

[Pamela Nash]

I thank the Minister for her answer, although I do not think that it will do much to allay my constituents’ fears about the impact on them of the DLA cuts. I am happy that she mentioned that the Government have been in discussion with disabilities charities. More specifically, however, what discussions has she had with those charities about families with children in residential care homes and the impact on them? Those families will no longer be able to take their children out at weekends and in school holidays.

[Maria Miller]

So that we are clear, I should say that the Government are talking about retaining spending on DLA at the same level as last year—that is after a 30% increase in expenditure over the past eight years under the Labour Government. With regard to the implications for children living in residential care settings, we are obviously looking at the details, but I can assure the hon. Lady that the intention behind the policy is very much about removing overlaps, not mobility, in the provision.

[Stephen Twigg]

Two blind people came to my advice surgery on Saturday who were very concerned about the impact of this proposed change on their independence. Have the Government made an estimate of the number of blind or visually impaired people who will be affected by this change?

[Maria Miller]

I am sure that the hon. Gentleman is aware that, given the way that disability living allowance works currently—and certainly given the way that we are looking to take it forward—we are assessing the barriers that people with a disability face, not the condition itself. Obviously, people who are blind or partially sighted face a range of barriers, but they might also have multiple conditions. That is why it is important to look at all those conditions and why, in putting forward for the first time an objective assessment for DLA or its successor benefit, we will be able to ensure that people really get the support that they need.

[Sheila Gilmore]

Will the Minister not agree to put the proposal on hold until she has carried out a thorough study of the viability of having local authorities step into the breach; or it is only proposals concerning trees that this Government put on hold, not proposals affecting vulnerable people?

[Maria Miller]

I can absolutely assure the hon. Lady that we are looking in great detail at the impact of all our DLA measures. I have been to talk to residents in care homes and their family members, and what I found was an array of ways in which disability living allowance is used. All hon. Members will want to ensure that the most vulnerable members of our society are left not with a benefits system that was designed for people living in family home settings, but with one designed for how people are living now and for their mobility needs.

[Mr David Ward (Bradford East) (LD)]

Many disabled people in residential care use the mobility component of DLA to ensure that they remain part of their local and wider communities. It was quite disappointing to hear a comparison drawn recently between those in residential care and those in hospital, many of whom are totally immobile, albeit for only a short period. Does the Minister agree that that was an unrealistic comparison, and can she say what assessment has been made of the mobility requirements of disabled people in residential care as compared with the requirements of those in hospital?

[Maria Miller]

My hon. Friend is absolutely right: people living in care homes have distinct mobility needs, and having gone out and spoken to residents, I have seen that at first hand. We need to ensure that we have a system that really meets those needs, and is not simply a sticking plaster for lots of other issues that may be forthcoming in the care homes sector. As with so many aspects of DLA, we are dealing with a benefit that is rooted in the past, not in the way people think about disability issues today. I hope that I can work with him on any examples from his constituency of how we can make it work better.

[Mr David Evennett (Bexleyheath and Crayford) (Con)]

Will my hon. Friend confirm that fairness and reasonableness will be the main considerations when she finalises her reform proposals?

[Maria Miller]

My hon. Friend will know from all the work that we have done and the consultation paper that we have put out that we want disability living allowance to continue to support disabled people to get into work and overcome the barriers that they face in their lives, and to ensure that the system works for today, not for 18 years ago, when it was first put in place.

[Duncan Hames (Chippenham) (LD)]

I sincerely hope that the Minister has been in listening mode during her consultation on the proposals. Constituents of mine have told me that car manufacturers offer discounts to the disabled, who use their DLA mobility component qualification to demonstrate their eligibility for these discounts. What consultation has she had with the industry to ensure that under her proposals, those in care homes do not find themselves having to pay more than the rest?

[Maria Miller]

I know that independent travel can be an important way for care home residents to achieve their objective of living more independently. We need to challenge the way that disability living allowance supports that at the moment, which could well include talking to motor manufacturers.

[Margaret Curran (Glasgow East) (Lab)]

Will the Minister specifically address the comparison with hospitals, which was quite wrong and has been described by the Disability Alliance as “offensive”? The cut would produce a saving equivalent to less than one sixth of the bankers’ bonuses about to be handed out at RBS. Will she think again about this cut, or do we have another lady who’s not for turning?

[Maria Miller]

I thank the hon. Lady for her question—I think. I would reiterate the point that I made earlier, which is that the changes to disability living allowance finances that we are talking about would mean keeping expenditure the same as it was last year, after eight years of a 30% increase. Overall, she has to keep that in mind. What we will do is ensure that we remove any expenditure overlaps, as she would expect us to do, and as I had hoped the previous Government would do.

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

14. How many new businesses he expects to be created as a result of the new enterprise allowance in the first 12 months of its operation.

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

Over the first two years of its operation, the new enterprise allowance is due to support the start of around 40,000 new businesses. In its second year, we expect the majority of those start-ups to take place in the first few months, when the new enterprise allowance is being rolled out in those parts of the country that are particularly affected by unemployment.

[Stephen Metcalfe]

The best way to deal with unemployment in my constituency is to build businesses, and I therefore welcome the introduction of the new enterprise allowance. Will my right hon. Friend confirm that the allowance will provide unemployed people with mentoring, as well as financial support, to enable them to start their own businesses?

[Chris Grayling]

I can indeed confirm that. What makes the new enterprise allowance different from all its predecessor schemes is that it will offer people who are seeking to start new businesses specialist support from people who have been there and experienced enterprise. We want to see voluntary sector groups that already offer mentoring become part of the scheme, and we want experienced business people to come forward and become mentors, perhaps through their chambers of commerce. This could make a huge difference to getting people off benefits and into self-employment.

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

15. What plans he has for collaboration between jobcentres and voluntary organisations.

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

We were pleased last week to announce the new partnership between Jobcentre Plus and the voluntary sector generally, which will help people to get back to work. Prince’s Trust advisers and other local voluntary organisations will start to have a desk that they man in jobcentres in the next few weeks, and that provision should be available pretty much around the country in April. This will be enormously helpful in tying the voluntary sector in to some of the most difficult people.

[Julian Smith]

Does the Secretary of State agree that voluntary groups can help jobcentres to help jobseekers? The Skipton and Ripon Enterprise Group, a group of leading business men in my constituency, is keen to help mentor jobseekers now. What advice can my right hon. Friend give to its members?

[Mr Duncan Smith]

First, what we are doing will really open the door to the voluntary sector’s engagement in the whole process. As my hon. Friend knows, the Work programme that the Minister of State, Department for Work and Pensions, my right hon. Friend the Member for Epsom and Ewell (Chris Grayling) has been working on has the voluntary sector embedded at the heart of how it will deliver its work. The desks in jobcentres that will be manned by representatives of the Prince’s Trust should open up the door to such people being able to see jobseekers as they come in. My hon. Friend should advise people to look at using provisions such as the enterprise allowance and, if necessary, to come and see my right hon. Friend the Minister about any other advice they need.

[Ian Paisley (North Antrim) (DUP)]

While the benefit system is undergoing change and reform, what plans does the Secretary of State have to change the delivery mechanism for benefits? Will he ensure that it remains customer focused, local and accessible?

[Mr Duncan Smith]

At the moment, the vast majority of people—about 98%, I think—receive their benefit payments directly into their bank accounts. There is a small number of people who are still, for various reasons, in receipt of cash payments. A proposal was left to us by the previous Government on how all this can be delivered in the next few years, but we have not made a final decision on it yet. We will announce our decision very shortly.

[Robert Halfon (Harlow) (Con)]

I am grateful to the Government for allowing a pilot scheme for local jobcentres to give out food bank vouchers from the food bank charities. Will my right hon. Friend ensure that the scheme that emerges is as simple and unbureaucratic as possible, so that the jobcentres in Harlow can receive food bank vouchers as soon as possible?

[Mr Duncan Smith]

I would not dare do otherwise, with my hon. Friend breathing down my neck on this one. It is due to his hard efforts and pressure that we have made this particular change, and I think that it is for the good. Of course, it is important that it does not become a substitute for anything else, but it will certainly be there if people feel that they need that extra assistance, and there is no reason why we should not do it.

[Gloria De Piero (Ashfield) (Lab)]

Has the Secretary of State made any representations to his colleagues about the proposed closures of voluntary organisations that support and train people to return to work, such as the Diamond centre in my constituency?

[Mr Duncan Smith]

We constantly discuss, in Cabinet and other forums, the idea of what we are doing with the voluntary sector and how we can best help and support it. We are putting a lot of money behind the voluntary sector right now, and the Work programme will make a significant amount of money available to the sector through back-to-work programmes. Of course there are difficulties in the sector, as some local councils choose to start with voluntary organisations when they make their reductions. Personally, I often wonder whether local councils too often see the voluntary sector as an add-on, rather than as an incredibly effective and integral way of delivering good services, and I hope that they will think again about some of those changes.

[Mr Christopher Chope (Christchurch) (Con)]

16. What account his Department takes of the effects of the level of the minimum wage in its business planning processes.

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

Departmental business planning processes take account of the minimum wage in the potential effect on the future pay bill and in departmental contracts. For some years, the Department for Work and Pensions has targeted pay awards towards our lower paid staff, and the lowest level of pay for directly employed DWP staff is currently £7.27 an hour compared with the 2010 national minimum wage of £5.93 an hour.

[Mr Chope]

Does my right hon. Friend agree that one way of making the big society even bigger would be to give freedom to individuals to take employment with charities at below the minimum wage?

[Chris Grayling]

I have to say that I do not share my hon. Friend’s view. What I would say to employers up and down the country is that I hope they will take advantage of the increased numbers of apprenticeships that are paid at special apprenticeship rates in order to allow people to develop the skills they need to build future careers.

[Mr David Hanson (Delyn) (Lab)]

Will the Minister assure the House that during internal Government discussions he will support the minimum wage that the Labour Government introduced and make sure that for each year over the next four years it rises by at least the level of inflation?

[Chris Grayling]

As the right hon. Gentleman knows, Conservative Members have supported the national minimum wage for many years—and will continue to do so.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

17. What recent representations he has received on his proposed review of housing benefit reforms.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

We have had, and have responded to, many representations on the review of the housing benefit reforms. Most recently, my noble Friend Lord Freud met with Lord Best to discuss the review and our intention to commission a team of independent, external researchers to undertake the task.

[Stella Creasy]

The Secretary of State will be well aware of the severe and long-term shortages of housing currently faced in Waltham Forest, as in many London boroughs. Given that there are 1,500 people aged 26 to 35 currently in receipt of housing benefit in Waltham Forest, where does he think they will be living next year if his plans to change the shared room rate go through?

[Steve Webb]

One consequence of the reforms to housing benefit will be that the local housing market will change. We anticipate, for example, that some of the larger properties might find themselves converted into houses in multiple occupation, although we do not know exactly what will happen. One problem is that over many years we have seen inadequate house building taking place under the hon. Lady’s Government.

[Matthew Hancock (West Suffolk) (Con)]

In the Public Accounts Committee, we heard from civil servants about the impact of housing benefit and other benefits that make for an extremely complex and complicated benefit system. We have also heard about the enthusiasm for having a universal benefit as a way of cutting through that. Talking of representations, would not these changes have been easier had we not had representations on where the money was left?

[Steve Webb]

My hon. Friend is quite right that Labour Members’ answer to most questions is “More money,” but when we asked where the money had gone, we were told that there was none. Housing benefit is probably one of the most complicated benefits in the system; it is at the end of the line when everything else has been worked out. The sooner we can integrate it into universal credit, the better.

[Hywel Williams (Arfon) (PC)]

On Friday, I met a group of residents at a hostel run by the North Wales Housing Association. Those people have very little prospect of employment in an area of such high unemployment, yet they might face a reduction in their benefits. Does the Minister accept that that sort of cut might threaten the viability of hostels such as the Pendinas hostel that I visited on Friday?

[Steve Webb]

The budget for discretionary housing payments across the country will be trebled over the coming years, so that additional funding will be available for particular difficult cases. One thing we want to do is enable people to get back to work, where jobs are available, and the universal credit process will increase the financial return and people who take low-paid jobs will have a greater ability to afford somewhere to rent.

[Dame Anne Begg (Aberdeen South) (Lab)]

18. If he will put in place provisions to ensure that the expertise of small employment providers is retained in the transition from existing employment programmes to the Work programme.

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

I am pleased to inform the House of two things. First, the Work programme bidding process closed this morning, and we have had a substantial number of bids, which is very encouraging. It looks as if the Work programme is going to go ahead according to plan, which is good news. I would also say to the hon. Lady that, shortly before the start of these parliamentary questions, I placed a written statement before the House, giving details of an extension to the welfare-to-work contracts under existing programmes through to next June. I have also written to the hon. Lady and her Committee, setting out the details of those changes. We believe that we have now put in place all the mechanisms needed to ensure a smooth transition through to the start of the Work programme, which remains very much on track.

[Dame Anne Begg]

I am glad to hear that my letter has had some effect, but will the Minister confirm that the contractors who are currently delivering Pathways to Work and whose contracts are due to expire at the end of March will not have to issue redundancy notices to their staff in the next couple of weeks, because they will be able to continue until they know whether they will be part of the Work programme?

[Chris Grayling]

Transitional arrangements will involve the existing providers in all programmes except Pathways to Work. In that instance, we are setting up an interim support programme which will be more substantial than such programmes have been in the past. As the hon. Lady will know, Pathways to Work was severely criticised by the Public Accounts Committee. Our interim arrangements will cover those who would otherwise have received support through Pathways.

[Mr Speaker]

I call Mr Douglas Carswell. He is not here, so I call Mrs Mary Glindon.

[Mrs Mary Glindon (North Tyneside) (Lab)]

20. What plans he has to tackle recent trends in youth unemployment.

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

Over the past few months there has been a fall in the number of young people claiming jobseeker’s allowance. However, we remain extremely concerned about youth unemployment. We are introducing measures through the Work programme and our work experience plans, and other measures through Jobcentre Plus, in order to provide the best possible support for young people who are struggling to find employment.

[Mrs Glindon]

Nearly 25,000 18 to 24-year-olds are claiming jobseeker’s allowance in the north-east, and young people account for more than 30% of the unemployed population in the region. Can the Minister assure me that there will be enough funds in the Work programme to guarantee that those young people will be helped into employment?

[Chris Grayling]

I share the hon. Lady’s concern. The fact that 600,000 people who left school and college under the last Administration have yet to find work is a huge problem that we must address. We are providing specialist back-to-work support through the Work programme, earlier than has been the case under previous programmes, and after three months for some young people with the most challenged backgrounds. I can assure the hon. Lady that that will remain a priority for the present Administration.

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

T1. If he will make a statement on his departmental responsibilities.

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

As I did not do so earlier, let me now welcome my shadow, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), to his post. I hope that we shall have engagements in the future, and I am sure that he will adopt a positive approach to measures that he believes will benefit the estate.

[Mr Liam Byrne (Birmingham, Hodge Hill) (Lab)]

There will not be a hair of difference between us.

[Mr Duncan Smith]

Indeed. I am glad to see that the right hon. Gentleman models himself very much on me, which is also very helpful.

I have had meetings today, and I have more meetings to come. I should also mention that we are getting rid of the default retirement age, which we consider to be a positive move overall for older people which should also help to boost the economy.

[Stephen Metcalfe]

What advice or consideration has been given to small and medium-sized enterprises on how they should handle the removal of the statutory retirement age, and what advice can the Secretary of State give businesses on managing employees with physically demanding jobs?

[Mr Duncan Smith]

The default retirement age is unlikely to have been used by many small and medium-sized enterprises; it tended to be used by larger businesses. Once it has been removed, employers should be able to dismiss staff, while obviously using the ordinary fair dismissal rules under the Employment Rights Act 1996. When employers can demonstrate that a retirement age is objectively justified, they can make a case for setting one. The key point, however, is that many large and many small companies have never used the default retirement age. They will argue that working with employees to secure a proper programme as they head towards their general retirement age is a positive move, and that employees should not be left lying there until the employer has to get rid of them.

[Mr David Hanson (Delyn) (Lab)]

T4. I recognise that the Secretary of State has made representations about the £1.5 million of bonuses paid to Remploy directors this year. Let me also say, before he mentions it, that that payment was originally agreed under the last Government. However, does he think it insensitive of directors to take £1.5 million in bonuses when in my part of the United Kingdom some 540 staff are potentially at risk of redundancy?

[Mr Duncan Smith]

The honest truth is that I do not think it a good idea for people to do that in the present climate. There is currently a public sector pay freeze, we are imposing limits on bonuses, and I am asking staff in one of the lower-paid areas of Government to forgo some of their future pay rises. My simple answer to the right hon. Gentleman is this: I wish that those who are thinking about acting in that way would think again, and I also wish that I had not been left in such an invidious position by the last Government.

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

T2. Opposition Members have spent the past 50 minutes calling, in almost every question, for more Government spending, yet just nine months ago we famously heard the shadow Secretary of State say that there was no money left. Given the shadow Secretary of State’s willingness to offer honest advice, might my right hon. Friend reciprocate the favour and offer his own advice to his new opposite number?

[Mr Duncan Smith]

Given my political career, I have given up giving advice to anybody, so the best thing the shadow Secretary of State can do is forge his own way and I will look to see how I can dismantle that.

[Pamela Nash (Airdrie and Shotts) (Lab)]

T5. On Friday, I visited the Reeltime youth and music group in my constituency, where I met three young men who had got their jobs through the future jobs fund. They feel that the FJF is a great success for them, and so did the group. The Scottish Labour party agrees, and has today announced that it will create 10,000 places if it wins in May. Will the Government reconsider scrapping the FJF, or do they still believe youth unemployment is a price worth paying?

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

I sometimes think Opposition Members simply do not listen. First, as we have just heard, the Labour party left behind for us the most monumental financial mess, so there are not large amounts of money in the kitty to pay for the best support we could possibly deliver or all the things that we would like to do. The reality is that we have chosen to divert the money that we have into paying for apprenticeships. We have announced tens of thousands of extra apprenticeships, as we believe that they are a much better way of delivering support to young people. There are huge numbers of opportunities for young people to take advantage of an apprenticeship and build a proper career, and there will be more and more such opportunities as the spending review goes by.

[Caroline Dinenage (Gosport) (Con)]

T6. It concerns me when I meet constituents who have given away quite sizeable chunks of money to their children just as they approach retirement in the hope that the Government will then support them through their retirement. What steps are the Government taking to encourage people to save more for their retirement?

[The Minister of State, Department for Work and Pensions (Steve Webb)]

We are pressing ahead in the Pensions Bill with measures to make the process of automatically enrolling people into workplace pensions a reality, so from 2012 over a four or five year period, getting on for 10 million people will be enrolled into workplace pensions for the first time with an employer contribution. We believe that that will transform the savings landscape, and we need to make sure it pays to save.

[Yvonne Fovargue (Makerfield) (Lab)]

T9. Recently, a constituent contacted me regarding his Atos Healthcare assessment. Three specialists had considered him to be unfit for work, yet it was suggested that he could be a bingo caller or a car park attendant. My local citizens advice bureau has identified many such cases which are resolved in favour of the claimant after an expensive review or appeal. Are there any plans to review Atos Healthcare’s delivery of medical assessments?

[Chris Grayling]

As the hon. Lady will know, soon after taking office we commissioned Professor Harrington to conduct a full review of the work capability assessment and the process around it. He has recommended a number of changes, which we are implementing as quickly as possible. I stand by the view that the assessment is the right way of helping people who have got the potential to get back into work. It is much better for those who can be in work to be so, rather than sitting at home on benefits, but we obviously have to make sure that the process is fair, just and proper and that we get the most accurate results possible.

[Priti Patel (Witham) (Con)]

T7. Given the news that there are more than 150,000 illegal immigrants claiming sickness benefits and maternity pay and that Europe is now threatening legal action under human rights legislation against this Government for planning to restrict those benefits, can Ministers give a clear assurance that the Government will stand up against Europe on this matter?

[Chris Grayling]

I can give my hon. Friend an absolute assurance on that. It is clearly absurd that illegal immigrants can access our benefits system. It is another example of the chaos we inherited from the previous Administration. I am the person who represents the Department for Work and Pensions and the Government in the European Employment Council, and my hon. Friend has my absolute assurance that I am fighting our corner to maintain the integrity of our welfare system, and will continue to do so.

[Jack Dromey (Birmingham, Erdington) (Lab)]

T10. Some 21% of the young people in Erdington are unemployed, the Connexions office in Erdington high street has closed, projects funded by the working neighbourhoods fund and the future jobs fund now face closure, and 13 advice centres also face closure as a consequence of council cuts. There is therefore increasing despair among young people. Some years ago, the Secretary of State made a journey to a housing estate in Glasgow. Will he agree to receive a delegation of the young unemployed from Erdington, so that he can hear from them first hand just how mistaken his Government’s policies are?

[Mr Duncan Smith]

Of course I will be happy to receive any delegation that the hon. Gentleman wishes to bring forward. The Government are absolutely clear about their determination to help get young people back to work. When he made his statement he must have recalled that only a few months ago his Government left us with almost the worst youth unemployment since records began. It is remarkable that under his Government youth unemployment rose during a period of growth. That is not much of a record for him to crow about.

[Jessica Lee (Erewash) (Con)]

T8. I want to raise the issue of family breakdown. My constituents often tell me that family breakdown involves not only the emotional turmoil of dealing with it, but the complexities of sorting out the financial arrangements and the accompanying delays. I would be grateful if the Minister would set out for the House the steps that the Government are taking to create a structure to ensure that parents can take financial responsibility for their children.

[The Parliamentary Under-Secretary of State for Work and Pensions (Maria Miller)]

I thank my hon. Friend for her question. I refer her to the consultation paper on the future of the child maintenance system in this country, which we have been consulting on in recent weeks and through which the coalition Government are looking to provide more choice and support for parents, so that they can take responsibility on reaching maintenance agreements. We are also offering further services, such as a calculation-only service, and a new and improved statutory scheme, which will be stronger. Overall, we are trying to ask parents to take more responsibility. I remind the House that the previous Labour Government endorsed this approach and I remind Labour Front Benchers that Lord Hutton said that he was

“convinced that in general and in principle”—

charging—

“should form part and parcel of”—

the Child Maintenance and Enforcement Commission’s—

“approach”.

Indeed, we are following his advice—

[Mr Speaker]

Order. I am extremely grateful to the Minister.

[Mrs Anne McGuire (Stirling) (Lab)]

Given that transport facilities offered by residential care establishments normally relate to social and care needs, not independent choice, could the Minister explain how the removal of disability living allowance from those in residential care is consistent with article 20 of the United Nations convention on the rights of persons with disabilities, to which this country is a signatory? Has she assessed her policy against the commitment to the convention?

[Maria Miller]

I can assure the right hon. Lady that we have assessed our policies in the right ways. I reiterate what I have said to her before, which is that the policy is trying to remove overlaps, not mobility.

[Jake Berry (Rossendale and Darwen) (Con)]

In my advice surgery on Friday, a young couple came to see me in Darwen to say that they were £30 a week worse off for living together. It is a shameful legacy of the previous Government that people are worse off for living in couples and worse off when they go back to work. What this couple, and everyone else in Darwen, wants to know is: when will the universal credit end this situation?

[Mr Duncan Smith]

My hon. Friend is right to say that this is one of the most invidious unintended effects of a benefits system, and this country found itself in a worse situation on the couple penalty that most others did because of the interplay and complexity of that benefits system. The universal credit will not immediately end all that, but it will make the situation much better for couples. When couples want to stay together, the Government should never be the thing that forces them apart. The right hon. Member for Birkenhead (Mr Field) has made that clear and I back him up on it completely.

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

Block contracts with care homes often leave individual care plans unclear on what mobility costs are to be met by the home. What guarantees can Ministers give that no disabled person in residential accommodation will find their ability to leave their own home reduced as a result of the removal of the mobility component of disability living allowance?

[Maria Miller]

Again, I reiterate that we are looking to remove overlaps, not mobility. The local authority contracts contain clearly articulated requirements for care homes to cover activities involved in daily living, which include providing access to doctors, dentists and local services, such as libraries and banks. In addition, in order to become registered, a care home provider has to undertake to promote the independence of the disabled people living in the homes that it is providing. We know, as do care home providers, that mobility is an important part of that independence.

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

This morning I met the BBC—the business breakfast club—in Hastings, which is a group of local employers. It raised with me its concern that when offering additional work to part-time employees of 16 hours, those employees often do not want to take it up because they find themselves worse off. Will the Secretary of State advise what will be done to even that out and make sure that work does pay after 16 hours?

[Mr Duncan Smith]

The objective of the universal credit is that, all the way up the part-time process, whatever the number of hours worked, work should pay. That is particularly so for those who take jobs with low hours and low pay, paying them extra. They will be the greatest beneficiaries of the system. It is invidious that there are only two points in the cycle at which people are able to take up work and make any money. In future, work should pay: that is the incentive and we should get people back to work by enduring that it does.

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

The Minister mentioned the consultation on the Child Support Agency, which includes the suggestion that both parents should have to pay for use of that agency. Many parents on low incomes need to go to the CSA. Will not such charges, if they are made, simply be a tax on their children and mean that there is even less money to bring those children up properly?

[Maria Miller]

Let me make it absolutely clear that there will be very clear ways in which such families can come to their own arrangements without incurring charges. If they feel that that is not possible, the statutory system will be there. Just to reassure the hon. Lady—the charges being put in place are only a fraction of the costs incurred in running the system. Indeed, the up-front charge that we are proposing for individuals on benefits is just one tenth of the cost of processing an initial application.

[Fiona Mactaggart (Slough) (Lab)]

The Minister has made much of her proposal to remove the mobility component from residents of care homes as one that will reduce overlaps, but there is one group of people for whom there is no overlap at all—children who are in boarding schools because they have special needs. Will she drop that proposal in relation to such children?

[Maria Miller]

I reiterate that we are still in consultation on this proposal and are listening carefully to all the issues that people raise. It is vital for children to stay in contact with their parents. The provisions for schools to do that are very clear and we will make sure that when school facilities are not available, there remains an ability to be eligible for disability living allowance, because children would not necessarily be resident in the home.

[Mr David Winnick (Walsall North) (Lab)]

Despite all these fine words, have Ministers seen the complaints that have been much publicised in the past few days that the people being targeted are those with multiple sclerosis and other very acute disabilities? Some of those people have said that if their allowances and benefits are taken away, so severe is their illness that they wonder whether life will be worth living. It is a disgraceful state of affairs that people with the most severe illnesses are being targeted in the current campaign.

[Chris Grayling]

I would say this to the hon. Gentleman: our goal is to do the right thing by people who can make more of their lives. This is not about taking support from people who need indefinite support. We will make sure that people on incapacity benefit who need support and cannot work will continue to be in the support group and will receive a higher level of benefit payment than at present. For those who have the potential to work, we will give them the specialist help they need to do so.

Building Schools for the Future

Monday 14th February 2011 Commons Chamber

15:33

[John Cryer (Leyton and Wanstead) (Lab)]

(Urgent Question): To ask the Secretary of State for Education if he will make a statement on his assessment of the High Court ruling on Friday to the effect that the decision to cancel the Building Schools for the Future programme in Waltham Forest and other areas was illegal.

[The Secretary of State for Education (Michael Gove)]

I am grateful for the opportunity that this urgent question gives me to repeat the points made in my written ministerial statement of Friday.

On Friday, Mr Justice Holman handed down a judgment on the judicial review brought by six local authorities, including Waltham Forest, following my decision to cancel BSF projects in their areas. It was, of course, deeply regrettable that any building projects had to be cancelled, but the scale of the deficit we inherited meant that cuts were inevitable, and the inefficiency that characterised BSF schemes meant that we needed a new approach. All the local authorities that pursued the action agreed that cuts had to be made, but, as the judge records, they argued that

“other (unidentified) projects should have been stopped rather than theirs”.

The claimants argued that Government decision making was confused and irrational, but the judge made it clear that the decisions I made were clear and rational. He said that

“the Secretary of State intended to draw, and did draw, a clear demarcation between situations where there were obligations under contract and those where there were not. The decision is not open to challenge on irrationality.”

The claimants argued that the chosen cut-off date for projects was wrong, but the judge also made it clear that

“a cut-off date of January 1st reflected government-wide policy and helped to achieve that policy by making very large savings.”

The claimants also argued that there was a breach of promise in stopping their specific projects, but the judge said:

“I do not consider that there was any failure…because there was no such promise or expectation.”

I am grateful that on all those substantive points, the judge found as he did, in our favour.

On two procedural grounds, the judge ruled in favour of the claimants. In essence, his view is that my consultation with 14 local authorities in relation to 32 sample schools and a further 119 individual academy projects did not go far enough, and that I should have included the six claimants in my consultation. He also judged that I should have had rigorous regard to equalities considerations in reaching my decision.

The judge has not ordered a reinstatement of funding for any BSF project, nor has he ordered me to pay compensation to any of the claimants. Instead, he concluded that I must give each of them an opportunity to make representations, and then review the decision, in so far as it affects these six authorities, with an open mind. I am happy to do so. The judge has made it clear that

“the final decision on any given school or project still rests with”

me, and that I

“may save all, some, a few or none”.

He concluded by saying that

“no one should gain false hope from this decision”.

I am grateful to the judge for that direction, for the fair and careful manner in which he appraised the evidence, and for his support for the Government on the substantive decisions that we took.

[John Cryer]

I want to emphasise, first, that the purpose of the urgent question was not to score points, but genuinely to elicit information, and secondly, that the court action was not taken light-heartedly but because, in the case of my local authority, Waltham Forest, we felt that there was no option as the urgency had become so great.

In my constituency, which is not unusual, seven schools were due for rebuilds—George Mitchell, Buxton, Belmont Park, Norlington, Connaught, Leytonstone and Lammas, which is on the boundary between my constituency and that of my hon. Friend the Member for Walthamstow (Stella Creasy). We were also expecting a new school to be built to deal with the rising demand for places in secondary school. That brings me to the crux of the argument, which is that by 2014 we will be 500 places short in secondary schools. That is a minimum. Waltham Forest is usually a recipient of migration from central London, which means that the actual demand could be 600, 700 or perhaps more. At present, 500 is the bare minimum.

There are three other points to be considered. One is that the structure of many of the schools in question is dreadful and literally falling apart. Teachers, pupils, governors and other staff have fought valiantly, and BSF was the light at the end of the tunnel until it was taken away. Secondly, a number of the schools that I mentioned serve some of the most deprived areas in London, which means some of the most deprived areas in Britain—areas that are struggling with all sorts of problems. Thirdly, some of the schools were on the verge of being decanted, expecting the work to start. In the case of Leytonstone, the school was hours away from moving students to other premises in the expectation that building work would start.

I want to ask a number of specific questions. What is the time scale for finding a replacement and addressing the judgment? Will the Secretary of State approach the matter with an open mind? He has already said that he would, but I want him to reiterate that. Will he consult openly with the schools and the local authorities, but in a fairly tight time frame because matters are becoming so urgent? Lastly, the argument is not about bringing back BSF. We recognise that it has gone, but as he said, we expect a replacement to be announced, and so far that has not happened. When will a replacement be announced?

[Michael Gove]

I am grateful to the hon. Gentleman for the fair way in which he makes the case on behalf of his constituents. I should point out that Waltham Forest has already received £68 million from BSF, but I appreciate, as he rightly says, that there are many schools in Waltham Forest which are not in the state of repair that either he or I would wish to see.

The hon. Gentleman makes the point that by 2014 Waltham Forest secondary schools will be 500 places short. I am sure that he, like me, is aware that many primary schools across London are short of places. We must balance the need to ensure that there are places in secondary schools with investment in primary schools, which BSF did not cover.

The hon. Gentleman asked three specific questions, one of which was about the time scale. I have already been in touch, through my Department, I understand, with Waltham Forest. We want to make sure that we can receive proper representations on behalf of the local authority and its schools in a way that enables us to make comprehensive judgments in the most rapid time available. For that reason, in response to his second question, I will of course keep an open mind and will be keen to hear from him, other Waltham Forest Members and anyone with an interest in the decision. His third question was on consultation with the local authority and the relevant schools. I will be in touch with the local authority to find the most expeditious way of ensuring that the judge’s directions can be followed.

[Tony Baldry (Banbury) (Con)]

However exemplary the Secretary of State is in being fair-minded, is not the reality that all the consultation in God’s creation will not create money where money simply does not exist? The point about the whole programme is that it was worse than bankrupt, because it cost £250 million without a single brick being laid.

[Michael Gove]

My hon. Friend makes a very good point. Unfortunately, under the previous Government, the BSF budget increased from £45 billion to £55 billion, yet only 8% of the school estate that was supposed to be renovated was renovated. We must have a more efficient way of ensuring that school buildings can be repaired, maintained and rebuilt, and that is what we intend to do.

[Andy Burnham (Leigh) (Lab)]

The High Court has ruled the Secretary of State guilty of an abuse of power, but anyone listening to him for the first time today would not have thought so. There is still not one word of apology. If he does nothing else, will he at least put that right by apologising to the communities that are suffering the devastating effects of his defective decision making?

Fresh doubts have been raised about the Secretary of State’s competence and judgment. To restore confidence, will he now publish all relevant submissions and advice related to that decision? Did he overrule official advice to consult before making those decisions? Will he confirm reports that a leading QC warned him that the councils had a fairly strong case against him? Why, then, did he proceed regardless, and how much public money has been wasted on legal costs? The judge requested a rerun with an “open mind”. The Secretary of State’s self-justifying response on Friday suggests that his mind is firmly made up. To give the six councils confidence of a fair hearing, should he not now remove himself from any further part in the decision?

This is a damning verdict on a Cabinet Minister by a High Court judge. We saw the same on school sport, Bookstart and the education maintenance allowance: snap decisions, no consultation. The Secretary of State is a repeat offender, dragged here yet again. Is he not now in the last chance saloon, with a clear warning to change his ways?

[Michael Gove]

I am grateful to the right hon. Gentleman for the way in which he responds to the judgment. He refers to an abuse of power, but he will be familiar with the fact that “abuse of power” is a judicial term that has been in use since 1603 and, in particular, has been applied in judicial review cases since 1985. It has been applied to Cabinet Ministers on both sides of the House. It is a matter of open debate that judicial review is there to ensure that decisions taken by Cabinet Ministers can be reviewed in the Court. As I said, I was delighted that in this case, on the substantive points, the judicial review found in the Government’s favour.

The right hon. Gentleman asks whether all relevant submissions will be published. All relevant submissions were disclosed in the proceedings and looked at by Mr Justice Holman. He had an opportunity, unlike the right hon. Gentleman, to read the evidence and concluded that the judgment that we made was entirely rational, and he backed us on the substance.

The right hon. Gentleman asks about legal advice that referred to the fact that councils had a strong case. That legal advice, as I have informed him and other right hon. and hon. Members, referred specifically to the 32 sample schools in the 14 local authorities that we consulted. All of those sample schools went ahead. The consultation was right and proper in that respect. I am afraid that, as is so often the case, he is misinformed, jumped to a conclusion and, as a result of asking a question to which he knows the answer is not the one he anticipated, has sadly made another mistake.

The judge acted in accordance with all the evidence and found that, on the substance, the right decision was taken. An opportunity now exists for me to review the decisions in the six local authority areas. As I have said before, I intend to do so in an open-minded way and to take advantage of the judge’s direction in order to hear their case.

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

When the Secretary of State carries out that review, will he keep in mind the claims of those schools that were excluded from the Building Schools for the Future programme and might be in more urgent need of repair than those that were included, such as the Duchess’s community high school in Alnwick?

[Michael Gove]

My right hon. Friend makes a very good point. One of the weaknesses of the way in which Building Schools for the Future was designed was that it did not prioritise schools on the basis of dilapidation; they were prioritised according to other, political criteria. There are of course schools in Building Schools for the Future areas which are in desperate need of renovation, but there are also schools outside those areas, such as the Duchess’s school in Alnwick, which are in a similarly dilapidated state—a consequence of the failure to invest money efficiently over the past 13 years.

[Mr John Spellar (Warley) (Lab)]

The Secretary of State’s initial remarks seem to indicate an attitude that the play was a success, but the audience was a failure. He did, however, move on and offer to look at those decisions with greater care. He will know that Sandwell is a hugely deprived borough with growing school rolls, and that many of its schools were told year on year that they could not have improvements because they were part of BSF. Will he now look at those cases again? People are faced with crumbling schools and, frankly, dashed hopes. Will he now listen to Sandwell’s representations in order to remedy that gross injustice?

[Michael Gove]

I appreciate the passionate and effective way in which the right hon. Gentleman makes his case. I had the opportunity to talk to Sandwell’s council leader on 5 August, when he brought a delegation of teachers, parents and young people to the Department for Education, and I am very, very happy to ensure that, in the process that we now have, I listen fairly to all the representations made by Sandwell and its Members of Parliament.

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

The Building Schools for the Future programme was put together according to political criteria rather than being based on Schools’ state of dilapidation. Does my right hon. Friend feel that that was right?

[Michael Gove]

My hon. Friend makes a very fair case. As I mentioned earlier, some local authorities and schools in the Building Schools for the Future scheme were badly in need of investment, and I, like all right hon. and hon. Members, am sorry that the money simply is not there to invest in every school that needs it. But, as my right hon. Friend the Member for Berwick-upon-Tweed (Sir Alan Beith) quite rightly makes clear, the school estates of many local authorities outside BSF were also in need of renovation.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

Regrets will not solve the problems of many Walthamstow schools affected by the judgment—problems including asbestos, leaky roofs and a lack of space for the curriculum. It was for precisely those reasons that on 12 July I asked the Secretary of State to come to Walthamstow himself. Will he now, finally, in the light of the decision, make good on that and see for himself the issues that BSF was trying to deal with in Waltham Forest? Then, we might finally have schools that are fit for purpose in our borough—unlike the Secretary of State, who it appears is not fit for purpose, according to the judge.

[Michael Gove]

I am grateful to the hon. Lady for making her case. Waltham Forest, as an effective and efficient local authority, has already been in touch with my Department, and I am delighted to say that we will be in conversation with it to ensure that the right judgment is made in due course. But, with respect to the hon. Lady and all Opposition Members, although many schools are in desperate need of rebuilding, the question that must be asked is, “Why weren’t those schools rebuilt effectively in the last 13 years, and why did the Building Schools for the Future scheme operate in such a wasteful and inefficient fashion?”

[Damian Hinds (East Hampshire) (Con)]

Sixty million pounds spent on consultants; £1,625 per pupil spent on IT. Would my right hon. Friend say that Building Schools for the Future represented the very best way of spending money for the future education of our children?

[Michael Gove]

My hon. Friend, who serves on the Education Committee, has made a study of the waste inherent in Building Schools for the Future, and he is right: it is a scandal that, while buildings, as the hon. Member for Walthamstow (Stella Creasy) pointed out, were in a state of decay, unfortunately millions of pounds were spent on consultants. One individual, in one year, made more than £1 million as a result of his endeavours as a consultant working on Building Schools for the Future.

[Mr Dennis Skinner (Bolsover) (Lab)]

Is it not becoming increasingly obvious that last year the Secretary of State took the decision to abandon all those schools under Building Schools for the Future in too much haste? As a result, he has had revised lists—I think there were six in all—and now this court judgment. We have a school in my area, more than 100 years old, being held up by pit props. A contract was made with the builder, but the case is still waiting to be decided. His junior Minister said that it is a compelling case, and there must be scores like that all around Britain. Why does he not stop the arrogance and get on with the job?

[Michael Gove]

The hon. Gentleman says on the one hand that we acted with unprecedented haste, and on the other hand that we should get on with it. One of the reasons we acted as we did is that the scheme we inherited was wasteful and inefficient. I should point out that as a direct result of changing the scheme we have been able to ensure that a school that was part of Building Schools for the Future, in the constituency of the right hon. Member for Doncaster North (Edward Miliband), is going to be built one year faster than it would have been under Labour, with 30% savings. Under this coalition Government, we are making the savings and beating the time scales to ensure that in the most deprived areas, the schools are built.

[Andrew Bridgen (North West Leicestershire) (Con)]

Is it not the case that despite the huge amounts of money spent on BSF projects before a brick was even laid, the Government architecture watchdog judged that 88% of those projects were either mediocre or not good enough? Does not that underline how badly managed the scheme was under the previous Government?

[Michael Gove]

My hon. Friend makes a good point. The Commission for Architecture and the Built Environment made it clear that far too many of the designs were not up to scratch under the previous Government. We want to make sure that every young person has a school that is fit for purpose. That was not the case under the previous Government.

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

The priorities for BSF were set according to social and economic deprivation and educational underachievement. Is the Secretary of State really saying that those are the wrong priorities when deciding what educational investment should be? Liverpool schools have been hit hard by last year’s announcement. A month ago, I wrote to the Secretary of State inviting him to visit St John Bosco school in my constituency—one of the schools that was affected by the announcement. Will he, or one of his colleagues, visit that school at his earliest convenience?

[Michael Gove]

I am grateful to the hon. Gentleman for making the case. Initially, the Building Schools for the Future criteria were exactly as he described, but subsequently they were altered so that readiness to deliver became a factor. That meant that, for a variety of reasons, the money was not always targeted at the areas most in need. He has made the case for St John Bosco and for other schools in Liverpool very effectively. One of my ministerial colleagues or I will make good on the promise to visit Liverpool.

[Mary Macleod (Brentford and Isleworth) (Con)]

Does my right hon. Friend find it outrageous that under the slow and over-complex BSF process, it usually took about 30 months before construction began? What can he to do ensure that the process is simpler and more efficient for schools such as Chiswick community school and Hounslow Manor school in my constituency?

[Michael Gove]

My hon. Friend makes the very good point that it took 30 months from the moment of starting the process to the first brick being laid. In the project that we have used as a pilot in Doncaster North, the procurement process took just 10 weeks and the school will be delivered one year ahead of schedule. If that is not proof that there was inefficiency in the existing scheme that we inherited, I do not know what is.

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

Will the Secretary of State tell us when he is going to make an announcement about a replacement for BSF for Coventry schools? A large number of our schools are dilapidated or have scaffolding around the buildings, and this situation cannot go on. I do not want him to blame the previous Government. You are in charge now. You put this question earlier: what did we do over the past 13 years? Well, we had 18 years of your previous Government when capital programmes were cut.

[Mr Speaker]

I am not in charge of anything other than the chairing of this session, but I look forward to what the Secretary of State has to say.

[Michael Gove]

The hon. Gentleman, along with the hon. Member for Coventry North West (Mr Robinson), met me last summer to make the case for Coventry, and he did so very effectively. I appreciate that a number of schools in Coventry need investment at some point in the future and have suffered as a result of the way in which the BSF timetable has operated. We hope that the James review of the allocation of capital will be published shortly—as I said, some of the pilot projects have shown that there is significant scope for savings—but naturally I want to make sure, as part of this process, that we can receive the submissions from the local authorities cited in this case.

[Mr David Ward (Bradford East) (LD)]

Under phase 3 of BSF, 19 school projects in Bradford were frozen. I am sure that the Secretary of State will agree that it was a cruel deceit to sign off phase 3 just before the general election when there was no money available to build those schools. However, is it not also cruel to spend new capital money on free schools before we first meet the needs of the schools tied up in BSF?

[Michael Gove]

My hon. Friend makes a balanced point. The point I would make about free schools is that in the work that we have done so far, we have established that we can cut significantly—by up to 50%—the costs of providing school places. There is a proposal for at least one free school in Bradford, and it will be considerably cheaper than BSF schools. I hope that he will work with me to ensure that all new schools that are built—whether free, maintained or academy—are value for money and admit students on the basis of social justice and equality for all.

[Kelvin Hopkins (Luton North) (Lab)]

The Secretary of State will be aware that Luton was one of the six authorities covered by the High Court action; the specific school was the Cardinal Newman Catholic school in my constituency. I visited that school on Friday and spoke at length to the head teacher. It is desperately overcrowded and has poor facilities, as is the case with all high schools in Luton. It is not so long ago that Luton had the highest proportion of school-age children in the country. In reconsidering these building projects, will the Secretary of State consider overcrowding and the lack of school capacity?

[Michael Gove]

The hon. Gentleman makes a good case. I am well aware of the problems that affect Luton’s schools. I shall, of course, look closely at the case that he, other Luton Members and Luton’s local authority have made.

[Charlie Elphicke (Dover) (Con)]

In Dover and Shepway, £2.9 million was spent on consultants. One Kent bidder spent £5 million on a bid only to lose. The scheme was a bureaucratic nightmare and a complete fiasco. Does the Minister agree that it was a fiasco? Who was responsible for this fiasco, and are they in the Chamber today?

[Michael Gove]

My hon. Friend asks a series of questions, but I must resist the temptation that he extends to me. We all know that the scheme had to be reformed. Those who embarked on Building Schools for the Future did so for the best and most idealistic of reasons. Those who made promises immediately before the last election, which no Government could honour, must look to their own consciences.

[Stephen Timms (East Ham) (Lab)]

The Secretary of State has assured us that he will keep an open mind in receiving representations from the six authorities, including Newham. I ask him to take a close look at the cases of Plashet school and Little Ilford school, whose pupils made a DVD to show him the state of their buildings. Renewal now would avoid continuous costly patching up. Should it not be allowed to go forward?

[Michael Gove]

The right hon. Gentleman makes a good case. I have had the opportunity to visit schools in his constituency and I appreciate the challenges that teachers face there. One reason why these six local authorities brought the case was that they were among the closest to the finishing line when the line was drawn. By definition, wherever the line was drawn, those closest to it would have felt the most acute sense of injustice; also by definition, those closest to it would have been among the most needy. Wherever the line was drawn, there would have been a feeling of grievance. I understand the feeling of grievance in Newham and I take on board the points made by the right hon. Gentleman and others.

[Robert Halfon (Harlow) (Con)]

Is my right hon. Friend aware that the BSF scheme spent £20 million on a school in Essex that closed a few years later? A local authority official said that all the money had been spent, but that they had no idea where it had gone. Does my right hon. Friend agree that that shows the failures of the BSF scheme?

[Michael Gove]

My hon. Friend underlines the fact that under Building Schools for the Future, the capacity of local authorities to spend money as they saw fit took second place to the diktats of a centralised bureaucracy. As a result, there was inefficiency, which meant that public money was not spent as effectively as it should have been on raising standards.

[Helen Jones (Warrington North) (Lab)]

Given that the Secretary of State’s actions have been judged an abuse of power in relation to six local authorities, does it not follow that there was an abuse of power in relation to other authorities whose BSF projects were cancelled and which have not yet taken legal action against him? Will he commit to review all BSF projects that were cancelled, including the building projects at two schools in Warrington that serve the most deprived areas of my constituency? If he will not, is he not open to the risk of further action from other local authorities?

[Michael Gove]

That is an understandable response from the hon. Lady, but the judge was clear that only the local authorities that received a specific form of approval after 1 January and that took part in this action were governed by it, and that no other local authority should consider that it is in time or within its rights to bring a judicial review.

[Andrea Leadsom (South Northamptonshire) (Con)]

Will my right hon. Friend explain why, in spite of having schools with the same leaky roofs, dilapidated classrooms and overcrowding as those described by many Opposition Members, my constituency was told that there was no chance of even being considered for a BSF project for the next five to 10 years?

[Michael Gove]

My hon. Friend repeats a concern that many hon. Members on both sides of the House have expressed—that the process by which individual schools and local authorities were selected for entry into Building Schools for the Future, even though it might have been conceived idealistically, in the end was not seen as fair. We need to ensure that the successor scheme guarantees that money is spent effectively and efficiently on those in the most need.

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

The residents of Sandwell have been let down twice by the Secretary of State. First, it was announced that Sandwell schools would be unaffected by the cuts, only for that to be rescinded a few days later. Secondly, he undertook to visit Sandwell to explain what had happened and then decided that he would not do so. Will he do something to restore the faith of the people of Sandwell in the Government’s intention by agreeing to make the consultation and review process totally independent, so that he is not left in the position of reviewing his own previous bad decisions?

[Michael Gove]

I am grateful to the hon. Gentleman for that point. He, along with the leader of Sandwell council, Sandwell teachers, parents and young people, was able to come and meet me in the Department, and he made the case for the schools in his local authority very effectively. An opportunity now exists for the decision to be reviewed, but the judge was quite clear that that decision should be taken by the Secretary of State.

[Matthew Hancock (West Suffolk) (Con)]

I welcome the very reasonable tone of the Secretary of State’s response to the reasonable judgment. Does he agree that it is not reasonable to ask pupils to be educated in schools that are falling down, or that after 13 years of a Labour Government, they see dripping wet rain coming in and, in some cases, skylights falling in, because dilapidation was not as significant a factor in the scheme as it should have been, and affected schools were therefore not eligible for BSF funding?

[Michael Gove]

My hon. Friend makes a very strong point. I note that while he was talking about dilapidation and making the case for reform of how we allocate capital with passion and urgency, Opposition Front Benchers were laughing. They might consider that this is an appropriate subject for levity, but I believe that they should reflect on their record in office and consider why, after 13 years and after they inherited a golden economic legacy, so few schools were in a fit state. Was it anything to do with any of the mistakes that might have occurred on their watch?

[Pat Glass (North West Durham) (Lab)]

To return the Secretary of State to the judgment, which was about consultation, will he give us details now of what consultation he will carry out with the six local authorities involved? Will it include children and young people themselves and their families?

I noted from the Secretary of State’s response to my hon. Friend the Member for Warrington North (Helen Jones) that the judgment does not rule out other local authorities that incurred expenditure also taking legal action. Will he consult those local authorities?

[Michael Gove]

I am grateful to the hon. Lady for her point. The judge was clear that it is only with regard to the six local authorities in question that I have to consult, and that no other local authorities are either in time or entitled to mount a judicial review. The manner of the consultation with those local authorities is very much a matter for them to outline in conversation with me and the Department, but I want to ensure that the process is as fair and expeditious as possible. With respect to other local authorities, such as those in Durham, I have of course had the opportunity to visit her constituency and that of the hon. Member for North Durham (Mr Jones) to see the specific case for investment outside BSF, which I know may be necessary.

[Mr Andy Slaughter (Hammersmith) (Lab)]

The Secretary of State will know that schools in Hammersmith and Fulham lost £200 million in well worked-up, mature BSF proposals. Instead, we have free schools enrolling pupils, despite the fact that they have no approved business case, their consultation is not complete and they have no secured site. Will he reconsider decision making in Hammersmith and Fulham, before he has to go back to the High Court?

[Michael Gove]

I am grateful to the hon. Gentleman for his point. I have had the opportunity to visit with him many of the outstanding schools in Hammersmith and Fulham, including Phoenix high school, which we both hold in high regard. The new free school that is likely to be opened, the West London free school, is being opened at a significantly lower cost than that for which schools were built under BSF. It will be in a handsome building adjacent, I believe, to the fee-paying independent school Latymer Upper, where he enjoyed such a great education.

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

I hoped that the Secretary of State would be able to bring us sunshine today in relation to some of the schools that have been affected, particularly Seaham school of technology, which suffers from terrible problems of dilapidation. The opportunity cost of not replacing the school and having to fund the repairs is considerable. It is the only school serving quite a large town, and it has rising demand. Will the Secretary of State consider the case for that school?

[Michael Gove]

I am grateful to the hon. Gentleman, not only for proving that he is a reader of The Times, and a fan, as I am, of Sarah Vine’s writing, but for making the case for investment in east Durham. I have had the opportunity in the past couple of months to visit the north-east twice, and I always enjoy doing so. He makes an impressive case. I know that with Building Schools for the Future gone, we must all look at how we can get money to the schools that need it in the best way. I also know that in Seaham and Easington there are schools that desperately need investment at some point in the future.

[Lilian Greenwood (Nottingham South) (Lab)]

Staff at Trinity, Bluecoat and Fernwood schools in my constituency are desperate for extra investment in their buildings. Will the Secretary of State say when he will meet Nottingham city council to review our city’s excellent case for that additional investment?

[Michael Gove]

At the earliest possible point.

Middle East

Monday 14th February 2011 Commons Chamber

16:05

[The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague)]

Mr Speaker, with permission, I shall make a statement on recent developments in the middle east and north Africa. Over the past few weeks, we have witnessed events of a truly historic nature in the region, including changes of Government in Tunisia and Egypt, and widespread calls for greater economic development and political participation.

Last week, I visited Tunisia, Jordan, Yemen, Bahrain and the United Arab Emirates to discuss the situation with our partners in the region. I held talks in Tunis with interim Prime Minister Ghannouchi, who is overseeing ambitious plans to open up Tunisia’s political system, reform its constitution, revive its economy and prepare for free elections. I strongly welcome those intentions, and the steps that the Tunisians have taken to sign up to international conventions on human rights.

I met some inspiring young students, whose motivation was a desire for the freedom, employment and human dignity that we enjoy in Europe. I believe that there is now a clear opportunity for a closer relationship between the United Kingdom and Tunisia. I discussed how the UK might support projects in Tunisia through our new Arab partnership fund. New funding was announced to the House on 1 February that will support economic and political development across the region.

In Egypt as in Tunisia, there is now a precious moment of opportunity for the people to achieve a stable and democratic future. Yesterday, I spoke to Egyptian Foreign Minister, Ahmed Aboul Gheit, and the Prime Minister, Ahmed Shafiq. I welcomed the statements of the higher military council that promised a peaceful transition to civilian and democratic government, new elections and the reform of the Egyptian constitution.

Tahrir square is calm today after yesterday’s announcements of the dissolution of Parliament and the suspension of the constitution. I encouraged the Egyptian Government to make further moves to accommodate the views of opposition figures, and was pleased to hear from Prime Minister Shafiq that members of the opposition should be included in a reshuffled Cabinet during the next week. We would also like to see a clear timetable for free and fair parliamentary and presidential elections, and a genuinely inclusive dialogue about the country’s future. We welcome the military council’s commitment to all regional and international obligations and treaties.

Egypt is a sovereign country, and we must not seek to dictate who runs its affairs, but we have been clear throughout this crisis that it is in our national interests as well as Egypt’s for it to make a successful transition to a broad-based Government and an open and democratic society, and to an Egypt that carries its full and due weight as a leading nation in the middle east and in the world.

I believe that we have been right to speak particularly strongly against repression of, or violence against, protesters, journalists and human rights activists. We call now for the release of those detained during the demonstrations and for steps to end the state of emergency, which curtails basic rights. The UK must always uphold the right to peaceful protest and freedom of speech.

Looking to the future, it is vital and urgent that we work with the EU and other nations to support economic development and more open and flexible political systems in the region. We have begun discussions with the United States on co-ordinating our assistance. The Prime Minister discussed that with President Obama this weekend, as I did with Secretary Clinton. We can help with the building blocks of open societies, knowing as we do that a stable democracy requires much more than just holding elections. We are also working closely with Baroness Ashton and her officials. A taskforce has been set up in Brussels to put together a plan for immediate assistance and long-term support for Tunisia, and a plan of long-term economic and institutional assistance for Egypt.

The UK Government is in close communication with the International Monetary Fund and the World Bank to ensure that they are doing all they can to provide appropriate and timely support to Egypt. We have also received a request from the Egyptian Government to freeze the assets of several former Egyptian officials. We will of course co-operate with this request, working with EU and international partners as we have done in the case of Tunisia. If there is any evidence of illegality or misuse of state assets, we will take firm and prompt action. My right hon. Friend the Chancellor of the Exchequer will discuss economic support and possible freezing measures relating to assets with European Union finance Ministers tonight and tomorrow in Brussels, and has requested a discussion at ECOFIN tomorrow.

I hope that the House will also join me in paying tribute to the staff of the Foreign and Commonwealth Office and those who over the past three weeks have calmly and professionally run our embassy within yards of Tahrir square, while assisting the departure of thousands of British nationals from Egypt, and to teams from the Ministry of Defence and the UK Borders Agency. We will keep our travel advice under constant review.

The changes taking place in the region provide opportunities that should be seized, not feared. In Egypt, a nation of more than 80 million people should soon have the opportunity to choose their President and their representatives democratically. In Tunisia, more than 10 million people may now finally have the opportunity to unleash the economic potential that their geographic location and talented population puts within their grasp, and to enjoy democratic freedoms.

But this moment is not without risk. Nowhere is that more apparent than in Yemen, where I spent a day in meetings with President Saleh and members of the Opposition. I had three clear messages to the Government there. First, we want them to make progress on national dialogue with the opposition parties, including agreement on changes to the constitution and action to address the grievances of people in Yemen. Secondly, we have asked for and are now examining a prioritised and budgeted development plan for poverty reduction from the Yemeni Government so that we can establish a multi-donor trust fund for Yemen and be confident that funds are properly used. These issues will be the main focus of the next Friends of Yemen meeting in the coming months.

We also look for intensified Yemeni efforts against the al-Qaeda threat on their territory. I know that the House will salute the courage of our embassy staff in Yemen, who face the highest threat of any of our posts overseas and were attacked twice by terrorists in the last year.

There is also a serious risk that Governments will draw the wrong conclusion from instability in the middle east and pull back from efforts to restart the peace process between Israelis and Palestinians. We should draw the opposite conclusion, which is that we need to see an urgent return to talks so that people’s legitimate aspirations for two states can be fulfilled through negotiations. This was the main subject of my discussions with King Abdullah of Jordan, as well as the recent steps the Jordanian Government have taken to promote domestic reform. In a region of uncertainty, the certainty provided by an agreement between Israelis and Palestinians would be of immense significance.

The Government are a friend to both Israelis and Palestinians. We are calling for both sides to show the visionary boldness to return to talks and make genuine compromises. Talks need to take place on the basis of clear parameters. In our view, the entire international community, including the United States, should now support the 1967 borders as the basis for resumed negotiations. The result should be two states, with Jerusalem as the future capital of both, and a fair settlement for refugees.

Finally, we must not allow our attention to be diverted from the grave danger of Iran’s nuclear programme. Iran claimed that it supported protestors in Egypt, but it has denied its own people the right of free expression today and placed opposition leaders under house arrest. Meanwhile, the threat from its nuclear programme has not diminished. Given Iran’s refusal to engage in genuine negotiations over its nuclear programme at the recent talks in Istanbul, we are now in talks with international partners about steps to increase the legitimate peaceful pressure on Iran to comply with UN Security Council resolutions and the requirements of the International Atomic Energy Agency.

All the issues that I have described underline how important the region is to our national interests. That is why we began, from our first day in office, a major, long-term effort to intensify Britain’s links with the countries of the middle east, north Africa and the Gulf —in diplomacy, trade, education, health and civil society —as part of a distinctive British policy towards the region.

I reaffirmed last week to leaders in Bahrain and the UAE that we are committed to intensifying our engagement on foreign policy and that we will step up our discussions with the Gulf states on Iran’s nuclear programme over the coming months. We will also pursue firm engagement with countries where we do not see eye to eye but have a considerable interest in edging those states towards a more constructive role. That was a process that I began when I visited Damascus two weeks ago for talks with President Assad. At this time of opportunity and uncertainty, the UK will therefore be an active and distinctive voice in the middle east. We will send a constant message about how important it is to move in the direction of more open and flexible political systems, and sound economic development, while respecting the different cultures, histories and traditions of each nation. Although we cannot set the pace of this change and must respect each country’s right to find its own way, we will be a reliable friend and partner to all those looking to do so, and a staunch defender of Britain’s interests in the region.

[Mr Douglas Alexander (Paisley and Renfrewshire South) (Lab)]

I thank the Foreign Secretary for prior sight of the statement he has just offered to the House. I welcome several aspects of the statement and join him, of course, in praising the work of officials in the Foreign and Commonwealth Office on the ground in Egypt and, in particular, the bravery of British staff working under difficult circumstances in Yemen. I also welcome the discussion of the use of the new Arab partnership fund and the work under way to co-ordinate international efforts to provide appropriate and timely support to Egypt. I also welcome the Foreign Secretary’s remarks last week emphasising the continuing importance of the middle east peace process—sentiments that he has echoed again today—and his continued efforts to help to address the continuing challenges facing Yemen and the grave threat of Iran’s nuclear programme.

As we watched a moment of history unfold on our television screens on Friday night, few of us would not have sensed history being made amid peaceful celebration and a genuine sense of hope and possibility communicated by the people of Egypt. Old certainties—political, regional and strategic—have been challenged by the scenes of hundreds of thousands of people on the streets of Cairo and elsewhere in the Arab world demanding a fundamental change in the relationship between the governed and their governments. I would therefore like, in particular, to address three points covered by the Foreign Secretary’s remarks. The first is the work that the Government are doing, in conjunction with the interim Egyptian Administration and the Serious Fraud Office, to ensure that assets wrongly taken from either the people of Tunisia or the people of Egypt are pursued and returned. The second is the British Government’s position on the future of Egypt, and the third is the implications of all these events on the wider region and the middle east peace process.

Earlier this month, it was reported that the assets of 46 allies and relatives of former President Ben Ali had been frozen following talks with the Tunisian Government. Will the Foreign Secretary confirm that this has indeed gone ahead, and update the House on the work of British and European Union officials to ensure that any assets wrongfully appropriated from the people of Tunisia by former President Ben Ali are returned to them? In recent days, there have been many media reports suggesting that former President Mubarak has a very large personal fortune held in bank accounts and property in the United Kingdom and Switzerland, among other countries. Yesterday, the Business Secretary said:

“I think it would be great for the reputation for the City of London if those accounts were frozen now.”

Yesterday, the Under-Secretary of State for Foreign and Commonwealth Affairs, the hon. Member for North East Bedfordshire (Alistair Burt) stated on the radio:

“There has to be a request made for any of this action to take place…There are things that can be done, but so far there has not been a request made and therefore it is not possible to speculate”.

I note, however, from the Foreign Secretary’s statement to the House this afternoon, that a request has now been received from the Egyptian Government. Will he therefore tell the House precisely when the request was received and what subsequent actions the Government have taken to freeze the relevant assets since its receipt? Will he inform the House what instructions have now been given to the Serious Fraud Office in the light of the request, and when the SFO began its actions in relation to the matter? Given the comments earlier today from the chairman of the Euro Group, Jean-Claude Juncker, supporting an asset freeze, will he explain the need for a delay in taking action before tomorrow’s meeting with European Finance Ministers? Why cannot this issue be addressed through direct contact and agreement with capitals prior to the meeting taking place? For the assurance of the House, will he confirm that he agrees with the Opposition that the UK should play its part in ensuring that any money that rightly belongs to the Egyptian people is returned to them?

Let me turn to the broader issue of Egypt’s future. The events of Thursday and Friday last week were extraordinary, but the question dominating our debate is: what comes next? The Foreign Secretary expressed his support for a clear timetable, but what is the British Government’s specific policy on the timing of the elections? Should they follow the timetable set out by President Mubarak on Thursday, or is it the Government’s view that a longer transitional period would now be more appropriate? Important as they are, free and fair elections alone do not guarantee effective democratic governance, which involves the vital and unglamorous task of building a series of institutions, as we heard, from diverse political parties to a free press, and from legal safeguards for human rights and minorities to an independent judiciary.

During that transition, are the Foreign Secretary and his officials pressing the higher military council for the emergency laws to be removed and detainees freed, and for maximum freedom to be given to political parties and trade unions to organise in preparation for democratic elections? The polarising policy adopted by the Mubarak regime undermined moderates and ensured that perhaps the two most powerful and enduring post-Mubarak power structures in Egypt are the military and the Muslim Brotherhood. Have officials from the Foreign and Commonwealth Office met the Muslim Brotherhood in recent days? Will the Foreign Secretary give us his latest assessment of the nature of the organisation and the strength of its support in Egypt, and say how he assesses its potential impact on Britain’s objectives for the region, which he set out for the House today?

Let me turn briefly to the consequences of these developments on the wider region. The Foreign Secretary met the Government of Yemen in recent days. Will he offer us the latest security assessment of the threat posed by al-Qaeda in the Arabian peninsula? Having attended the London Friends of Yemen conference in my capacity as Secretary of State for International Development, I am aware of the challenges faced in Yemen, so will he update the House on how British resources are being used, ahead of the establishment of the multi-donor trust fund, to address the development and security challenges faced in Yemen?

I welcome the reference made by the Foreign Secretary to the situation of the Iranian opposition leader Mir-Hossein Mousavi, who has reportedly been placed under house arrest in order to prevent him from attending demonstrations in Tehran. Will the Foreign Secretary share with the House what further steps he is contemplating in speaking up for human rights in Iran? He has expressed his rightful concern about the grave danger of Iran’s nuclear programme, so will he update the House on his assessment of the prospects for the E3 plus 3 process, given the disappointing failure of the talks in Istanbul?

The announcement of the formation of a new Cabinet of the Palestinian Authority, combined with the planned presidential and legislative elections in September, is widely perceived as yet another consequence of the events in Tunisia and Egypt of recent days. The chief Palestinian negotiator, Saeb Erekat, also reportedly offered his resignation on Saturday, although reports suggest that Mr Abbas has not yet accepted it. Will the right hon. Gentleman tell the House what the situation is in the Palestinian Authority, and say what further information he has about the timing of those elections?

For many involved in the peace process from the Israeli side, the events of the last few weeks will have been unsettling. Although the cold peace with Mr Mubarak was the foundation of Israel’s regional security, the events of recent days show just how brittle that supposed stability was. What discussions has the right hon. Gentleman had with his Israeli counterpart on the subject, and what he has done to urge the Israelis to see recent events as an impetus for a renewed commitment to the peace process? I am sure that I speak for all parts of the House when I say that, for the region, a peace one day between the legitimate representatives of the people of Egypt and a secure Israel would be an even greater prize than the last 30 years of stability.

[Mr Hague]

The right hon. Gentleman asks a wide range of questions, and I shall try to go through them. I thank him for his words about the staff of the Foreign Office, and about what they have done and continue to do in Yemen, as well as in Egypt. I know that it will mean a lot to them to be appreciated in all parts of the House.

I also thank the right hon. Gentleman for his support for what I have said about the middle east peace process. As I understood it, he supports the intensification of our measures on Iran, which I talked about in my statement. These are conscious changes in policy. It is a conscious change in policy for not only us, but the United States to say that a settlement in the middle east should be based on 1967 borders. It is a conscious change in policy to say that now, on top of the measures agreed in the European Union last year, the peaceful pressure on Iran must be intensified. To be joined by the Opposition in those changes of policy gives strength to them, and it always counts for a great deal in foreign policy for this House to speak in a united way.

I might have to take the right hon. Gentleman’s questions in reverse order, but I will try to get through them all. This leads us naturally to a discussion of the peace process, which I have discussed with my Israeli counterpart. Foreign Minister Lieberman visited London on 24 January, and we have also had more recent discussions with the Israeli Government. Indeed, the Secretary of State for Defence, my right hon. Friend the Member for North Somerset (Dr Fox) was there over the weekend, underlining the point that the events in the region strengthen the case for making a success of negotiations on a two-state solution. I hope that recent events will be a jolt to many among the Israeli and Palestinian leaderships, showing them that, in the next few years, the opportunity to find a two-state solution will slip away unless there is a renewed readiness to engage in the process.

I am concerned about instability on the Palestinian side of the negotiations. The right hon. Gentleman mentioned the reported offer by the Palestinian chief negotiator to resign. There is also the prospect of elections among the Palestinians. This instability also underlines the importance of finding a way of getting the direct talks going again soon. The United Kingdom is very active diplomatically in trying to do that, and we will continue to be so.

The right hon. Gentleman asks about the prospects for the E3 plus 3 negotiations with Iran. There will be prospects for those negotiations only if Iran approaches them entirely differently from the way in which its negotiators approached the meeting in Istanbul on 21 and 22 January. The preconditions that Iran set for that meeting were entirely unrealistic, as Iran knew. It is important that it should be prepared to discuss its whole nuclear programme with the E3 plus 3 if such negotiations are to succeed. The door remains open to negotiations with Iran, but, so far, it has not proved willing to enter it.

The right hon. Gentleman asked about Yemen. There is of course a serious threat to our national security from the operations of al-Qaeda in Yemen. The recently well-reported cargo bomb plot was evidence of that. We are active in Yemen. The right hon. Gentleman will be familiar with the fact that the Department for International Development is very active there, with £50 million of support in the current year helping to provide more schools, to increase the number of doctors and to help with microfinance projects. That is valuable work, but we could do a lot more if we had the agreed framework of working with Yemen that we are calling for through the Friends of Yemen process, including the detailed development and poverty reduction plan. We received details of that plan just as I arrived in Yemen, and we are now examining it. I regard our work on the affairs and stability of Yemen in the coming months to be of great importance in the conduct of our foreign policy.

We certainly agree with the right hon. Gentleman’s points about the future of Egypt. I think I mentioned in my statement that we want detainees to be freed. We also want to see a clear timetable for elections. There is an expectation that they will take place in six months, but not yet a categorical commitment. It would be wise to meet that expectation. As he and I have both said, however, democracy is more than about holding elections. What matters even more than the date is that the process between now and then should allow new political parties and civil society in general to grow and prosper. That is why it is important that emergency laws should be lifted, and that we and other nations—not only European nations but democratic Muslim nations such as Turkey and Indonesia—should join in the building up of civil society in Egypt. As the right hon. Gentleman said, that space between the National Democratic party and the Muslim Brotherhood has not been filled before. The Opposition parties in Egypt are small and weak.

We retain, as the previous Government did, certain contacts with the Muslim Brotherhood—in particular with those who were elected Members of Parliament in the 2005 elections. There has been normal contact with them, and that contact continues. Those people have clearly taken part in recent events in Egypt, although they are insistent that they will not be contesting the presidency of the country. We will maintain our contact with them, and judge them by their behaviour.

The right hon. Gentleman asked about the seizure of assets. Yes, the requests made by the Tunisian Government are being acted on. The freeze has been implemented, investigations are taking place, and the ways in which our authorities should co-operate with that are being followed up.

The specific request from Egypt was received this morning. That is why there is a difference between what the Under-Secretary of State for Foreign and Commonwealth Affairs, my hon. Friend the Member for North East Bedfordshire (Alistair Burt) said on the radio yesterday, when that request had not been received—and had certainly not been seen by Ministers—and the information put out this morning, which is that such a request has been received and will be acted on.

To clarify an issue for the right hon. Gentleman, it is not the Serious Fraud Office, but the Serious Organised Crime Agency that is involved in the investigation of assets acquired through corruption. We, of course, have to abide by the law on this matter. That means that we will act on requests from foreign countries, but that Ministers can direct an investigation or a seizure and freezing of assets only if they are in possession of evidence of criminal activity or of a threat to our national security. We are under certain constraints if no request is received. Nevertheless, the European Union is able to implement an assets freeze for wider purposes, which is what my right hon. Friend the Chancellor is discussing with his colleagues in the EU tonight. We are acting on this expeditiously, and I thoroughly agree with the general sentiment that the right hon. Gentleman expressed about this issue.

[Sir Malcolm Rifkind (Kensington) (Con)]

In unreservedly welcoming the Egyptian revolution and similar uprisings elsewhere in the middle east, may I commend the Foreign Secretary, his predecessor and, indeed, the United States Government for insisting on having good working relationships even with autocratic regimes in the middle east which, regardless of their internal affairs which we deplore, have pursued moderate and constructive policies, seeking dialogue with Israel and working in a peaceful way towards a two-state solution between Israel and Palestine? Does the Foreign Secretary agree that any other approach would never have served the best interests of that region?

[Mr Hague]

I agree with my right hon. and learned Friend. That is the policy he pursued when he held my office. It is important to do that in any practical approach to foreign policy. In fact, I would go a little further than my right hon. and learned Friend, as it is also important to have some kind of dialogue with autocratic regimes even when they have not always pursued moderate and sensible policies. As I mentioned, I visited Syria just over two weeks ago, where, of course, we disagreed. I disagreed in our meetings with President Assad about Syria’s relationship with Iran, about the country’s human rights record and the about the situation in Lebanon. Even with such countries, however, it is important to have dialogue. Diplomacy in foreign policy is not just about talking to people with whom we agree.

[Sir Gerald Kaufman (Manchester, Gorton) (Lab)]

In welcoming the right hon. Gentleman’s tough line on the middle east peace process, may I inform him that last week I led a delegation of Members of Parliament and Members of the European Parliament from several European countries to visit four refugee camps in Lebanon? I saw there the worst conditions I have ever seen in refugee camps—including even those in Gaza—and especially in Bourj al-Barajneh, which is a hell on earth. May I put it to the right hon. Gentleman that being bred in those refugee camps is an anger and bitterness against Israel—with huge numbers of children living in squalor of the worst kind—which will place in jeopardy the future existence of the state of Israel unless a settlement is reached soon?

[Mr Hague]

I am grateful to the right hon. Gentleman for those reflections on his visit. The Under-Secretary of State for Foreign and Commonwealth Affairs, my hon. Friend the Member for North East Bedfordshire visited the same location in June, so we are well aware of the circumstances that the right hon. Gentleman describes. Part of the discussions I have with the Israeli Government leaders involves pointing out that the long-term trends are against the strategic security of Israel and make that harder to guarantee in the future, unless it is possible in the near future to make a breakthrough on peace talks with the Palestinians that then unlock the potential of a comprehensive peace in the region, with a fair settlement for refugees, which is an important aspect. To find determination in the Israeli Government as well as among the Palestinian leaders to drive that forward in the coming months must be one of our prime foreign policy goals.

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

My right hon. Friend will be well aware of the significant contribution made by the Westminster Foundation for Democracy in the states of eastern Europe—countries with no history of democracy—during the 20 years since the Berlin wall came down. May I assure him that we are well able to play our part in the exciting events in the middle east and north Africa, and will stand ready to do so at the invitation of the peoples of those countries?

[Mr Hague]

I welcome what my hon. Friend has said. A couple of weeks ago I announced an increase in funds for the Westminster Foundation for Democracy, which I consider to be part of the mixture of support for civil society and the development of political parties when that is appropriate and agreed with the countries concerned. I very much hope that the foundation will be able to play a role in both Tunisia and Egypt.

[Mr Denis MacShane (Rotherham) (Lab)]

Does the Foreign Secretary share my dismay that the first act of the new military rulers in Egypt—the generals and colonels who are now in charge there—has been to ban strikes and, in effect, prevent trade unions from functioning? Are we not in danger of seeing an agreement between men in uniform and the Islamist Muslim Brotherhood that will leave no space for secular democracy, which must allow a degree of social justice and the right of Egyptian workers to organise freely?

[Mr Hague]

It is indeed very important for secular democratic parties to be given space in which to develop. That is one of the issues on which I exchanged comments with the right hon. Member for Paisley and Renfrewshire South (Mr Alexander) a moment ago. The military council has made many announcements that we should welcome—I listed them in my statement—but that does not mean that we agree with everything that it says or does. One of the things that we are encouraging the Egyptian Government to do, which I discussed with the Egyptian Prime Minister and Foreign Minister yesterday, is to continue to “reach out”, as we would say in the jargon, to opposition groups in Egypt—including, of course, trade unions and small opposition political parties—and ensure that they feel included in the process that is taking place. I am sure that that is the soundest approach.

[Nicholas Soames (Mid Sussex) (Con)]

I congratulate the Foreign Secretary on the return of a wise and distinctive British voice to the middle east, and warmly endorse the wise words of our right hon. and learned Friend the Member for Kensington (Sir Malcolm Rifkind). Does the Foreign Secretary agree that it will be extremely important to work closely with the organisation set up by Lady Ashton in the European Union, which has so much to contribute to ensuring that institutions in Egypt are financed and assisted as they walk towards democracy?

[Mr Hague]

Absolutely. That is important and urgent work, and my hon. Friend the Under-Secretary of State met Lady Ashton on Friday to discuss it in detail. It is one of the main ways in which we can assist in Egypt. The taskforce is doing its work in Brussels, and the United Kingdom will be very much part of that. I believe that we will be able to co-ordinate what we are doing across the European Union to give a serious measure of support to the process of change in Egypt.

[Mr Ben Bradshaw (Exeter) (Lab)]

I congratulate the Foreign Secretary on what he has said today and, indeed, on what he said on the eve of his regional tour last week about the added urgency that the happy events in Egypt give to restarting the middle east peace process, but can he reassure the House that the American Administration share his analysis and, more importantly, are prepared to put on Israel the requisite pressure which, as we know from our experience of the past 20 years, is the only thing that will lead to a lasting solution?

[Mr Hague]

I discussed that with Secretary Clinton yesterday. I think that we should salute the efforts that she and former Senator George Mitchell have made in recent times. I am very conscious from all the meetings and discussions that I have had with them since May last year of the sheer energy and time that they put into trying to ensure that direct talks continued after September, when they unfortunately came to a halt.

The position that I have said that the United States and all of us should take is not yet the position of the United States, but I have informed the House openly that it is what we are advocating. I should have liked the statement on parameters to which I referred to be part of the Quartet statement issued in Munich just over a week ago. It was not part of that, but we will continue to advocate it, and I hope that it will become part of the approach of the whole Quartet, including the United States.

[Dr Andrew Murrison (South West Wiltshire) (Con)]

I congratulate my right hon. Friend on the tone he has struck with emerging and potential Administrations in north Africa, but there are countries in the wider region that are embarked upon a process of political evolution, not revolution. What can Her Majesty’s Government do to help them?

[Mr Hague]

We do, of course, work closely with those Governments. The evolutionary approach is a much wiser one, and, indeed, had the Egyptian leaders taken that approach in recent years—or even recent months—I think they would have been in a much stronger position over the past few weeks. That point has not been lost around the region, and some nations have introduced important political and economic reforms. Jordan is one of them, as I mentioned earlier, and Bahrain is another; it has already held three sets of national elections. That is not to say everything in all these countries is exactly as we would desire it, but they are embarked on a process of evolution and developing more open political systems, and we should welcome and support that.

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

I welcome the Foreign Secretary’s statement. What further steps can be taken to pressurise Iran to comply with United Nations Security Council resolutions and give the people of Iran the right of free expression?

[Mr Hague]

We are currently embarked upon the search for those measures, so I cannot give the hon. Gentleman the specifics of the answer, but as I am calling for an intensification of measures of peaceful pressure on Iran, it is clear that we are looking to intensify some of the economic sanctions that have already been agreed and put in place. I will have to return to the House with more details on that when we have discussed it with our international partners.

On a subject that the shadow Foreign Secretary, the right hon. Member for Paisley and Renfrewshire South (Mr Alexander) raised, although I do not think I answered him, we continue to speak up for human rights in Iran at every opportunity. Our ambassador has sometimes been roundly abused for doing so, but he does not shrink from doing so, and I have taken the opportunity to do so again today. We do so regularly through the Foreign Office website and other means of communication, and Iranians are able to hear some broadcasts and communications, such as those from the relevant BBC channel. We will continue to stick up for human rights.

[Iain Stewart (Milton Keynes South) (Con)]

Although I agree with my right hon. Friend that the current situation can, and should, give fresh impetus to the middle east peace process, there is considerable concern in Israel about the country’s future security. Will my right hon. Friend reassure me that he will do all he can to guarantee that the new regime in Egypt honours its obligations under the 1979 treaty?

[Mr Hague]

As I mentioned in my statement, we strongly welcome the statement of the military council in Egypt over the weekend that international obligations and treaties are to be upheld, and the United Kingdom will strongly put the case to any future Government in Egypt that that should be their starting position in foreign policy.

[Richard Burden (Birmingham, Northfield) (Lab)]

Given what the Foreign Secretary has said about the middle east peace process, which I endorse, does he share the view of the Israeli newspaper, Yediot Aharonot, which said today that it is a little worrying that a country that refers to itself as the only democracy in the middle east should apparently feel so uncomfortable at having a democracy next door? As Gaza still suffers under blockade, can the Foreign Secretary tell the House what is happening with the blockade in the light of recent events, what Israel is doing and what is happening at the Rafah crossing?

[Mr Hague]

It is important for us all to have some faith in democracy. Instability on its own is, of course, a danger to the success of the peace process, but democracy itself is not a danger. We must have faith in what we practise in this country and believe in for others, and we should give that advice to Israel as well. We look to Israel to implement fully the commitments it has entered into about access to Gaza. We welcomed those commitments when they were made some months ago, but I do not think that the flow of materials in and out of Gaza has yet met the prospect that was held out at the time. We consistently raise that with the Israeli Government. We have consistently raised our view that the blockade of Gaza is unsustainable and unacceptable. We continually look, therefore, for improvement—building on some very small improvements so far—in access to Gaza.

[Robert Halfon (Harlow) (Con)]

Given the continued belligerence of the Iranian nuclear programme, the strengthening of Hezbollah in Lebanon and of Hamas in Gaza, and the possible Islamisation of Egypt, does my right hon. Friend agree that Israel is now surrounded by Iranian allies or proxies? Does he have an assessment of the security threats to Israel and of the peace treaty?

[Mr Hague]

Of course there are many security threats to Israel, but the way for Israel to chart its way forward away from those threats is to seek urgently the resumption of the direct talks with the Palestinians and to find the two-state solution that would ensure that many of those threats fell away. As I say, it is important to be positive about the change and the prospects in Egypt. It is important for Israelis to be positive and welcoming about that as well, because expressing excessive fears about Islamisation in Egypt—I hope that they become excessive; of course, I cannot know what will happen—may become a partly self-fulfilling prophecy. So we should take a more positive attitude than that, and the way forward is the reinvigorating of the peace process.

[Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)]

Just over a week ago, a group of Egyptians blew up a pipeline taking gas to Israel and Jordan. Were the Israelis right to be concerned about that?

[Mr Hague]

Yes. We do not yet know what exactly happened in that incident, but it rightly caused concern in Israel and Jordan. I know from visiting Jordan last week that the extra energy costs resulting from the incident were several million pounds a day, in an economy that can ill afford it. That underlines the need for a rapid return to a state of affairs in Egypt that allows its economy to recover and provides stable security, which is why we have argued for an orderly transition and now the implementation of what the military council has pledged itself to. So, yes, people were right to be concerned about that, but the answer to that is stability and democracy in Egypt.

[Neil Carmichael (Stroud) (Con)]

In welcoming everything that the Foreign Secretary has said, may I ask him whether he has been in contact with the French Foreign Minister to discuss the situation in Algeria and Morocco?

[Mr Hague]

Yes, we are in discussion with all of our allies. I had an extensive discussion on north Africa and the middle east during my previous meeting with the French Foreign Minister, and we also discussed these matters at the Foreign Affairs Council on 31 January in Brussels. The situation in Algeria is also uncertain; a demonstration took place there at the weekend and its Government have announced certain reforms, including better media access for opposition groups, and economic and social reforms. That is a further illustration of how Governments across the region are noticing that they need to embark on those things to give better hope and prospects to their populations.

[Mark Durkan (Foyle) (SDLP)]

I welcome the strength and balance of the Foreign Secretary’s tone on the middle east peace process. He says that the Government are friends to both Israelis and Palestinians, but does he believe that that statement is believed and understood equally by Israelis and Palestinians? What confidence can he give those who have cause to doubt based on experience?

[Mr Hague]

I hope that it is believed and understood. It is meant sincerely, by not only this Government but the previous Government and hon. Members from right across the House, that we want security and prosperity for all Israelis and Palestinians for the future. We want a secure Israel living alongside a viable, contiguous Palestinian state. Of course, every time one makes a policy announcement or expresses a preference for talks to resume in certain conditions, that can be seen as taking sides in some way, but that should not hold us back from advocating those things. This country believes these things and means them very sincerely, so let us all underline that fact.

[Andrew Bridgen (North West Leicestershire) (Con)]

May I congratulate the Foreign Secretary on his recent visit to Yemen—the first by a British Foreign Secretary since 1996? As my constituency includes East Midlands airport, I am well aware that instability in Yemen can lead to serious security risks in the UK.

[Mr Hague]

I am grateful to my hon. Friend for those comments. As I have said, our diplomats and aid workers do a terrific job in Yemen, so I thought it important to visit that country to see what they do and to talk directly to the President of Yemen. The security concerns that my hon. Friend mentions were right at the top of the agenda and I asked the President further to reinvigorate and strengthen the efforts that the Yemeni authorities are making to take on and defeat al-Qaeda.

[David Cairns (Inverclyde) (Lab)]

Quite understandably, events in Egypt overshadowed the announcement made by the Israeli Government on 4 February, which was welcomed by the Quartet the following day, of significant security easement on the west bank and—a little contrary to what the Foreign Secretary has just said—some easement of the blockade of Gaza. Does he accept that although those actions are not a substitute for final-status negotiations, in which both parties must engage, they are progress? As well as talking tough with Israel, which he seems to be specialising in these days, should he not congratulate Israel when it does the right thing and encourage the progress that we have seen in the past few days?

[Mr Hague]

Of course I agree with that; we put out a statement welcoming those measures. The Quartet’s envoy, Tony Blair, played an important part in bringing about those confidence-building measures and I pay tribute to him for that. We certainly welcome those measures, but, nevertheless, the overall assessment of the situation in Gaza is as I described in answer to the hon. Member for Birmingham, Northfield (Richard Burden). It is important to make more significant compromises than have been offered by the Israelis or Palestinians in recent months in order to have real hope that direct talks can take place and succeed.

[Andrea Leadsom (South Northamptonshire) (Con)]

Does my right hon. Friend have a view on the way that social networking sites have affected the direct action in Egypt and Tunisia? Does he think that that is an unmitigated good or is there a risk that rumours and false information could be spread in that way and worsen the problems in the middle east?

[Mr Speaker]

The Foreign Secretary’s views on philosophy are interesting, but we are also concerned about policy.

[Mr Hague]

Yes, there is no doubt that social networking sites have played an important role, particularly in Tunisia. That was very apparent from the young people I met and talked to there, many of whom, especially the young women, had taken part in the revolution on social networking sites rather than out in the streets. They were very proud of the way that they had co-ordinated their messages in the days before the revolution in order to intensify the action and demonstrations that took place. Those sites have played an important role and it is something that we should be positive about overall. The world is changing in a very significant way: people of all ages have access to communicating in that way and it is important that their freedom to do so is preserved. One way in which the Egyptian authorities have gone wrong in the past couple of weeks has been in trying to suppress access to the internet and misuse mobile telephone networks. People now have the right to use those things in a relatively open way.

[Jeremy Corbyn (Islington North) (Lab)]

Is the Foreign Secretary aware that there is a real need to review the whole policy strategy towards the middle east and north Africa? We have had 30 years of US aid pouring into Egypt with no discernible improvement in human rights and we have EU trade agreements with a number of countries that include a human rights clause that has not been enforced or effected. Is it not time for us to look again at the whole strategy for the region? Mubarak was in effect supported, particularly by the US, and it was the people of Egypt who got rid of him, not international diplomacy or pressure.

[Mr Hague]

Clearly, there are changes taking place in the policies of this country and our allies towards the middle east. Several of the things I have referred to in my statement today are changes in policy towards the middle east. On the specifics of the hon. Gentleman’s question about human rights clauses not being observed, there is a case, which my right hon. Friend the Prime Minister raised at the recent European Council, for strengthening the conditionality of such clauses and for the European Union’s becoming more insistent on the proper observation of those clauses. We will be discussing that further in the EU.

[Keith Vaz (Leicester East) (Lab)]

May I join the hon. Member for North West Leicestershire (Andrew Bridgen) in welcoming the Foreign Secretary’s visit to Yemen—the first by a British Foreign Secretary since reunification? I am sorry that he was not able to get to Aden on this occasion.

On discussions on poverty and security, I note that it is not this Government who have failed to deliver on our pledges but other donors. Will the Foreign Secretary ensure that they are encouraged to pay up as they have promised to do? On security, we need to do better. It has taken us six months to get one scanner to Sanaa airport, but in order to help defeat al-Qaeda, we need to do things much faster.

[Mr Hague]

We are helping with airport security. The right hon. Gentleman is right about that, but it is not always quite as simple as it may look to put these things in place. On the question of international donations, those donations will be available, provided the international community is convinced that the development and poverty reduction plans are sufficiently detailed and credible, and that we can organise some of the aid through the multi-donor trust fund of which I spoke. There will, I think, be a generous response, provided that those plans are credible. That is what we have to establish at the next meeting of the Friends of Yemen, which I hope will take place within the next couple of months.

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

It is immensely important that the Foreign Secretary has raised again and has consistently raised the matter of human rights in Iran and the plight of political prisoners. The internationally renowned film maker, Jafar Panahi, has been released from prison but is now facing a further six-year sentence. He has been banned from travelling abroad, even to pick up film awards. He has also been banned from film making for 20 years by the regime. Could the Government add their voice to the calls for freedom for Jafar Panahi and other political prisoners?

[Mr Hague]

Yes, the hon. Gentleman is right to raise that case—one of too many cases. We could make a long list of such cases. It is another example of the unacceptable and arbitrary nature of what passes for justice in that country, so I echo his call. We will pursue that case in the future.

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

The Foreign Secretary is right when he says that democracy is about more than elections. There are two things that he could do in a concrete way. One he has already done—increase the funding for the Westminster Foundation for Democracy. The second is to increase the funding of the World Service, rather than cutting it.

[Mr Hague]

Of course, it would be nice to have the budget to do everything that everybody demanded. As the hon. Lady knows, we do not have the budget to do that. On the World Service and the Arab world, I stress that satellite television is watched almost ubiquitously through the Arab world and was of course much resented by the Egyptian authorities during recent events. That includes the BBC. BBC Arabic is continuing on medium wave, and the shortwave service is being continued for the most sensitive areas in Sudan and the Arabian peninsula, so the BBC will continue to have a very strong representation in the Arab world.

[Mr David Winnick (Walsall North) (Lab)]

Is it not important that the Egyptians are not cheated of their remarkable victory in the past few days, and that there will be continued pressure for democratic elections to be held and the decisions accepted? May I tell the Foreign Secretary that I have heard successive Foreign Secretaries over many, many years telling us in the Commons about the need for a Palestinian-Israeli settlement, but as long as the settlements on occupied land remain with Israel illegally and continue to be built, is it not clear that there can be no genuine settlement? It is up to the United States above all to put sufficient pressure on Israel to see sense. Possibly the evacuation of the settlements would lead to a settlement.

[Mr Hague]

The settlements are illegal under international law. We are clear about that, and the previous Government were clear about that. There is no question about it. The issue of the settlements can be finally resolved only with a settlement on borders, which in our view, as I said, should be based on 1967 borders, with land swaps. That would have implications for some of those settlements. The United States has made valiant efforts to bring the parties back together on the basis of a continued Israeli moratorium on settlements, but sadly did not succeed in doing so. We all feel strongly about the issue. The hon. Gentleman is right to feel strongly about it. What we now need to find is a practical way to get both parties talking again, and that requires both of them to be ready to make the compromises necessary to do so.

[Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)]

What was the Foreign Secretary’s specific purpose in visiting Bahrain, and did it meet his objectives?

[Mr Hague]

My purpose in visiting Bahrain was to discuss the situation in the region with Bahrain’s leaders, which I did with his Majesty the King, his Royal Highness the Crown Prince, the Foreign Minister and the Prime Minister, so I had extensive discussions—[Interruption.] No, I did not have time for any leisure, despite the aspersions of those on the Opposition Front Bench. I also visited the British maritime component of the military command there, which conducts counter-terrorism and counter-piracy operations, and saw some of the valuable work that our Navy is doing, based in Bahrain. I also met human rights activists there, because the British Government have given a great deal of support to their activity, recognising that many reforms have taken place in Bahrain in recent years, but also that improvements could be made in its human rights record.

[Hywel Williams (Arfon) (PC)]

Egypt is often seen as the cultural powerhouse in the Arab world, not least because of the production of films and books in Alexandria. What steps can the Government take to promote those valuable cultural activities and so indirectly shine a light on other closed societies in the middle east?

[Mr Hague]

That is a valuable point. I hope that we can do more in the cultural area as we work with that country in the coming months. I hope that we can do more in promoting not only civil society and the building blocks of democracy, but educational and cultural co-operation. That is part of our programme for elevating relationships throughout the middle east, so we will attend to that in this case as well.

[Michael Dugher (Barnsley East) (Lab)]

The Foreign Secretary last week visited a number of non-democracies for reasons that we understand and that he has set out before the House, but does he feel that in that context, with the benefit of hindsight, it was helpful, sensitive or even fair to describe the democratic state of Israel as belligerent?

[Mr Hague]

I think it right to warn against belligerent language on all sides in this situation and not to describe any country as belligerent, but to warn against that and call for a reinvigoration of the peace process. I think that that was widely appreciated and perfectly well understood in the region.

[Mr Andy Slaughter (Hammersmith) (Lab)]

May I, like many Members on both sides of the House, welcome what the Foreign Secretary said about the basis for a just peace between Israel and Palestine, especially on borders and refugees, although I am not sure about land swaps? I also welcome what he said about the expropriation of funds from Egypt, but will he go a little further, because the Business Secretary said yesterday that he was not aware that Mubarak had substantial assets in the UK? I will tell the Foreign Secretary who does know that: the Egyptian diaspora in this country, who are horrified about criminals coming over from Egypt, and the UK banks. Will he talk with both groups to ensure that we freeze and seize those assets?

[Mr Hague]

I cannot at this point add to what I explained earlier. We cannot do these things on a whim or a suspicion. The Proceeds of Crime Act 2002 requires us to receive a request from another country in order to take action immediately to freeze assets. If we want to initiate an investigation by the Serious Organised Crime Agency, we must have evidence of criminal activity or be faced with some emergency, such as a direct threat to our national security. We must operate within the law, but we are already acting on the request we have received from the Egyptian authorities today and are discussing what we can do more widely across the European Union as a whole, so I am satisfied that at the moment we are doing everything we can on the issue.

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

The Foreign Secretary is of course right to focus on the potential of the extraordinary change in Egypt to kick-start the middle east peace process, but given the recent comments of the Iranian Foreign Minister and the leader of Hezbollah, what more can Britain do to ensure that Egypt’s future is one of peace towards its neighbours?

[Mr Hague]

I think that we have to do all the things we have discussed over the past hour to support the building of civil society and democracy in Egypt and to fill the moderate, sensible political space so that it is neither fanatical or extremist on the one hand, nor brings more authoritarian government on the other. I think we can fairly conclude that the prime motivation of the people who demonstrated in Egypt was not foreign policy or hostility to other nations, but their seeking of the economic opportunities and political rights that we consider normal in our country. If that is the case, and I think it is, then that is the reason why we should have some faith in the development of openness and democracy in Egypt; and we should do everything we can to support that.

Afghanistan

Monday 14th February 2011 Commons Chamber

17:05

[The Secretary of State for Defence (Dr Liam Fox)]

With permission, Mr Speaker, I will report to the House the Government’s assessment of progress towards UK objectives in Afghanistan.

Before I begin my statement, I regret to have to inform the House that two British soldiers from the Royal Logistics Corps died early this morning at Camp Bastion. An investigation is under way into their deaths, but early indications suggest that they were caused by a fire. Their families have been informed, and I am sure that I speak for the whole House when I say that our thoughts and prayers are with them at this very difficult time.

International forces from 48 nations, including the United Kingdom, are in Afghanistan to prevent terrorists, including al-Qaeda, from again using Afghanistan to plot and launch terror attacks. The contributions of each nation to the international security assistance force are listed in the supplementary written information that I have provided for Members.

Meeting our objectives requires working with Afghanistan’s neighbours, and that includes helping Pakistan to tackle the problems on its side of the border. We are acting to provide the security space required for indigenous security and governance to grow, and we are supporting that growth through diplomatic, developmental and military means. The goal is for the Government of Afghanistan to provide, on a sustainable basis, the capability and governance required to manage their own security.

Although international military forces have been in Afghanistan since 2001 and significant gains have been made, it is only since August last year that we have had the number of troops and the right level of equipment to fulfil the strategy set for them. The challenge lies in having the patience and will to see the mission through.

The Foreign Secretary reported to the House in October. In this quarterly report, I will concentrate on the security progress being made in central Helmand, where the majority of UK forces operate. That is represented by the shaded area on the map of Helmand province that I have provided to Members.

Afghanistan has 401 districts, but 60% of the violence occurs in just nine of them, and eight of those nine are in Helmand and Kandahar. So we need to remember that Helmand is not representative of Afghanistan as a whole, and that there are many places where progressively a sense of normality and security is returning. Before I turn to general progress, in keeping with our undertaking to keep Parliament better informed as far as operational restrictions allow, I should like to update the House on current force levels.

The previous Government announced on 30 November 2009 that they had increased the endorsed UK force level to 9,500. It will not surprise the House to hear that that core number of 9,500 does not fully account for the actual force numbers we have deployed, given the complex and highly dynamic current situation on the ground. As the previous Government acknowledged, a sizeable contingent of our highly effective special forces operates in Afghanistan. In accordance with long-standing practice, we do not specify the scale or nature of their activities, but, if we take them into account with the enabling support that they need, we see that they take our numbers to more than 10,000.

For many years, UK forces have contributed to the protection of Kandahar airfield. In December 2009, it was expected that they would hand over that task to another ISAF partner within a matter of months. That did not happen, and we still have almost 200 extra troops protecting Kandahar airfield. That is constantly under review. Additionally, in September 2010, we announced the deployment of 200 personnel from the Allied Rapid Reaction Corps to ISAF Joint Command for 12 months. They will return by February 2012.

To maintain operational flexibility, we also approve temporary deployments, or surges, of additional personnel to meet specific and time-limited tasks. These include personnel to provide key headquarters functions or to prepare infrastructure for the rigours of the Afghan winter. From time to time, we also deploy the Theatre Reserve Battalion. The number of UK military personnel on the ground in Afghanistan also fluctuates from day to day, reflecting the number of personnel on rest and recuperation breaks, as well the changes that occur as we hand over responsibility between units during the twice-yearly reliefs in place. So the actual number of military personnel currently in Afghanistan is regularly well over 10,000.

We keep our force levels under constant review, and some reductions this year may be possible, dependent on conditions on the ground and implementation of the security transition process. I want every member of our armed forces deployed in Afghanistan to get the credit for the incredible job that they do, and I know that all those in the House will want to join me in paying tribute to their selfless courage and hard work.

The efforts of our armed forces are supported by the work of many hundreds of civilians from the Ministry of Defence and other Departments, including staff in our embassy in Kabul, in our taskforce headquarters and provincial reconstruction team in Lashkar Gah, in district stabilisation teams across Helmand, and in units and facilities outside Afghanistan. Again, I am sure that the House will want to join me in acknowledging the valuable work that they do and their devotion to duty.

In central Helmand, as General Petraeus has said, we have not yet seen success or victory, but we are seeing progress. It is fragile and not irreversible, but it is progress. The increase in Afghan and ISAF forces has enabled us to take the fight to the insurgency and, understandably, this has led to an overall increase in the number of violent incidents. But over the past three months, although the number is still higher than in previous years, we are seeing a trend of falling security incidents. For example, in the Marjah district of Helmand province, security incidents have fallen from a high of around 25 a day at the height of summer to just three or four a day at present. There is a seasonal pattern, as many insurgents, especially those fighting for financial rather than ideological reasons, return to their homes for the winter. This year, however, with the unusually mild weather and with winter arriving late, and the increased activity by ISAF and the Afghan national security forces, the fall in the number of incidents is more likely than in previous years to be an indicator of progress. However, I have to say to the House that casualty numbers are once again likely to rise in spring this year as insurgent activity increases.

This year will be just as difficult as 2010, but there will be distinct differences. The increased number of ANSF and ISAF forces allows us to arrest the momentum of the insurgency in more areas. Afghan forces will also begin to take the lead for security as the first districts and provinces begin the process of transition. There are now over 152,000 Afghan national army and 117,000 Afghan national police. This is on schedule to meet the October 2011 growth target to deliver 305,600 Afghan national security forces. But as the quantity increases, quality must not be neglected. One example is improving literacy to ensure that orders can be communicated in writing as well as orally, so that there is less scope for misinterpretation. Currently, around 85% of ANSF recruits are illiterate on entry. Literacy training is now mandatory for all recruits. The training is to be conducted by Afghan teachers, creating employment and boosting the economy, and significant progress is being made.

Progress has also been made in implementing the Afghan local police initiative. This is a temporary programme of village-owned security aimed at providing a security effect in areas with limited or no ANSF presence. The programme, established by presidential decree, comes under the authority of the Ministry of the Interior. Fourteen sites have been established, and 2,800 ALP have been recruited. Once the necessary security and capacity are established, these local forces will be integrated into the regular ANSF.

In Helmand, our bilateral police mission has focused on training Afghan national police at the Helmand police training centre, from which the 2,000th officer graduated in December. The UK Government have funded the building of six new police stations in Helmand in the last six months, with 10 more in construction and 28 more in design.

Following the Lisbon NATO summit, the transition process is on track. The joint Afghan-NATO transition board is set to deliver recommendations this month on which provinces will enter the transition process. President Karzai has confirmed that he will announce the first phase of transition on 21 March.

The UK Government’s development programmes work with the Government of Afghanistan to build capacity to direct and deliver their own development. Real progress is being made at the local level across Afghanistan. UK-funded teams from the provincial administration in Lashkar Gah have begun to create a district community council in Marjah, which this time last year was an insurgent stronghold. In Musa Qala, the newly elected council is developing a district plan for the Afghan Government to deliver with support from the UK. At national level, action plans have been developed for the Afghan Government’s national priority programmes, and we have seen encouraging progress in some areas. For example, revenue collection has increased by 32% compared with the same period last year, albeit from a low base. That is 9% above the International Monetary Fund target and brings Afghanistan a step closer to self-sufficiency.

The newly elected Afghan Parliament was inaugurated last month, with frictions between the Executive and legislature resolved democratically. However, we remain very concerned about levels of corruption, and in particular about the disturbing allegations about the Kabul Bank. We will continue to press the Afghan Government to translate their anti-corruption commitments into action.

The Afghan Government are taking further steps towards peace and reconciliation for all Afghans. The High Peace Council has toured Afghanistan to publicise the Afghan peace and reintegration programme. It is early days, but in some areas of Afghanistan, particularly in the north, increasing numbers of insurgents are seeking a way out of the cycle of violence. The High Peace Council recently visited Pakistan to take forward dialogue on peace and reconciliation.

Three hundred and fifty-six British servicemen and women have died on operations in Afghanistan— 15 since my right hon. Friend the Foreign Secretary last reported progress to the House at the end of October. In the face of such sacrifice, we should be in no doubt about the importance to our national security of the mission and our support for it. We have seen progress over the past few months but the need for strategic patience remains. To paraphrase the US Defence Secretary, we need to stop pulling up the tree by its roots to see if it is growing. There is still a great deal to do, but I believe there is also cause for cautious optimism.

[Mr Jim Murphy (East Renfrewshire) (Lab)]

I welcome the chance to respond and I thank the Secretary of State for his update and for advance sight of it. This is the first opportunity I have had to put on record my thanks and those of the leader of my party and the shadow Foreign Secretary to all who facilitated our recent visit to Afghanistan.

The Secretary of State is right to say that as we go about our proceedings, more than 10,000 fellow Britons go about the business of making the UK more safe by making Afghanistan more stable. As I have reflected before, the courage of our forces is surpassed only by their modesty. I also put on record our appreciation of the efforts of our diplomatic and development staff in Kabul and throughout Afghanistan, many of whom we met. Theirs is a tough job and they combine professionalism with more than a little bravery. We remain committed to a cross-party approach to a cross-government strategy. The Secretary of State should know that our default position is to support the Government’s efforts in Afghanistan.

The Secretary of State is right to pay tribute to those who died earlier today and those who have died in recent times. No words said in this House can halt the suffering in the family homes of those who have been lost, but those families will know that across the country, there is immeasurable respect for them. They remain in all our thoughts and many of our personal prayers.

The House will be grateful for the right hon. Gentleman’s update on the security situation and it will be glad to hear about the progress being made. I wish to ask him two sets of questions: the first about security and the second about diplomacy. On security, he rightly said that violence is concentrated in the south, but there are also concerning reports that violence is increasing in previously peaceful areas, most notably in the north of the country, where the Islamic Movement of Uzbekistan is said to be operating and strengthening the Taliban’s ability to attack. How is the coalition, and in particular nations other than the UK and the US, responding to those worrying developments?

The ability of Afghan forces to take ever greater responsibility for their own country will be an incremental process towards 2014, with the most significant recent development, alongside the US military surge, being an Afghan surge of locally recruited forces. In that context, I am pleased to hear the Secretary of State’s comments about the Afghan national police being on track to meet its final recruitment targets this year.

We had the opportunity to visit the excellent police training centre in Helmand involving British police forces, which is so important to the literacy and numeracy that the Secretary of State spoke about. He will be as concerned as I am, however, about the assimilation of national police within local communities. A recent UN report showed that in the south, the popularity of the police has dropped over the past year. It strikes me as unsustainable to have a national police force that is only 3% southern Pashtun. How are recruitment practices being modified to ensure that the police force is more reflective of the areas that it is charged with securing? Will the Secretary of State undertake to keep the House informed on a regular basis of the Afghan national security forces’ ability to operate independently of ISAF?

Turning to the political process, it is increasingly acknowledged that there will not be a military-only solution in Afghanistan. Although there have been, and will continue to be, military successes, we also need a diplomatic surge to match the military surge. As we moved to the agreed withdrawal date of 2015, a political settlement is not a prerequisite for our withdrawal, but it is undoubtedly a condition for lasting peace.

Many people make comparisons with the peace process in Northern Ireland, including some of the Afghans whom we met in Kabul. Although I believe the similarities are limited, one thing that Northern Ireland teaches us is that the process can be painstaking, even though there were fewer domestic and international actors there and a clearer sense of central authority—conditions that we do not currently have in our favour in Afghanistan. Will the Secretary of State share with the House how he foresees diplomatic efforts within Afghanistan and with her neighbours progressing over the forthcoming year? What are the benchmarks by which the House will be able to judge short-term success?

There are many other major issues that it will be important for Afghanistan to overcome to enjoy lasting peace. There are innumerable financial challenges, with rising unemployment and high levels of poverty fuelling recruitment to the poppy trade and the Taliban. There are rising numbers of internally displaced people, and corruption remains a real problem. I therefore ask the Secretary of State to confirm to the House that he will raise those matters at the Bonn conference, particularly a plan for further support for the Afghan economy. Will he provide an update on negotiations between the Afghan Government and the International Monetary Fund on the Afghan support fund?

On returning from Afghanistan, it struck me that over the past year or so, there had been a shift from a collective feeling of reluctant international pessimism to a sense of cautious optimism. Nothing in the Secretary of State’s statement today led me to change my opinion. On behalf of Labour Members, I continue to look to work with him on a bipartisan basis on this most important of issues.

[Dr Fox]

I am extremely grateful not only for the content of the right hon. Gentleman’s response, but for its tone, and I am very glad that the Government were able to facilitate a successful visit to Afghanistan. It is fair to say that we are lucky in this country, because unlike some countries involved in the international coalition, we have a generally unified political position, from which we can give support to operations and to the morale of our armed forces. I am very grateful to the Opposition for that.

On security, the right hon. Gentleman is right that there are small pockets in the north and east where we continue to see trouble—and in some cases exacerbated trouble—but Afghanistan is still most violent in the south, which is where we face the greatest violence from the insurgency. I had the opportunity on my last visit to go to regional command north to discuss the situation with General Fritz. I went there from Helmand, so being able to go out and walk freely in the streets, visit a university and do a small press conference was quite a contrast. We need to be clear that the difference across Afghanistan is huge. We tend to look at Helmand as the typical experience and extrapolate from it, but we need to try to remember that there is a wider Afghanistan too.

It is clear that the Afghan local police will supplement the ANSF. It is also clear that the Government in Afghanistan recognise the need for a bottom-up as well as a top-down approach to policing, and the need to supplement the ANSF where required. If I may say so, the right hon. Gentleman perhaps got his figures mixed up, because the southern Pashtuns are better represented in the Afghan national police than in the Afghan national army, but everybody is aware of that problem.

On the political settlement, all of us, and especially those who have visited Afghanistan recently, have recognised that we are moving into a settlement that is based on the political space and not just on the military space. It has always been the case that both will be required. It is also worth pointing out that we cannot expect a clean-cut settlement, to which the right hon. Gentleman alluded. The settlement will be Afghan-based, Afghan-focused and Afghan-dependent, and it is unlikely to be anything other than messy to those who look at it from the outside. However, we have always said that we need to look both to those who are reconcilable to the Afghan constitution and the concept of democratic government, and to those who are irreconcilable and who need to be dealt with by military means.

Finally, the right hon. Gentleman made an important point on the concept of a regional settlement. Too often, the discussion on Afghanistan is in terms that it is some sort of vacuum, but we must consider its northern neighbours, the relationship with Pakistan, the complex interaction between Pakistan and India, and increasingly, the relationship between Pakistan and China. We need to understand all that in the context of the settlement, and the long-term implications of the settlement in the region. I discussed some of those issues with General Kayani and President Karzai only a week and a half ago. There is an increasing awareness among Afghanistan’s neighbours that the countries surrounding them need to play a constructive role in Afghanistan if any of the gains for which so many sacrifices have been made are to be sustainable.

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

I thank my right hon. Friend for his statement, and particularly for his last few words on involving the international players around Afghanistan in a final settlement. Can he say more about who will lead the political settlement around which we hope stability will be maintained as British and American troops withdraw later in this decade? May I point out that cautious optimism represents painfully slow progress 10 years after this war started, and that a lasting settlement is possible only if there is a political settlement that involves talking to our enemies?

[Dr Fox]

It is very clear that it is unlikely that a single political initiative will bring all the players into a final settlement, so there are a number of ongoing initiatives. The Prime Minister’s role has been very important in having a dialogue with the Government of Pakistan and the Government of Afghanistan on a trilateral basis, and a similar initiative is being undertaken by the US. We must all understand that the key player is Pakistan, which is so important to a successful outcome.

If I may make a plea to the House, a lot of criticism is levied at Pakistan when things are not going right, but it would do us all good to be much more welcoming of the positive measures that are being taken there. Pakistan is in a very difficult situation, but it is still able to assist us. It does us no good constantly to criticise a key ally, or to fail to praise it, when it is making important contributions.

[David Miliband (South Shields) (Lab)]

I thank the Defence Secretary for the open way in which he conducts these quarterly reports. I hope that we can have a longer debate on Afghanistan, because there is a danger that it will become the forgotten war—as we can see from the relatively few Members in their places.

With permission, Mr Deputy Speaker, I have two questions. First, on security, the Defence Secretary did not mention the annual and respected UN security assessments. They were reported in The Wall Street Journal in December and showed that security deteriorated across the country in 2010. I wonder whether he will commit to publish those assessments, or a summary of them, because the maps were very clear.

Secondly, I wish to follow up the important comments by the hon. Member for Harwich and North Essex (Mr Jenkin). The regional engagement is central, and I was pleased to hear the Defence Secretary reflect on that. However, a year and a bit on from the London conference we are no closer to the council for regional stability or anything like it, which could put on to a structured basis the regional engagement that he and I know is so important for any political settlement in Afghanistan to have sustainability and confidence.

[Dr Fox]

The right hon. Gentleman makes several important points. There are few things that would give me more pleasure than trying to persuade my right hon. Friend the Leader of the House to have a debate on Afghanistan. It is very important that Members get more time than is available when simply responding to a quarterly statement. I think many hon. Members would wish to take time to explore in more detail some of the more nuanced issues than is possible in the response to a statement.

If I am not able to get the full assessments published and placed in the Library, I will certainly ensure that summaries are available. On the issue of deteriorating security, we need to be careful about how we measure that. If we are getting a larger Afghan national security force and ISAF taking on the insurgency in more places and challenging them for ground in more places, we are likely to get a rise in the level of violence, but that level is not a good measure of the security situation. It is better to find a way to measure the safety of the population and ensure that we have a balanced view of what security means.

I take on board the right hon. Gentleman’s point that we need to make more progress in regional co-operation and involving the regional leaders, but I may be able to provide one moment of optimism. At the Munich security conference just two weeks ago, more than at any time previously I felt a growing awareness of the need to see Afghanistan in its regional context, given the complexities surrounding it. That is something that my right hon. Friend the Foreign Secretary and I want to push forward as quickly as we can. I entirely agree with the right hon. Gentleman that the regional aspect is key to the long-term sustainability and viability of the Afghan state.

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

The whole House will have been saddened by the death of the two young soldiers in Camp Bastion this morning. The return of their bodies to the UK will mean a total of three repatriation ceremonies in a fortnight through RAF Lyneham and Wootton Bassett. Is the Secretary of State yet ready to tell us or make a statement about what will happen to repatriation ceremonies as we move towards the closure of RAF Lyneham? I know that the statement is imminent: when will it be ready?

[Dr Fox]

I am not able to give those details today, although my hon. Friend is correct to say that we will do so shortly. I am sure that the House would agree that it is not so much where we honour our war dead, but how we do so. Wherever those ceremonies take place, it is essential that those who have made sacrifices are treated with all due respect and honour.

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

May I, too, pay tribute to the soldiers serving in Afghanistan? I recently had the privilege of meeting some of them when we were there with the Defence Committee, especially those of the Royal Irish Regiment based at Nad Ali, who are doing an excellent job in driving back the Taliban. Perhaps not enough is said in public about the success that our armed forces are enjoying. That, sadly, is not matched by the political progress that is being made and I echo the comments of the Opposition spokesman. More could be done on the political side of things, especially with the Afghan Parliament. We in Northern Ireland, who have some experience of negotiating political arrangements and taking care of the rights of minorities, would be happy to sit down with our Afghan counterparts and share our experience with them.

[Dr Fox]

I am grateful for that offer. I have often thought about how, through our development aid, we are willing to give advice on economics and bureaucracy but still seem to expect people who have never had experience of political life suddenly to be able to be politicians. I would have thought—if I may say so—that one thing we have plenty of in this country is ex-politicians. We should be trying to find a way of using our experience at all levels of government to assist with the skills level necessary for politics in Afghanistan to succeed. Why do we assume that people require professional assistance in every other walk of life, but that somehow people can learn instantly to become democratic politicians? There is room for improvement in that area.

[Dr Andrew Murrison (South West Wiltshire) (Con)]

What confidence does my right hon. Friend have in the principal overland supply route from Karachi, particularly given the recent unwelcome attention of the Pakistani Taliban and on occasions—sadly—the attitude of Islamabad? Furthermore, what alternatives is ISAF planning to the north and the west on the extremely colourful map with which he has provided us?

[Dr Fox]

Sadly, being colour-blind, I cannot share in the enthusiasm on that last point. However, I say to my hon. Friend that we always have to consider the wider security picture to ensure that we can maintain our supply routes. As he correctly said, there have been problems recently with the southern supply route, and certainly the Americans are increasing their dependence on the northern route. Along with our ISAF partners, we will consider what changes we might have to make in the balance between those supply routes to ensure that we never compromise the essential links on which our armed forces in Afghanistan depend.

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

May I, as others have done, compliment the Secretary of State on the considered tone of his statement? However, little was said in it about the prospect of a political settlement involving all the parties, including the regional ones. Although it might be impossible for him to include a section on that, given the dire security implications, will he bear it in mind that his view is shared throughout the House and the country? We are not seeking a military victory—one is not possible—in this set of circumstances. Furthermore, a political settlement will be protracted and difficult, so the sooner we get on with it the better, and the more he will be able to tell us about it.

[Dr Fox]

The hon. Gentleman is correct that increasingly attention will be focused on the political element of a settlement in Afghanistan. Those who have visited it recently will have been struck by the fact that on the ground, at a tactical level, we are certainly making gains. The security picture on the ground is improving, in some cases beyond recognition. However, the problem remains at the political level. It remains this: how do we persuade those in Afghanistan that there is a better future for them under a democratic constitutional Government? This year we have a major opportunity. One of the Taliban’s great propaganda weapons has been to say that the international community will be leaving in July 2011. However, when it becomes clear not only that we are not leaving, but that we are building up the Afghan national security forces, we might deny it one of its best cards. We should be preparing, therefore, for a political push in the second half of the year on reconciliation and reintegration. That is when we will find that we have a better following wind than in recent times. We will pay a high price if we miss that window.

Alec Shelbrooke (Elmet and Rothwell) (Con): Drawing on my right hon. Friend's comments about Pakistan, I ask him to update the House on his assessment of what would happen to the stability of Pakistan were we to withdraw our troops in the very near future.

[Dr Fox]

There would be a real risk of instability in the whole region. Again, I go back to the issue of Pakistan. When one talks to the political or military leaders in Pakistan, one finds an increasing understanding that they cannot simply deal with the Pakistan Taliban and not deal with the Afghan Taliban, because ultimately there is a threat to the stability of the Pakistani state itself. The concept that we must fight a common threat together is one that is increasingly understood in Islamabad. Although we will have criticisms of what might not be done in Pakistan, we should also welcome political and military activities there that are helping in what is increasingly regarded as a common fight.

[Mrs Madeleine Moon (Bridgend) (Lab)]

The Select Committee on Defence was able to see first hand how the training of the Afghan national security forces is improving and how the investment is paying dividends. However, Afghanistan has a very small air force—an excellent air force, but a small one—and will never be able to provide its own strategic air cover. What role does the Secretary of State see Britain’s RAF playing in providing that air cover, in the way that it did over Iraq for the Kurds? Does he see that as part of our ongoing commitment, and is he happy that we will have the capacity, in pilots and planes, to carry that through?

[Dr Fox]

Strategic air cover for Afghanistan is some way down the line, but it will be required when there is a stable state able to maintain its own security. That, of course, is some way in the future, but given that Afghanistan’s capacity will be small, as the hon. Lady said—at the moment it is well behind where it needs to be—how arrangements for that process are put in place will be a matter for the whole of the international community, not just the United Kingdom.

[Mr Adam Holloway (Gravesham) (Con)]

There are many Afghans outside the ruling clique who believe not only that the exit strategy will not work in the long term, but that it is fatally flawed and in fact cannot work. General Petraeus’s strategy has been described as “Fight, then talk”. Does the Secretary of State think that we ought to be fighting and talking, and that this should include talking to all modes of the insurgency?

[Dr Fox]

History teaches us that in any insurgency or conflict, we inevitably move from a military phase, taking on the violence of insurgency, into a phase where there is both military contact and diplomatic activity, and hopefully from there into a phase of diplomatic resolution on the political stage. I think that we are at a point where, as I said earlier, we will increasingly be looking not simply at the military position or the security situation on the ground, but at the political level. What has come across in the House this afternoon appears to be an increasing view on both sides that the political arena will be increasingly important. That is in no way to diminish the importance of the security environment within which those political talks will take place, but without the success of the political element the security gains will not provide a stable and secure Afghanistan.

[Mr David Crausby (Bolton North East) (Lab)]

Following today’s announced cuts in RAF training, which will deny us the use of pilots who are virtually qualified, what guarantees can the Secretary of State give on the impact on heavy lift supplies to Afghanistan, which the Afghans will never deliver themselves, and the delivery of helicopter support to both our troops and theirs on the ground? Surely he realises that the Government must not impose an increasing burden on a diminishing number of our pilots.

[Dr Fox]

There were in fact no cuts announced today, other than in some of the newspapers, which were catching up on some of the announcements in the SDSR. No changes that were made in the SDSR will have any impact on operations in Afghanistan.

[Penny Mordaunt (Portsmouth North) (Con)]

I also recently visited Afghanistan and can testify to the excellent job that our armed forces are doing in carrying out their duties. I do not believe that the same can be said of President Karzai or Members of the Afghan Parliament, and this is not just a capacity or knowledge issue: there is also too little focus on human rights and the quality of life of the Afghan people. Does the Secretary of State agree that we must address the political deficit, to ensure that in the long term the blood and treasure that this country is spending for the benefit of both our countries will not be in vain?

[Dr Fox]

I agree with my hon. Friend, but I think that the signs are perhaps more optimistic than she suggests. Certainly, those who have had regular meetings with President Karzai will recognise that, since the Lisbon summit, he has become less worried about the time lines of 2011 and the summer deadlines that he previously believed to be extremely important. He is now more focused on the 2014 transition. That has had a beneficial effect on the ability of the Afghan politicians to look at the wider range of issues, and we will continue to stress the need for that in our ongoing engagements with President Karzai and other members of the Afghan Government.

[Mr Denis MacShane (Rotherham) (Lab)]

Will the Secretary of State confirm that the small country of Georgia has actually lost more soldiers in Afghanistan than NATO nations such as Belgium, the Czech Republic, Hungary, Latvia and even Turkey? Will he also confirm that Georgia has more soldiers serving there than NATO countries such as Belgium, the Czech Republic, Greece, the Netherlands, Portugal, Slovakia and Slovenia? Will he pay tribute to Georgia for that? Georgia cannot join NATO because we now have to be nice to Moscow, but I know that the Secretary of State likes his travelling, so will he find time to pay a short visit to that country to say thank you for the sacrifice it is making?

[Dr Fox]

I can reassure the right hon. Gentleman, because I was in fact able to make our thanks known directly to the President of Georgia when I met him last week at the Munich security conference. The great benefit of such conferences is that they diminish all our travel while enabling us none the less to engage in the necessary diplomacy. The right hon. Gentleman makes the important point that some of the small nations that have been involved in Afghanistan have set a wonderful example to some of the larger ones—those that I might characterise as the sleeping giants. Some of those small countries, including Georgia, Estonia and Denmark, have made a disproportionate contribution. They should be extremely proud of what they have done, and all democratic politicians in the House should be willing to thank them whenever we can.

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

In the past, my right hon. Friend has mentioned the fact that 11,000 of our troops have been in Afghanistan, which is a very high number. Would he be willing to confirm that that is the case? Will he also join me in paying tribute to 3 Commando Brigade, which is soon to go to Afghanistan, and in wishing it Godspeed and hoping it comes back safe and sound?

[Dr Fox]

It is always the wish of Members on both sides of the House that our troops should come back with the minimum of loss, given the wonderful job that they do on our behalf. As I have said today, the number of our forces in Afghanistan is regularly above 10,000. It has, on occasions, reached the 11,000 mark, but that is not the case at present. That is inevitable, however, given the complexities of the reliefs in place, the rest and recuperation changes and the temporary surges that I described earlier. I hope that I gave the House a proper description of what is happening on the ground. I think that it is better to make it transparent when we deploy increased numbers, so that the House and the country can thank every one of our service personnel for the level of sacrifice that they are making.

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

The Secretary of State has made it clear today that troops “may” begin to be withdrawn this year, depending on the conditions. However, the Prime Minister has previously stated that troops will begin to be withdrawn this year. Did the Prime Minister inadvertently mis-speak, or has the position changed?

[Dr Fox]

The Prime Minister has made it very clear that, although we would like to see British troops coming home as soon as possible—which family of any member of our armed forces would not want to see that?—that will happen when conditions on the ground are appropriate. As I said today—I repeat the Government’s position—it may be possible to see some troops coming home this year, but that will be dependent on the conditions on the ground.

[Dan Byles (North Warwickshire) (Con)]

It is sometimes easy, when talking about regional geopolitics, to forget the individual soldiers sweating on the front line. Is my right hon. Friend now satisfied that the troops have the equipment that they need to do the job?

[Dr Fox]

I am not sure that I am the best person to arbitrate on that question. From discussing the issue with our troops on the ground and their commanders, I know they will say, particularly since the American surge, which has made a difference to the whole dynamic in Afghanistan, that there has been a change in the overall level of equipment. I think that since our engagement in Afghanistan started, there has been an ongoing improvement and refining of personal equipment—the individual equipment—for our armed forces. I think that that will continue to change as circumstances change. One thing that is very clear is that the Government remain absolutely committed to ensuring that our troops on the ground have what they need to do the job.

[Paul Flynn (Newport West) (Lab)]

Still optimism after 10 years! That is a longer period than the first world war and the second world war combined—a period throughout which our British soldiers have been dying in Afghanistan. There are 356 dead—twice the number killed in Iraq and three times the number killed in the charge of the Light Brigade, an event of similar futility. The Secretary of State’s optimism is based yet again on his being in denial of the reality. Would he like to tell us about the army and the police in Afghanistan—not the numbers joining, which he has told us about again and again, but the numbers of those dismissed or who have deserted since his last statement?

[Dr Fox]

If the hon. Gentleman wants always to focus on the problems we face, there is a long list from which to choose. To say that we are in denial of the overall position, however, is simply not to be in full command of the facts. Anyone who has visited Afghanistan will be well aware that there is a big improvement in the security position on the ground.

[Paul Flynn]

How many?

[Dr Fox]

If the hon. Gentleman has the manners to let me answer his question, I will do so.

There is undoubtedly still a problem with the capability of the Afghan national security forces—it is not just a matter of the numbers in the Afghan army and the Afghan police, but they are improving. The ability to train them in specialist tasks is also improving. If there is a weakness in the case, it is the fact that not all the partner nations are contributing to the extent that they could in the NATO training mission in Afghanistan, which would provide some of the wider ranges of skills. The improvement in literacy is driving up the standards. Given the cynicism that the hon. Gentleman brings to these debates, let me point out that General Karimi cited one young soldier who said:

“The Taliban want to keep me in the dark. My army will teach me to read and write so I can come into the light and make my own decisions.”

Who are we to want to turn that light off?

[Mr Peter Bone (Wellingborough) (Con)]

I thank the Secretary of State for making his statement and also, on behalf of the House, for giving us the back-up information and for announcing in advance on the Order Paper that this statement was to be made. I would like to echo his tribute to our special forces, who are not often mentioned but who do a terrific and excellent job. How does my right hon. Friend propose to wake up the sleeping giants so that they contribute more to the operations?

[Dr Fox]

With difficulty, but persistence. The former Foreign Secretary, the right hon. Member for South Shields (David Miliband), is no longer in his place, but I am thinking of the discussions we had when we were in opposition. This has been an ongoing problem. It is simply a matter of continuing to press the idea that if we all want the collective benefits of a stable Afghanistan, we all have to contribute to making it happen. I know that the Foreign Secretary, the Prime Minister and I never waste an opportunity to remind all our partners in Afghanistan that everyone must play a maximal role if we are to achieve the success we want—particularly, in view of the deficit we still face, in the NATO training mission. We are short—290 short at the moment—of police trainers. If anyone is listening to our exchanges in any of the countries mentioned, they might want to take note.

Budget Responsibility and National Audit Bill [Lords]

Monday 14th February 2011 Commons Chamber

Second Reading

17:54

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

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

Fiscal responsibility is the overriding priority of this Government. In May, within 24 hours of taking office, we published a coalition agreement setting out our agenda for government. Fiscal responsibility was the very first item on the very first page of that agreement. It read:

“deficit reduction and continuing to ensure economic recovery is the most urgent issue facing Britain.”

Let me remind the House why we chose that as our priority. We inherited the largest budget deficit in our peacetime history, we inherited a budget deficit forecast to be the largest in the G20, and we inherited the largest structural deficit in the whole of Europe. We simply could not ignore the mountain of debt that was casting a shadow over our economy and our people, so we set ourselves an ambitious task—to bring order back to the nation’s finances. The Bill aims to do exactly that.

[Mr Mark Field (Cities of London and Westminster) (Con)]

Will the Minister add one more criterion to her list—that a moral case needs to be made for ensuring that we do not pass on to future generations the debts that have been racked up for the consumption of the generations alive today?

[Justine Greening]

I agree absolutely. Far too often we fail to make the point that the penalty for not dealing with the deficit today will be to hand on even bigger debts to our children tomorrow. They will not thank us, and should not thank us, if we fail to address the urgent crisis that we have come into government to tackle.

Before I get into the detail, I would like to set out again the Government’s broader fiscal objectives. This coalition Government believe that fiscal policy should ensure that the national finances are sustainable. As I have just said, sustainable public finances mean that future generations will not need to pay for the services enjoyed by all of us today. Sustainable public finances mean that the economy can expand and grow without the fear of tax hikes and spending cuts in the future. Sustainable public finances also mean that monetary policy can operate effectively and stabilise the economy, when needed. With that in mind, we have taken decisive action since taking office.

In May, we had immediate reductions to in-year spending, which bought us much-needed breathing space in the sovereign debt storm raging across Europe. The emergency Budget in June was the moment when fiscal credibility was restored. At the Budget, my right hon. Friend the Chancellor set out the Government’s fiscal mandate. Our first goal within the mandate is to balance the structural current deficit by the end of a rolling five-year forecast period.

[Mr William Cash (Stone) (Con)]

My hon. Friend may remember that before the election, a number of us took grave exception to the fact that the then Government were not telling the truth about the full extent of the debt. Will she give us an assurance that this Government will tell the truth to the British people, in line with the National Audit Office and Sir Michael Scholar, so that they know what the Budget deficit really is?

[Justine Greening]

My hon. Friend makes an excellent point. The way to provide that guarantee and certainty is to pass the Bill before us today, which sets up the Office for Budget Responsibility—but does so, critically, as an independent organisation that will make its own forecasts. In so doing, it will contribute to being independent of Governments and provide credible official forecasts for the first time in our country. That will give us the certainty we need. I will come on to explain later how we ended up needing official forecasts to be done independently, referring to the problems that had arose prior to this Parliament.

[Mr Edward Leigh (Gainsborough) (Con)]

The Government have a serious political difficulty, to which the Justice Secretary referred over the weekend, giving rise to a considerable amount of publicity. All over the country, local authorities are loading cuts on to front-line services, yet we read today that scores of local authority executives earn more than the Prime Minister. What is the Minister’s message to local authorities? Will she insist that they deliver real efficiency savings to avoid these cuts in front-line services, which are so politically damaging?

[Justine Greening]

rose—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. I would be grateful if the Minister answered that question in relation to the Bill before the House.

[Justine Greening]

No doubt my hon. Friend will be encouraged to learn of our belief that our efforts to cut back-office costs and protect front-line services in Whitehall should be replicated in town halls.

Key to understanding progress against the Government’s fiscal mandate are strong, credible, independently conducted official forecasts. Our first goal is to balance the structural current deficit by the end of a rolling five-year forecast period; our second is to see the public sector debt ratio fall at a fixed date in 2015-16. The measures that we set out in the Budget, along with the departmental allocations that we set out in the spending review, constitute a four-year plan to meet that fiscal mandate. We are currently on track to meet the mandate one year early, in 2014-15.

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

I understand the Government’s objective to reduce public debt over a fixed period, but what flexibility does the Minister feel needs to be built into the system to take account of unexpected economic circumstances and shocks?

[Justine Greening]

I have just defined that flexibility. Although we want to balance the structural current deficit by the end of the rolling five-year forecast period, we are, as I have said, on track to meet the mandate one year early. We are clearly ensuring that we will achieve our overall objectives. By the end of the current Parliament we will have completely eliminated the structural current deficit, and the debt ratio will be falling. That is our four-year plan for restoring order and stability to our nation’s finances, which has been praised by the international community and welcomed by the financial markets.

[Sajid Javid (Bromsgrove) (Con)]

The Minister refers to praise from the international community. If she was referring to the International Monetary Fund, I welcome that praise. She will also be aware that the IMF’s independent evaluation office reported last week that it had felt intimidated and bullied by the Treasury in which the current shadow Chancellor, the right hon. Member for Morley and Outwood (Ed Balls), and the Leader of the Opposition played a key role between 2004 and 2006, and that it had been forced to water down its criticism of United Kingdom fiscal policy. Will she reassure the House that, as the IMF has praised this Government’s plans for the OBR, it seems that we did not intimidate it as the last Government did?

[Justine Greening]

I hope that we will have an altogether more constructive relationship with the IMF. In fact, it has already commented on the background to the need for this Bill. In November last year, it stated that the recent crisis led the UK to suspend its two national fiscal rules—the golden rule and the sustainable investment rule—at the end of 2008, and that the credibility of the national rules as effective constraints of policy action was weakened well before the crisis. It went on to say that the rules failed to prevent a worsening of the fiscal balance in the years leading up to the crisis, leaving insufficient buffers as the economy entered the downturn, and that while in place the golden rule was often criticised becauseit provided insufficient monitoring, transparency and accountability of fiscal policy. That was the IMF’s assessment of the previous fiscal mandate, and I think that it demonstrates clearly why it was so ineffective in tackling the problems that our country experienced. In many respects, it provided the ground on which those problems were able to prosper and grow.

[Claire Perry (Devizes) (Con)]

Does the Minister agree that the problem when the Treasury sets rules of that kind is that such rules can be broken, manipulated and “gamed” for entirely political reasons? Following the establishment of the OBR, for the first time we will have a Treasury that focuses on real control of the public finances and value for money for the taxpayer, rather than a policy-making, press release-driven organisation.

[Justine Greening]

My hon. Friend makes an excellent point. We cannot allow the Treasury to be judge and jury. That was the problem under the last Government. The Institute for Fiscal Studies said recently:

“If an OBR had been in existence over recent years it might have discouraged Gordon Brown from persevering with fiscal forecasts that most independent analysts thought over-optimistic from 2002 onwards.”

We believe that the OBR can have a real impact on the Government’s financial and fiscal management.

We are clear about the fact that we need to put our country’s public finances back on a sustainable footing. Both the IMF and the OECD went from issuing warnings and cautions about the UK’s economy and public finances to describing the measures introduced by the coalition Government as “essential” and “courageous”. Only a couple of weeks ago the Secretary-General of the OECD urged the British Government to stay the course, and we will. Our bold action has taken Britain out of the financial danger zone, but we must not forget that none of this would have been possible without the crucial first step of increasing the credibility of our fiscal framework. The Bill will put on a statutory footing our reforms of the way in which fiscal policy is conducted in this country.

Let me remind the House of the origins of the Office for Budget Responsibility. Within a week of taking office, we had set up a new independent body to return credibility to official forecasts. Until then, the final decision on official Government forecasts had always been made by the Chancellor and his advisers—one of whom is now shadow Chancellor—rather than by independent experts. Over the past 10 years, the last Government’s forecasts for growth in the economy have been out by an average of £13 billion, and their forecasts of the budget deficit three years ahead have been out by an average of £40 billion. Unsurprisingly, those forecasting errors have almost always been in the wrong direction.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

The transparency that the Bill brings to finances is part of an overall package of transparency. My hon. Friend mentioned budgets that have overrun. Does she agree that the Bill will help to prevent Departments from losing control of their budgets in the way that was described recently by a senior civil servant?

[Justine Greening]

My hon. Friend is right. The fact that, for the first time, official forecasts will be prepared by a body that is independent of the Treasury is critical. It will not only return credibility to the assessment of whether the Government are on course to meet their fiscal mandate, but will make that more likely to happen. I believe that Governments will be reticent about introducing policies that seem to take them off course. There is a clear distinction between the responsibilities involved. The fiscal mandate and the policies will continue to be determined by Ministers. It is not for the OBR to do that; what it must do is assess the economic and fiscal forecasts in the light of those policies, and in the light of their likelihood of meeting the fiscal mandate.

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

Does the Minister agree that growth is key to economic recovery, and that the recent negative growth figures have destabilised the Government’s economic policy? Is it not worrying that the OBR has already revised its growth forecast from 2.6% when the Government took power to 2.3% following the emergency Budget, and to 2.1% following the spending review?

[Justine Greening]

I think that demonstrates the value of the OBR. For the first time we shall have a set of entirely independent forecasts to which Members can refer.

The hon. Lady has strayed on to the detail and implications of the policy, and I think that it is perfectly fair for her to do so. We have always said—I believe that Mervyn King, the Governor of the Bank of England, said the same last year—that the recovery would be choppy. It is not at all unusual for an economy emerging from recession, particularly a recession as long and severe as the one that we have undergone, to experience at least one instance of either flat or negative growth.

I do not want to be called to order, Mr Deputy Speaker, so I shall move on. Let me simply say to the hon. Lady that she has confirmed my point that benefiting from independent forecasts for the first time will be key to holding a good-quality, informed political debate about the Government’s economic policy and how it is progressing, and that the OBR has also said that we are on course to achieve our fiscal mandate.

[Mr Peter Bone (Wellingborough) (Con)]

Will the Minister clarify something for me? If the OBR says that growth will be x in the next year, must the Chancellor abide by that? Obviously, measures in his Budget may encourage growth: he may cut taxes, for instance.

[Justine Greening]

The OBR makes an independent fiscal forecast and assessment of the economy. The Treasury may or may not agree with that forecast and assessment, but the point is that it is done entirely independently of the Government. Rightly, however, it will remain the prerogative of Ministers to decide policy. That is the clear distinction we have set out throughout the Bill.

We needed to make sure that we have official forecasts for the economy that the public can trust, even if that means we end up giving away some of our powers as Treasury Ministers. As my right hon. Friend the Chancellor has said, we need to fix the Budget to fit the figures, not fix the figures to fit the Budget. That is why the OBR was established, and the Institute for Fiscal Studies has said it is a “welcome” innovation.

To enable the OBR to get to work immediately, it initially operated on a non-statutory basis. It was headed by Sir Alan Budd, a highly respected fiscal and macro-economic expert in our country. The interim OBR produced an independent assessment of the economy and public finances both ahead of, and at, the Budget in June. We gave it direct control over that forecast, with full access to all the data, assumptions and economic models. It made all the key judgments and decisions underpinning the economic and fiscal forecasts. Great strides were also made in transparency. More information was published than ever before. That fact was noted by both the Treasury Committee and the IFS.

[Andrea Leadsom (South Northamptonshire) (Con)]

As a member of the Treasury Committee, may I say that it was incredibly valuable to be able to challenge the OBR members who were present and Government Ministers? From our point of view as representatives of Back Benchers, the process was very useful.

[Justine Greening]

I welcome that helpful intervention. My hon. Friend will no doubt be aware that the Treasury Committee inquiry into the OBR described Sir Alan Budd as an “exemplary” witness. In putting together this Bill, we took on board the Committee’s points, and I am sure my hon. Friend will be happy about the unprecedented role the Committee will play in appointments to the OBR.

The final task of the interim office was to provide advice on how the permanent, statutory OBR should be established. I am happy to report to the House that the Bill is designed in line with the detailed recommendations made by Sir Alan Budd in his letter to my right hon. Friend the Chancellor. We have now moved to permanent arrangements. This Bill enshrines in statute provisions to ensure the OBR’s independence. Robert Chote has been appointed as the OBR’s first permanent chair. His appointment was confirmed by the Treasury Committee. He is supported by Graham Parker and Steven Nickell, whose appointments were also confirmed by the Committee.

The permanent Budget responsibility committee led on the production of the OBR’s economic and fiscal outlook, published in November. In addition, the resources made available to the OBR have been increased. There has been a transfer of technical forecasting capacity from the Treasury to the OBR, and a transparent, multi-year funding settlement has been agreed for the spending review period. The OBR has also moved to a new external location outside the Treasury building.

Let me now turn to the detail of the Bill. We debate this Bill after the constructive scrutiny the other place has given it. The other place welcomed the Bill. Part 1 includes provisions on the new framework for fiscal policy. Clause 1 sets out the need for the Treasury to produce a charter for Budget responsibility setting out the formulation and implementation of fiscal policy. In particular, the charter will set out the Government’s fiscal objectives and the fiscal mandate, and a draft of the charter is available to Members alongside the Bill.

Clause 2 requires the Treasury to produce a Budget document on an annual basis. The detail of exactly what needs to be covered within the annual Budget document is set out in the charter. The Bill also repeals the legislative aspects of previous Governments’ fiscal frameworks, including the Fiscal Responsibility Act 2010, a pointless piece of declaratory legislation that would have made no improvement in fiscal planning, instead merely setting up another set of targets that Ministers would assure us they were going to meet right up until they missed them.

Clause 3 provides for the existence of a statutory body called the Office for Budget Responsibility. Clause 4 sets out the main duty of the OBR, which is to examine and report on the sustainability of the public finances. This is a broad remit, which means that the OBR will not be limited to forecasting alone. At a minimum, the remit of the OBR means it must produce the following: assessments of the likelihood that the Government will meet their fiscal mandate alongside each forecast; a sustainability report at least once a year; a report on the accuracy of its forecasts at least once a year; and full economic and fiscal forecasts at least twice each year. Beyond these tasks, the OBR will be able to undertake any research and analysis pursuant to its remit.

Clause 5 describes how the OBR is to fulfil its duties. Crucially, it includes a set of principles—objectivity, impartiality and transparency—to guide the OBR in fulfilling its remit. It also requires that the OBR must not analyse or develop non-Government policies. Analysis is rightly the domain of the OBR, but, as I have said, policy making is the responsibility of publicly elected Ministers. These principles protect independence. Clauses 5 and 9 also put in place explicit provisions for the OBR to have complete discretion over the way it carries out its statutory duties, giving it full access to the information it requires to do so. The remaining clauses in part 1, as well as schedule 1, set out further detail of the operation and governance of the OBR.

We have sought to reflect the theme of independence in the constitution and governance of the OBR. In line with the recommendation of the International Monetary Fund, the OBR is established with its own legal personality and will operate at arm’s length from Ministers as an executive non-departmental public body. The OBR’s executive functions will be undertaken by a three-person Budget responsibility committee. The members of this committee will be appointed by the Chancellor. To support independence, the Bill makes provision for the Treasury Committee to veto all appointments and dismissals. That statutory veto bestows on the Committee more power than it has over any other public appointment. The Chancellor has said that he is giving the Committee this veto to ensure that there is no doubt that the individuals leading the OBR are independent and have the support and approval of the Committee.

A chairman will lead the BRC and run the OBR. All staff will report to the chair, and that person will control the “hiring and firing” of the staff. The staff will be civil servants, ensuring that the OBR can recruit from the widest possible pool of expertise. There will also be at least two non-executive members, to provide support and challenge to the OBR. The non-execs will report on how the OBR performs its duty. They will also commission expert peer review of the OBR’s forecast and analysis.

The OBR will report directly to Parliament, with its forecasts and reports laid directly in the House, as was the case with the autumn forecast in November 2010. Written questions from Members will be passed to the OBR to respond to, and the members of the BRC will be available for Select Committee scrutiny.

The provisions in part 1 represent a permanent improvement to economic policy making and the transparency of government. Britain is now one of the first advanced economies to have an independent fiscal agency that produces official fiscal and economic forecasts. It is therefore no surprise that these reforms have attracted praise from the IMF, and they put us at the cutting edge of international best practice. I hope that the world will look with interest at our policy innovations.

Part 2 modernises the governance of the National Audit Office. The goal of the NAO is to maintain effective independent oversight of spending. The Bill’s provisions will strengthen the NAO at this critical time of scarce public resources. Members will be aware that very similar provisions were included in the previous Government’s Constitutional Reform and Governance Bill, which passed through this House with cross-party support. However, there was no time for the other place to consider those provisions at the end of the last Parliament, and this Bill represents the earliest opportunity to bring them back before Parliament. The provisions are aimed at implementing the recommendations made by the Public Accounts Commission following its review of NAO corporate governance.

As a result of this Bill, the office of the Comptroller and Auditor General will continue to exist; the CAG will be an independent officer of this House and will be limited to a single 10-year term. The NAO will be established as a new corporate body in its own right. I do not propose to go into great detail on those provisions, given that when they were discussed during the passage of the Constitutional Reform and Governance Bill the then Chairs of both the Public Accounts Commission and the Public Accounts Committee supported them. I also understand that the new Chair of the Public Accounts Committee has indicated that she is content.

In summary, the provisions in this Bill will bring confidence and responsibility back to our country’s fiscal framework, with stronger institutions and improved governance. They are as crucial for the long term as they are for the short term, and I commend the Bill to the House.

18:20

[Ms Angela Eagle (Wallasey) (Lab)]

The Bill makes changes to the responsibilities exercised by the Treasury in fiscal policy making, establishes the interim Office for Budget Responsibility on a permanent statutory footing and modernises the governance arrangements of the National Audit Office. I wish to make it clear at the outset that we support the sensible changes to the governance of the NAO which, as the Minister pointed out, are proposed in parts 2 and 3 of the Bill. We do so not least because they were our reforms. As she was good enough to observe, we set them out in the Constitutional Reform and Governance Bill towards the end of the previous Parliament. As someone who has served three times as a member of the Public Accounts Committee—once in opposition, once in government and once as a Treasury Minister—I am glad to see the reforms getting on to the statute book, despite the extra obstacle presented by the intervention of a general election. I also wish to thank the Minister and the Government for the open mind that they showed to Labour amendments during the passage of the Bill in the Lords. I hope that she will show a similar approach to the amendments that we will table in Committee.

The creation of the OBR seeks to apply to one narrow part of the UK’s fiscal institutions some of the autonomy that Labour brought to monetary policy when we made the Bank of England independent—of course, we took steps to make the Office for National Statistics independent too. As the House of Commons Library has pointed out, there are examples of similar bodies in other countries. Austria, Belgium, Canada, Denmark, Hungary, Holland, Slovenia, Sweden and the USA all have some arrangements for independence in forecasting and analysis of the national fiscal situation.

The reform was initially sold by the Chancellor, with much fanfare, as one that would take the politics out of economic forecasting. In doing that, he gave the entirely false implication that previous Ministers had somehow been instructing hapless officials in the Treasury to produce incorrect but politically convenient forecasts. The reality is that the previous Government published a range for gross domestic product growth, and in all the years before the crash on only two occasions did growth fall below the range that the Treasury published. In the other years, the figure fell either within the range or above it, thus showing that we were exercising caution. We were not fiddling the figures. That level of accuracy is about all that any of us can expect from economic forecasting, which is a notoriously unreliable art rather than an objective science. Let me share a quote with the House:

“Economic forecasting, by its very nature, is subject to uncertainty. Our judgement is that, at this stage of the economic cycle, the outlook is even more uncertain than usual.”

That was the OBR’s comment on its forecasts in June 2010.

However, I have found evidence of one occasion when a Chancellor overruled the Government’s forecasters, and the House may be interested to hear about it. In 1996, the then Chancellor, who is now the Secretary of State for Justice, was reported to have increased the growth forecast from 2.5% to 3% in order to make way for pre-election tax cuts. The chief forecaster he overruled was, by some odd coincidence, Sir Alan Budd, the curiously short-lived first head of the interim OBR.

[Matthew Hancock (West Suffolk) (Con)]

I am sure that the hon. Lady was not about to move on from talking about forecasts having spoken only about growth forecasts, not about the previous Government’s dreadful record on fiscal and deficit forecasts.

[Ms Eagle]

The important thing to note about forecasts, particularly those on the tax take, is that it is difficult to be accurate with them. When I served on the Treasury Committee prior to becoming a Treasury Minister, there was comment on how accurately the Treasury was able to forecast the tax take. Clearly, it is more art than science, so the House would be mistaken to believe that because something has been forecast, it is automatically an objective certainty. Those of us who deal with these issues, on both sides of the House, know that forecasting the economy can be as uncertain as forecasting the weather—Michael Fish found out how uncertain that can be one night. Forecasts are what they are; they can sometimes be wrong and sometimes they can be accurate. I honestly think that, in general—I am not making a party political point—the Treasury has a reasonably good record on forecasting.

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

I entirely agree with the hon. Lady on the difficulty of forecasting, as even the best economic forecasters get it wrong, but I wonder whether she was as shocked as I was to read in the Financial Times about the bullying of the International Monetary Fund by the Treasury and the Financial Services Authority. Was that not a pretty disgraceful way to behave?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. We are in danger of going off into past subjects. The hon. Lady may be tempted to answer, but we have to deal with the Bill before us and not with speculation in a newspaper about bullying. I think that we will stick to the Bill.

[Ms Eagle]

Thank you, Mr Deputy Speaker.

Let me be the first to say that the Opposition support an independent OBR, so long as it is indeed independent. In that respect, the OBR has some ground to make up and some points to prove after its very difficult start in life. Initially it was located a few doors down from the Chancellor in the Treasury and consisted entirely of Treasury civil servants. Its much vaunted “independence” was utterly compromised in June last year when it was unwisely bounced into the politically convenient early publication of employment forecasts, suspiciously just ahead of Prime Minister’s Question Time—the Minister did not refer to that incident. The forecasts themselves turned out to be controversial and the OBR ended up looking more like an offshoot of the propaganda machine inside Conservative central office than an independent and trusted forecasting organisation. Sir Alan Budd, the interim head of the OBR, announced his shock departure shortly afterwards. We may well have to wait until he writes his memoirs to find out exactly what really happened.

[Several hon. Members]

rose—

[Ms Eagle]

I will give way in due course.

The OBR must work hard to establish a reputation for independence after that extremely shaky start, and I look forward to its new head, Robert Chote, demonstrating major improvements in that respect.

[Andrea Leadsom]

The hon. Lady may be aware from reading the Treasury Committee’s report on the original independence of the interim OBR that colleagues on her own side quizzed Sir Alan Budd and others very closely on that point. The Committee’s report makes it very clear that there was nothing to answer, that the OBR had indeed acted independently and that it had not been in hock to the Government.

[Ms Eagle]

Nevertheless, independence has to be perceived to be there too. No matter what individuals behind the scenes know, part of consistency and the whole point of such independence is that it is accepted across the political spectrum and in the country as a whole. If that is not the case, the organisation does not have the credibility that the reform creating it sought to establish. That is why I look to Robert Chote, who has moved out lock, stock and barrel from the Treasury, to begin to establish that reputation.

[Justine Greening]

It is only right that I should put on record the comments of Sir Alan Budd, in his report on the progress of the interim OBR, on the issues that the hon. Lady has raised—budget forecasts and interference. On the fact that some Treasury officials perform both roles of giving advice to the Chancellor and helping the OBR to produce the forecasts, he clearly said in paragraph 31:

“We do not believe that this involved any conflict of interest.”

In relation to how the OBR should operate and the issuing of forecasts, he said in paragraph 44:

“We are also able to state, without reservation, that there was no ministerial involvement in the forecasts at any stage.”

The hon. Lady uses Alan Budd as an example of someone who was somehow manipulated, but does she accept that his comments do not bear that out? Perhaps she would like to withdraw her comments.

[Ms Eagle]

This concerns those who allowed the bringing forward of estimates of job losses caused by the Government’s decisions on fiscal consolidation, which happened to be published just ahead of a Prime Minister’s Question Time at which that was to be a point at issue. Clearly, the relevant people should have realised the effect that that coincidence would have on the OBR’s reputation for independence when it had only just been set up.

On the Minister’s point about whether the OBR should use Treasury forecasters, Lars Calmfors, the chair of the Swedish fiscal policy council, has contrasted the arrangements in the Bill with those in Sweden. He said that it is very difficult when the OBR is working very closely with Treasury civil servants and other forecasters:

“one cannot have it both ways—the OBR cannot be both an independent watchdog and an in-house provider of input into the Treasury’s work.”

We shall certainly want to explore in greater depth in Committee that aspect of the arrangements for our OBR, which differs from the Swedish arrangements.

In addition to concerns about independence, we want to raise in Committee issues of the OBR’s accountability to Parliament. We wish to explore how independent the OBR will really be, given that close co-operation with the Treasury will be needed to access the information to generate the forecast in the first place. There is also the issue of its budget—I accept the comments that the Minister made about the transparent five-year budgeting process, but there are examples of similar bodies in other countries having had their budget cut as a result of displeasing the Government with whom they were working. The governance arrangements will need further scrutiny, as will issues of accountability, not just in relation to the Treasury Committee veto on appointments, but regarding the OBR’s accountability to Parliament.

Although the Bill is about who makes forecasts, the reality is that independent forecasting is no substitute for sound Budget judgements. The Government will not be judged on the accuracy of their forecasts, but they will be held to account for the consequences of the choices they have made in the circumstances they were confronted with and the forecast that the OBR had given them. Our dispute is with the Government’s plans and choices, not with the independence of their forecasting machinery.

When we left office, unemployment was falling, growth was forecast to be 2.3% this year, inflation was lower than it is now and was falling and, according to the OBR, borrowing had come in at £20 billion lower than had been forecast in 2009. When the previous Government delivered their last Budget in March 2010, UK growth was faster than in Germany, Italy and the eurozone as a whole, but the current Chancellor has chosen to prioritise rapid deficit reduction over any other policy goal and he has slammed the brakes on growth. Without an electoral mandate, the Government have chosen to launch a risky experiment with our economy and our prosperity.

[Justine Greening]

I completely disagree with much of what the hon. Lady says, not least given that her Government left unemployment 400,000 higher. She mentions electoral mandate, but surely she does not think that the previous Prime Minister had one, because he was never voted in as Prime Minister.

[Ms Eagle]

We do not have a presidential system: we have a prime ministerial system and the leader of the governing party tends to be asked by Her Majesty the Queen to form the Government. That is what has always happened, and if the Minister wishes to change that, perhaps we need to take an even wider look at our constitutional arrangements than that planned by the Deputy Prime Minister.

[Mr Mark Field]

Although the hon. Lady makes a fair point about explicit mandates, it is surely also the case that there was absolutely no explicit mandate for any of the actions taken by the erstwhile Government after 2008, given the situation that we found ourselves in.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. We are getting tempted once again. If Members stick to the Bill, that will be helpful.

[Ms Eagle]

There is a difference between having an economic policy that is put into place directly after a general election, when manifestos said one thing and the Government did another, and responding to a crisis that very few people saw coming and that threatened the entire infrastructure of the global banking system. There are obviously differences between those situations, but I respect the hon. Gentleman’s expertise in financial matters, particularly regarding the City.

The Government have chosen to cut public expenditure faster and deeper than any other country in the industrialised world except Iceland and Ireland. They have chosen to announce the deepest cuts in public spending in the UK since the second world war. Nine months into the life of this Government there is still no sign of any plan for jobs and growth, but sensible people know that without a plan for jobs and growth it will not be possible to get the deficit down as the OBR predicts it should come down. Meanwhile, the cuts are beginning to bite and the OBR has forecast that more than 330,000 public sector jobs will be lost. Some 10,000 police jobs have been announced as going so far, and there are reports that 250 Sure Start centres will close. Unemployment, which had begun to fall, is now rising again and inflation, which was low and falling when we left office, is now rising. All that is before the effects of the Government’s ill-advised decision to increase VAT. Growth has stalled.

[Mr Deputy Speaker]

Order. Hon. Members have been tempting us away from the Bill, but I am sure that the hon. Lady wants to stick to it. We do not want to be tempted through further interventions, so if she will keep to the Bill, that will be helpful.

[Ms Eagle]

The important issue is how the independent forecasts interact with what happens in the economy and how that can change and be affected by the Government’s economic decisions.

[Matthew Hancock]

I enjoy debating with the hon. Lady, so I am extremely grateful to her for giving way. She has just prayed in aid the OBR, saying that it had forecast that the deficit would fall, but she has also said that under the Government’s plan the deficit will not fall. The OBR’s forecast is based on the Government’s plan, so does she agree with herself or not?

[Ms Eagle]

This is how we can get into difficulty with forecasts, which are static when they are made but apply to a dynamic situation. The hon. Gentleman knows, for example, that our debates in the House are, in part, about the effects on growth of a drastic fiscal consolidation. Our contention has always been that cutting too far too fast will suppress growth to such an extent that the deficit reductions that were hoped for will not come about. That is an essential part of the economic debate that, as far as I can see, we have been having since the Budget in June last year.

Forecasts can be affected by subsequent events and by Government policies. That demonstrates that what matters most is not forecasting for its own sake, but the judgment of the Chancellor of the Exchequer and the Government, and the extreme fiscal choices that they have made.

[Alison McGovern (Wirral South) (Lab)]

Does my hon. Friend agree that we have another independent forecaster, the Bank of England, which was made independent in 1997? What lessons from the interaction between the Treasury and that independent forecaster ought to be applied to the relationship between the Treasury and the OBR?

[Ms Eagle]

In order to fulfil its duties, the Bank of England produces its own forecasts, which do not always agree with what were previously Treasury forecasts and will now be OBR forecasts. There are also a number of independent forecasters out there with their own view of the situation. Forecasts range from optimistic to pessimistic, and those of us who watch these things learn to take account of that. Regarding OBR forecasts or forecasts of the Bank of England as statements of the unvarnished truth will quickly get us into difficulty.

[Andrea Leadsom]

I am grateful to the hon. Lady for giving way again. On a point of clarification, the issue of multiple forecasts came up in the Treasury Committee review, and it was made clear that the OBR takes the Bank of England’s monetary forecasts on interest rates and uses them as its own for its fiscal forecast, so there is no duplication or overlap. One is forecasting the state of interest rates and the other is stating the fiscal forecast.

[Ms Eagle]

Yes, but the Bank of England will also forecast for its own use growth and other aspects which it needs to assess in formulating monetary policy.

OBR forecasts predict that by the end of this Parliament, 110,000 more people will be on the dole under the Government’s plans, compared with our previous plans. Under Labour, the economy was forecast to grow by 2.6%, compared with only 2.1% under the current Government’s plans. The consumer prices index would have been at 1.6%, rather than 2.8%. So the OBR has decided that there would have been higher growth, more jobs and lower inflation under Labour.

[Justine Greening]

May I ask the hon. Lady a straightforward question? The Office for Budget Responsibility assesses that we have a greater than 50% likelihood of hitting our fiscal mandate, which is to eliminate the structural deficit by 2014-15 and achieve our broader fiscal mandate on debt ratio. Does she welcome that or not?

[Ms Eagle]

It is important to see what the forecasts are and what they mean at this stage of economic recovery. Of course I want to see the economy recover and grow, unemployment coming down and inflation being controlled. Unfortunately, that is not what the signs that we have been picking up since the Government’s decision to cut so deep and so fast tell us about the real economy. We will see as time goes on how the OBR adjusts its forecasts to take account of the monthly and quarterly statistics from the Office for National Statistics.

The shock GDP figures before Christmas strongly imply that the Chancellor will suffer the embarrassment of his growth forecasts being downgraded by the OBR in his self-proclaimed Budget for growth, which is due to be unveiled next month. We will wait and see.

We on the Labour Benches support a genuinely independent OBR but, as I said, we will explore in Committee the practical extent of that independence and suggest amendments to the Bill to shore it up a little more. We will need to explore the viability of the arrangements to produce, rather than comment on, the fiscal forecasts, as many other fiscal councils do. We will need to explore the extent of the OBR’s remit and whether the close co-operation with civil servants required to produce the forecast will lead to behind-the-scenes negotiations that will compromise at least the perception of independence.

Let us be under no illusion that the existence of the OBR, which we support in principle, can in any way protect us from the misjudgments of the present Chancellor or any other. The OBR must assume, as the Minister said, that the Government’s plans are a given. It cannot comment on the fiscal mandate or on wider fiscal policy in general. It is prevented from doing so. All it can do is calculate the probability of the Government being able to achieve their stated plans. The OBR therefore cannot protect the country from the mistakes that the Chancellor makes, or from the mistakes that he has made already. It is no panacea and it should not be regarded as one. Our dispute—

[Sajid Javid]

Will the hon. Lady give way?

[Ms Eagle]

No, because I am about to finish. Our dispute is with the Government’s plans, not with the OBR’s forecasting. We look forward to closer examination of the Bill in Committee. We will subject it to detailed scrutiny.

18:39

[Mr Mark Field (Cities of London and Westminster) (Con)]

Thank you, Mr Deputy Speaker, for calling me so early in the debate. As you know, I have to attend a constituency engagement for which, unbelievably, I am not well enough attired, for it is a black-tie dinner in the City of London. [Hon. Members: “Ah!”] I am supposed to be protected from that lot, Mr Deputy Speaker, so do your level best, please. I apologise that I shall not be here for all the winding-up speeches.

Listening in the House to Budgets and autumn statements over much of the past decade has been, at times, a somewhat surreal experience. Year after year the erstwhile Chancellor, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), rattled out cascading figures for growth and public deficit reduction. As the hon. Member for Wallasey (Ms Eagle) rightly pointed out, the growth figures proved, at least until the middle of the previous decade, to be uncannily accurate, even often defying so-called expert opinion. However, the deficit numbers were always hopelessly, devastatingly inaccurate.

Almost comically, although this can scarcely be regarded as a laughing matter, every single Budget between 2001 and 2007 forecast that the public finances would move back into surplus in about three or four years. As time wore on, the debt and annual deficit rose inexorably as the Treasury employed smoke and mirrors to conjure the illusion of fiscal stability.

[Matthew Hancock]

The hon. Member for Wallasey (Ms Eagle) cast aspersions on the ability of my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), now the Justice Secretary, to forecast, saying that in 1996 he forecast more than 2.5% growth. Information has reached me that in 1997 growth was more than 3%, so it turns out that he was right. What does my hon. Friend make of that?

[Mr Field]

My hon. Friend makes an extremely good point. In the one case in which the hon. Member for Wallasey (Ms Eagle) tried to argue that there had somehow been untoward behaviour by the last Conservative Government, events have proven, if anything, that they surpassed what had been expected.

[Ms Angela Eagle]

Will the hon. Gentleman give way?

[Mr Field]

I fear that we are going to go over old ground, but let us do it.

[Ms Eagle]

Having conceded that point, the hon. Gentleman now seems to be saying that the best solution is to have the Chancellor make the forecasts personally, which does not seem to be the point of the Bill.

[Mr Field]

As I recall it, the point was conceded by Opposition Members, not by those on this side.

The relevance of all this to our current economic woes should not be underestimated. With global investors buying into the fiscal assurances made by the erstwhile Government, the rosy forecasts played their part in making it easy for Britain to borrow money during the past decade, and borrow we did, even in the good times. We all now know the disastrous consequences that came to pass.

This salutary experience provided the genesis of the idea for an office for budget responsibility. I must confess that when the Chancellor first mooted the idea in late 2008, when shadow Chancellor, I was sceptical and thought that it sounded like the ideal proposition to be made in opposition and then quietly forgotten. I believe that it is to his great credit that the notion saw the light of day so soon after my party reached government.

My other fear was that it might be an overly inflexible straitjacket to constrain freedom of manoeuvre. Again, the Chancellor has addressed this point up front, as has the Economic Secretary. The Chancellor desires and even relishes such a restriction on himself—and, I suspect, on his successors. Although it might not prove to be quite as revolutionary as the Treasury would have us believe, I accept that it is still an important step towards transparency and accountability in forecasting budgetary numbers.

My only reservations are relatively small and relate to issues of practice, rather than of principle. I fear that the real strains and potential limitations of any office for budget responsibility will unfortunately come at the point in the economic cycle when we most need prescient and instinctive judgment. At such times of crisis or near crisis in any economic phase, we require a robust willingness to stand up against the conventional wisdom of the day.

In the run-up to the 2008 financial crisis, for example, no forecasting organisation saw the crash coming. No one in this House, not even the Secretary of State for Business, Innovation and Skills, despite all that is now said on his behalf, really foresaw precisely what would happen. That includes all the independent bodies, such as the Institute for Fiscal Studies. Let us wonder how the OBR, had it been established, might have acted only three or four years ago. Had it not shared the outlook of other forecasters, would it have had the mettle or the strength in 2007 to tell the previous Government that they were living far beyond their means? How would it have been viewed if it alone had advised the Government at that stage to hold back on their spending plans or, indeed, increase the tax burden? I believe that the true test of its effectiveness will come only when it is required to deliver such unpalatable news in future.

Similarly, what if the OBR had concurred with the forecasts of other organisations at the time but a more responsible Chancellor had been in place who instinctively viewed the economically clement weather as only a mirage? Might the perceived infallibility of an OBR forecast have restricted his or her ability to take measures that went against the common wisdom? To that extent, I have some sympathy with what has been said by those on both Front Benches, because we do not know how forecasts will pan out. Even as recently as the emergency Budget on 20 June 2010, many predictions for growth; and certainly for unemployment were made at the time that even I thought were slightly too optimistic. The OBR’s notion was that unemployment would reach a peak during the current tax year. We hope that that will be the case, but that will not be down just to Government policy, by any stretch of the imagination. I think that the way the economic cycle has worked out globally means that unemployment is likely to be somewhat higher during 2011-12 and perhaps even higher still the following year.

I believe that there are some unavoidable conflicts in the OBR’s operation. Organisational independence is absolutely vital to its working and credibility, as the Economic Secretary noted in her contribution. However, it must necessarily rely on a close relationship with the Treasury in order to understand its methods and have access to its data. Members have already mentioned the blurring of those boundaries between the Treasury and its new independent conscience that led to the first hiccup last summer—the argument that spilled over from the release of the OBR’s unemployment forecast, which happened to bolster the Prime Minister’s argument when he was under fire later that day at Prime Minister’s questions.

One must accept that there will almost inevitably be an ongoing tension and an inherent potential for a conflict of interest, but I hope that that has been eased now that the OBR has been able to move out of its Treasury offices and acquire an important physical independence. Without the trust that stems from such autonomy, the OBR is absolutely nothing. Nevertheless, there is also a danger that it will be seen as perhaps too credible and as a panacea in its own right.

[Sajid Javid]

My hon. Friend will note that in her closing remarks the hon. Member for Wallasey (Ms Eagle) told the House not to see the OBR as a panacea. Did he notice the irony of that statement, because it was the previous Government who passed the Fiscal Responsibility Act 2010 and presented that as a panacea to the nation, pretending that it is possible to legislate and bring down the deficit without taking any tough decisions?

[Mr Field]

I do not want to go too far into the past, but my hon. Friend is absolutely right. We now recognise the hubristic foolishness of the notion of ending boom and bust and that the economic cycle had somehow been put to one side. We have all now learned that lesson, and this generation of Members will be much more sceptical about any such panacea that is proposed in future.

As I have said, no organisation, not even those without links to the Government, forecast the scale of the economic crisis. Ultimately, economic forecasts are just that, and if we place blind faith in the independent projections, potential risks might also be ignored. Therefore, part of the OBR’s continuing role must be constantly to remind us all of its own fallibility and advise on a range of possible outcomes, pointing out not only to politicians, but to financial markets, the longer-term threats to our economy in the event that the markets, in particular, prove too forgiving.

Putting aside those concerns, which are relatively minor in comparison with the entirety of what we are trying to achieve, there is a great deal to welcome, particularly with regard to transparency and accountability. Furthermore, if the OBR works as it should, it is likely that any unofficial tinkering by the Treasury will be flagged up early and properly scrutinised by Parliament, returning some long-lost gravitas to the Treasury Committee and to Parliament itself.

As I have said in this House before, the restoration of confidence to our economy was always going to depend largely on rebuilding trust. The establishment of the OBR marks an important milestone in encouraging us to place our faith once again in the financial and political systems of our nation. We must of course be alert to the potential pitfalls in its operation, but it also represents an important check against a hitherto unchecked Treasury, and as such the OBR must now be treated as a credible new fixture in this fresh financial landscape.

18:58

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

It is a pleasure to speak in this debate. In giving the Bill’s proposals qualified support, Opposition Members view the creation of the OBR as part of the direction of reform started by the previous Government, with the creation of the Monetary Policy Committee of the Bank of England to decide on monetary policy and the establishment of the Office for National Statistics. The International Monetary Fund has said that the OBR’s proposed mandate is

“broadly consistent with established best practice for independent fiscal councils.”

Placing the Office for Budget Responsibility on a statutory basis is an important stage both in its development and in securing its greater independence from the Treasury, but Opposition Members will continue to scrutinise the Bill’s provisions closely to ensure that the OBR is as genuinely independent from the Government as it can be, and sufficiently accountable to the House.

It would be unacceptable if the OBR’s independence were compromised by insufficient access to its own resources, or if it were subject to excessive intervention by the Treasury. The OBR is due to receive £1.75 million per year in funding until the end of the current spending review period, but higher than expected CPI inflation might see that financial support fall in real terms. The Institute for Fiscal Studies recommends, on page 56 of its green budget, that

“the OBR should be as transparent as possible about what meetings have been held, and when and how all key assumptions made in its forecasts were decided upon”.

Internationally, it has been established that fiscal councils can undertake four main roles in connection with economic policy: first, provide objective macro-economic forecasts on which Government budget proposals can be based, as carried out by the Centraal Planbureau—CPB—in the Netherlands and by the Economic Council in Denmark; secondly, cost various Government policy initiatives, as performed by the Congressional Budget Office in the United States, the CPB in the Netherlands and the Parliamentary Budget Office in Canada; thirdly, evaluate whether fiscal policy is likely to meet its medium-term targets, as the Fiscal Council does in Hungary; and fourthly, analyse the long-term sustainability of fiscal policy, with examples being the CPB in the Netherlands, the CBO in the US, the Government Debt Committee in Austria, the Fiscal Council in Hungary and the Fiscal Policy Council in Sweden.

Of those functions, the OBR appears to cover only the first and third. Fiscal councils are less likely to engage in normative analysis of economic policy; only the Austrian Government Debt Committee, the Danish Economic Council and the Swedish Fiscal Policy Council appear to carry out that role.

The OBR’s role includes responsibility for preparing the Government’s economic and fiscal forecasts and issuing them alongside fiscal forecasts with the Budget. That is clearly helpful to the Government, but it means that Ministers are able to prepare in detail for any consequences of a Budget before the OBR makes its assessments public. Without safeguards, that could lead to concerns about the extent of private consultations between Ministers and the OBR prior to publication—the perceived problem during the release of unemployment data last summer.

As Lars Calmfors, chair of the Swedish Fiscal Policy Council, wrote in The Guardian on 28 July last year:

“It might be better if the OBR provided a post-evaluation of the budget as an input into the work of parliament (in addition to a forecast before the budget).”

The IFS also concludes in its green budget that there is a case for the OBR

“to take as much advantage as possible of the required end-of-year fiscal report to conduct and communicate detailed analysis of how and why outcomes deviated from the forecast.”

As my hon. Friend the Member for Wallasey (Ms Eagle) said, there are also questions about the use of different forecasts by the Treasury, the OBR and the Bank of England. The Bank already produces macro-economic forecasts. As the IFS again concludes:

“Those produced by the OBR will be used when deciding fiscal policy, while those produced by the Bank of England will be used by the MPC”—

the Monetary Policy Committee—

“when deciding on monetary policy.”

That might lead to a situation in which fiscal and monetary policy is not sufficiently well co-ordinated.

On fiscal forecasts, progress has been made to underline the OBR’s independence in reaching its conclusions, but it needs to make as much data as possible, as well as the details of its financial models, available to the public. In evidence to the Treasury Committee recently, Professor Tim Besley recommended that the OBR should be able to communicate with key international bodies such as the International Monetary Fund, the EU and the OECD.

The OBR’s mandate will not in itself generate higher growth, and that brings us to the proposed charter of fiscal responsibility to be created through clause 1. The aim of the charter as stated is to create

“objectives in relation to fiscal policy and policy for the management of the National Debt,”

and to establish the Government’s “fiscal mandate”. Opposition Members have no problems with that concept; indeed this House legislated for similar goals in the Fiscal Responsibility Act 2010, but the real difficulty is with the Government’s proposed fiscal mandate of attempting to eliminate the deficit over a four-year period—and the effects that that is already having, as the country can see, on growth.

The OBR has already revised down its growth forecast for 2011, from 2.6% when the Government took office last May to 2.3% after the emergency Budget in June; and it did so once more, to 2.1%, after the comprehensive spending review in November. We will see on 23 March whether those figures have to be downgraded again in the light of growing evidence that the Government’s decisions on the economy have seen it take a turn for the worse this winter.

When Labour left office, the recovery was picking up, with growth of 1.1% in the second quarter of 2010, and, according the OBR’s own analysis, the deficit for 2009-10 came in more than £20 billion lower than forecast. The Office for National Statistics was clear that, even once the effects of December’s inclement weather were taken into account, there would have been no growth at all in the last quarter of 2010.

The Government should adopt a fiscal mandate in the Bill to put jobs and growth first in order to ensure that cutting the deficit does not harm the productive capacity of the economy, and they should end their complacent argument that the economy is “out of the danger zone”. With the country facing 20% youth unemployment, rising prices and stagnant growth, that is not a claim that either the Prime Minister or the Chancellor can credibly make.

[Sajid Javid]

The hon. Gentleman will know that Government debt stands at £1 trillion. According to a recent ONS report, if we add on the bank debt that the country inherited from the previous Government’s policies, we find that the figure is about £2.3 trillion—equal to 160% of GDP. Does he consider that to be a good legacy with which to engender growth?

[Mr Bain]

I am grateful for that intervention, because it gives me the opportunity to compare and contrast the public sector net debt of 1996-97, which was 42.5%, with that of 2007-08, before the financial crisis—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I am trying to allow some freedom, but we are in danger of straying off Second Reading and on to a general debate about the economy. Can we please come back to the debate in hand?

[Mr Bain]

I am very grateful for that guidance, Mr Deputy Speaker.

To conclude my response to the hon. Gentleman, public sector net debt in 2007-08 was 36.5%, so it was lower than that which we inherited when we came to office.

The analysis of the IFS, in chapter 2 of its green budget, produces the conclusion:

“The financial crisis and associated recession have reduced revenues and, to a greater extent, increased public spending as a share of national income. Without action, there would have been an unsustainable increase in borrowing and debt. The government’s spending cuts and tax rises are forecast to be sufficient to return the UK’s public finances to a sustainable position, but the same would have been true under the fiscal consolidation plan set out by Labour in its March 2010 Budget.”

I doubt that even Government Members would label the IFS a deficit denier, so a fiscal mandate that pays insufficient attention to the impact of higher growth and employment in bringing the public finances back to stability will fail the needs of the country.

We look forward to scrutinising the Bill in Committee, to improving the operation of the OBR and perhaps, during the Bill’s proceedings, to securing the change in fiscal mandate that would improve the economic prospects of the British people.

19:09

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

In this debate on the Bill and the Office for Budget Responsibility, I would like to focus on the word “responsibility”. Interestingly, Members in other parts of the House have focused on the downgrading of the growth forecast from 2.6%, to 2.3%, to 2.1% and possibly lower, but at no point has it been said that this allows the Chancellor to ensure that we have a Budget that is based on facts rather than on what he would like the growth figures to be. That is the problem of previous years that led to a bunker scenario.

[David Rutley (Macclesfield) (Con)]

I wonder whether my hon. Friend has noticed that the Institute for Fiscal Studies has said:

“If an OBR had been in existence over recent years it might have discouraged Gordon Brown from persevering with fiscal forecasts that most independent analysts thought over-optimistic from 2002 onwards”.

[Alec Shelbrooke]

I am most grateful for my hon. Friend’s intervention, which makes my point. If the OBR had been there in the past, it would not have been possible to proceed with the bunker mentality that I mentioned. Alternatively, the Chancellor could still have moved forward with the same forecast, but everybody would have known exactly where the blame lay and got rid of the arguments that we hear time and again whenever we talk about the horrific financial mess that this country is in—the chorus from Labour Members saying, “It’s the banks, it’s the banks.”

[Mr Bain]

It is!

[Alec Shelbrooke]

My point is proved by that sedentary intervention. Labour Members think that the whole financial crisis is down to the banks.

There is no doubt that the banks contributed to the global recession, but there is equally no doubt that this country was one of the worst placed countries in being able to deal with the downturn. Let us not forget what a structural deficit is. Again, I see Opposition Members shaking their heads, completely in denial of the fact that this country was living way beyond its means. One does not rack up a £1 trillion debt in the good times if one is acting sensibly. While £120 million a day in interest is going to foreign nations, we see councils around the country, especially Labour-run councils, cutting front-line services that impact on the public and trying to blame the Government, yet never mentioning what we could have done with that £120 million a day. We have to get a grip on the economy.

I want to return to the OBR, because I am conscious, Mr Deputy Speaker, that you have been trying to keep the debate on track. Let us consider the name of this body —the Office for Budget Responsibility. “Responsibility” is a word that has been lacking in the governance of this country and its fiscal policy, not only in the Treasury but, as we recently learned from senior civil servants, in other Departments that lost control of spending. We in this House have to be responsible and move things forward.

[Alison McGovern]

The hon. Gentleman rightly says that we should be cautious. How successful does he feel that previous attempts to add caution to Budgets were? The National Audit Office has previously examined the assumptions made by the Treasury. For example, it was assumed in the March 2010 Budget that GDP growth was 0.25% lower than it really was. Would he like to comment on how those previous attempts at caution might feed into the OBR’s future work?

[Alec Shelbrooke]

As the hon. Lady suggests, previous forecasts and attempts at caution came from many different angles. The public will recognise that the OBR is giving us a proper set of figures that can be relied on. If the Chancellor of the Exchequer then ignores those figures and ploughs ahead, not only would the calls from the Opposition be deafening but the public would know that the Chancellor was acting against their interests.

[Matthew Hancock]

Does my hon. Friend know that in 1995 the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) called for a panel of independent forecasters to express their views on public finances? Does he agree that it is a great shame for the nation that the right hon. Gentleman did not act on that when in government, because it might have meant that there was restraint and, in turn, that he would not have left this country in such a terrible mess?

[Alec Shelbrooke]

I am grateful for that intervention. Needless to say, one of the very first things that our Chancellor of the Exchequer did was to give away the forecasting power to an independent body so that our statistics be relied on. This is about not just public faith in the statistics but the faith of the money markets internationally. That is why the forecasts and credit ratings of this country have been upgraded since the emergency Budget, and secured since the Government laid down a clear, responsible fiscal policy on how they were moving forward. These are highly important matters.

Like many people, I am sure, I am sick to death of the cherry-picking by Labour Members. Stopping that taking place strengthens the case for the Office for Budget Responsibility. The hon. Member for Glasgow North East (Mr Bain) told the House about GDP figures between 1997 and 2010, when Labour left office, but he never mentioned that the private finance initiative was taken off the books. That meant that huge amounts of public debt and public spending were not linked in to those GDP figures because of a fiddle done with the statistics. That cherry-picking must, and will, stop under the Office for Budget Responsibility.

We are told that forecasts can change and that it is therefore not the fault of the previous Chancellor that we are in such a mess. I would like to have seen the forecasts that were made for the price of gold in 2000, when it was at its lowest level ever. Was everybody saying, “It will just drop further and further, so sell the lot now”? I very much doubt it. When things go wrong, it is too easy for the Opposition to say, “It wasn’t our fault—forecasts change.” We now have a Chancellor of the Exchequer who has taken the bold step of passing responsibility to the Office of Budget Responsibility and has put together a Budget that is based on realistic figures rather than what he would like them to be, buried in his bunker at No. 11.

19:16

[Alison McGovern (Wirral South) (Lab)]

It is a pleasure to follow the hon. Member for Elmet and Rothwell (Alec Shelbrooke), whose robust arguments I always enjoy, if not agree with.

The purpose of this Bill is to separate politics and economics, which is not always an easy job but is one that it is important to do. There is a body of academic understanding about the importance of the independence of judgments, forecasting and transparency, and that importance is recognised and understood on both sides of the House. In many ways, the Bill makes clear Labour’s economic legacy of the past decade—rules-based economic policy. The reasons for the sustainable investment rule and the golden rule were clear: after decades of boom and bust, it was felt that the way forward was to establish clear lines of accountability and rules by which economic policy might be set.

[Alec Shelbrooke]

I agree that the golden rule was important, but how does the hon. Lady respond to the fact that the dates of the cycles were moved to fit in with what the then Chancellor was claiming instead of sticking to the timeline that he originally outlined for the fiscal cycle?

[Alison McGovern]

Understanding the business cycle has been the job of economists since the dismal science began. The fact that it is difficult does not make it the wrong thing to try to do. I applaud some of the work that has been done by the Treasury and others in trying to find a better way forward. The hon. Gentleman asks an important question that cannot be dismissed by saying, “Oh, this is just people politicking.” Understanding the business cycle is extremely difficult.

When we consider the importance of rules-based economic policy, it is important to reflect on the fact that the Office for Budget Responsibility is to fiscal policy what the independence of the Bank of England was, and remains, to monetary policy: that is, it is an external-to-the-Treasury body that is charged with an important economic function that will drive the policy prescriptions that the Government make, in liaison and discussion with, and working alongside, independent chairs and officials from the organisations concerned. I have no doubt that that is an extremely difficult job. I wonder how real that independence can be. That is an important question for us to consider as the Bill moves through the House. The OBR’s work will be inextricably linked with Departments.

That point was brought home to me by the answer to a parliamentary question in which I asked the Department for Work and Pensions for forecasts of the number of young people who would be unemployed through the life of this Parliament. The Minister of State, Department for Work and Pensions, the right hon. Member for Epsom and Ewell (Chris Grayling) wrote:

“The Department produces projections for business planning purposes which are aligned to the overall independent claimant count forecasts published by the Office for Budget Responsibility”.—[Official Report, 31 January 2011; Vol. 522, c. 587W.]

I wondered what the nature of that alignment would be. I understand that it will be an iterative process as business planning projections are made and discussed in challenged conversations with the OBR. It will not be easy to maintain the independence of this body, but we must all strive to do so.

If you will allow me, Mr Deputy Speaker, I will take this opportunity to say that I mentioned that parliamentary question in Treasury questions last Tuesday, and said that

“the Government’s own business planning projections show that the proportion of young people on the dole by the end of this Parliament will be reduced by less than 1%.”—[Official Report, 8 February 2011; Vol. 523, c. 153.]

I misspoke, and should have said less than one percentage point.

It will be a difficult job behind the scenes to maintain the independence of the OBR. Lars Calmfors, who has been mentioned, has argued that it will be difficult to stop or prevent behind-the-scenes negotiations with the Treasury. However, I believe that the Government have set such store by the independence of the OBR that they want it to succeed and its independence to be maintained. As hon. Members have suggested, it could have increased accountability to Parliament via the Treasury Committee. I am sure that the members of that Committee will be perspicuous in demanding that accountability and independence.

To conclude, I will make a few remarks about rules-based economic policy. I take it from this debate that it is agreed across the House that the right way to make economic policy is to set out ahead of events the rules and principles that the Government wish to stick to, and that the Government should allow themselves to be held up and judged on the basis of those rules. What could possibly be the problem with that approach to making economic policy? In some ways, we are already seeing the problem. Young people in this country who are unemployed because of the global shock face significant difficulties. We have to ask ourselves how the rules that we have set as the basis of our economic policy allow us to act to ensure that our economy runs well. Surely, economic measures are the tools to aid a well-functioning society, not the other way round. If so, our economic policy must be able to respond to shocks.

Not only must the Government say what the rules for their economic policy are and allow themselves to be judged by independent bodies on those rules, as they are doing; they must also say how they will respond to crises. Should this country find itself in a further economic downturn, facing an even worse situation for residents of this country, especially those on the lowest incomes and at the start of their careers, who face severe unemployment, how will the Government use the flexibility in their economic policy to return the country to growth, and how will their economic rules take account of the possibility of shocks? This is a significant challenge for the Government and I hope that all hon. Members will add to the scrutiny of the Bill as it progresses.

19:24

[David Rutley (Macclesfield) (Con)]

Like other hon. Members, I will focus my remarks on the measures that will put the Office for Budget Responsibility on a statutory footing, where it needs to be. I will talk about how important it is to take forecasting out of the Treasury and to give Parliament a greater role in maintaining the independence of the OBR, which will be vital, as everybody has said.

Above Bollington stands one of the most loved landmarks in the Macclesfield constituency: White Nancy. This unique, brilliant white summerhouse was built by the Gaskell family in 1815 and it stands proudly on top of Kerridge hill. Some think that it was built to commemorate the battle of Waterloo. Whatever the reason, White Nancy is today a well known and trusted reference point. When someone sees it, they know exactly where they are. That is what I hope the OBR will become in the landscape of the UK economy.

The Economic Secretary mentioned several reasons for the creation of the OBR, and spoke of the importance of creating it at this moment in time. I think that it will provide better forecasts, address the “judge and jury” issue that we have heard about and effectively hold Governments of all persuasions to account. That is exactly what is required.

To begin, I will give a few thoughts on better forecasts. I was reminded recently of an observation made by the American economist John Kenneth Galbraith:

“The only function of economic forecasting is to make astrology look respectable.”

I am not a great fan of his economics, but his one-liners were pretty good. Like many Members, I accept that economic forecasting is not a precise science. However, it is vital that our expert forecasters are allowed the objectivity and independence that are needed to do the best possible job. They must be able to look into their crystal balls outside the Treasury building and free from Treasury influence. The ability to recruit economic talent from outside the Treasury will be a great help. I believe that the OBR is well placed to provide better forecasts.

The creation of the OBR can address the fundamental conflict that we have seen in successive Governments of the Chancellor and the Treasury being both judge and jury, through setting fiscal policy and making the forecasts for the economy and public spending. By their nature, economic forecasts are based on assumptions, opinions and judgments. The temptation for Treasury Ministers to make a judgment or prepare a forecast that helps the Government of the day presents a clear challenge to the credibility of the forecasting process. The OBR is an important and positive step in removing that temptation.

I was struck by Lord Turnbull’s response to me on this subject when I served on the Treasury Committee some months ago:

“What happens is that there’s a sense of giving yourself the benefit of the doubt, of wishful thinking. That is what the OBR is there to correct.”

He went on:

“The OBR is important because it is an antidote to and a constraint on wishful thinking. It will bring more rigour, and it has already begun to do so”.

When I asked him more about the wishful thinking during his time at the Treasury, he said:

“I think that there was wishful thinking all the way through. If you had experienced 60 quarters of uninterrupted growth, it wasn’t surprising that you tended to think that somehow something fundamental had changed.”

That is exactly the type of thinking that the OBR has been designed to review, scrutinise and challenge, which is an urgent priority.

The OBR can provide better forecasts, it will tackle the judge and jury dilemma, and it is empowered to hold this Government and future Governments to account. That will be a vital task at this challenging time and for future generations. So what of the OBR’s priorities? In its short life, it has demonstrated its independence, the professionalism of its personnel and the high quality of its output. In its first forecast on the economy back in June, it brought some realism back to the growth forecasts. It was pretty clear that those published by the previous Government in the run-up to the election contained too much wishful thinking. The markets were openly sceptical, which in itself was an unsustainable position. In that sense, the OBR has scored a notable success already by helping to restore confidence in the forecasts for public spending and the performance of the UK economy.

It is vital that we build on that promising start and put the OBR in an unrivalled position. I was pleased to see the recent publication of a report by the OBR that detailed how it sets out to co-ordinate its activities with other Government Departments to produce fiscal forecasts, and the processes that it will follow. That transparency will help further strengthen the organisation and its standing. Its chair, Robert Chote, said recently that he wanted the process of fiscal forecasting to be as accessible as possible. In his words, he wants to

“let people see inside the forecasting sausage machine”.

That is not quite how I would have put it, but I agree with the sentiment.

Beyond the transparency and accessibility of the OBR, which is pivotal, it is essential for it to become a respected and trusted reference point. That is a big ambition that will require the highest standards to be maintained, and constant vigilance will be needed to ensure that we get the OBR where it needs to be.

Having served on the Treasury Committee, with hon. Members who were present earlier in the debate, when the creation of the OBR was debated and key officers were appointed, I commend the work that the Committee undertook at that time and the role that it continues to perform today. I also wish to take the opportunity to commend the Chancellor for his decision and for the inclusive approach that he adopted during the creation of the OBR. By giving the Treasury Committee a meaningful role, he has gone a long way towards empowering Parliament and demonstrating the need for the OBR’s independence. That established from the very start its credibility as an independent body and will help build that credibility in Parliament. By giving the Committee the power of consent over appointments and dismissals, the Chancellor is giving Parliament greater power. The Committee also has the important power to carry on vetting those who are appointed, as it did last year and will continue to do. It is important that the OBR has the ability to prevent Ministers from removing people who might be perceived as being a bit too objective for their liking.

The Government have gone further and even given the OBR the power to submit to the Treasury Committee its own additional estimates memorandum, which will enable it to undertake scrutiny of funding for the OBR. As the Committee’s report set out clearly, it will take a much stronger role in observing the OBR’s work. It states that

“it is vital that it commands confidence across party boundaries. We will take evidence from the organisation regularly as part of the budget process. We will intervene if we believe the OBR’s independence is threatened. We expect the members of the Budget Responsibility Committee or the nonexecutive directors to report any concerns they have to us. Only if it is independent will the OBR be successful.”

There is a clear role for the Committee. It has the OBR in its sight and will continue to involve the OBR in its important work.

Some Members, such as the hon. Member for Glasgow North East (Mr Bain), mentioned international comparisons, and other countries have indeed had bodies similar to the OBR established for decades. One of them is the Central Planning Bureau in the Netherlands, which he mentioned. That body has responsibility for scrutinising not only Government but opposition spending plans. I am sure that Labour Members’ heartbeat fluttered briefly as they thought about the implications of that, but perhaps if the CPB operated in the UK it would not have too much work on its hands right now. We will see what develops on the Opposition Front Bench over the decades ahead. The serious point is that the OBR could learn from such international comparisons. A huge amount of learning can be done from other countries, and I hope that the OBR will examine them in developing its functions and work in the years ahead.

The permanent creation of the OBR is an overdue step. It will bring more transparency and greater confidence to economic forecasts, and it has already begun to build a solid reputation as an objective and authoritative voice as well as gaining respect in all parts of the House. The Bill represents an important structural change in how the Treasury works. It will take the politics out of economic forecasting and give Parliament greater powers of scrutiny. Personally, I want to ensure that the OBR becomes the trusted, respected reference point that I talked about earlier, and I will do all in my power to support it in that work. This country needs it. We must put such institutions in place to ensure that our public finances are never allowed to get into this mess again.

19:35

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

Like colleagues throughout the House, I welcome putting the Office for Budget Responsibility on a statutory footing and the opportunity that it offers for independent forward financial forecasting. That will enable us to see clearly the impact of policy decisions on the public finances, and it will set the context for, and inform, future policy choice. However, as has been pointed out, the OBR and its forecasting mechanism do not of themselves correct or reshape policy mistakes. It is the Government who set the fiscal mandate, and the OBR is there to say whether that mandate has been met. There is no requirement on the OBR to offer any critique of that mandate, or to judge whether it is fair.

We cannot examine only whether the Government have achieved their forecasts. I support the remarks of my hon. Friend the Member for Wirral South (Alison McGovern), who suggested that there was a larger context to address—whether the Government’s policies reflect the right policy ambitions and produce the right social outcomes, and whether the spending on them is effective. To that extent, I am particularly interested in Ministers’ comments on the relationship between the OBR and the other organisation highlighted in the Bill, the National Audit Office.

Like my hon. Friends, I am concerned about the Government’s current mandate to eliminate the deficit within four years. We are concerned to critique not just the mandate but the policies that will bring about the achievement of it. We are extremely concerned that those policies will have a harsh impact on the lives of the people across the country whom we represent, and we are concerned about their impact on growth, employment and intergenerational fairness. That last point is specifically highlighted in the draft charter, and I would be interested to hear the Exchequer Secretary explain how the OBR will judge and assess long-term intergenerational fairness. It is not sufficient simply to say that we cannot pass on to tomorrow’s children the deficit of today, because today’s children are bearing the burden of the policies that the Government are adopting to address that deficit. I would welcome an explanation of exactly what Ministers mean by intergenerational fairness and how the OBR will assess it.

[Alison McGovern]

Does my hon. Friend think that in addition to that, the Government ought to consider the effect of unemployment on a person’s long-term career, and therefore on their family, as part of intergenerational fairness?

[Kate Green]

My hon. Friend makes an excellent point. Some superficially appealing terminology has been bandied about in relation to the Bill, but we need to know the substance of what Ministers understand to be fair.

Members in all parts of the House welcome the opportunity for transparency that lies within the Bill, but as others have pointed out, that transparency is potentially undermined if the OBR does not secure the resources necessary to ensure that its independence is not compromised. The OBR needs to be adequately resourced to carry out a full and proper analysis. In that context, looking at the full impact of policy includes modelling imputed behavioural change, about which the Government have so far shown themselves to be casual, including in their analysis on the introduction of the universal credit, which is one of their major policy proposals. Great claims have been made for the universal credit’s impact on increased benefits take-up and labour market participation, but the Department for Work and Pensions’ analysis of such behavioural changes to drive such outcomes is remarkably thin. How deep can the OBR dig when departmental analysis apparently does not do so?

There is two-way traffic in policy making and in analysing the impact of policy initiatives. The OBR has been set up specifically to reflect in its forecasts what we might call policy “knowns”, but as was pointed out, there are opportunities to allow for dynamic forecasting so that we can judge the impact of new policies on the public finances in future. I believe strongly that the creation of the OBR offers an opportunity to tie those two aspects of policy forecasting together, so that it is possible to verify departmental impact assessments at the time when policy is being considered—prior to its implementation—and as part of the process of legislative scrutiny and approval by the House.

As my hon. Friend the Member for Wirral South pointed out, there are tensions involved in ensuring that the OBR has a role in scrutinising policy making as it develops and emerges, but there is an important opportunity to enable Parliament effectively to critique, to challenge and to improve. How do Ministers see the OBR’s role in the context of iterative policy making, and how do they think that tension will be resolved?

I look forward to the ongoing process of the passage of the Bill to implement the OBR, and to its independent reports and analysis. However, it is important to understand that the Bill is a step on the way to better policy making and scrutiny rather than a job fully done. Of course, the OBR offers great potential to aid our understanding, but I am clear that it is just one element of how we judge policy cost and impact, and most importantly, policy success.

19:42

[Stephen Williams (Bristol West) (LD)]

I guess that you, Mr Deputy Speaker, and many hon. Members have a collection of fridge magnets. I have one back home in Bristol that I acquired on a visit last summer to Hughenden manor. Of course, Disraeli, who lived there, is a rich vein of quotes, and perhaps one of his most famous is that there are “lies, damned lies and statistics”, which is what this debate is all about. Statistics are never more controversial than in economics. There was quite a controversy surrounding the last quarterly growth figures—I will make no jokes about snow—but in forecasts and retrospective reporting, there are random factors, and such reports are often revised.

Forecasting, of course, is even more contentious than retrospective reporting on economic events. I am sure that all Chancellors have at least been tempted to inject political factors into what the hon. Member for Wirral South (Alison McGovern) called the “dismal science” of economics. Whether economics is a science at all is debatable, but it is certainly inexact as a social science, and very heavily influenced by politics. In fact, it was traditionally known as “political economy”.

In all Budgets and autumn statements, Chancellors forecast tax yields and outlined the effect of their policies on employment and unemployment. They said who would benefit and described the impact of their policies on the fiscal balance and debt. As a chartered tax consultant and in the last six years as an MP, I watched a decade of Budgets by the former Prime Minister and Chancellor, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), whose first act as Chancellor was to set up the independence of the Bank of England, to which many hon. Members have referred. The implementation of a Liberal Democrat manifesto commitment 13 years before we got around to joining the Government was welcome, but after 1997, the former Chancellor made up his own rules as he went along on everything other than monetary policy. The golden rule has been mentioned several times, but his best friend, Prudence, has understandably not been mentioned by Opposition Members, because as we all remember, in all his Budgets and forecasts, everything was rosy. The Chancellor always confounded his critics and said, “Everyone else is wrong. Lo and behold—what a surprise! —I have a marvellous thing to announce.” What happened? The 2008 crash happened.

[Alison McGovern]

On that very note, which was the more prudent: putting the country into a situation in which people could not withdraw cash from the banks or recapitalising the banks, as happened?

[Stephen Williams]

I was talking about events prior to the crash, rather than the policy response to the crash itself, which was in any case initially rather timid and slow. My right hon. Friend the Member for Twickenham (Vince Cable) repeatedly urged the Chancellor to nationalise Northern Rock, which was the first symptom of the crisis, but those urges were resisted for quite some time.

[Alec Shelbrooke]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. We are getting tempted into an area where we should not be. We are dealing with Second Reading. I am sure the hon. Member for Bristol West (Stephen Williams) will stick to that, and that Mr Shelbrooke’s intervention will be relevant to it, and not a history lesson for those in the Chamber.

[Alec Shelbrooke]

Thank you, Mr Deputy Speaker. My hon. Friend was trying to make the point that the key word in the name of the Office for Budget Responsibility is “responsibility”.

[Stephen Williams]

I thank my hon. Friend for that intervention.

Predictions and forecasting are at the heart of the Bill. I slightly disagree with my hon. Friend the Member for Cities of London and Westminster (Mr Field), my coalition colleague, who has now gone off to his black-tie dinner, because the crash—if not its scale—was forecast by my right hon. Friend the Member for Twickenham. I remember him being derided and sneered at in the House at the time, including by the hon. Member for Wallasey (Ms Eagle), who today led for the Labour party.

I welcome the setting up of the OBR, and particularly the appointment of Robert Chote from the Institute for Fiscal Studies as its first permanent chair. I am sure that all hon. Members have cited IFS reports in support of our policies at various times, and that we have all been on the receiving end of its critiques, which are not always welcome. Nevertheless, everyone recognises that those reports were arrived at independently, and therefore that they had authenticity and credibility about them. I also welcome the appointment for five-year terms of Mr Chote’s fellow board members and the ongoing Treasury Committee scrutiny, of which my hon. Friend the Member for Macclesfield (David Rutley) spoke. As we heard, the Bill is not a panacea for dealing with economic ills, but I am sure that the OBR will none the less restore credibility to our statistics and give a sound basis for decisions.

The second part of the Bill, which has not been mentioned much, deals with the National Audit Office. As I have mentioned Disraeli, I will mention in balance Gladstone, who set up the NAO. All Members of Parliament will recognise that the reports produced by the NAO are excellent and well informed across the range of policy issues. As the hon. Member for Stretford and Urmston (Kate Green) said, it is the role of the NAO to review the impact of Government policy especially in financial areas, and to examine whether money has been spent efficiently according to the original remit of the policies. Although the NAO formally reports to the Public Accounts Committee, of which I was briefly a member in the last Parliament, its reports and its work are fundamental to the operation of the House of Commons itself.

I welcome the statement made by the board of the NAO and the professional qualifications now held by some of its board members. I remember going to a briefing by the NAO not long after I became a Member of Parliament and being astonished by the lack of financial qualifications of many people in the civil service—I shall avoid looking in their direction—who none the less managed the purse strings of billions of pounds of public money. Professional qualifications should also be rolled out around Departments.

[David Rutley]

As hon. Members have said, one of the opportunities provided by the OBR will be more expertise from people outside the Treasury, who will put their views, thoughts and experience to work on forecasting. Does my hon. Friend agree?

[Stephen Williams]

Indeed, I do agree and the OBR as it develops will be able to draw on the expertise in the Treasury, although its forecasts must be its own, not the Treasury’s. Over time, the OBR will develop its own in-house expertise, although it will hopefully not grow into too large a quango—if we are still allowed to use that word.

The Bill is an important hallmark of coalition Government. It shows that the Government are interested in transparency and evidence-based policy making, as well as in listening, especially to advice. It will certainly provide confidence in our national statistics and economic forecasts, underpinning the Government’s overriding aim of restoring confidence and stability to our national economy and public finances.

19:52

[Sheila Gilmore (Edinburgh East) (Lab)]

I seem to be fated—this is the second time in two weeks—to be the last Back Bencher to contribute to a debate. Tempted though I am to continue to speak until as close to 10 pm as allowed by the need for wind-up speeches, I shall resist temptation—I can see my colleagues’ looks of horror. For those of us who are far from home and whose potential valentine is 400 miles away, we have nothing better to do than speak in this debate.

More seriously, it will be useful to have independent forecasts; indeed, it already has proved useful. In the short life of the Office for Budget Responsibility we have seen some figures that even this Government, who have professed a desire to be transparent, might not have been too happy about. Several of my hon. Friends have referred to figures such as the forecasts for unemployment and for economic growth. Had it not been for those reports, the Chancellor and other members of the Government might have been tempted to be a little more optimistic and gung-ho. We saw a little of that even last year when some Ministers talked about economic growth in the second and third quarters. We might have thought that everything was now motoring forward, but the OBR was able to tell us that that was not quite the case. The OBR’s forecasts may not always be palatable, even to the Government who have set it up.

I appreciate, Mr Deputy Speaker, that you have not wanted people to discuss the economy generally, but it was clear from the context in which this debate was put by the Economic Secretary that we cannot entirely avoid doing so. She made it clear that the OBR’s remit is determined by the Government’s view of the economy and what needs to be done to deal with it. She said that deficit reduction was the priority and the context for the OBR, but the question of how to do that remains. How do we reduce the deficit, how fast, and what are the implications of reducing it too fast? The Opposition believe that the actions that have been taken in order to fit the framework set for the reduction of the deficit in this Parliament may be counter-productive. The deficit may in fact rise, because if unemployment rises, demand falls and the economy does not grow, tax revenues will fall even further—and that was part of the reason for our current position. If that happens, we will see the deficit grow.

[Alec Shelbrooke]

As the hon. Lady has said, the OBR will indeed stop a Chancellor saying, “Growth is going to be this amount, and therefore I will borrow this amount,” while knowing full well that growth might not be so high and he might not be able to repay it. Surely that was the problem in recent years, and it is hoped that the OBR will stop such mistakes from being made again.

[Sheila Gilmore]

Our views of when it is appropriate to borrow and what the Government should do about the economy are clearly different. Emotive words have been used in this debate, including the term “mountain of debt”. Coalition Members are fond of saying that interest payments on borrowing are wasted. They are also fond of domestic analogies, and we hear a lot about the national credit card being maxed out, but there is another domestic analogy that we might use. When we pay our mortgage payments, we do not say that that is money wasted—it is money being invested for the purpose of acquiring a home.

When I was the convenor of housing for Edinburgh city council, 40p in the pound of tenants’ rents went on debt repayment. Sometimes the local newspaper and council opposition members would say, “This is terrible mismanagement”, but it was not mismanagement—it was an investment in building homes over many years and improving homes with such luxuries as central heating and double glazing.

[Stephen Williams]

The hon. Lady is talking about debt being run up for investment. Of course the previous Government put most of that debt off the balance sheet of the Treasury completely and into private finance initiative schemes. They ran up debts to fund current expenditure on public services, and that is why we ended up in a crisis.

[Sheila Gilmore]

The hon. Gentleman is wrong about that. Up to the point of the recession, most of the borrowing was for investment in schools, homes, roads and transport projects. Yes, there were some PFI schemes, and I was interested to hear the hon. Member for Elmet and Rothwell (Alec Shelbrooke) castigate such schemes, because it is my recollection that PFI was a favourite mechanism of the previous Conservative Government, who introduced it. Many of my colleagues in the Labour party were less than enthusiastic about it even during the years of the Labour Government.

I am trying to make the point that there are different ways of looking at the economy and at what the appropriate policies are. I was interested in a brief debate in the Treasury Committee about whether the OBR should look at other policies: should it look at the policies of an Opposition what might be? Outwith that, why should it just look at the particular ground rules that the Government have set out? Those rules will represent one view, but there might well be other views and policies that could lead to different results. The Government appear to have rejected the view that the OBR should look at anything other than Government policy, on the grounds that that would not make it politically neutral, but we need real transparency and a proper debate in the country about the best way forward.

[Andrew Griffiths (Burton) (Con)]

I have been listening to the hon. Lady’s analogy. She does not like talk of the credit card being maxed out, and thinks it more akin to taking on a mortgage to purchase a home. Does she not agree, however, that having to pay £120 million a day in interest alone is actually more akin to using a credit card to pay the mortgage every month?

[Sheila Gilmore]

Clearly, I do not agree with that. These two analogies are interesting ones, in that they show the different viewpoints of the different sides of the House. They are both legitimate viewpoints, and it is right that we pull them out and have this debate, because there is not just one way of coming to a conclusion on what we should do.

If the OBR is to develop in the future, one option is to look at different ways of arriving at the ends we all want. There is no suggestion, despite what Government Members say, that Labour Members think it right to run a very big deficit on an annual basis. We have never said that; we have said that we want to reduce the deficit. However, we differ with the Government over the speed at which that is done. That will determine all of these forecasts and where we go from there. If we have those different viewpoints, would it be helpful—other people might think it is not—for a truly independent OBR to be able to look slightly wider than the tramlines that the Government are setting down and about which we have heard so much? Should we be able to forecast only on that basis? It would be interesting to consider whether alternative policies could lead to a different and—I would hope—better outcome.

I do not want to add anything else because I can see that some people here have somewhere far more interesting to go. I hope that some people receive red roses and chocolates tonight in celebration of the day.

20:02

[Kerry McCarthy (Bristol East) (Lab)]

This has been an interesting, if somewhat truncated debate. My hon. Friend the Member for Edinburgh East (Sheila Gilmore) is probably right that the relatively few number of people in the Chamber and the fact that the debate will finish a couple of hours early is not evidence of a lack of interest in the subject under discussion, but proof that romantic hearts beat beneath our tough and cynical exteriors. [Interruption.] I mean some of our tough and cynical exteriors.

We support much that is in the Bill, but I will turn first to the contributions of hon. Members. My hon. Friend the Member for Wirral South (Alison McGovern) said that the establishment of the Office for Budget Responsibility was an attempt to separate politics from economics. I suspect that that will be difficult to achieve, but as she said, it is important that we at least try. She also talked about rules-based economic policies, how they were introduced under the previous Government, and how the establishment of the OBR entrenches that approach. She also spoke at the end of her speech about something that I know is a great passion of hers: the problem of youth unemployment and what we can do to tackle it. I am sure that she will return to it on many other occasions in the Chamber.

As ever, my hon. Friend the Member for Stretford and Urmston (Kate Green) made an excellent speech and talked about how it is important that, when discussing such issues that are technical and very much about structures, we focus not just on the numbers, but on the outcomes that we want to achieve. This is not just a dry discussion about the fiscal mandate and the mechanisms that we put in place to monitor it or to forecast the future trajectory of Government economic policy; it is about the underlying policies brought in to achieve that mandate. She spoke passionately about intergenerational fairness and the importance of considering how we can better model imputed behaviour, and she suggested that departmental evidence was very thin on behavioural change and that the OBR might have a role in fleshing that out. That was a valid point.

My hon. Friend the Member for Edinburgh East talked about how the OBR, if it does not totally instil caution in the actions of Ministers, will at least act as a brake on Governments’ over-optimism and the wishful thinking that leads them to think that things are rosy, or will be rosier than the evidence suggests. She made the point that we cannot divorce the question of reducing the deficit from the question of how we go about doing it and the policies we implement to achieve that end. My hon. Friend the Member for Glasgow North East (Mr Bain) warned of the dangers of complacency, and of thinking that the recovery is secure, that we are out of recession and that the country is out of the danger zone. He also talked about the fiscal mandate for eliminating the deficit and warned of the dangers of pursuing that in too rapid a fashion.

The hon. Member for Cities of London and Westminster (Mr Field) has had to leave to go to a black-tie event. I suspect that he has rather more black-tie events than most of us in the House. The sorts of events I attend usually involve the St George Labour club and beer at 99p a pint. However, he obviously leads a more exalted existence than many of us. Both he and the hon. Member for Elmet and Rothwell (Alec Shelbrooke) were fairly political—dare I say it—in their comments. They made references to the previous Government living beyond their means. The hon. Member for Elmet and Rothwell denied that the banks were responsible for the recession and again mentioned the country living beyond its means. At this time of night, and perhaps with better things to do, we do not want to rehearse those arguments. However, it is important that rather than trying to score political points, we look at the details of the Bill and the seriousness of what it is trying to achieve in introducing a more evidence-based approach to economic forecasting.

The hon. Member for Macclesfield (David Rutley) made a very good and thoughtful speech. He quoted J. K. Galbraith, which I suspect my hon. Friend the Member for—

[Ms Angela Eagle]

Wallasey.

[Kerry McCarthy]

I knew it began with a W. Anyway, she is probably very familiar with this quote:

“The only function of economic forecasting is to make astrology look respectable.”

The hon. Member for Macclesfield said that he was not a great fan of J. K. Galbraith. I happen to be a great fan, although I had not heard that quote before. His “A Short History of Financial Euphoria” ought to be required reading for anyone who takes up a job in the City these days. The hon. Gentleman resisted the temptation to resort to political point scoring. His point that the OBR can in time become a respected and trusted reference point is valid—I certainly hope it will be achieved.

What the hon. Member for Macclesfield said about greater powers being given to the Treasury Committee was interesting. I was a member of the Committee for a couple of years when first elected to Parliament in 2005, and I remember spending many sittings seeking assurances from the Financial Services Authority and the Bank of England about regulation, the risks that derivatives trading imposed, and so on. I remember receiving blithe assurances that it was difficult for Committee members— with their limited resources—to challenge on an ongoing basis. If increased powers are given to the Treasury Committee to vet appointments, to scrutinise the work of the OBR, particularly its funding, and to ensure that it has the necessary resources to do its job, thought needs to be given to whether the Committee has the resources necessary to do that job.

The hon. Member for Bristol West (Stephen Williams) slightly lost me at the beginning with his talk about Disraeli and fridge magnets, but then moved on to talk about Bank of England independence, which he claimed was a Liberal Democrat manifesto—

[The Parliamentary Secretary, Office of the Leader of the House of Commons (Mr David Heath)]

It was.

[Kerry McCarthy]

I am not denying it. The hon. Member for Bristol West said that it was an example of Liberal Democrat manifesto policy being implemented 13 years before they got into government. I would suggest that the reason he is claiming credit for that is that there are very few examples of that now that they are in government.

Let me move on to the Bill. The plans for the National Audit Office have received very little attention in this debate, because there is a general consensus that they are the right thing to do. They are almost exactly in line with our plans for the National Audit Office that we set out in our Constitutional Reform and Governance Bill, which we did not get through the parliamentary process before the May 2010 election was called.

We support the creation of the Office for Budget Responsibility, which we see as continuing the direction of travel that we set in government by giving independence to the Bank of England and the Office for National Statistics. However, we have a number of concerns about the details of the proposals. We welcome the amendments that were introduced in the other place—with some, limited success—to try to make the OBR more independent from the Government, for example by giving it budgetary independence, so that we can be sure that it has the resources that it needs to do its job and produce genuinely independent forecasts without being compromised by Treasury control. We intend to explore that further in Committee, to see whether we can give the OBR greater independence. It is also important to explore in Committee how we make the OBR more accountable to Parliament, rather than to the Treasury.

However, we will not let this Government hide behind the OBR or use its independence as a shield to protect them from valid criticism of the impact of their economic policies. The Government are wrong if they believe that the OBR will protect us from the consequences of the Chancellor’s misjudgments. Indeed, the OBR will help to hold the light up to the Government’s record. It is notable that the OBR has already predicted that unemployment will be higher under this Government than under Labour plans, that growth will be lower under this Government, and that consumer prices index inflation will be higher. In fact, as has been mentioned—I think by my hon. Friend the Member for Glasgow North East, or perhaps by my hon. Friend the Member for Wirral South—the OBR has already had to revise its growth forecast downwards twice, down from 2.6% to 2.3% after the emergency Budget, and down again, to 2.1%, after the spending review. That is a telling verdict on this Government’s policies for growth—or lack of them—and the Chancellor’s failure to produce a growth plan. We wait to see whether the March Budget will force the OBR to downgrade its growth forecast yet again.

The OBR has also confirmed—although the Government seem to have ignored this because it is politically inconvenient for them to acknowledge it—that the deficit was more than £20 billion lower in 2009-10 than expected, owing to firm and decisive action taken by the Labour Government. What is clear—we do not need the OBR to tell us this—is that under this Government unemployment and inflation are rising, living standards are falling and the recovery has stalled. Although we support the substance of this Bill to a large extent and we shall not seek to push its Second Reading to a vote this evening, we remain deeply sceptical about whether the Government have learnt any lessons from the past eight months during which the shadow OBR has been in place. We hope that lessons will be learnt going forward.

20:09

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

We have had an interesting debate and it would be fair to say that there has been some consensus from both sides of the House that it is right and proper for us to establish the Office for Budget Responsibility. I am grateful to my hon. Friends the Members for Cities of London and Westminster (Mr Field), for Elmet and Rothwell (Alec Shelbrooke), for Macclesfield (David Rutley) and for Bristol West (Stephen Williams) for expressing their concerns about the state of the public finances and the record of the previous Government. However, I am also grateful for the comments of Opposition Members, such as the hon. Members for Glasgow North East (Mr Bain), for Wirral South (Alison McGovern), for Stretford and Urmston (Kate Green) and for Edinburgh East (Sheila Gilmore), who supported the concept of the Office for Budget Responsibility.

As my hon. Friend the Economic Secretary to the Treasury said at the start of this afternoon’s proceedings, fiscal responsibility is the overriding priority of this Government. The deficit that we inherited, the debts that the previous Government amassed and the fiscal forecasts that accompanied both have clearly shown the inherent weaknesses that plagued the old way of doing things. The reputation of the Government’s forecasts in recent years was that they had a bias towards optimism. After all, a balanced budget was always just around the corner. In 2003, the budget would be back in balance by 2005. In 2004, it would be back in balance by 2007, and in 2006, by 2008. In 2007 we would have a balanced budget by 2009, and in 2008, we would reach the balanced budget in 2011. It is perhaps apposite to quote Robert Chote in his previous capacity as the man in charge of the Institute for Fiscal Studies, who said that this was a

“sustained display of conviction forecasting”.

Indeed, the over-optimistic approach to the public finances of that era is not purely a thing of the past. We recently learned, for example, that the shadow Chancellor continues to believe that there was no structural deficit in the UK economy in advance of the credit crunch. How wrong can one be? The fact is that there was a perception that, all too often, the temptation to nudge up a growth forecast here or reduce a borrowing number there proved all too great. Governments would preach the principle of prudence while in reality the onus was always on optimism. That serves no one’s interests. Economic policy needs to be based upon the reality—grounded in fact and not fallacy—and to be able to stand up to external scrutiny when put under the spotlight. Credibility must be restored.

It is worth pointing out that the previous Government attempted to do just that with the notorious Fiscal Responsibility Act 2010. I looked up what Chris Mullin, the former Member for Sunderland, South, said about it in his diaries. In his entry for 5 January 2010, he writes that he came into the Chamber to listen to the debate, describing the proposal as:

“Surely the most pointless piece of legislation ever devised.”

He continued:

“To be fair to Alistair”—

the former Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling)—

“this is not his doing. It shows every sign of having been dreamed up in the fun factory at Number 10. He managed to keep a straight face throughout as George Osborne shredded it mercilessly.”

We have come up with something somewhat better, because we need to demonstrate to the British people that the Government can be relied upon to tax and spend sensibly. The Office for Budget Responsibility will do exactly that. This fully independent body is bringing integrity back to the official forecasts. With full access to all the data, assumptions and economic models needed, the OBR is making the key judgments that underpin our economic and fiscal decisions.

Let me touch on the issue of independence, which a number of hon. Members raised. It is right that the OBR has access to all the numbers. We believe that the relationship with the Government strikes the right balance. The OBR will perform a core executive function in providing the official forecasts and a published assessment of the likelihood of the Government’s meeting their fiscal mandate, but it will do so independently of Ministers, with all judgments and methodology questions being at the complete discretion of the budgetary responsibility committee. That model has been supported by a range of external commentators, including the Institute for Fiscal Studies. It is also worth noting that Lord Turnbull said on Second Reading in the other place:

“What is proposed is a pragmatic and, in my view, well judged hybrid”.—[Official Report, House of Lords, 8 November 2010; Vol. 722, c. 22.]

The OBR will appoint its own staff and will have a budget responsibility committee confirmed by the Select Committee on the Treasury. That process of confirmation will ensure that the right staff are appointed to the BRC. The non-executives will be required to report regularly on the extent to which the OBR has been able to perform its duties, with complete discretion through the annual report. That is an important safeguard for the OBR.

Let me touch on Parliament’s role, which was raised by the hon. Member for Wirral South and my hon. Friend the Member for Macclesfield, who is a member of the Treasury Committee. The OBR will submit all its findings to Parliament, with each forecast and report being laid before the House, as was the case for the economic and fiscal outlook produced by the OBR in November. To ensure accountability, any written questions from hon. Members will be passed directly to the OBR, which will respond in the usual manner. All members of the budget responsibility committee, as well as the OBR’s non-executive directors, will also be available for Select Committee hearings. The evidence that OBR representatives have already given to the Treasury Select Committee has been widely welcomed by hon. Members.

I want briefly to mention the National Audit Office. As we have heard, the measures in the Bill largely reflect the provisions in the previous Government’s Constitutional Reform and Governance Bill. There was no time for the other place to consider those provisions before the general election, and this Bill represents the earliest opportunity to bring them before Parliament and to implement the recommendations of the Public Accounts Commission following its review of the National Audit Office’s corporate governance. This, too, has been welcomed on both sides of the House.

The provisions in the Bill will restore confidence and responsibility to our country’s fiscal framework. For too long, there was suspicion about the reputation of the forecasts produced by the Treasury: to put it kindly, they were suspected of optimism. What we now need is stronger institutions. We need to allow for expert scrutiny of the public accounts. We need improved economic governance, and much-improved transparency, and this Government are taking great steps towards achieving that. This is the right course of action for our economy, and for our country. I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Budget responsibility and national audit Bill [Lords] (programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Budget Responsibility and National Audit Bill [Lords]:

Committal

1. The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

2. Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 8 March 2011.

3. The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

4. Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

5. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

6. Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

7. Any other proceedings on the Bill (including any proceedings on consideration of any message from the Lords) may be programmed.—(Stephen Crabb.)

Question agreed to.



Budget responsibility and national audit Bill [Lords] (Money)

Queen’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Budget Responsibility and National Audit Bill [Lords], it is expedient to authorise—

(1) the payment out of money provided by Parliament of any expenditure incurred by the Treasury or the National Audit Office in consequence of the Act, and

(2) the payment out of the Consolidated Fund of—

(a) amounts payable in accordance with remuneration arrangements made in relation to the Comptroller and Auditor General and the person who chairs the National Audit Office, and

(b) amounts payable in consequence of liability for breach of duty in relation to audits, examinations and inspections carried out as part of the Comptroller and Auditor General’s functions.—(Stephen Crabb.)

Question agreed to.

Budget responsibility and national audit Bill [Lords] (Ways and means)

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Budget Responsibility and National Audit Bill [Lords], it is expedient to authorise—

(1) the imposition of charges to corporation tax in relation to transfers of property, rights and liabilities, and

(2) the payment of sums into the Consolidated Fund.—(Stephen Crabb.)

Question agreed to.

Business without Debate

Monday 14th February 2011 Commons Chamber

Home affairs

Ordered,

That Mr Aidan Burley be discharged from the Home Affairs Committee and Michael Ellis be added.—(Geoffrey Clifton-Brown, on behalf of the Committee of Selection.)

International development

Ordered,

That Mr James Clappison be discharged from the International Development Committee and Mr Sam Gyimah be added.—(Geoffrey Clifton-Brown, on behalf of the Committee of Selection.)

Science and TEchnology

Ordered,

That Alok Sharma be discharged from the Science and Technology Committee and Stephen McPartland be added.—(Geoffrey Clifton-Brown, on behalf of the Committee of Selection.)

Southend (City Status)

Monday 14th February 2011 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Stephen Crabb.)

20:22

[Mr David Amess (Southend West) (Con)]

I am fortunate, on Valentine’s day, to be able to describe to the House the merits of Southend being granted city status next year. In the bid, I am supported by my hon. Friend the Member for Rochford and Southend East (James Duddridge) and my right hon. Friend the Member for Rayleigh and Wickford (Mr Francois). As they are both Government Whips, however, they are unable to catch your eye, Madam Deputy Speaker. So on this occasion, it is I alone who will be speaking on behalf of Southend.

Southend is asking the Parliamentary Secretary, Cabinet Office, my hon. Friend the Member for Forest of Dean (Mr Harper) to be its Valentine tonight. I know only too well that he does not have the power to say tonight, “Yes, Southend can be a city.” Obviously, I understand that. Nevertheless, given that I was involved in the previous bid in 2002, I thought that it was right to put down an early marker. It would also be useful if the Minister were to set out exactly what considerations are involved.

Let me start from the beginning. The biggest advocate for Southend being granted city status is my own mother, Maud. God willing, she will shortly be celebrating her 99th birthday. She lives near the Olympic stadium in Stratford, and she is, in every sense, an east end girl. When she was bringing me up, it was a wonderful treat to travel to Southend-on-Sea. My children would laugh at the idea that going to the British seaside was a wonderful treat; they would probably expect to go round the world, and might not even be satisfied by that. In those days, however, to go to Southend was a great joy. I have childhood memories of going there to see the longest pier in the world, having the excitement of travelling by train out along the Thames estuary, enjoying Rossi’s ice cream, going down to the old town of Leigh and having cockles, mussels and shrimps. All those things left a great impression on me. Probably my strongest memory is of going to the amusement arcades along the golden mile in the constituency of my hon. Friend the Member for Rochford and Southend East. My mother is privately leading the charge for city status for Southend.

The “Oxford English Dictionary” defines the word “city” as simply being

“a large town or other inhabited place”,

but it distinguishes a city as being

“a title ranking above that of ‘town’”.

According to such definitions, Southend-on-Sea certainly meets the very basic defined requirements to call itself a city.

I have googled quite a lot of stuff about cities, I was surprised to discover that there are only 66 cities in the United Kingdom and that—shock horror!—there are none in Essex. How is it possible that the biggest county does not have a city? I do not want to fall out with my hon. Friend the Member for Rochford and Southend East and my right hon. Friend the Member for Rayleigh and Wickford—I will not fall out with the former; the latter is considering putting in a bid for his own town to become a city—but it is absolutely staggering that there is no city in Essex.

I am sure that my hon. Friend the Minister will not be able to tell the House tonight whether a town in Essex other than Southend has put in a bid, but if Southend is the only town to do so thus far, as seems to be the case, I think that speaks for itself. There are many complex requirements involved in a town becoming a city, but it would be fair to define a city as a cultural and economic hub with a large, diverse local community and an area in which communities and businesses seek to centralise their interests.

As far as culture is concerned, Southend is awash with it. I was at the annual dinner of the Essex yacht club on Saturday. The original guest speaker was unable to fulfil the engagement, so at relatively short notice we brought in a “stand-in”—a chap called Paul Carslake. He had an electric spray-on-paint device and created the most wonderful drawings I have ever seen by using a microphone and holding the spray. It was just incredible. He auctioned one his works of Michael Caine. This chap is famous: he has done stuff for the Rolling Stones and has travelled all over the world. He provides just one example of talent from absolutely nowhere.

We all know about the famous actors and actresses in Southend—starting, of course, with Helen Mirren, but we are awash with them, as there is also Lee Mead. As I say, we are awash with talent of every description: actors, actresses, singers, dancers, painters, sculptors—the whole gamut can be found in Southend. In every sense, then, we fulfil the cultural criterion.

Like most seaside towns, Southend faces many challenges. It is not as popular as it used to be to spend holidays in English seaside resorts. Nevertheless, Southend has repositioned itself as a centre of learning. We have the wonderful new Southend-based university of Essex; we have magnificent schools in the town; and we have a language college—and it is all bringing in a good deal of income to the town. We are also awash with small entrepreneurs as well as larger businesses, adding still more value.

We have a diverse local community from all parts of the world, bringing different cultures to the town. I hope that my hon. Friend the Member for Rochford and Southend East and my right hon. Friend the Member for Rayleigh and Wickford will confirm with a nod that relations between the cultures in Southend are extremely good indeed, with no problems at all.

I believe it would be hard to differentiate Southend in its everyday life from any other British city. I do not want to upset colleagues, but I have looked carefully at a few towns that have become cities and I cannot see how Southend fails to meet the criteria, because it has every bit as much going for it—and more! That puzzles me.

The Queen’s diamond jubilee will be celebrated next year. As the Minister will no doubt tell us, it has been announced that, as part of the national celebrations, a bidding process will be opened to bestow the honour of city status on areas whose bids are successful. As I have already told the Minister, who kindly replied to confirm it, Southend is bidding for city status.

Why does Southend want to become a city? It would have a significant impact on the morale of the local communities and would give the local economy a major boost during a difficult time for business and individuals alike. A key theme of the bid will be the projection of the community’s views of Southend, highlighting in particular its vibrancy and ambition. Furthermore, our bid will champion the various successful aspects of the town, celebrating the thriving local businesses in the area, its wonderful cultural and volunteering communities, the massive regeneration projects to improve pedestrian and road safety while giving Southend a modern and clean feel, the growing education sector and the fabulous local schools that the town boasts and its diverse and multicultural population.

I had the privilege of chairing the Committee considering the London Olympic Games and Paralympic Games Bill. Given that I come from the east end of London, as I mentioned, I am very excited at the prospect of the Olympic games. Hadleigh, the neighbouring area to Southend West, will host the bike events, which is good news. At the moment, Southend is actively seeking to attract international teams to choose Southend as a base for their training camps. I am delighted to tell the House that so far we have had visits from team representatives of Sri Lanka and the Philippines, with more to follow. I hope to attract international interest because we are only 40 miles from where the Olympic camp will be based and because we have wonderful facilities. The visiting teams were given a first-class presentation at Eastwood school, where there are marvellous sports facilities. Belfairs high school, which is being refurbished, will have wonderful facilities that will be unveiled later in the year.

Only a few weeks ago, Mark Foster, another Southend lad—well known because he is very tall, has won a few world championships, has competed in the Olympics and has appeared on “Strictly Come Dancing”—opened our new swimming pool, which features the best diving facility not just in the country but in the world. It also has a dry area. I think that international teams who are proficient in that sport will consider Southend very attractive as a base for their training camps. I hope that I have given the House a sense of the wonderful facilities that we have there.

In many ways, Southend-on-Sea already has the look and feel of a modern British city, but there is no sign saying “Welcome to the city of Southend”, and that is what I want to see. Southend is a town to be proud of, and it should be celebrated as such. In towns up and down the United Kingdom, during tough times like these, we sometimes need to remind ourselves of the greatness of where we live. If we are declared to be a city, that moment alone will lift the hearts and spirits of everyone. Last week we suffered a terrible tragedy when Trevor Bailey, who lived in my road and was a wonderful cricketer, lost his life. He served in the second world war and gave much for his country in every sense, and he would have been the first to support Southend and its community in the bid for city status.

I should add that I represent the part of the country with the most centenarians. Southend, which has appeared three times in “Guinness World Records”, contains a range of senior citizens who would be absolutely delighted if we were granted city status.

The recognition of Southend’s greatness, locally and nationally, would have a real impact on the civic pride felt by local communities. Evidence from previously successful bids has shown that city status can lead to a reduction in antisocial behaviour—in graffiti, for instance—and can increase aspiration among communities, and aspiration in itself can lead to higher attainment and economic activity.

Southend has achieved a great deal over the past five years. It has improved social housing to meet the needs of the local population. It has also improved adult community care, children’s services, education at all levels—from Sure Start centres to the university—and the area has been regenerated, including roads and public spaces. Its population of 164,000 is the largest in the east of England. Let me repeat to my hon. Friend the Minister that I am puzzled by the fact that it is not already a city.

Southend is seen by many as a hub for learning, culture and business. It has superb transport links to the surrounding areas and to London. We have nine railway stations, two bus companies, vastly improving road networks and an expanding airport. Only last Friday I visited one of the hangars at the airport to observe a number of apprentices at work, and I know that the skill that they have already acquired in refitting some of their planes is truly remarkable.

Southend has facilities to accommodate members of all religious faiths in its strong multicultural community. It provides outstanding educational opportunities, catering for everyone and anyone. As I have said, Southend has a large campus for the university of Essex specialising in drama and the arts, a regionally renowned adult community college, four outstanding grammar schools, and a generally excellent education service. Southend certainly has strong academic credentials. The principal of South Essex college, Jan Hodges, has done a magnificent job in all she has achieved for the college.

The town is a hub for the arts and culture, with one of the largest regional theatres in the Cliffs Pavilion. We also have the renowned Focal Point art gallery and museums with collections of national importance. Saxon remains were found in Priory park. They are being restored and will eventually be displayed in a suitable museum. We have a cultural events programme, including an annual carnival along the seafront. We have a thriving local music and visual and performing arts scene, and the internationally famous “Metal” which is based in Chalkwell park in Southend, where we invite artists from all over the world to share their skills with local artists. We have an annual festival, and “Metal” links in with the Royal Opera House in dance and theatre. Therefore, culture and the arts in Southend are second to none.

Unlike many seaside towns, Southend has a varied economy, enjoying a vibrant entrepreneurial culture, global companies with bases in the town, innovative and cutting-edge companies, and some of the best performing stores in the region in both the high street and the sought-after boutiques in Leigh-on-Sea. My predecessor, the late Lord Channon, used to take Princess Margaret along the little boutiques there, so impressed was she with that shopping area.

Southend has some outstanding historical architecture throughout the town, including the world-famous mile-long pier, which is being restored, the beautiful Regency architecture in the Clifftown conservation area, the historic fishing village in Leigh-on-Sea and the award-winning Pier Hill development. Southend is steeped in history and is proud to showcase the beautiful architecture, with the new designs, including the Pier Hill development, fitting seamlessly into the town.

The profile of Southend will be raised significantly with a successful city status bid, thus changing the perceptions of Southend not only for the local population but also throughout the country—if those perceptions are in any sense negative. The economy of Southend will also benefit significantly if the bid is successful. Raising the profile of Southend in such a positive way will enhance the activities that are pursued in Southend, setting a positive example that will lead to securing further inward investment into the town. City status will appeal to foreign markets in particular.

One of Southend’s key economic sectors is tourism, and it will also receive a significant boost. There is often greater interest in visiting a city than in visiting a town. City status will give Southend the opportunity to highlight everything it has to offer to wider audiences, enabling the town to secure more vital income from tourism.

Southend has benefited from the significant regeneration projects that have been carried out, yet there are still ambitious plans for the town. With the reductions in public sector funding, new avenues need to be explored in order to secure investment for the town. A successful city status bid will not only raise the profile of the plans for the new museum and the redevelopment of the pier, but will also enable a successful fundraising effort among trusts and foundations. These projects will in turn generate more income and job opportunities for Southend and go a long way to enhancing civic pride and aspiration among local communities.

I am puzzled by the fact that there are 66 cities, but not one in Essex. I am puzzled that Southend, whose population of 164,000 and growing is the biggest in Essex, is not already a city. On every count, Southend meets the criteria for city status. I very much regret that our bid in 2002 was unsuccessful, but a decade later I hope that this Minister will accept the wish that Southend wanted me to pass on to him tonight, which is that he be Southend’s Valentine.

20:45

[The Parliamentary Secretary, Cabinet Office (Mr Mark Harper)]

It is tempting to begin by saying, “With an offer like that, how can one possibly refuse?” However, I will have to disappoint my hon. Friend the Member for Southend West (Mr Amess), at least on the immediate offer to be Southend’s Valentine.

The Government have noted with pleasure the considerable interest of towns throughout the United Kingdom in entering the competition for city status to mark the Queen’s diamond jubilee in 2012. My hon. Friend has certainly used his opportunity to explain to the House the considerable merits of Southend, and that is entirely understandable. Clearly, if he ever ceases to be a Member of Parliament, he will be able to get a job as a senior tourism officer for his borough, given that he set out a kaleidoscope of things it has to offer. Other hon. Members will have noted this Adjournment debate and those whose constituencies are bidding for city status will doubtless seek an opportunity of their own, so you will have many more interesting bids to hear about, Madam Deputy Speaker. My hon. Friend used this opportunity not only to set out Southend’s case for city status, but to remind us that Southend provides a number of training opportunities for Olympic teams. He used this debate to set those out and remind other countries of the opportunities for them in his constituency.

I am sure that my hon. Friend will understand the reason why I have to disappoint him, which is that Ministers must remain impartial in this competition. Indeed, during Prime Minister’s questions the hon. Member for North Antrim (Ian Paisley) tempted my right hon. Friend the Prime Minister to support the campaign for Ballymena in County Antrim to win the competition. Although my right hon. Friend recognised the powerful case that had been made, he, too, had to remind an hon. Member that Ministers must remain neutral. That is the reason why I have to decline my hon. Friend’s kind invitation on this Valentine’s day.

The reason fairness is so crucial in this competition is that this competition does not have any criteria in the usual sense of that word. City status continues, in this country, to be an honour granted by the sovereign—nowadays, following a competition—as a rare mark of distinction. Reasons for success or failure in these competitions are never given, and city status is not and never has been something that towns claim by ticking off a list of hard and fast criteria. The reason for that is fairly obvious. As we see when we look at a list of cities, any attempt to draw up a list of criteria would run into difficulties immediately. Some cities in the UK are large and some are small. Some have conspicuously attractive and well laid out city centres, whereas that applies less to others. Some have wonderful cathedrals, universities, airports, underground systems or trams, and some may lack those physical features, but boast a vibrant cultural life. My hon. Friend not only drew attention to the physical characteristics of his borough, but spent some time setting out its cultural attractions.

[Mr Amess]

Will my hon. Friend allow me to add something? I forgot to say that when Southend approached me about the bid, I immediately said, “Fine, but we don’t have a cathedral.” We have a number of churches that could perhaps be cathedrals, but will my hon. Friend confirm that a town does not need a cathedral to become a city?

[Mr Harper]

I can confirm that. There is no checklist of criteria that people can tick off to qualify. The guidance for entries to the competition is on the diamond jubilee pages of the Department for Culture, Media and Sport website. It lays out the type of information that towns bidding in the competition should include. They should give a flavour of the town and should lay out its interesting features and why it should become a city, as my hon. Friend has done this evening. The Government have said that we would like city status—and a lord mayoralty or lord provostship under the parallel competition among existing cities—to be conferred on a vibrant, welcoming community with an interesting history and a distinct identity. Those are the characteristics we have set out, but there are no hard and fast criteria. It is for towns to put together bids that spell out what makes them special.

If a town considers that it deserves to be granted city status, it should look at the guidance on the Department’s website, and if it confines its case to the broad limit of 100 pages set out in the guidance its entry will be welcome. All valid entries received by the closing date of 27 May 2011 will be carefully and fairly assessed on their merits. The Government look forward to receiving strong entries from a variety of local authorities, including Southend, and to announcing the new city in early 2012.

My hon. Friend said that his mother Maud is a champion of Southend’s bid for city status and that she will celebrate her 99th birthday soon. Whatever happens with Southend’s bid, I look forward with him to his mother’s receiving a communication from Her Majesty the Queen on her 100th birthday in 2012. So, whatever happens, there will be something to celebrate in Southend for my hon. Friend and his mother Maud.

Question put and agreed to.

20:52

House adjourned.