Westminster Hall

Tuesday 15th February 2011 Westminster Hall

Tuesday 15 February 2011

[Mr Andrew Turner in the Chair]

Fuel Prices

Tuesday 15th February 2011 Westminster Hall

Motion made, and Question proposed, That the sitting be now adjourned.—(Mr Dunne.)

09:30

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

Good morning, Mr Turner, and I offer a warm welcome to what appears to be a very well attended debate. I am delighted to have secured this debate, and I am particularly pleased about its timing, which is before the Budget on 23 March.

This debate is timely, because it examines the impact of fuel duty, particularly in remote rural communities such as those in North Yorkshire. I will just set the scene by outlining the prices as of yesterday, 14 February 2011. People would be hard pressed to buy unleaded petrol in Thirsk, Malton or Filey for less than £1.30 a litre, and they would be hard pressed to buy a litre of diesel for less than £1.36 a litre.

I want to spend some time outlining the impact of these prices on rural communities, and I also want to set out why I fear that the diesel duty differential is affecting rural communities so harshly. Finally, I want to discuss the options to address this issue.

It is no secret that oil prices have reached a record high—barrel prices have reached $100. The fuel duty and VAT element of petrol prices both impact on drivers and as many people regard those elements as a form of double taxation, their effect on petrol prices is highly inflationary. It is generally thought that 20% of the running costs of a truck are accounted for by the cost of fuel duty at this time.

There is a high dependence on cars in rural areas, where we have limited public transport and where the car is a necessity for many people, particularly the elderly, those on fixed incomes and those with young families. In the words of the AA, in rural areas those on lower incomes are already being priced out of the market.

[Harriett Baldwin (West Worcestershire) (Con)]

I congratulate my hon. Friend on securing this extremely important debate. I represent a rural area myself. Does she agree that there are so few petrol stations in rural areas that the existing rural petrol stations can charge much higher prices than petrol stations in towns?

[Miss McIntosh]

The problem is that the sale of fuel in rural areas tends to be less per vehicle. I have learned that people tend to “tank up” for two or three weeks at a time. That has an impact, as rural petrol stations do not face the competition for customers that exists in urban areas.

A particular concern for North Yorkshire is that we have had extremely adverse weather this winter, particularly in November and December, and in addition we have a particular reliance on 4x4 vehicles. I want to declare an interest, in that I run a partial 4x4 vehicle to ensure that I can access parts of my constituency that I would otherwise be unable to reach. We know that 4x4 vehicles are more fuel-efficient than they were in the past. However, for the reasons that I have given, diesel prices at the petrol pump are higher than they were in the past.

In preparing for this debate, I was surprised by diesel prices in the UK. I had understood that they were the second highest in Europe. In fact, the helpful note provided by the Library for this debate shows that the UK has the highest diesel prices in the EU, despite a pre-tax price that is among the lowest in the EU. The differences in diesel duty rates in EU countries are incredibly stark compared with those for petrol. In some member states, where there are lower diesel duty rates, the diesel discount is nearly 50%. By contrast, the diesel duty rate in the UK is 18p a litre, or 47%, higher than in any other EU country and more than 25p, or 80%, above the simple average for the other 26 member states. It is shocking that the higher cost is passed on to those of us who live in rural areas.

[David Simpson (Upper Bann) (DUP)]

This is a very important subject, which is shown by the number of hon. Members attending this debate. In Northern Ireland, the rise in duty on fuel is obviously a major concern, given that we have a land border. The rise in duty causes major difficulty for all our constituents. However, I am sure that she will have seen reports in the press today that the EU may try to stop the duty and the VAT on fuel from being reduced. I am sure that that is a major concern for her constituents, as it is for mine.

[Miss McIntosh]

When the Minister responds to the debate, he may want to touch on that issue. Also, when I come to put my case for a rural rebate, I will acknowledge that there might be problems with regard to the EU directive in this sector.

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

I wonder whether my hon. Friend has examined the impact of rising fuel prices on micro-businesses. In our rural communities, micro-businesses are key, and the Federation of Small Businesses has estimated that rising prices will cost each one of these businesses, which are already sorely pressed, an extra £2,000 every six months.

[Miss McIntosh]

Some 6,000 small businesses in Thirsk, Malton and Filey will be affected, and I congratulate the FSB on its excellent campaign.

The impact on farmers—across north Yorkshire, farming is often the main business, and it certainly is in my constituency—of rising fuel prices has been catastrophic. That issue has pushed up the cost of producing livestock and the cost of taking livestock to market. Moreover, for those who train racehorses across North Yorkshire, many of whom are based in Thirsk and Malton, rising fuel prices have pushed up the cost of feeding the horses and the cost of transporting horses and jockeys to races.

[Jim Shannon (Strangford) (DUP)]

As the hon. Lady has said, rural communities in particular are suffering, and the area that I represent, which is very much a rural community, is one of those that has suffered most. Does she agree that concerns have been expressed during the past few months, particularly since Christmas, that some retailers were taking advantage of the situation in relation to the price increase? And does she also agree that there is perhaps a role for Government in relation to monitoring, controlling and regulating that situation?

[Miss McIntosh]

I am mindful of the point made by the hon. Member for Upper Bann (David Simpson) about the land border between Northern Ireland and southern Ireland. In the European Union, the dream place to live as far as fuel duty is concerned is Luxembourg. I am reminded of the queues that I saw on a road in Luxembourg, which existed because the fuel duty is less in that country. So I am very mindful of what the hon. Member for Upper Bann has said and, as I said earlier, I hope that that is an issue that the Minister will respond to, because rural communities seem to be bearing the brunt.

RAC analysis of the survey “Family Spending 2010” shows that spending on transport for the average household was £58.40 out of a total weekly expenditure of £455. Transport is the biggest single item of expenditure, bigger even than food, rent, mortgage or entertainment. Obviously, ancillary services will suffer if transport costs continue to rise incrementally.

There are four options to discuss today. The first is not very realistic—it is the option to do nothing and maintain the status quo. Personally I do not believe that that is a sustainable or realistic option. Obviously, my preferred option is for the Government to pause on 1 April and not to impose the 1p rise in duty. Of course, that increase will be the eighth duty increase to have been proposed by the previous Labour Government since November 2008. I am mindful of the fact that if it is imposed, it would add at least 4p more to petrol and diesel pump prices, on top of the 1p increase in duty in January and the VAT increase as well.

The perhaps more controversial proposal to introduce a fuel duty stabiliser was first put forward by the present Chancellor when in opposition. As shadow Chancellor, he launched a fairly full consultation in July 2008 on a fair fuel stabiliser, a mechanism to ensure that when fuel prices go up fuel duty falls:

“So as the price of fuel rises, the amount of VAT charged also rises. This means that when the price of fuel goes up, the amount of tax charged on it also rises…The current system also makes the public finances more unstable. This is because, when oil prices rise, the Government receives an unexpected windfall from taxes on North Sea Oil production. And when oil prices fall, the Government suffers an unexpected shortfall in revenues.”

I take some comfort from the fact that the Chancellor, in his June Budget, said:

“We are examining the impact of sharp fluctuations in the price of oil on the public finances to see if pump prices can be stabilised, and we will also look at whether a rebate for remote rural areas could work.”—[Official Report, 22 June 2010; Vol. 512, c. 178.]

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

The hon. Lady has set out the virtues of a fuel tax stabiliser, but does she agree that that still does not address the differential between prices in rural and urban areas, which makes it so difficult for the small businesses that I represent?

[Miss McIntosh]

I entirely take that point, and it is why one proposal that I will come on to is the rural rebate discount. I have no doubt in my mind that the fault for where we are lies very firmly at the door of the outgoing Government, and in particular of their Chancellor. In his 2009 Budget, he announced tax increases on roads, fuel, alcohol and tobacco, and set out fuel duty to increase by 2p per litre in September of that year, and then by 1p per litre above indexation each April for the next four years. The decision to increase duty rates in real terms was projected to raise £3.6 billion over the next three years from 2009-10 to 2011-12.

[Mr David Hanson (Delyn) (Lab)]

Will the hon. Lady tell us whether she voted for the recent VAT rise?

[Miss McIntosh]

I will come on to that in a moment, but it would be nice to hear from the shadow Minister whether he feels any pain or anguish, or any need to apologise for where we are, particularly as many hon. Members from all parts of the House have today said that we are where we are. We need an all-party approach to get out of this, and since we know for a fact, from reading Lord Mandelson’s book, that the Labour party, had it remained in government, would have been committed to increasing VAT, we will not take lectures from Labour Members today.

Motoring organisations and some road hauliers have set out their difficulties with a fuel duty stabiliser, and perhaps the Minister in her response will tell us what stage we are at concerning the assessment reached by the Office for Budget Responsibility about how the stabiliser will work in practice. Were a stabiliser to be introduced, is she convinced that the reduction would be passed on to the motorist? If the reduction remained with the oil companies, there would be no advantage in introducing a stabiliser.

Turning to the rebate for remote rural areas, I realise the difficulties in persuading the European Union of such a necessity, but having practised the art, both as a European Community lawyer—now a European Union lawyer—and during 10 years in the European Parliament, I am more well-versed than most in how to persuade the European Union and our fellow member states, many of whose citizens live in equally remote areas. People in rural areas should be entitled to a discount on the rate of duty.

With fuel duties, the principle would obviously have distribution effects, given the greater reliance in rural areas on both private and public transport. We can have a debate and an argument about how the reduction in duty can best be administered, and I realise that a differential duty would require special dispensation, but the UK, in looking to apply a derogation for a lower rate of duty for petrol sold in one area—Scotland, for example—fails to recognise areas such as Northern Ireland, where there is a land border with an area selling fuel at a lower rate of duty. Also, remote areas that are particularly rural and do not have large centres of population, where people do not have schools closer than 13 or 15 miles and have to travel some distance to do a weekly shop, will be particularly penalised.

[Andrew Bingham (High Peak) (Con)]

My constituency is very rural and contains a huge amount of quarrying. The quarries are remote, and most of the stone is carted out by road, with hauliers paying high fuel prices. Stone is a building block for much of the economy, so does my hon. Friend agree that if there were a rural consideration, the benefits would descend to people in non-rural areas?

[Miss McIntosh]

My hon. Friend has provided an appropriate example of a business that depends heavily on road haulage to get its product to market, and I am sure that it would be a particular beneficiary if the fuel duty stabiliser or a rural rebate were introduced.

Domestic fuel is a subject that appears in my mountains of correspondence. One or two people have expressed concern about the possible operation of a cartel, particularly in the north of England—Yorkshire, the Humber and the north-east—in domestic heating oil prices. I welcome the fact that the Government have grasped that issue and are looking into it through, I understand, Ofgem, but I hope that one of the purposes of this debate is to push at what might be an open door, to press the Government to, at the very least, examine both where we are and how we got into this difficulty. My constituents have expressed their concerns in fairly strong terms. One stated:

“I like many other people in this country am fed up with having to pay over the odds in tax for what is to many people an absolute necessity rather than a luxury”.

Another wrote:

“I am the owner of a small business and am extremely concerned about increases in fuel duty, which have hit the small business sector the hardest.”

[Andrew George (St Ives) (LD)]

I congratulate my hon. Friend on securing this important debate. I have written to the Economic Secretary about the pilots that were announced last October for the proposed rural area rebate. EU Finance Ministers’ approval will be required before we can even get the small pilots going on the Isles of Scilly and in Scotland, which will take some time. Does she agree that it is really important that the scheme is rolled out as quickly as possibly, and that the Government need to go a stage further and indicate which rural areas they intend to cover?

[Miss McIntosh]

I am taken by my hon. Friend’s arguments, but we learned a lot from the smash-and-crash approach of the Labour Government, who announced that they were introducing a 1p increase due to the state of the economy and the fact that the price of oil was $149 a barrel. The Prime Minister’s response to my question showed a responsible attitude. We need a responsible, well-thought-out approach in the Budget. Then we can have pilot schemes in North Yorkshire, Cornwall, Scotland and Northern Ireland.

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

I support my hon. Friend’s argument. Although the Financial Secretary has said that far-flung areas of Scotland might qualify for rural pilots, North Yorkshire is the most rural county in England and must surely qualify for a pilot if the Government decide to run some.

[Miss McIntosh]

I am delighted that my hon. Friend and neighbour has put the case so eloquently. Rural communities, such as those in North Yorkshire, are suffering, and they deserve special attention.

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

On perceived price fixing between local retailers, I wrote to several major supermarkets in my area before the general election. Fuel is 7p a litre more expensive in Rossendale than in the immediately adjoining town of Bury. The supermarkets wrote back to say that there is a small geographical area in which they fix their prices. Is that not a case of major retailers charging people what they can bear rather than what is necessarily fair?

[Miss McIntosh]

Several hon. Friends have made comments that I hope the Government will take up, not least of which is the fact that some small independent retailers who try to offer fuel in rural areas are being priced out of the market because suppliers 20 miles away undercut them substantially. All those issues are worthy of further investigation.

[Andrew George]

Will my hon. Friend give way?

[Miss McIntosh]

I am drawing my remarks to a conclusion.

I believe that we are pushing at an open door, and I take this opportunity to press the Government to change. Doing nothing is not a realistic option. The price of fuel is one of the most pressing issues facing those in rural communities. The small businesses that drive our economy, including the 6,000 small businesses in my constituency alone, are suffering particularly. Fuel forms a large part of individual household income, and it is extremely inflationary in pushing up the price of everyday items. UK hauliers already pay as much as £12,000 a year more than some EU competitors. As I have said, we now have the highest duty on diesel, yet our diesel is the most cheaply produced.

I make a plea to the Minister to stop the 1p increase on 1 April, consider seriously a fuel stabiliser and a remote rural rebate or discount, which would have a favourable impact on many rural constituencies represented in this Chamber, and address the discrimination against rural dwellers endemic in current pump prices. The differential between diesel and petrol is now unacceptable and must be addressed. I urge the Minister to respond in the most favourable terms possible for the good of families, farmers, the elderly, those with young children, small businesses and all of us in rural areas who depend on cars.

09:54

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

It is a pleasure to serve under your chairmanship, Mr Turner. I congratulate my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) on securing this debate. The issue is important for those of us who represent rural communities, as the large turnout of hon. Members from the two coalition parties and Northern Ireland indicates. However, the right hon. Member for Delyn (Mr Hanson) casts a lonely figure on the Labour Benches. I also note that no Scottish National party Members have turned up, which is a scandal considering all the things the SNP is saying in the Scottish press. It shows that the SNP’s priorities are completely wrong.

Representing a sparsely populated rural constituency as I do, I am only too aware of the impact of high fuel prices on people and businesses. I represent many islands of the Inner Hebrides. To give some examples, the price of fuel on larger islands such as Mull and Islay is typically 15p a litre higher than at a city centre supermarket, and on the smaller islands such as Coll and Colonsay, the price is usually about 30p a litre higher. That obviously has a great impact on people’s living standards and on anyone on the islands who is trying to run a business.

I was therefore delighted when the Government announced their intention of pursuing a pilot scheme under which a 5p per litre fuel duty discount would be introduced on many islands, including the Inner Hebrides. I know that the Government need EU permission to go ahead with the scheme, that it takes time to get such projects through the EU and that it is important that the Government get their proposals right, but I urge them to take the proposals through the EU as quickly as humanly possible. I hope that there will be no objections in the EU. Several other countries—Greece, Portugal and France—have similar discount schemes on their islands, so I hope there would be no obstacle to our island pilot scheme. However, as other hon. Members have said, it is not just on the islands that the price of fuel is high. It is the same in many rural parts of the country.

[Andrew George]

I am grateful to my hon. Friend, who is making an excellent case. My constituency, like his, would benefit from the proposed rural rebate, especially the Isles of Scilly, which have just 2,000 people. He is absolutely right that it should be a fait accompli at the EU level, because the principle is already established. The difference in price on the Isles of Scilly is much the same as in his constituency. Does he not agree that we must press Ministers not only to get the proposals through the EU as quickly as possible but to indicate where the pilot will be rolled out beyond the small areas that will benefit in the first phase?

[Mr Reid]

I agree. Some 6,000 of my 60,000-odd constituents will benefit from the pilot scheme, but I hope that it can be rolled out later to other rural parts of the country. However, the most important thing is to establish the principle. My hon. Friend will share my frustration that throughout the last Parliament, we proposed such a scheme every year in the Finance Bill and, although we often heard noises of sympathy from Labour Ministers, no action whatever was taken. It is important to establish the principle, which is why the pilot scheme is so important. Once the principle is established and is shown to work—Labour Ministers always said that it could not, in practice—we can prove it will work. It is important to establish the pilot and prove that it works. Then we can roll it out to other rural parts of the country.

On the coming Budget, the previous Government introduced the fuel duty escalator, which increased fuel duty by 1p over and above the rate of inflation. According to my calculations, that means that the tax on fuel would have increased by 4p in the coming Budget if Labour were still in power. Thankfully, they are not. I think we have established that any argument that fuel duty must increase for environmental reasons no longer stacks up. Market forces have already driven the price of fuel very high, which deters people from using their cars. Any further fuel duty increase would not help the environment; it would simply harm the rural economy.

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

It is easy for the coalition to knock the previous Government, and I have no objection to that at all. However, the coalition Government will be judged by what they do rather than what they say about the past.

I draw to the hon. Gentleman’s attention the fact that many rural dwellers do not use cars as a luxury. They use them because there is no alternative. Many of my constituents have no good local bus service and no train. We should bear in mind that they use their cars not out of luxury but from necessity. The Government say that transport sits at the centre of the rural economy; let them prove that they mean that.

[Mr Reid]

I agree. In my own constituency, particularly on the islands, there are no trains, buses are few and far between, and it would not make sense for the local council to subsidise a bus service for only one person. That would be less beneficial to the environment than people using their cars.

I agree that it is easy to knock the previous Labour Government and that this Government must be judged on their record. It must also be pointed out that we face an enormous budget deficit and that the budget has to be balanced. I recognise that fuel duty brings in a lot of money for the Treasury, but I urge the Chancellor to find another way of raising revenue. Fuel duty discriminates against rural areas in a way that no other tax does, and almost any other tax increase to substitute for the fuel duty escalator would be an improvement. I will doubtless be considered a heretic at the Treasury for saying this, but why not put up the basic rate of income tax? The pillars of the Treasury may collapse at the idea that such heretical thoughts are still around. Every Chancellor for the past 30 years seems to have viewed bringing down the basic rate of income tax as a totemic symbol, but it is a much fairer tax than fuel duty because its impact is equally felt throughout the country, whereas fuel duty impacts far more heavily on rural areas. I therefore urge the Chancellor to abandon the fuel duty escalator policy that he inherited from the previous Government, and raise any other tax in order to balance the budget.

In conclusion, let us get the islands’ fuel duty pilot up and running as soon as possible, and abandon Labour’s fuel duty escalator in the Budget.

10:01

[Ian Paisley (North Antrim) (DUP)]

I, too, congratulate the hon. Member for Thirsk and Malton (Miss McIntosh) on securing this important debate. I am delighted that we have the opportunity to talk about the issue and that the Minister is present to listen to the concerns being raised, to which I hope she will be able to respond positively—if not today, then at least in the Budget.

In The Daily Telegraph in January, Boris Johnson wrote the immortal words that

“when it costs more to fill your tank than to fly to Rome, something is seriously wrong.”

I say a profound “Hear, hear!” to that—there certainly is something seriously wrong when it costs less to fly to Rome than to drive to Cullybackey in my constituency. Although that is a humorous point, it is—like all such humorous points—a telling one. The pips are now squeaking throughout this country, and none more loudly than in rural parts. Many hon. Members have already indicated that the car is not a luxury for people who live in rural areas. The hon. Lady made clear the necessity for four-wheel drive vehicles in rural parts of these islands. They are absolutely essential. That has to be driven home to the Government, who live mainly in cities. They have to recognise the needs of the rural community.

I say a huge “Hear, hear!” to the words of the hon. Member for Argyll and Bute (Mr Reid), who spoke about an island pilot scheme. I am glad that I live on an island—it is called Ulster—and I hope that such a pilot scheme will apply there as well. I flew today from the mainland of Ulster to this island to participate in this debate, so I hope that there is recognition for a fuel stabiliser from my island as well as the hon. Gentleman’s island. It is critical. Parts of England, Wales and Scotland have remote rurality, but if ever such remoteness was multiplied—there are a channel and seas between us—we are on the periphery of the periphery. On that basis alone, we deserve some sort of recognition for our rural areas and recognition that help will be given.

I was delighted to see in the agreement that formed the new Government recognition that something was going to be done to address inflated fuel prices. I am sure that, if we cast our minds back to the election, we would all recall that fuel prices were exceedingly high and that our potential and actual voters said on the doorsteps, “You have to do something about fuel prices.” That lost momentum—it is almost as if the car is no longer filled with fuel and has stalled. Now that prices are back up, as the hon. Lady has said, to 136p—15p higher in parts of Scotland, and 10p in parts of Northern Ireland—surely the momentum must be put back into the issue and the Government must grasp the nettle.

[Jim Shannon]

Since the coalition came into power last year, fuel has risen by £2.35 per tank. Does my hon. Friend think that the onus is on the coalition Government to address that issue?

[Ian Paisley]

The hon. Lady has rightly indicated that there are four options. As a member of an Opposition party, I am prepared to leave it to the Government and say that it is up to them to come up with a solution. Let us hope that we can get something with cross-party and cross-House support, and that we can drive it forward so that it makes a difference for the people who send us here. I think that we can all agree on that.

[David Simpson]

While we are having a go at the coalition, I might as well join in. Does my hon. Friend agree that the coalition needs to realise that, where Northern Ireland is concerned, millions upon millions of pounds of revenue are being lost to the British Exchequer every single year the longer this goes on?

[Ian Paisley]

Yes, that is an excellent point, and I want to comment on the issue of smuggling later. I emphasise the points made by other hon. Members that the Budget gives this Government the opportunity—I hope that they will take it and listen to the concerns—to come up with a solution that we can get behind and support.

[Gavin Williamson (South Staffordshire) (Con)]

The hon. Gentleman speaks eloquently about the importance of dealing with the issue. If the Government are able to deal with it, will the Democratic Unionist party and others march through the Government Lobbies in support of the Budget?

[David Simpson]

We are well used to marching.

[Ian Paisley]

At home, if I march, I need to fill in an 11-bar-one form. The hon. Member for South Staffordshire (Gavin Williamson) may not be familiar with that form, but here I have the luxury of parading anywhere I want. If I support the Government’s proposal, I will happily lead the charge through the Lobbies and he will follow in my wake.

On average, petrol at home is about £1.30 or £1.35 per litre, depending on where it is bought. Of that maximum £1.35, 80p is a combination of taxes. People have talked about holding back the 1p increase in April, which will make a difference of about 2p or 3p at the pump, but we need something that will make about 25p difference at the pump if we are going to get not only the rural community, but hauliers and local industry moving again, and people with get up and go to recognise that the economy is starting to breathe and move again. The Government have a serious duty to address that.

My hon. Friend the Member for Upper Bann (David Simpson) has touched on the issue of smuggling. High prices encourage smuggling, and on my island it is incredibly easy to smuggle, because we have a land border with another nation state which has a different fuel price. If ever there was an open invitation or open goal to the smuggler, that is it. The Minister will know that in Northern Ireland alone—these figures are staggering—£200 million is lost each year to Her Majesty’s Revenue and Customs because of smuggling. In the Republic of Ireland, a further €140 million is lost to their Exchequer because of fuel smuggling. On top of that, environmental waste and damage are caused as a result of removing the various tracers and markers from fuels. That causes untold environmental pollution and harm.

If we have a fuel stabiliser, or the fuel price differential is altered and brought in to recognise those differences, the opportunity to smuggle and to cause crime and waste will no longer exist. We are only encouraging crime if we do not address the matter. That is another solid reason why the Government must get behind dealing with the issue of having fair fuel prices. They could, of course, do so through a taxation cut.

[Dr McCrea]

Does my hon. Friend agree that people are looking for clarity about how we arrive at the price of our fuel in the first place? Soaring prices at the petrol pumps are causing anger, particularly bearing in mind that many of the companies concerned recently announced massive increases in profits.

[Ian Paisley]

Clarity is important. Yesterday, I took the opportunity to check how the price differential is made up. Some 58.9p on every litre is duty, and a further 22.3p is VAT. The price of the actual commodity—whether it is diesel or petrol—is currently around 46p. Then, of course, the person who is pumping the fuel has to make a small profit, which is usually a matter of pence—about 5p. There is something seriously wrong when 80p of that is all tax. As I have said, it is getting to the point when people in remote rural communities can no longer get around. The closure of petrol stations in my constituency means that it is 16 miles between some villages and the local petrol station. If someone runs out of fuel, they are stuffed. People have to start thinking ahead, buying fuel and bulk storing it. That is not safe; it is hazardous. We must recognise that we are putting immense pressures on our rural communities. Such a situation must be addressed.

I leave hon. Members with those thoughts. As I have said, like many hon. Members, I am prepared to leave it to the Government to come up with a solution that we can get behind. I am glad that the Minister is here—I can see that she is taking notes—and I hope that she is able to give us some encouragement at the end of the debate. I look forward to the Budget, which will be the opportunity for the Minister to respond.

10:12

[Simon Hart (Carmarthen West and South Pembrokeshire) (Con)]

I congratulate my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) on securing this important debate. I apologise to her, the Minister and yourself, Mr Turner, for possibly having to leave before the Minister has completed her wind-ups.

I shall try to bring together some of the comments made this morning by mentioning two examples from my constituency that illustrate the problem we have. The first issue is something we have not referred to this morning: the cost of domestic fuel for purposes other than simply driving. I thank my constituent Colin Keen for raising that matter. I shall give a quick example. Between Christmas eve and about the middle of January, people who were tied into domestic fuel contracts with a company called Flogas had a 46% increase in their fuel prices. That is an unsustainable and unjustifiable increase, which has a considerable indirect and direct effect on the rural community and the rural business network. It would be helpful for the Minister to address the problem experienced—at least in my part of the world—by a number of householders who are on large estates. They are tied into lengthy fuel contracts that they cannot reasonably or, in some cases, legally get out of. Their domestic fuel prices are apparently being adjusted without any reference being made to them and without them being able to do anything about it at all.

The second example I shall refer to is that of another constituent, Mr Barry Jones. He has studied local supermarkets and has pointed out that we are not necessarily getting a fair crack of the whip from them. He highlighted that Tesco in the rural town of Carmarthen is charging different prices from Tesco in the more urban setting of Llanelli down the road. There is up to 4p a litre difference. Tesco in Carmarthen argues that it is setting its prices in line with local suppliers. That is fundamentally untrue; it is not. It is setting its price at a rather different rate. I cannot help but think that such a situation is slightly ironic when I see a Tesco tanker with a slogan on it that reads: “Why pay more?” The answer is: because we have no choice. Perhaps we can address the grip that the five big supermarkets seem to have over every aspect of our lives, particularly in rural communities.

My hon. Friend the Member for Thirsk and Malton made a further point in her introductory comments about the overall inflationary effect of the issue on rural communities. What we are seeing—and what was being reported on the BBC this morning—is that there has been a much more profound increase in the price of things we need over and above the price of things we want. Fuel hikes have a very different downstream impact on the things we need compared with the things we occasionally want.

That brings me neatly to a further comment about the definition of rurality, which has been touched on in different ways by a number of hon. Members this morning. Several years ago, I tried to get a proper definition of rurality and, perhaps rashly, I asked the pollsters Ipsos MORI for one. It did not have a definition of rural and the people I asked simply said to me, “Well, it’s anything that isn’t urban.” If I may respectfully say so, that is a particularly unhelpful suggestion. Rurality comes in very different forms: isolated, very isolated, fairly isolated and, simply, rural. We need a clearer indication from the Minister and perhaps other interested bodies of what rurality and isolation really mean. I can foresee that some difficult choices and decisions will have to be taken and that they will be based on a line on a map that might mean everything to a bureaucrat, but that will mean absolutely nothing to those of us who live and breathe rurality every day. We might have constituents who fall the wrong side of a line and are prejudiced against—I accept that that might be unintentionally—as a consequence. That definition is important.

We have been told that up to 600 filling stations are closing every year, which means that people have to travel that much further to get their essential fuel. We are told that local authorities in certain parts of the country are cutting back on their rural bus services because of the increase in fuel prices and the downstream effect of that. However, we cannot lose sight of the direct and indirect effects of the issues discussed in this morning’s debate. The matter is affecting directly and indirectly pensioners, care workers, volunteers and hauliers. I can think of two hauliers in my constituency that are based in isolated rural areas so that they can be close to the ports of Pembroke dock and Fishguard. They are in an ideal location, but they can pretty well do nothing about fuel prices. They cannot even go over to Ireland—the Republic—and get a better price. Such price increases are playing havoc with their cash flow.

[Roger Williams]

The hon. Gentleman’s hauliers, like my hauliers, suffer competition from people who come over the channel with a full tank of fuel and carry out transport business. That is a great disadvantage to our hauliers, who have to pay the full amount applicable in this country.

[Simon Hart]

That is a good point. I think I recently read a coalition announcement that a surcharge might be applied to those foreign hauliers. It is worth remembering that hauliers cannot function without three things: vehicles, drivers and fuel. We cannot simply turn around and say that they have to address their overheads in the way we might do so with other businesses. They cannot function without those three vital ingredients.

I shall finish by touching on the big society—I think I have read about that in the news in the past 24 hours—and the social mobility that will come as a result of that. Every hon. Member who has spoken this morning has mentioned the effect of fuel prices, whether domestic or for vehicles, on their daily lives and on how they conduct their businesses. Every one of those observations could have been a direct reference to the big society. We cannot deliver the big society in rural Wales or rural Britain under the current conditions. There are people out there for whom the big society has been a part of their daily life for years, but it is becoming increasingly difficult to be champions of the big society because of fuel duty.

I am not high enough up the political food chain—nor, indeed, are other hon. Members here—to make these decisions, but they need to be made and, as an hon. Member said, they need to be made urgently. Whether it is a rebate, whether it is a stabiliser, whether it is a freeze on duty, or whether it is a combination of those things, the most pressing need for rural Britain if it is to be able to remain in business and deliver the big society is clarity and urgency. I hope that the Minister can address them both this morning.

10:20

[Sheryll Murray (South East Cornwall) (Con)]

I congratulate my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) on securing this debate. It is essential that we discuss this matter, because of its severe effect on constituencies, such as mine in south-east Cornwall. There is no doubt that high fuel prices affect everybody, but in our rural constituencies they have a disproportionate effect.

South East Cornwall has a large number of self-employed people, small businesses and people who have to commute, and we have a very poor public transport infrastructure. The railway timetables are such that often the train cannot be taken and bus companies find it increasingly difficult to provide the service that is needed, so people rely on their cars. My constituents write to me time and time again about the cost of petrol. I stood at the general election on a manifesto that contained the fair fuel stabiliser. I hope that the Chancellor of the Exchequer will include provisions for that in the Budget so that my constituents, including businesses and the self-employed, are at least able to budget for a 12-month period, rather than have their profits decline continuously because of the high rise in fuel prices.

I echo what all hon. Members have said in the debate, but there is one issue that has not been addressed, which is the effect of current fuel prices on our shipping industry. I declare a special interest because my husband is a commercial fisherman. People do not seem to understand that, while our fishermen are able to reclaim the duty they pay, it has a detrimental effect—in fact, a disastrous effect—on their cash flow. There are fishermen in my constituency who go to sea in dreadful weather conditions, but do not secure any return from their catch because it all goes on fuel.

[Jim Shannon]

Part of the point expressed by the hon. Lady relates to fuel, but also to the price of the commodity being less than it was three years ago and to restrictions from Europe on days at sea. Those reasons, along with the fuel increase, are why the fishing industry is in dire straits today.

[Sheryll Murray]

I could not agree more, but I want to stick to the issue of the price of fuel, which is having an effect on our farmers, our hauliers, our fishing industry and on small businesses in my constituency. In South East Cornwall, most businesses are tiny and cannot stand the impact of increasing fuel prices on their cash flow for much longer—it cannot continue.

To sum up, Cornwall has a large number of residents who have no access to the mains gas supply, or other, cheaper alternative supplies of heating. The increase in fuel duty affects the ability of a lot of my constituents to provide heating in their homes.

[Dr McCrea]

Does the hon. Lady acknowledge that there is frustration in the community that, when a barrel of oil on the international market goes up, the price rises immediately, yet whenever there is a decrease, there seems to be a long period of time before the price deflates again? Is that not another issue that needs to be tackled by the Government?

[Sheryll Murray]

The hon. Gentleman sets out a very good case for the introduction of a fair fuel duty stabiliser, which would cushion that effect.

Finally, I would like to mention the rural rebate and make the case for the whole of Cornwall to become a pilot for the rural rebate. We already have convergence funding, so there is already recognition that Cornwall is a special economic area. I ask the Chancellor to ensure that Cornwall is considered as a recipient of a rural rebate.

10.26 am

[Glyn Davies (Montgomeryshire) (Con)]

Thank you, Mr Turner, for calling me to speak in this debate, which is of huge importance. I, too, congratulate my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) on securing this debate. This issue is probably more important and relevant to the problems facing my constituency at present than any other that I can think of, and it dominates a lot of conversations.

I intend to make a fairly short speech because hon. Members have raised most of the points I wanted to raise; I do not want just to repeat them. However, fuel duty is particularly important where I live for two main reasons. One is the absolute cost. As with a lot of rural areas, fuel is essential to us. We cannot just pick up a newspaper in a local shop; we have to drive to the shop. We cannot access any services without having to drive to them. That point is more relevant in a sparsely populated area than anywhere else.

The second issue is competitiveness, about which my constituency neighbour, my hon. Friend the Member for Brecon and Radnorshire (Roger Williams), made—twice, I think—an important point. Competitiveness is important because it affects not just transport hauliers from overseas but those in Britain. The position of small businesses and individuals where we live is incredibly difficult because of competition. The price of fuel is acting as an anti-regional policy that is persuading people to move out, simply because of cost. This is not about individual, large purchasing decisions; it is the accumulation of all the little things that everyone has to buy that makes living so much more expensive.

I do not live on an island, but Montgomeryshire, and Brecon and Radnorshire, are very sparsely populated. Most of the sparsely populated parts of Britain are probably represented here by hon. Members who have made interventions. We want something to be done, but I know perfectly well that that is much easier said than done. There are two issues that must be dealt with: we have to face up to the world market that has caused fuel prices to rise, and which we do not have any great control over; and there is the state of our public finances, which the Treasury has to deal with. We are in huge debt and massive interest payments must be repaid—that cannot be denied. To ask the Chancellor of the Exchequer to reduce taxation anywhere in the Budget is a difficult request, and a balance must be struck. However, we also know from what he has said previously that he is sympathetic on this issue. He has spoken about a fair fuel stabiliser in the past, and that is certainly one way to address it. I can see the question of the use of a fair fuel stabiliser giving rise to great difficulties, and I am certain that the advisers working for the Chancellor are looking at how those difficulties could be ironed out. I can see that there are problems.

The second issue, which interests me more because it is getting a lot of coverage, is one that many Members have spoken about today and which I would favour: giving some form of concession to the parts of the country that are deemed to be sparsely populated or rural, where the impact of the price of fuel is greatest. It is said that we are talking about a figure of only 5p per litre, and that the concession would apply only to the remotest parts of Britain. In that regard, I, like others who are present today, want to make a pitch for where I live. Rural Wales is sparsely populated, and if we are to start this initiative in the remotest parts of Britain—that is what is being discussed—and if the Chancellor has to negotiate with the European Union on how a pilot scheme might be introduced, I hope there will be an early roll-out to constituencies such as mine, where it might make a difference.

[Roger Williams]

My hon. Friend does not need my help—he speaks with great experience and passion on this matter—but some people consider Cumbria the most sparsely populated area in England, although, as he and I know, Powys is four times more sparsely populated. That may add some strength to his bid.

[Glyn Davies]

I am hugely grateful to my honourable neighbour, if that is a proper parliamentary term to use. No, I did not know that it was four times more sparsely populated. As he started to speak, I was intending to go straight to Google to find out the relative levels, but I accept the figure he gives. We know that Powys is sparsely populated. In the past, there would have been Government initiatives to address the problem, but I cannot think of any current great initiative. We need one, and we need to be added to the list of places where fuel price alleviation might be provided.

I wanted to make this contribution, first, because the issue is hugely important to my constituents, and, secondly, to encourage the Chancellor to recognise in his Budget that it is one of the greatest problems facing the remotest parts of rural Britain. The insidious impact is, as I described earlier, an anti-regional policy that makes it far more difficult to bring development to the remotest parts of our country.

[Mr Andrew Turner (in the Chair)]

I call Andrew Bingham. You have until 20 minutes to 11.

10:32

[Andrew Bingham (High Peak) (Con)]

Thank you, Mr Turner. I, too, congratulate my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) on securing this debate. Much of what needs to be said has already been said, but I would like to make some quick points on rurality.

There are certain goods that can come only from rural areas. I have alluded to stone from quarries, and there is also milk from our farms. Such goods have to go into urban centres, so the people who transport them are based in rural areas. Big haulage contractors are based in High Peak because that is where the product is. The impact on small businesses based in rural constituencies has already been mentioned, and, if we are not careful, the price of fuel will drive such businesses away from rural areas into urban areas, thereby accelerating the demise of rural towns.

The Ferodo brake linings factory is in my village of Chapel-en-le-Frith. Shops in and around the village exist on the back of that factory and the people who work in it. If we drive such companies into urban areas, our small towns will suffer.

The Countryside Alliance has produced statistics showing that people who live in rural areas spend a higher percentage of their income on fuel because of the lack of public transport. Since I was elected to this place, I have been impressed by the transport in London. There are buses and the tube—there are various ways of getting about that are not available to people in rural areas. The bus I use to come here runs every six minutes, but buses in rural areas run every half hour or less, which makes getting around more difficult. Consequently, people spend more of their income on private transport. I believe that the average rural resident travels about 8,700 miles on private transport, whereas it is about 5,000 miles for an urban resident. That equates to an extra £200 in tax in a year.

[Ian Paisley]

One bus in my constituency comes once a day, and another bus—a charity bus—comes once a week.

[Andrew Bingham]

I am sure that that is right, and I am sure it is the same in other areas. That brings me to considering the solution. I know that the Chancellor is looking at the issue—he said so in the House—and I understand that he is in a very difficult position because of the financial implications. We have spoken about concessions for rural areas. My concern with that is defining what is rural and what is not. I have various small towns and villages in my constituency, such as Glossop, which shares a boundary with Greater Manchester. It may not be considered rural, but one can go a few miles up the road to a little village called Sparrowpit which is very rural. Like my hon. Friend the Member for Carmarthen West and South Pembrokeshire (Simon Hart), I worry that a line will be drawn and people will fall on the wrong side of it.

The answer is the fair fuel stabiliser. I know it is a difficult issue, and I have great sympathy with the Chancellor and the Treasury team who have to determine how a stabiliser would be introduced. Perhaps we need to hold off on the duty rise that is due while we try to get it working. Many of us here are standing up for rural areas. I do not think that people in urban areas really understand how big an issue this is to those in rural areas who fill their car up perhaps two or three times a week if they have to drive here, there and everywhere, and how much that impacts on the household budget.

I thank you for giving me an opportunity to speak, Mr Turner, even though I had not notified you earlier.

10:36

[Mr David Hanson (Delyn) (Lab)]

I congratulate the hon. Member for Thirsk and Malton (Miss McIntosh) on securing this debate, which has drawn a great deal of interest. The fact that some 20 Members from all parts of the United Kingdom—Northern Ireland, Wales, Scotland and England—contributed to it shows how important the issue is across the whole of the UK. I confess that for a moment I felt like the 24th Regiment of Foot at Rorke’s Drift—I felt that I was surrounded by thousands of Government Members—but I was pleased that at some point the focus of the debate shifted to the Minister rather than the Opposition.

[Miss McIntosh]

I am delighted to see that the right hon. Gentleman has been joined by a reinforcement on his side. Does he think there is any reason for this issue registering so little in the interests of members of his party that no one else has turned up to participate in the debate?

[Mr Hanson]

I have hon. Friends who represent rural areas. I myself represent a rural constituency. In 2000, the well-known fuel dispute commenced in my constituency because of concerns over fuel prices—we have an interest in the matter.

My first point in response to what the hon. Lady said is that the previous Labour Government did try to address the issue. She will know that striking the right balance between taxation, the environment and affordability of car transport is critical, and that is why Labour, when in government, postponed fuel duty rises when the cost of petrol was high. In October 2008, we postponed the 2p per litre rise to help alleviate the pressures that we recognised were there.

When the fuel dispute took place in my constituency, petrol was around £1.06 to £1.07 per litre. In my constituency, it is now around £1.28 per litre—slightly less than has been mentioned today but a big difference—and, as Members have said, that impacts on businesses, schools, commuters and a range of issues generally. My first thought was, if that is the case, what have the coalition Government, who have had the opportunity to tackle the issue, done since last May? In an intervention, I explained to the hon. Lady that she voted for VAT increases which, according to the House of Commons Library, have added around 2.6p per litre to the price of petrol. Those are important issues. I do not want to focus on the negative, but we cannot get away from the fact that the price of petrol is higher now than it was when Labour left office, and it is higher because of the VAT increases for which she voted.

[Miss McIntosh]

Is the right hon. Gentleman denying that it was his Government’s policy, had they continued in government after the election, to introduce VAT increases which would have had a negative impact?

[Mr Hanson]

There is a range of issues. We would have had to see what we would have done. We had a range of plans to tackle the deficit, but, in my view, VAT is a regressive tax.

[Miss McIntosh]

That is a yes.

[Mr Hanson]

The hon. Lady might want to, but she cannot hide from the fact that her vote—and the votes of all hon. Members who have spoken today from the Government Benches—has added to the increase in the price of fuel since May last year. That is an uncomfortable fact for them, but that is what they have done. Again, I do not want to focus on the negative, because we have had some positive discussions. However, when attacked, I tend to fight back. Unfortunately, that point was made, so I have to reply on the record.

We have had a number of suggestions, all worthy of consideration. I will look at each in turn. The hon. Lady discussed the issue of the fuel duty stabiliser. The issue was raised during the election, and the hon. Members for South East Cornwall (Sheryll Murray) and for High Peak (Andrew Bingham) also touched upon it today. The fuel duty stabiliser involves some problems, so an explanation from the Minister as to where the Government are on their election pledge from last May would be worth while. The Government’s own Office for Budget Responsibility said recently that the idea of a fuel duty stabiliser is unworkable. I share that view, on behalf of the official Opposition.

In principle, the concept is simple: as oil prices go up, fuel duty will go down; and as oil prices drop, fuel duty goes up. The motorist, therefore, pays more or less the same for fuel and the Exchequer gets more or less the same in revenue. However, in reality, the suggestion is far from simple. On 14 September, the Office for Budget Responsibility published an assessment of the effect of oil price fluctuations on public finances, with the aim of informing the debate. The report found that a temporary rise in oil prices would have a negligible effect on UK public finances, while a permanent rise would create a loss. The Government would find introducing a fair fuel duty stabiliser difficult because, as the head of the OBR, Robert Chote, suggested a couple of weeks ago,

“a fair fuel stabiliser would be likely to make the public finances less stable rather than more stable”.

A 1% reduction in petrol duty would cost the Exchequer around £130 million. The fuel duty stabiliser, depending how it was operated, could cost between £3 billion and £5 billion of public expenditure. The stabiliser was a manifesto commitment, which the Conservative Government wish to carry out, but they need to explain how they will do so and how they will compensate for the loss to the public purse of such a sum. My rural constituents, as well as my urban constituents, will have to find that money from somewhere else, whether in public service cuts or extra taxation. The then Liberal Democrat spokesman, now the Secretary of State for Business, Innovation and Skills, said in opposition that he believed a fuel duty stabiliser would be “unbelievably complicated and unpredictable”, which the OBR has confirmed. We need an explanation of where we are. Is the fuel duty stabiliser still a live option? Do the Government intend to keep their manifesto commitments? What would the cost to the public purse be of the potential loss of income from the stabiliser? Since the election, all we have seen is a rise in VAT to 20%, which has increased petrol prices, not decreased them.

The hon. Members for High Peak, for South East Cornwall, for Montgomeryshire (Glyn Davies), for Carmarthen West and South Pembrokeshire (Simon Hart) and for North Antrim (Ian Paisley) suggested that we look at the idea of a rural derogation, which the Liberal Democrats proposed in their manifesto. The idea seems to have been adopted by the coalition. However, the pilot at the moment is simply for the Northern Isles and for the Isles of Scilly. We have also had representations today for the “island of Ulster”, as the hon. Member for North Antrim called it, as well as from Cornwall and mid-Wales—a very rural area, I know, as pointed out by the hon. Members for Brecon and Radnorshire (Roger Williams) and for Montgomeryshire—and from the hon. Members for High Peak, for Thirsk and Malton and for Skipton and Ripon (Julian Smith). Such areas should be included in such an issue.

How would the Government define a rural area, given the issues raised? Half of my constituency is extremely rural and half extremely urban. Throughout the Chamber, we have had discussion about where the border falls. The difficulties are real. First, why have the areas chosen for the pilot been selected? I could make a strong case for parts of Northern Ireland, where I served as a Minister, parts of mid-Wales, which I know very well, or parts of North Yorkshire.

[Andrew Bingham]

The right hon. Gentleman called for the rural derogation, which I am not against. However, that worries me, because I sort of agree with him. My constituency is rural, but includes two fairly sizeable towns, so where the lines are drawn would concern me. We could have that same problem of people shipping petrol across the lines.

[Mr Hanson]

The issues are real. Again, in response, can the Minister tell me why the pilot areas were chosen? What is the assessment of rolling out a rural derogation throughout the United Kingdom? What are the cost assessments for the pilot areas and, indeed, for the other areas bidding today? How do we change the current scheme of taxing oil when it leaves the refinery, rather than at point of sale?

[Roger Williams]

On people travelling to get cheaper fuel, the idea of a derogation is to equalise the price between areas, not that it is cheaper in rural areas than in urban areas.

[Mr Hanson]

As the hon. Gentleman knows, that still involves a cost. We have already seen great bids from a number of parts of the United Kingdom for the derogation to be applied.

Currently, tax on oil is levied on leaving the refinery, rather than at point of sale. The complex issues of a derogation involve not just fairness but also applicability and how to achieve the aims wanted on the ground. The Government must reconsider the real issues.

Finally, one of the big issues in the Chamber that has not been explored was touched on briefly by the hon. Member for Montgomeryshire: the role of the oil companies in the price of petrol. Shell will have made £1.6 million in profit during the hour and 10 minutes of today’s debate. Even after the cost of the Mexican gulf oil spill—£7.7 billion—British Petroleum made £1.8 billion in profit in the third quarter of 2010.

The Government have their responsibility for the price of petrol, but I am also interested to know what steps they are taking internationally about oil company profits—made, quite rightly, in part, from the cost of petrol. Are steps being taken to look at such levels of profit and at whether we can take action among Governments to make a difference? The issue has no easy solutions. We took action as a Government to reduce the price of fuel when it was under pressure. In the Budget, the Government have the opportunity to do the same with the proposed rise. I am interested in what the Minister has to say. The solutions proposed today are not all simple, applicable or desirable. We need to have cross-party consensus, and I appreciate that the Minister has a difficult job. She must now know what we knew in government: none of the issues are easy, without real pain to communities at large. I welcome hearing what she has to say.

10:47

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

It is a pleasure to serve under your chairmanship, Mr Turner. I also thank my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) for securing today’s debate. We debated the subject on the Floor of the House recently, but I very much welcome another debate today, because she has clearly raised an important issue.

The cost of fuel is a difficult issue for many families and businesses throughout the country. As I said, the House had an extensive debate last week and, again, we have had helpful contributions from Members throughout the Chamber today. I share the disappointment of my hon. Friend that no Labour MPs other than the shadow Minister participated on an issue that clearly affects all our communities.

In fairness, when we face such difficult times, the impact of fuel duty and fuel prices become even more critical for families and businesses. The Conservative party had recognised that in opposition. We have always acknowledged the impact of oil prices—how they feed through into fuel prices at the pump—to be a real challenge. The Opposition, as we heard again from the shadow Minister, still do not recognise the problem to be in need of solution. We do.

As discussed today, we talked about a fair fuel stabiliser, which I reassure the Chamber we are looking at actively. We take it seriously, and we are looking at how we can develop that policy, among others.

[Miss McIntosh]

I know that the Minister will be pressed to go further, but she will probably not be able to today. One of the coalition Government’s best selling points in the run-up to the election was that we always referred to factors such as rurality and sparsity of population. That was in all areas of life, whether delivering the big society or speaking about the everyday roles of individuals and businesses in rural areas. Will the Minister confirm whether we will go back to that? Do we need a fuel duty regulator? Many of the concerns raised during the debate were about how the reduction in cost would transfer to the motorist if a stabiliser was brought in. I hope the Minister will address the huge and significant differential between the prices of diesel and petrol at the pump.

[Justine Greening]

My hon. Friend raises an interesting point, and this debate has been an excellent opportunity for hon. Members to set out the challenge that fuel prices pose for their communities and businesses. It is difficult—and it would not be right—for me to pre-empt the coming Budget, but my hon. Friend sets out some of the broader issues. This debate is not just about how the oil price feeds through to the price at the pump, but about recognising that rural areas face a particular challenge. I say to my hon. Friend the Member for High Peak (Andrew Bingham) that people in urban areas do understand the impact of fuel prices—they face them too—but we recognise that there are additional challenges for rural areas.

As we have heard, public money is short and the deficit we inherited is unprecedented in modern times. The previous Government had no answers or real ideas—we have heard no ideas today—to tackle the mess that they created. There was something ironic about the note from the outgoing Chief Secretary to the Treasury that said, “There’s no money left.” In many respects, it was even worse than that; we were left with a deficit and debts.

It is worth running through the many rises in fuel duty that we have seen. There was a rise of 2p per litre on 1 December 2008; a rise of 1.8p per litre on 1 April 2009; and a rise of 2p per litre on 1 September 2009. A rise of 1p above RPI was announced in the 2009 Budget. That was phased in from April last year, with a second rise of 1p per litre in October. A range of future increases was announced in the 2009 Budget, one of which has particularly concerned hon. Members in this debate. In spite of all those rises, we picked up an enormous deficit and, according to the outgoing Government, there was no money left. That shows what an absolute mess they handed over which, as has been pointed out, places constraints on what we are able to do. However, we know that we must tackle that mess, and tackle it we will.

We have had to take difficult decisions. Nevertheless, in the midst of that we have taken steps to increase the personal allowance, which will rise by £1,000 from April this year. That will help families on the lowest incomes, and 880,000 taxpayers will be taken out of paying income tax altogether. Parents will be able to take advantage of increases in child tax credits, and pensioners will receive above-indexation increases in the state pension. We have managed to do something that the previous Government did not do in 13 years—re-establish the link between the state pension and earnings. Corporation tax for businesses is being cut from 28% to 24% over the next four years.

[Dr McCrea]

The Minister must acknowledge that those measures apply across the board and to those in urban areas as well as rural areas. Rural areas are being penalised because of the price of petrol, and we need something to deal with that issue.

[Justine Greening]

That is why I am about to talk about the fair fuel stabiliser and the rural fuel rebate pilot. We have tried our best to tackle the deficit, but the way to do that is to encourage growth, help business get back on its feet and take away tax rises and the jobs tax—it would have been catastrophic if employment had cost companies more. We managed to get rid of the worst effects of that, but there is a particular issue with fuel.

In opposition, we talked about a fair fuel stabiliser because we recognised the problem posed by oil prices in feeding through to the price at the pump. When we came into power, one of the first things we did was to ask the Office for Budget Responsibility to look specifically at how the price of oil affects our economy. It said that although there may be some tax receipt growth, higher energy and fuel prices do not help the economy—a point reiterated by many hon. Members. It pointed out that a rise in the oil price has a range of other effects on the economy and does not feed through into extra tax receipts in a straightforward way. People spend less money, goods become more expensive, and certain benefits increase as a result of a rise in oil price. Therefore, it is a difficult issue.

I reassure hon. Members that we are looking at a fair fuel stabiliser and at other measures to tackle the problem of fuel prices. There are a range of options, but we must ensure that whatever we do is fair and affordable. Tax is a matter for my right hon. Friend the Chancellor, and I would not be so presumptuous as to pre-empt him. He will update the House during the Budget, which is only a few weeks away.

The rural fuel duty rebate was mentioned. It is clear that changes to the fuel price have a particular effect on those who live in rural areas and, as we have heard, have a greater reliance on petrol and diesel and face significantly higher prices. That problem is exacerbated by the lack of alternative transport, and realistically for many people the car is the main way of getting around.

My hon. Friend the Member for Carmarthen West and South Pembrokeshire (Simon Hart) spoke about why the definition of rurality is so important. Interestingly, the EU does not have exact criteria to define rurality, but it will look at the rebate in terms of state aid, and take into account a range of factors such as the cost of transporting fuel, average fuel prices, public transport and access to petrol stations. It is able to look at the issue in a flexible way, which is helpful.

When we came into government, we announced our intention to introduce a rural fuel duty pilot. The pilot will deliver a duty discount of up to 5p per litre on all petrol and diesel, which will save some drivers in rural areas more than £500 a year. We are still looking at the exact scope of the scheme; today’s debate has shown that many hon. Members have particular concerns for their communities and the rurality faced by those communities. It is not as easy as one might hope to define what is rural and where a rural fuel duty might apply, but the pilot aims to get on with that process and work through those challenges. We want the scheme to go ahead in the Inner and Outer Hebrides, the Northern Isles and the Isles of Scilly, but we have not yet finished the exact definition of the scheme. Before it goes ahead, the scheme must get clearance from the European Union. Those discussions are ongoing and are currently at an informal level as that is the best way to proceed to ensure that the pilot scheme is approved. We will update the House further at the time of the Budget.

To conclude, the dramatic increase in world oil prices and the previous Government’s increases in fuel duty have pushed up prices at the pump. We understand the concerns of families and businesses across the country, and we are taking every action possible to help those most in need. At the same time, we must act responsibly and ensure that we tackle our record national debt. That is not easy; it is a difficult balance to strike and we are considering all options in the run-up to this year’s Budget.

Housing (London)

Tuesday 15th February 2011 Westminster Hall

11:00

[Jeremy Corbyn (Islington North) (Lab)]

I am very pleased that we have secured this debate on housing needs in London. There is a feeling of déjà vu about it, although the cast is smaller than usual for debates on housing in London. We have had many such debates and discussions and I suspect there will be many more, because the biggest single issue facing constituents of London MPs is housing problems, which affect just about everyone in every sector. I remain acutely disappointed by the Government’s policies in this respect and the response they have offered so far to the deepening crisis that people in London face.

Homelessness has returned to the streets of London and is increasing fast, as anyone walking around London late at night will quickly observe. I am talking about the numbers of desperate and destitute people sleeping in shop doorways, hanging round outside tube stations and sleeping over central heating exhaust vents. Indeed, the Evening Standard reported that a number of people had been found sleeping in rubbish chutes in west London. That is not a good advertisement for what is a very large, multicultural and diverse city in the 21st century—a city that sees itself as a world-class leader.

Other issues, which I shall go through in my remarks, include the costs of housing for people living in the private rented sector, the enormous shortage of council housing, and what I believe is something of a democratic deficit in the administration and development of housing associations.

Later today, a housing lobby will take place outside the House and probably also in Committee Rooms here. Many people who are council tenants and others will be making the very strong point that the desperate housing shortage in London and the rest of the country must be dealt with, that the market alone cannot solve the problem and, indeed, that the Government strategies, far from solving the problem, are making it considerably worse.

I shall say more about this later, but within the mix of housing in London, the difference with the rest of the country is that the national average for home ownership is about 70% and declining, whereas in London it is declining much faster and, in constituencies such as mine, the proportion of people living in and owning their own home hovers at about the 30% mark and falling. For my constituency and for most of central London, as my hon. Friend the Member for Hammersmith (Mr Slaughter) will testify—similar figures will apply in his constituency—the difference is the very large numbers of people living in private rented accommodation.

Let me first deal with the issues relating to home ownership in London. For the majority of people on anything approaching an average income, the idea of owning one’s own property in London is a pipe dream. They may have a chance of purchasing on a part-rent, part-buy basis—a shared-ownership scheme. However, in central London constituencies such as mine, people would need to have an income well above the national average—indeed, we are talking about an income of £40,000 or more—to get anywhere near meeting the mortgage requirements, if they can get a mortgage and if they can raise the deposit required. For the majority of people in London, unless they have a degree of inherited wealth from their parents or someone else, or access to the very large deposits required by banks and building societies, home ownership is an impossible dream.

Many people have opted to buy into leaseholds or shared ownership with housing associations, and there are deep concerns about the service charges imposed by housing associations and other holders of freeholds who sell on leases in their properties. There is a need for even greater transparency on capital works undertaken to improve those properties. Those of us who represent constituencies where there are a considerable number of leaseholders who have bought in on the right to buy, or bought from people who bought their flat under the right to buy from the local authority, know that there are constant disputes about the costs of capital works and the repayments required. Indeed, they leave some people in a penurious state.

I suspect that many people, when they buy into leasehold properties, are completely unaware of the implications of lease ownership in relation to capital works and vastly and rapidly increasing service charges. I look to the Government to be prepared to be much more transparent and much tougher on regulation in this respect. It is an area of inquiry that the Select Committee on Communities and Local Government ought to be looking into.

The Government’s normal refrain in any debate on anything is that everything that is a problem in our society is the fault of the previous Government. I want to place on the record a couple of points about the previous Government’s record. First, I strongly praise them for the work they did on the decent homes standard, and for the huge and very necessary investment that was made to deal with the repair backlog in council and housing association accommodation. It is a joy to see estates that have been transformed with new kitchens, new bathrooms, new roofs, new windows, new entrance areas and common parts, improvements in the community facilities and improvements in community centres. That creates a sense of pride and well-being in a community that it is hard for anyone to appreciate who has not been through the misery of living on badly run council estates with run-down common areas and high levels of vandalism. I am talking about the sense of pride that comes from the improvements and the reductions in vandalism and antisocial behaviour that result from them. By and large, the decent homes standard work that has been done has been a very good experience. I regret the way in which the so-called choice was put to tenants—that they had to go either to an arm’s length management organisation or for a stock transfer in order to receive central Government money for that. Fortunately, those policies were eventually changed so that all tenants, irrespective of the quality of management or otherwise of their local authority, could receive the central Government money that is so necessary and valuable.

However, as the Minister will know from a recent debate on this subject, a number of local authorities in London did not do very well or did not get any decent homes standard money. They and their tenants desperately need those improvements. I am thinking particularly of Camden and Lewisham, but I suspect they are not the only examples of authorities that need that special attention to achieve improvements in their properties.

The other great step forward that the previous Government made was on homelessness and the rough sleepers initiative, increasing the number of hostel places and encouraging the various charities that run hostels, or local authorities, to provide, as a priority, transfers from those into long-term, permanent, affordable accommodation. That was an important step forward, as was giving priority to people who have come out of prison—long-term offenders who need to be rehabilitated into society. Forcing them into homelessness and poverty is not a way of rehabilitating them and is no good for society as a whole. I am constantly and increasingly shocked by the number of homeless people one meets who are either ex-service people—usually ex-servicemen—or ex-prisoners and convicts. It does not do our society any good to ignore those people and force them into homelessness.

I realise that the Government’s general strategy on housing allocation policies is to leave the issue to local government and to walk away from it entirely, but I ask Ministers and local authorities to think carefully about those policies. We have rightly emphasised the needs of families with children, the vulnerable, those who suffer illnesses, including mental illness, and vulnerable elderly people. Obviously, they are all a priority, but we seem completely to ignore the needs of youngish single people when it comes to providing reasonable, publicly accessible local authority or housing association properties.

It is depressing to have such young people come to see me in my advice bureau, and I am sure other colleagues have had the same experience. The person in front of us will usually be a young man, who will often be in a reasonable job. They will be earning £18,000 or £20,000 a year, but they simply cannot get anywhere to live, because they cannot afford the deposit on a private rented place. In any event, the rent would be very high—possibly £250 or more a week. These people cannot access local authority housing because they are not deemed to be in priority need. One therefore comes across people—I am sure colleagues can bear this out—who hold reasonable jobs but who have no permanent home. They are sofa-surfing or, in some cases, even sleeping in cars, which is tragic. When we look at housing allocation, we need to address the needs of not only families and others, but single people.

[Zac Goldsmith (Richmond Park) (Con)]

I accept that the onus cannot be entirely on local authorities, and that point is well made. However, there is a lot that the local authority can do to place empty homes back on the market. My constituency covers Richmond and Kingston, and there are up to 2,000 empty homes in each of those boroughs. By that, I do not mean homes that have been waiting to be refurbished or homes that cannot be sold, but empty homes by any standard. If, for starters, we multiply the 4,000 homes in those two boroughs by the number of boroughs across London, we have an enormous number of empty homes that could be brought back on to the market and used. Does the hon. Gentleman think that the Government could do more to empower local authorities to get such homes back on the market?

[Jeremy Corbyn]

The hon. Gentleman makes a fair point. Local authorities have powers in this respect, if they care to use them, and some authorities do. Indeed, the local authority in my area is extremely proactive in pursuing empty properties and trying to bring them into rented use or have them taken over by a housing association or somebody else. Typically, these are places such as flats above shops. The hon. Gentleman is absolutely right: there is something criminally wrong about large numbers of good-quality homes being deliberately kept empty across London. Some owners see them as long-term, reserve places that they might live in at some distant point in the future. Some see them as an investment and will wait for property prices to go up. In a society where there is so much homelessness and housing stress, it is simply immoral for places to be kept deliberately empty. I would therefore support effective measures to bring those homes back into use by people who are in desperate housing need.

Where the previous Government did act rather belatedly was on the construction of housing association and council properties. There was an increase in housing association build, most of which came about under section 106 of the Town and Country Planning Act 1990 and planning agreements on particular local sites. However, there was not enough intervention, and the previous Government were not proactive enough. Only rather belatedly did we start building council housing. I am pleased to say that my local authority is now building council housing again. That started during the latter period of the previous Government, when the then Liberal-controlled council brought the programme into being. That programme has continued and is being expanded under the current Labour-run administration in Islington. However, the authority lacks the capital that it requires from the Homes and Communities Agency. When the Minister replies, therefore, I hope he will understand that housing and building costs are high in London, that housing need is desperate and that the only long-term, efficient way out of the housing crisis is to construct council housing at fixed rents and with permanent tenure, which gives people a sense of security, a decent home and an environment in which to grow up.

Before I come to housing benefit, let me say one thing. If we go to any primary school, secondary school, police station or social worker in London and ask what the biggest problem is that we face, we will be told that it is related to housing in one way or another. Young people are growing up in small, overcrowded flats, with two or three siblings sharing a bedroom. That is no way to grow up. Young people in those circumstances cannot bring friends home and they cannot do their homework. There are fights over the television, there are fights over when the lights should be switched on and off—there are fights the whole time simply about space. Anyone who goes into a flat where three teenagers are sharing a room will see the arguments that go on and the stress that is caused to the whole family. What happens as a result? The teenagers do not stay home of an evening; they go out. They do not have a lot of money, so they get into bad company when they go out, and problems result from that. These teenagers underachieve in school. Illness runs rife throughout the whole family. The family breaks up. There is a huge cost to us all in terms of wasted lives, underachieving children, broken families, divorce and everything else. We must recognise that unless we provide all our young people with decent, secure, clean, dry and properly repaired accommodation, it is very unlikely that they will achieve their full potential in school, college or university. We are wasting a whole generation as a result of our failure to address the housing crisis in London.

Local authorities have great difficulty fulfilling their statutory housing obligations to house homeless families or those in desperate need. They do not have enough council or housing association allocations to do that. Incidentally, there is a whole science around allocation, with people looking at the choice of bidding or desperately looking on internet sites and reading newspapers to find out how many points they need to get which flat, how many steps are involved and all the other details, which are so important. However, most of those people, most of the time, will be desperately disappointed because they will fail even to be selected to look at a place, never mind to be shortlisted for possible allocation. For thousands and thousands of people, it is like losing a lottery every week, but the consequences are desperate. We therefore need to address the issue.

Local authorities often place families in private rented accommodation. I do not blame them for that; they have no choice. A whole industry has therefore grown up around the housing shortage, with letting agencies and private landlords charging as much as they can get away with. The housing benefit system will usually pay the rent. Although it varies slightly from borough to borough, the rent for a typical two-bedroom local authority flat in central London is of the order of £100 a week. A two-bedroom flat in poor condition in the private sector costs at least £250 a week, and £300 is quite common. For a house, we are looking at £500 or £600 a week. The difference is paid through housing benefit, so we are all paying the exorbitant profits made by letting agencies and private landlords; they are the people who are living off the housing benefit system.

When the Government say, as the previous Government did, that they have to address the problem of the cost of housing benefit, particularly in London, I absolutely agree, because pouring money into the private sector in this way simply is not a good use of public funds.

[Mr Andy Slaughter (Hammersmith) (Lab)]

A two-bedroom flat in the private sector in my constituency would actually be about £350 a week, so it is even more perplexing that the Government insist that the rent in new social lettings will be 80% of market rent. That means that the rent payable by new tenants will be three to three and a half times what it would be in existing social tenancies. That, of course, will have to be covered by housing benefit in many cases.

[Jeremy Corbyn]

My hon. Friend makes a good point and is extremely experienced in dealing with those issues, both as an MP and as the former leader of Hammersmith and Fulham council, where he did a great deal to try to improve the quality and quantity of the housing stock.

We all do advice surgeries and hear sad and difficult cases. I was talking last week to a lady in my constituency who has discovered that her private sector rent has gone up from £315 a week to £475 a week. I do not blame the local authority, because the housing benefit that she is paid is fixed by the Government through the local housing allowance. My constituent is not in work and receives benefits, and she has been told that she must contribute £145 a week to make up the shortfall between what the local housing allowance will pay and the rent that is expected or demanded from the landlord. She is expected to pay more than the rent that she would pay if she lived in equivalent council accommodation. It is clearly impossible for her to find £145 a week, which is more than her benefits. She would have nothing to eat and nothing for the children, so the only solution is to move away.

What effect will moving away from the area have on my constituent, her family and all the rest of us? She will lose her place and will have to try to find, if she can, a two or three-bedroom flat, probably in the far suburbs of London or outside London. She will lose her family network; her children’s education will be disrupted; she will not have access to the doctors, hospital or community network and support that she is used to; her whole life will be completely uprooted. Wherever she goes, she will have no security of tenure. She will have six months, or perhaps a year if she is lucky, before the landlord decides to allow her to stay or increases the rent because it is possible to get more in the private sector, in which case she will have to up sticks and move on again. Imagine how that feels for the children—the insecurity, changing schools, mum and dad moving the whole time and nowhere permanent to stay or build up a network of friends. It is that sense of insecurity that is so bad for the children of many families living in London.

The Government have decided to address excessive housing benefit costs, and I agree with them. There are two ways of doing it. One is to let the market sort things out, and the other is to bring in some form of regulation, so that there is permanency of tenure and greater security, and so that we spend less money. Unsurprisingly the Government have decided to go for the market option, so they have set local housing allowance limits. I have some figures from James Murray, who is the executive member for housing in Islington and does an extremely good job in difficult circumstances. Bizarrely, Islington falls into four broad rental market areas—inner-east London, central London, outer-north London and inner-north London. The figures for a two-bedroom flat vary. In inner-east London, the figure is £300 a week; in central London, it is £500 a week; in outer-north London, it is £230 a week; and in inner-north London, it is £329 a week.

James Murray also makes the point that in the past 10 years

“demand for private rented accommodation in the borough has gone up by about 20%”.

My observation is that it continues to rise very quickly.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

I apologise that, for several reasons, I cannot be here for the whole debate. The hon. Gentleman knows that I always want to be involved in these issues.

When I asked the Secretary of State to consider re-examining the broad market rental area boundaries, I received a positive and encouraging response in the House. I hope that the hon. Gentleman will join me and London Conservative Members in trying to win that argument, so that when people are considered for alternative accommodation in the private sector—if they have to go there—it should be within the local authority boundaries where they start, unless they choose otherwise. Their links—their schools and usually their families—are in those places, and it seems that that would be a sensible and good social policy. I hope that we all agree that that would be progress, if we can bring it about.

[Jeremy Corbyn]

Absolutely, because the less distance people must move, the better. That change would ameliorate the policies, and I, and I am sure other colleagues, would be more than happy to support it. We want to minimise disruption.

I do not want to say too much more, because other hon. Members want to speak. I want to conclude with some points about overcrowding in Islington, which is a small borough in comparison with many others. There are 3,096 families living in overcrowded homes, and of those 355 are in severe overcrowding, which means that they lack two or more bedrooms relative to their need. Clearly, there is a need to build council properties. The council is a major provider of housing in Islington, and in its budget, which is due to be debated this Thursday, 17 February, it has managed to present a significant increase in money to go into council house building:

“Despite the difficult times, we have been able to raise the investment in new build housing from £1.6 million”—

planned under the previous council administration—

“to a new total of £10.1 million for 2011/12. This will go towards work on-site this year for 86 new council homes, with plans in progress to continue and increase this programme.”

I applaud what Islington is trying to do, which is to meet housing needs. Where is central Government’s contribution to meeting those needs? The Government tell local authorities that the only way in which they can build new council properties is by raising council rents to 80% of market rents. That means that for many people it will be impossible, in work, to pay a council rent. We are presented with a vista where people will not be able to accept a council nomination, because they will not be able to afford the rent, which will be too expensive. They will have to go somewhere else and try to find somewhere small and overcrowded, where they can at least afford to stay. That is a monstrous way to fund new building—to say that those in great housing need must pay for people in even greater housing need to be provided with somewhere to live. Why can we not have what we have always had, namely central Government allocation of money through the Public Works Loan Board or any other appropriate arrangement, so that we build our way out of the crisis? I hope that the Minister at least understands that point.

I want to add some brief thoughts. We have experienced the sadness of homelessness and witnessed the health problems and disasters that come from it. London is a strong, thriving and vibrant city in many ways, but if it is left to the free market to deal with the issues that it faces, it will begin to take on some of the worst aspects of cities in the United States: the poor will be driven out, because of the housing benefit system, and the private rented market will take over entirely, bringing all the insecurities that go with that. Young people who move to London, who are in work and who manage to get into the private sector pay a vast proportion of their income on housing costs—probably the highest level across Europe. I have talked to people, some of whom work in this building and are on reasonable salaries for their age, who pay 50% to 60% of their take-home pay in private rent for a shared flat or house, which is a huge burden. There is no possibility that they will ever save enough money to buy a place. We must recognise that without public intervention and investment, the housing crisis in London will get worse and worse.

I have four brief points to make to the Government. First, they should look at the way the benefit changes are operating, and in particular at their perverse effects on families living in inner London. Secondly, they should bring about some degree of security and regulation in the private sector, to avoid the continual merry-go-round of people having to leave private rented flats after six months or a year, and to create some long-term security and certainty. Thirdly, they should build council housing, providing local authorities with the wherewithal to do so. The virtuous circle of taking building workers out of unemployment and putting them into work to provide housing for those who need it is a major and a beneficial form of income regeneration. Finally, the Government should speak to the banks about the difficulty that so many people have in getting mortgages because of the large deposits that are required.

If the Government and local authorities were to consider such intervention, we would all benefit. The benefits would be better health, fewer family break-ups, better educational achievement and a happier and more cohesive society. I hope that the Government understand that many building companies fear that they will go under because of cuts in house building. In its latest residential crane survey, Drivers Jonas Deloitte said that of the 28,150 homes under construction at 169 sites in London, 44% are allocated for affordable housing. Under current policies, that number will go down, and those companies and those jobs will be in trouble. Meet the social needs and solve the economic problems—the two things go together.

11:31

[Mr Andy Slaughter (Hammersmith) (Lab)]

It is difficult, at a time when attacks are being made on the national health service and on state education at every level—from Sure Start to tuition fees—and when we are having to deal with the big society cuts to the voluntary and advice sectors, for housing to be given sufficient attention for us to see exactly what is happening as a result of Government policy; but what is happening in housing is as disastrous in its own way as it is in those other areas. I am therefore grateful to my hon. Friend the Member for Islington North (Jeremy Corbyn) for securing this morning’s debate, as it gives us an opportunity to talk at greater length than usual in Westminster Hall about the Government’s housing policy and its effect on London.

I shall not repeat what my hon. Friend said; he has many more years’ experience as a constituency MP and in dealing with housing problems in London than I do, but I adopt entirely the arguments he put forward, in particular regarding the pernicious effects he spoke of—the bad, insecure, inadequate and overcrowded housing that all London MPs must see every week in their surgeries. Those effects go far beyond housing conditions; they cover health, education and quality of life. It is a national scandal that they have been allowed to develop over far too many years.

I shall deal briefly with four aspects of housing. The first is the private rented sector; the second is the effect of housing benefit changes; the third is the Government’s policy on social rented housing; and the last is planning policy. One of the early decisions taken by the coalition Government was to abandon the previous Government’s proposals that resulted from the Rugg review—a national register of landlords, regulation of letting and management agents, and compulsory written tenancy agreements. When the Government made that announcement, the Association of Residential Letting Agents said that it was extremely disappointed. It said:

“This move risks seriously hampering the improvement of standards in the private rented sector, the sector's reputation, and the fundamental role it plays in the wider housing market as well as failing to protect the consumer who has nowhere to go when there is service failure or fraud”.

That is the view of the industry. My view, as a constituency MP, is that we are seeing a return to Rachmanism in parts of London, with appalling conditions of social rented housing. Perhaps the difference this time is that local authorities are colluding with bad private landlords, with things such as direct letting schemes and, now, the ability to discharge their obligation to the private sector permanently rather than temporarily.

I hear what was said by the right hon. Member for Bermondsey and Old Southwark (Simon Hughes). He is no longer in his place; he tends to pop in and out of these debates. I hope that Members on both sides will try to mitigate the effects of the housing benefit changes that his Government are introducing. It would be better if the Government were to withdraw and review those changes than to give a sop to those who, in their thousands, will be forced to move out of their homes from April onwards. I do not know how we are going to find adequate replacement housing for those hundreds of families in areas with property prices at the levels of Islington and Hammersmith—unless it is in more overcrowded, less salubrious streets and flats. There are few of those, however, because gentrification in inner London has meant that there really are no places where cheap property is available to rent.

It is social engineering. It is gerrymandering. It will force out poorer families who have made their homes in wealthier areas, perhaps over generations; gentrification has crept up on them, and they are now being told that they are not welcome in those areas but must move further out. I hear what the right hon. Gentleman had to say, but they are crocodile tears and warm words from the Liberal Democrats.

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

On the subject of crocodile tears, does the hon. Gentleman acknowledge that it was his party’s policy to consider the level of housing benefit? I presume that that review was intended not to increase housing benefit but to decrease it.

[Mr Slaughter]

I have heard the hon. Gentleman many times try to cling to the Labour party as a way of excluding his lamentable failure in supporting a Government who are systemically attacking poorer constituents.

[Tom Brake]

Is it true?

[Mr Slaughter]

The hon. Gentleman must have some poorer constituents, even in Carshalton and Wallington, but perhaps not as many as I do. It would be better if he kept quiet in these debates rather than making such inane points.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Robert Neill)]

Will the hon. Gentleman answer my hon. Friend’s question?

[Mr Slaughter]

I see the coalition in action.

[Tom Brake]

He’s not going to answer.

[Mr Andrew Turner (in the Chair)]

Order.

[Mr Slaughter]

I can tell the hon. Gentleman that, of course, budgets and housing benefit would have been reviewed, but he is wrong to think that a Labour Government would have been party to the mass eviction of hundreds of families from areas in which their children attend school and they have low-paid jobs. We are talking not about indolent people but those doing low-paid essential jobs in inner London. Before the hon. Gentleman gets on his high horse, he should think about the consequences of his Government’s policy.

Far more fundamental in the long term will be the review of social housing policy. I almost admire the speed at which the Government have moved to ring the death knell of social housing. There has been consensus on that policy certainly since the second world war, and in the charitable sector since the beginning of the last century. That, however, is not good enough for this Tory-led Government.

There are four principal changes. The first is the introduction that I alluded to earlier of near-market rents for new lettings. In London, they will effectively be unaffordable, even to those on average incomes. Rent for two and three-bedroom flats in Hammersmith will rise by three or three and a half times. The second is the two-year tenancy. The speed of their introduction is amazing. I printed a leaflet to warn tenants that the Government might be introducing five-year tenancies, but before I was able to deliver it they had introduced two-year tenancies. The third element is the almost complete collapse of capital funding for the social sector.

As I mentioned earlier, there is the end of the requirement to provide permanent housing in the long term, with the private sector being used to discharge housing need obligations. If, God forbid, the Government were elected for another term, within 10 years there would not be a recognisable social rented sector left in this country. The proud tradition of providing affordable good-quality homes for people on low and average incomes will be gone, and a fundamental part of the welfare state and the post-war settlement will be gone with it.

Finally, let me turn to planning policy, which is a slightly trickier area to consider. I accept what Government Members say about the previous Government’s record in this regard. Over the past 40 years, our record on building sufficient numbers of high-quality affordable homes in this country has not been good. It is almost as if we lost the will to build such homes in the 1970s. In my constituency, we have good examples of the estates and properties that were built in the 20th century: the “homes for heroes” in the 1920s, the “garden” estates in the 1930s and the good quality brick-built council estates of the 1940s and 1950s. We even have some 1960s properties, which, although they have gained a bad reputation, are generally solidly built to Parker Morris standards. They are popular with people who live in them, even if they have not been maintained properly over the years.

The consensus on the will to build good quality council and housing association properties in sufficient quantities has gone. Individual local authorities—including, I hope, my own when it was under Labour control—did their bit and had to be resourceful in doing so. For example, there were the infill developments. We saw building on existing estates, public land being given to people who were prepared to build affordable housing, and building on top of supermarkets. We managed to build about 3,000 good, affordable units over a period of years, but it was a struggle. I do not pretend that it is easy to build social rented houses in areas of high land prices. Nevertheless, as my hon. Friend the Member for Islington North said, for many people—even those on average and above average income—social rented housing is the only type of affordable housing. The definitions of affordability in London have been stretched to ridiculous lengths. The Mayor and some councils say that an income of £70,000 to £80,000 qualifies under the affordable definition, because the types of discounts available on properties for sale or for rent in new developments demand such an income. I am sorry, but I do not accept that people who earn £80,000 a year are in housing need—even in London—which is the perverse definition of my own council.

The problem of planning development is slightly more complicated. At the moment—and the debate is opportune for this reason—London councils are going through their process of approving local development frameworks, which replace the unitary development plans. In preparing for this debate, I looked at my own borough’s LDF, which may or may not be typical, and it appears to give good news. It seems to say that it will build 13,000 houses over the next 20 years, with a maximum of 20,000 allowable. However, when I examined those figures I found that what is actually planned goes well beyond them.

Perhaps the biggest new development under planning consultation in London is the Earl’s Court and West Kensington Opportunity Area, which the LDF says could provide about 2,000 new homes, at least in Hammersmith, over the next 20 years. The developer says it will provide 8,000 homes over the next five to 10 years. The Hammersmith town centre development, which is somewhat misnamed because it includes areas way outside the town centre, including the historic riverside—the hon. Member for Richmond Park (Zac Goldsmith) may be interested in this because he has written about it—is not one development but a string of developments along the riverside. The traditional low-rise buildings of this historic area are being converted into hideous tower blocks of luxury one and two-bedroom apartments. We have seen such developments springing up along many parts of the river on the south side of the Thames. The apartments are built principally for people coming from abroad or for those who wish to have a London pied-à-terre in addition to accommodation elsewhere. We are talking about buildings that are not just at the top of the market, but above it. The LDF for Hammersmith says that over 20 years, up to 1,000 new homes will be built in this area. Some 1,300 homes are currently being built or are under planning consideration for this area, so that target appears to have been exceeded already.

What we are seeing in planning terms, certainly in central London and in my part of London, is a development grab. Those parts of land that might be available for affordable and sustainable development in the future are being cannibalised for luxury high-rise blocks. Some of the blocks on the riverside are up to 15 storeys, and some in the west Kensington area are up to 30 storeys or more. That is a massive increase in residential units, but they are exactly the wrong type of residential units for the local population and will not meet housing need in London. That is a scandal and a misuse of planning powers. Of my local authority, the developer of the Hammersmith riverside says:

“Now the council says it is ‘open for business’, and I think they are—that’s why the development community has embraced the new administration”.

You bet they have. Helical Bar, the developer of the Hammersmith riverside development, has a dispensation to have no affordable housing in it whatever; in fact, there will be a net loss of affordable housing because trust properties for visually impaired people will be demolished to make way for the skyscrapers.

Mr Slade, the founder of Helical Bar, gave £20,000 to the Mayor in the run-up to his election campaign. He made this very prescient comment:

“You do run the thin line of someone saying: I am doing this to have access and influence, but that was what politics was always about. It is a little unfair, but there must be 20 per cent truth in it.”

Helical Bar wants to build high-rise flats in outer London. It now has that consent on the way despite the opposition not just of the hon. Member for Richmond Park, but of almost all my constituents, who do not want to see the destruction of their living environment and of the things they hold dear. They want to see not luxury high-rise flats, but affordable homes for themselves and their children.

[Zac Goldsmith]

I absolutely share the hon. Gentleman’s concerns about the nature of this development. As he knows, I have spoken on the record about it and submitted a number of objections. However, is it not true that the decision comes from the local authority and is not one over which the Mayor has any influence at all?

[Mr Slaughter]

The developments I am talking about are of sufficient size and scale to require the Mayor’s approval, or the Greater London authority’s dispensation regarding factors such as their height and their not containing affordable housing. In addition to the town hall development to which the hon. Gentleman refers, there are other developments along the river. St George has just decided it wants to build 750 similar properties with no affordable housing in them just south of Hammersmith Broadway, and has its eye on redeveloping a council estate, which the council may wish to demolish, for luxury housing. We are not talking about not enough being done to promote affordable housing in London, or about neglect or negligence. We are talking about a concerted policy to socially engineer areas by demolition, and the removal of social housing units in London and their replacement with luxury, small high-rise developments. The ability to build in London for London’s population will not exist again for another generation. That is the real damage being done by this Tory-led Government and their creatures in town halls around London. I am afraid that that is the depressing message.

I entirely endorse what my hon. Friend the Member for Islington North said. I fear that the news, when one looks at the situation on the ground, is actually worse than inaction: it is the deliberate destruction of the consensus on housing policy that has sustained this country for many decades.

11:50

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

Thank you for calling me to speak in this debate, Mr Turner. I apologise for missing the opening remarks of the hon. Member for Islington North (Jeremy Corbyn).

[Jeremy Corbyn]

You have heard them before.

[Tom Brake]

Indeed, my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) said that I had perhaps heard some of the hon. Gentleman’s comments before. I was in a meeting with the Peabody Trust and some of its residents to discuss housing, which is why I was late for the debate. I know that the hon. Gentleman has been a passionate and consistent defender of housing under successive Governments, whatever their political colour. Therefore, he is right to say that I have heard him make those comments before in the 13 years since my election to this House. Nevertheless, the fact that I have heard them many times before does not mean that they do not have great merit, and I suspect that I would not differ much from his analysis of the problem in London, albeit that we might have some differences of opinion about possible solutions.

I take a different view about the comments made by the hon. Member for Hammersmith (Mr Slaughter), whose proposals seem to exist in a vacuum. His proposals neither take into account the financial environment in which we are operating nor acknowledge that his own Government planned to examine the level of housing benefit being paid to people in London and other parts of the country. I asked him a question about that issue, but he carefully evaded answering it. He failed to acknowledge that issue, when it would have been the decent thing for him to have done.

That brings me to decent homes. The Minister will know that Sutton Housing Partnership, the arm’s length management organisation in my area, has submitted a new bid for decent homes funding. It is a scaled-back bid compared with the bid that was originally proposed. The partnership had secured a limited amount of funding in the first year of the programme from the previous Government, and I hope that, under the new bidding arrangements, it will succeed in securing substantial funding during the lifetime of the programme that it needs to implement to ensure that social housing in the London borough of Sutton benefits from that funding, as it should do. In many respects, social housing in Sutton has not benefited from the substantial programmes that local authorities in other areas have implemented to repair windows, bathrooms, kitchens and the like.

Many parts of my constituency would have benefited from those repair programmes. For example, the St Helier estate was built in the 1930s. It stretches into Mitcham and Morden and into Sutton and Cheam. It requires investment: it would be unfair to say that many of the properties on the estate have not been touched since the 1930s, but many improvements need to be made. I hope that the Minister will be able to say a little about the progress of the programme to improve that estate.

My second point is about the meeting that I have just had with the Peabody Trust and some of its residents on the St Helier estate. What those residents are trying to achieve is very much in keeping with what the Government are trying to do in relation to the big society. In other words, those residents want to take responsibility for the management of their estate. However, the difficulty arises because that estate has a mixture of tenants, shared ownership, residents and leaseholders. Therefore the structure of tenure is very complex, and I acknowledge that.

[Mr Philip Hollobone in the Chair]

I am pleased that we have someone from the Department for Communities and Local Government attached to that programme, who is working with the residents of the estate, because Sutton is one of the vanguard boroughs when it comes to the big society. That person will try to find ways to work through those problems with the support of the Peabody Trust, which is also keen to address them. The residents feel that they will be able greatly to reduce the costs associated with the maintenance of that development—the Beddington Zero Energy Development or BedZED, which many hon. Members will be familiar with—if they are able to achieve some type of voluntary arrangement to manage those properties. As I understand it, a voluntary arrangement is required to work within the complicated tenure structure that exists on the estate.

Another issue that I hope the Minister will respond to is that, as I understand it, housing associations in the UK abide by European regulations when they advertise for contracts in a way that housing associations in other European countries do not. That means that housing associations in the UK face an additional financial burden as a result of following the appropriate EU process for advertising, which housing associations in other EU countries do not have to follow. If it were possible to remove that burden from housing associations in the UK, it would clearly reduce the costs involved from the point of view of tenants, the Government, shared owners and leaseholders. I hope that the Minister is examining that issue.

I know that the Minister cannot take any action on the final issue that I want to discuss, but he might want to comment on it. It is the issue of planning applications, and specifically the speed with which they are processed. From both a job creation point of view and the point of view of providing housing, particularly if that involves converting or extending properties, the quicker that planning applications are processed, the sooner the builders can get on with the work. I have had representations about that issue myself. I had one on Saturday from a local builder, who is waiting for the completion of four planning applications. He said that, apart from holding him and his staff back from doing their jobs, it is having an impact on the people who will occupy those properties or conversions, once they are completed. Those are the specific issues that I want the Minister to respond to.

I conclude by saying that although I did not hear—regrettably—the comments of the hon. Member for Islington North when he opened the debate, I am sure that he made some salient and pertinent points about the importance of trying to address the substantial housing deficit in London and about the potential consequences of the changes to housing benefit, of which I know that hon. Members from all parts of the House are aware. I hope that the Minister can reassure us on those points this morning.

11:57

[Chris Williamson (Derby North) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Hollobone, as it was to serve under Mr Turner’s chairmanship before he left Westminster Hall.

I start by congratulating my hon. Friend the Member for Islington North (Jeremy Corbyn) on securing this debate and on making an extremely powerful and cogent speech. He made a number of pertinent points. In the first part of his speech, he referred to the record of the previous Labour Government, including the decent homes investment, which made a big difference to many households in the capital, and the rough sleepers initiative, which did so much to address the problem of homelessness in London. He also mentioned the new build programme. Towards the end of the previous Labour Government, that programme had also started to make an impact on the housing crisis in London. It is regrettable that the policies that are now being pursued by the Conservative-led Government are going in the opposite direction to those Labour policies.

Pertinently, my hon. Friend identified the fact that homelessness is now increasing again in the capital. The scourge of homelessness is an issue that should unite parties across the House, so that we can take the necessary measures to reduce the growing number of people who are forced to live on the streets, which is a stain on our national character. If homelessness in London has increased at the end of this Government’s tenure in office, that will be a very poor statement about their record on tackling this issue.

As my hon. Friend mentioned, it is also clear that the number of people who are forced to sleep on a friend’s sofa—I think that it is known colloquially as “sofa surfing”—is growing. That is because it is simply impossible for those people to access accommodation, as there is such an inadequate supply of housing in the city and the housing that is available in the private sector is beyond their means.

There is also a big problem with the housing benefit system. The system is wasteful, and I agree with my hon. Friend that there is a great need for much more regulation. He called for four areas to be addressed, one of which is changes to the housing benefit system. I agree with that, because there is perversity, but I do not agree with the changes that the Government are pursuing. Regulation needs to be introduced. We need to build more council houses, and I concur with my hon. Friend’s comments about the banks being forced to provide mortgages for people who would like to, and have the income multiples to enable them to, access private sector owner-occupied accommodation.

My hon. Friend the Member for Hammersmith (Mr Slaughter) spoke eloquently about the gentrification of many neighbourhoods in the capital leading to an inadequate number of affordable houses. That contributes to the overall problem in London, and the Government’s policies are effectively leading to a clearance, with people on low incomes being forced out of many boroughs. That is completely wrong, and the Government need to think again. My hon. Friend also identified the fact that much of the housing being built is inappropriate, and I have seen figures that suggest that about 80% of it is only one or two-bedroom units. Clearly, there is a need for much more emphasis on family housing, for the very reasons that my hon. Friend the Member for Islington North gave. A whole host of problems are related to people being forced to live cheek by jowl in accommodation that is too small for a growing family.

There is a need, particularly in the capital where house prices are much higher, for the Government to deal with the problem of people accessing mortgages, and pressure needs to be brought to bear, possibly with regulation to ensure that banks do not insist on people finding massive deposits. That problem is in desperate need of attention, because it contributes to building up the current housing crisis in London.

The proposed changes to social housing tenancies simply will also make matters worse, with the expectation for people to move on if their earnings exceed a certain level, forcing them into an even more precarious and difficult situation. In addition, the housing investment cuts have hit London hard, and they exacerbate the problem to which my hon. Friends have referred.

The amount of housing currently been built in London is inadequate and much of it is inappropriate for family needs, but another problem is that about 50% of it is located in just three boroughs, and there needs to be some attempt to ensure that there is building right across the city.

[Mr Slaughter]

Another part of the Riverside development that I have mentioned is being developed by a housing association, which is building £1 million two and three-bedroom luxury flats with river views, so that it can take the profit and build in east London. That is good for the people of east London, but there is already a lot of affordable housing there, and it does not help people in desperate need in west London.

[Chris Williamson]

My hon. Friend makes a powerful point. It is not really the business of housing associations to build luxury multi-million pound accommodation. Their whole raison d’être should be to provide affordable housing, which is why they came into being in the first place. They have lost sight of their original purpose when they start engaging in market-led developments, such as the one that my hon. Friend has mentioned.

I referred earlier to the difficulties that people have in raising deposits, and I have seen figures that suggest that it takes more than 14 years on average for someone to save for a deposit, assuming that they can keep pace with house price inflation. It is completely wrong that people are forced to rely on relatives to get a foot on the housing ladder, because it disfranchises tens of thousands of people in London whose families do not have the wherewithal to provide them with the deposits needed to purchase the houses that they aspire to own.

The hon. Member for Carshalton and Wallington (Tom Brake) said, I think, that the economic background was one of the reasons why the Government had made some of their decisions on housing and cutbacks. I assume that he was referring to the finance that has been made available for housing and the cuts being made in housing benefit. I disagree with him, because it is really important that the Government seek to invest in the housing market and in providing houses, because that is a way of addressing the very problems that the hon. Gentleman mentioned. Using the construction industry is an excellent way of assisting a private sector-led economic recovery. Most of what is procured for the construction industry is sourced from the UK, which provides a huge number of jobs in areas where housing construction and other building is taking place. It is mistaken to suggest that the economic circumstances that the country faces in some way justify the cutbacks in housing.

The hon. Gentleman also referred to delays in planning, and I agree that more needs to be done in that regard. I am concerned, however, that proposals in the Localism Bill might add delays, or will certainly make it more difficult in many circumstances to provide the houses that people desperately require.

It seems to me that the biggest reason for this housing crisis in the capital is an obsession that can be traced back to the early 1980s and the introduction of the right to buy, with its emphasis on a personal subsidy rather than a subsidy on bricks and mortar. That was almost inevitably going to end in tears, which is where we are today. As my hon. Friend the Member for Islington North pointed out, many landlords—I accept that it is not all of them—have sought to exploit the housing benefit system and to maximise rents. That has led to rents in the private rented sector going up and up to a point at which the Government—the same Government who introduced the obsession with personal subsidies in the first place—are now reining in those subsidies and forcing the poorest people and those on middle incomes in the city to bear the burden for their policy mistake, which can be traced back 30 years.

[Jeremy Corbyn]

Is my hon. Friend also aware that those who live in private rented accommodation not only pay high rents and often a large deposit, but often pay much higher heating costs, because the energy efficiency of the housing is so low? In addition, repairs are often so poor and incompetent that tenants end up paying for repairs themselves out of sheer desperation, in order to live somewhere reasonable. We need a much tougher regulatory regime for private rented accommodation.

[Chris Williamson]

I could not agree more, because my hon. Friend is absolutely right. Again, research has demonstrated that the private rented sector is far and away the worst in terms of providing adequately insulated accommodation. That adds to the burden of people living in such accommodation, obviously, but it also has significant environmental implications for our cross-party commitment to reduce carbon emissions and address climate change. The private rented sector clearly has a big part to play. My hon. Friend has made a forceful point and has provided another reason why more must be done to regulate the private rented sector.

In conclusion, I return to the importance of investing in housing and of a bricks and mortar subsidy rather than a personal subsidy. We should be seeking to turn the juggernaut around and emphasising building new houses and providing subsidy for affordable housing in London in order to supply the homes that people desperately require. That would provide a huge economic stimulus and create many jobs for local people as well as, most importantly, homes.

Good quality homes would also have huge implications for educational outcomes for the many people living in overcrowded circumstances who would be able to move into more appropriate accommodation. Again, my hon. Friend the Member for Islington North made that point. We could also address the health of people in inadequate housing by investing more in providing more and better affordable housing. Crime and antisocial behaviour would be reduced, because people would be living in better circumstances rather than being forced out on to the streets in the evening, where young people get into mischief. It would certainly make a big difference to the quality of personal and family life, which would have a massive, beneficial knock-on effect on the wider community.

[Tom Brake]

Is the hon. Gentleman about to be more specific about what financial commitment his party would make and how many additional properties they would build? Also, would he exclude the sort of option that is occurring in my constituency, for instance, where a housing association’s regeneration of Durand close depends on the sale of private properties as part of the development? Admittedly, those properties are in the same place, not in a different location. Is he excluding the proposed option to give housing associations additional funding to build more properties?

[Chris Williamson]

There is a desperate need for public investment in social housing. On the previous Labour Government’s record, although we certainly could and should have done more in terms of new build during the first part of our Administration, our record on bringing existing housing stock up to a decent standard shows that it was a worthwhile policy initiative and that, in large measure, we achieved it. I know that some areas in London—maybe the hon. Gentleman’s constituency is among them—still have not benefited from the decent homes initiative, but 90% of affordable, social and council housing throughout the country and in the capital has benefited.

We must get away from examples such as the one that the hon. Gentleman mentioned, in which housing associations develop market properties, sell them at a profit and use the money elsewhere. In my view, we ought to exclude that, because it is not the way forward. That is not where housing associations ought to be. The main thrust of what I am saying is that expenditure on housing benefit in this country is massive. We must find a way to shift from personal subsidy in the form of housing benefit to a subsidy of bricks and mortar, so we can build more affordable housing for the sake of all the economic and social benefits that would flow from that. That is what the Government should be considering. I will be interested to hear the Minister’s comments.

12:15

[The Parliamentary Under-Secretary of State for Communities and Local Government (Robert Neill)]

It is a pleasure to see you in the Chair, Mr Hollobone, as it was to see Mr Turner earlier. I congratulate the hon. Member for Islington North (Jeremy Corbyn) on securing another debate about housing in London. We do not always agree on the solutions, but I pay tribute to the assiduousness and seriousness with which he regularly addresses the issue. Like other hon. Members, he has raised important points with which I will endeavour to deal. This has been a wide-ranging debate, and I will do my best to pick up the detailed points made.

I accept that housing matters to everybody. It is important politically and socially. Having a home that meets one’s needs is fundamental to achieving one’s aspirations for oneself, one’s family and one’s community. I hope that that is common ground for all parties in the House, and I want to make it clear that the Government regard it as a key objective to help people to achieve those aspirations. I will deal with general issues as well as points about London specifically.

We as a Government are committed to increasing the number of houses available both to rent and to buy. That includes affordable housing, but we must be imaginative in choosing models to use. We need to consider greater flexibility in social housing to ensure best use of stock and help people stand on their own two feet. We must also consider how to protect the vulnerable and disadvantaged and address homelessness, which the hon. Gentleman fairly and properly mentioned. We want to support people to stay in their own homes.

[Jeremy Corbyn]

The Minister will be aware that homeless charities in London—particularly Shelter, but also the Mary Ward Centre and others—have serious financial problems at present. Their grant funding has been cut, although they are trying to retrieve it from London local authorities. The cut in housing advice provided to homeless people by those organisations is devastating and can lead to only greater homelessness. Is the Minister prepared to look into the matter, receive a delegation and consider whether extra help can be given to ensure that those vital agencies remain open?

[Robert Neill]

I am sure that my right hon. Friend the Minister for Housing and Local Government will happily get in touch with the hon. Gentleman. It is worth putting it on record that we are working with the National Homelessness Advice Service to ensure that front-line advice workers have the support that they need. We have established a cross-Government ministerial working group to examine the underlying causes of homelessness and we continue to invest in the Places of Change hostel improvement programme. We are attempting to address the problem, but I appreciate the seriousness with which the hon. Gentleman raises the issue, and I will ensure that the appropriate Minister is in touch with him. I will return to the broader issues of homelessness in due course.

We make no apology for saying that home ownership is at the core of people’s housing aspirations, and it should be at the core of our policy. It is a good thing. It gives people responsibility for their own needs, financial security and confidence. I think that it is good that housing wealth now accounts for nearly half of all household wealth, up from about 25% in 1980. Some hon. Members have criticised the right to buy and related issues in this debate, but I do not apologise for the right to buy. In the 1980s, I was a parliamentary candidate twice in Dagenham, which had one of the largest housing estates in Europe. I thought that it was utterly liberating for ordinary people—good hard-working families—to have the chance to own their home. Not everybody will always manage that aspiration, but we need to make sure that it is there, that we help people in that way, and that we also assist those who, for a number of reasons, will not be in a position to meet it.

[Chris Williamson]

Will the Minister concede that, although the right to buy was liberating and gave access to home ownership for people who perhaps previously would never have been able to aspire to it, the decision to prevent local authorities from building, or to make it difficult for them to build, alternative affordable accommodation contributed to the massive housing crisis with which we are confronted?

[Robert Neill]

Those decisions were very much of their time and in response to it. I am not sure how much that in itself contributed, but I accept that, in the current age, we need a flexible approach to giving local authorities and housing associations the ability to build as is appropriate. That is why we are where we are now. It does not undermine the thrust of a policy that I think was necessary at the time.

[Mr Slaughter]

The average price of a property in Hammersmith is now more than £500,000, and 40% of my constituents have incomes of less than £20,000. It will require quite a degree of flexibility if the Government’s policy of prioritising home ownership is going to go ahead. They are just empty words, are they not?

[Robert Neill]

The hon. Gentleman is as specious as ever. I am sorry that he has managed to lower the tone of the debate, while his hon. Friend the Member for Islington North dealt with the issue in a serious fashion, as usual. The contrast between the two hon. Gentlemen is always instructive. Of course, as I have said, there will always be those who will not be able to own their own homes—the hon. Member for Derby North (Chris Williamson) rightly recognised that as well—so we need a policy that embraces that, but I shall not go down the route of point scoring which is so characteristic of the hon. Member for Hammersmith (Mr Slaughter). The fact is that it is by no means incompatible for us to encourage home ownership and also deal with those who, for a number of legitimate reasons, will never be in a position to own their own homes.

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

Will the Minister give way?

[Robert Neill]

The hon. Gentleman has only just arrived, but he is an old chum so I will happily give way to him.

[John McDonnell]

I apologise for being so late. I was discussing another issue with one of the Minister’s ministerial colleagues and could not get here any sooner. Will he address an issue facing a number of us in London, particularly outer London, namely that of the growing number of homeless and rough sleepers? It is hitting the outer London boroughs on a scale that we have not experienced before. Inner London has had high numbers but the issue is beginning drastically to affect London boroughs as a result of the policies of housing suppliers in particular.

[Robert Neill]

It is worth looking at the fact that we are consulting on and overhauling the way in which rough sleepers are counted. We need to get a better and more complete picture of the issue, because the previous system did not do it effectively. It is also worth saying that, although there has been fluctuation, the current figures suggest that, overall, statutory homelessness remains at historically low levels. However, I accept the hon. Gentleman’s point that we need always to press down on the issue. It is not an easy area to cover accurately, and I know that the Department will happily keep in touch with him on this serious and important issue.

To return to the point that I was addressing before the hon. Member for Hammersmith intervened, I accept that poor affordability and difficulties with affordability create a gap for aspiring first-time buyers, which is exactly the point made by the hon. Gentleman. Average house prices have increased, so we need to address that. I believe, however, that the way to do that is not necessarily through more and more intervention—although some intervention is always appropriate—but through giving communities control of development in their area and greater freedom, which is the reverse of what the hon. Gentleman was advocating. That is the way forward and I have more faith in the ability of Hammersmith and Fulham council than in that of the hon. Gentleman to tackle their area’s housing needs.

The Government are determined to encourage local authorities, developers and housing associations to work together with communities to deliver the homes they need through schemes such as the new homes bonus, which is a powerful tool. The Government have set aside nearly £1 billion for that scheme over the period of the comprehensive spending review. In fact, hon. Members may want to look at the new homes bonus calculator on the Department’s website, which shows how any particular local authority can benefit from it.

[Mr Slaughter]

Will the Minister give way?

[Robert Neill]

In a moment. I would like to make a point, if I may. In addition to that scheme, we are introducing the community right to build, which will streamline the arrangements where there is local support for neighbourhood planning. That is often thought of in terms of rural and parish areas, but there is no reason why it should not also apply to communities in London and our other great cities.

Yesterday, my Department, together with the Homes and Communities Agency, published the affordable homes framework. It sets out details on giving housing associations much more flexibility on rents and use of assets, for which they have been asking for some time. The key part of that is the new affordable rent model, which will be a constructive and useful tool that is expected to deliver up to 150,000 new affordable homes over the next four years. The old, rigid models did not always work. We need to be prepared to think more imaginatively.

[Mr Slaughter]

I am grateful to the Minister for giving way. He is right that Hammersmith council knows how to co-operate with developers. The west Kensington development that I spoke about earlier is a joint venture between the council and Liberty International, which is one of the biggest property firms. It will see the demolition of 750 good quality, newly modernised council homes, and the building of up to 8,000 luxury, high-rise, 30-storey blocks. Last year, the Minister said:

“Instead we want to see communities coming together to take responsibility for meeting their own housing ambitions…This is about giving communities real power and real influence.”

In the community under discussion, however, 80% of the tenants do not want their homes demolished. They want the power from this Government to take over their homes in the way described by the hon. Member for Carshalton and Wallington (Tom Brake). Will the Minister support the tenants rather than the property developers who want to destroy their homes?

[Robert Neill]

As usual, the hon. Gentleman makes a serious issue simplistic. The Government are determined to make sure that those precise issues can be determined at a local level. He knows that it is probably not appropriate for Ministers, particularly in our Department, which has responsibility for oversight of the planning system, to comment on developments that might go through the planning process and end up being considered by our Department. It is appropriate to have a greater degree of nuance and flexibility in the system than was the case in the past, when rather rigid developments sometimes imposed unacceptable developments upon communities. The hon. Gentleman will, therefore, understand why I will not go down the same route as him.

The affordable homes framework is a bold initiative, and I believe that it will enable communities. It is also worth remembering that this Government are providing considerable funding towards the issues. We are investing more than £6.5 billion in housing, and we are investing considerable moneys in London, which has particular pressures that we all recognise and with which we seek to deal. That is why we are handing the Mayor of London the ability to take over the Homes and Communities Agency operations in London, so that he can align delivery more effectively with the strategic housing pot available, in co-operation with the London boroughs. That seems to us to be the right thing to do.

We need to address the issue of overcrowding. As the hon. Member for Islington North has rightly said, there are a significant number of overcrowded households. Although that applies to the private sector, I would not seek always to run it down, because responsible private landlords have a key role. There are also some 258,000 overcrowded households in the social rented sector, while 430,000 households in that sector are under-occupied by two or more bedrooms. That is why it is wrong to rule out our proposal to look at issues such as flexible tenancy. In some cases, people’s housing needs will change as their life histories progress, and it is sensible to give them the means to reflect that. It is not the right approach to have too rigid an adherence to subsidy based purely on bricks and mortar.

I have been generous with interventions, but I am running out of time, so I will write to hon. Members on the other specific and important points that they have raised.

Pupil Premium

Tuesday 15th February 2011 Westminster Hall

12:29

[Mr Stewart Jackson (Peterborough) (Con)]

It is a delight to serve under your chairmanship for the first time, Mr Hollobone. I welcome the Minister to his place. I know from experience that he is absolutely committed to driving up educational standards and to rigour in all that we do in our schools.

This is an excellent opportunity to raise a hugely important issue that not only affects my constituency, but has national purchase. I am indebted to the officers of Peterborough city council—particularly Gary Perkins, head of school improvement, and Jonathan Lewis, assistant director of children’s services—for the assistance they have given me in preparing for the debate. I am also indebted to the officers of Westminster city council for their assistance, research and comprehensive briefings.

For the avoidance of doubt, I would like to make it absolutely clear that my remarks are not a criticism of the pupil premium policy. I strongly welcome and endorse the policy and the fact that the coalition Government will be spending £625 million on free school meals for children in the next financial year. That is particularly aimed at children from lower socio-economic backgrounds, and such a policy is absolutely right. There will be £430 spent per pupil. The amount concerned will rise to £2.5 billion by 2014-15. Naturally, that will benefit my constituents who are in receipt of free school meals, as it will people across the country. That will be new funding on top of existing funding contained within the dedicated schools grant. This debate is not about criticising the pupil premium; it is about suggesting how it can be improved and enhanced to meet the challenges of particular circumstances in my constituency.

The free school meals indicator is a blunt instrument. I welcome the commitment given in the White Paper “The Importance of Teaching”, which was published in November, to ensure that schools funding is transparent, logical and equitable. I also welcome the commitment to ensuring that a new national funding formula is “fair and managed properly”. I am pleased that the Minister is undertaking to revisit the school funding formula and the fact a consultation will begin later this year, not least because the funding formula currently used is not based on current data. The formula is historical and misses some very acute issues in a relatively small number of local education authorities, including my own at Peterborough city council. I concede that the ethnic minority achievement grant, which is worth more than £200 million this year, has helped some local education authorities to cope with children who have English as an additional language and with minority ethnic new arrivals. However, as I will discuss later, I am concerned about the decision to incorporate that and other discrete funding streams into the dedicated schools grant.

I have read carefully the Department for Education consultation document published last year entitled “School funding settlement for 2011-12: the pupil premium and Dedicated Schools Grant”, and I have to tell the Minister that I am not entirely convinced that

“Known eligibility for free school meals is the only pupil-level indicator…that we currently have.”

Ministers should be rightly wary of including things such as tax credit receipts or social deprivation indices into the premium. However, the small number of LEAs with significant numbers of English as an additional language pupils, particularly at primary level, should be taken into consideration in designing the post-2011-12 architecture of the pupil premium for reasons that I will now move on to.

It would be inappropriate to rehearse all the historical issues around large-scale migration from eastern Europe that my constituency has experienced during the past seven years since 2004. Suffice it to say that we have had to tailor our public services—housing, policing, health and education—to fit 20,000 new EU migrants who have come to Peterborough as a result of the 2004 European Union directive on free movement. That has obviously put some strain on the delivery of public services. In addition, there is a significant cohort of Pakistani heritage children in our schools who, for cultural reasons, come to primary school speaking largely Urdu, after being brought up by mothers, sisters and aunts. That is the cultural reality. If we combine that situation with the fact there are also low-skill, low-wage, indigenous white British families, there is a perfect storm of very difficult circumstances for primary schools to deal with.

In Peterborough, 30.5% of primary school pupils do not have English as their first language, which is 4,767 pupils. Almost 3,000 pupils in the secondary phase do not have English as their first language, which is around 22%. Overall, 26.5% of pupils on the school roll in the local education authority do not have English as their first language. Let us consider some significant examples. I pay tribute to Tim Smith, who is the head teacher at Beeches primary school in Craig street—the central ward of Peterborough—where six out of 528 pupils speak English as their first language. That is an enormous challenge—I will come on to this later—in terms of tailoring lessons and delivering a national curriculum, particularly key stage 2 of the standard assessment tests. Indeed, what alerted me to the seriousness of the matter in a concrete form was the fact that underachievement and poor education attainment were occurring not because our governors or teachers are below par or our children are particularly dense, which they are not, or our parents do not care, but simply because of the demographics—the social and economic profile—of my constituency and local education authority.

In December 2010, Peterborough was placed sixth from bottom in the key stage 2 results for SATs. That is not acceptable, because we are not a city that is particularly socially deprived when compared with many other parts of the country, for example, the north-west, Yorkshire and Humberside, and the north-east. Some 15% of our children have special educational needs compared with the national average of 1.4%, and Peterborough has an extremely high turnover rate of pupils—almost double the national average. Of the 2,103 pupils with key stage 2 results in 2010, 21% were not in the city at the start of their school life. A further 22%, or 455 pupils, who had foundation stage were no longer in the city to take their key stage 2 tests. Therefore, we have a massive problem with churn and children coming in and out of school. Often those are the same children who have English as an additional language. Hon. Members might be surprised to learn that almost 900,000 children in England have English as an additional language. That lays bare the significant challenge we all have in dealing with the issue.

The problems are high levels of pupils with English as an additional language, minority ethnic new arrivals, non-standard entry and churn among those pupils and, of course, significant pockets of social deprivation in my constituency across all racial, religious and cultural groups. It would be unfair to place the blame on Peterborough city council. I have had my differences with the council from time to time and it has not always taken the issue on board with the alacrity and seriousness of purpose that it could have, for example, many years ago when I was raising the matter. However, the council is now trying to do its best to ameliorate a very difficult situation that is having an impact on my constituents and their children.

The council is doing its best to cope with the circumstances. An exemplar school in that respect is one of the largest in Peterborough: Fulbridge primary school. That school has a superb head teacher, Iain Erskine, who is coping with a school in which dozens of languages are spoken. Indeed, in the whole of the city of Peterborough, 94 separate languages are spoken across our schools. An Ofsted inspector recently stated:

“the local authority has been relentless in its pursuit of improvement.”

We have a stark issue with attainment, as has been proven by the specific figures on English and maths. At the end of key stage 2, the proportion of English as an additional language pupils attaining national average levels in English is 19.3% lower than for those who speak English and, for maths, the figure is 11.9% lower. If anything, that situation got worse between 2009-10.

I will not go into minute detail about how resource-intensive those children are in terms of lesson planning, teacher training, and interfacing with pupils’ parents, many of whom do not speak English. Culturally, those parents do not need to speak English—many are in low-wage, low-skill occupations where the need to speak English is not apparent. For example, even if Polish children, who are extremely good at science and mathematics and are generally very gifted, are up to speed in English and mathematics, when they go home there is no cultural pre-disposition to speak English. It is very difficult for them. Other children, whose parents are less skilled, from, say, Lithuania or the Czech Republic, are in a situation where their parents’ contract for packaging fruit or picking vegetables in the fields of south Lincolnshire, Cambridgeshire or Northamptonshire finishes after six months. They then leave their rented accommodation and withdraw the children from school, or they may go to another part of the UK. It is debilitating and resource-intensive to train teachers and to have the capacity to deliver real improvements and added value for those particular families.

I will return specifically to the pupil premium and to work by Westminster city council, in a very helpful briefing paper it prepared recently for the Minister for Immigration, my hon. Friend the Member for Ashford (Damian Green). The briefing paper makes it clear that the focus on the pupil premium is

“too narrow and that multiple pressures caused by the needs of migrants (including deprivation, EAL and mobility factors) ought to be included for the Pupil Premium basis in the future.”

Furthermore, the National Association for Language Development in the Curriculum, in response to the recent White Paper, argues:

“the Ethnic Minority Achievement Grant, should not be merged with the Direct Schools Grant (DSG) and that any changes should be postponed at least until the government has completed its review of the system of funding beyond 2011-12.”

What are the solutions? As a loyal Conservative, I might be expected to say that money is not necessarily the only issue that solves every problem, but it will really help a local education authority such as Peterborough. Ministers need to think about the impact of the ethnic minority achievement grant, what it achieved, and how rolling it up with the dedicated schools grant could be a retrograde step in making sure that the people who need the most help—governors, teachers, parents and children, and a specific number of schools in a specific number of authorities—continue to receive that fiscal incentive to try to improve results and educational attainment. To give a few examples, a local education authority, such as Peterborough, that is facing such problems could recruit more qualified and experienced bilingual staff; run more English as a second language classes after school; engage with parents to encourage them to speak English and improve their own English to help their children; employ more teachers, as opposed to teaching assistants, with those skills; and develop specific language programmes, such as holiday boosters and catch-up programmes.

I support Westminster city council’s advocacy—or at least I support the idea that it should be debated and discussed by Ministers—of a specific fund held in the Department for Education for new arrivals to the UK. It calls it a “cash passport” and makes the case that it is recognised that non-standard admissions and English as an additional language will not be reflected in the existing pupil premium funding. We need to look carefully at that.

In conclusion, I ask the Minister to look carefully and specifically at how the pupil premium regime can be ameliorated to assist children with English as an additional language when he looks at all the representations he receives from different organisations in the course of the consultation. It was important to have this debate to raise this issue. With all due respect to the Minister, he and colleagues have a lot on their plate with free schools and academy schools, and with taking on, to an extent, the vested interest of the producer and the teachers’ unions. I am not entirely convinced that the issue that I have raised was necessarily on the political and administrative radar, so it was important to do so. I hope that either the Minister or our noble Friend Lord Hill will be able to meet a delegation from Peterborough local education authority in the near future to understand the key challenges facing our children in the city.

The Minister has made an excellent start in his post at the Department for Education. This is an issue of great significance and importance, and of pressing need. I hope that the Ministers will listen and will take forward policy that reflects the very difficult and acute circumstances in Peterborough and in other places. I look forward very much to the Minister’s reply.

12:45

[The Minister of State, Department for Education (Mr Nick Gibb)]

It is a pleasure to serve, I think for the second time, under your chairmanship, Mr Hollobone. I congratulate my hon. Friend the Member for Peterborough (Mr Jackson) on securing today’s important debate and on the way in which he presented his case. I know that my hon. Friend is a passionate advocate for his constituency and constituents, and also believes, as I do, in very high standards in our schools.

I understand his concern at the level of migration and the strain that it puts on his constituency, particularly in relation to the number of pupils who have English as an additional language. Between 2005 and 2010 there was a 59.6% rise in the number of pupils with English as an additional language in Peterborough. I can say immediately that I am very happy to meet my hon. Friend and a delegation from Peterborough city council to discuss the issues in more detail. Peterborough is, in fact, not one of the lowest-funded authorities in England. At £4,422 a pupil in 2010-11, the level of funding is slightly above the average figure in England of £4,398. That demonstrates, however, that even authorities with above-average funding can still have problems with the unfairness caused by the current system of school funding.

I certainly share my hon. Friend’s concern with the previous Government’s policy on migration. As a Government, we want to build a more integrated society, with greater equality of opportunity. That applies to adults as well as to children, and we are reviewing English language requirements across the immigration system to ensure that all those who come to the UK have the skills and language ability that they need to participate fully in society. We want to continue attracting and retaining the brightest and the best people who can make a real difference to economic growth. I agree, however, that unlimited migration places enormous pressures on public services, particularly schools, as my hon. Friend has outlined. The Government aim to reduce levels of net migration back to the levels of the 1990s and to achieve that we have already announced that we will introduce a limit on economic migration from April 2011.

My hon. Friend has set out the effect of migration on schools in Peterborough, the difficulties of coping with large number of pupils who do not have English as their first language, and the pressure on school places. It is important that children with English as an additional language should be given the support they need to improve their educational attainment and our policy is to encourage rapid English language acquisition to facilitate their integration. I know that the increase in pupil numbers, particularly in primary schools, is a major pressure in many areas of the country, and that the ethnic minority achievement grant has played an important part in recent years in helping to meet the additional needs of children with English as an additional language. Peterborough local authority received an EMAG allocation of £847,886 in 2009-10. The Department for Education is still finalising the figures for 2010-2011, but I can confirm that the final figures will be at least as much again. I understand the point that my hon. Friend made in his opening remarks, and the views of Peterborough city council, but it remains a key priority for the coalition Government that children with English as an additional language are supported.

As part of our school funding settlement for 2011-12, which we announced on 13 December 2010, we confirmed that to simplify the funding system we would be mainstreaming relevant grants, including EMAG, into the dedicated schools grant from April 2011. Under the new arrangements, schools will be able to continue targeting pupils with English as an additional language for additional support, but they will also have the freedom to target other underperforming groups if they wish to do so. Local authorities will be free to retain a portion of the funding to run centralised EAL services and, where allocations are small enough not to warrant devolving the sums to schools, they can choose to retain the whole amount centrally. It is important to stress that the mainstreaming of EMAG funding is not about cutting costs. For 2011-12, funding per pupil, including mainstreamed grants, is being maintained at 2010-11 cash levels. The grant will be included in the money that goes to Peterborough city council, albeit not separately identified. The quantum of the grant will still be there and will still go to the council.

I know that Peterborough has seen significant increases in recent years in the proportion of children with English as an additional language. That is why the authority was awarded an exceptional circumstances grant of £979,000 in 2009-10. I can confirm that the figure will rise to £1.5 million for 2010-11. We will be mainstreaming the grant in the 2011-12 financial year based on the 2009-10 figure rather than the 2010-11 figure. Funding for 2011-12 will also be based on schools’ actual pupil numbers in January 2011, which means that year-on-year increases in pupil numbers will be reflected in Peterborough’s final funding allocation.

My hon. Friend suggested that we might use the pupil premium to address the issue of English as an additional language. We introduced the pupil premium to support the most disadvantaged pupils in schools, targeting extra funding specifically at those from the most deprived backgrounds to enable them to receive the support that they need to reach their potential, and to help schools reduce educational inequalities. For this year, as my hon. Friend said, the premium will be set at £625 million, which amounts to £430 of additional funding for every pupil from a deprived background. We have decided that the indicator used to reflect deprivation for 2011-12 will be known eligibility for free school meals. Poverty is the single biggest predictor of poor attainment at school, regardless of ethnicity or country of origin. I know that he believes free school meals to be a rather blunt tool for deciding eligibility, but the link between free school meal eligibility and underachievement is strong.

[Mr Jackson]

Does my hon. Friend concede, notwithstanding the laudable aim of using free school meals as an indicator for accessing money for children in the most need, that, in the case of east European migrants particularly and other migrant groups, there is a cultural predisposition against claiming free school meals? Therefore, some of the children who would most benefit from extra funding are not able to do so, and that obviously has an impact on the overall educational attainment in their school.

[Mr Gibb]

I understand my hon. Friend’s point. Such points are made to us as we go through the consultation to assess what indicator to use. For example, some people argue that we should use “ever” free school meals, so that parents who have ever claimed free schools meals for their children within a period of six or so years should also be entitled, regardless of the fact that this year they no longer claim the benefit. We are considering what is the best indicator.

However, we believe that the best pupil level measure available for identifying and targeting underachievement is free school meals, or some component of it. We expect that more parents will apply for free school meals once it is made clear that pupils will attract additional funding for the school. Indeed, we are receiving reports even now that more parents are doing so, and we hope that that will help to solve the problem of under-claiming. The parents my hon. Friend referred to who do not claim for stigma reasons may well feel that they should claim because it helps the school more broadly if they do. It is our intention to extend the coverage of the pupil premium from 2012-13 onwards to pupils who have previously been known to be eligible for free school meals—as I just said, the ever free school meals indicator.

As my hon. Friend knows, we have concerns that the current funding system is unfair, illogical and opaque. The spend-plus system of allocating dedicated schools grant is currently based on historical accident and out-of-date assessments of need, and is inflexible in responding to change, as he knows from his constituency. That means that it is not able to adjust to reflect current needs in local authorities such as the high level of EAL needs in Peterborough. That is why we are committed to reviewing the underlying funding system so that schools with the same needs can receive similar levels of funding.

In our White Paper “The Importance of Teaching”, we said that we would consult on developing and introducing a clear, transparent and fairer national funding formula based on the needs of pupils. We are already working to develop options for the future funding of schools, with the aim of consulting in late spring, as my hon. Friend said. The consultation is likely to cover the merits of a national funding formula, transitional arrangements and the factors to be included in such a formula. English as an additional language will certainly be a factor in the review and consultation. We need to consider how best to provide the necessary additional financial support to schools with such pupils, taking into account how the additional need decreases—for example, as a pupil becomes more proficient in English. My hon. Friend will appreciate that I obviously do not know the outcome of the review, but I hope that he will take in good faith a commitment from me to study carefully the issues that he has raised in the context of the school funding review and in our consultation later in the year.

[Mr Philip Hollobone (in the Chair)]

I thank the hon. Member for Peterborough (Mr Jackson) and the Minister for taking part in the debate. We now move on to the next debate.

Holiday Accommodation

Tuesday 15th February 2011 Westminster Hall

12:57

[Mr Mike Weir (Angus) (SNP)]

I am pleased to serve under your chairmanship again today, Mr Hollobone.

I represent a largely rural constituency which covers more than 2,000 sq km from the fertile coastal strip of seaside towns to the mountainous and sparsely populated glens. What all parts of Angus have in common is their beauty, which has made tourism an important and growing part of the local economy. The latest Office for National Statistics classification discloses that almost 10% of jobs in Angus in 2008—the last year for which I can find figures—are tourist-related, which is significantly above the national average of around 8%. As well as the more traditional holiday tourism, my constituency also attracts a significant number of visitors from the UK and overseas who are attracted by field sports. It will therefore be no surprise that I maintain an abiding interest in tourism development issues, which affect the economic development of Angus and the prosperity and well-being of my constituents.

I should say at the outset that I am not here simply to lambast the Government for their attitude to tourism. I took a great interest in the furnished holiday lettings relief and its impact on the self-catering sector, and campaigned hard against the ludicrous proposals put forward by the previous Labour Government. I acknowledge that the present Government have introduced new proposals which, although still not ideal, are a significant improvement on what had been proposed, and last week I submitted to the Treasury my third response to consultation on the issue in less than a year. I do, however, wish to concentrate on a proposal which I believe could cause serious damage to this vital industry: the Minister’s proposal to do away with the current, widely recognised star rating scheme for holiday accommodation. He has suggested, in effect, that consumers instead look at private internet sites such as TripAdvisor.

I have pursued the matter through a series of parliamentary questions and have been somewhat perturbed by the answers, since it seems clear that the Government are moving towards self-assessment and feedback rather than the current star rating scheme. Incidentally, the Minister stated in one answer that tourism is a devolved matter for the Scottish Government. That is not the whole picture, at least at present, as VisitBritain is responsible for marketing tourism for the whole of the UK in significant parts of the world, including the crucial emerging markets of Brazil, China and India, under what I understand is referred to as the “quadrant model”.

Many tourists coming to the UK will be looking for a holiday that covers several centres, including Scotland. Therefore, the current hard-won system, with all the national tourist boards and the Automobile Association co-operating in a similar star system, has a great deal of merit. Allied to that, such a system is common overseas, so visitors from other areas will be familiar with the concept and be able to recognise easily what type and standard of accommodation is available for consideration in all parts of the UK. In particular, visitors from the emerging markets that I have flagged up are unlikely to fly directly to Scotland, unless arriving via charter arranged under an incentive scheme, or for a conference. In such limited cases, use of self-catering accommodation is extremely unlikely.

I cannot overstate how hard the tourist industry has worked to bring into being the common standard, which ensures that a three-star self-catering cottage will be of the same quality in Scotland, England and Wales. I cannot emphasise enough how much work was done by the tourist boards and the industry, which compromised on sometimes heartfelt positions for the greater good of the industry going forward. In a rolling programme, self-catering was the first sector to apply the common standard. Other sectors have now joined, but the self-catering common standard was the first to be reviewed as standards and visitors’ expectations have moved on.

I consider the mooted scheme to be a serious error. The star-rating scheme has built up considerable trust and recognition over the years as a robust scheme that gives us a good idea of the standard of accommodation we are likely to encounter, based on an objective assessment by an independent body.

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

May I add to the hon. Gentleman’s argument? Will he consider that, whatever system we have going forward, we need to make it less onerous? The very small businesses in my constituency certainly find the current scheme difficult. If someone has a bed and breakfast and a cottage, the two assessments are separate, so whatever scheme we have, may we make it simpler and more affordable?

[Mr Weir]

The hon. Lady makes a good point. As I will explain in my remarks, the new proposals will make the situation even worse for self-catering small businesses.

I accept that the current scheme is not perfect, and many hoteliers believe it too prescriptive, homogenising and sanitising accommodation with what some deride as its tick-box approach, which can penalise quirky, extraordinary or mould-breaking properties. Subscription to the scheme has been less extensive than was hoped, especially in England and, more particularly, in London. However, for all its limitations, it delivers an objective assessment based on published and transparent criteria. TripAdvisor and its like do not. Instead, individuals can register their views on holiday accommodation on a website, but their views are totally subjective and could be influenced by a huge number of the variables encountered.

The comedian Michael McIntyre has a funny routine based on someone using TripAdvisor to rate a holiday. Like all good comedy, it has a germ of truth. He notes that someone looking at the various comments on TripAdvisor is most likely to believe those that are bad. Indeed, often, only the disgruntled care to write up the experience—others simply do not bother.

Last year, I holidayed on the beautiful island of Seil, in self-catering accommodation found on the VisitScotland website and chosen on the basis of the star rating. My family and I had a great holiday, and we would thoroughly recommend it to anyone but, on returning home, with many things to do, writing a review on a website was the last thing on our minds. That is a danger for good properties.

That strikes to the very nature of the problem. There is absolutely no quality control over what may be posted on such sites. There is no effective way for the hotelier or holiday cottage provider to prevent someone with a particular beef—perhaps they did not get on with them, perhaps they were unreasonable, or perhaps they were simply vindictive—from commenting on the website. Yet such a comment could have a serious impact on the business. If the Minister has any doubt about the capacity of rival tradesmen who have lost in legal disputes, or of the plain malicious, to pursue vendettas in acts of cyber-sabotage, he could do worse than consult the website www.ihatetripadvisor.org.uk.

While in theory the small business owner might have redress in law, few would have the resources to pursue such an action. Has the Minister looked at the jurisdiction section in the terms and conditions on www.tripadvisor.co.uk—in case he does not know the website address? If he does so, he will find:

“This Website is operated by a US entity and this Agreement is governed by the laws of the State of Massachusetts, USA. You hereby consent to the exclusive jurisdiction and venue of courts in Massachusetts, USA and stipulate to the fairness and convenience of proceedings in such courts for all disputes arising out of or relating to the use of this Website. You agree that all claims you may have against TripAdvisor arising from or relating to the Site must be heard and resolved in a court of competent subject matter jurisdiction located in the state of Massachusetts.”

Despite the somewhat impenetrable English, that appears to give sole jurisdiction to the courts of the state of Massachusetts.

I am sure I am not alone in finding it strange that a Minister of the Crown will be recommending that consumers in the UK should consult, and that UK taxpaying accommodation providers should find themselves at the mercy of, an organisation that specifically seeks to exclude the writ of Her Majesty’s courts, as a supplement to and eventual substitute for a state-sanctioned system of quality assurance. For a Government that pride themselves on reducing the burden on small businesses, that seems a curious tack to take.

Should the jurisdiction barrier be laboriously and expensively overcome, the hard-pressed business which seeks to obtain redress for defamation also runs up against a comprehensive disclaimer on the website:

“TripAdvisor takes no responsibility and assumes no liability for any Content posted, stored or uploaded by you or any third party, or for any loss or damage thereto, nor is TripAdvisor liable for any mistakes, defamation, slander, libel, omissions, falsehoods, obscenity, pornography or profanity you may encounter”—

which makes it sound much more interesting than it probably is.

TripAdvisor will retort that it makes provision for management responses, but experienced practitioners whom I have consulted advise that that can too easily fall into an entrenched argument of “He says” or “She says”, from which there is no easy way out, and all in the public domain. Others have reported difficulties in accessing that right to reply, being told that any robust defence of the business breaches the user guidelines.

If that were not bad enough, there can be serious differences between how hotels and self-catering are treated on such sites. In a recent article in The Sunday Times, Adam Raphael, editor of The Good Hotel Guide, made the point:

“TripAdvisor, the best known hotel review site, carries millions of consumer reviews, but its usefulness is marred by its failure to screen out collusive and malicious reviews.”

He freely admits to having an obvious interest in the matter but points out that, in preparing his publication, his team track every review sent to them and know who the writers are, where they are coming from and how sound their judgments are. Tellingly, he adds:

“When our readers disagree, we send an anonymous inspector to spend the night at the hotel or B&B, at our expense.”

Adam Raphael also makes the point that TripAdvisor and similar sites have no idea who is writing reviews and make only a feeble attempt to check that they are genuine. He cites one response to a hotel’s complaint that a critical report was planted by a competitor:

“Since reviews are posted by our members on an open forum, and we do not verify the information posted in this, we are unable to provide you with proof that this member reserved, stayed or actually visited [your] hotel.”

Perhaps the final nail in the coffin was when TripAdvisor published a list of its top 25 hotels in the UK—one of which was, in fact, in administration and closed. That sets out the problem. Adam Raphael was looking at it from a different, commercial angle, but surely a star scheme administered by the national tourist agencies within the UK is the best way to ensure that tourists—whether domestic or from overseas—know what they are getting and can trust.

Bad as matters are for larger hotels, however, a much more serious situation could be faced by holiday lets in more rural areas such as mine in Angus, or that of the hon. Member for Newton Abbot (Anne Marie Morris) in the south-west. Just to show my inclusiveness and to demonstrate that this concern is not just a Scottish one, I made some inquiries as to how many English self-catering properties were listed on TripAdvisor. I thank the chief executive of the English Association of Self Catering Operators for doing the spadework.

The Minister might be interested to know that in the whole of England there are 3,706 such properties—in Devon only 239, in Cornwall 362, in Norfolk 76 and in Dorset 167. He might agree that those numbers are very small for some of the principal holiday destinations in England. Clearly, that is a small fraction of total self-catering accommodation in England. My understanding is that to get listed, a business has to pay to get on such a third-party site or hope that a client nominates them. As Adam Raphael notes in his article, that has already led to allegations that some hotels are offering inducements for good reviews on the sites.

The main point, and the thing that concerns me most, is that most self-catering accommodation would get very few reviews on such sites, unlike larger hotels, and therefore the impact of one unreasonable review would be far more detrimental to a small business. Will the Minister consider the difference between the accommodation types and the business models that they operate? A self-catering property that is let out for 25 weeks a year—fairly good going in the current market—might see 35 bookings made. If an average of three people visit per booking, that gives 75 people per property per year who might leave feedback on sites such as TripAdvisor. That includes children and close family members. Contrast that with a 10-bedroom hotel. According to the most recent annual UK occupancy survey for UK serviced accommodation, published in 2009, room occupancy averaged 58%. An average of two people per room would give 2,117 bookings and 4,234 visitor nights that could result in feedback on sites such as TripAdvisor. Put simply, such sites do not work for self-catering. The allied system is called FlipKey, but it is expensive to use as there is no linked booking engine for self-catering to generate funding, as Expedia does for TripAdvisor. FlipKey take-up has been understandably low.

The internal systems in Scotland and the other nations of the UK are devolved, and I understand that VisitScotland is likely to continue offering a quality assurance scheme along the lines of the current star-rating scheme. It sees the scheme as offering opportunities rather than being a burden, and in answer to initial reports on the proposed changes it responded that Scotland’s star-rating quality assurance scheme is recognised as a world leader. VisitScotland has recently signed a three-year contract with the Swedish agency for economic and regional growth to develop a quality assurance scheme for visitor attractions and the accommodation sector. It has worked with Namibia and South Africa on quality schemes, and is currently in discussion with Norway, Finland, Estonia and Swaziland.

A huge amount of effort has been put in over the years between VisitScotland, VisitWales and VisitEngland to produce a common standard for those visiting all parts of the UK and, in the case of foreign tourists, those encouraged by VisitBritain. If the Minister goes down the road of self-assessment, that will render the common standard meaningless and tourists will have to deal with at least two competing systems. At a time when we need to work together to encourage economic development in our rural economies—of which tourism is a vital part—that seems a backward step.

The chief executive of Farm Stay UK wrote to me yesterday:

“As we position the UK on the world stage with the Royal Wedding, the Olympic and Paralympic games and the Rugby World Cup, now is not the time to be pulling away from a quality initiative.”

I would add the Commonwealth games in Glasgow to that list.

I will be interested to hear the Minister’s response. I urge him to reconsider this matter before it is too late, and to meet with the chair of the Federation of National Self Catering Associations, and the CEO of Farm Stay UK, whom I am sure can put the case for the self-catering sector more forcefully than me.

13:13

[The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (John Penrose)]

It is a pleasure to see you in the Chair, Mr Hollobone. I am delighted to respond to the hon. Member for Angus (Mr Weir) on this important issue, which has been slightly distorted in the public debate thus far, so I am glad for the opportunity to respond to his points and to set the record straight.

The hon. Gentleman has helped me by securing this debate—for which I thank him—and by kindly asking me a written parliamentary question, which I answered on 2 February. There were a number of associated questions, but one was specifically on this topic and I shall start by reading part of the answer that I gave him at the time. I hope it will provide answers to much of what he has spoken about today. I stated:

“We are not considering abolishing the schemes, but rather passing them over to be run by the industry itself instead.”—[Official Report, 2 February 2011; Vol. 522, c. 819W.]

That is crucial because a large part—although not the entirety—of the hon. Gentleman’s argument was based around the principle that we are scrapping the star-rating schemes. We are not. I made that clear to the hon. Gentleman in a written answer, and I am happy to repeat it now. I accept that star-rating schemes have a purpose and are valued and useful. That use has historically been strong, and it will continue in the future.

It is all very well for people to get over-excited about the wonders of the internet; it has many great things that it can provide for us all. However, many people are still not particularly comfortable using the internet or find it hard to afford—we talk about the digital divide—and those people need an alternative source of information. Trust has built up in star-rating schemes over time, and we would be foolish to abandon that.

[Mr Weir]

I understand what the Minister says, but will he clarify what that implies for the cost to small businesses—the point raised by the hon. Member for Newton Abbot? Is money being provided to the national tourist board—in England, in the Minister’s case—to continue the scheme in its current forum? Are considerable increases in cost to the small holiday-letter expected, so that the scheme can continue?

[John Penrose]

As I am sure the hon. Gentleman knows, these schemes are typically run on a combined cost basis. At the moment, the Government provide a modest amount of funding through VisitEngland to pay for a small number of staff who are involved in administering the scheme in England. There is more than one scheme, such as that sponsored by the AA and various other organisations around the country. I was in the New Forest the other day visiting its impressive local tourism organisation. It has a New Forest accommodation rating scheme. In most cases, people typically pay a small sum to be part of such a scheme, and in the best-run ones, the sums paid by the participant are graded according to the size and type of accommodation provided. No one is suggesting that that system is due to change.

In this country we still have a system where Governments get involved in rating the quality of hotels and other kinds of holiday accommodation. I find that bizarre because we do not have—thank goodness—a Government rating system for cars or cornflakes or almost any other kind of consumer product. There is good reason for that, because in most fields of life we trust people to make up their minds based on good consumer information. It is important that people have good consumer information when booking a holiday or accommodation, but the emphasis should be on providing that information rather than on the Government saying, “We know what ‘good’ looks like.” Anyone in the tourism industry would accept that the goalposts are moving fast, and there is a welcome proliferation of different kinds of accommodation for different niches. It is difficult for any star-rating system to keep up with that, particularly a state-mandated and sponsored system.

[Mr Weir]

The 2008 report by the Select Committee on Culture, Media and Sport pointed out the importance of the star-rating system in driving up quality. At that time, the Department listed the scheme as one of its great achievements. The Minister’s arguments seem to turn that on its head.

[John Penrose]

I do not think they do. I have repeated something that I had already told the hon. Gentleman in a written answer: we are not planning to can the scheme; we plan to continue with it, but to allow the industry to take it over. I have spent the past five minutes explaining some of the strengths of such a scheme, but it is peculiar at the very least, and unusual compared with other industries, for such a scheme to be state sponsored.

I started by agreeing with the hon. Gentleman that star-rating schemes are an important part of a holidaymaker’s assessment of where they want to go and stay. They are not the only thing, and increasingly there are other sources of information. I will come on to the different sources of information, including the hon. Gentleman’s jeremiad against TripAdvisor and all its ills. Clearly, star-rating schemes have a place, but I find it bizarre that in a world where we have many star-rating systems other than the state-sponsored one, and where we do not have state-sponsored quality approval schemes for all sorts of other consumer goods, we somehow think it sensible and right for the Government to be the author and intermediary of something for hotels. That is a bizarre anomaly.

The hon. Gentleman went on to talk about some of the alternatives, saying that they also have flaws. I will come to that in a minute. It is important to realise that although star-rating schemes have their strengths and are a trusted brand in many cases, they also have their limitations. As I was beginning to point out, a welcome and increasing variety of accommodation is available. In the last 18 months to two years, across Britain as a whole we have seen a huge increase in the amount of self-catering accommodation that people are using for their holidays. There is also in the hotel sector an increasing proliferation of types of hotel—niche players of one kind or another. There are people providing green hotels, which have a very low carbon footprint and are environmentally sensitive; high-style boutique hotels; and everything in-between. That is to be welcomed, but it is extremely difficult to argue that one star-rating scheme can capture that breadth and richness.

It is quite instructive that we have only to think of the expectations that people have of what a typical three-star hotel will provide today compared with 10 or 15 years ago to illustrate how things have changed and will continue to change. The chances are that 10 or 15 years ago, people would have expected a reasonable hotel room to have a trouser press in the corner and a phone. Nowadays, whether or not people like the trouser press, they are much more likely to be concerned about whether there is wi-fi access. The fact that a great many people have mobile phones nowadays makes the phone relatively less important. All I am saying is that the criteria need to move with the times. The industry is reacting well and rapidly to reflect that diversification of market opportunities. It is extremely difficult to expect a single state-run star-rating scheme to keep up with all that, even though—let me agree with the hon. Gentleman once more, just for the sake of clarity—he and I both accept that star-rating schemes are important. I am arguing about how we provide one, rather than whether they are a good thing.

Before I talk about some of the alternatives and whether TripAdvisor is the worst or best thing since sliced bread, I should pick the hon. Gentleman up on one other point. He began by acknowledging that tourism is a devolved matter, and he is absolutely right. For the sake of clarity, let me point out that VisitBritain is in charge of marketing Britain as a whole—as one would expect from the name—to the world outside to drive inbound foreign visitors to the UK. We are taking all sorts of measures to get it properly funded and make it able to do that in the most effective way possible in the next three or four years, because we have an amazing set of international events that will be attracting people to this country.

I am thinking of events such as the royal wedding, which is due very soon, but also, in 2012, we have the Queen’s diamond jubilee and the Olympic and Paralympic games, plus the cultural Olympiad. In the years following, we have two different flavours of rugby World cup; we have another Ryder cup coming up in golf; and of course in Glasgow we have the Commonwealth games. There is a huge opportunity for us to sell the UK as a destination. Even if people are not coming here to see those events, they will probably be viewed by some of the largest TV audiences the planet has ever seen, so they present an unparalleled marketing opportunity in attracting people here in the years following the events, just because they liked what they saw on TV.

The hon. Gentleman is right to say that VisitBritain has that pan-Britain role. However, it is also worth pointing out that the decisions by Scotland, Wales or England on things such as a star-rating scheme are entirely local; they are fully devolved. Therefore, although I appreciate his remarks at the start of his speech, I gently say to him that a great deal of his concern about the star-rating schemes in Scotland must be directed to the Scottish Executive, rather than here. I do accept, however, that there is a point about consistency between the different nations.

[Mr Weir]

I am listening to what the Minister is saying but I rather fear he has missed my point. I fully accept that, internally, these things are devolved. Indeed, VisitScotland has made very clear its support for the existing scheme. However, that is not the argument. The point I was making about VisitBritain is that, given all the events that are coming up, most of the tourists will fly into London because Heathrow is the premier international airport and there are very few direct international flights to Scotland’s airports—apart from certain destinations—particularly from many of the countries where VisitBritain operates. My concern is that if tourists come to the UK, they should be able to be assured that the type of starred accommodation available is similar throughout the various countries of the UK. I suspect that many of them will travel about a great deal while they are here. The worry is about breaking up a hard-won scheme that has taken many years to establish. If Scotland, Wales and Northern Ireland keep their schemes, as I think they probably will, and England goes its own way, there is a real danger of causing confusion and affecting important international tourism to the UK as a whole.

[John Penrose]

I take the hon. Gentleman’s point, and I suppose the most reassuring response I can give is that the good news is that the tourism industry, both collectively and individually, is not stupid and understands the importance of common standards. He will understand that all the different existing schemes—I mentioned the AA scheme and the very local example that I saw in the New Forest—take notice of, and in many cases contribute to, a common set of standards, so there is a direct read-across between, for example, the AA scheme and others. That is clearly to the advantage of the entire tourism industry. Handing the English scheme back to the industry is very unlikely to endanger that, because it is clearly to its commercial advantage. I hope that that reassures the hon. Gentleman.

In the couple of minutes I have left, I shall move on to the hon. Gentleman’s point about some of the alternatives. There was a long and impassioned section in the middle of his speech about the evils of TripAdvisor and all the things it gets wrong. For the sake of clarity, I point out that this Department and this Government do not hold a brief for TripAdvisor or anyone else like that at all. It would be entirely wrong of us to pretend that we did, or even to do so. TripAdvisor is the most commonly used such website in this country. It is used by people who are not stupid and who find what it says helpful—although I think many of them take what it says with a pinch of salt, because some of the reviews need to be viewed with a careful eye, for the reasons the hon. Gentleman laid out. However, there are plenty of alternatives, and many of those have very tight—and perhaps in some people’s view, tighter—quality controls on the kinds of postings they allow. For example, many of them allow postings to be made only by people who have genuinely visited and stayed the night in the accommodation in question. Therefore, postings are made only by customers. They cannot be made by the people running the bed and breakfast down the road, who feel like posting something nasty even though they have not stayed in the accommodation. There are different ways of dealing with the quality control angle.

Websites of any kind that provide customer reviews live or die by the trust the British public place in those ratings. If someone visits such a site and thinks it is being spiked or generally misused, they are much less likely to go back to it. Therefore, there is a huge reputational risk for any websites that allow low-quality reviews to become too large a proportion of the total. For example, if, in the hon. Gentleman’s view, TripAdvisor is getting it wrong too often and others are doing a better job, we would logically expect people to transfer their affections very quickly, given the rate at which things move in the digital world, from that website to another one. The hon. Gentleman is right to say that such websites are not perfect, and there are concerns about them, but there is an eminently sensible self-correcting mechanism whereby people can vote with their feet—or, in this case, with their mouse.

[Mr Philip Hollobone (in the Chair)]

After that five-star debate, we move to a debate on funding for technology innovation in wave power.

Wave Power

Tuesday 15th February 2011 Westminster Hall

13:29

[George Eustice (Camborne and Redruth) (Con)]

It is a pleasure to serve under your chairmanship, Mr Hollobone, in this important debate on the funding of wave-power innovation and technology.

Let me start by saying a little about the potential of this new industry. About 25% of all wave and tidal technology development is going on in this country. Our marine resource is second to none, and that is nowhere truer than in the south-west of England. The extraordinary resource around our coastline is backed up by lots of the skills and expertise that we need to develop the technology. The Carbon Trust has estimated that wave power could eventually meet 15% to 20% of our current power needs and that it might produce enough electricity over time to power 11 million homes. Furthermore, with the extraordinary development of this new energy resource comes a lot of economic potential. It is estimated that the industry could be worth £2 billion by 2050 and that it could create more than 16,000 jobs. Some estimates suggest that the wave and tidal power industries together might employ 10,000 by as early as 2020.

My constituency is home to the wave hub project, which is the first project of its kind anywhere in the world. It is the first time we will have a commercial-scale facility to test arrays of wave-power devices at deep-water locations. The project consists of a long cable 16 km off our coast at Hayle, with a plug anchored on the sea bed to take up to four arrays of devices for testing. Currently, the maximum power produced by each device is 4 or 5 MW, but it will be possible to expand capacity over time so that the wave hub could feed no less than 50 MW into the network. One company has already signed up to plug into the wave-power device. Ocean Power Technologies will test a commercial-scale version of its PowerBuoy system, which is one of the leading systems being developed.

My constituency is also home to the Peninsula Research Institute for Marine Renewable Energy, or PRIMaRE, to give it its short name. The institute is based at the Tremough campus near Falmouth. At the institute, academics from Exeter university and the Camborne School of Mines are doing a lot of important work, which is needed to support the development of wave-power technology. I visited last summer to see some of the work that is being done on moorings. The Cornish coast is famous for wrecking boats, and the sea can be quite choppy at times, so getting the strength of moorings for wave-powered devices just right is an important part of the development of wave power. PRIMaRE is also doing a lot of tests on new devices to see how each device works in commercial situations.

That brings me to a point about the importance of developing and funding technology innovation. The marine renewables deployment fund will be phased out in March 2011, although according to those in the industry, this £40 million fund was never very satisfactory. It was notoriously difficult to access; in fact, I am not sure whether anybody ever successfully accessed it. The reason is that one of the criteria stipulated that a device had to have been actively and successfully working in commercial situations for at least three months before someone was eligible to apply for a grant. However, the key thing about wave-power technologies is that developers need support before that point; they need support before they get to the stage of keeping a device in the water for three months, not after they have achieved that extraordinary feat. Some estimates suggest that the cost of developing and deploying a commercial-scale device is in the region of £30 million, so developers need support much earlier in the process.

Some improvements were made under the marine renewables deployment fund, which was deliberately designed to come in a bit earlier. However, we now need to think carefully about how we move from the proving stage—testing small devices at the European Marine Energy Centre—to the stage of developing wave power on a much bigger scale.

[Andrew George (St Ives) (LD)]

My hon. Friend is making a good case. In the previous Parliament, my constituency included the Hayle area, so I was involved in the development of the excellent project he is talking about. However, does he agree—I think he is coming to this—that if the project, which enjoys perfect conditions, is to become a commercial success, we need public sector support, such as renewables obligation certificates or other means, to bridge the gap between where it is now and where it needs to be?

[George Eustice]

Yes, I absolutely agree. Although the wave hub technically comes ashore at Hayle, my hon. Friend has told us once before that it is actually in St Ives waters, and we have both had discussions with representatives of the fishing industry, who have concerns about where the wave hub is located. However, I absolutely agree with my hon. Friend, and I was coming to the point he raises.

The Government have announced a review with the Technology Strategy Board. They have also announced the new idea of technology innovation centres. Those involved with the wave hub and the PRIMaRE institute at Tremough are keen to develop a TIC for offshore renewables in the south-west. What I want from the Minister today is some idea of the criteria that will be applied. We know that a technology innovation needs assessment—TINA, in the jargon of the trade—is being carried out for projects that want to put themselves forward for a TIC. I was recently pleased to hear the Minister repeat his pledge about trying to develop a marine energy park in the south-west, and there is no better place for that than Hayle. A lot of infrastructure improvements are being carried out on the north quay, and a small marine business park will be located near the wave hub project.

I am keen, however, to understand the criteria that will be applied. I am not a big fan of ring-fencing these budgets and pots of money. Some in the industry say that we should make x amount of the £200 million available for wave-power development, but it is much more important to apply the right criteria to determine where to allocate the funds. The marine renewables deployment fund failed because we were far too risk averse. The whole reason for having public subsidy and public investment in these areas is to bridge the gap between risk and potential. When it comes to wave power, we have extraordinary potential, with a source of energy that could meet 15% or 20% of our energy needs. However, there is also a large risk in that it is much harder to develop devices to use out at sea in difficult conditions. As I said, it can cost up to £30 million to develop these technologies. The Government’s role should be to come in and bridge that divide between risk and potential.

The second key point about the criteria is that they must look at what stage the development of the technology has reached. Those involved in wave power have just gone past the phase of testing devices in a tank in the laboratory and have moved to testing commercial-scale arrays, so the industry really needs some additional funds to help it make the next step. A lot of the other renewables industries that will be competing for the same funds are quite a bit further along the development road, and we should be making much tougher demands on them so that they start getting private sector investment. We should also remember that providing public sector investment can unleash a lot of additional private sector investment. The £100 million that the Government have already invested in wave power has brought in an additional £200 million of private sector investment. There is private sector money, but those concerned need to know that there is a commitment to develop things to the next stage.

Finally, geography is another factor to take into account in relation to the capacity to develop an industry, and I want to say a little about ROCs. In Scotland five ROCs per megawatt-hour are paid at the moment for wave power that is generated, but there is not the capacity on the grid to develop an industry there. We need to avoid a situation in which all the development of the industry takes place in Scotland, but in a few years we find that there is insufficient capacity in the grid to capitalise on the industry properly. It would be far better to develop the industry in the south-west where there is capacity on the grid to upscale and expand the industry.

I believe strongly that in addition to the right technology push we need the right support framework to create the pull conditions to enable the industry to go beyond the development stage. There is no doubt that the answer is to increase the number of ROCs that we pay on the commercial devices to five ROCs per megawatt-hour, so that we match Scotland. That would give a level playing field.

[Andrew George]

My hon. Friend has got to the nub of the biggest hurdle to taking the project forward. As the Government are reviewing the ROC regime it is clear that some intense negotiation is needed between the UK Government and the Scottish Executive, to give sense and sanity, and an even playing field across the border.

[George Eustice]

I agree with my hon. Friend. There was quite a bit of criticism of the decision by Scotland to go unilaterally for the five-ROC regime. Others in the industry say that perhaps five are not needed and perhaps three or four would be acceptable, but we need that level playing field, so that the people developing the technology can make rational judgments rather than just chasing those paying the highest amount of money.

We are clearly entering an era of energy needs in which there is no magic bullet. We shall need many different sources of energy to come on stream. The Minister once told me that wherever he goes, and whatever conference he attends, people say “This is the magic industry that is the future” whether it be biomass, anaerobic digestion, nuclear or something else. The truth is that we shall probably need a range of sources to supply our energy needs in the future. It is clear that wave power could be one of those important sources, but only if we are willing to back it to the next stage, to get it to a commercially viable situation.

[Mr Philip Hollobone (in the Chair)]

With the permission of the hon. Member for Camborne and Redruth (George Eustice) and the Minister, I invite Mr Shannon to make a contribution, but I want to call the Minister at 1.45.

13:43

[Jim Shannon (Strangford) (DUP)]

Thank you, Mr Hollobone. I thank the hon. Member for Camborne and Redruth (George Eustice) for securing the debate. I want to make a couple of quick comments, as I understand that time is limited.

I fully support the points that the hon. Member for Camborne and Redruth made. There is wave and green energy creation in my constituency, at SeaGen at Portaferry, which is a very successful venture that took a lot of private enterprise spending as well as Government support. What discussions has the Minister had with the Minister of Enterprise, Trade and Investment in Northern Ireland, Arlene Foster? Have there been any discussions with her about how to introduce wave energy?

I am always concerned about the impact on the fishing industry, which the hon. Member for Camborne and Redruth alluded to in his speech—obviously the issue is of concern elsewhere, too. The fishing industry is not against wave energy but there is concern about and awareness of the need to maintain fishing stocks and fishing areas. I want to know what will happen in that regard.

We have European and Government targets for green energy, which we must meet. I am keen to support wave energy, and I keen that the Government should support it. I am also keen that something should be established to ensure that the fishing industry will not be disadvantaged. Wave energy is one of those on-tap resources of which we should take more advantage.

13:45

[The Minister of State, Department of Energy and Climate Change (Gregory Barker)]

I congratulate my hon. Friend the Member for Camborne and Redruth (George Eustice) on securing the debate today. My hon. Friend is already known as a champion of his constituency, but he is becoming an experienced and articulate advocate for the wave and marine industry generally, which has huge potential not only as an energy source but as an employer and generator of wealth, particularly in the south-west. As I hope I shall show, we see that as something with real potential for the south-west, and—as I am sure that the hon. Member for Strangford (Jim Shannon) will be delighted to hear—all around the British isles.

My hon. Friend the Member for Camborne and Redruth began by talking about his constituency, which is famous for, among other things, being the home of Wave Hub. That is a good example, as he pointed out, of how the UK is currently leading the world in the nascent industry of wave and tidal energy development. It is a unique facility, as he said—it is the only grid-connected facility where arrays of commercial-scale wave energy devices can be tested in a live hostile environment. It is an important asset as we develop the sector, and one that the UK Government take very seriously. Together with the other UK marine energy testing facilities—the European Marine Energy Centre in the Orkneys, and the onshore marine drive train testing facility, which is being developed at the National Marine Energy Centre in the north-east of England—it helps to provide Britain with a unique offer to the emerging sector, which is already helping to concentrate the global focus on our waters. I believe that a globally competitive opportunity is emerging.

I am glad to tell my hon. Friend, if he did not already know, that the Secretary of State will be visiting Wave Hub later this month as part of a visit to the south-west, to see how the commissioning of the facility is progressing. I look forward to getting an update from him, and I hope in due course to have the opportunity to visit Hayle myself. I assure my hon. Friend that I am personally committed to marine energy and that I share his level of ambition. Not only that, but the coalition Government, who are determined to be the greenest Government ever, are absolutely committed to harnessing the benefits that a successful marine renewables industry can bring to the UK. Support for the development of the sector is explicitly written into the fabric of the coalition agreement. I also assure my hon. Friend that I am committed to leading the way to ensuring that that commitment, unlike others made by previous Governments, will be realised.

There are real gains to be had from creating a successful and vibrant marine energy sector in the UK. If we can capitalise on our natural coastal resources, those gains will be manifold. Marine energy can certainly contribute to our renewable energy generation mix and help us meet our longer-term carbon saving targets, but the benefits go beyond that to providing us with secure, clean electricity, which enhances our energy security. Certainly, in our appreciation of marine energy we need to look more widely at the sector than through the prism of our relatively short-term and narrow 2020 carbon targets. We need to take on board, as a Department and across Government, the opportunity to build a new manufacturing sector in the UK. However, that should be seen in the context of the coalition’s wider ambitions to rebalance the economy, recognising that among other renewable sectors it gives us the opportunity to create new jobs and more opportunities, both at home and globally.

We can capture that opportunity only if we capitalise on the hard work already done by that sector, ensuring that the right foundations and support are in place to build on its success. For too long, previous Governments have failed to provide the sector with a clearly articulated long-term vision of what they want to achieve in the marine energy sector. That needs to change, and we are determined to change it. That is why I have established the marine energy programme; and I want to create a dynamic new cluster in the sector with the establishment of a network of marine energy parks around the UK. I hope that the first marine energy park will be in the south-west.

We clearly need to give greater focus to our marine efforts. I recently attended a meeting at No. 10 with Eric Schmidt of Google, chaired by the Chancellor. Out of that came a sense that we can learn a lot from the growth of other sectors that are based on scientific innovation, such as IT. The clustering of companies in silicon valley in the US was a key driver of that innovation and growth, because it fostered information sharing and competition and ultimately led to a reduction in investment risk, the fertilisation of new ideas and an increase in investor confidence.

[Andrew George]

I am most encouraged. I entirely endorse the Minister’s saying that this Government should be the greenest Government ever and his commitment that, with this project, our country should lead the world in marine energy. That said, and with the £42 million investment in place and annual insurance for the project already being met, what can the Government do to ensure that wave devices are placed on that site? Ocean Power is the only company that proposes doing so, but we need more, and I believe that that needs Government commitment. What can the Government do to assist this project?

[Gregory Barker]

I shall endeavour to explain. The Government need to do a number of things.

Marine energy parks could draw together research and development, manufacturing and other sector expertise in one place to achieve that, not on an exclusive basis but as a hub with many spokes. In a number of locations around the UK that is already beginning to happen, and the building blocks for future marine energy parks are already beginning to form—for example, activity in and around the Pentland firth in Scotland, off the coast of Anglesey and in south-west England is creating exactly the right conditions for marine energy parks. As I have made clear, we see the south-west leading the way. It has the potential to be the first marine energy park, given its unique mix of renewable energy resource and home-grown academic, technical and industrial expertise in the sector.

At the first meeting of the UK Marine Energy Programme Board, which was held in Exeter last month, I set a challenge to stakeholders in the south-west and elsewhere to come forward with ideas on collectively creating a marine energy park that will be successful in attracting additional investment and helping to boost the UK’s offer on marine energy. I look forward to working with those stakeholders and harvesting their ideas. However, my hon. Friend was absolutely right to say that public sector capital is only the beginning. We need to ensure the long-term growth of the industry, crowding in private sector capital and creating the conditions in which such capital will dwarf what the public sector can provide in these hard times. That is the real opportunity that we have to play for.

We still have a lot to do to achieve the level of deployment suggested by my hon. Friend the Member for St Ives (Andrew George), and he was right to press the matter. Over the next three or four years, I want us to be talking about deployment and scaling up in real time. We need a big vision and clear leadership, but it really is rubber-on-the-road time when it comes to working collaboratively with the industry, so that we can make real progress on the ground and at sea. Marine energy has been a Cinderella industry for far too long, and we need a programme that will set out our vision and the key stepping stones for implementation. I hope that the Marine Energy Programme Board will help me during the next few months to marshal the various pieces needed to ensure an effective deployment programme.

Turning to energy market reform, feed-in tariffs and the renewables obligation, the message from the first Marine Energy Programme Board meeting in Exeter was clear. First, we need to focus on getting the right levels of revenue for the sector to attract investment. Secondly, investment in innovation to reduce risk is absolutely necessary. That investment must be pulled in and made available in the near future.

We are already consulting on whether to offer generators a choice of renewables obligation certificates or a new feed-in-tariff mechanism between 2013-14 and 2017, once the electricity markets review legislation is in place. That will give marine generators access to the new forms of FITs from the start, which will provide added certainty and a more stable revenue stream. It will be a while before the new FITs are in place, and the marine sector needs to be confident that appropriate support will be in place before then, so as to ensure that longer-term investments will be made.

The longer-term future of the sector is clearly tied up with the new FITs, but we shall deal with the immediate problem through the review of the current ROCs. The coalition Government acted immediately after coming into office to review the banding of ROCs. As a result, investors will have certainty about what support is available a full year earlier than previously planned, with a Government response this autumn and legislation in place on the new ROCs banding by April 2012.

I cannot prejudge what that review will say, but the message given by my hon. Friend the Member for Camborne and Redruth was echoed powerfully at the meeting in Exeter. I am well aware of what the industry needs in order to expand and go forward, but that clearly needs to be balanced by other factors and other demands for renewable subsidy, which is, in effect, what ROCs are. Evidence obtained from the marine industry will feed directly into the ROCs review, and I am taking a personal interest in it.

That brings me to technology. The history of the marine renewables deployment fund—the MRDF—and its failure to spend is well known, and my hon. Friend briefly cantered around that course. It is a real indictment of the previous Administration’s failure to turn good will into good progress. The MRDF has been sitting on £50 million of the environmental transformation fund since it was created in 2005—as my hon. Friend said, the fund will close in a matter of weeks at the end of this financial year. That budget was allocated for the current spending review period, and the Department will have to make decisions over the allocation of new innovation funding. We secured more than £200 million of innovation funding in the comprehensive spending review; to date, we have allocated £60 million for ports infrastructure, but there are other competing areas. However, we will listen carefully to the needs of the marine industry.

The development of criteria for technology innovation centres is being undertaken by the Department for Business, Innovation and Skills. However, my Department is working closely with our BIS colleagues to ensure that those criteria are effective, appropriate and sufficient to drive innovation and technology. Detailed proposals have yet to be developed, but an offshore-focused TIC would make a valuable contribution in moving the sector forward, and we are actively engaged with our colleagues in that dialogue.

One of the Britain’s great strengths is its expertise in research and development. That is particularly true in the marine energy sector. With the Minister for Universities and Science, I co-chair the low carbon innovation group, which brings together the key Government bodies that support low carbon innovation, which allows us to ensure that they act in concert. That group has been developing the technology innovation needs assessments referred to by my hon. Friend, and marine energy and bio-energy are part of that programme.

This is clearly an important time for the industry. I would like to give more detail, but time does not allow it.

14:00

Sitting adjourned without Question put (Standing Order No. 10(11)).