House of Commons

Thursday 24th March 2011 Commons Chamber

Thursday 24 March 2011

The House met at half-past Ten o’clock

Prayers

Thursday 24th March 2011 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Thursday 24th March 2011 Commons Chamber

The Secretary of State was asked—

[Neil Carmichael (Stroud) (Con)]

1. What assessment he has made of the likely level of take-up of domestic solar power by 2020.

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

Analysis undertaken by the Department for Energy and Climate Change in February 2010 estimated that the feed-in tariff scheme would lead to the deployment of about 700,000 domestic solar photovoltaic installations by 2020. In the light of the reforms to the schemes and the falling costs, I believe that we can do significantly better than that.

[Neil Carmichael]

In view of the need for certainty in Government policy, what representations has the Minister received from the investment community since the announcement of the review of the fast-track tariff in relation to solar power?

[Gregory Barker]

The investors who were looking to invest in larger schemes are disappointed; that is coming through as part of the consultation. This was a difficult decision, and I can assure my hon. Friend that it was not taken lightly. We are, however, absolutely convinced that it was the right thing to do. We inherited from the previous Government a complete mess of a scheme with no proper financial controls or economic modelling, but we have now taken measures that mean we will avoid the boom and bust that we have seen in other countries across Europe. We are providing a platform for long-term growth.

[Mr Speaker]

I thank the Minister for that, but answers need to be shorter.

[Mr David Hanson (Delyn) (Lab)]

The decision on the feed-in tariff regime has caused great consternation in north Wales—so much so that the managing director of Kingspan, a company in my constituency, has written to me to say:

“DECC has potentially destroyed a renewables sector that is only some 11 months old and taken with it the jobs and growth opportunity that it would have provided for the UK economy in general and North Wales in particular.”

In the light of that comment from the managing director of a manufacturing company, will the Minister meet me, my hon. Friend the Member for Wrexham (Ian Lucas) and others to discuss this bad decision?

[Gregory Barker]

I profoundly disagree with the right hon. Gentleman. We have not cut the budget for the feed-in tariff scheme. We have put in place proper financial controls to ensure that there is money in the system through to 2014. I would be happy to meet him to discuss this matter further, but he must remember that the tariff changes apply only to systems larger than 50 kW, which is equivalent to the size of two tennis courts, and not to domestic housing.

[Dan Rogerson (North Cornwall) (LD)]

Will my hon. Friend consider the letter has been sent to the Secretary of State from the Wadebridge Renewable Energy Network—the WREN group—in my constituency about community-based projects that might be bigger than the new threshold?

[Gregory Barker]

Community-based projects that are larger than 50 kW—about the size of two tennis courts—and up to 150 kW, which is significantly larger, will still get a tariff comparable to that paid in Germany. We should be competitive with Europe, and the pressure should be on manufacturers to reduce the cost of their products rather than to provide bonuses. We hope that many community projects, particularly those around the 100 kW size, will still be able to go ahead, but the pressure must be on manufacturers to bring down their prices.

[Huw Irranca-Davies (Ogmore) (Lab)]

The Minister has single-handedly destroyed the confidence of the solar sector and the wider renewables sector at a stroke, and personally shredded the Government’s green credentials. The Renewable Energy Association says that the industry has been “strangled at birth”. Sharp’s in Wrexham states that this was

“terrible news—effectively destroying the solar sector”.

The Solar Trade Association calls the decision “a total disaster”, and the Micro-Power Council says:

“The 50 kW plus sector may well wither on the vine: many jobs will go and businesses will see demand dry up.”

Is it not just sheer blind arrogance for the Minister to suggest that all those bodies are wrong and that only he is right?

[Gregory Barker]

The fact is that we inherited a complete pig’s ear of a scheme from the previous Government. The hon. Gentleman and the hon. Member for Hackney South and Shoreditch (Meg Hillier) voted against the scheme in 2008, yet they are now the heroes of the feed-in tariff. We have put in proper financial controls and the investment that will guarantee the system for the long term. I would have thought that, having driven the country into the ground, Opposition Members would be more financially prudent, but behold, on the Opposition Front Bench—

[Mr Speaker]

Order.

[Gregory Barker]

A graduate of the—

[Mr Speaker]

Order. Order. Let me just make it clear that when I say “Order”, the hon. Gentleman resumes his seat. It is as simple and unmistakable as that.

[Huw Irranca-Davies]

Thank you, Mr Speaker. I can understand why the Minister is getting so agitated. I have only one more thing to add. Does he at least agree with this eminent expert on the importance of projects of up to 5 GW, who says:

“The idea behind it is to allow the inclusion of non-commercial scale projects, such as those that will be installed by homeowners, small businesses, local authorities, community groups, farmers and others. That would help out hospitals and schools that want to facilitate greater use of renewables and ensure low emissions as part of our 2020 targets.”—[Official Report, 18 November 2008; Vol. 483, c. 144.]

Those are the words of the Minister of State, Department of Energy and Climate Change, the hon. Member for Wealden (Charles Hendry), then the shadow Minister. Why is he wrong on this as well, and why is the Minister of State the fount of all knowledge?

[Gregory Barker]

Not for the first time, the hon. Gentleman has his numbers wrong: it is not 5 GW, but 5 MW—and 5 MW is still the equivalent of heating 1,500 homes. The fact of the matter is that the scheme we inherited from the previous Government—[Interruption] If the hon. Gentleman calms down, he will have the answer. Given the scheme we inherited, we had some choices to make: we supported either people in their homes, small businesses and communities or very large-scale schemes. We decided to support home owners and consumers; the hon. Gentleman can support big single investors. As I say, it is a clear choice.

[Lilian Greenwood (Nottingham South) (Lab)]

2. What steps he is taking to provide funding for further carbon capture and storage demonstration projects.

[The Minister of State, Department of Energy and Climate Change (Charles Hendry)]

We remain committed to providing public investment for four carbon capture and storage projects and last year announced up to £1 billion for the capital costs of the first project. Decisions on the provision of funding for further projects will be subject to receiving suitable proposals from industry and considerations on value for money and affordability. As the Chancellor announced yesterday, the funding will be provided from general taxation.

[Lilian Greenwood]

I thank the Minister for that response. Last week, I met young research scientists from the university of Nottingham who were undertaking exciting research into carbon capture and storage. Without detail and clarity on future projects, however, the UK could lose the opportunity to be a world leader in this vital technology, so what is the timetable and the guaranteed funding for demonstration projects 2, 3 and 4?

[Charles Hendry]

I would be delighted to meet the students the hon. Lady mentions because the skills in our universities form a very important part of the UK’s ambition to lead in this technology. We have made it clear up front that there is public funding for projects, with capital up front, and real progress was announced yesterday.

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

Does my hon. Friend agree that, in contrast to the Opposition’s array of red tape on funding, the coalition Government need to ensure that the funding for large, important projects such as CCS is as simple and straightforward as possible?

[Charles Hendry]

My hon. Friend is absolutely right, which is why the Chancellor made his announcement yesterday. This is a simpler way of getting the funding in; it provides the funding up front rather than it being based on output, and it is a significant step forward.

[Malcolm Wicks (Croydon North) (Lab)]

Given the abandonment of the levy and a reliance on Government money from general taxation, the words “blood out of a stone” come to mind, in view of my own experience with the Treasury. Will the Minister assure us that public spending will be made available in addition to what has already been announced to ensure the future of this technology, which is absolutely vital to our fight against global warming?

[Charles Hendry]

The right hon. Gentleman has tremendous knowledge in these areas, so he will also be aware of the European scheme NER300, to which the United Kingdom has submitted nine projects out of a total of 22 across Europe. That provides capital up-front funding. What the Chancellor announced yesterday removes the tremendous complexity from the levy and provides a much more straightforward scheme to drive this technology forward.

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

3. What recent steps he has taken to ensure security of energy supplies in response to the political situation in the middle east.

[The Secretary of State for Energy and Climate Change (Chris Huhne)]

The UK has diverse sources of oil and gas, including our own substantial North sea production. Political unrest in the middle east has not led to any oil or gas shortages so far. My Department has been in close contact with the International Energy Agency and International Energy Forum partners, and Organisation of Petroleum Exporting Countries members. Saudi Arabia has said it will make up any shortfall through increased oil production. The IEA has confirmed its readiness to use emergency stocks, if required.

[Jesse Norman]

I thank the Secretary of State for his reply. Microgeneration is a key part of our future energy security. What impact does my right hon. Friend expect his Department’s decisions on feed-in tariffs to have on the number of home owners able to generate their own electricity?

[Chris Huhne]

I expect the decisions we are taking on feed-in tariffs to ensure a steady and sustained growth in the industry, which will protect householders, who are completely unaffected by the review, in respect of any amount below 50 kW. As the Minister of State, Department of Energy and Climate Change, my hon. Friend the Member for Bexhill and Battle (Gregory Barker) pointed out, that amounts to two tennis courts and it is absolutely unaffected. We therefore expect that the number of households generating their own electricity will rise.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

The Secretary of State surely knows that solar is a very important part of future energy security in our country. The recent decision to backtrack on solar means that community groups that were going to make a real contribution now feel deserted. Their banks have deserted them, so this sort of solar initiative will no longer go ahead.

[Chris Huhne]

I am glad that the hon. Gentleman has taken up this issue. Let me be clear that the decisions we took were designed to ensure sustainable and strong growth in the solar industry. That is absolutely key. We are precisely trying to avoid boom and bust in this sector. If it had gone on growing, the large-scale plants would have gobbled up all the money available for small-scale plants. That would have meant slamming on the brakes, after which there would have been a much greater threat to the industry. We are going to have sustainable growth, which is as it should be.

[Sir Peter Tapsell (Louth and Horncastle) (Con)]

May I put it to the Minister that in the current dangerous and complex circumstances the most important key to the preservation of oil supplies is that Bahrain should remain in friendly hands, and that from the British point of view it is strategically far more important than Libya?

[Chris Huhne]

The hon. Gentleman has made an interesting and important point. Bahrain is a long-standing friend of this country. We have watched with interest over the years as it has increasingly experimented with becoming a more open society, and it is very regrettable that that process is where it is. I note what my hon. Friend has said, and we are watching the situation closely.

[Mr David Burrowes (Enfield, Southgate) (Con)]

4. What recent representations he has received on the effect on consumers of high oil prices.

[Karl MᶜCartney (Lincoln) (Con)]

18. What recent representations he has received on the effect on consumers of high oil prices.

[Andrew Stephenson (Pendle) (Con)]

19. What recent representations he has received on the effect on consumers of high oil prices.

[Laura Sandys (South Thanet) (Con)]

20. What recent representations he has received on the effect on consumers of high oil prices.

[The Minister of State, Department of Energy and Climate Change (Charles Hendry)]

I have received a number of representations on the effect of high oil prices on consumers. The Government are aware of the significant impacts that they are having. That is why the Chancellor has announced a £1.9 billion package to ease the burden on motorists, and why I have asked the Office of Fair Trading to investigate the domestic oil market.

[Mr Burrowes]

How does my hon. Friend expect renewable energy in particular to help off-grid customers who have previously had no alternative to traditional supplies such as heating oil?

[Charles Hendry]

My hon. Friend has raised an extremely important point. One of the purposes of our world-leading renewable heat incentive is to encourage businesses and, subsequently, homes to install renewable energy equipment. That is an important way of helping people who currently rely on off-grid mechanisms such as oil and gas.

[Karl MᶜCartney]

I hope that my hon. Friend was as pleased as I was when the Chancellor announced in his Budget statement the scrapping of the fuel duty escalator and the introduction of a fuel duty stabiliser. Does he agree that that will go at least some way towards helping my hard-pressed constituents and fellow drivers in Lincoln and throughout the country, who before the general election were faced with an escalator that involved seven fuel duty increases?

[Charles Hendry]

I am delighted to join my hon. Friend in his pleasure at yesterday’s announcement, and the relief that it will bring his constituents and many others throughout the country. Scrapping the escalator imposed by the previous Administration was a significant change of policy, and all our constituents will be grateful for the steps the Chancellor has taken.

[Andrew Stephenson]

Given the significant number of households in Pendle and the 3.6 million in the United Kingdom as a whole that are off the gas grid, how soon does my hon. Friend expect the OFT’s investigation to be concluded?

[Charles Hendry]

That is another important point. I have asked the OFT to complete the work quickly. I want to have its report by the autumn, so that we can learn any necessary lessons and make any necessary changes before next winter in order to protect customers who are off the grid.

[Laura Sandys]

I join my hon. Friends in commending the Chancellor of the Exchequer’s announcement yesterday. Many of my constituents will be very, very pleased about it. However, will the Department, during its investigation of the market, look into the discrepancies between pump prices across the country? I do not understand why the prices in my constituency are among the highest, and I am not sure that my constituents do either.

[Charles Hendry]

The investigation relates chiefly to the domestic oil and gas market, but if there is evidence of unfair and anti-competitive practices in relation to fuel prices on forecourts, I hope that my hon. Friend will write to the OFT, and I should be grateful if she copied me into the correspondence so that I can see the evidence for myself.

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

Seventy per cent. of households in Northern Ireland depend on domestic heating oil. What discussions has the Minister had with the Northern Ireland Minister of Enterprise, Trade and Investment about possible regulation of the home heating oil industry and the exorbitant prices that households are now being charged?

[Charles Hendry]

That too is an important point. The fact that Northern Ireland is significantly more exposed than other parts of the United Kingdom in this regard was one of the driving forces behind our request for the OFT investigation. We will work with the devolved Administrations in any way we can to ensure that any particular examples of difficulties in different parts of the country are taken into account.

[Kerry McCarthy (Bristol East) (Lab)]

About a year ago, the then Secretary of State and I were fortunate enough to be taken up on to the roof of Redland Park united reformed church in Bristol by Rev. Douglas Burnett to look at the solar panels installed there, which had made a huge difference to the church’s fuel bills—it was not having to pay for fuel at all, and was making money selling electricity back to the grid. Is it not therefore ridiculous that under the new feed-in tariffs other churches in Bristol will not be able to follow suit?

[Charles Hendry]

As my fellow Minister of State has made clear, the previous Government got their estimates wrong. They assumed there would be no large-scale solar developments in this country by 2013, but there have been a significant number of large-scale applications. That would have blown the budget and made it more difficult to deliver for domestic installations, and we are therefore right to review this process.

[Mark Durkan (Foyle) (SDLP)]

What assessment have the Government made of the effect of speculative commodity indices activity on wholesale commodity prices, and what steps are they taking to restrain such activity by banks here and international funds?

[Charles Hendry]

There is varying evidence on the effect. There is certainly some evidence that it has pushed up prices, but there is also evidence that hedging can help consumers. We have had discussions with countries, including Saudi Arabia, and it is willing to increase oil production to deal with any market shortages that might arise. I am satisfied from those discussions that demand can be met by increased supply, so shortages should not be a factor in pushing up prices.

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

5. What recent assessment he has made of the adequacy of the nuclear safety regime in the UK; and if he will make a statement.

[Bob Blackman (Harrow East) (Con)]

8. What recent assessment he has made of the adequacy of the nuclear safety regime in the UK; and if he will make a statement.

[Sajid Javid (Bromsgrove) (Con)]

11. What recent assessment he has made of the adequacy of the nuclear safety regime in the UK; and if he will make a statement.

[The Secretary of State for Energy and Climate Change (Chris Huhne)]

The International Atomic Energy Agency integrated regulatory review service—IRRS—recently noted that the UK has a mature and transparent regulatory system, an advanced review process, and highly trained, expert and experienced nuclear inspectors. Nevertheless, we take the recent unprecedented events in Japan extremely seriously, and I have asked the chief nuclear inspector, Dr Mike Weightman, to provide a report to the Government on the implications and the lessons to be learned for the UK nuclear industry.

[Amber Rudd]

I thank the Secretary of State for that answer, but I must tell him that a number of residents of Hastings and Rye have written to me, and although they share heartfelt sympathy for the people of Japan, as they live next to Dungeness they now have additional concerns. They want to know what action can be taken to ensure that our country’s nuclear facilities are made even more safe.

[Chris Huhne]

Let me reassure the hon. Lady first and foremost that there are very substantial differences between our situation and that in Japan. We refused to authorise the boiling-water reactor type used in Japan when that was proposed for use in the UK. Secondly, we do not, of course, live in an earthquake zone. The strength of the most severe earthquake in the UK was a mere fraction of the strength of that in Japan—the recent Japan earthquake was stronger than the 1931 Dogger Bank earthquake by, I think, a factor of 60,000—and nor do we have the associated tsunamis. We are not complacent, however, and we are looking into this. We do have extreme weather events, and Dr Weightman has asked all our existing nuclear sites to check that they can withstand the extreme weather events that we experience.

[Bob Blackman]

With the advent of the electric car, there will clearly be a requirement for much more baseload overnight so that people can recharge their electric cars, which means the case for nuclear power advances quite rapidly. What we need in this country is safe nuclear power. What consideration has the Secretary of State given to ensuring it is produced quickly and safely?

[Chris Huhne]

As my hon. Friend knows, the coalition Government’s plans clearly envisage an important role for nuclear. We aim to bring the first new nuclear on stream for 2018. It is our view that new nuclear can play an important part, and unless Dr Weightman’s report gives us any particular reason to reassess that, I see no reason why that should not remain our view.

[Sajid Javid]

There are undoubtedly lessons to learn from the tragedy unfolding in Japan, and I am pleased that my right hon. Friend says we will learn them. Nevertheless, does he agree that the only realistic way we can meet the expected huge increase in domestic demand for energy is through the domestic production of nuclear power?

[Chris Huhne]

As I have just said, our plans clearly envisage an important role for new nuclear. When people visit the departmental website, they can access an interesting pathways model called “My2050”, which allows them to see the effort that would have to be made if we did not have nuclear. We would have to make enormously greater efforts on both renewables and carbon capture and storage. That is physically possible, but the costs would be very substantial.

[Mr Dennis Skinner (Bolsover) (Lab)]

The nuclear industry is in serious trouble as a result of what has happened in Japan, we are running out of supplies of North sea oil and fighting all over the place in the middle east is massively increasing the price of oil, so is it not time for king coal again?

[Chris Huhne]

The hon. Gentleman makes a good point. The entire departmental strategy on energy is to have diverse supplies; it is not to put all our eggs in one basket, be it coal, nuclear or renewables. The reality is that coal will have a role to play in a low-carbon future, as will other diverse supplies.

[Albert Owen (Ynys Môn) (Lab)]

It is right to review the implications of UK civil nuclear power in the light of what happened in Japan. Does the Secretary of State agree that it is also right to explain that strategic site assessments and generic nuclear installation designs have been approved by this House and by the Government, and that we need not only to make it clear to the public that safety is paramount, but to make it clear to business that it is right to invest in nuclear?

[Chris Huhne]

I assure the hon. Gentleman that I have made it clear in every statement I have been asked to make on this issue that safety is absolutely paramount. That is precisely why I want Dr Mike Weightman to examine all the lessons from Japan, and for us to base any debate on the facts and the evidence, and not on knee-jerk reactions. There have been knee-jerk reactions in other countries, but that is not the right basis for British policy.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

It is fascinating hearing the Secretary of State dance around on this issue. I welcome his remarks as far as they go—clearly safety is paramount in nuclear power—but he has made some comments over the past few days and has today failed to be emphatic about the Government’s position on nuclear. Will he make it clear? He has used words—[Interruption.] I can hear chuntering from those on the Government Front Bench. He has used words such as “we envisage a role”; he has pointed again to a study of a future without nuclear on his departmental website; and he has talked in The Observer about an

“80% reduction in emissions…without new nuclear”

if we invest more in renewables. Those are red herring statements. Will he be emphatic and make it clear to investors what the Government’s position is on new nuclear? Will he tell us clearly: is he backing new nuclear?

[Chris Huhne]

I do not think investors are under any illusions about the position. At the Nuclear Development Forum, I said very clearly that we continue with the plans as set out in the coalition agreement, and that we envisage a role for new nuclear and want to see new nuclear come on, but that we have to put an emphasis on safety. That is why we commissioned Dr Mike Weightman’s report. I do not anticipate that it will lead to enormous changes, but we will have to wait to see its results and base the debate on the facts.

[Claire Perry (Devizes) (Con)]

6. What recent discussions he has had with his EU counterparts on the setting of an EU-wide 30% carbon dioxide emissions reduction target by 2020.

[The Secretary of State for Energy and Climate Change (Chris Huhne)]

I have had numerous discussions with my EU colleagues in recent months on the importance of the EU low-carbon transition, including the role of an EU-wide 30% target. In response to the publication of the Commission’s 2050 low-carbon road map on 8 March, I wrote an open letter jointly with my ministerial colleagues from Denmark, Greece, Germany, Portugal, Spain and Sweden urging an open debate on a 30% target. I continue to use opportunities such as the discussion of the road map at the forthcoming informal Environment Council meeting to make the case for an early move to a 30% target.

[Claire Perry]

I thank the Secretary of State for his reply. Does he agree that the Chancellor’s Budget statement yesterday confirming the capitalisation, timing and role of the green investment bank will do much to inspire confidence in Britain’s ability to achieve its own emissions targets by 2020?

[Chris Huhne]

I entirely agree with my hon. Friend. One of the most important announcements made yesterday was the one on the green investment bank and the fact that we have trebled the amount of capital found for its capitalisation during this spending round. We will try to do our bit on asset sales, but if they cannot be found, they will be guaranteed by the Treasury. In addition, the fact that the bank can begin to borrow and lend before the large amount of energy investment in offshore wind is crucial.

[Nia Griffith (Llanelli) (Lab)]

I welcome the Secretary of State’s comments about working with other European countries to seek a reduction in carbon emissions. Will he explain, then, why his Government have just announced a unilateral carbon floor that is making steel companies, such as Tata in my constituency, extremely jittery and is making them consider pulling out from investing here to invest in other countries in Europe? We will simply be uncompetitive, even with our European partners.

[Chris Huhne]

The reasons for the carbon price floor were set out clearly by the Chancellor. We need to send out clear signals to investors about the transition to the low-carbon economy. This measure will do that, and it will also, operating within the power sector, ensure that we use low-carbon sources of electricity through the whole process and the transition rather than merely using high-carbon ones. It is an important part of our transition to a low-carbon economy.

[Mr Kevan Jones (North Durham) (Lab)]

7. Whether he plans to bring forward proposals to encourage households to take up the green deal.

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

The green deal will be a real game changer, but the Government fully recognise that the deal might need to provide additional drivers if we are to achieve the full scale of our ambitions to retrofit more than 14 million homes by 2020. We are working closely with a range of stakeholders to identify additional triggers that will steer customers towards the green deal and in the Energy Bill we are seeking powers to require changes to poorly insulated private rented accommodation.

[Mr Jones]

What measures will the Minister use to assess the effectiveness of the green deal, particularly in the light of the fact that he is not linking it to the UK’s carbon reduction targets?

[Gregory Barker]

The green deal is one of a number of tools, but clearly its effectiveness will be tested by the number of homes we manage to insulate and bring up to a decent standard. We have said that our ambition is 14 million homes by 2020. Clearly, that is the huge target that we must meet if we are to meet our carbon budgets.

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

Many of the materials that will feature in the green deal to improve the heat efficiency of homes attract VAT at a rate of 5% but some, such as double glazing, still attract it at a rate of 20%. Does the Minister agree that it would encourage people into the green deal if all the materials were taxed at 5%? Will the Minister investigate to find out whether that can be achieved?

[Gregory Barker]

The hon. Gentleman makes a good point. Obviously, this policy is primarily led by the Treasury, but I did have a good discussion with Pilkington on exactly this matter only last week. We will continue to look at it.

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

I was very interested to hear the Minister’s response on the green deal. As yet, we have seen no targets in the Energy Bill and nothing to link it to the Climate Change Act 2008 so that it can create a tangible emission reduction. Yesterday, we heard the Chancellor talk up the green deal in the Budget, but not so loud was his announcement on page 117 of the plan for growth that the Government have scrapped the requirement for new homes to be truly zero carbon. Does the Minister agree with WWF, which said that this announcement of the destruction of the policy sweeps away

“years of work and ambition”?

What representations did he make to his colleagues in the Department for Communities and Local Government and the Treasury before the decision was made?

[Gregory Barker]

This is a DCLG lead, but there should be no doubt about our commitment to the transformation of the housing stock. We know that the Opposition are still addicted to targets, but the difference is that the Government are addicted to real progress and to transformational change. They can carry on creating new targets and we will get on with making real changes in real life.

[Mr Mike Weir (Angus) (SNP)]

9. What recent discussions he has had with ministerial colleagues on the construction of new nuclear power stations.

[The Secretary of State for Energy and Climate Change (Chris Huhne)]

I have had discussions with Cabinet and other colleagues in government on energy policy including new nuclear build. We take the recent unprecedented events in Japan extremely seriously and I am having continuing discussions on the subject of new nuclear power stations in the light of the ongoing situation.

[Mr Weir]

Given that analysis released by Redpoint Energy shows that yesterday’s carbon price floor announcement will lead to a windfall profit for existing nuclear stations of £1.33 billion—let alone what it will mean for new stations—how does that sit with Ministers’ repeated pronouncements that there will be no public subsidy for nuclear?

[Chris Huhne]

The carbon price floor is designed to encourage low-carbon sources of energy and it is not in any way designed to attract particular support for one low-carbon source or another. One could equally argue that it is benefiting renewables. That is why it will lead to the switching effect that we find desirable, so that we rely more on low carbon than on high carbon. In addition, the hon. Gentleman will note that the Treasury is considering the impact on existing operators and will keep that under review.

[Mr Dominic Raab (Esher and Walton) (Con)]

This week, the former UK chief scientific adviser Sir David King has said that the real lesson from Japan was that

“nuclear power is even safer than we thought…by far the safest method of power generation”.

Will the Secretary of State be mindful of that advice and does he agree with that assessment?

[Chris Huhne]

I am mindful of it. That is an interesting argument which has been made in many quarters. It is absolutely crucial, comparing the debate in this country with those in other countries such as Germany, that we should base it on the facts and the evidence. That is precisely why I asked Dr Mike Weightman to produce a report—so that we can have a sensible and measured debate based on the facts and the evidence.

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

Could the Secretary of State say a little more about the assessment he has made of the potential rise in costs of the fleet of new nuclear following the Fukushima disaster? Will he comment in particular on the likelihood that the Japan accident will make it more difficult for private investors to raise capital to build the eight new reactors that are planned by the Government?

[Chris Huhne]

On the first point, it is too early to answer the hon. Lady until we have had the report from Dr Weightman and we can understand whether we need improvements in our regulatory regime and whether there are lessons to be learned. There are substantial differences between the Japanese situation and ours but I am determined that we should learn any lessons we can. On the second point, although I spent many years in financial markets I do not claim to know how they will react to particular events as they can often react in a rather faddish and fashionable manner. I think we will just have to wait and see.

[Julie Hilling (Bolton West) (Lab)]

10. What steps he is taking to ensure that consumers receive advice on energy-saving measures.

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

Reliable advice will form an important part of the new green deal framework to be introduced in 2012. Having a comprehensive assessment setting out energy efficiency measures that are likely to be suitable for each individual property along with the potential opportunities for microgeneration and renewable heat will be a crucial step in every green deal journey.

[Julie Hilling]

I have been doing energy surgeries with E.ON in Bolton West, where it has a large base, to advise constituents on ways in which they can cut energy, reduce bills and stay warm. Considerable concern has been raised about the complexity of tariffs and the difficulty, especially for the elderly, of finding the cheapest supply. What can the Government do to help?

[Gregory Barker]

This is something we are looking at. We have engaged with all the major energy suppliers to create far simpler tariffs. The hon. Lady is absolutely right and if she has something to add—it sounds as though she has—I would be very happy to meet her to harvest her ideas and make sure they are included in the new, improved tariff arrangements that we are bringing forward later this year.

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

One of the easiest ways of introducing immediate energy reduction is educating people to heat hot water only when they need it. What plans do the Government have to bring forward the Walker proposals in this regard?

[Gregory Barker]

There are no such current plans that I am aware of, but my hon. Friend is absolutely right. We would certainly be happy to consider whether there is a way of incorporating those proposals into our existing plans, because we need to do a great deal more.

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

12. Whether he has made an assessment of the potential effects of the outcome of the 2011 Budget on the development of low-carbon technologies.

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

The Budget announced several new policies which will support the development of low-carbon technologies including £2 billion of additional capital for the green investment bank, a carbon floor price to provide a stronger, more stable signal to investment in low-carbon generation, and preferential company car tax treatment for low-carbon vehicles. All that is in addition to the creation of 21 enterprise zones and a £100-million boost for science that will further drive green growth.

[Bridget Phillipson]

The north-east has led the way with the development of low-carbon electric vehicles, as the Minister will know, and with the network of charging points. He will be aware that if those vehicles are to have mass-market appeal there needs to be a comprehensive network of charging points. What further action will the Government take to support a nationwide roll-out of such charging points?

[Gregory Barker]

We are working closely with our colleagues in the Department for Transport because—the hon. Lady is absolutely right—there needs to be a concerted, joined-up strategy if we are to realise the potential of electric vehicles. There will be more details on that, but I assure her that a lot of work is going on in Government and that the Departments are working effectively together.

[Andrew George (St Ives) (LD)]

The Treasury has resisted the establishment of a public investment bank since the 1930s, so I congratulate my hon. Friends on having achieved that, but it will not be effective until 2015. What can be done to speed up the implementation of the green investment bank?

[Gregory Barker]

The Chancellor announced yesterday that the green investment bank will be up and ready for business in 2012 and will have £2 billion of additional capital. The key is that it will be able to raise funds from 2015 at scale, in the bond market for example, that will allow it to make a meaningful contribution to the billions of pounds that we will need to raise in the second half of the decade to finance the vital renewable energy infrastructure projects.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

Is the Minister really happy that the green investment bank will deliver the necessary investment in green industries as quickly as possible?

[Gregory Barker]

Yes, I am. I would point out to the hon. Lady that Bob Wigley, who chaired the green investment bank commission, said yesterday:

“The Chancellor has found a pragmatic way of getting the bank up and running with a significant level of seed equity, allowing it to develop its activities without risk to fiscal prudence.”

That is absolutely spot on. We think that it will make a substantial difference not only in the next few years, but in the next couple of decades and beyond. This is a key time in the development of financial services.

[Meg Hillier]

The Opposition welcome the green investment bank, which is something we supported, but we have concerns. The other week we had Government green growth week—I forgive you, Mr Speaker, if you missed it—with a series of rehashed announcements. Yesterday’s announcement about the green investment bank worried me because there will be no real investment opportunity for four years. The Minister might be insulated from business, but I meet businesses all the time that need that investment now, so can he tell them when they can approach the bank to borrow money?

[Gregory Barker]

From 2012, when it opens for business. It is pretty clear. That is why the chairman of the green investment bank, who knows a lot more about business than Members on the Labour Front Bench, was very pleased with the announcement. The £3 billion is an awful lot more than Labour pledged in its manifesto.

[Damian Hinds (East Hampshire) (Con)]

13. When he plans to respond to the Committee on Climate Change’s fourth carbon budget report.

[Simon Wright (Norwich South) (LD)]

15. When he plans to respond to the Committee on Climate Change’s fourth carbon budget report.

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

The Climate Change Act 2008 requires the Government to set the fourth carbon budget level in law no later than 30 June 2011. I anticipate that a statutory instrument will be laid before the House after the Easer recess.

[Damian Hinds]

The carbon budget plan is still back-ended, calling for reductions of 4.7% compound after 2030 but only 3.2% before. That is credible so long as investment in research and development is strong at the front end. What more can the Minister do, working with colleagues in Government, to stimulate the development of low-carbon vans and heavy goods vehicles as well as power?

[Gregory Barker]

My hon. Friend is right: there is a whole range of measures, but transport is also key. The recent spending review announced that the Government have provided up to £400 million for measures to promote the uptake of ultra-low carbon vehicle technologies, including support for consumer incentives, the development of recharging infrastructure and a programme of research and development work, which we continue to add to.

[Simon Wright]

The Committee on Climate Change recommended a tightening of the second and third carbon budgets in the light of the impact of the recession. Does the Minister agree that we must deliver on that recommendation and use the Committee’s report as a means of strengthening the UK’s global leadership in encouraging our international partners to tighten their emissions targets?

[Gregory Barker]

My hon. Friend is absolutely right. We must maintain our global leadership position, not only because it is important for tackling dangerous climate change, but because we want to grab market share in the new clean technology markets around the world, which are growing fast. We need to assert our leadership in the low-carbon markets, and to do so we need an ambitious policy to drive it at home.

[Mr Peter Lilley (Hitchin and Harpenden) (Con)]

When my hon. Friend heard Lord Adair Turner spell out his fourth five-year plan, was he, like me, reminded of the old Soviet planning system? I am sure that if anyone could have made the Soviet Gosplan system work it would have been him. Will my hon. Friend treat with great caution forecasts 15 years ahead for the costs to which we are committed, given that the Barclays and Accenture plan reckons that meeting current targets for 2020 will cost €3 trillion?

[Gregory Barker]

Clearly there is a huge investment agenda, and my right hon. Friend is right, but we see that as an opportunity as well as a cost. He will also know that the cost of doing nothing and standing by while climate change hits the world progressively through this century will be considerably greater than prudent early action.

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

14. What recent discussions he has had with ministerial colleagues on attracting private sector investment into low-carbon technologies.

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

The Secretary of State regularly meets ministerial colleagues, and attracting private sector investment is one of many topics considered in their discussions on promoting a low-carbon economy and long-term green growth.

[Chi Onwurah]

As the Secretary of State knows, many innovative clean-tech start-ups throughout the north-east are crying out for funding. Given that the green investment bank cannot borrow and £3 billion is not going to build us our green future, what will he do to ensure that more funding is available?

[Gregory Barker]

I think the hon. Lady misunderstands the role of the green investment bank. It is there to spur private sector growth and investment, which is ultimately going to deliver the green investment and green growth that we need. The bank, with £3 billion, which is considerably more than the Labour party proposed, is going to be a real engine for growth, but it is not the only show in town; there is a whole range of other policies that we need to promote a green enterprise recovery.

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

Following the Chancellor’s commitment to rebalance our economy, does my hon. Friend agree that Plymouth, with a very fine reputation for marine science and research, has a significant part to play in developing a green and low-carbon economy? Is he willing to come to Plymouth to see the very real work that the university and other authorities are doing within the city?

[Gregory Barker]

I gladly accept the invitation from my hon. Friend, who is a great champion of Plymouth. With its long maritime history, port facilities and engineering expertise, it is extremely well placed to benefit from that type of green growth, particularly in the marine area, and I look forward to seeing it at first hand.

[Mr Iain Wright (Hartlepool) (Lab)]

16. What recent discussions he has had with representatives of energy-intensive industries on electricity market reform.

[The Secretary of State for Energy and Climate Change (Chris Huhne)]

Concerted efforts are made by all Ministers and officials in the Department to engage stakeholders with an interest in electricity market reform, including representatives of energy-intensive industries.

[Mr Wright]

It does not make much sense, either economically or environmentally, when the steel that will be used in the rush to a low-carbon economy is imported from Russia and Ukraine because of electricity market reform and regulatory differences. Tata Steel has a world-class pipe mill in my constituency, and it really wants to play a leading role in the supply chain for the national infrastructure. Will the Secretary of State listen to Tata’s concerns, level the playing field for UK firms and ensure that the competitiveness of firms in this country is not hindered?

[Chris Huhne]

We are very keen to listen to Tata’s concerns, and both myself and the Secretary of State for Business have been very aware of energy-intensive industries. It is important to recognise that the costs of a move to the low-carbon economy depend on what we think the costs of staying with the fossil fuel economy are, and judging by recent moves in the oil market we may find that that is a volatile source of supply—and a rather costly one.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

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

[The Secretary of State for Energy and Climate Change (Chris Huhne)]

In addition to my normal departmental responsibilities, we have commissioned a report from the chief nuclear inspector on the implications of the situation in Japan and the lessons to be learned. We have launched the renewable heat incentive to provide long-term guaranteed financial support for renewable heat technologies, and the Energy Bill has now been introduced to the Commons from the Lords.

[Dr Whitehead]

Can the Secretary of State clarify whether the carbon floor price that starts in 2013 will be £16 per tonne, as the Chancellor suggested yesterday, or £4.94 per tonne plus the European Union emissions trading scheme amount, as the accompanying Treasury document sets out? If the latter is the case, does the Secretary of State think that it will produce a considerable differential between electricity imported through interconnectors and electricity produced domestically, and what are his plans to deal with that?

[Chris Huhne]

The Chancellor is absolutely correct, because there is a carbon floor price, and it is designed to ensure that the price, which is composed of the emissions trading scheme and the carbon floor price, is as applied to electricity generators. He is very well aware, I know, of the potential implications of the carbon floor price for interconnection, and that has been taken into account in the Treasury’s decision.

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

T2. The Government’s report, “The Plan for Growth”, published yesterday, states that the Secretary of State for Energy “will also place significant weight on the need to support the economic recovery in related”—planning—“consent regimes”. Can he confirm that the Government will now consider the benefits to the local economy of building a new power station at Dungeness as part of their consultation on new nuclear sites?

[Chris Huhne]

I am aware that my hon. Friend has an important constituency interest in this. He has been a great champion of the interests of his constituents in securing another new plant at Dungeness. I am reluctant completely to redraw the national planning statements, which have already been going out for consultation, but the interests of the national economy certainly need to be taken into account, and they will be.

[Mr Iain Wright (Hartlepool) (Lab)]

T7. Yesterday’s announcement from the Chancellor about a supplementary charge for oil and gas producers places a question mark over investment decisions and the possible supply chain, and it might increase still further our reliance on imported oil and gas. Teesside is a major hub for offshore engineering, with many jobs reliant on it. Will the Minister guarantee that no jobs will be lost in Teesside, which is an unemployment hotspot, as a result of the Chancellor’s decision?

[Chris Huhne]

The Chancellor is keen to see new jobs in Teesside; that is precisely why he announced that one of the enterprise zones will be coming to the Tees valley. We have a great commitment to new jobs in Teesside and, indeed, the whole of the north-east. On the hon. Gentleman’s specific point, I anticipate, because of the rise in the oil price, that we will have a lot of resources available to operators in the North sea, and I would be surprised if there was not a continued increase in investment.

[Mr Steve Brine (Winchester) (Con)]

T3. In the past, park home residents in Winchester and Chandler’s Ford have expressed to me their grave disappointment that they have not been eligible for the Warm Front scheme. Like the omission of a specific park home option on the 2011 census form, this rather feeds the view of many park home residents that they are treated differently. Does the green deal offer them cause for hope, or at least some excitement?

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

Yes, it certainly does. I can confirm to my hon. Friend that in relation to funding energy efficiency improvements, the green deal should apply to park homes if they have an appropriate energy meter and qualify under the normal rules. Later this year, we will consult on the size and scope of the energy obligation, including the types of property and householders qualifying for support, and that will include park homes.

[Julie Hilling (Bolton West) (Lab)]

T8. With around 30,000 people dying of cold each winter, the introduction of smart meters and ever-increasing fuel bills, will the Minister meet me to discuss the promotion of cold meters, which sound the alarm when the temperature dips below safe levels? That is particularly important for elderly people.

[Gregory Barker]

Yes, I will certainly meet the hon. Lady to discuss that. It is not an idea that I have heard a lot about, but it sounds very sensible. The great thing about the green deal is that we want to encourage the introduction of new technologies that will help the consumer.

[Mr David Burrowes (Enfield, Southgate) (Con)]

T4. Enfield has a welcome commitment to increase the supply of decentralised renewable and low-carbon energy. May I invite the Minister to come to Enfield to see for himself these innovative plans, particularly on capturing energy from waste, and to see that when it comes to supporting renewables, instead of chasing mega-business deals, small and local is often beautiful?

[Gregory Barker]

My hon. Friend is absolutely right; small and beautiful is our vision for a much more decentralised energy economy. I would be delighted to come to Enfield to see the real strides that people are making to achieve that.

[Helen Goodman (Bishop Auckland) (Lab)]

Earlier we heard the Secretary of State boasting about his experience of financial markets. The rules of the Office for National Statistics about how to classify things are absolutely clear. It is more than 20 years since private finance initiatives were set up, so why has he been so incompetent in the way that he has structured the green investment bank, which has been classified in the public sector, giving the Treasury the excuse to delay its borrowing powers for four years?

[Chris Huhne]

The hon. Lady, as a former Treasury official, knows about this from the inside. I can assure her, however, that I was not boasting of my expertise in financial markets, but drawing attention to the fact that, although I had been in those markets for a considerable period, I was completely incapable of forecasting how they would react in these particular circumstances. I do not believe that we are going to have the problems with the green investment bank that she anticipates. It is clear that this is a historic moment. For the first time, the Treasury and the whole Government are agreeing to set up an institution that will be able to borrow, in its own right, just before the point at which it will need those resources. It will be able to borrow because the offshore wind investments will be there in the second half of the decade. As an ex-Treasury official, the hon. Lady well knows that given all those years in the 1930s when we became the only industrialised country not to set up a public development bank, this is an extraordinary achievement, and I hope that Labour Members recognise it as such.

[Simon Kirby (Brighton, Kemptown) (Con)]

T5. Does the Minister agree that offshore wind farms, such as the one that has been proposed for off the coast of Brighton, will not only help energy supplies and counter the effects of climate change, but boost the local economy?

[The Minister of State, Department of Energy and Climate Change (Charles Hendry)]

My hon. Friend is absolutely right. Wind farms bring significant job opportunities. I have been to the port at Newhaven to talk about those opportunities. This will be an important part of our energy infrastructure going forward. Britain already leads the world in the deployment of offshore wind, and we intend to build on that and to secure supply chain jobs in Britain.

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

My question relates to the renewable heat initiative. I am sure that the Minister remembers the productive meeting that we had with Geothermal International, a small company in Coventry. Although the outcome on the commercial applications side has been very good, the continuing delays on the domestic side are holding back the industry. It is a very important industry in the small and medium-sized enterprises sector, which is being targeted by the Government. If he could hurry up with that, we would be able to make more progress.

[Gregory Barker]

I assure the hon. Gentleman that the domestic launch is not being delayed at all. The only difference is that at the same time as we launch the industrial scheme this year, we will launch the renewable heat premium. The premium will reach more consumers in the first year than the ordinary tariff under the original model was anticipated to reach. I assure him that the premium will add to the scheme, not detract from it.

[Mr Robin Walker (Worcester) (Con)]

T6. Recent announcements, including that on the premium, have been welcomed warmly by Worcester, Bosch Group, which employs more than 1,000 people in Worcester. It wants the domestic roll-out of the scheme to succeed, and feels that the key to that is winning over installers. Will the Minister update the House on his plans to engage with installers, and will he visit the training centre with me, where more than 10,000 installers are trained each year?

[Gregory Barker]

My hon. Friend is absolutely right that installation is key, particularly for such new, innovative technologies, which are not all as tried and tested as we would like. We are working closely with installers. My officials meet regularly with firms and liaise closely with the industry. I would be delighted to accept my hon. Friend’s invitation and see it for myself.

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

I have a range of energy-intensive industries in my constituency, including steel, glass, paper and the entire clay pipe manufacturing capacity of the UK. How can south Yorkshire develop its manufacturing capacity and encourage economic growth if the international competitiveness of its current engineering capacity is being undermined by the Government’s energy market reforms?

[Chris Huhne]

In answer to a previous question, I made it clear that we are listening to energy-intensive industries carefully, and using all the means that we can to ensure that we can offset any demonstrable effects. We have had those discussions in the context not just of the carbon floor price, but of the European Union’s emissions trading scheme. We will continue to watch this situation carefully because I want to see many new jobs in south Yorkshire and everywhere else in the country.

[Mr Peter Lilley (Hitchin and Harpenden) (Con)]

T9. Earlier, the Secretary of State said that in the long term, the costs of unrestrained climate change will exceed the costs of doing something about it. Surely he is aware that the Stern report states that over the whole of this century, the costs of the programme that he is advocating exceed any benefits from reducing climate change, so that—[Interruption.] That is in the Stern report on page 167. Surely the Minister is aware of it.

[Chris Huhne]

Let me answer my right hon. Friend. This is not just a question of assessing the costs to the world in the long run if unrestrained climate change is allowed to proceed; it is also a question of energy security in this country and of the costs of the alternative. Given that the oil markets have gone from $60 a barrel two years ago to $80 a barrel last year, and are now at $115 a barrel, my right hon. Friend should be well aware that relying on fossil fuel markets could be extremely damaging to our economic health.

[Ian Lavery (Wansbeck) (Lab)]

The Committee on Climate Change has recommended that the carbon intensity of electricity should be reduced from today’s 500 grams of CO₂ per kWh to the highly challenging figure of 50 grams of CO₂ per kWh by 2030. The Energy and Climate Change Committee suggests that the target should be about 100 grams of CO₂ per kWh. Will the Minister or the Secretary of State explain how difficult it would be to achieve the recommendation of the Committee on Climate Change?

[Charles Hendry]

rose—

[Chris Huhne]

rose—

[Charles Hendry]

We are both keen to answer that because it is such a good question and we have such a good answer. We see a whole range of opportunities, and carbon capture and storage will be a fundamental one. It brings a real opportunity for coal to be part of the mix. We can look at the number of bids that we have had in—nine bids have come to Britain for the European scheme, out of 22 across the whole of Europe. Seven of those are for coal and two are for gas, which shows that there is a real opportunity for clean coal in the UK mix, which will be a world-beating achievement.

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

Given the Government’s commitment to both a low-carbon future and localism, do Ministers agree that everything should be done to encourage local carbon budgets, which can clearly play an important part in achieving our national targets?

[Chris Huhne]

I agree that local carbon budgets are important, which is one reason why we have continued with the pilots of databases that allow local authorities to know what their carbon emissions are and to continue to set targets. I do not want to impose those on local authorities, because they are a matter for localism, but it is right that they should have the information on which they can base informed decisions.

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

The vital ring-fenced support for the marine renewables deployment fund ends next week. With the green investment bank some way off, no news on the low-carbon innovation fund until the summer and nothing in the Budget, will the Minister clarify what backing the industry can expect, or does he prefer the jobs to go abroad?

[Gregory Barker]

Absolutely not. We have gripped this agenda, as the enthusiasm of the new marine programme energy board made clear when we met in Exeter. I can tell the hon. Lady that we will announce the allocation from the Department of Energy and Climate Change’s budget for supporting low-carbon technologies very shortly, and the results of the review of the renewables obligation that the Minister of State, my hon. Friend the Member for Wealden (Charles Hendry), brought forward will also be announced in due course.

[Andrew George (St Ives) (LD)]

On the idea that there is no public subsidy for new nuclear, the Government will of course effectively have to underwrite new nuclear in respect of events that we all hope will never happen. How is the carbon floor price not effectively a back-door subsidy for new nuclear?

[Chris Huhne]

My hon. Friend should be aware that we are not providing underwriting funds or soft loans. In the United States, for example, the Obama Administration are proceeding with $35 billion of soft loans for the nuclear industry, but we have explicitly said that new nuclear will be built here without public subsidy. We have also said that, as Lord Stern pointed out, climate change is the greatest market failure of all time. We have to offset that market failure with a clear signal to the markets, whether through the emissions trading scheme or the carbon floor price, that low carbon is here to stay and we must accelerate it.

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

Yesterday, in response to the Budget, Karl-Ulrich Köhler, chief executive officer of Tata Steel Europe, said that

“the introduction of the Carbon Floor Price…represents a potentially severe blow to the sustainability of UK steelmaking.”

Does the Secretary of State believe that the CFP announced yesterday is the type of state intervention that is good for British steel making on Teesside?

[Chris Huhne]

I have said in answer to previous questions that we will engage in ongoing discussions with energy-intensive users. We want them to use low-carbon electricity, and a number of them are doing that, including by moving to biomass. There are alternatives, and there is flexibility in, for example, the EU emissions trading scheme, which allows us to help.

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

What assessment has the Secretary of State made of the damage done to business confidence by his extraordinary U-turn on support for mid-sized solar installations, and of the 14,000 new jobs that were in the UK solar industry precisely because of that? How many of those jobs will be lost as a result of that extraordinary decision?

[Chris Huhne]

The hon. Lady has to be aware that sadly, in the world in which Ministers operate, we have to assess the alternatives. Had we not acted, the alternative would have been a much greater boom and bust and a much greater destruction of confidence. I am absolutely unhesitating in assuring her that solar industry confidence is substantially higher than it would have been if we had taken the action that she suggests.

[Several hon. Members]

rose—

[Mr Speaker]

Order. We must now move on.

European Summit

Thursday 24th March 2011 Commons Chamber

11:34

[Mr William Cash (Stone) (Con)]

(Urgent Question): To ask the Chancellor of the Exchequer whether the decision described as the draft decision in the motion to approve the treaty change on the European financial stability mechanism without a referendum, which was passed by the House yesterday, is now under review.

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

I am grateful for this opportunity to make a statement to the House about Portugal and the European stability mechanism. I understand that hon. Members are concerned about the events that unfolded in Portugal, which has faced difficult challenges for some time.

Yesterday, the Portuguese Prime Minister resigned after Parliament rejected his austerity Budget. However, let us be clear: Portugal has made no request for assistance, and I hope that hon. Members will understand that it would be inappropriate for me to engage in any speculation about what may happen. It is not for me to say whether Portugal should ask for help, just as I would not tell it how to run any part of its economy. However, I assure the House that we will keep hon. Members informed of any developments.

Hon Members may wish to reflect on the fact that, as my right hon. Friend the Chancellor said yesterday, our deficit is larger than Portugal’s, but market rates in the UK are similar to those of Germany. That reinforces the fact that it is right to pursue the course that we set last year to tackle the deficit.

My hon. Friend the Member for Stone (Mr Cash) has also raised questions about the European stability mechanism. A strong and stable euro area is important for British business. Over 40% of our exports go to the euro area, but we are not a member of the monetary union, and it is not our responsibility to deal with the euro area’s problems. That is why we have welcomed the progress that has been made on the European stability mechanism. In the design of the ESM, we had to ensure that there was no transfer of powers from the UK to the EU. We would never have accepted that.

The treaty change applies only to euro area member states. There is no transfer of power or competence from the UK to Brussels. The ESM puts no obligation, legal or political, on the UK to contribute. That is why we have supported the agreement, which makes the euro area’s responsibilities absolutely clear. In 2013, the European stability mechanism will come into effect. Also in 2013, the European financial stability mechanism will come to an end, and the UK will not be part of it.

Several countries, including Germany, have strong views about how the ESM should be designed, but that cannot change the fundamental aspects of the mechanism, because the ESM will be developed under article 136 of the treaty and it can apply only to member states whose currency is the euro. The UK cannot join the ESM without joining the euro. As my hon. Friends know, that will not happen in the lifetime of this Parliament.

Furthermore, we have ensured that the recitals—the preamble—to the draft decision by the Heads of State and Government at the December Council meeting stated that article 122, which was used to create the temporary funding mechanism,

“will no longer be needed”

and “should not be used” to ensure financial stability for the euro area as a whole once the permanent mechanism is in place.

Should there be any suggestion of amending the draft decision at the European Council, the Prime Minister could not legally agree to it without first coming back to the House for additional approval after a further debate. The House and the other place would have to ratify any change to the treaty.

[Mr Cash]

I asked the question, first, because the existing European financial stability mechanism, to which we are potentially exposed in respect of Portugal, was described in the report of the European Scrutiny Committee, which I have the honour to chair, as “legally unsound”; and, secondly, because it involves the United Kingdom underwriting approximately €8 billion to eurozone countries until 2013.

The motion for a treaty change to create the new mechanism, which was passed yesterday, provides for amending article 136 of the European treaty without a referendum, but the amendment prescribes strict conditionality. What are those conditions? The motion that was passed yesterday now appears to be vitiated. Will the Government renegotiate the decision so that the European stability mechanism, if proceeded with at all, is agreed by the British Government with unanimity only if the legally unsound existing European financial stability mechanism, to which we are wrongly exposed, is repealed? The United Kingdom would thus not be required to contribute to the bail-out of other eurozone countries such as Portugal, which would amount to approximately €4 billion. That course of action is open to the Prime Minister in his negotiations at the summit today, and it would relieve the hard-pressed British taxpayer.

If my proposal were accepted, I feel sure that the Government would have an improved chance of obtaining the European Scrutiny Committee’s clearance for any new decision and the passage of any subsequent Bill required under the House’s procedures. Will my proposal be accepted?

[Mr Hoban]

My hon. Friend and I have debated this subject before, and my right hon. Friend the Minister for Europe opened a lengthy debate on it on 16 March. The Government are clear that the European stability mechanism is an important tool, but it is for the euro area to fund it. The ESM will lead to the extinction, as it were, of the EFSM. I do not feel it appropriate to engage in further speculation on events elsewhere.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

Clearly, it would be troubling if the situation in Portugal reignited a round of eurozone bond market anxieties. The Opposition agree that it would be inappropriate either for us or the Government to engage in a running commentary on the likely impact of events in Portuguese politics or Portugal’s debt-financing capabilities. That is for the eurozone countries to resolve, and I would not expect the UK taxpayer to be drawn into the situation.

However, I have a number of specific questions for the Minister. For general information and the interest of the House, will he say a little more about the UK’s relationship with the Portuguese economy, including our trade relationships and UK banks’ interests in Portuguese bonds and so forth? Will the Minister update us on the Finance Ministers meeting that took place—I think—on Monday as a prelude to today’s EU summit? Originally, there were reports of an expectation that today’s summit would find its way towards resolving the permanent bail-out mechanism, yet we now hear that because of various disagreements, that will be kicked into the long grass again, until June. Does the Minister agree that it would be quite bad not to resolve that ongoing problem until the summer?

What are the Prime Minister and Chancellor doing to expedite negotiations and agreement on the permanent mechanism? Is it acceptable that the Prime Minister did not actually attend the meeting of 17 countries at the last summit at the beginning of the month, when we clearly have an interest in resolving those questions? Is it correct that the eurozone countries have invited the UK and other non-eurozone countries to have a say in debates on the new permanent mechanism? Quite honestly, we have an indirect interest in what happens, so it is surely in our interests to ensure that the eurozone countries resolve those questions quickly. It is not acceptable for the UK to absent itself at the critical moment, when it should be putting pressure on them to resolve those questions. Ultimately, we need stronger leadership from the Government to ensure that those matters are resolved in Europe and the eurozone. The longer they remain unresolved, the more likely it is that our interests will be affected.

[Mr Hoban]

The hon. Gentleman makes an important point. It is vital that there is stability in the eurozone and that agreement is reached on the ESM. My understanding is that the issues raised by the German Government and German Chancellor are not about the fundamental design of the mechanism, but about its detailed terms. We will discuss that at this weekend’s European Council, on which the Prime Minister will report to the House on Monday, as is customary.

The hon. Gentleman asked about the UK economy’s exposure to Portugal. Our exposure is relatively small—smaller than that of a number of other European countries. Our bilateral trade in 2010 was about £4 billion, so we do not have a significant exposure, although Portugal is of course an important trading partner.

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

Can we just have a reality check? There will be no stability in the euro area until at least some of the countries currently in it leave. There seems to be little doubt about that.

May I remind my hon. Friend that we have just had an austerity Budget—another one? In my constituency, people are talking about having to make NHS savings of £84 million over the current planning period. Can he imagine how absolutely furious British voters will be if it turns out that the British taxpayer must continue to contribute to the bail-out of euro countries even though we are not a member? Why does he not take the opportunity—before agreeing to the new stability mechanism—to get our European partners to agree that we shall be released from any obligation to the temporary stability mechanism for which we are currently liable?

[Mr Hoban]

My hon. Friend forgets that we have already agreed with our European partners that the European stability mechanism will replace the temporary structures that were put in place, and of course we should not forget that we are part of the EFSM as a consequence of decisions made by the previous Government, not this Government.

[Mr Speaker]

I call Denis MacShane.

[Mr Denis MacShane (Rotherham) (Lab)]

Obrigado, Mr Speaker.

The plain fact is that Portugal is our oldest ally. It is in trouble and we should help. When Margaret Thatcher brought the rebate back, she was questioned by a Eurosceptic on the Labour Benches who asked, “Why are you allowing more money to go from the British taxpayer to all these new countries?” She replied: “We should help Portugal”. We should do the same tonight. I hope that our Prime Minister will remember our longest, oldest friendship with any European country, and ignore the Eurosceptic waffle from those sitting behind the Front Bench.

[Mr Hoban]

I do not believe it is appropriate at this stage to engage in speculation about the Portuguese economy. There has been no request for a bail-out, and further comment would be unhelpful.

[Mr Peter Bone (Wellingborough) (Con)]

On the Portuguese potential bail-out, will the Minister agree to make a statement to the House before we are committed to any bail-out? What provision has been made in the Budget for such a bail-out?

[Mr Hoban]

My hon. Friend wishes me to respond to a hypothetical question, but I do not intend to do so today.

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

For clarity—and in the hope of getting at least one sensible answer out of this debate—will the Minister confirm that because we do not have a veto over the bail-out mechanism, if Portugal applied for a bail-out, we could be exposed to liabilities of up to €4 billion? We have no veto, which means that we would be forced to do it, irrespective of which Government negotiated the position. I would like a yes or no.

[Mr Hoban]

The hon. Lady, who is very knowledgeable and well-versed in these matters, knows exactly the terms on which the EFSM was established. However, I do not believe that it is helpful to speculate on hypothetical situations.

[Sajid Javid (Bromsgrove) (Con)]

Portugal finds itself in this sorry state today because yesterday its Parliament failed to pass a budget that would have allowed foreign investors to continue investing in its sovereign bonds. Does my hon. Friend realise that had we not had a change of Government in our country 10 months ago, we could just as easily have found ourselves in a very similar situation?

[Mr Hoban]

My hon. Friend is absolutely right. Owing to decisions that this Government have taken to get our public finances back on the right track, it is not sterling that has been speculated against in the currency markets.

[Sir Stuart Bell (Middlesbrough) (Lab)]

Listening to what my right hon. Friend the Member for Rotherham (Mr MacShane) said about Portugal being our oldest ally, I was reminded of the only word that survived the Peninsular war. It was “vamos”—the Portuguese and Spanish ran away. It seems from the speeches of the hon. Members for Stone (Mr Cash) and for Harwich and North Essex (Mr Jenkin) that they wish to run away from the European Union. They have been running away from it since its beginning. In response to a question from me, the Prime Minister said recently that he believed in “a healthy eurozone”. Is it not better for the eurozone to have its competitive pact and its financial stability system? Furthermore, building on the point made by my hon. Friend the Member for Nottingham East (Chris Leslie), is the Minister not worried that 17 member states in the eurozone will create a two-speed Europe?

[Mr Hoban]

It is absolutely right that Europe should be competitive and able to compete with companies in north America, Asia and south America in what are becoming increasingly challenging global markets. Europe needs to address its competitiveness, which is why we engaged in the economic taskforce led by Herman van Rompuy. We need to see changes in Europe, and my right hon. Friend the Prime Minister will be pressing for that at the summit.

[Chris Heaton-Harris (Daventry) (Con)]

The Minister will know that although Portugal has not so far requested any help, it is in a similar situation to Ireland, in that Ireland did not request any help at the very beginning, but was forced to take it later. Yesterday, we voted—essentially—on a treaty change. Will the Minister confirm that, if the change is made in the coming weeks—the Prime Minister having come back to the House—the UK Government will still have a veto to play, or will the veto be played this weekend, meaning that we cannot change anything in the future?

[Mr Hoban]

I do not know whether my hon. Friend was present for the debate in the House on 16 March when we discussed the ESM, but let me remind him of what my right hon. Friend the Minister for Europe said:

“Should there be any suggestion of amending the draft decision at the European Council—there is no such suggestion from any quarter at present—the Prime Minister could not legally agree to it at the European Council without first coming back to this House and the other place for additional approval after a further debate.”—[Official Report, 16 March 2011; Vol. 525, c. 424.]

Of course, there can be no change to the treaty unless primary legislation passes through both this place and the other place.

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

Will the Minister confirm that had we joined the euro, we would have been expected beyond 2013 to make a significant contribution? Has he had a chance to ask the Chief Secretary to the Treasury whether he has abandoned his policy of joining the euro at the earliest possible date?

[Mr Hoban]

I frankly think that that was a pathetic question.

[Martin Horwood (Cheltenham) (LD)]

Do Ministers agree that, having just put in place the most comprehensive system of democratic checks on further transfers of power to the European level of government, it is now high time that this Government got on with the priority of providing a positive leadership role for Britain in all European decision-making forums, and that the anti-European guerrilla warfare from the Back Benches really does not help?

[Mr Hoban]

My hon. Friend is right to point out that much work needs to be done in Europe. I believe that this Government have played an important role, particularly in pushing the competitiveness and growth agenda, and that is the right role for this country to play.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

The Minister and colleagues on the Government Benches are again keen to draw an analogy between this country and, this time, Portugal—previously it was Ireland and Greece. Can he confirm that the UK is in an entirely different position from those countries, given that it controls its own interest rates and its own currency?

[Mr Hoban]

The only reason that this country is in a different place from Greece, Ireland and Portugal is the action that this Government have taken to sort out the mess left by Labour.

[Matthew Hancock (West Suffolk) (Con)]

Will the Minister confirm that the contingent liability under the scheme was set up after Labour had lost the election by the then Labour Chancellor? Does what is happening in Portugal, where interest rates have today risen above 8%, not provide the most eloquent lesson on what would happen here if we did not get a grip?

[Mr Hoban]

My hon. Friend is absolutely right. The decision taken by the previous Chancellor meant that we became part of the ESFM, and that is why the liability exists today. My hon. Friend is absolutely spot on: we have taken difficult decisions in this country. This Government have decided to tackle the deficit that Labour left behind, and we have a clear plan to do it. The Opposition have no ideas. Under a Labour Government, this country would be running out of steam.

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

The events last night in Portugal bring into sharp focus why it is important to maintain the confidence of the markets. Is the Minister glad that this Prime Minister did not attend the meeting of the 17 eurozone countries, because the last Prime Minister attended and gave away our rebate?

[Mr Hoban]

Certainly, the previous Government very rarely showed any backbone in dealing with our European partners on the rebate or other matters. This Government stand up for Britain’s interests when it comes to the debate in Europe. We have done that on the rebate, on the budget and on this mechanism.

[Bob Blackman (Harrow East) (Con)]

When Ireland was in trouble, we helped out. Ministers brought forward a proposal to give a loan to Ireland to help sort out their finances. I appreciate that at the moment there is no proposal to do the same for Portugal, but will the Minister give an assurance that we as a House will be given the opportunity to debate any such proposal that comes forward?

[Mr Hoban]

As I said before, I do not think that it is helpful to engage in unnecessary speculation. However, I would point out to my hon. Friend that this Government have sought to ensure that we keep the House informed on all matters of importance.

Business of the House

Thursday 24th March 2011 Commons Chamber

11:54

[Hilary Benn (Leeds Central) (Lab)]

Will the Leader of the House give us the forthcoming business?

[The Leader of the House of Commons (Sir George Young)]

The business for next week will be:

Monday 28 March—Continuation of the Budget debate.

Tuesday 29 March—Conclusion of the Budget debate.

Wednesday 30 March—Remaining stages of the Police Reform and Social Responsibility Bill (Day 1).

Thursday 31 March—Conclusion of remaining stages of the Police Reform and Social Responsibility Bill (Day 2).

Friday 1 April—Private Members’ Bills.

The provisional business for the week commencing 4 April will include:

Monday 4 April—Opposition Day (14th allotted day). There will be a debate on an Opposition motion, subject to be announced.

Tuesday 5 April—General debate on Britain’s contribution to humanitarian relief in Libya, followed by a general debate on matters to be raised before the forthcoming Adjournment. The latter debate has been nominated by the Backbench Business Committee.

I should also like to inform the House that the business in Westminster Hall for 31 March 2011 will be:

Thursday 31 March 2011—A debate on high-speed rail.

[Hilary Benn]

I am grateful to the Leader of the House for that reply. The House will welcome today’s statement on Libya and will look forward to being further updated.

The Welfare Reform Bill will involve a large number of regulations being presented to the House. Will the Leader of the House assure Members that they will appear in good time to allow for full parliamentary scrutiny?

The Government gave a clear undertaking that they would talk to the Opposition about their draft legislation to increase—in a terrorist emergency—the number of days for which someone can be held from 14 to 28. To date, the shadow Home Secretary has not been consulted, despite a number of requests to the Home Secretary. Will the Leader of the House encourage his colleague to respond?

On section 44 stop-and-search powers, the Home Secretary has got herself into a difficulty and has had to introduce, by way of a remedial order, the new provisions on stop and search that were due to be included in the Protection of Freedoms Bill. She has done that by means of a written statement, thereby denying the House the chance to debate and scrutinise the change before it was made. May we have an explanation of why that happened?

Given that just about everything that we heard in yesterday's Budget statement had already been leaked to the media in advance, could the Leader of the House look at a different system for next year? Perhaps the Chancellor could get up, simply say, “I refer the House to the briefing I gave the newspapers a few days ago,” add anything new and sit down. Then we could move straight on to the Leader of the Opposition and the debate. It might help some Members to stay awake.

Will the Business Secretary make a statement on the failure of the Government’s much trumpeted one in, one out policy on new regulations? For the Department for Business, Innovation and Skills—the Department meant to be leading on the policy—it has been a case of 46 regulations in since May, and no regulations out. In fact, the majority of Departments have introduced more regulations than they have removed.

It seems that the policy is being observed only by the Liberal Democrats, although in their case they are applying it not to regulations, but to their principles. One principle out—opposition to trebling tuition fees; one new principle in—helping to undermine the NHS. We also read with interest that the Liberal Democrats are planning to issue a pocket-sized card listing every one of their many achievements in government. Will the Leader of the House find time for a statement on that? After all, it would not take very long.

May we have a statement from the Health Secretary explaining why the latest polling results from Ipsos MORI on public satisfaction with the NHS have still not been published, six months after they were submitted to the Department of Health? It is reported that they show that more members of the public than ever believe that the NHS is doing a good job—not exactly the message that Ministers have been seeking to convey. This is a very curious case of Ministers trying to bury good news.

Also on the health service, we read with great interest this week that the Deputy Prime Minister has told his MPs that he will be “taking the lead” in reining in his own Government’s plans for the national health service. He is said to be determined to make changes to the Health and Social Care Bill, which is currently in Committee, and a senior party source said that he had decided to “front up” the issue with the Health Secretary.

This is quite extraordinary, and presents a bit of a parliamentary challenge for the Leader of the House. Now, the right hon. Gentleman is a reformer, so I wonder whether he would be prepared to break new ground by organising a joint statement at the Dispatch Box from the Deputy Prime Minister and the Health Secretary, so that they can slug it out under the full glare of parliamentary accountability. Or perhaps we could make use of the Procedure Committee’s welcome recommendation—published in the last hour—that we allow the use of iPhones and iPads in the Chamber in place of paper, and the two members of the Cabinet can have an online argument instead. It could probably work, as long as Vodafone kept us all connected.

Finally, on Westminster council’s infamous ban on feeding the homeless, I am sure that the Leader of the House was as pleased as I was to read last week that a Home Office spokesman had said:

“The Home Secretary has no plans to ban soup runs.”

I am delighted that the coalition—if I may describe it as such—between the right hon. Gentleman and me has forced the Government finally to make their position clear. Will he simply confirm for us today that when Westminster’s draft byelaw is put to the Department for approval, it will be treated with the contempt that it deserves and sent packing?

[Sir George Young]

That was a marvellous smokescreen for the rather disappointing performance by the Leader of the Opposition yesterday. The shadow Leader of the House might want to recalibrate his performance in order to avoid this unhappy contrast.

On the Welfare Reform Bill, of course we will seek to publish the appropriate regulations well in advance so that the House has an opportunity to reflect on them. I will pass on the right hon. Gentleman’s request for more consultation between the shadow Home Secretary and my right hon. Friend the Home Secretary. On the Protection of Freedoms Bill and the written ministerial statement, the Bill is now before the House and I hope that there will be adequate opportunity for the House to cross-examine Ministers.

As for leaks, the right hon. Gentleman will know that there has always been a good deal of speculation before Budgets—and I have to say that he does not have much of a leg to stand on in this regard. He was a special adviser in 1997, and most of the Labour Government’s first Budget was systematically leaked to the Financial Times before the Chancellor had even got to his feet. Some years later, a BBC reporter interviewing the Treasury spin doctor Charlie Whelan asked him directly whether he had been responsible for the leak. Whelan replied:

“I might well have been. I can’t remember, to be honest. Probably was me. It could be Ed Balls, it could be me.”

So I hope that we will hear no more from Labour about Budget leaks.

If there is one person who is known to be able to stay awake during Budgets, it is my right hon. and learned Friend the Lord Chancellor, who delivered six excellent Budgets when he was Chancellor of the Exchequer. On the issue of regulations and the Department for Business, Innovation and Skills, my right hon. Friend the Business Secretary will be taking part in a debate later today about regulations, and will therefore have an ample opportunity to deal with the one in, one out policy.

Labour has had more than one policy on tuition fees over the past few years, and it would do well to reflect on that before starting to make that its currency. As for joint appearances at the Dispatch Box, I wonder how the then Prime Minister Tony Blair and the then Chancellor Gordon Brown would have got on if they had both appeared at the Dispatch Box, as members of the same party, to hammer out an agreed policy.

On health and social care, I do not think that the right hon. Gentleman should believe absolutely everything he reads in the press.

On Westminster city council, the right hon. Gentleman might know that the consultation ends on 25 March. The portfolio holder on the council has made it clear that he wants a non-legislative solution. He plans to have discussions with those running the soup runs, and two soup run providers have already agreed to provide their services in a more settled environment. I welcome that. The right hon. Gentleman might also look at some of the comments from those helping rough sleepers about the desirability of focusing the soup runs within an established building, rather than their acting as a magnet that attracts rough sleepers from all over the capital. I very much hope that he and I are at one on rough sleepers, and that we can support Westminster city council and the enlightened approach that it is now taking.

[Several hon. Members]

rose—

[Mr Speaker]

Order. Many colleagues are seeking to catch my eye, but I remind the House that there is a statement by the Foreign Secretary to follow, and a heavily subscribed continuation to the Budget debate. If I am to accommodate this level of interest, brevity will be of the essence.

[Laura Sandys (South Thanet) (Con)]

Will the Leader of the House find time for a debate on the Department of Health’s drugs procurement process in relation to companies such as Pfizer, to ensure that corporate social responsibility comes into the process?

[Sir George Young]

I applaud my hon. Friend’s campaign on behalf of those in her constituency who are threatened by the decision taken by Pfizer. I will certainly draw the attention of my right hon. Friend the Secretary of State for Health to her request for more corporate social responsibility. It might also be appropriate for her to intervene during the Budget debate, as that is a direct matter for businesses in this country.

[Natascha Engel (North East Derbyshire) (Lab)]

I thank the Leader of the House for his business statement, as well as for his written ministerial statement yesterday on extra time for private Members’ Bills, Opposition days and time allocated to Back Benchers. Will he tell the House exactly how many extra days will be allocated to Back Benchers? Will he also tell us how many of those debates will be in the Chamber? He has just announced that the pre-recess Adjournment debate—a Back-Bench debate—has been reduced from the normal six hours to three, to give the House the chance to have an important debate on Libya and humanitarian aid. I acknowledge how important it will be to have that debate, just before we break up for the recess, but will he explain why he cannot simply add an extra day on to the parliamentary calendar in order to give the pre-recess Adjournment debate and that important debate on Libya and humanitarian aid a whole day each? It is in the Government’s gift to do that. I am sure that this would never have crossed the mind of the Leader of the House, but perhaps that will not happen because the extra day would be a Wednesday, and the Prime Minister would therefore be forced to come to the Dispatch Box to answer questions.

[Sir George Young]

Let me rebut instantly the hon. Lady’s final suggestion. My right hon. Friend the Prime Minister looks forward to every Wednesday with relish. On her question about the extra days, we have tabled a motion to extend the number of days for private Members’ Bills. We do not need to lay a comparable motion to deal with the days for the Backbench Business Committee. Since the Committee was established last July we have allocated roughly one day a week to it, and I propose to continue to do that. We do not need to table a motion in order to do so, however.

On the question of extending the sitting days to include next Wednesday, the House values the certainty of having a calendar published well in advance, and there are precedents for the pre-recess Adjournment debate taking half a day rather than a whole day. We have tried to reconcile the need for certainty with the need for the House to be updated on the difficult position on Libya and to contribute to that debate, as well as respecting the demands of the pre-recess Adjournment debate. I hope that we have struck a fair balance between those three demands. I can tell the hon. Lady that I propose to table a business motion so that the protected time of three hours for the pre-recess Adjournment debate will not suffer any injury as a result of any statements or other events on that day. I hope that when I table that motion, she will smile at it.

[Mr John Redwood (Wokingham) (Con)]

May we have a debate in Government time on the future of the euro and the economic governance arrangements in the European Union? Those of us who fought long and hard, and successfully, to keep Britain out of the euro would like ministerial reassurance that we are not going to be dragged into any of the financial or governmental consequences of its current problems, and that we will get something back for Britain when those countries need our consent to change.

[Sir George Young]

I understand my right hon. Friend’s concerns, but I cannot promise an imminent debate on that subject. Following the important meeting of the European Council that begins today, however, there might well be a statement early next week, which would give him an opportunity to share his concerns with my right hon. Friend the Prime Minister.

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

Today, 30,000 14 to 15-year-olds from 815 schools in every part of the country are working with the BBC to make the news, and 30,000 other young people have taken part in news-related projects during the year. Will the Leader of the House find time for a debate on how we can support the BBC in that work and recognise the incredible importance of the work in developing civic awareness and an understanding of the news among young people?

[Sir George Young]

I applaud the BBC’s initiative; I saw one of the programmes before I came into the Chamber. I cannot promise a debate, but there is an unallocated Opposition day on Monday week. The right hon. Member for Leeds Central (Hilary Benn) will have heard the hon. Lady’s bid; perhaps part of that day could involve a debate on that important subject.

[Harriett Baldwin (West Worcestershire) (Con)]

The House holds the principle of one person, one vote to be absolutely sacrosanct. Will the Government find time between now and the referendum on 5 May to hold a debate in the Chamber on the referendum question?

[Sir George Young]

My hon. Friend asks a very good question. We have not had a recent debate on the alternative vote, although we debated the matter when the legislation was going through. There is some confusion on AV. One person, when asked what the AV referendum was all about, thought that it was about whether Aston Villa would come top of the league this year. I hope that between now and 5 May there will be a good public debate on this matter. Again, the Opposition have not yet chosen their subject for Monday week. However, we know that there is some difference of opinion on AV within the Labour party, and for that reason it might not choose the subject for discussion on that day.

[Nick Smith (Blaenau Gwent) (Lab)]

Will the Government make time for a debate on the proposed changes to the DNA database, following evidence to the Protection of Freedoms Public Bill Committee by the chief constable of the West Midlands, who said that 1,000 criminals would go free as a result of this Government’s changes?

[Sir George Young]

The Protection of Freedoms Bill is before Parliament at the moment; it is in a Public Bill Committee. Within that Bill are the clauses on DNA to which the hon. Gentleman has referred. I know that my hon. Friend the Minister who is taking the Bill through the House would like to respond to the hon. Gentleman’s assertion, with which the Government disagree.

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

Any large corporations that enjoy public contracts also enjoy favourable payment terms. However, many of the small and medium-sized enterprises that support the same contracts do not benefit from equally favourable terms. Will my right hon. Friend require a statement from the Cabinet Office to ensure that current and future contracts are reviewed to help our SME businesses?

[Sir George Young]

I am sure that the Government want to be an enlightened party to contracts and wish to discharge their obligations and pay their bills on time. I will certainly convey my hon. Friend’s suggestion to my right hon. Friend the Minister for the Cabinet Office and make it clear that in his opinion—I think it is a widely shared view—the Government should not make SMEs wait for payment due to them from the public sector.

[Mr John Spellar (Warley) (Lab)]

Parliamentary questions are an essential mechanism by which the House is able to hold Ministers to account. There are, however, some gaps in the system. One of those is a member of the Cabinet, Baroness Warsi, who last year claimed that the Conservatives failed to win an overall majority at the general election because of electoral fraud, predominantly within the Asian community. Will the Leader of the House find time next week for a statement at which the Baroness could either justify that statement or profoundly apologise for it?

[Sir George Young]

As the right hon. Gentleman knows, I cannot find time for such a debate, because the right hon. Lady would not be able to appear in this Chamber. However, I am sure she will have heard what the right hon. Gentleman has said and will want to respond to it in the appropriate way.

[Tessa Munt (Wells) (LD)]

When I was elected, I tried to do the right thing and save money by using second-class post. I discovered that of the five small envelopes used, three are, illogically, more expensive if second-class post is used rather than first-class post. One of the differences amounts to £2.24 for a 250 batch. According to my back-of-the-envelope maths, including the printing costs for two types of envelopes based on 2009 usage, a saving of £15,500 a year could be made. The print runs are huge; the set-up costs are minimal. The House of Commons uses 2,000,703 first-class envelopes, costing £1,000,646. If 5% were urgent and 95% were sent second class, the postage savings would amount to more than £250,000 of taxpayers’ money. Will the Business Secretary please promote and encourage the use of second-class envelopes by—

[Mr Speaker]

We have got the gist, but I am afraid that the question is too long. We have got the thrust of it, and we are grateful.

[Sir George Young]

I am sure that the envelope on which my hon. Friend did the maths was a second-class one! I will draw her comments to the attention of the House authorities, and I applaud the steps she is taking to save money by using second-class envelopes where appropriate. It seems anomalous if the position is as she described it, so, as I say, I will pass her comments on to the House authorities.

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

Constituents regularly tell me of the difficulties they face in accessing local bus services—ranging from high fares and a lack of services after 6 o’clock to there being no direct routes to the hospital or to GP surgeries. In response, I have launched a campaign to improve local bus services. May we have a debate on what steps the Government are taking to improve accountability and value for money when it comes to local people having their say over bus services?

[Sir George Young]

I applaud the hon. Lady’s campaign to make bus services more accessible to her constituents, particularly when they need to go to hospital. I announced a few moments ago that we will have the normal pre-Easter recess Adjournment debate, and it strikes me that this would be an appropriate subject for her to raise on that occasion.

[Robert Halfon (Harlow) (Con)]

Following the Budget announcement yesterday about university technical colleges, will my right hon. Friend find time for a debate on UTCs—not just because they will transform vocational education for our youngsters but because Lord Baker visited Harlow college, which is leading a bid, with local businesses, to have a UTC there?

[Sir George Young]

I am grateful to my hon. Friend for his kind words about my right hon. Friend Lord Baker, who listened with interest to yesterday’s statement that there would be not 12 but 24 high-quality, technically oriented UTCs. We are aware—and if we were not, we are now—of Harlow college’s interest in submitting an application. I can tell my hon. Friend that the intention is to select the first round of new technical academies to go forward by the early summer, following a competitive selection process.

[Mr Dave Watts (St Helens North) (Lab)]

May we have a statement on how the Government intend to ensure that the announced increases in tax on the fuel companies will not be passed on directly to hard-pressed motorists? Are we to take it from the statement that any further increases will be referred for scrutiny before they are allowed?

[Sir George Young]

Of course I understand the hon. Gentleman’s concern—but I do not know whether he has had time to look at the regulatory impact assessment carried out in 2006, when his party was in government, on increased taxation on North sea producers. It said:

“Oil companies are price-takers, facing a globally-determined market price for their output, and so will absorb all costs. They will be unable to pass any costs on to consumers, and the impact will be distributed proportionately across producers with no adverse effects on competition”.

I hope that gives the hon. Gentleman the reassurance he was seeking.

[Kwasi Kwarteng (Spelthorne) (Con)]

Will the House have the opportunity to debate the Independent Parliamentary Standards Authority review of MPs’ expenses, which will be published tomorrow?

[Sir George Young]

My hon. Friend reminds the House that at one minute past midnight IPSA is due to publish the outcome of its review of the scheme. I understand that it hopes to inform hon. Members of its contents before then. As my hon. Friend will know, there is now a group that liaises between the House and IPSA and has regular meetings to discuss the scheme. I suggest that my hon. Friend, and indeed others, use that channel to communicate their views on the revised scheme, as they already do now.

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

May we have a debate or a statement from the Transport Secretary on London Midland’s proposals to break the franchise commitment to staff all stations from the first to the last train. I believe that that has serious implications for the safety of passengers using those stations, and I am worried about the ease with which it is prepared to break its commitment. We need a statement or a debate.

[Sir George Young]

I understand the hon. Gentleman’s concern, and I will draw the matter to the attention of my right hon. Friend the Transport Secretary. If it is a term of the contract that these services should be provided, they cannot be unilaterally abrogated.

[Julian Sturdy (York Outer) (Con)]

May we have a debate on the provision of critical care beds, which are of such importance to our NHS generally, and particularly, in my part of the world, to my local hospital in York? I know that it will welcome the recently announced extra 3,700 beds.

[Sir George Young]

The Health and Social Care Bill will shortly return to the Floor of the House after its Committee stage. My hon. Friend is right: the Department of Health announced last month that 3,747 critical care beds were available in January this year—the highest number ever recorded. I am sure that the whole House will rejoice in those figures.

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

There is some disquiet about the UK Government’s proposed Calman-like process for Wales, which has implications for the way in which the Welsh Government are funded. Will the right hon. Gentleman ask the Secretary of State for Wales to make an oral statement on the Floor of the House so that we can debate this issue?

[Sir George Young]

I will pass on the hon. Gentleman’s concerns to my right hon. Friend and ensure that she communicates with him before the Easter recess.

[John Hemming (Birmingham, Yardley) (LD)]

What happened on Monday was a good example of why business sometimes needs to change at short notice—but there has obviously been confusion about what is happening to the pre-recess Adjournment debate. What progress have the Government made in discussions about having a House business Committee, which might introduce greater transparency in the process of managing business?

[Sir George Young]

The coalition Government made a commitment that the previous Government did not make—that we would introduce a House business Committee. We remain committed to doing that within three years of the commencement of this Parliament. We propose to review how the Backbench Business Committee has worked after its first year, and then have discussions about the introduction of a House business Committee.

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

Will the Leader of the House ensure that we have a statement next week on the Government’s child poverty strategy? Under the Child Poverty Act 2010 the Government are required to publish such a strategy by tomorrow, yet in a written answer from the Minister with responsibility for disabled people earlier this week, I was informed that she has not yet even seen fit to appoint the commission that is intended to advise on such a strategy.

[Sir George Young]

The hon. Lady has made a valid point, which has been addressed in a written ministerial statement. I know that my right hon. Friend the Secretary of State for Work and Pensions will want to regularise the position as soon as he can, and I will ensure that he informs the House in the near future of how he proposes to do that.

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

May we have a debate on our country’s gold reserves? As my right hon. Friend will recall, the gold price crashed a decade ago when Britain sold its reserves, an event that became known as the “Brown bottom”. Does he think that this month’s record high will become known as the “Balls-up”?

[Sir George Young]

We are in the middle of a four-day debate on the Budget, during which I am sure it will be appropriate for my hon. Friend to amplify his remarks at greater length.

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

The House will be shocked to learn that children as young as seven are being issued with firearms licences. Can the Leader of the House tell us when the Home Office plans to respond to the report that the Home Affairs Committee published before Christmas?

[Sir George Young]

I am sure that other Members will have heard a feature on the “Today” programme which highlighted the freedom of information responses to which the hon. Gentleman is referring. In fact we have some of the toughest gun controls in the world, and we are having another look at them. The age limits in the firearms law reflect the different levels of risk posed by different guns in different circumstances. If young people do have access to firearms and shotguns, it must be safe and controlled. We are considering the recommendations of the Home Affairs Committee, and we expect to respond in May or June.

[Martin Horwood (Cheltenham) (LD)]

The very long parliamentary Session offered the tantalising prospect of successful private Members’ legislation, which I hoped would include my Tied Public Houses (Code of Practice) Bill, but my aim has been frustrated by the fact that all the newly available sitting Fridays are dominated by dozens of Bills promoted by one or two Members. Would you, Mr Speaker, or the Leader of the House care to comment on the situation, and on whether it is frustrating the whole point of private Members’ legislation?

[Sir George Young]

I understand my hon. Friend’s frustration. However, the Bills that were successful in the ballot will take priority over those that may follow. I tried to extend the number of days available for private Members’ Bills by tabling a motion yesterday. We cannot make progress with that motion because an amendment to it has been tabled by my hon. Friend the Member for Wellingborough (Mr Bone), but the Government intend to make more time available for private Members’ Bills, to reflect the length of the session.

[Anas Sarwar (Glasgow Central) (Lab)]

There is huge concern in Scotland over reports that the Scottish National party is to repeat its use of slogans on Scottish election ballot papers. Following the 2007 election fiasco during which nearly 150,000 papers were spoilt, the Gould review found that the use of slogans such as “Alex Salmond for First Minister” were “confusing and potentially misleading” for the electorate, and it was thought that it would be outlawed. May we have an urgent statement from the Secretary of State for Scotland to clarify the issue and avoid a repeat of what happened in 2007?

[Sir George Young]

I will draw the hon. Gentleman’s comments to the attention of my right hon. Friend the Secretary of State of Scotland, unless the matter falls within the responsibility of the Scottish Electoral Commission. In either event, whoever is responsible will write to him.

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

Minerals can be extracted only from where they lie, and many mineral reserves lie in my constituency. My right hon. Friend will be well aware that minerals policy has been specifically excluded from the Localism Bill. Will he find time for a debate on minerals policy, and in particular on the distribution of the aggregates levy? I think it important for communities that suffer the blight of mineral extraction to have a fair share of the levy as a form of compensation.

[Sir George Young]

Many Members whose constituents contain aggregate sources such as gravel pits will share my hon. Friend’s concern, and the Backbench Business Committee may wish to find time for a debate. As my hon. Friend says, the aggregates levy sustainability fund reduces the environmental impact of the extraction of aggregates, but as a result of the October spending review settlement, the Government will have to discontinue the programme of work after the end of the current financial year. I will draw my hon. Friend’s concern to the attention of my colleagues who have responsibility for the matter.

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

Will the Leader of the House make time for a debate or statement on an announcement made yesterday indicating that 900 million records of medicines prescribed by family doctors are to be published on line? That has many implications, not least the usefulness of such information to private drug companies and the impact on civil liberties.

[Sir George Young]

I understand the hon. Gentleman’s concern, and will draw the matter to the attention of my right hon. Friend the Secretary of State for Health. It may be another suitable subject for the pre-Easter recess Adjournment debate on Tuesday week.

[Priti Patel (Witham) (Con)]

Last month the Planning Inspectorate decided to impose a travelling showpeople’s site on the village of Tolleshunt Knights in my constituency. The decision was based on the regional spatial strategy and planning circulars issued by the last Government. Can my right hon. Friend tell us why those circulars are still in place, and when they will be scrapped?

[Sir George Young]

As I think my hon. Friend knows, we have announced our intention to withdraw the circulars and replace them with a new light-touch planning policy. We want to move quickly, but there is a proper process to be followed. Our proposed new policy will be published for public consultation shortly.

[Bill Esterson (Sefton Central) (Lab)]

Given the Prime Minister’s apparent confusion yesterday over the future of the disability living allowance, may I raise the case of my constituent Scott Sheard, who has been refused the mobility component of DLA? He needs the allowance so that he can live at home, but he also needs to make a gradual transition. Will the Leader of the House ask his right hon. Friend the Secretary of State for Work and Pensions to reconsider Scott’s case, and those of many other people with disabilities who need the mobility component in order to live independently?

[Sir George Young]

The regime that affects the hon. Gentleman’s constituent is the regime that we inherited. We propose to make changes to the DLA, but they require primary legislation, which will have to be approved by the House. We want to move from the current regime, which has not been examined for 20 years and results in conflict and overlap, to a new regime based on personal independence payments. We want to enhance the mobility and independence of people who are entitled to payments at the moment. This is not about saving money, but about introducing a better regime for those with real needs.

[Mr Edward Timpson (Crewe and Nantwich) (Con)]

May we have a debate on the Government’s commitment to delivering 250,000 more apprenticeships by 2015? That would allow us to discuss the crucial role played by apprenticeships in developing skills in our engineering sector, especially in the rail and motor industries that are so important to our economy, both in Crewe and Nantwich and elsewhere in the country.

[Sir George Young]

I believe that yesterday’s announcement in the Budget of more resources for apprenticeships and work experience was warmly received. In a few moments my right hon. Friend the Business Secretary will be in his place. Today’s debate will provide a good opportunity for the House to discuss the value of apprenticeships to the community, and in particular, their reinforcement of our manufacturing and engineering capability, which has such a high profile in my hon. Friend’s constituency.

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

My hon. Friend the Member for Easington (Grahame M. Morris) drew attention to the possible publication of 900 million medical prescription records online. Given that banks, lenders, insurers, private health care employers, neighbours, foreign agencies and Governments would be able to gain access to those records, may we have a debate on the Floor of the House on how the proposal relates to the Data Protection Act, employment law and other legislation?

[Sir George Young]

I repeat the undertaking that I gave a few moments ago—and on Tuesday the Health Secretary will be answering questions in the House, when the hon. Gentleman may have an opportunity to raise the matter in either a direct or a topical question.

[Andrew Stephenson (Pendle) (Con)]

Will the Leader of the House find time for a debate on the good news announced yesterday about the Government’s council tax freeze initiative? Both Pendle borough council and Lancashire county council have agreed not to increase the tax, but the initiative was not covered in recent debates on the local government finance settlement.

[Sir George Young]

My hon. Friend has drawn a contrast between the doubling of council tax under the Labour Government and the freeze introduced by the current Government. He may also know that we have abandoned plans for a council tax revaluation that would have meant soaring bills for millions of homes.

[Steve Rotheram (Liverpool, Walton) (Lab)]

The Leader of the House turned down my previous request, but will he now find time for a debate on pay structures in banks, following the revelation that last year RBS paid 323 staff more than £1 million each, Barclays paid 231 staff more than £1 million each, and HSBC paid 280 staff more than £1 million each? Does he agree that that requires an urgent debate, given that yesterday’s Budget failed to tackle such excess?

[Sir George Young]

If that requires an urgent debate, which I concede may well be the case, that urgent debate can take place over the next three days. My right hon. Friend the Chancellor has announced an increase in the bank levy. However, it would be perfectly in order for the hon. Gentleman to catch your eye, Mr Speaker, today or on Monday or Tuesday, and to receive a response from one of my Treasury colleagues.

[Karl MᶜCartney (Lincoln) (Con)]

Will my right hon. Friend find time for a debate on the role of the Electoral Commission? It is no longer offering guidance and advice to election officers, most of whom have a wealth of experience of running elections very well for many years, and has taken to bullying and imposing expensive and excessively bureaucratic top-down diktats ahead of the local elections and referendum that will take place in six weeks’ time.

[Sir George Young]

I will draw my hon. Friend’s comments to the attention of the chair of the Electoral Commission. There is the opportunity to cross-examine my hon. Friend the Member for South West Devon (Mr Streeter), who speaks for the Electoral Commission, on the Floor of the House, and my hon. Friend the Member for Lincoln (Karl MᶜCartney) could also raise the matter with him informally outside the Chamber.

[Ian Lavery (Wansbeck) (Lab)]

Many MPs are very unhappy about the lack of clarity and content in departmental written answers. The responses to many questions are fudged, and many are answered as “unknown”. Will the Leader of the House make time for a debate on this?

[Sir George Young]

The hon. Gentleman is entitled to receive enlightened and informed answers to written questions. It might help if he could be slightly more specific about which answers have caused concern, and if he does so I will raise the matter with the appropriate colleague.

[Pauline Latham (Mid Derbyshire) (Con)]

Will my right hon. Friend the Leader of the House outline how business leaders in my constituency and Derbyshire in general can put their ideas to the Chancellor in respect of his announcement yesterday on establishing more enterprise zones?

[Sir George Young]

As my hon. Friend will know, the Cabinet recently met in Derby in her county. We met wealth creators in Derby, and they pressed the case for more investment in the town and the county. Members will have an opportunity in today’s debate on the Budget and subsequent debates to make the case for an enterprise zone in their constituency, and I note that my hon. Friend has made an early bid.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

The last Government put in place the victims of overseas terrorism compensation scheme. May we have a debate in Government time to ascertain when British victims of overseas terrorism will begin to receive compensation?

[Sir George Young]

The hon. Gentleman raises a serious issue that has already been raised on a number of occasions. As he knows, the Ministry of Justice is carrying out a review. I hope it will be completed shortly, because I understand the concern that is felt on both sides of House about the delay.

[Bob Blackman (Harrow East) (Con)]

Seven schools in Harrow are currently consulting on becoming academies. They are doing so in the teeth of a campaign of misinformation by Labour-run Harrow council and outright hostility from the teaching unions. May we have an urgent statement from the Secretary of State for Education on what he is going to do to stop councils giving misinformation to schools that are trying to break free of the dead hand of the local education authority?

[Sir George Young]

I welcome that initiative in my hon. Friend’s constituency, which shows that parents want to use the freedoms given to them under this Government’s legislation. I will draw his concern to the attention of my right hon. Friend the Secretary of State for Education, so we can see whether further steps need to be taken to make sure that those who want to establish free schools or academies are not intimidated as a result of misinformation.

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

Further to the request made by my hon. Friend the Member for Westminster North (Ms Buck), I draw the Leader of the House’s attention to early-day motion 1640, tabled yesterday, which seeks to save BBC Radio Merseyside.

[That this House believes BBC Radio Merseyside is a loved and valuable institution within Merseyside, providing local news and entertainment to over 300,000 listeners; notes that BBC local radio offers exceptional value for money at a cost of 3.2 pence per listener hour, in comparison with other stations such as BBC Parliament (14.1 pence) and Radio 3 (6.3 pence); further notes that BBC Radio Merseyside is the most listened to BBC local radio station outside London; further notes that for a third of its listeners, 100,000 people, it is the only BBC radio station that they choose to listen to; is highly concerned at proposals that would end daytime programming; and calls on the BBC to protect its proud history of broadcasting on Merseyside with a commitment to fund BBC Radio Merseyside.

There are no fewer than 40 BBC local radio stations throughout the UK, all of which are cherished by their communities and provide excellent value for money at 3.2p per listener hour, but the news that local programming may be scaled back to “drive time” and breakfast time is extremely worrying. Please may we have an urgent debate on the future of BBC local radio programming?

[Sir George Young]

I understand the hon. Lady’s concern. It strikes me that this would be an appropriate subject for a Backbench Business Committee debate or an intervention during the pre-Easter recess Adjournment debate, but she has just made her case very effectively.

[Mr Peter Bone (Wellingborough) (Con)]

If passed, motion 7 on the Order Paper would have the effect of cancelling all currently scheduled private Members’ sitting days and replacing them with four new days. Instead of getting the additional 13 days we should have because this is a two-year parliamentary Session, we would finish up with only four days. I think that is more cock-up than conspiracy, but may we have a debate on the matter next week?

[Sir George Young]

I am not sure that my hon. Friend has interpreted the motion correctly. The Government want to provide four more days to debate private Members’ Bills. My hon. Friend has blocked that by tabling an amendment which means that, as of today, that extra time will not be given. I very much hope we can resolve the matter. We have a bit of time, because we have announced the dates up to the end of the summer. I hope that between now and then we can find a satisfactory solution, and that my hon. Friend will not stand in the way of what the Government are trying to do, which is to give more time for private Members’ Bills.

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

People have welcomed the council tax freeze nationally, but may we have a debate on what people in my constituency and elsewhere can do if their council puts through large council tax rises in future?

[Sir George Young]

Help is on the way, because the Localism Bill contains a provision for local people to have a referendum if their local authority proposes high council tax increases.

[Mr Speaker]

I call Mr Pincher.

[Hon. Members]

Hear, hear.

[Christopher Pincher (Tamworth) (Con)]

Thank you, Mr Speaker; I know my place.

Many of my constituents have raised concerns about clinical services in local hospitals, notably Good Hope hospital. May we have a debate on NHS staffing levels, so that we may learn about the progress being made in increasing the number of doctors and nurses and reducing the number of bureaucrats so beloved of the last Government?

[Sir George Young]

Since we took office, the number of managers has fallen by some 3,000, I think, and the number of doctors has increased by some 2,000, so help is on the way.

North Africa and the Middle East

Thursday 24th March 2011 Commons Chamber

12:35

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

With permission, Mr Speaker, I should like to make a statement updating the House on the actions we are taking to protect civilians in Libya and other issues of concern in the middle east.

First, I must confirm the sad news that a British national was killed in a bus-bombing in Jerusalem yesterday, which injured over 30 Israelis, eight of them seriously. Her family was informed last night. Our embassy in Tel Aviv and consulate-general in Jerusalem are doing everything possible to assist her family and those who were travelling with her. I know the House will join me in sending our deepest condolences to her family at this tragic time, as well as in expressing our solidarity with the people of Israel in the face of such a shocking and despicable act of terrorism. I condemn this attack in the strongest terms and call for those responsible to be held to account.

I am also gravely concerned about renewed rocket attacks on Israel from Gaza and the deaths of Palestinian civilians in Gaza. I urge all parties to restore calm and to work to achieve the two states that are the only lasting hope for peace.

On Libya, we continue to take robust action to implement UN Security Council resolution 1973, which authorised military action to put in place a no-fly zone to prevent air attacks on Libyan people and take all necessary measures to stop attacks on civilians while ruling out an occupation force. The case for this action remains utterly compelling. Appalling violence against Libyan citizens continues to take place, exposing the regime’s claims to have ordered a ceasefire to be an utter sham.

Misrata has been under siege for days by regime ground forces, although coalition air strikes are helping to relieve the pressure on its citizens, many of whom have been trapped in their homes without electricity or communications, with dwindling supplies of food and water, and facing sniper fire if they venture into the streets, while the local hospital is swamped with casualties. Ajdabiya continues to be under attack, with reports of civilian deaths from tank shells. This underlines the appalling danger its inhabitants would be in without coalition action, as do continued threats by Gaddafi forces to “massacre” residents in areas under bombardment.

There is universal condemnation of what the Libyan regime is doing from the United Nations, the Arab League, the African Union and from Europe. The regime’s actions strengthen our resolve to continue our current operations and our support for the work of the International Criminal Court. Our action is saving lives and protecting hundreds of thousands of civilians in Benghazi and Misrata from the fate that otherwise awaited them. That is what UN Security Council resolution 1973 was for, and that is why we are implementing it.

We are taking the utmost care to minimise the risk of civilian casualties. The only forces acting indiscriminately or deliberately inflicting casualties are the forces of the Gaddafi regime. UK forces have undertaken a total of 59 aerial missions over Libya, in addition to missile strikes. Last night, our forces again participated in a co-ordinated strike against Libyan air defence systems. A no-fly zone has now been established and the regime’s integrated air defence system has been comprehensively degraded. There are no Libyan military aircraft flying.

Over 150 coalition planes have been involved in military operations, including Typhoon and Tornado aircraft from the Royal Air Force. Thirteen nations have currently deployed aircraft to the region. A number of additional nations have made offers of aircraft and other military support, which are in the process of being agreed. Royal Navy vessels are in the region supporting the arms embargo. Those coalition operations are currently under United States command, but we want them to transition to NATO command and control as quickly as possible. NATO has already launched its operation to enforce the arms embargo, its planning is complete for the no-fly zone and we are making progress on NATO taking on all measures under resolution 1973 needed to protect civilians from Gaddafi’s attacks. We need agreement to unified command and control for it to be robust, and we expect to get that agreement soon.

Resolution 1973 lays out very clear conditions that must be met, including an immediate ceasefire, a halt to all attacks on civilians and full humanitarian access to those in need. We will continue our efforts until these conditions are fulfilled, and the Libyan regime will be judged by its actions not its words. Our message to the Gaddafi regime is that the international community will not stand by and watch it kill civilians—that is a view that this House overwhelmingly endorsed last week. To his forces we say that if they continue to take part in Gaddafi’s war against his own people, they will continue to face the military force of the coalition, and if they commit crimes against Libyan people, they will be held to account.

I announced yesterday that Britain will host an international conference next Tuesday to take forward the implementation of UN Security Council resolution 1973. We are inviting NATO allies, key international organisations, including the UN, the Arab League and the African Union, and many Arab nations. We continue to engage in intensive diplomatic activity to increase the multilateral pressure on the Libyan regime. Further UN and European Union sanctions have been agreed targeting Gaddafi and his associates, and those Libyan organisations responsible for funding his regime. As of today, the EU has designated the National Oil Corporation of Libya, thus cutting the regime off from future oil revenues.

We are gravely concerned about the well-being of up to 80,000 internally displaced people. The Secretary of State for International Development is in close communication with his counterparts in international organisations about immediate and longer-term support to the Libyan people. The United Kingdom is beginning preliminary consultations with international partners and organisations on an internationally led stabilisation effort to get Libya back on its feet in the longer term.

It is not for us to choose the Government of Libya. That is for the Libyan people themselves, but they have a far greater chance of making that choice now than seemed likely on Saturday, when the opposition forces were on the verge of defeat and the lives of so many were in danger. We continue to deepen our contacts with the Libyan opposition, including the interim national council based in Benghazi. I spoke to Mahmoud Jabril, the special envoy of the council, on Tuesday to discuss the situation on the ground and to invite him to visit London. In the words of the Arab League resolution, the current regime has completely lost its legitimacy. We call on all those, including the interim national council, who believe that Colonel Gaddafi has led the people of Libya into an impasse to begin to organise a transition process.

In Syria, there are reports of many deaths and the use of live rounds after security forces cleared a mosque in Deraa. We call on the Government of Syria to respect their people’s right to peaceful protest and to take action about their legitimate grievances. We also call for the utmost restraint on all sides, including by the Syrian security forces, during the further protests that have been called for tomorrow in Syria. In Bahrain, we support a process of dialogue leading to political reform that can address the legitimate aspirations of all the people of Bahrain, and I urge all parties to join, without preconditions, the proposed national dialogue.

In Yemen, a state of emergency has been declared by the Government and a day of marches is planned in Sana’a tomorrow. There has been looting and disorder in that city and in other cities, and more than 50 protesters died in Sana’a last Friday. We call even now on the opposition, the Government and the various factions of the Government to engage in dialogue. There are still some British nationals who have chosen to remain in Yemen. Since October, we have been unable to provide consular assistance in Yemen because of the significant terrorist threat. There are many parts of Yemen that the ambassador and his staff are unable to reach. In the light of the rapidly deteriorating security situation and the protests tomorrow, I have temporarily withdrawn part of the British embassy team in Sana’a, leaving a small core of staff in place. Commercial flights to and from Yemen are still operating, although that could clearly change. Should there be further violence in Yemen, normal means of leaving, particularly through the commercial airport in Sana’a, could be blocked, and the ability to travel around Yemen will be severely restricted. On 12 March, we advised all British nationals to leave Yemen as soon as they could. As the situation has deteriorated further since, I want to make it absolutely clear today that all British nationals remaining in Yemen should leave without delay.

The United Kingdom believes that the people of all these countries must be able to determine their own futures. That is why in all of them we argue for reform not repression, and why in Libya, supported by the full authority of the United Nations, we have acted to save many lives threatened by one of the most repressive regimes of them all. This will continue to be our approach as change continues to gather pace in the middle east.

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

I thank the right hon. Gentleman for his statement and for allowing me advance sight of it this morning. May I join him in condemning the act of murder witnessed on the streets of Jerusalem yesterday, where a British national lost her life? This atrocity should be unequivocally condemned across the world, and our condolences are with the people of Israel and the families of those affected, including those in this country.

The right hon. Gentleman talked about the situation in Yemen, which the House will know is deeply concerning. Amid the worrying developments, Britain must be consistent in urging the embrace of more democratic government by countries in the region. The Government are therefore right to urge progress on national dialogue with opposition parties and democratic reforms. Now that our embassy team has been withdrawn, for reasons that I fully appreciate, will he tell the House how and through what mechanisms Britain will continue to urge restraint and reform on the Yemini authorities? He explicitly urged UK nationals to leave Yemen, but can he also assure the House that all appropriate contingency plans are in place for any remaining UK nationals?

The BBC reports that at least 10 people have been killed and dozens wounded after Syrian police opened fire on people protesting in Deraa. Given the Foreign Secretary’s very recent visit to Damascus, will he update the House on his views as to whether any further protests are likely to be met with reform or with further repression? Will he also take this opportunity to update the House on any recent discussions the British Government have had with the King of Bahrain about the recent unrest in that country? Will he also inform the House what steps the Government have taken to get a clear picture from the authorities in Saudi Arabia of their intentions towards Bahrain? He will of course understand the risk not only that the legitimate demands of the people of Bahrain are suppressed, but that the country becomes a fulcrum of violence in the region.

I shall now address the pressing situation in Libya. May I associate myself and all Labour Members with the Foreign Secretary’s words of support and admiration for the role our armed forces are playing in this action? Last Monday, the Prime Minister and the Foreign Secretary made the case in this House for enforcing UN resolution 1973. My right hon. Friend the Leader of the Opposition made it clear that we support the Government in this action to protect the Libyan people, but it is the Opposition’s responsibility in offering this support also to scrutinise the Government’s actions in implementing the mission.

Many hon. Members on both sides of the House made it clear in Monday’s debate how important it was for this mission to have and to retain broad international and regional support, and therefore welcomed the endorsement of the Arab League. I have been calling for more than a fortnight for a joint meeting of representatives of the Arab League and the European Union, so I welcome today’s news that London will host a meeting next to help to bring together nations involved in this effort. The Prime Minister indicated at the Dispatch Box on Monday that coalition meetings would be a regular occurrence. How regular will they be? Will they be at foreign ministerial or Heads of Government level?

Will the Foreign Secretary update the House on the details of the Arab military involvement that has materialised so far and on what has been promised for the immediate future? He updated the House by saying that the UK has undertaken a total of 59 aerial missions, but House how many missions including planes from Arab countries have been undertaken? Will he also be clearer about the UK Government’s position on the NATO command and control structure for this mission? In particular, will he let us know whether he would wish the operations degrading Gaddafi’s assets to be overseen by an ad hoc group of Ministers or to be answerable to the full North Atlantic Council? Does he agree that although the focus at the moment is understandably on the military pressure, it is vital that we maintain and increase pressure on the regime in other ways?

Given the importance placed by resolution 1973 on the prevention of mercenaries arriving in Libya from other countries, will the Foreign Secretary assess the accuracy of reports that mercenaries are still arriving in Libya? What action is being taken against those countries providing mercenaries and will he tell the House what progress has been made on investigating at least the possibility of an escrow account for Libyan oil money that could contribute to a fund to address post-conflict reconstruction in Libya?

Does the Foreign Secretary believe that a lead individual of international standing should be appointed to take charge of co-ordinating post-conflict planning? The whole House and the public will want to know what work is under way on contingency planning. I heard his remarks about an international stabilisation effort and the work of the International Development Secretary. What, in the British Government’s view, are the structures equal to this immense task, who will lead the work and how will the House be assured that this vital work is being done?

Let me ask one final question. Will the Foreign Secretary assure Members that in the light of the coming recess the Government will ensure that Members are kept updated and, if necessary, that the House will be recalled if circumstances merit that course of action? We continue to support the Government and our armed forces as they act to protect the Libyan people and we will continue with that support and with detailed scrutiny of the Government’s decisions in the days ahead.

[Mr Hague]

I am very grateful to the right hon. Gentleman and for the continued strong unity across the Floor of the House on so many of these issues—on all of them, at the moment. Of course, he joined me in condemning the bomb attack in Israel.

In answer to the right hon. Gentleman’s questions about Yemen, not all the embassy team has been removed. A core of staff remains, including the ambassador, but as I saw for myself when I was in Yemen last month it is not easy for our staff to move around. Last year, there were two separate attempts to kill our ambassador and the embassy staff, and moving around even in the capital is a very difficult process. To move around more broadly in the country is dramatically more difficult and that is why it is so difficult to give consular assistance to British nationals who might be scattered in different parts of Yemen.

I can assure the right hon. Gentleman that there are detailed contingency plans that can go into operation at very short notice for the evacuation of the British nationals who remain, but if we had to trigger them it would have to be a military-only evacuation, possibly in very difficult circumstances. It would therefore be difficult to be assured that we would be able to bring out everybody from remote parts of Yemen. That is the importance of stressing now that British nationals should leave. There are reports that oil companies are withdrawing their staff from Yemen. I want to emphasise that we will give every assistance we can and that we have contingency plans ready to go at any time, but that does not guarantee that we could get everybody out.

The right hon. Gentleman asked whether further protests in Syria are likely to be met with repression. The evidence is that yes, they would be. Of course, we will use all our diplomatic efforts with the Syrian authorities to say that they should not do so, but that is what has happened and there are reports this morning that up to 25 people have been killed in the protests over the last couple of days.

We are in regular touch with the Government in Bahrain. I think I mentioned a few days ago that the Prime Minister spoke to the King of Bahrain and I spoke to the Foreign Minister a week ago. I hope to speak to the Crown Prince of Bahrain again shortly about the status of the national dialogue that he attempted to launch. Clearly, there have been difficulties on both sides of the argument in Bahrain as regards participating in that national dialogue and it is important that they are all ready to enter into it. The forces that have entered Bahrain from Saudi Arabia, the United Arab Emirates and other Gulf states are there legitimately at the invitation of Bahrain. They are not engaged in crowd control or in dealing with the protests, but are safeguarding installations. I discussed this at length with Prince Saud, the Saudi Foreign Minister, who was here with us two days ago. The British Government are encouraging dialogue in Bahrain and we look to Saudi Arabia to encourage that as well, and we look to all the Gulf states to play a constructive role, which I believe they wish to do.

On the right hon. Gentleman’s questions about Libya, the work of our armed forces continues to enjoy strong international and regional support. I think we should be clear about that. There were some doubts when the House debated the matter on Monday about the position of the Arab League, but it has subsequently made statements giving robust support for the implementation of UN resolution 1973.

We are still working out some of the questions about command and control. The simplest and most effective solution is for all the operations conducted within NATO to come under the North Atlantic Council and for other countries to plug into that and to work with it. We have made a great deal of progress, as I said in my statement. We should understand that this is a new coalition, put together last week and very quickly, for obvious reasons. There are bound to be issues to sort out in its management, but we are getting through them pretty well. I will discuss the remaining issues with Secretary Clinton and with my French and Turkish counterparts later this afternoon to try to iron out the remaining difficulties with future NATO command and control. I should stress that representatives of the nations involved in this operation can meet in Brussels on a regular basis, so the regularity of the meetings is established.

On Arab involvement, the forces of Qatar are taking part in the missions to enforce the no-fly zone. Other Arab nations have not yet sent a military contribution, although they remain strongly supportive of the mission. We are still in discussions with some of them about sending further military contributions to those operations. The right hon. Gentleman is quite right to draw attention to reports of mercenaries entering Libya. Given the danger they might pose to civilians, they do so at their peril and they should be aware of that.

I mentioned how the designation of the National Oil Corporation of Libya means that future oil revenues are stopped. Oil has not been lifted from Libya over the past few weeks, so the flow of oil cash to the regime has stopped for the moment in any case. We are still discussing the idea raised by the right hon. Gentleman about an escrow account.

My right hon. Friend the International Development Secretary is working hard on the post-conflict situation. In our view, this must be a unilateral and UN-led effort and we will be able to have discussions about that with other nations at the conference next week. Of course, we will want to keep the House updated. I and my right hon. Friends the Secretaries of State for Defence and for International Development will make further statements as necessary. The Leader of the House has announced a debate just before the House rises for the recess in the week after next. It is probably too early to speculate about the recall of Parliament two weeks before the recess, but we will of course do whatever is necessary to keep the House informed.

[Several hon. Members]

rose—

[Mr Speaker]

Order. Many colleagues are seeking to catch my eye, but the House might like to know that no fewer than 35 hon. and right hon. Members are seeking to contribute to the Budget debate, so economy is of the essence if I am to be able to accommodate the level of interest.

[Richard Ottaway (Croydon South) (Con)]

I welcome the Foreign Secretary’s statement and, in particular, his point about sanctions being strengthened and the National Oil Corporation being listed. That should focus minds. He was quizzed quite hard last week about the arms embargo. Has he reviewed the position and is there any way that support in some form or another can be given to the rebels, who are facing a fairly unequal battle?

[Mr Hague]

We are continuing to review the position and I do not have a new announcement to make to the House or to my hon. Friend about that. There are a variety of legal opinions about the relevant paragraph of the UN resolution. Whatever we do, on this and all the issues involved, must be in strict accordance with the UN resolution and we must maintain the legal, moral and international authority that comes from that. We will not do anything that we think would transgress that resolution. We are looking at it in that light and I will update the House when we have come to any conclusions about it.

[Mike Gapes (Ilford South) (Lab/Co-op)]

The Foreign Secretary mentioned the meeting to be held in London and said that the African Union will be involved in it. The African Union is specifically mentioned in Security Council resolution 1973 as having a mission that is engaged in the area. Will he update us as to whether there is potential for the African Union to play a positive role in getting a peaceful resolution to the conflict in the near future?

[Mr Hague]

Yes, there is a role, but a peaceful resolution would require the Gaddafi regime to observe resolution 1973. If that happened, all concerned could be in discussions with the African Union, but that requires a ceasefire, an end to violence and an end to attacks on civilians. There is certainly a role for the African Union and I hope we will be able to discuss that with it. I do not yet have confirmation of who will attend the conference in London, but it has been invited to attend and this is exactly the sort of thing we want to discuss with it.

[Sir Menzies Campbell (North East Fife) (LD)]

I hope that my right hon. Friend will excuse me if I press him a little further on the issue of command, which has both military and political implications. While it is clear that the present arrangements have not impaired in any way the military effectiveness of the operations, it is equally clear that they are not sustainable in the long term. Will he tell us what undertakings, if any, he has received from Secretary of State Clinton to the effect that any transition will not be hurried and will be both effective and smooth?

[Mr Hague]

My right hon. and learned Friend is absolutely right to point out that the discussions about this issue have in no way impaired the military operations that have taken place so far. All the nations concerned have that very much in our minds during our discussions and our absolute priority is to implement the resolution and get these organisational questions sorted out while we are getting on with that. I have already mentioned in my response to the shadow Foreign Secretary that I will discuss these issues with Secretary Clinton later today. I think there is a common determination among all the nations involved to sort this out. We are in the business of seeking not that kind of undertaking but a solution regarding the command and control of operations going forward, and I hope that we are close to achieving that.

[Mr Ben Bradshaw (Exeter) (Lab)]

Is it not clear, given the brutal suppression of protests in Bahrain, that most Gulf countries do not recognise the need for the sort of political reform that the Secretary of State has spoken about? In order to maintain support for what we are doing in Libya, which I strongly endorse, do we not need to be wholly consistent in our approach to democracy and human rights in the middle east?

[Mr Hague]

We do need to be consistent, but we also need to recognise where countries make reform efforts. If I may say so, it is something of a generalisation to say that the Gulf countries do not recognise the need for reform because many of them have embarked on such reform in recent times. Kuwait has introduced considerable reforms, including the election of its Parliament, the Sultan of Oman has made very substantial reforms, including major changes in his Government in the past few weeks, and Prince Saud was describing to me, when he was here on Tuesday, some of the reforms being contemplated in Saudi Arabia. I think there is a recognition, including in the Gulf states, that it is necessary across the Arab world for reform to take place. That reform will be at a different pace and of a different nature according to the culture of each country, but I think they are seized of that fact. My right hon. Friend the Prime Minister gave a powerful speech about this in the Kuwaiti Parliament last month and there has been a strong measure of support for that among the Gulf states. In addition, other countries, such as Morocco, are adopting very serious reforms. That kind of peaceful evolutionary reform is what we have to encourage, rather than the violence we have seen in so many countries.

[Mr James Arbuthnot (North East Hampshire) (Con)]

Will my right hon. Friend say something about the relationship between the action we are taking in Libya and the strategic defence and security review? Might we need to reconsider some of the decisions taken in that review, such as the scrapping of some reconnaissance aircraft and even some ships?

[Mr Hague]

The Prime Minister has made the position on this clear. It was precisely in order to be able to deal with more than one situation or conflict at a time that we came to the conclusions we did in the review, and that means we are able to continue our operations in Afghanistan while also conducting this operation. That is also why we chose to adopt the adaptable posture in the defence review, as my right hon. Friend the Defence Secretary has often explained, and why we chose to retain such a wide spectrum of military capabilities, so that many of them could be expanded in future if necessary. We must continue to work in the framework of our defence review. We are able to bring the necessary equipment into this operation with the forces we have now, so the issues that my right hon. Friend the Member for North East Hampshire (Mr Arbuthnot) raises are really for the longer term.

[Keith Vaz (Leicester East) (Lab)]

Both the Foreign Secretary and the shadow Foreign Secretary have spoken about the critical situation in Yemen and we know that it is going to get worse with the declaration of a state of emergency. We appreciate the efforts being taken by the Foreign Secretary, but is it not necessary to try to bring sides together? May I urge him or the Prime Minister to make that call to the President of Yemen to see whether we can get both sides together? We are hugely respected there and this is our time to act.

[Mr Hague]

Yes, I will absolutely respond to the right hon. Gentleman’s urging. As he well knows, there has been no shortage of effort on the part of this country to do that urging. That is why I went there myself last month and met not only the President but opposition groups and urged them all to be generous to each other in their dealings. I cannot say that our urging has yet been heeded, but we will continue it over the coming days, doing exactly as he says.

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

With unrest spreading throughout the region and civilian casualties rising at the hands of autocratic leaders, what circumstances would need to exist, if any, for Britain to instigate or consider instigating a no-fly zone in other countries?

[Mr Hague]

I must again stress something that the Prime Minister has explained: just because we cannot do everything does not mean that we should not do something where there is a particularly grave situation that particularly offends our belief in human rights, especially the right to live. That has been the situation in Libya. Whatever we do in any other country, we will always be guided by the criteria we established before the passing of the UN resolution, which are that there must be a demonstrable need and a clear legal basis for any British involvement and that there must be strong support from within the region. The establishment of those principles has put us in a very strong position in relation to the crisis in Libya and those principles would guide us elsewhere.

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

In condemning utterly the barbarous attack on the bus stop in Jerusalem, with the consequent loss of innocent life, and the Israeli attacks in Gaza that have resulted in the deaths of many civilians, including a grandfather who was playing football with his teenage grandchildren, will the right hon. Gentleman make it clear to the Government of Israel that Israel cannot be exempted from the wave of yearning for emancipation that is sweeping the middle east? Will he also make it clear that unless the Israeli Government respond, there will be no peace for Israel and the country’s future existence will be placed in jeopardy?

[Mr Hague]

As the right hon. Gentleman will have heard in my statement, I condemn all those attacks and the deaths on both sides—of Palestinians in Gaza and of those who died in the terrible terrorist attacks on Israel in recent days. In the middle of the important developments and dramatic change in the middle east, I have underlined and will continue to underline that those events add to the urgency of the peace process. It is important that both Israeli and Palestinian leaders understand that and that they are prepared to make the necessary compromises to get direct talks towards a two-state solution going again. I have put that in my own way, but what I have said is strongly in accordance with the sentiments the right hon. Gentleman has expressed.

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

When the Government decided to withdraw the last of our carriers and the Harrier force with it, they did so at the last minute and for financial reasons. Now that both the Prime Minister and the Chancellor have confirmed what I sought to establish previously—that these operations will receive extra funding from the Treasury reserve—will the Foreign Secretary have urgent discussions with the Secretary of State for Defence on reactivating HMS Ark Royal and some of the Harriers, because, I assure him, people who know about these matters know how versatile and valuable such a capacity would be?

[Mr Hague]

No. I have urgent discussions every hour or so with my right hon. Friend the Secretary of State for Defence, but it is important to implement the strategic defence and security review and to bear in mind that fundamental to our national security is the restoration of our national finances. Yes, we have had to do some things that in an ideal world we would not have done, and the defence budget has had to be controlled, but we have been able to do, and continue to do, what is necessary in Libya without the equipment to which my hon. Friend refers. Our operations are conducted by Typhoon aircraft and, for ground attacks, by Tornado aircraft. These are flying from land bases in the Mediterranean and are able to conduct the operations very easily without, in this case, the need for an aircraft carrier.

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

Like everyone else, I deplore Gaddafi’s continued military offensive, which undoubtedly is costing the lives of many civilians. Will the Foreign Secretary tell us whether any diplomatic efforts are being made by countries such as Russia, China, and particularly Turkey, to see what can be done to persuade Gaddafi to stop the fighting?

[Mr Hague]

I think that the whole world is pretty much united on urging Gaddafi not only to stop the fighting, but to leave the scene. That is the view even of countries that did not support the UN Security Council resolution. This is a worldwide view. However, Colonel Gaddafi is clearly not easily persuaded to engage in a dialogue to reach out to the opposition. We hope he will see that the situation is such that it is necessary for him to go, and that is the only way forward for the Libyan people. The countries to which the hon. Gentleman refers are certainly of that opinion as well and certainly do not want the Gaddafi regime to continue.

[Mr Edward Leigh (Gainsborough) (Con)]

On that very point about the Gaddafi regime continuing, some of us were briefed this week by the BBC journalist who had been detained in horrendous circumstances in Tripoli. He is clearly no apologist for the regime, but he said that it was remarkable how quiet Tripoli was, with demonstrations confined to one suburb and engaging only 200 or 300 people. Clearly the people there are cowed and massive subsidies are being poured at them. As some of us have asked constantly, what will happen if Gaddafi simply beds down in Tripoli? What is the game plan? What are we trying to achieve? Will the Foreign Secretary confirm that we are only on a humanitarian operation to protect the people of Benghazi and no more?

[Mr Hague]

Almost, as it is not just the people of Benghazi we need to protect. Although UN resolution 1973 specifically mentions Benghazi, it also calls for the taking of all necessary measures to protect the civilian population and populated areas in other parts of Libya. That is our mission. Our military mission is defined as clearly as any military mission has ever been by a UN resolution, and we will stick to that resolution. Clearly it is highly desirable for Gaddafi to go, as we have said for many weeks, but in military terms what we have set out to do is enforce the resolution. That means protecting Libya’s civilian population, attempting to bring about a ceasefire and not putting any occupation force on to any part of Libyan soil. We will stick strictly to the resolution.

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

Since Turkey has said it would supply ships and submarines to enforce the arms embargo, that leaves Germany as the only major NATO member state that is not contributing to the actions in Libya. Will Germany be invited to the conference next Tuesday?

[Mr Hague]

Yes, Germany will be invited. It is a crucial partner of this country in the European Union and in NATO. The different countries in NATO have of course taken varying decisions about their level of participation, and indeed on whether to participate, but Germany has not been unhelpful or obstructive and has not attempted to block the work we need to do in NATO. It set out its position at the UN Security Council and did not vote for the resolution, which we must respect, but it has not been unhelpful in so many other ways. I hope that it will attend the conference in London.

[Martin Horwood (Cheltenham) (LD)]

I welcome the Foreign Secretary’s statement, particularly the positive news of contact with the interim national council in Libya. I know that a review and revocation of arms export licences to Libya has already taken place, but will all arms export licences to the Governments of Yemen, Syria and Bahrain now urgently be cancelled if they have not been already?

[Mr Hague]

My hon. Friend will be aware that more than 100 licences have been revoked in the case of Libya, that many have been revoked in the case of Bahrain and that successive Governments have been extremely careful about the licences granted in the case of other countries, such as Syria. We constantly review these licences in the light of changing developments in the middle east. I do not have a new announcement to make about that today. If we think it necessary to revoke other licences for the countries he mentioned, we will certainly do so, and I will keep the House updated on that.

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

May I thank the Foreign Secretary for the promptness and fullness of his briefing to the House? We look forward to the conference next Tuesday, for which we expect a similar briefing. Will he take that opportunity to make it quite clear that, in so far as we know what the end game will be for this complex situation, the commitment of British ground troops will not be part of it?

[Mr Hague]

As I said in answer to my hon. Friend the Member for Gainsborough (Mr Leigh), we will stick very strictly to the terms of the UN resolution. As the hon. Gentleman is aware, that rules out any occupation force in any part of Libya. He can be absolutely assured that there will be no invasion of Libya. To give a fuller answer, there have already been occasions on which we have sent special forces into Libya, for instance to rescue the oil workers in the desert three weekends ago. We can neither exclude such necessary, small-scale things, nor anticipate what might come up, but we are not preparing for a ground invasion of Libya and will not be doing so.

[Tony Baldry (Banbury) (Con)]

My right hon. Friend was right to underscore the Government’s support for the work of the International Criminal Court, but will he expand a little on his understanding of what the ICC is doing to ensure that those close to and around Gaddafi appreciate and understand that if they are responsible for directing attacks that inflict civilian casualties, they too stand liable to be indicted for war crimes and crimes against humanity?

[Mr Hague]

My hon. Friend makes an important point, and every time we make that point we are doing what he is calling for, which is stressing to the people involved that they may well have to answer in future to the ICC. The prosecutor of the Court has begun the necessary investigations, so material can now be gathered and sent to it. The best way to communicate that is through the media, which is why my right hon. and hon. Friends and I, and our colleagues in other countries, have stressed very strongly in the international media, including al-Jazeera and other channels, that this is what is now set in train and that people must remember when they contemplate any crime or atrocity in Libya that the reach of international justice can be very long.

[Natascha Engel (North East Derbyshire) (Lab)]

What, to the Foreign Secretary, does operational success in Libya actually look like? Further to that, what then will be his exit strategy?

[Mr Hague]

It means the implementation of the UN resolution. I cannot stress this strongly enough—that we operate within international law and under the mandate of UN resolution 1973. So success requires a real ceasefire, not the fake ceasefires announced by the Gaddafi regime in recent days, and a real ceasefire means disengaging from areas of conflict, ceasing attacks on civilians, an end to violence and harassing and menacing civilians, and the full establishment, which we have now achieved, of a no-fly zone over Libya. Those are the requirements of the resolution, and that is the mission that we are embarked on. It is too early to say what will happen when that point has been achieved, because we are still working hard to achieve the protection of civilians and the bringing about of a ceasefire, but that is as far as our military mission in Libya goes.

[Robert Halfon (Harlow) (Con)]

The country will welcome my right hon. Friend’s remarks about the tragic loss of the innocent British citizen to Palestinian terrorists in Jerusalem yesterday, but on his remarks about Syria, and given that the Syrian Government attacked a funeral in recent days, what steps can the British Government take to make sure that we do not see a repeat of the tragic massacre in 1982 of thousands and thousands—up to 40,000—Syrians by the Assad regime?

[Mr Hague]

The steps that we can take at the moment are diplomatic steps to make it clear to the Syrian Government that the forcible suppression of protest and the killing of protesters is wrong, morally and legally, and also very unwise, because experience throughout the middle east is showing that violence on the part of the authorities does not bring about a solution to such issues or to disorder in various parts of the region. We will of course continue to stress that to the Syrian authorities and redouble our efforts to do so.

[Graham Stringer (Blackley and Broughton) (Lab)]

I have received strong representations from the Shi’a community in Cheetham Hill and Crumpsall in my constituency. It is extremely concerned about a possible deterioration of the situation in Bahrain and worried about the protection of the Shi’a community there. Can the Foreign Secretary give any assurances, beyond supporting increased dialogue, about how the British Government could protect the Shi’a community in Bahrain?

[Mr Hague]

The sectarian aspect of the problems in Bahrain is deeply worrying, particularly if the stand-off continues and tensions are raised on both sides of that sectarian divide—there are clearly concerns on the Shi’a and Sunni sides of it. It is in the interests of the Shi’a community in Bahrain for a dialogue to be successful, because when we think about it we find that there is no other way forward for Bahrain, other than a constitutional settlement between the two sides of that sectarian divide. It is a country with a Shi’a majority, but it has a Sunni minority of about 40% of the population, so they have to find an agreed way forward if the country is to function.

That is why we stress the need for dialogue, but we do not just stress the need for it here: we urge it on the leaders of the Government in Bahrain, through our regular contacts with them, and our ambassador has also urged it through all our contacts—and we have good contacts—with the opposition groups and human rights organisations in Bahrain. We are one of the countries with the strongest such contacts, so we are taking practical action on both sides to encourage dialogue.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. We have quite a few Members standing, so could we have shorter questions and shorter answers? Then we will hopefully get everybody in.

[Jo Swinson (East Dunbartonshire) (LD)]

The scale of the foreign policy challenge in the middle east and in north Africa is immense, with the UN action in Libya and the situation in any one of Bahrain, Syria and Yemen having the potential to become a major crisis. Despite that, will the Foreign Secretary assure the House that he will not take his eye off the ball elsewhere, particularly in providing vital support to the democracy building in Tunisia and in Egypt which is crucial to the future stability of the whole region?

[Mr Hague]

Yes. My hon. Friend is quite right, because overarching all that we have discussed in today’s statement is what I referred to in the House on Monday: the need for a bold, ambitious and historic programme on the part of the United Kingdom and the European Union to provide a magnet for positive change to the countries of north Africa and the middle east. Although today we are discussing the detail of what is happening in individual countries, that is all under the umbrella of a European policy towards the region that has to be drastically revised to come up with solutions and offers that match the unprecedented—in this century—challenge that we all now face.

[Mr Andy Slaughter (Hammersmith) (Lab)]

With so much international attention focused on Libya for obvious reasons, other regimes in the region appear to think that they can use military force against civilians with impunity. The Foreign Secretary has commented on the matter already, but what specific steps will he take with Syria, which is killing its civilians in Deraa, and with Israel, which is almost daily killing civilians in the Gaza strip?

[Mr Hague]

In answer to earlier questions, I have made clear the position on Israelis and on Palestinians, and the need for them all to make the necessary compromises. We have also discussed Syria and the strong messages that we have sent to the Syrian regime, but the hon. Gentleman does not provide an exhaustive list. At this time, Iran has imprisoned opposition leaders and become one of the most oppressive regimes in the world. It also has one of the worst human rights records in the world. We will of course vigorously continue to raise those issues as well.

[Mr Andrew Tyrie (Chichester) (Con)]

The Foreign Secretary said that it was desirable for Gaddafi to go. Given what we know about Gaddafi, is it plausible to imply that we can fulfil our humanitarian objectives while he stays?

[Mr Hague]

I cannot see—so many Government throughout the world have said this so many times over the past few weeks—any peaceful or viable future for the people of Libya if Gaddafi is still there. It is more than desirable; I put that in its politest form. It is essential that he gets out; it is essential that he goes. I hope my hon. Friend will not mistake in any way the strength of our message and the international community’s message on that. Let me also stress, however, as I did in answer to the hon. Member for North East Derbyshire (Natascha Engel), that our military mission is to implement the United Nations resolution, and that we will stick strictly to its implementation.

[Mr Dave Watts (St Helens North) (Lab)]

Given the responses to earlier questions, how would the Government deal with a situation where it became clear that Gaddafi was going to stay in power for the foreseeable future? Would we leave our forces and sanctions in place indefinitely?

[Mr Hague]

I am not sure that in this situation it is helpful to get into all the hypothetical scenarios of what may come. Clearly, we are planning for scenarios, particularly on the humanitarian and stabilisation side, as I said, but we have to concentrate on the implementation of the resolution and on taking such work forward. A whole variety of scenarios could be foreseen, but to get into providing a commentary and speculating on each of them would be helpful neither to our forces involved at the moment nor in achieving our immediate objectives.

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

May I congratulate the Foreign Secretary on the work that he not just did, but continues to do, with the UN in making sure that the action is wholly legal? It restores faith in this place after the years that have gone by. Has he considered, or has an assessment been made of, the potential situation in Lebanon, and is the diplomatic service in high-level talks with Israel to ensure that that border situation does not exacerbate the situation crossing the region?

[Mr Hague]

My hon. Friend draws attention to another point of tension in the middle east, one that I discussed intensively with President Assad when I visited Syria at the end of January. Of course, we want to see stability in Lebanon. In particular, we want to see the special tribunal for Lebanon continue to conduct its work, so that it is clear that crimes cannot be committed with impunity there; and of course, we want to see stability on that border. It underlines the importance and urgency of taking forward the middle east peace process, as several other hon. Members have said, because that is one way to bring about a greater assurance of stability between Israel and Lebanon.

[Mark Durkan (Foyle) (SDLP)]

I join the Foreign Secretary in condemning the terrorist murder in Jerusalem, and equally the deadly attacks on civilians on Gaza.

The Foreign Secretary has said that the conference on Tuesday will be very much aimed at looking at the whole of the UN resolution. The second item of that refers not only to the high delegation from the African Union but to the UN special envoy. It is also the part that refers to a peaceful and sustainable solution. Will he ensure that that is given due consideration on Tuesday, because there needs to be greater understanding about its meaning and its prospects, and we need to ensure that any pursuit of it is not undermined by any military measures undertaken through other mandates in the resolution?

[Mr Hague]

Yes—basically. It is important to have regard to all elements of the resolution and to ensure that all the international organisations to which the hon. Gentleman refers are involved. I would stress that the creation of a ceasefire and bringing about an end to violence, which is what we are engaged in now—the protection of civilians and implementing those aspects of the resolution—are essential to the kind of work to which he refers, because at the moment there is not the right atmosphere for any of that other work to take place. We will have regard to the whole of the resolution at the meeting in London.

[Mr Peter Bone (Wellingborough) (Con)]

Would the House be correct in interpreting the Foreign Secretary as saying, in effect, that if there was a ceasefire—a real ceasefire—and attacks on civilians ceased and there was no danger to them, a divided Libya would be a successful outcome of the operation?

[Mr Hague]

No. Of course, we support the territorial integrity of Libya; I stress, though, that it is our military mission that is laid down in the resolution. That is because we will always stay within international law, with international support and with regional support—and that very much continues to be the case. We are not looking for a divided or a partitioned Libya. We want the people of Libya to be able to determine their own future, and it is only in the event of an end to violence, and the ceasefire that the resolution calls for, that they will be able to do that.

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

With specific reference to the Foreign Secretary’s update on the involvement of the Arab League, will he clarify whether the Qataris have been involved in flying over Libya?

[Mr Hague]

Qatari forces are taking part in the enforcement of the no-fly zone.

[Duncan Hames (Chippenham) (LD)]

In these troubled times, Governments are swift to announce asset freezes for these astonishingly wealthy ruling elites. When a regime ultimately falls, as may turn out to be the case in Libya, what then happens to those assets?

[Mr Hague]

These assets belong to the people of Libya, and so in all normal circumstances—if we can describe any of these circumstances as normal—they would be available to a future Government of Libya. They are frozen, not confiscated. In this case, of course, they are very substantial. In the UK, we have frozen £12 billion of assets; in the United States, I think there were $30 billion of assets. That just shows that the Libyan people could have a much more prosperous future if they had a more economically open and politically free approach. Those assets are held for them.

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

Now that the no-fly zone is operational, does the Secretary of State agree that there is little justification for the continuation of bombing of Libyan infrastructure and idle assets, and that offensive enforcement of a no-fly zone should be targeted only at mobilised Libyan Government military forces?

[Mr Hague]

Operations have been directed against military forces or against the command and control of those forces. As my right hon. Friend the Defence Secretary always stresses in our meetings, we take the greatest care to avoid civilian casualties, and there have been no confirmed civilian casualties caused by coalition activities so far. We do everything we can to minimise the risks of that. Certainly, the air strikes and missile strikes that we have authorised are on military targets—on air defence systems, on forces that are threatening the civilian population of Libya, or on the command and control of those systems. Those are all wholly legitimate targets.

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

Given the vital nature of sustaining the coalition, may I press the Foreign Secretary to clarify for the House how often meetings of the coalition will take place, and at what level?

[Mr Hague]

As I mentioned earlier, there is a regular meeting in Brussels between contributing nations—representatives of the countries involved. Many of those are, for instance, permanent representatives to NATO. That takes place all the time. We are also, at a ministerial level, in daily touch across the coalition through telephone calls and visits from one country to another. The conference that we will host in London on Tuesday is at the broadest level—the highest strategic level—to look at future stabilisation and humanitarian questions, as well as at what is going on in Libya now. I assure the hon. Gentleman that all those things together form a mass of consultation and involvement—with daily conversations with the Arab League, for instance. The Under-Secretary of State for Foreign and Commonwealth Affairs, my hon. Friend the Member for North East Bedfordshire (Alistair Burt), and I speak to Amr Moussa, the secretary-general of the Arab League, pretty much every day. There is extensive consultation.

[Dan Jarvis (Barnsley Central) (Lab)]

May I push the Foreign Secretary a little further on any international stabilisation force? What is the Government’s thinking on which UN agency should lead any post-conflict work, and which individual would lead such a potentially huge task?

[Mr Hague]

Those are perfectly legitimate questions, but slightly in advance of where we have got to. My right hon. Friend the International Development Secretary is engaged in discussions about that. There are a variety of agencies and a variety of individuals who can lead it. That is one of the things that we will be able to discuss with our partners at the conference next week.

[Ann Clwyd (Cynon Valley) (Lab)]

Next week the Government intend to change the law on universal jurisdiction, making it more difficult to get an arrest warrant in this country for those accused of war crimes. Where is the logic in that?

[Mr Hague]

The logic is that it will still be possible to get an arrest warrant if there is a reasonable chance of prosecution. It makes this country rather ridiculous if people can get an arrest warrant for people from other countries where there is no realistic chance of prosecution. It is therefore important to change that law. The law as it stands has been abused in relation to visitors from several other countries. It was abused, in my view, when there was a threat to the proposed visit of Mrs Livni to the United Kingdom. She is an Israeli politician of great importance, and a strong advocate of the peace process, but she feels unable to visit the United Kingdom because of that law. If we want, as we do, to be able to engage in pushing forward the peace process, we need such people to be able to visit the United Kingdom.

Points of Order

Thursday 24th March 2011 Commons Chamber

13:38

[Helen Jones (Warrington North) (Lab)]

On a point of order, Mr Deputy Speaker. On Tuesday, a member of the trade union USDAW who was attending an event in this House was not allowed to enter because security officials objected to one of the slogans on the board he was bringing in. They did not object to his bringing in a board per se, but merely to the slogan, which said: “Child Benefit Frozen by the Tories”. The USDAW One was kept in a room near the security entrance until I went down to free him, when he was allowed to come through. Will you investigate this matter, Mr Deputy Speaker, and can it be made clear that entrance to this House should be denied only on the grounds of security, and not on the grounds of the views that people wish to express?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

I am grateful to the hon. Lady for giving me notice of her point of order. This is not a matter on which I can readily comment. I invite her to discuss it with the Serjeant at Arms. As the hon. Lady knows, we do not discuss security arrangements on the Floor of the House, but I hope that some arrangement may be come to.

[Ben Gummer (Ipswich) (Con)]

On a point of order, Mr Deputy Speaker. Following comments made by a senior member of the Opposition Front Bench on the “Today” programme this morning, I wonder whether you could clarify a point of order for me, as a new Member of this House unsure of all its rules. I know that it is not in order to accuse an hon. Member of lying following comments made inside the Chamber, but I wonder whether it is in order to accuse an hon. Member of lying on the basis of comments made outside the Chamber.

[Mr Deputy Speaker]

I thank the hon. Gentleman for letting me know about that point of order. The position on reflections made on Members of the House, and others, is set out on pages 438 and 439 of “Erskine May”. Reflections on Members’ conduct cannot be made in debate unless based on a substantive motion. That applies to reflections made on conduct either inside or outside the Chamber.

Bills Presented

European Convention on Human Rights (Withdrawal) Bill

Presentation and First Reading (Standing Order No. 57)

Mr Peter Bone, supported by Mr Philip Hollobone, Mr Christopher Chope, Mr Nigel Dodds, Mr Douglas Carswell, Mark Reckless, Richard Drax, Philip Davies and Dr Julian Lewis, presented a Bill to make provision for the withdrawal of the United Kingdom from the European Convention on Human Rights.

Bill read the First time; to be read a Second time on Friday 9 September, and to be printed (Bill 172).

Common Fisheries Policy (Withdrawal) Bill

Presentation and First Reading (Standing Order No. 57)

Mr Peter Bone, supported by Mr Philip Hollobone, Steve Baker, Mr Christopher Chope, Mr Nigel Dodds, Mr Douglas Carswell, Mark Reckless, Richard Drax, Philip Davies, Andrew Percy and Dr Julian Lewis, presented a Bill to make provision for the withdrawal of the United Kingdom from the Common Fisheries Policy.

Bill read the First time; to be read a Second time on Friday 21 October, and to be printed (Bill 171).

European Union (Freedom of Movement) (Amendment) Bill

Presentation and First Reading (Standing Order No. 57)

Mr Peter Bone, supported by Mr Philip Hollobone, Mr Christopher Chope, Mr Nigel Dodds, Mr Douglas Carswell, Mark Reckless, Richard Drax, Philip Davies, Zac Goldsmith and Andrew Percy, presented a Bill to make provision for the United Kingdom to establish immigration controls for European Union nationals independent of the European Union.

Bill read the First time; to be read a Second time on Friday 25 November, and to be printed (Bill 170).

European Union (Exemption from Value Added Tax Regulation) Bill

Presentation and First Reading (Standing Order No. 57)

Mr Peter Bone, supported by Mr Philip Hollobone, Steve Baker, Mr Christopher Chope, Mr Nigel Dodds, Mr Douglas Carswell, Mark Reckless, Richard Drax, Philip Davies and Zac Goldsmith, presented a Bill to make provision for the United Kingdom to set Value Added Tax rates without regard to the rules set by the European Union.

Bill read the First time; to be read a Second time on Friday 20 January 2012, and to be printed (Bill 169).

Ways and Means

Thursday 24th March 2011 Commons Chamber

Budget Resolutions and Economic Situation

Thursday 24th March 2011 Commons Chamber

Amendment of the Law

Thursday 24th March 2011 Commons Chamber

Debate resumed (Order, 23 March).

Question again proposed,

(1) That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.

(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—

(a) for zero-rating or exempting a supply, acquisition or importation,

(b) for refunding an amount of tax,

(c) for any relief, other than a relief that—

(i) so far as it is applicable to goods, applies to goods of every description, and

(ii) so far as it is applicable to services, applies to services of every description.—[Mr George Osborne]

13:41

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

For a fleeting moment, I thought that I was in the wrong debate. It is always interesting to hear proposals put before the House by the hon. Member for Wellingborough (Mr Bone).

Twelve months ago, at the time of last year’s Budget, unemployment was falling, growth was rising, inflation was low and stable, and we were on track to halve the deficit in four years. Indeed, because more people were in work, paying taxes and not receiving benefits, borrowing ended up £12 billion lower last year than was forecast the autumn before. However, there was still a long way to go. Following the biggest global financial crisis of the past century, we were getting back on the right track to get the deficit down and to restore our economy to sustainable growth.

One year on, the economic context for this Budget is radically different. Inflation is up to 4.4%, increasing prices for everyone and threatening a rise in mortgage rates. Unemployment, which was falling, is now rising to its highest level for 17 years. Consumer confidence has seen its biggest fall for nearly 20 years. Our economy, which was growing, has ground to a halt according to the latest figures. Just a few months ago in the autumn, we were told by the Prime Minister, among others, that the economy was out of the danger zone. However, on growth, inflation and unemployment, it appears that we are now re-entering the danger zone.

The question that families and businesses up and down the country will be asking is what changed over the past 12 months. Let me set out for the House what did change over the past 12 months. Yes, commodity prices have gone up. Yes, world oil prices are higher. Yes, we had a bad winter. However, other countries such as America, Germany and France have been similarly affected by higher oil and commodity prices and by bad weather, and their economies are still growing, unlike the British economy. Germany had worse snow than Britain, there was a big freeze in France and the US had the worst blizzards for decades, but their economies grew in the fourth quarter of last year. While our growth forecasts have worsened, theirs have improved. The German economy is forecast to grow more strongly than it was last year, as is the American economy. Growth in the world economy has been revised up. Which is the major economy that is now downgrading its growth forecasts? It is the United Kingdom.

[Matthew Hancock (West Suffolk) (Con)]

Will the right hon. Gentleman accept and welcome the fact that the British economy is growing faster than the EU average, or will he continue to talk down the economy?

[Ed Balls]

On the latest figures, the British economy was not growing at all—in fact, it had contracted by 0.6%.

I see the hon. Gentleman’s press releases regularly. They come across my desk two or three times a day. I want to give him some support. [Interruption.] I want to give him some support. The hon. Gentleman has a campaign to reverse the cancellation of funding for a dilapidated school in his constituency following the cancellation of Building Schools for the Future. I am right behind him. He has called for a new pedestrian crossing and to unblock the money for it, which is being blocked by a Tory council. I am with him. He has campaigned to keep his local library open. I am right behind him on that one. He wants to keep Thetford forest safe. Yes, I am with him on that one. He asks how we can deal with the pressures on the voluntary sector. I have to say, I think that he is in the wrong party.

Under Labour’s plan, the economy was set to grow strongly. [Interruption.] I have just given the hon. Gentleman more publicity than he had in three months from all those press releases.

[Ben Gummer (Ipswich) (Con)]

On the Labour plan, the right hon. Gentleman said this morning on the “Today” programme that we went into the recession with a low deficit. Is an average deficit of 2.9% low in his mind, or was that a mis-speak?

[Ed Balls]

I do not want to give the hon. Gentleman an economics lesson, but he needs to be able to differentiate his deficits from his debts. The fact is that we went into the downturn with a low deficit. We were borrowing to invest. Our national debt was lower than that of America, Germany, France and Italy, and lower than the national debt that we inherited from the Conservatives. We will not take any lectures from them on fiscal profligacy. Who was it who raised taxes 22 times in the 1990s?

Under Labour’s plan, the economy was set to grow strongly, unemployment was falling, and we were on track to halve the deficit in four years. Everything has now changed. But what changed? The change was the arrival of a new Conservative Chancellor who was determined not to halve the deficit in a Parliament, but to eliminate it entirely with an immediate hike to VAT, the deepest spending cuts our country has experienced in 70 years and the largest spending cuts of any major country in the world. America has a big deficit, but it is cutting it at a steadier pace and keeping its jobs programme in place. Its economy is now growing strongly and unemployment is falling.

[Mr Peter Bone (Wellingborough) (Con)]

Will the right hon. Gentleman give way?

[Ed Balls]

In a second, but I certainly will.

In Britain, we have to make some tough choices to get the deficit down. That means fair tax rises and spending cuts, but the Chancellor’s policy is going too far and too fast, and we are paying the price in lost jobs and slower growth.

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

I am not sure quite which hallucinogenic substances are being ingested on the Opposition Benches, but if I may ask a question—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I think that we will reconsider the suggestion about drug taking.

[Jesse Norman]

I am happy to withdraw the suggestion and to make it clear that the substances in question were not hallucinogenic. May I simply ask the shadow Chancellor—

[Mr Deputy Speaker]

Order. Is there a suggestion that my ruling was wrong?

[Jesse Norman]

indicated dissent.

[Mr Deputy Speaker]

I take it that you have withdrawn the suggestion, Mr Norman. I accept that. Are you now going to pose a very quick question?

[Jesse Norman]

Will the shadow Chancellor enlighten us on why WPP left this country under the last Administration, and why it has now returned, as has been announced in the news today?

[Ed Balls]

I am very pleased that WPP has returned to this country, and I am very disappointed about the 3,500 jobs lost at Pfizer in Kent. That is why we need to be careful about how we proceed.

I have to say that I have never in my life taken a hallucinogenic substance. I am happy to take any intervention from Government Front Benchers on that subject.

[Mr Bone]

I am grateful to the shadow Chancellor for giving way; he is being extremely generous, as always.

Why should we take any lectures from Labour on unemployment, when every single Labour Government have been kicked out with a higher level of unemployment than when they got into power, and when the last Government doubled unemployment in Wellingborough?

[Ed Balls]

It is a bit rich to have a lecture from the hon. Gentleman, who used to say that the national minimum wage would cost millions of jobs. We, unlike Members on the Government Benches, do not think unemployment is a price worth paying.

The Chancellor is going too far and too fast, and we are paying the price in lost jobs and lost growth. That is because a vicious circle is now taking hold in our economy. If the economy is not growing and hundreds of thousands of people lose their jobs, then fewer people pay tax, more people claim benefits and it is harder to get the deficit down. By cutting too far and too fast, the Chancellor is not solving the problem, he is making it worse. That was why yesterday, we heard from the OBR that growth had been downgraded for last year, this year and next year; that unemployment was forecast to be higher in every year of the forecast period; and that up to 200,000 more people would be unemployed than the Chancellor said last summer. Our borrowing was coming in £20 billion lower, but the Chancellor has now been forced to revise up his borrowing over the next four years by £45 billion.

The Chancellor said yesterday that he would put fuel in the tank of the British economy. Is not the truth that, as a result of his Budget, it is confidence in the British economy that is now tanking, and he who is running out of fuel?

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

May I remind the right hon. Gentleman that in the mid-1990s my constituency was 440th in the jobseeker’s allowance list, but that by 2010 it was 132nd? Why should my constituents believe him having seen that record of unemployment under Labour?

[Ed Balls]

Because a year ago unemployment was falling, and now it is rising. [Interruption.] The Chancellor sits on the Front Bench and says, “This is so bad.” Does he mean growth being downgraded? Unemployment going up? I will take his intervention at any point he wants, but if he does not want to make interventions from the Dispatch Box, maybe he should not be doing it from a sedentary position. [Interruption.] If he wants to intervene, I will allow him. I have made my pledge.

None of what I am saying will come as any surprise to the Secretary of State for Business, Innovation and Skills. He warned of it a year ago. In fact, I remember standing with him on the green on Budget day a year ago, and he said:

“We must not cut Government spending too soon and risk plunging a fragile recovery back into recession. Cuts without economic growth will not deal with the deficit”.

Wise words, and how right he has proved to be. Even after the election, and even after his colleagues decided to bury their worries and go along with immediate spending cuts and a VAT rise, the Business Secretary was still warning of the risks to come. He said on “Newsnight” last May, after the general election, that the speed of the cuts had to be based on the condition of the economy. He said:

“These things will have to be judged at the time of the Budget, and of course I don’t present the Budget personally but I’ll make an input into it.”

He went on:

“Over the course of this Parliament judgments about the speed of cuts have got to take account of the changing conditions that are coming, and that is basic economic policy based on evidence, which is what I’m in favour of…We don’t know what the impact of these cuts will be on employment.”

Wise words again, and he was right. The cuts are too fast and too deep, confidence is tanking and unemployment is up. This Budget was the time to change course, before it was too late. Sadly, the Business Secretary has not been heard.

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

Does the right hon. Gentleman not accept that public spending is not actually falling but continuing to rise? The sad thing is that we all have to take our share in bearing more than £120 million a day in interest payments on the debt left behind by the last Government.

[Ed Balls]

The hon. Lady is right—deficits went up. They went up in Britain, Germany, France, America and all around the world. They did not go up because spending or the national debt was too high in Britain. That is a Conservative myth put about to try to justify the Government’s cuts to police, the national health service and schools. The reason deficits became big was that we had the biggest global financial crisis in 100 years. If we had not let the deficits go up when the tax revenues went down, it would have been not a world recession but a world depression. It was only our actions—here in Britain and around the world—that saved our financial system from disaster. We nationalised the banks, let the deficit go up and got unemployment down—all of which was opposed by the present Chancellor.

[Michael Fallon (Sevenoaks) (Con)]

If all that is true, can the shadow Chancellor explain why the deficit here was the worst in the G20?

[Ed Balls]

The hon. Gentleman knows the answer. We went into the downturn with a deficit that was low and covered our borrowing for investment. [Interruption.] It was low. We had low national debt—lower than France, Germany or Japan. We then had a global financial crisis, which hit the American and British economies hard. Our economy had a larger financial services sector than others—that was precisely why we did not join the single currency in 2003—so of course America and Britain were harder hit than other countries by the financially driven recession.

If we had not let the deficit go up, which some hon. Members now seem to think we should not have done, the result would have been unemployment above 3 million rather than it peaking at 2.5 million. The economy would have gone from recession into depression. That is the economics of the situation. The question is, who did a good job of getting the deficit down? We had the deficit coming down, unemployment coming down and growth going up, but a year later we have unemployment going up, inflation going up and the economy ground to a halt. As a result, borrowing will be £45 billion higher, not lower.

[John Mann (Bassetlaw) (Lab)]

My right hon. Friend may be able to assist me with some statistics that are missing from the Government’s document “The Plan for Growth”. I can see nothing in it about what has happened in the past 15 years. The chart showing growth under the last Government is missing. Similarly, there are no international comparisons showing what is happening to our growth compared with other countries, and what was happening under the last Government.

[Ed Balls]

The reality was that we had a long period of sustained growth and low inflation, and we reversed the high unemployment of the 1980s and 1990s. We put behind us the instability of the Tory years by making—[Interruption.] If the Chancellor wants to make an intervention, we are still waiting.

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

Is the shadow Chancellor saying that the last Government abolished boom and bust?

[Ed Balls]

I noticed that the Chancellor did not choose to intervene with the answer that I was hoping for, but there we are. The fact is, when we came into government in 1997, we made the Bank of England independent and he opposed it.

We had a period of sustained growth and rising employment. The Conservatives said that the national minimum wage would cost jobs, but employment went up. Under the Conservatives child poverty doubled; under Labour it came down.

We had the longest sustained period of investment in the NHS since the second world war, but there was a global financial recession, which affected countries around the world. Who dealt with that? The British people should be thankful that it was not the Chancellor and his friends, because opposing nationalisation of the Royal Bank of Scotland and Northern Rock would have been a catastrophe for the British economy.

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

Although the right hon. Gentleman is right to say that there was global downturn, and he also rightly points out that there had been continued growth between 2000 and 2007, in each and every one of those years a deficit was being run up. That is our point—an unsustainable deficit was run up in the good times, before the global crisis began.

[Ed Balls]

I have studied the Chancellor’s new fiscal mandate. He says that he wants to get the national debt on a downward trend by the end of the Parliament. We had national debt on a downward trend in 1997, 1998, 1999, 2000 and 2001. Before the financial crisis hit, our national debt was lower than the debt we inherited from the Conservatives. [Interruption.] Hon. Members are barracking—but let me answer the hon. Gentleman, because at least he asked a serious question, unlike some of the nonsense we have heard from other hon. Members on the Government side of the House. The second part of the fiscal mandate is to get the budget, excluding investment—the current balance—back into balance by 2015. Yet that is the golden rule.

The golden rule is getting, over the cycle, the current budget, excluding investment, into balance. That never happened in the 1980s and the 1990s, but it happened for a sustained period under Labour. However, it is true that, throughout that period, we borrowed to invest. Of course we did. Our infrastructure—our schools and hospitals—had not been invested in for 20 or 30 years. Throughout the period before the financial crisis, national debt was below the level that we inherited from the previous Conservative Government.

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

Is not it the case that in 1997 Labour cancelled the road-building programme, which would have been an investment in infrastructure?

[Ed Balls]

If I remember rightly, our mistake was not to reverse the cancellation of the road-building programme that we inherited from the previous Government. We inherited an environment Department that did not want to build roads and a transport Department that had given up asking for transport investment. When we came into government it took time to build schools, because in the previous 18 years so few new schools had been built that local authorities had lost the capacity and the ability to build them. That is the reality.

[Several hon. Members]

rose—

[Ed Balls]

I will make a bit more progress before giving way.

Let me return to the Business Secretary, because he was wise to say that those matters should be judged at the time of the Budget, based on the economic conditions. That is why we have argued that the Budget was an opportunity to change course from the reckless cuts. The problem is that the Business Secretary has not been heard. The blinkered Chancellor is ploughing on regardless, oblivious to what happens around him.

The Business Secretary needs to change tack. “Newsnight” is clearly not the way to get his message out. It does not get him on to the front pages; it does not make people listen to him. Why does he not do what he did last time? Perhaps he needs to call in some more young constituents for another candid conversation, another avuncular chat. It worked last time. The Chancellor certainly knew about his views on media ownership and News International. It is a pity he did not also share his thoughts on the risk to growth and jobs from the Chancellor’s reckless cuts.

The Business Secretary knows that the Chancellor is taking a massive and reckless gamble. He knows that it is the wrong thing to do, just as he knows that scrapping the future jobs fund and education maintenance allowances, hiking up tuition fees, raising VAT and cutting benefits for disabled people is wrong. It is one thing to want to be in power, but sacrificing one’s principles and beliefs for power is quite another. They used to call him Saint Vince, the wise economist. He had a reputation for telling it like it is. Why does he not tell us what he really thinks today? He knows that the economic strategy of the Government of which he is now a part is deeply flawed, misguided and unfair.

[Lorely Burt (Solihull) (LD)]

The right hon. Gentleman is right—the Business Secretary is very wise. He warned the right hon. Gentleman when he was a business Minister with responsibility for the City that there was far too little regulation for the banks. Does he now regret the fact that he said at the time that we should have light-touch regulation for the banks, which eventually proved so disastrous?

[Ed Balls]

We all look back and say that we should have been tougher on the banks. Of course we should have been. The irony is that the Business Secretary is in government, sitting next to a Chancellor who criticised us in 2005 and 2006 for being too heavy-handed in our regulation of the banks. We were told that too much heavy-handed regulation from Europe was stifling the competitiveness of the City of London. The Conservative party called for light-touch regulation: that was the reality at the time.

As for the Business Secretary’s other regular critique, that we allow too much household debt in our economy, it was interesting to note from looking at the OBR Budget Book last night that household debt as a percentage of income is now forecast to rise next year, the following year, the subsequent year, the year after that and the year after that—five years of household debt as a percentage of income rising every year, while the savings ratio stays low and stable. He is part of a Government that are certainly not delivering what he said was the prospectus for the future.

[Mr Edward Timpson (Crewe and Nantwich) (Con)]

The shadow Chancellor is keen to tell us what happened to the national debt between 1997 and 2001, but is silent about what happened to it after that. Perhaps he could enlighten us about what happened to the national debt between 2001 and when he left office?

[Ed Balls]

I have not been silent at all. I said that there was a global financial crisis, which meant that our deficit and our debt rose, as it did in America, France, Germany and Japan. It is a good job that we went into the crisis with a lower national debt than we inherited, and a lower level of national debt than France, Germany, America and Japan. It is a good job that we did not listen to the Conservative party, or our debt would have been higher, our unemployment would have risen and we would still be in a depression.

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

rose—

[Hon. Members]

Hooray!

[Jacob Rees-Mogg]

Thank you. I am grateful for such widespread support.

May I draw the shadow Chancellor’s attention to page 8 of the Red Book? He referred to private sector debt, which rose from 200% of GDP to 450% of GDP when the Labour Government were in office. That fundamental instability led to our troubles. It was great while debt was rising—it led to full Government coffers—but it got out of control and that is the root cause of the problem.

[Ed Balls]

As I said, the OBR says that subdued consumption outlook requires households to dip into their savings again in 2011, so the savings ratio continues to fall back from its post-recession peak. It also says that the savings ratio is now forecast to be historically low. Household debt as a percentage of income rises every year from 2010, even though it fell in 2009-10. Those are the facts.

Yesterday we needed a plan from the Chancellor to help hard-pressed families facing the squeeze, to get people back into work and to get our economy growing again. That is what we needed, and that is what we did not get. There was no change to a deficit reduction plan that is faster than that of any other major economy in the world. It pushes growth down and unemployment up. The Chancellor fails to realise that cutting too deep and too fast will make it harder to get our deficit down. He also failed to understand that while he gives the banks a tax cut this year, ordinary families are being hit hard now. It was a smoke-and-mirrors Budget.

[Rory Stewart (Penrith and The Border) (Con)]

Will the right hon. Gentleman please share his plan and growth strategy with us?

[Ed Balls]

I will gladly share our plan. First, the economy was strengthening and unemployment was falling—[Interruption.] The Chancellor’s Parliamentary Private Secretary shouts too loudly. Why does he not calm down a little? That may be how they do things in Chelsea and Fulham, but we do not do that in the House of Commons.

Unemployment was falling and growth was rising because we were halving the deficit over the four years. The Chancellor has gone from halving the deficit to trying to get rid of it entirely in four years, by implementing the largest cuts to spending and tax rises of any economy in the world. It is not working. In fact, we heard today that Moody’s, the credit rating agency, is looking at whether it needs to downgrade the British economy because of the threats to growth following yesterday’s Budget.

Secondly, Labour would repeat the bank bonus tax now, raise £2 billion for a second year, and use that to build 25,000 more homes and create 110,000 more jobs for young people who are now not going to get help from the future jobs fund. That was our second plan—and that option was entirely open to the Chancellor, but he chose not to repeat the bank bonus tax, but instead to give a tax cut to the banks.

Thirdly, we would have reversed the rise in VAT on fuel, because the Chancellor’s 1p cut in the Budget—there is still doubt whether that will actually get to motorists—is outweighed by the 3p a litre rise in fuel prices because of the VAT increase that he introduced just a few weeks ago. We cannot blame the Chancellor for the rise in world oil prices resulting from the middle east crisis. He made the right decision not to go ahead with the duty rise, and we would have done the same, given the level of world oil prices. However, the rise in VAT was a complete own goal. It pushed up inflation and prices and cut family budgets. It was a mistake. It was the wrong tax at the wrong time. The Chancellor should just admit that he got it wrong, go to his European partners and say, “Can I reverse this mistake before it’s too late?”

That is our plan, and the Chancellor—[Interruption.] Government Members shout, “Is that it?” but they do not understand the economics of this and the previous Budget. Halving the deficit over four years was ambitious but deliverable. Eliminating the budget deficit in four years means a massive fiscal contraction. Unless we suspend all the laws of economics, assume that no international evidence counts, and believe that fiscal multipliers do not count in our kind of economy, that kind of contraction in fiscal policy and its impact on the public and private sectors is crushing. Only Greece is trying to go faster. We have already seen the biggest fall in consumer confidence for 20 years, and unemployment is up before the cuts have really started to bite.

People are looking to the future and are worried, and the Chancellor is not listening. In his world, that is not a concern. He does not worry about what is happening out there in the real economy but for businesses and families up and down the country, the prospect of rising unemployment year by year, of slow growth last year, this year and next year, and of falling confidence, is a real concern. My advice to the Chancellor is this: take the blinkers off and look at what is actually happening in our economy. It is hurting, but it is not working.

[Stephen Hammond (Wimbledon) (Con)]

We just heard that the shadow Chancellor’s plan is to halve the deficit over the lifetime of this Parliament. For clarity’s sake, will he tell us what the implications of that would be for the cost of borrowing? What advice has he taken on the yields on 10-year gilts, which would clearly move if we cut borrowing?

[Ed Balls]

The hon. Gentleman needs to look at what is actually happening to the yield curve, the term structure and long-term interest rates. He will know that before the election, when the previous Government had a plan to halve the deficit over four years, the long-term interest rate level was pretty much identical to the rate now. That is the fact. Our debt maturity is long, our long-term interest rates are low, and there has been no problem getting our gilt auctions away at any point in the last two or three years. The idea that there was some big impending crisis is a myth invented by the Chancellor of the Exchequer and the leader of the Liberal Democrats to justify the biggest and most unfair U-turn on a manifesto that we have seen in the last 100 years of British political history.

[Duncan Hames (Chippenham) (LD)]

rose—

[Matthew Hancock]

rose—

[Ed Balls]

I will take an intervention from the hon. Member for Chippenham (Duncan Hames) now, but I will come back to the hon. Member for West Suffolk (Matthew Hancock)—definitely.

[Duncan Hames]

The shadow Chancellor wants to slow the pace of spending cuts, so will he tell us what spending cuts he wants in the coming year?

[Ed Balls]

I think the rise in VAT was a mistake, and I think the hon. Gentleman used to agree. I think that spending cuts this year are a mistake, and I think he used to agree with that too. I would halve the deficit over four years, and borrowing would have come in £20 billion lower—[Interruption.] I will answer the question. I set out more detailed spending cuts—in schools—than any other Cabinet Minister at that time. We said we would cut £1 billion from policing, and, for example, that we would go ahead with the disability living allowance gateway reforms. However, the scale and pace of the Government’s cuts are too deep and too fast, which is destabilising our economy. We were right to say, “Don’t make the cuts until the recovery is secure. If you make cuts on this scale before the recovery is secure, what do you end up with? No recovery at all.” That is the situation today.

[Matthew Hancock]

rose—

[Ed Balls]

Let me turn to the detail of the Budget for a second more, but I look forward to hearing from the hon. Gentleman. I only read out five of his Labour campaigns, but maybe he will enlighten us on a sixth in a moment.

[Albert Owen (Ynys Môn) (Lab)]

The shadow Chancellor was right to remind the Liberal Democrats that they once thought that a VAT increase would be a bombshell, but does he also remember the Prime Minister, when he was Leader of the Opposition, saying that VAT was a regressive tax that would hit the poor the hardest, and that he had no intention of increasing it?

[Ed Balls]

I also remember the Chancellor saying that the Budget was progressive, and it turned out to be regressive, but my hon. Friend is being unfair to Liberal Democrat colleagues. They were not against a VAT rise; they were against a Tory VAT rise. Nick Clegg’s general election leaflets said, “Stop the Tory VAT bombshell,” and he never said, “Stop the Tory-Liberal Democrat VAT bombshell,” so my hon. Friend is being a little harsh on colleagues.

[Matthew Hancock]

The right hon. Gentleman talks about international evidence, but why should we listen to him rather than to the OECD, the International Monetary Fund, the European Commission and all major business organisations, which support the concept of dealing with our debt?

[Ed Balls]

The hon. Gentleman needs to be careful with boastful interventions. Let me read out a quotation:

“The measures we have taken have been commended by international bodies such as the European Central Bank, the European Commission, the IMF and the OECD. They have also won the approval of the international markets.”

That is the financial statement of 9 December 2009 from the Irish Finance Minister. He is no longer in office, because he had OECD and IMF approval for a policy that drove unemployment up, growth down, confidence down and the deficit up. Does that not sound somewhat familiar? [Interruption.] If the hon. Gentleman wants to make a third intervention, I shall happily take it, but perhaps he should reflect a little further before he puts out his next press release.

The Chancellor said yesterday that this was not a tax-raising Budget and he did not need to ask for a penny more. However, when we study the details of the Red Book—in table 2.1 on personal tax, the tax cuts from the personal allowance and the tax increases from the switch to the consumer prices index, and changes to national insurance contributions—we find that the tax increases are bigger than the tax cuts. That is the fact. The increase in the personal allowance, which the Liberal Democrats boasted about with such enthusiasm yesterday, is completely crushed by the CPI increase: that is there in the Red Book. The Chancellor said that he would not come along and mislead the House in his Budget, but that is exactly what he did.

We also found out that because the Government changed the indexation of national insurance and the personal allowance, and because many people in our country—disproportionately women—are in part-time work and on low wages, and pay national insurance but not income tax, yesterday was a tax rise for 400,000 of the lowest-paid workers in our country, disproportionately women and part-time workers. That never made it into the Chancellor’s speech, nor did he say that the personal allowance changes were worth £48 a year, but the VAT rise will cost the average family with children £450; that never cropped up in the speech either. Nor did he point out that the upgrading of the GDP deflator—the inflation measure—means that despite the Prime Minister’s promises last year that NHS spending would rise in real terms year by year, it will actually fall year by year. That is another broken promise from the Prime Minister.

Many business people will be asking, “Why didn’t we have a Budget that did a bit more for growth?” It looks as if I was right in Treasury questions on Tuesday when I suggested to the Chancellor that his growth strategy was so flimsy he needed to beef it up, because he has now cut corporation tax by 1p, which is welcome, and is paying for it through measures on tax avoidance, which is also welcome. However, paragraph B.13 of the OBR’s Budget document reads:

“The OBR was notified of the change to corporation tax and the 1p cut in fuel duty…too late to incorporate any indirect effect of these measures in the economy forecast.”

I do not think he told the OBR until the afternoon before. However, it was able to give some clarity. It said that it believed that

“any such effects would have been minimal.”

This growth strategy has been produced with fanfare and much delay, but since publication his own independent auditor, the OBR, has said that it will have no impact on growth and jobs in our economy. Is that not the reality?

An alternative was open to the Chancellor, and it was one that I have set down. He could have decided to follow the American example and cut the deficit at a steadier pace in order to strengthen growth and lower unemployment.

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

Moody’s credit rating agency warned today that the UK’s triple A credit rating could be affected by slower growth. Does that not undermine entirely the Conservative party’s too-fast, too-deep cuts strategy and show that growth is the important aspect of this country’s economic policy?

[Ed Balls]

I accept my hon. Friend’s point. I was tempted earlier to go down that road, because the fact is that in 2006, 2007 and 2008, the credit rating agencies entirely failed to spot the financial crisis in the first place. The Conservative party and the Liberal Democrats are keen to quote credit agencies when they support their case, but not when they do not support their case. The truth is that the credit agencies failed in the crisis, and quoting them at all is very risky indeed.

As I said, the Chancellor should have adopted our plan for deficit reduction, growth and jobs. He also ought to have adopted our plan to repeat the bank bonus tax for a second year, and used it to give immediate help to young people and jobs, rather than cancelling—in fact abolishing—the future jobs fund. As I have also argued, he should have cut VAT on fuel. That would have been a fairer and more substantial approach. However, the fact is that this year, as a result of the Chancellor’s tax decisions in the Budget, fuel tax will not fall; it will rise by 2p per litre. That is the reality.

The Chancellor should have reversed the VAT rise. That was a big mistake. Two years ago, when we proposed a cut in VAT, which got growth moving and unemployment down, he said, “People won’t notice the VAT cuts.” I am sure that he did not notice them himself, and he probably thinks that people will not notice the VAT rise either. The fact is, however, that with consumer confidence and growth down, and unemployment up, people are noticing what is happening and what he is doing. That is why they are so worried.

[Mr Dave Watts (St Helens North) (Lab)]

Does my right hon. Friend agree that the Government are yet to spell out how they will ensure that the increases for fuel companies are not passed on to motorists?

[Ed Balls]

There has been some confusion on this over the past 24 hours. We know from the OBR that it was told of the 1p cut in fuel duty so late that it could not even get it into its economic forecast. The Chancellor realised at the weekend that he was behind the curve, that he was not setting the agenda, that living standards were a rising issue and that Labour was making the case for fuel tax cuts, so he jumped in late with his 1p cut, but he did not have the courage to reverse his 3p rise. That is the reality. Had the Chancellor done things properly—I can give him some advice on this, because I know how to do things properly on North sea oil tax—he would have consulted the oil companies in plenty of time, explained what was happening, made the case, got their agreement, and then announced the policy in the Budget. I think that many of the oil companies did not find out about it until it was announced in the Budget. That was the problem.

Yesterday afternoon the Chief Secretary to the Treasury—as always, he is not here—was on a television programme about the Budget. He was asked, “How will you stop the oil companies simply passing on the cost in consumer prices?” He said that he did not know, but that he would monitor the oil companies closely. That was the problem. The Government did not do the work, and this was cobbled together at the last minute. That is why it has caused so much confusion and consternation in the past 24 hours. He needed a headline and a flourish to his speech, but he did not want to announce that they were cutting the winter fuel allowance—an announcement we would never have had at the end of a Labour Budget—so instead he announced a cobbled-together, last-minute 1p cut in petrol tax.

The Chancellor is not listening.

[Mr George Osborne]

I can see that the right hon. Gentleman wants to get this point on the winter fuel payment going. Will he confirm, therefore, that I am only following the plan set out in the last Labour Budget on the winter fuel payment?

[Ed Balls]

A plan was set out in the last Labour Budget for a 1p rise in petrol tax, but the Chancellor reversed it. If he could reverse it on petrol tax, why could he not reverse it on the windfall tax? The fact is that it was not his priority. When we entered government in 1997, what did pensioners get? They got £10 in a Christmas bonus. What did they get from Labour? They got £200, and the poorest pensioners got £300. What did we do? We confirmed in Budgets that we could carry on with the £300 in a sensible and proper way for a period of years. It would have been for the Chancellor to decide in this Budget what then to do, but I can tell hon. Members that a Labour Chancellor would have extended it. Instead, a Tory Chancellor cuts it. That is the truth.

The Chancellor is not listening. He just does not get it. He does not get how hard people are being hit by higher VAT and cuts in local services. He does not get what it means to face the fear or reality of unemployment. For the sake of our country’s future, he needs to think again and start putting jobs first—and he needs to start doing that right now.

14:27

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

I want to talk about how we progress from the painful but very necessary deficit cuts to achieving growth that is balanced and sustainable. However, I shall start by addressing the shadow Chancellor’s attack. His starting point seems to be that the past is another country, and that 2010 was year zero. I am afraid, however, that all his rather bumptious self-confidence cannot conceal his massive legacy: the biggest deficit in the G20, an overweight and damaged banking system, and an economy that was hopelessly unbalanced.

The right hon. Gentleman’s criticism is built around the downgrading of the growth forecast, but before we get any more of this “Growth is down! Growth is down!”, let us remember what happened to growth in the last two years of the Labour Government—it was down to minus 4%. By the last quarter of the Labour Government, GDP was back where it was in 2006. Indeed, if we look at growth on a per capita basis—that is, living standards—we find that five years of Labour Government produced a decline in per capita incomes in Britain. The only time in history that this had happened previously was shortly after the first world war, so we do not need any lessons on growth. As the Chancellor pointed out yesterday, the European Union and the IMF has Britain’s projected growth comparing favourably with that of France—the shadow Chancellor’s favourite country—Italy, Spain, the eurozone and the whole of the European Union of 27. Our projection is better than any of those.

[Mr Chuka Umunna (Streatham) (Lab)]

This morning at the Treasury Committee, the former chief economist in the Cabinet Office, Jonathan Portes, remarked that—as my hon. Friend the Member for Bassetlaw (John Mann) has also pointed out—“The Plan for Growth” that the Business Secretary has published does not show the average growth from 2000 to 2010. Why is that? Presumably the Business Secretary knows the numbers, so does he agree that the performance was not terribly bad, which is precisely what Jonathan Portes said?

[Vince Cable]

For six of those 10 years, we were dealing with an artificial boom based on a property bubble, an overweight banking system and, as the shadow Chancellor has acknowledged, gross levels of personal debt. That was why there was rapid growth in the early part of that period. However, if we look at that period as a whole, including the last period of Labour Government, we see a decline in per capita income that was unprecedented even in 20th-century history. That is the record that we are dealing with.

Let me deal with the shadow Chancellor’s pessimism about employment. We are all rightly concerned about unemployment—we have to be—but let us remember that last year growth was 1.3%, which is lower than the projected growth for the coming year. In that time, there were 428,000 new private sector jobs—300,000 were in the second half of last year—which by a long way more than offset the 132,000 job losses in the public sector, many of which, incidentally, were a result of the cuts that the last Government were starting to introduce. Our responsibility—this was the purpose of the Budget—was to ensure that we have sufficient private sector confidence so that companies hire people and invest.

[Mr Watts]

If the economy delivers lower growth, as is likely, and if unemployment continues to increase, does the right hon. Gentleman believe that the Government need to adopt a plan B?

[Vince Cable]

We are sticking very firmly with plan A, because plan A is right. The hon. Gentleman will know that flexibility is built into economic management, primarily through monetary policy, and that is the mix that we will continue.

The shadow Chancellor is right. There is of course concern about a squeeze on people’s living standards, and we are concerned about that no less than he is. The Chancellor has tried to alleviate the problem through action on fuel duty and by lifting the income tax threshold. I would like to spend a few moments looking at the two proposals that the shadow Chancellor has made—he has repeated them today—to deal with the problem. The first proposal turned out to be illegal under European Union law. Like me, he is a good European—we would both like to observe European Union law—and to change that law would have taken roughly five years, which will not provide much relief.

After the fiasco of the shadow Chancellor’s “VAT relief on petrol” idea, his other big idea, which he elaborated on today, was to finance jobs through the tax on bank bonuses. I remind him that he and I have some form on this issue. When the last Government were in power, I was critical of the idea of taxing bank bonuses as I did not think it would work. It is to the credit of the former Chancellor that, through his ingenuity, he made it work. In the year in which the measure operated, he raised £2.5 billion—not the £3.5 billion that is often cited, because that takes no account of the offset in corporation tax. Because of his skill in making the bonus tax work, we have to listen to his advice when he says:

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

He has counselled very strongly against a repeat of the bonus tax. He was—to use the word—wise.

There is another reason why I am surprised that the shadow Chancellor has returned to the bonus tax issue. He may remember that back in 2006, when he was the City Minister, a big debate opened in the Labour party when Bob Diamond was having one of his early years of extremely generous bonuses. The deputy leader of the Labour party declared “war” on “fat City bonuses”. She was promptly slapped down by the then City Minister, who reminded us that such pay-outs were good for tax revenues and for job creation. In that particular Labour party debate, I was very much on the side of the deputy leader.

If the previous Government are serious about taxing banks, why did they allow a situation to arise in which only two of the 15 major banks had in place an agreement to stop large-scale tax avoidance? We have now stopped it. Every single bank is now covered by the HMRC code on tax avoidance. Additionally, we have put in place the levy on banks’ balance sheets, raising £10 billion, which is four times as much as the one-off bonus tax would have raised.

[Ed Balls]

I am concerned by that comment, and I am not sure whether the Chancellor would agree with it. The fact is that hundreds of thousands of people in our country work in financial services, often on low or average earnings of around £20,000 to £25,000 a year. Is the Business Secretary really saying that those jobs are not important, and that job creation in financial services can be dismissed? He is not one of those people who says, “Let the financial sector go to Switzerland”, is he? He is supposed to be the Business Secretary.

[Vince Cable]

I really do not know what the right hon. Gentleman is talking about. We started by talking about excessive bonuses in one very large investment bank, and he has now extended that to the whole of the financial services sector. Of course that sector is valuable. Of course the jobs and the tax revenue are valuable, but that is not what he was talking about in his ideological dispute with his deputy leader.

Let me return to the right hon. Gentleman’s central message that the Government should abandon, or substantially modify, their fiscal strategy. I shared a platform last week at the London School of Economics with Angel Gurría of the OECD. He was asked what the Government should do. He had a simple message, which was that we should “stick with it”. He is not some pro-coalition politician or right-wing ideologue; he is the head of an organisation representing 25 Governments. Opposition Members should ask themselves—the shadow Chancellor was asked this but he neatly evaded the question—why all the major international institutions, including the International Monetary Fund, the European Commission and the G20, support the strategy that we have adopted. The reason is that they are all painfully aware that we are in an economically dangerous world in which crises of sovereign debt are not very far away.

[Ian Murray (Edinburgh South) (Lab)]

The Business Secretary is going through a list of international organisations that evidently support his plan. However, as a result of the plan, the UK will have the smallest public sector in the G7 by 2015—smaller even than that of America. Does not that tell the right hon. Gentleman, who was on our side of the argument before the election, that this is an ideological attack on public services in this country?

[Vince Cable]

I cannot see how it can be ideological to have a public sector that, by the end of this Parliament, will have a share of GDP comparable to what it was when the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) became Prime Minister. Whatever criticisms the Opposition might want to make, ideology has absolutely nothing to do with this.

The comments of the international organisations are reflected in those of the business community. The former head of the CBI has often been quoted on this, because he was critical of the Government. He had some strong criticisms, which we have taken to heart. However, it is worth remembering how he started the speech that is now so frequently quoted. He said:

“This coalition Government has been single-minded—some might even say ruthless—in its approach to spending cuts…That policy is strongly supported by business, on the grounds that sound public finances are an essential foundation for a sound economy.”

I want to deal more specifically with the suggestion that we are cutting too much too soon. The shadow Chancellor has quoted me on this, and he is quite right. I said on “Newsnight”, and I will continue to say, that there is a serious economic debate that we must constantly have on striking the right balance between not choking off recovery and not risking a financial crisis. That is the calculation that we are having to make. Our approach has been vindicated by the evidence, and the evidence is the response of the financial markets. The bond yields, which are important not just as an indicator but because they set the cost of capital for business and investment, are 3.5% for 10-year bonds, which is close to the rates in France, Germany, the Netherlands and Sweden, compared with 5.2% in Spain, 7.5% in Portugal, 9% in Ireland and 12% in Greece. That is a fair comparison with what they were a year ago when the Labour party was in power. Since then, the differential has widened by 1.5% in respect of Spain, 3.5% for Portugal and 5% for Greece and Ireland. In real terms, the cost of capital—long-term capital in this country—is now zero. The reason why that matters was summarised many years ago by John Maynard Keynes. Labour Members may revere his memory, as do some of us. During the crisis of the 1930s, Keynes wrote to Roosevelt:

“The turn of the tide in Great Britain is largely attributable to the reduction in the long-term rate of interest.”

That is the basis on which we have to take account of interest rates.

[Mr Umunna]

Of course Keynes also said that if the facts changed, he changed his mind. Does the Business Secretary agree with the Energy Secretary who said that the Government should not be “lashed to the mast” of their economic policy? On 29 November, the Chancellor said that he would stick to his fiscal mandate to allow the Monetary Policy Committee maximum flexibility to loosen monetary policy. If inflation remains as per the central prediction at the moment, I see no real prospect of the MPC being able to loosen monetary policy further. That means that if growth is sluggish, the Government will surely have to look to a contingency plan. That seems to be what the Energy Secretary was suggesting. Does the right hon. Gentleman agree?

[Vince Cable]

I am not sure that what Keynes said was a matter of changing his mind in response to a change in fact. He was stating one of the basic principles of Keynesian economics—that the cost of capital has to be kept low.

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

The Secretary of State said that the evidence had borne out his decision to change his mind on the scale and pace of deficit reduction, but what evidence does he need? Since he made that decision, the unemployment forecasts have risen, the inflation forecasts have risen, the growth forecasts have fallen, the debt repayment forecasts have risen, and as for bond yields he has no evidence that at the time of the election they were causing any problem for the UK’s financing of its debt under the last Government. What evidence is there to suggest that he was right to change his mind?

[Vince Cable]

I do not know when the right hon. Gentleman last opened a financial newspaper. If he had done so recently, he would know that all the countries on the periphery of Europe that have been hit by the rising cost of capital are in very acute financial crisis, which we have avoided. We have German interest rates, and at the same time we are carrying a deficit on the scale of the most debt-ridden economies such as Ireland and Portugal.

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

One thing the Opposition can claim is that there was stability in the bond market, which we have been able to continue this year in order to borrow at reasonable rates. As the Business Secretary knows, directly and indirectly, although we have long-term rates in the bond markets, the main problem is that if small companies can borrow at all—very few of the small and medium sector singled out by the Chancellor and the Government as the key area of expansion are able to do so—it is only at exorbitant rates. What are the Government going to do about it?

[Vince Cable]

In the earlier part of his comments, the hon. Gentleman was right to acknowledge how important interest rates are. He is also right to say that because of the badly damaged banking system, small companies have an extreme problem with lending. That is why the Chancellor and I have been dealing with the banks to try to get them to reach an agreement, which they now have, to extend considerably the amount of lending to small and medium-sized enterprises. That was one of the earliest decisions we had to make—to focus on access to capital.

While we are dealing with the issue of what has to be cut, I would like to ask the Opposition what they would do. The right hon. Member for Wolverhampton South East (Mr McFadden) wants us to run a bigger deficit. What would the Opposition cut? It is a question I often pose to my opposite numbers in the BIS team. They had planned a 25% cut in departmental spending, which is what I am doing. We are cutting a lot of things—very painfully—so I ask the Opposition what they would do, but we have not yet had a single suggestion about what they would do instead.

Government Members often raise that sort of question, but it is becoming obvious that the natives opposite are also getting restless. I noticed that the right hon. Member for Salford and Eccles (Hazel Blears)recently said that the Labour party needs to be

“explicit about cuts… The public expects us to at least give a broad direction—but I think they are worried that we haven’t been as clear as we ought to be”.

Another senior Labour Member of Parliament—who, perhaps wisely, remained anonymous—told the Financial Times:

“It can’t be that hard for us to say what we would cut, or at least give a few examples, for goodness’ sake.”

[Interruption.] Beneath the shouting, those are the questions that Labour Members are asking themselves, and they are absolutely right to do so.

[Jesse Norman]

On the question of evidence, is my right hon. Friend aware that institutions as wide ranging as the Institute for Fiscal Studies and the Bank of England have calculated independently that we would be borrowing between £7 billion and £10 billion more if interest rates had been allowed to stay at the same level, without the fiscal austerity programme that was introduced by the Chancellor?

[Vince Cable]

Yes, indeed. There is clearly a close link between the level of the budget deficit and interest rates, both long-term interest rates in the markets and short-term interest rates set by the Bank of England. That is why maintaining a monetary policy that is supportive of growth—which is what we are doing—requires fiscal discipline.

Let me now deal with how we can achieve sustainable, balanced growth, and what “sustainable, balanced growth” actually means.

[Steve Rotheram (Liverpool, Walton) (Lab)]

It has taken the Secretary of State 20 minutes to reach this stage.

[Vince Cable]

I have been dealing with a great many interventions from members of the hon. Gentleman’s party. I am always happy to do that.

I must begin by acknowledging that the task is a massive one, although there are some encouraging signs. Manufacturing is growing at its fastest pace for 16 years, the car industry is growing by 12% a year, and we are seeing a real-terms growth of 5.5% in exports. However, when it comes to rebalancing the economy, I do not pretend that we are anywhere other than at the beginning of a very long march. It is a long march because we inherited a structure that was horribly unbalanced and unsustainable.

Let me remind Opposition Members of some of the things that we inherited, quite apart from the deficit. There was a hollowed-out manufacturing sector that, under the last decade of Labour government, declined by more than the manufacturing sector in any other western country, from 21% to 12% of GDP. Exports were growing at half the rate of growth of world trade. As we were reminded by the shadow Chancellor himself, household debt was running at 170% of GDP, a higher rate than in any country in the world as far as our statistics can establish. We had a property bubble that was more extreme than that in the United States, and banks were encouraged to grow until their balance sheets amounted to more than 400% of the British economy. We had grotesquely distorted pay structures and lending behaviour, and a financial vulnerability of Irish and Icelandic proportions.

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

The Secretary of State has talked of sustainable economic growth. How does that square with the Government’s claim to be the greenest Government ever? Given that the Office for Budget Responsibility has been set up so as not to take account of green considerations, is there not a real risk that if the green investment bank is not a proper functioning bank from day one, it will not be able to lever in investment that could otherwise have contributed to the growth recovery that we need?

[Vince Cable]

The claim to be the greenest Government ever has been vindicated in significant part by some of the key announcements in the Budget—of, for instance, the establishment of the carbon floor price, which is the first effective carbon tax system in the world, and the green investment bank, to which the hon. Lady referred. It has been made clear for the first time that it will be a proper bank—a borrowing bank—although, as a public sector institution, it will have to reflect the position of the public finances.

[Angela Smith]

The carbon floor price, which the Secretary of State has just mentioned, could threaten the international competitiveness of key intensive energy users such as the steel, glass, paper and ceramics industries. How will the right hon. Gentleman ensure that growth does not suffer as a result of the policy?

[Vince Cable]

The hon. Lady makes a valid point. I have already spoken to representatives of the steel industry about precisely that issue.

The Budget referred to the climate change agreements and to more extensive relief. Energy-intensive industries are an issue, but any Government who are serious about carbon reduction will have to deal with such industries in a balanced way.

[Graham Jones (Hyndburn) (Lab)]

Does the right hon. Gentleman agree that exports are being driven by the decision to stay out of the euro and the low value of the pound?

[Vince Cable]

The low value of the pound has certainly been very helpful, and that is supported by low interest rates. That is indeed a supporting factor for exports. It is not just a question of exchange rates. That is why I introduced the trade White Paper a few weeks ago. We are extending export credit support for small-scale business. The current export boom must be sustained, and it definitely was not sustained under the last Labour Government.

When we consider the catalogue of ways in which the economy became unbalanced under the Labour Government, it becomes clear that there was not just a problem of deficit denial, but there was manufacturing denial, trade denial, debt denial and banking denial. There was denial of many of the fundamental weaknesses that emerged in the economy. We are picking up the pieces and trying to create the conditions for sustainable growth.

[Ben Gummer]

Would my right hon. Friend add job denial to his list because, as under every single Labour Government, when the last Administration left office unemployment was higher than when they came into office?

[Vince Cable]

That is right, and I am sure that if we reflected a little we could add further to the list.

Let me talk about employment.

[Ian Murray]

rose—

[Vince Cable]

Let me press on a little first, and then I will take an intervention.

In future, growth and jobs will come from the private sector, and in particular from small-scale business. Taken in conjunction with the trade White Paper to which I have referred, the Budget’s commitment to lower and stable corporation tax gives the strong signal that we are open for business and we warmly welcome inward investors. Growth and jobs also depend on small companies, which provided a giant proportion of the 300,000 additional jobs created in the private sector in the past six months, and they will be helped by the Budget’s extension of small company business rate relief and cuts in small company corporation tax.

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

On inward investment, this Administration’s “ The Plan for Growth” states

“the Government will provide a bespoke service to key inward investors, giving them direct access to UK ministers and speedy resolution of bureaucratic obstacles to investment”.

Does the right hon. Gentleman not think that that could leave the Government open to rather difficult situations with foreign investors, and how does he think British businessmen will feel when they see inward investors getting priority access to Ministers that they do not enjoy?

[Vince Cable]

I would have thought that Opposition Members who want the economy to flourish and new jobs in their constituencies welcomed the fact that I and other Ministers spend a lot of our time talking to potential inward investors. That is good not only for them but for the British companies that then become part of their supply chain and whose confidence is reinforced.

Especially for small businesses, growth requires the Government not to put unnecessary obstacles in the way. When we searched the archives, we discovered that we had inherited a stock of 21,800 regulations and that the last Government were responsible for roughly 10,000 of them. Rather sad people like me who have spent some of the best years of our political lives in Statutory Instrument Committees will have seen all of that happening.

We have taken action to stop the gold-plating of EU regulations, to ensure that every new regulation is matched by the value of an “out”, and to mandate sunset clauses. We have launched a reform of the expensive and time-consuming tribunal system, and we have injected common sense into Health and Safety Executive inspections. The Budget confirmed the statement I made last week that there will be a three-year moratorium on new regulation affecting micro-businesses with fewer than 10 employees.

[John Mann]

You should be ashamed of yourself.

[Vince Cable]

Not at all; we should be proud of lifting regulation from small companies that generate employment, which every Member should be concerned about.

[John Mann]

Will the right hon. Gentleman give way?

[Vince Cable]

No, I have taken a lot of interventions, and the hon. Gentleman has already made his intervention from a sedentary position.

The role of government is not only to get out of the way when they are blocking growth, but to intervene when there is a genuine market failure. Training is one such area, and we are seeking to alleviate the problem by supporting apprenticeships. When we came into office, 150,000 apprenticeships were planned for 2010-11 to be part-funded by government. We have increased that number, even in an environment of cuts, by 75,000 over the spending review period and in this Budget we have added another 50,000. The problems of training are massive. Let us remind ourselves that we inherited a system in which 14% of the adult population have poor literacy skills—we are talking about the reading age of a 12-year-old—and 19% have grossly inadequate mathematical skills. That is the base from which we start. [Interruption.] A lot of people, both in this House and outside it, would take this issue of innumeracy among the public much more seriously than the Labour Front-Bench team.

In the Budget, the Government have also invested further in science, particularly in research infrastructure. Through a combination of policies—the protection of the ring-fencing of the science budget; the legislative action to protect scientists and others from libel action; and the launching of the technology and innovation centre and advanced manufacturing—we have made a very firm declaration of support for the science community and the commercial application of science.

[Joan Walley]

Before the Secretary of State leaves the issue of apprenticeships, will he tell the House whether the new money for apprenticeships will be dependent on employers coming forward? In my constituency, in the city of Stoke-on-Trent, employers have not come forward in the way we need them to do, so there is a real danger that the new apprenticeships will go to other areas of the country, where they are not needed so badly.

[Vince Cable]

It is new money and of course this has to be employer-led; otherwise, there would be no job to follow the apprenticeship. That is why it has got to come from the private sector and why this is the best way of investing in training.

In my concluding comments, I wish to move on to the issue of fairness. It is a legitimate challenge to any Budget to ask about its distributional impact.

[Mr Don Foster (Bath) (LD)]

I confess that I am about to be disappointed here. In 46 minutes, we heard hardly any news from the shadow Chancellor about what a Labour Government would do. My right hon. Friend is about to disappoint me by not even mentioning some of the other fantastic things he has done for businesses, such as the research and development tax credit, the entrepreneurs’ relief, the increased bank lending, the developments in the enterprise investment scheme and so on. Why is he not referring to these many other good things?

[Vince Cable]

I probably was going to disappoint my right hon. Friend, because the Chancellor covered those issues very well yesterday. However, there is a lot more where that came from.

[John Mann]

rose—

[Vince Cable]

I am not going to take any more interventions.

I return to the issue of fairness. When we first came into office, the major attack from the Opposition was that we were going to hit the poorest hardest. When it became clear that we were producing policies to protect the state pension, increase child tax credits, give preferential treatment to low-paid workers in the public sector and lift low-paid workers out of tax, attention shifted to the so-called “squeezed middle”, which has been variously defined to encompass 90% of the population.

The truth of the situation is that as a result of the financial crash and the recession that followed, Britain is a significantly poorer country than we were several years ago, so living standards have been squeezed. As the Governor of the Bank of England said,

“the real consequences of this crisis are only now beginning to be felt.”

What we have done in the Budget is take concrete action on fuel duty and on lifting the thresholds at which low earners pay tax. I shall dwell on that point a little—

[Nick Smith (Blaenau Gwent) (Lab)]

rose—

[Vince Cable]

Let me finish this point. One genuine philosophical difference we have with the Opposition is on how best to help those on low and modest pay. The Opposition believe in using targeted means-tested benefits. By contrast, we believe that the best way of doing this is by lifting low earners out of tax—880,000 on 1 April and 260,000 more next year. In this way, we not only lift them out of tax but reinforce the incentive to work and to save alongside the welfare reforms. Other taxpayers received £200 in cash last year and will get £126 more next year. We believe that in tough times, we should let taxpayers—especially the low-paid—keep more of their own money, rather than taking it off them and giving some back through complex means-tested benefits.

The test of the Budget will not be the response of the political world or this debate. It will be the response of the business community, which has to invest for recovery. It is worth reviewing what the business community has said about the Budget as it has often been critical of Budgets in the past. The British Chamber of Commerce said:

“Despite tight fiscal conditions we are encouraged that the Chancellor has prioritised business growth and private sector expansion alongside deficit reduction”.

The Engineering Employers Federation—the manufacturers —commented:

“The Growth Review has now started to deliver tangible progress in removing the barriers to growth investment and job creation in the UK”.

And the CBI concluded:

“This budget will help businesses grow and create jobs”.

The Government recognise that the road back to balanced, sustainable recovery will be painful and difficult, but we are on the right track. As the head of the OECD put it, we must “stick with it”.

[Several hon. Members]

rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. I remind hon. Members that there is now an eight-minute limit on all Back-Bench speeches and 30 or more Members wish to participate, so will each Member bear in mind that they have a colleague who might also like to make a contribution? It is not compulsory to use the full eight minutes; you could always leave time for somebody else.

15:02

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

I am very pleased to follow the Secretary of State for Business, Innovation and Skills, but, unfortunately, by the end of his speech he still had not told us a single practical thing from the strategy for encouraging growth. Despite all the pages in “The Plan for Growth”, the Office for Budget Responsibility stated yesterday that it found nothing that it could measure as contributing to an improvement in the UK’s growth prospects. He goes on about low interest rates, but I wonder whether he has tried to borrow, or knows of any small company that has had to borrow, in the current difficult market and has been able to do so at the low or zero interest rates to which he referred. That is absolute nonsense. It is divorced from the real world and he knows it.

The Business Secretary knows that when we were both in different places in the Chamber he used to say that we had either to establish a national bank or its equivalent or to make the banks lend. He has come up with no solution to the problem and the fact remains that the single biggest inhibitor to growth in the vital sector of small and medium-sized enterprises still remains, and that is their inability to access credit. How can they grow in a difficult situation when markets are flat without access to credit? That is the question he has not answered and until he has answered it, he has no credibility as a Business Secretary. We need definite plans for doing that at some stage.

[Rory Stewart]

Will the hon. Gentleman give way?

[Mr Robinson]

I shall in a moment.

It is no good the Business Secretary asking us for our plans. He now has responsibility, he chose to take it and he chose, also, to go into this coalition, having been convinced by a concerted effort by the Governor of the Bank of England and others that the Liberal Democrats were wrong before the election—that within one week of the election campaign, everything had been turned on its head and we faced an imminent crisis, the outcome of which was that we would face interest rate rises and an inability to borrow nationally, along the lines of the situation faced by Greece and Portugal. He knows that he did not even meet the Governor for a working over, because his leader, the Deputy Prime Minister, had already been worked over. Nobody else on the Government side needed to be worked over—the Governor had worked them over before and during the election campaign. The implicit deal was, “Go along with this huge deflationary package, and I will keep monetary policy so loose that you don’t need to worry—you’ll still get growth.” I believe that that is the sort of Faustian deal to which the Business Secretary referred in his reply to the Budget debate last year.

What have we seen since? Interest rates are still low and policy has been loose. No doubt it might even continue to be loose for a period of time, but I am sure that interest rates will go up in the near future. Irrespective of that, there is still no credit for the SMEs from which, as Sir Richard Lambert pointed out, the vast majority of jobs must come if the commercial and business sector—the private sector—is to recover. However, there is still no prospect of their being able to borrow. Why does the Business Secretary say, therefore, that there is no alternative because the OECD says so? The OECD is as wrong as everyone else. We heard last night from Robert Chote that all those forecasts are a “load of rubbish”. One cannot always be right about such things; nobody ever is. One might ask what the point of them is. Certainly, to invoke the OECD, which can be as wrong as anyone else, and say, “It says that we have to go on with this strategy, so therefore we will,” in the face of all the mounting evidence that the strategy is not working is perverse and not worthy of the intellectual distinction that the Business Secretary is capable of bringing to these problems.

The only thing that could be said in favour of the Government’s policies is that they have not had enough time yet—not quite a year—to have worked, but it is obvious that they are not working.

[Jacob Rees-Mogg]

Will the hon. Gentleman give way?

[Mr Robinson]

I shall in a moment, but the hon. Member for Penrith and The Border (Rory Stewart) is first.

The figures for every crucial forecast area of activity are pointing in the wrong direction. Unemployment is up, growth is down, inflation is up, bizarrely, and Government borrowing is up—the very thing they are meant to be getting down—as measured against the OBR forecasts. Those are the only measures we can use to judge whether their policies are working. We can look at the past and it is clear that they are not, but to see whether they are working, we have to look at the forecasts. The Government’s whole policy is predicated on such forecasts, but look at the figures now—down, down, down! Every single indicator is going the wrong way, but they still say that we have to press on with their programme—plan A or whatever it is. I think I heard the Business Secretary say, in response to an intervention from an Opposition Member, that some flexibility is built into the Government’s plan A. I do not know whether he will elaborate on that or whether I misheard—we will see in tomorrow’s Hansard whether I did. I did not raise the issue at the time because I was not sure whether I had heard right—I could not believe it. If there is some flexibility, the sooner it is acknowledged, built in and practised the better.

[Rory Stewart]

Clearly, it is very difficult to get banks lending to small and medium-sized enterprises and to balance the need for that against the problems caused by credit in the first place. What solutions does the hon. Gentleman propose?

[Mr Robinson]

I do think it is pathetic when the only answer that the Government, who are charged with handling the nation’s affairs, can come up with is, “What are the Opposition going to do?” If the Government want to vacate those Benches, my right hon. Friend the shadow Chancellor is not slow in coming forward and would be over there on the Government Front Bench faster than anyone. We have instead a Business Secretary who preached about these matters very eloquently when he was in opposition and said that he would be practical, but he has done nothing.

What do we have now that the current Government are in office? We have inflation going up to 4.4% or perhaps even 5% and the deficit reduction that was to come from growth being hindered because growth and the forecasts are all down. Each forecast, whether for borrowing, inflation, unemployment or growth, is heading in the wrong direction. Those are the facts. All indicators, whether for last year, this year, next year or even the year after that, are headed in the wrong direction. Perhaps the Government should fix the electoral cycle to have 10-year terms and then some latter-day outcome might eventually catch up with what they forecast at the beginning. It should be clear to anyone looking objectively at the evidence that the Government’s plan is not working, that it needs to be changed and that there are alternatives that could be pursued.

If we are talking about getting growth in the economy—the right sort of growth—I agree entirely that we need business employment and development in the private sector. Let us consider HS2—the stupid vanity project that I am sure the Business Secretary would have opposed when in opposition. It is being proceeded with despite the eventual cost of some £32 billion. I cannot believe that the Treasury is going along with it, but I am told that the Chancellor is, bizarrely, in favour of it. Why do we not switch from that to the simple plan that was set out in Atkins’ alternatives—I think it was alternative 2 —for an investment that could be proceeded with immediately, that would give us what is most needed right away and that would help Coventry: four-tracking the line between Coventry and Birmingham? That could have been given the go ahead this year, had effect next year and made a direct contribution.

Why cannot we get the schools programme back on track? Make it quicker, make it simpler—we would accept all the criticisms if that would make it easier for the Business Secretary to go ahead with it. In Coventry, we have not had a single school built—not one! One school in my constituency has been propped up by scaffolding for the past three years. I was on the shadow Chancellor’s back all the time about that when he was the Education Secretary, asking, “Why can’t we get it done quicker? Why can’t we do it?” I was told that procedures had to be gone through and all the rest of it. The Government should speed it up and get on with it, but they should not cut it and stop those projects as they are doing at the moment. I still believe that they should go ahead with some of the other important projects that we could do, particularly in transport, and that they should go ahead with building projects.

To take the example of building projects and the construction industry, I read a couple of days ago in the Financial Times that orders in the industry over the past six months are down 50% on the previous six months. Much of that would be good, constructive infrastructure investment of the kind we are want to see, creating employment and skills and making a real contribution to long-term growth in the private sector, and yet we have cut it by 50% in six months. That cannot make sense, and in the meantime unemployment, borrowing and inflation are going up—all the wrong indicators.

In my remaining minute I will focus on Coventry. I heard today that we have lost another 400 jobs in an insurance company there. Since the Government came in, around 2,500 jobs have gone in Coventry. If the Business Secretary is open to meeting companies inwardly investing in this country, which he says he is, will he come to Coventry to see the investment problems we have? We have nothing to take back to those people who have lost their jobs. I say to him that he should have the confidence and courage of his convictions and stand up to the Treasury and his so-called coalition partners, because things are going to get worse, and he faces returning here with his whimpering excuses to his own increasing embarrassment.

15:11

[Mr Sam Gyimah (East Surrey) (Con)]

I have sat here today with a sense of déjà vu, first because I sat here yesterday for a number of hours and did not make it into the debate—as it wore on today I felt that the same thing was going to happen—and secondly because of the arguments from the Opposition, especially those put forward by the right hon. Member for Morley and Outwood (Ed Balls). If we were to listen to him and completely ignore the fact that we had a general election in which they lost and we won and formed a coalition Government—[Interruption.] The British people clearly did not believe that Labour’s stewardship of the economy had been exemplary, which is why they were kicked out of office. That is why in places such as Erewash, a seat that Labour won in 1997, we had a 10% swing back to the Conservatives. Let us not allow Labour to pretend that their stewardship of the economy was somehow exemplary. Until they learn to accept, in front of the British public, that they made mistakes, they do not have the credibility to be part of the economic argument. Let us not allow the right hon. Gentleman to rewrite history.

I will take up the gauntlet laid down by the right hon. Member for Bath (Mr Foster). Rather than allowing Labour to push us into debating the fiscal plan that we set out last year and the implications for growth and interest rates now, let us talk about some of the excellent measures that are in “The Plan for Growth”, because Government Members owe it to the British people to explain them rather than letting the Opposition muddy the water on what happened in 2008-09, when they clearly mismanaged the economy and were kicked out of office.

[Mr Mark Field]

My hon. Friend is absolutely right. “The Plan for Growth”, particularly in relation to the smallest start-up businesses and the idea of exempting them from much of new regulation and legislation or putting a moratorium on it, is a very positive way forward. I hope he will explore that a little further.

[Mr Gyimah]

I agree with my hon. Friend entirely. One of the great things about “The Plan for Growth” is that the Chancellor did not try to say that there is a silver bullet for creating growth in the economy, or that we can pick winners. No bureaucracy or Government can really pick winners to generate economic growth. I am reminded of a story—perhaps apocryphal, but certainly instructive—about McKinsey, the strategy consultancy firm, which produced an economic outlook for the 2000s that completely omitted the internet when identifying the key drivers of economic growth. Today the internet is a massive sector worth, I think, £100 billion and employing thousands of people. It is right that we have not tried to pick winners.

Looking at what the Chancellor has done, I note that it is we, rather than Opposition Members, who recognise that growth will come from the private sector, not from a state-led programme. That is why I agree with the four objectives that he laid out: to be competitive on taxes; to be one of the best places to start, finance and grow a business; to encourage investment in exports as a route to a more balanced economy; and to create a more educated work force.

I will focus on just one of those areas—starting, financing and growing small businesses—partly because I have an interest in it because my constituency is full of small businesses. Nationally, however, there are 4.8 million small and medium-sized enterprises, and they are responsible for 50% of private sector output and 60% of jobs. If we really want to create the growth that drives jobs, we should surely look to do so from the private sector.

Research by the National Endowment for Science, Technology and the Arts points out that 6% of the fastest-growing companies create 50% of the jobs, not just in the south-east, but throughout all regions and sectors. In other words, the start-up, survival and eventual success of small companies is vital for public policy and for creating growth.

The hon. Member for Coventry North West (Mr Robinson) mentioned bank lending, but fast-growing companies’ revenues are often volatile and their cash flows can be unpredictable. Banks do not want to lend to them, so we need to be able to create an environment for equity lending. One thing we know in the UK is that, if people want to raise amounts below £2 million, they find it incredibly difficult to do so. Such risk capital, however, encourages businesses to take a risk—to take on the new plant, to hire new staff—so it is great that there are so many changes to the enterprise investment scheme in “The Plan for Growth”.

Increasing relief to 30% means that someone who is going to invest in a business knows that they can offset 30% of their investment against tax. It will encourage people to take sensible risks and invest in those companies that will drive growth. Raising the relevant annual limit to £1 million and to £10 million per company means that companies can seek capital from high net-worth and private individuals, not just from institutions. Anybody who is involved in small businesses knows that people often rely on friends and family to support their business in its early stages, so it is good to see the Government backing those who are ready and willing to take such risks.

Raising the limit on qualifying companies to 250 employees means that the measure will apply not just to start-up companies, where the failure rate can be quite high, but to well-established companies that need capital to grow. I would like to see what more the Government can do to allow connected persons to enjoy such tax reliefs, because connected persons—directors—cannot enjoy them at the moment, and that is where businesses get much of the expertise that they need. By making investment in small businesses easier, the Budget recognises and encourages people who are willing to take risks.

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

I am listening very carefully to the hon. Gentleman. Does he agree that the real problem for small businesses is not in formation, as a number of them will inevitably die after a few years, but in taking a small business and making it into a larger business? I take his point about venture capital trusts, business angels and all the other mechanisms, but the only way in which we can achieve such growth is through bank lending. That is the real source of capital for small businesses, so how do we improve bank lending?

[Mr Gyimah]

I take the hon. Gentleman’s point and thank him very much for it. Anybody who has ever tried to start a business knows that banks do not lend to businesses with unpredictable revenues or cash flows. One has to raise equity to support small businesses, and the Budget includes a raft of measures to encourage individuals and institutions to invest in them. Entrepreneurs do not always mind whether it is a bank or an individual who is willing to invest in their business either in the early stages or when they need new plant; what they want is the money to grow their business and to hire new staff. That is how they look at it, and there are many appropriate measures in the Budget to address that.

The Budget also seeks, through the entrepreneurs’ relief and raising the cap on capital gains from £5 million to £10 million, to reward people who mortgage their home, take a low salary and start a business. That will not make the newspaper headlines, but in competitive terms it makes the UK a centre for investment. I have spoken to several people in the venture capital industry who say that they will now be thinking of coming to the UK to look for small business assets to invest in. It also means that an entrepreneur who lives in another country will come to the UK to set up a business such as Skype because he is more likely to attract investment—and yes, they might be from abroad, but they will employ UK residents. That is what is great about this Budget. Unless we understand that the engine of growth is enterprise—that it is individuals and their efforts who will drive growth—we will be barking up the wrong tree as we discuss this Budget.

In addition, we have measures such as the research and development tax credits; I cannot go through them all in the short time that I have available. It is good that small businesses that invest a lot in R and D can get some of that back in the form of a tax break. I am reminded of a husband and wife who came to my surgery. They had set up a business, having developed equipment to treat club foot, and needed R and D tax credits, but they had to move to Cornwall to do so. I hope that the tax relief that we are providing will not only be regionally based but that people will be able to access it wherever they are in the country.

Last week, Opposition Members came up with their growth plan—the right hon. Member for Morley and Outwood reiterated it today—which would levy the bank tax again and spend it on a series of Government programmes. What I like about this Budget is that it does not seek a Keynesian stimulus—we cannot have that because we have maxed out the credit card—but backs enterprise. It relies on the endeavour, the ingenuity and the efforts of the British people to get our country back on its feet again, in contrast to what the Opposition did, which was to get the country into a mess.

15:22

[Chris Williamson (Derby North) (Lab)]

In listening to the debate today, and certainly yesterday, I was interested to note that George Orwell’s Ministry of Truth is still alive and well and speaking through the Chancellor of the Exchequer. His relentless Newspeak mantra that we are all in it together just will not wash. When we consider that poverty is increasing, unemployment is going up, and the Government Benches are stuffed full of millionaires and people who are doing extremely well for themselves, it is complete and utter nonsense to suggest that we are all in it together.

It is not only wrong to suggest that for those reasons, but because the cuts are very unevenly spread, and depending on which part of the country someone happens to be from, a different level of cuts are being imposed. They are far greater in the more deprived parts than in the more affluent parts. The reality is that the poorest people in Britain will bear the biggest burden of the cuts imposed by this Administration.

According to a new report by the Institute for Fiscal Studies, the British people are suffering the biggest drop in their living standards for 30 years. It is no coincidence that 30 years ago another Tory Government presided over the last drop in living standards. The Business Secretary said today that he was happy to have the worst public services in the G7 countries by 2014-15. What an admission from a member of a party that used to claim to be a progressive party that stood up for ordinary working people! Clearly, that is a long way in the past.

[Mr Mark Field]

The hon. Gentleman makes great play of the idea of reduced living standards. That is not a phenomenon that has arisen only over the past nine months. Indeed, it was when the credit and debt bubble was built up for many years during the last Labour Administration that living standards for ordinary people began to be undermined. As for saying that we are all in this together, that is the very reason that the Chancellor has bravely decided, although it does not make a lot of economic sense, to keep the highest rate of tax at 50%. I fear, however, that he is doing grave damage in ensuring that some people who should be developing businesses here are leaving these shores, which is not in anyone’s interests, rich or poor.

[Chris Williamson]

There is nothing brave about what the Chancellor is doing. In fact, he is behaving like a bully; he is picking on the poorest and weakest members of our community. As I have said, the poorest in our society will bear the biggest burden of these cuts. If Labour had won the last general election, the measures that we would have put in place would have ensured that the poorest people in our country did not bear the biggest burden. That is an absolute fact, as was made clear by my right hon. Friend the Member for Morley and Outwood (Ed Balls) in his speech.

The Chancellor claims that this is a Budget for growth, he says that he wants a private sector-led recovery, and he argues that his catastrophic cuts are necessary. However, this Budget will not deliver the growth that the country needs, it will not precipitate a private sector-led recovery, and it will not create the jobs that the country desperately needs. While other countries are seeing their economies grow, the UK’s growth forecasts have once again been revised down—for the third time in 10 months. That is dreadful.

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

Does my hon. Friend agree that the Government and the Government parties seem to lack an understanding of the interdependence between the public and private sectors? Without a strong public sector and a strong private sector, this country will go nowhere.

[Chris Williamson]

That is a point that I will come to later in my speech.

The Chancellor is presiding over the highest and longest squeeze on public spending since world war two. My fear is that the Budget and the unprecedented cuts being pursued by the Government will impede economic recovery. As my hon. Friend said, the Chancellor refuses to accept that there is an umbilical link between the public and private sectors. Taking an axe to one causes catastrophic bleeding in the other. Last year’s PricewaterhouseCoopers report highlighted that connection admirably in pointing out that the half a million job losses in the public sector will be replicated in the private sector.

[Martin Horwood (Cheltenham) (LD)]

Will the hon. Gentleman give way?

[Chris Williamson]

No, I will not give way any more.

This Budget does little or nothing to ameliorate the public service cuts. The cuts to local council budgets in particular are vindictive, gratuitous and counter-productive. The Department for Communities and Local Government budget is set to experience a whopping real-terms reduction of 67.8% over the next four years.

The Chancellor needs to create demand in the economy. My hon. Friend the Member for Coventry North West (Mr Robinson) referred to the importance of the construction industry. Every pound invested in construction generates £2.84 in total economic activity, and 92p of every pound spent on construction is retained in the UK. Every pound invested by the public sector yields a return of 56p to the Exchequer, making it a net investment of just 44p. In spite of those facts, house building is at an all-time low, Building Schools for the Future was scrapped and housing targets have been abolished. The £250 million announced in yesterday’s Budget to support first-time buyers is not enough.

The proposed changes to the planning system, which as the Chancellor said will introduce a presumption in favour of sustainable development, contradict the proposals in the Government’s Localism Bill. What is going on? On the DCLG website, the Minister of State, the right hon. Member for Tunbridge Wells (Greg Clark), who has responsibility for decentralisation, is quoted as saying that the Localism Bill

“will enact new rights allowing local people to shape and influence the places where they live, revolutionising the planning process by passing power down to those who know best about their neighbourhoods.”

A Budget briefing from the UK Contractors Group states that

“it has been much harder to obtain definite information on investment intentions from a number of key public sector clients. Indeed, there appears to be some deliberate attempts to delay decisions and to obfuscate on forward plans. A prime example of this is the future of the school building programme. The Sebastian James review was originally scheduled to report to ministers before Christmas. In March, we are still waiting for the Department for Education to signal its intentions. Equally on energy supply, the industry stands ready to support the enormous amount of investment needed but to deliver this support effectively and efficiently we need a clear understanding of the future programme.”

It goes on to say how the health reforms have caused further confusion.

I turn to the Chancellor’s modest reduction in fuel duty. As other Members have said, it is more than offset by the imposition of the VAT rise. I have been lobbied heavily by small businesses and residents in my constituency, who say that the VAT rise on petrol is hurting and needs to be reversed. It is not acceptable for the Government to argue that they are prevented from doing so by the European Union—that simply will not wash.

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

Will the hon. Gentleman give way?

[Chris Williamson]

I will not give way any further, I am afraid.

The Chancellor should have done more to support manufacturing. The growth fund is inadequate—nowhere near as much as the regional development agencies were spending—business confidence is falling and the enterprise zones will not generate growth either. It is simply a case of rearranging the deckchairs. Let us not forget that it was the Tories who decimated manufacturing industries when they came to power in 1979. They also put all their eggs in the financial services basket, and that is why this country was overexposed when the financial bubble burst.

There are also problems with the Government’s ambitions on welfare reform. A Financial Times survey of businesses showed that three quarters of them said that they could not absorb lost public sector jobs, and that 57% were not interested in doing so. What hope do long-term unemployed people have of being able to get employment, given the welfare reforms and the so-called private sector-led recovery, which is not happening? They will simply not be able to get employment, given the cuts that the Government are bringing about.

Further to that, an investigation by my local paper, the Derby Telegraph, has shown that unemployed workers are being discriminated against by the insurance industry, which is saying that landlords who let their properties to unemployed workers will not be able to obtain insurance. A lot more people will be facing that situation as a result of the cuts, with more and more people losing their jobs.

We are in an economic downward spiral, and we need a virtuous circle. We need public sector investment to create jobs and demand in the economy, which in turn would create more demand and then more jobs. Yesterday, the Chancellor claimed that his decisions had brought economic stability, but the reality is that they have created a toxic cocktail of falling growth, increasing poverty and rising unemployment.

The inconvenient truth for the Chancellor is that his decisions have left this country facing the spectre of stagflation. To add insult to injury, he is borrowing an extra £44.5 billion a year, and for what? It is to pay for unemployment and lower growth. It is clear that he has lost the plot, and that we need a plan B. He said that

“society should not just be judged by the strength of its economy alone, but also by the compassion of its people”.—[Official Report, 23 March 2011; Vol. 525, c. 961.]

He certainly fails on the first point, and he is making the second very difficult. I am afraid that unless we get a plan B, this country is doomed to further decline.

15:33

[Mr Charles Kennedy (Ross, Skye and Lochaber) (LD)]

The hon. Member for Coventry North West (Mr Robinson) has had to leave the Chamber, but for reasons that I well appreciate he went to the heart of much of the economic debate since the general election, which has been about whether the pace and depth of the Government’s public expenditure cutting strategy is too far and too fast, and what implications it will have for other indicators. I suspect that that debate will go on for the remainder of this Parliament and for many years into the future.

The hon. Gentleman knows that, as something of an unreconstructed Keynesian myself, I have every sympathy with his side of the argument and have expressed my view on many occasions over the past year about the rapidity and depth of the public expenditure constraint and cutting strategy. None the less, whether or not it is too far and too fast, reading into it quite what he did is too much, too soon. The Government set sail so firmly last year that they and their economic policy are tightly lashed to the mast this year and will remain so in the years ahead. Their consistency of purpose has shown that. The Budget should be seen in that context.

The coalition Government’s economic fate will be sealed in the third to fourth year of the Parliament, when so many of the genuine longer-term implications of the strategy that is being pursued become clear. Despite the views that I have expressed in the Chamber and elsewhere in the past year, it must be acknowledged—I genuinely do so—that, within the severe self-constraints that the Government have imposed, there is much welcome ingenuity in the Budget.

I want to draw particular attention to the continuing pressure and policy direction on income tax personal allowances. I would like to underscore that, because the Liberal Democrats have been wedded to the principle and policy for many years. As a result of the proposals that the Chancellor outlined yesterday, in the financial year 2011-12, more than 1 million people will be lifted out of income tax altogether, and 25 million people will be better off. Women and part-time workers will be the primary beneficiaries of such a policy. I welcome that. Those figures have been verified today by our most authoritative independent source in this place—the House of Commons Library—in an excellent briefing note on the Budget, which has been circulated. It is important to place that on the record and demonstrate that, thanks to the Liberal Democrat input into the coalition Government, social conscience is continuing to be emphasised at the heart of Government policy.

I want to make two specific points from a constituency viewpoint. First, I welcome the fuel policy measures. Some 20 years ago, when Jim Wallace, a long-standing friend, was still a Member of the House, he and I embarked on a series of meetings and visits with the European Commission in Brussels. We were astounded to discover that a derogation was available to member states—it was a much smaller European Union in those days—on fuel policy. For the best part of those two decades, I and many others have hammered away at successive Governments, Conservative and Labour, to pursue such a policy, only to meet, every time, a brick wall. The Treasury hates that sort of thing, and I have no doubt that the Treasury institutionally continues to hate it and is not rubbing its hands with glee at the commitment that was given in the Budget. However, at last, the Government are applying for the scheme, which will be introduced for the most peripheral island communities as a means of lowering fuel prices. That is great.

Having argued for such a policy for nearly 20 years, it would be churlish not to welcome it. I simply make the point that the Government have to start somewhere, and self-defined island communities make sense. Equally, many more remote mainland communities have problems that are not essentially dissimilar, but for obvious reasons of definition, they cannot be included in the scheme. In my area, there are such communities around Lochalsh and Wester Ross. I hope that when the analysis of the scheme is examined, the impact on those areas will not be overlooked and that their continuing needs will be taken into account in the years ahead.

Secondly, the acceleration of the policy on the green investment bank through the Budget is welcome. An increase of £2 billion in the start-up funds that will be available to the bank was announced, and it continues to be a big priority for the Government. I say that because the Kishorn site in Wester Ross, a remote part of the western highlands, is a prime UK site to take advantage of the potential in offshore renewable technology. I have raised that issue many times, and the Secretaries of State for Scotland and for Energy and Climate Change are taking a great interest, which I welcome. The impetus that the Government give to the green investment bank will be critical in that respect.

Other aspects of oil policy in the Budget are controversial, but I offer one reflection from my constituency in conclusion. A great concrete platform—a classic historical example—for the North sea was built at Kishorn. To this day it extracts oil, but it was a case of boom and bust. The opportunity from renewables would mean sustained employment in that community, and that technology harvests natural resources, which can continue, essentially, in perpetuity. It is important that the Government continue to emphasise that.

In welcoming those important developments in this week’s Budget, and their potential impact on the economy, social fairness and areas such as mine, I hope that we can look forward to continuing resolve from the Government.

15:41

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

As Chair of the Select Committee on Business, Innovation and Skills, I wish to address my remarks to the so-called plan for growth. It is fair to say that I share with many people a sense of bafflement that the plan was published in the context of a Budget that shows that this year’s projected growth rates are lower than last year’s. That makes me wonder how a plan for growth works within the Government’s overall policies. This is the first plan for growth that I have ever known to predict a drop in the growth rate.

The plan is conspicuously devoid of references to jobs. If we have a plan for growth, we should reasonably expect an element of job creation to be included. The private sector is supposed to be mopping up those cut from the public sector as a result of cuts in public spending, and we ought reasonably to be able to expect to see how the plan deals with that.

The problem is that the plan incorporates a series of micro-measures. I approve of some and would not object to others, but they are intended to deal with a macro-economic programme that fundamentally undermines their objectives. The statistics have been reeled out several times, but the most important one is that the Government, in trying to keep interest rates down, have a fiscal policy that includes VAT increases. Those push inflation up, therefore increasing the chances that interest rates will go up. That could fundamentally damage the potential for growth in our economic capacity.

I welcome some elements of the plan, not least because some, such as the export credit insurance measures, were recommended by my Committee. I have to hand it to the Government, because I pushed for those when I was a Government Member, but I did not make much progress. At least on the surface, those measures address some of the issues that the manufacturing industry raises. I do not know whether they will be successful, but they are a step in the right direction.

Similarly, the creation of a creative industry council addresses a gap in the recognition that the creative industries play in exports and employment. My churlish quibble might be that among the 32 or so industrial ambassadors who promote our industries abroad there is not a representative of the creative industries. Given the huge export market of our creative industries, and in the light of some of the issues involving IPT abroad in particular, I would ask the Government to consider that point in order to reinforce the measures they have already taken.

Many of the objectives and plans of other Departments cut across what the Department for Business, Innovation and Skills is trying to do. We are just recovering—I hope—from the damage that the visa issue has inflicted on our export potential and ability to attract bright research students and undergraduates into our universities. All the feedback that the Select Committee received during its recent visit to China demonstrated that in the country that will be the economic driver of the world economy over the next 30 years, that issue has given the impression that Britain is not open for business. It is too early to say whether the measures announced on Tuesday will address that problem, but the initial indications from universities are that they will go some way towards doing so. However, damage has been done that is fundamentally at odds with all the objectives incorporated in the plan.

[Mr Binley]

I am delighted that the hon. Gentleman has found space in his speech to make the point about visas. I had the good fortune, owing to the sad occurrence that happened to the Chairman of the Select Committee, to lead that delegation to China, and I want to impress on the House how many people in both the British and the Chinese business community made the same point. This is a really important issue, because they think that Britain is closed for business. We need to change that perception. Does he agree that the Home Secretary needs to do more to ensure that the message gets through loud and clear in China?

[Mr Bailey]

I thank the hon. Gentleman for that intervention. For personal reasons, I could not join the Committee’s visit to China. However, he put those proposals to me forcefully, and I have spent the morning with the appropriate Ministers pressing that very point, because a lot of damage has been done. We need to rectify it if we are to realise any of the potential in the document.

On the localism agenda, noises were made in the Budget about improving planning for local businesses. Despite the fact, however, that the Localism Bill places planning priorities in the hands of local communities and neighbour planners, the local organisations set up by the Government—the local enterprise partnerships—have no defined role in that. I do not understand how we can have a legal process for devising planning programmes locally without incorporating the representatives of the local business community. There is enormous concern among the business community about the potential damage that that could cause.

[Martin Horwood]

Will the hon. Gentleman give way?

[Mr Bailey]

I am sorry but I am not taking any more interventions, because a lot of Members want to speak.

There are a number of measures that in themselves might be good, but which I do not think address the scale of the problem created by the Government’s macro- economic policy. First, research and development tax credits are very welcome. Business has been pushing for them, particularly in high-quality manufacturing, but at the end of the day they will affect only a few thousand businesses. They are very welcome but will not in themselves transform the economic landscape. Entrepreneur reliefs are also welcome, but they affect only a few hundred people. National insurance holidays for start-ups were announced some time ago, but so far only some 1,500 of the 400,000 that it was thought would apply have done so. The Government need to look at that again.

I have mixed feelings about enterprise zones. There will be one in my area, which I very much hope will work—I will certainly be working with the black country business community to ensure that it does. However, the reality is that enterprise zones are a recycled policy from the 1980s, which was not even very successful then. Indeed, those fears were expressed yesterday by the hon. Member for Chichester (Mr Tyrie), the Conservative Chair of the Treasury Committee. If the policy is to succeed, we have to prevent existing businesses from relocating just to pay less tax, while not necessarily employing more people. I am concerned that we may end up trying to prevent that by incorporating a lot of regulations that will defeat the purpose of having enterprise zones in the first place.

Although there are some measures in the plan that are good, they are not sufficient to address the core problem of the macro-economic policy that undermines them. They are hot on rhetoric, but they will not deliver very much, I am afraid—although my Committee will be probing and supporting those that can.

15:51

[Stephen Hammond (Wimbledon) (Con)]

Before I start, let me refer the House to the register. I give advice on transport matters to the Confederation of Passenger Transport, and economic advice to the Professional Contractors Group.

I am delighted to follow the hon. Member for West Bromwich West (Mr Bailey), the Chairman of the Business, Innovation and Skills Committee, who welcomed a number of the measures in the Budget. Some will clearly be helpful, so it was perhaps disappointing that the shadow Chancellor did not acknowledge them. He will probably be relieved to learn that I have little in common with him, apart from the fact that we were both economics undergraduates—I suspect that he was rather more distinguished than I was. I remember one of the first tutorials given by Maurice Peston, now Lord Peston, a former Labour adviser who taught us about economic debate. I just wonder whether the shadow Chancellor needs to reflect on how his proposition that the cuts are being made too fast and too deep is equally a subject of economic debate, and whether, as could be argued, he is being just as ideological and dogmatic as he claims the Government are.

For there are some economic facts—some economic truths—even if the shadow Chancellor did not want to accept them this afternoon. Whatever he says, this Government were left with the biggest peacetime deficit—a deficit that was 11% of GDP, twice that of Germany and Italy, while France had 8.6%. Borrowing is costing £120 million, and let us be clear: the total stock of debt tripled over the lifetime of the Labour Government. Those are facts.

[Mr Mark Field]

Does my hon. Friend also accept that the brutal truth is that for many years we have collectively lived well beyond our means? Only our near-zero interest rates are disguising just how damaging that is.

[Stephen Hammond]

My hon. Friend makes a correct point, and those are true facts. The causes of those facts may be in dispute. There is a clamour from the Labour party about the financial crisis. No one is suggesting that it did not happen, but equally the Labour party cannot escape the fact that this country had a structural deficit before the financial crisis or that Labour contributed at least partly to that crisis, because the regulatory regime that the previous Government put in place made no estimation of systemic risk.

There are risks to the Budget strategy—although I should say from the outset that I support it wholeheartedly. Those risks concern the lack of growth in places such as Brazil, India and China—which are slowing dramatically compared with previous levels—global inflation and the eurozone crisis, which the Prime Minister is talking about today. There are risks to the Budget strategy; it is just that the risks that the Opposition are talking about are not the risks that are real. Their strategy relies on their comment about the cuts being “too fast, too deep”. This is not just about the fact that no international economic body agrees with them, or about their plan to halve the deficit over the lifetime of this Parliament—which the shadow Chancellor reiterated again this afternoon, albeit without giving any detail. That deficit might or might not halve, but the total stock of debt would still rise, as would the cost of servicing it, even at this level.

The shadow Chancellor was wrong blindly to dismiss what is happening in the gilt markets. I read the yield curve this morning, just as he did, and it is clear that 10-year gilts yields are low at the moment. If the market believed that the Government’s debt reduction plan was going to change, those yields would undoubtedly rise and the cost of borrowing would rise substantially from £120 million a day, ruling out any prospect of more of the things that we really want to spend public money on. Labour Members shouted out, “Too fast, too deep,” yesterday, but they should remember that there are risks involved, and that theirs is an equally dogmatic strategy.

It has been interesting to observe the movement in the past year from the Opposition Benches to the Government Benches. Year after year, as we sat on the Opposition Benches, we listened to Chancellors changing their forecasts and changing the length of economic cycles. I would gently say to the Opposition that we have growth in the economy, and that there is growth for the next four years. Its overall level might be tinkered with slightly, but the forecasts often change—

[Chris Leslie (Nottingham East) (Lab/Co-op)]

Growth forecasts are going down.

[Stephen Hammond]

No, far from it. The hon. Gentleman was not in the last Parliament, when the Chancellor consistently got it all wrong. The Opposition say that the Government’s position is dogmatic, but my contention is that theirs is equally dogmatic.

[Mr Mark Field]

Does my hon. Friend also recognise the massive distinction, in the context of forecasts on growth and throughout the economic sphere, between what happened before the election and what has happened since May 2010? In the past the Chancellor of the Exchequer made the forecasts in his own interests. We have instituted the independent Office for Budget Responsibility, and it is a sign of the robustness of its independence that it has issued the downgrades in the forecasts to reflect changing circumstances.

[Stephen Hammond]

Indeed; I am grateful to my hon. Friend.

The shadow Chancellor, in contending today that the changes were too fast and too deep, once again relied on the Keynesian multiplier. He is an eminent economist, and he should know better than to rely too heavily on that mechanism. It has traditionally held out the prospect that public sector investment has an impact on the private sector, so there could be an element of crowding out and of limiting of growth potential. If the right hon. Gentleman has read the recent academic research, however, he will also know that the size of the multiplier in the growth phase of an economy is about a third of the size of the multiplier when an economy is going into recession. To rely on that thesis is therefore to rely on a very weak economic mechanism.

But let us leave the world of deficit denial behind, and welcome a Budget that does not bow to pressure. It is hugely important that the Government should stick to their policy of deficit reduction, as that is the only way to achieve long-term growth in the economy. Market rates clearly indicate that there is confidence in what the Government are doing, and to be blown off course would result in a loss of confidence. The cost of borrowing and the yields on 10-year gilts, which are important for the cost of industry borrowing and UK Government borrowing, would change. Domestic inflation would rise in those circumstances, and any indication of making a special case for one would result in having to make a special case for another. The Government are therefore to be congratulated on sticking to their policy.

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

Will the hon. Gentleman give way?

[Stephen Hammond]

I am sorry; I have no more time.

Many colleagues on both sides of the House, including the Chairman of the Select Committee, the hon. Member for West Bromwich West, have made the point that the macro is always based on the micro. The devil is always in the detail. This is the first Budget for many years in which the detail has matched the rhetoric, and in which the detail on the micro side supports the detail on the macro side. Measures include the corporation tax rate, and the 21 new enterprise zones. Far from being a failed policy of the 1980s, this was a great success. Only earlier last year, when I travelled to Merseyside and Manchester to talk to business people there in my role as a shadow Transport Minister, I found that people were asking for this and were keen for it to come through.

The measures to support small and medium-sized enterprises include research and development tax credits and the change in the enterprise investment scheme, which, alongside what is happening with the banks, will bring new capital into the country. These are micro-economic reforms that will come through to build macro-economic success through growth. The simplification of the tax code, the abolition of regulation, the acknowledgement that the 50% tax rate must be only temporary—these are all key levers of growth. They are a sign that in this Budget, the rhetoric is matched by the detail and the commitment.

Finally, growth must come in order to be fair to families, and again with this Budget, the rhetoric matches the detail. The increases in personal allowances, taking the lowest income earners out of paying tax altogether, ensuring that the 40% tax band is not extended, the freeze in council tax—those measures will all impact on real people, and it is real people and the private sector, not just the Government, who build the growth of the economy. The Budget is to be commended; it is the first for some time in which the detail has matched the rhetoric.

16:01

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

I listened to the Budget debate yesterday as well as today, and I want to take up some of the points raised in it. I clearly come from a different economic school from the hon. Member for Wimbledon (Stephen Hammond)—and I probably come from a different one from his erstwhile colleague the shadow Chancellor as well!

The premise of the debate so far has been that as a result of profligate public expenditure by the last Government, we have an economic crisis on our hands. The conclusion is that we can solve the deficit largely by cutting public expenditure. My hon. Friend the Member for Bassetlaw (John Mann), who is no longer in his place, referred to various Treasury charts, and I have to say that one that was published a short while ago demonstrates that the profligate expenditure argument is simply not true.

Let us consider the recent Treasury chart about public spending under the last Government and previous Governments as a percentage of gross domestic product. It shows that public expenditure under the last Government was, in fact, less than it was at the height of Thatcherism and under John Major’s period in office. I shall circulate this chart to Members. I know this is true because for many of the years the last Labour Government were in office, I was attacking them for not spending enough and for poor expenditure. I fully agree with the criticisms made of the private finance initiative; I opposed every PFI scheme that was proposed.

If we look at the chart to find out when expenditure as a proportion of gross domestic product rose dramatically, we discover that it was, as the shadow Chancellor said, only when the economic crisis hit and we had to pump out the quantitative easing into the economy. In my view, the deficit occurred as a result of the failure to match expenditure with tax justice. We had large levels of tax evasion and avoidance and, in addition, we failed to develop a whole range of other tax bases within the economy. Genuine criticisms can be made of over-dependence on the financial sector and the failure to develop the manufacturing sector during that period.

What do we do now? It is not all about cutting expenditure. In yesterday’s debate, reference was made to the crisis of the 1930s and the lessons that can be learned from it. It is worth Members returning to J.K. Galbraith, who I believe wrote the best book on the crisis, “The Great Crash 1929”. What Galbraith says is that although economic structures can be put in place, what will defend us most against a repeat of the crisis is memory. We seem to forget that the cause of that crisis was the cause of this crisis—speculation by the banks and other speculators and, yes, a Government who failed to regulate. I have to say, however, that when a number of Members called for bank regulation in this House, there was an element of quietude on all sides. I remember fighting for four years, in almost a solitary capacity, to secure the passage of the City of London (Ward Elections) Bill at a time when we were pressing for regulation.

One of the lessons of the 1930s is that the one thing we should not do in a recession is cut public expenditure, because that will turn a recession into a depression. However, it is exactly what the Government seem to be doing. At present 2.5 million people are unemployed, 1 million young people are unemployed, according to recent statistics 1.7 million people are in voluntary and part-time employment, and the £80 billion cuts proposed by the Government will make at least another 1.2 million people unemployed.

What I am really anxious about, however, and what we should all be anxious about, are the cuts in capital expenditure. We are told that there will be a 4% cut next year and a 6% cut in the year after that, and that local government capital expenditure is to be cut by 30%—possibly more, according to the Red Book. I believe that if that element of demand is removed from the economy, we will experience either a deflationary spiral or the worst of all worlds, stagflation: increasing inflation along with stagnation in the real economy. I do not believe that there will be a double dip. My fear is that we will become like Japan, where asset values are falling, and will scrape along the bottom of economic activity for perhaps a decade.

People ask what the alternative is. I have mentioned the lessons of the 1930s, and Keynes’s name has been bandied about many times today. It is true that Keynes concentrated on the bond market, but one of the main lessons to be learned from him is that the key issue is unemployment. I think we should be declaring, across parties, that our objective must be the return of full employment, which appears no longer to be cited as a policy objective. As has already been pointed out, the most effective way of restoring investment is through capital investment—the development of capital programmes in housing, renewable energy and transport. I ask Members to look at the green new deal and to examine the “One Million Climate Jobs” booklet produced by trade unions including the Public and Commercial Services Union, which sets out a capital investment programme that could get people back to work.

How would that be paid for? Let me list just a few short-term measures. I am very pleased that windfall taxes have come back into fashion, and I commend the Government for that, but I do not think that the windfall taxes on the banks go nearly far enough. The lending rates on personal loans in particular are exploitative and extortionate in the markets. I also think that if we are to consider organisations that have profiteered during the recession, we should consider the supermarkets. Commodity inflation is about 3%, but they have increased prices by 6% and above, and they have been profiteering for a number of years.

I think that a windfall tax on energy is appropriate. The current profits of British Gas average 24%, and Ofgem has reported an average profit margin of 38% per customer since last November. That is profiteering during a recession. Some economists have suggested that a windfall tax in those three areas would produce up to £10 billion to get people back to work.

Let me make clear, however, as I did under the last Government, what should happen in the longer term if we are to avoid future deficits. Yes, it is about careful expenditure and it is about having confidence in local and regional decision making, but it is also about achieving a fair and just tax system that will fund our expenditure. First, we must tackle tax evasion and avoidance. What has been done about that by past Governments and by the present Government is trivial. According to Richard Murphy and John Christensen of the Tax Justice Network, £150 billion a year is potentially available to us. Secondly, we need a financial transaction tax. We have been talking about a Robin Hood tax for too long, and we should now be implementing it. Thirdly, I think we should deal with land speculation. I believe that now is the time for land value taxation. If we tax the wealth in land, we will encourage development rather than preventing it.

On Saturday, there is to be a “march for the alternative”. I expect at least half a million people to march in the streets against the cuts, and I want them to march for a just alternative. I believe that one of the alternatives they will expect us to implement in the House is a fair taxation system allowing investment in public services so that we can all share in that wealth.

16:09

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

I refer Members to my entry in the Register of Members’ Financial Interests.

I am delighted that business, as well as families, took centre stage in yesterday’s Budget. Enterprise zones will be a beacon for growth. There will be two in Yorkshire: one in Leeds and one in Sheffield.

[Mr Binley]

My hon. Friend might also be pleased to know that West Northamptonshire Development Corporation will shortly submit an application to create an enterprise zone in Northampton, which will bring 10,000 new jobs to an area that is supposed to be building 50,000 new homes over the next 15 years. Does that not show that the Budget is particularly about promoting growth, and that this is just one way to achieve that?

[Julian Smith]

My hon. Friend is absolutely right, but he will be facing stiff competition from the North Yorkshire local enterprise partnership, which will be seeking to get ahead of his proposal.

The most exciting aspect of yesterday’s Budget was the direction of travel the Chancellor set in respect of the conditions for business that he wants in Britain, because growth will ultimately be achieved through the individual efforts of business leaders, not through Government. The 2% cut in corporation tax signals to companies that Britain is once again open for business. It is now clear to every potential investor, in the UK and overseas, that this Government are committed to putting in place the best corporation tax rates in the G20 by the end of this Parliament. Overnight, global companies such as WPP have said that that will make a difference to their decisions on where to invest. That is great news.

The Budget also encourages those who want to set up a business to go for it. It contains a big nudge from the Government for people to give entrepreneurship a go. There is a golden carrot to dangle before those thinking of taking a risk: a 10% capital gains tax rate up to £10 million. The profit motive is a motivator, and the Budget clearly says, “If you believe in your business, take the risks and are successful, you will be much better off financially.” Therefore the message is, “Unless you’re a cracking singer or can dance like the Business Secretary, forget ‘The X Factor’ and ‘Strictly’; this Budget gives you a golden ticket to join start-up Britain.”

The moratorium on new legislation for small businesses with fewer than 10 employees will be a big relief for entrepreneurs, who need to be fully focused on jobs and growth rather than the latest wheeze from Whitehall. When I was a small business owner, dealing with employment law took more time than any other management responsibility. Employment laws and regulations have been piled on British business since 1997.

[Ian Lucas (Wrexham) (Lab)]

Will the hon. Gentleman give way?

[Julian Smith]

Not at the moment.

Let us be clear: employers want to get on with running their business. They want to allow their workers flexibility in their jobs and to give them training, but they also want to make decisions themselves. The changes in the Budget will provide welcome relief from administration, rules and red tape, which always come from new legislation. Opposition Members have already started putting about the myth of this being about “nasty Tories” who have no interest in equal rights. It is nothing of the sort. Labour took some good steps on employment, and we have accepted many of them, but the last Government ultimately failed to see that adding on regulation after regulation was counter-productive; they just did not know when to stop.

This Budget establishes two principles: first, that micro-business needs to be treated differently from other business, which is very important for my constituency; and, secondly, that creating jobs is more important than adding more regulations to existing ones. Everything we do should encourage business and make things easier for risk takers. Only by doing that will we get this country’s economy growing to its full potential. Jam-packed with other measures as well as the ones I have talked about, this Budget has set us firmly on the right course.

16:15

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

The first thing to say about this Budget is that it has to be seen in the context of last year’s Budget, because that gave us a large-scale fiscal adjustment of some 6.9% of gross domestic product over the course of the Parliament and the measures announced this year were inevitably going to be smaller in scale and focus. So our discussion is not so much about the measures about to be taken, but, inevitably, largely about the measures already taken: the VAT rise; the shift from the retail prices index to the consumer prices index for so many things; the pay freezes; the child benefit freezes; and the cuts to public expenditure. All those are going to have a far larger impact on household finances and on businesses than anything announced yesterday.

The one headline the Chancellor did not want to see in today’s newspapers was anything that smacked of a U-turn or a reversion to a plan B in terms of his broader strategy. What that means for the public is set out in the forecasts published alongside the Budget by the Office for Budget Responsibility. For the third time since the election, we have seen a downgrading of growth forecasts—growth down last year, this year and next year. Inflation forecasts are up and unemployment is at a 17-year high. The forecasts for borrowing and the interest to be paid on borrowing are also up, even though dealing with that is supposed to be the central purpose of his grand economic strategy. Those forecasts underline the fact that growth is needed and although the Chancellor will continue to claim that any problems he is addressing are Labour’s fault, he will find out that, to use his own metaphor, this particular tank of political fuel runs out over time.

My right hon. Friend the shadow Chancellor fairly pointed out that growth was increasing at the time of the general election, before falling back sharply at the end of the year. I am not sure that even the Chancellor believes that that was about snow. It was about confidence, as the country realised what a tough time lay ahead for family budgets over the next couple of years. The central antidote to all this bad news about cuts was supposed to be the growth plan published yesterday. The Chancellor announced a stream of measures on innovation, tax, planning, training and so on. It was tempting to close one’s eyes, just as the Justice Secretary did, imagine a different accent and be reminded of some of the Budgets that the Chancellor used to attack so strongly for their blizzard of initiatives. We can imagine a range of groups being invited to the Treasury and the Department for Business, Innovation and Skills to be asked what was on their shopping lists. The question for us is whether the sum of these various parts adds up to a plan for growth or whether they are a list of things to insulate the Government against the accusation of having no plan for growth—the two are certainly not the same thing.

I wish to discuss a few of the individual measures, because I believe that my party should adopt a level-headed approach to them. Some of them may work, some of them may not and some of them are, in fact, Labour party policy. The technology and innovation centres announced by the Government are welcome. They were recommended by Dr Hermann Hauser in a report to the Labour Government last year and are based on the successful Fraunhofer institutes in Germany. Their essential task is to bridge the gap between concept and production—between the great idea and the manufactured product. We have long heard commentators say that Britain is less successful at doing that than other countries, so I am glad that the Government have carried on this idea begun under the Labour Government.

The Chancellor also made much yesterday of his new regime for short-life assets in manufacturing, which is designed to encourage investment in new machinery. That has been welcomed by manufacturers over the past 24 hours, but before the Government get too carried away we have also to remember what the Chancellor announced last year: a hit of almost £3 billion on manufacturing to pay for his corporation tax cut by cutting capital and investment allowances. In other words, he made manufacturing—the part of the economy that needs to invest in new plant and machinery—pay for a tax cut for the parts of the economy less reliant on such investment. This is not, as he claimed yesterday, a conversion to support for making things; this is the Chancellor applying a dressing to a wound that he created last year. What he has given back in the measures on short-term assets is a lot less than he took last year—[Interruption.] If there is any doubt about that, I refer the Economic Secretary to pages 42 and 44 of the Red Book, which clearly set it out.

The Chancellor also announced 21 new enterprise zones, with the relaxation of planning control, business rates and so on. If they can create jobs in areas such as the black country, which I represent, they should be welcomed. I sense in the proposals, however, the spirit of Lord Heseltine, who was also involved in the regional growth fund. We had enterprise zones back in the 1980s, when unemployment was 3 million and industry was collapsing all around us. I hope that in reaching for them now the Government are not privately expecting a repeat of the circumstances that gave birth to them in the first place. I also hope that they are not a consolation prize for local enterprise partnerships that are disappointed when the results of the first round bids for the regional growth fund are announced in a week or two’s time.

Some of the measures are worthy of consideration and support, but do they add up to the plan for growth that the Government have claimed they are? Surely to answer that we need to return to the broader context. There is no denying that, had the outcome of the election been different, there would have been difficult decisions to take. It is important for all of us to say that to the electorate. The deficit cannot just be wished away, but there is a legitimate debate to be had about the speed and scale of deficit reduction and its impact on families up and down the country.

The deficit is not there because the Labour Government lost control of the public finances; it is there because of the hit that our public finances took as a result of having a large financial sector and because of the measures we took to stop recession turning into depression. That is not a loss of control, but a Government acting to stop recession having a more painful impact on the public and on business than would otherwise have been the case.

The Budget claims to be a Budget for growth, but there is no escaping the fact that the growth forecasts have been reduced. That is what will matter to businesses and families throughout the country.

16:22

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

I speak not merely as a member of the Treasury Committee but on behalf of tens of thousands of working people in my county of Herefordshire. It is a county where the average income is £21,000, where residents face the very high costs of living in a rural area—especially for fuel and transport—and where there is a very high relative number of small businesses. These are real people putting in the hours to support themselves and their families at a difficult economic time.

I welcome the Budget and especially several measures that will have a direct impact on the well-being of my constituents. The first is the cut in fuel duty, which we have pushed for very hard with the Treasury. The second is the rise in the income tax threshold, which will take many Herefordians out of income tax all together. The third is the support for small businesses and entrepreneurship; for apprenticeships; for local housing; for the university technical colleges; for the green investment bank; and, finally—a measure that is perhaps as important as any of those—for filling in potholes, an area in which Herefordshire rather specialises.

The Budget marks a further decisive step in dealing with the disastrous legacy of the previous Government. We know the brute economic facts, but it is important to remind ourselves of the wider picture: that this country now faces paying nearly five times more in debt interest every day than it does on care for the elderly; and that we have, in addition to the disclosed public debt numbers, £200 billion-plus of off-balance sheet debt for the private finance initiative. The wider story, however, concerns the atmosphere of unreality on the Labour Benches, and particularly on the Front Bench, which one might describe as a fog enshrouding planet Balls.

The intention seems to be to rewrite history and to deny, as the shadow Chancellor did today, the fact that in 2007-08 the previous Government created a 3% budget deficit at a time of 3% economic growth—a structural deficit that had existed at that point for seven years. It is unrealistic to pretend that America and Germany are parallel cases to ours in terms of economic recovery. America has the global reserve currency in the dollar and therefore has a far greater intrinsic ability to inflate its way out of trouble, and Germany has benefited massively over the past year or two from the expansion in the American purchasing of industrial goods. Their situations are not parallel to ours. The truth is that our economy is grossly unbalanced and that that is what exposed us to the situation we find ourselves in.

Also unrealistic is the Opposition’s refusal to acknowledge the weight of expert opinion supporting the present policy, including from the G20, the IMF, the OECD, the US Treasury Secretary and even Tony Blair. The Bank of England testified only a couple of weeks ago that without the current austerity measures, our borrowing costs would be 3% higher. Given the amount of refinancing we have to do over the next two or three years, that implies additional borrowing of some £10 billion. If one has any doubts about this issue, one need only look at Portugal, which is close to economic meltdown.

Finally, we have the shadow Chancellor’s denial, which we heard again today, that any deficit ever existed. As they say, “De Nile is not just a river in Egypt.” [Interruption.] I am in town all week! Labour’s strategy has been pretty clear: ignore economic reality, disavow the previous Chancellor’s own plans to make cuts and increase taxes, attack the coalition wherever possible and hope the voters do not notice. The result has been a refusal to articulate any constructive, concrete proposals at all. I note the contrast with the Republicans in the US, who have opposed the Democrats with great vigour. Whatever their personal merits, the fact is that the Republicans in Congress have created positive alternative plans that have to be debated. That is in sharp contrast to the actions of the Opposition in this House.

The truth is simple: this country has suffered the biggest economic shock since the great depression. It will take years to recover fully from that shock and the world’s economic system remains very fragile. The USA took slightly longer than a decade to rebuild after the great crash of 1929. Japan started to recover from the asset-based deflation of the early 1990s only a few years ago and it will be a doubly cruel blow if the earthquake sets back its recovery any further. The idea being pushed by the Opposition that this Government are in any way responsible for the current economic mess is laughable.

[Martin Horwood]

The hon. Gentleman makes a powerful case about the Opposition’s economic strategy, or lack of one. Does he agree that what they might also have done is risk an increase in interest rates that would have hit everyone with a mortgage, everyone with an overdraft and every new business seeking to borrow?

[Jesse Norman]

I thank the hon. Gentleman for that intervention. It is certainly true that if we had higher borrowing costs and a tighter monetary policy, interest rates would be higher, mortgage rates would be higher and the average mortgage holder and household would be suffering considerably.

I welcome the fact that the Budget is a reforming Budget that has not shied away from taking difficult long-term decisions, such as the proposals to merge income tax and national insurance. A properly functioning system of social insurance could have been a very fine thing—indeed, that was what Beveridge originally anticipated—but the system has been allowed to slip away from the contributory principle into a disguised income stealth tax. The new reform will bring home to people just how heavily they are taxed and will encourage them to demand better public services for their money.

In short, the country is emerging from a time of fake capitalism that was matched by fake government—a time when Fred Goodwin could destroy an august 200-year old financial institution, squander billions in shareholder value and then walk away with a fortune and have a Minister sign off on his pension. The economy became grossly unbalanced in that time and executive compensation soared both inside and outside the financial sector with little or no relation to performance. It was a time of increased complexity, short-termism, bureaucracy and regulation. As every Herefordian knows, what we need now is real capitalism, with real people taking real risks, investing real time in real work and reaping real rewards for their efforts, and this Budget is a very important step in that direction.

16:30

[Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)]

The Budget was billed as a Budget for growth, which my constituents wanted and the Sunderland economy needed, but it is not a Budget for growth. In fact, it is a Budget in which the Chancellor has had to admit that he is failing to create growth. What is growing after this Budget and the tax and spending announcements of the past 10 months? I will tell you, Madam Deputy Speaker, what is growing: the Chancellor’s nose. It is the dole queues that will be growing, with all the projected job losses. The cost of living will be growing, with the Government’s regressive VAT hike, which hits the poorest families hardest. The number of young people not in education, employment or training will be growing, due to the scrapping of the future jobs fund and the education maintenance allowance.

[Martin Horwood]

Will the hon. Lady give way?

[Mrs Hodgson]

Not at the moment.

John Campbell from Washington e-mailed me yesterday. He currently receives £30 a week in EMA to support his studies. He asked me what support he would now get. I cannot answer, because Ministers have not told us yet, despite repeated hints from the right hon. Member for Bermondsey and Old Southwark (Simon Hughes). I share the disappointment that he will no doubt have felt yesterday. Students are making choices about their future now. How can they do so while this silence persists?

We heard that the Chancellor will lift the tax-free allowance by £630 in 2012. I am sure that those of my constituents who will be lucky enough still to have a job this time next year will be very grateful for the extra 92p a week they will get. Perhaps they could use it towards the increased prices of their weekly shopping and energy bills, or to offset their loss in tax credits or frozen child benefit. What this Chancellor gives with one hand, he takes away many more times over with the other.

I remember, as I am sure do my hon. Friends, the furore in 1999 when the Government of the day announced an increase in the state pension of 75p a week, which was widely decried as an insult, despite being part of a wider package of measures that included the introduction of the winter fuel allowance and free TV licences. I checked with the Library this morning and found that 75p in 1999 is equivalent to around £1.05 today, which is 14% higher than 92p. Using that reasoning, the Budget’s increase is an even bigger insult. The right hon. Member for Havant (Mr Willetts), who was shadow Minister for social security, asked my right hon. Friend the Member for Edinburgh South West (Mr Darling) at the time whether he felt guilty about cutting taxes for business at the same time as making such a derisory offer. I wonder whether the right hon. Member for Havant feels guilty today.

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

I am grateful to my hon. Friend for giving way and for highlighting the effect of the proposals on her constituents, but she is perhaps being a little unfair to the Government on pensions. After all, they are solving some of the problems by bringing forward proposals that will eventually mean that some people might not be able to retire until they are 80. Is that not the kind of measure they should have highlighted more yesterday, rather than the ones they chose to highlight?

[Mrs Hodgson]

Although we all acknowledge that we will have to work longer because we are living longer, I do not think that anyone in this Chamber would want still to be working when they are 80.

At the Liberal Democrats’ spring conference last week the Deputy Prime Minister referred to the 75p increase in 1999 as an indignity, so I wonder how he views the 92p increase announced yesterday. Family income is vital to our growth prospects, as squeezing household budgets means less consumer spending, which in turn means lost profits and jobs in the sectors that depend on it.

How will growth be encouraged in Sunderland and the north-east? We heard yesterday that 21 local enterprise zones will be created and that one of them will be in the north-east local enterprise partnership on Tyneside. Seeing as we have an LEP for the whole north-east, leaving aside Tees valley, which is being given its own LEP and enterprise zone, why can we not have an enterprise zone that covered a wider area or more areas within the north-east enterprise zone, such as Wearside, in which Sunderland sits, which has both the need and potential, which are two criteria?

I was interested to read today in my local paper, the Sunderland Echo, that the Chancellor may have made an error in announcing that the local enterprise zone was going to be in Tyneside, because the location of the zone has not yet been decided. The Energy Secretary spoke to the Echo on that point and said that there was going to be a zone in the north-east local enterprise partnership area, and that the north-east LEP would help to choose where it was. He may need to go back to school and re-take his English baccalaureate—perhaps he does not have one—in geography, however, because Tyneside and the north-east are two very different areas.

That aside, we all know that if the Government were serious about stimulating the private sector they would never have abolished One North East or slashed funding for regional development. The Chancellor said that he wanted his Government to be the greenest ever, and he told us that funding for the green investment bank would be increased, in turn increasing the amount that it could leverage from private sources. I will not complain about any measures to increase investment in the low-carbon sector, particularly when that investment is going to help companies to innovate and create jobs in the north-east, but the Government could and should be doing so much more. Germany and China are taking action right now to stimulate green growth, so surely it is in this country’s economic interests to do the same and attract businesses before they locate to the countries that are taking action.

I also have concerns about the much heralded renewable heat incentive. A business man with a small to medium-sized enterprise in my constituency wrote to me to make the point that, had the scheme started next month, it had the potential to provide a big boost to the solar thermal sector. As it is, it will not start until October next year, and at a much reduced level to that which was expected. So, in effect, and even with the premium payment, the whole industry is on hold for 18 months, because who would invest now when they could get an incentive to do so in the next 18 months? That does not help the renewable energy sector; it puts the industry in limbo, and it puts jobs and innovation at risk.

My constituents may be pleased that the Chancellor has taken some action on fuel duty, however—an issue that many of them have contacted me about in the past few weeks. Cutting the duty on fuel by a penny will have made for some good headlines, and we all know that he needs those, but he failed to tell my constituents watching yesterday that a 1p cut in duty will not make up for the 3p VAT increase that he introduced at the beginning of the year. Again, he gives with one hand and takes much more away with the other.

There is so much more that I wanted to raise, but I will do so another time. Like so many of this Tory-led Government’s policies, this Budget is for the few, not the many. The bottom line is that this so-called Budget for growth has caused the Office for Budget Responsibility to revise down growth predictions; it had failed before it was even printed. The Chancellor spoke for an hour yesterday, but he provided almost nothing from which my constituents could draw any comfort. So, on behalf of those constituents, in particular the young and the struggling families, I urge him and his ministerial colleagues to listen seriously to the concerns that hon. Members have raised today.

16:38

[Jessica Lee (Erewash) (Con)]

Thank you, Madam Deputy Speaker, for calling me to speak in this important debate. I, for one, welcome the Chancellor’s Budget statement, and I look forward to voting on all its details and recommendations. In particular, I am relieved to be able to say that Britain is once again open for, and backing, business.

Before I was elected last year and since, in my meetings with and speeches to the business community in Erewash, I have always reflected on how important it is that we in this country make things again. I was pleased to hear Sir James Dyson speak a few years ago, and I think my right hon. Friend the Chancellor referred to him in his speech yesterday. To hear somebody of such experience, gravitas and talent speak is really encouraging, and from that I saw the real need to support budding scientists and entrepreneurs. In particular, there is a genuine need to support young women who are thinking about a science career. We all know that, for whatever reason, engineering and science, as a profession, has had a lower uptake of young women wanting to pursue it. That is a shame. Some of the measures set out in the Budget statement and by the Business Secretary do all they can to encourage young women by saying, “Now is the time. You can have a career in science and engineering—it is for you, and there are the opportunities to do well.”

In Erewash, we have a proud history of manufacturing, including traditional lace-making, furniture-making and engineering. Sad to say, the traditional lace-making, in particular, has declined over the past 10 years or so; indeed, we have just one such factory left. The people there have used their entrepreneurship and ingenuity to keep it going. I am sure that everyone in the House can imagine that that brings with it daily challenges, such as finding appropriately qualified mechanics to repair the machines and finding new business, but they are trying their best and doing well. However, we also see, unfortunately, a number of empty lace factories where once they were busy and flourishing. Under the last Labour Government, manufacturing halved as a share of gross domestic product, and jobs in that sector declined by 40%.

Moving on to the many positives about business and entrepreneurship in my constituency, we have several successful small and medium-sized enterprises, particularly in high-tech engineering and aerospace manufacturing, and there is a great need to support them at this time. Geographically, there are many advantages to my constituency, which is based right in the heart of the country. We have nearby large employers such as Rolls-Royce and Toyota, as well as the universities of Derby, Nottingham and Loughborough, all with very successful business departments.

We all know—the figure is startling every time it is said—that £120 million per day is paid in debt interest. That is more than the schools budget and the defence budget. There is always moaning and groaning from the Labour Benches whenever that is mentioned, but we have to deal with the facts as they are. When my constituents come to my weekly surgery, they always start by saying, “We know that the country has a lot of debt, and we know that we have to sort it out.” There is a realism and a level of acceptance about it, and that is how we have to move the debate forward.

For me, the Budget statement marked a line in the sand. What I heard is that Britain is back, and that Britain is backing business. This morning, we saw the headlines saying that in the light of the measures announced yesterday, the WPP agency may well return to the UK with its business. I suspect that it will be the first of many important businesses that are going to come back and invest. That is a great start.

The Budget contains several steps that will help business. First and foremost, there is the cutting of corporation tax by 1%, which will take it down to 23% by 2014. There will be 50,000 more apprenticeships, taking their number to more than 250,000. Locally, we have a strong history of supporting apprenticeships, and that will further encourage new jobs, investment and training for young people. The doubling in the number of university technical colleges is a positive, as is extending the small business rate relief holiday to October 2012.

I was particularly delighted to hear the announcement about the establishment of an enterprise zone for Derbyshire and Nottinghamshire. My constituency is right in the heart of that area, and I will do my best to ensure that we are its beating heart; I will fight for an appropriate level of investment. We also have some of the centres of innovative manufacturing that were announced yesterday, at Loughborough university and the university of Nottingham. Again, many young people in my constituency could benefit from that training and help, and I will do all I can to make those facilities available to them.

The enterprise zones will follow the structure set out in the local enterprise partnerships. We were lucky to have a strong LEP application for Derbyshire and Nottinghamshire from the outset, and it was one of the first to be accepted. That group is already taking great steps towards being up and running, so that it can take in bids and bring in investment and jobs. I think that the enterprise zone will assist in that even further.

Finally, the freezing of council tax will benefit hard-working families in my constituency. We are lucky in Erewash because this is the second year running in which the borough council has frozen council tax. That will really help people.

I welcome the Budget speech. I will fight for investment for my constituency, and I certainly back the move to help manufacturing.

16:46

[Ian Murray (Edinburgh South) (Lab)]

There was so much and yet so little in yesterday’s Budget that could be talked about this afternoon, but I will concentrate on the growth section.

The first line of the foreword to the Government’s document, “The Plan for Growth”, states:

“This Plan for Growth is an urgent call for action.”

At last, after almost a year of the coalition Government, they have finally realised that hard-pressed businesses and families up and down this country need an urgent call to action for growth. However, I do not see a call to action for growth in cutting public spending too deep and too fast; the highest unemployment since 1994; the highest youth unemployment since records began, with no plan to get it down; inflation on the march, with the retail prices index at its highest level in 20 years; the largest squeeze on living standards in modern times; increasing VAT to 20%, which puts more pressure on consumer confidence and further compounds business insecurity; a continued lack of liquidity in lending markets through our banks; fuel prices that are out of control; consumer confidence at its lowest level in more than 20 years; and an overwhelming, ideologically driven attack on public services. That is certainly hurting people in my constituency, but it definitely is not working. We have all that, and the real effects of the VAT increase and the public sector job losses are still to feed through to the real economy. This does not seem to me to be a call to action for growth; it is no plan for growth, or perhaps a panic plan for growth.

That point is made clearly by the Office for Budget Responsibility, the independent body set up by the Chancellor, which we debated a few days ago in this Chamber. Even after the Chancellor’s “Budget for growth”, which, to use his words, should add fuel to the economy, the OBR has reduced its growth forecast for this year and next year, as it did last year. It is surely a huge embarrassment for the Chancellor that his Budget for growth actually downgrades growth. It is extraordinary that it does, given the urgent call for growth in the Government’s own document and the Chancellor’s own words that it would be a Budget for growth. This must be a historical first.

The Chancellor has failed to realise that cutting too deep and too fast is damaging our economy. The public and private sectors are inextricably linked. Slow growth and rising unemployment will make it harder to get the deficit down. The move from 2.1% to 1.7% is a reduction. Unemployment has been revised up to 8.2%. As someone said to me at my surgery a few weeks ago, “How can you possibly pay back debt from the dole queue?” They were absolutely right.

[Martin Horwood]

In its submission to the comprehensive spending review, the hon. Gentleman’s party suggested that the cuts in unprotected Departments should be no more than 20%. What the Government actually delivered was only 19%. Does he think Labour’s proposed cuts were going too far and too fast?

[Ian Murray]

I find it surprising that the Liberal Democrats always jump to their feet during these debates and throw out statistical analysis of stuff that is, quite frankly, not true. The Liberal Democrats’ leaflets from the general election, which I still leaf through, tell me time and time again that they supported what we were doing on the economy, that the banks were all to blame, that VAT would not have to go up and that employment was the key to growth. The Secretary of State for Business, Innovation and Skills said that to Jeremy Paxman after the general election.

[Jessica Lee]

Will the hon. Gentleman give way?

[Ian Murray]

I will carry on, if the hon. Lady does not mind, because our colleagues want to contribute to the debate and our time is restricted.

What we heard yesterday was a big Budget con. My right hon. Friend the Member for Wolverhampton South East (Mr McFadden), who is not in his place at the moment, said that this Budget could not be seen in isolation from the last one. It is a continued attack on the cost of living. As has been said, the Institute for Fiscal Studies said yesterday that the Chancellor is giving with one hand but taking it back not just with the other hand, but with

“lots and lots of other hands”.

Does that not show how out of touch he is? Did he not realise that people would see the Budget con?

The Government trumpeted the increase in the tax threshold, but changed the threshold increase mechanism to the consumer prices index, which will totally offset the increase. Page 42 of the Red Book shows that the Government will hand out £1.2 billion in a tax cut but take £1 billion back over time through the change to the threshold indexation. Of course, the biggest con of all is that indirect taxes will continue to rise by the retail prices index, which of course is the highest measure of inflation.

I have not even touched on the millions of families who will lose their child benefit, or the fact that every family earning less than £26,000 a year will lose their tax credits. It is a Budget con for families. The Budget confirms that although ordinary people will be thrown a little bit of corn, there is little doubt that they will be hit the hardest by this uncaring and out-of-touch Government.

The second con that I wish to examine is the fuel con. We all welcome the 1p cut on fuel. I am not a car driver, but I appreciate how much it costs to drive. My constituents constantly tell me about the pressure on small businesses that have to fill up vans and cars. However, at 7 pm on Monday, the petrol station next to my constituency office was charging £1.28 a litre. On Tuesday night it was charging £1.30 a litre, and on Wednesday night, after the 1p decrease, it was charging £1.29 a litre. The 2.5% VAT increase makes up 3.25p of that price. That is the fuel cut con—the price is 1p down due the Chancellor’s decision, but 3.25p up to due to another decision of the same Chancellor.

As has already been asked, who is to say that oil companies will not just pass the additional tax costs back to the consumer? Oil and Gas UK has said in the past 24 hours that there will be job losses and a reduction in production in the North sea as a direct result of the Government’s policies. We are left in a quandary. Do we have more job losses and less production in the North sea, which could be catastrophic for the Scottish economy, for what might be absolutely no benefit to consumers at the pumps? The IFS said yesterday of the fair fuel stabiliser:

“If oil prices stay high but volatile, this policy will do little to stabilise pump prices.”

It is a policy that does not help hard-working families fill their cars, and may cost jobs.

According to the Government’s own figures, this Budget does nothing for growth. The Chancellor needs to think again before it is too late and he sends this country into a spiral from which it may never recover.

16:54

[Michael Fallon (Sevenoaks) (Con)]

I remind the House of the interests recorded in the Register of Members’ Financial Interests.

I am sorry that the shadow Chancellor is no longer with us, because a couple of elements were missing from his speech. First, any sense of humility was lacking in one of the architects of banking supervision, who started with 10 well-funded banks and ended with only five. Secondly, there was no apology for the appalling deficit that we inherited. Let us be clear: it is 10 years to the month since the Labour Government balanced a Budget. That is nothing to do with something that happened in 2007 or 2008. They made the mistake of letting the deficit grow in the good years as well as the bad.

The Budget’s most important feature is that it does not change the fiscal consolidation plan. We remain on track to balance the budget again by removing the structural deficit by 2015. The Office for Budget Responsibility’s forecast is that we maintain our position on track to being able to do that.

Most of the meat of the Budget is also extremely welcome, and I am glad that Opposition Members have picked out pieces that they, too, can welcome as helping their constituencies. Simpler taxation and less regulation are the drivers of a successful economy. Businesses have enough to worry about at the moment; the Government should not be one of their worries. Reducing the weight of tax and red tape on our businesses is essential. I urge Ministers to stick to their task, regulation by regulation, tax by tax, until we can genuinely say that we have one of the most competitive economies in the west.

I also welcome the Budget’s emphasis on the longer term, backing the newer technologies, especially in energy and the environment, and taking the measures necessary to improve the employability of that huge pool that we inherited of people under 25 who are simply outside the labour market.

I am struck in my constituency by how many companies succeeded in growing even under the previous Government, without direct subsidy or specific grants. I visited three recently. The Sevenoaks energy academy, which I had the honour of opening last year, trains hundreds of engineers in renewable energies, providing courses in fitting solar panels, rainwater harvesting and so on. One of Sevenoaks’s most dynamic business women, Julie Walker, made a £1.5 million investment in that academy, and I welcome that.

[Ian Lucas]

Will the hon. Gentleman give way?

[Michael Fallon]

I will not, if the hon. Gentleman will excuse me.

Secondly, Vine Publishing is a new media company in my constituency that is heavily involved in all kinds of print and digital work. Its turnover now approaches more than £3.25 million and it employs 12 people. It was founded by three entrepreneurs, who dropped out of university because they preferred to go into business.

Thirdly, I attended the opening of the Ideal Waste Paper Company this month. It has built a major new recycling facility at Swanley—a £14 million investment, creating 60 new jobs and recycling more than 250,000 tonnes a year.

Those are examples of companies of the future, in the new technologies, the new energies and the new media. We should all ask ourselves how we get more of them. Of course, getting the long-term climate is right, but we must also address how to make it easier for people to set up such companies.

First, we must consider how we make it easier for them to start up. Like my hon. Friend and neighbour the Member for East Surrey (Mr Gyimah), who made an excellent speech, I support the Government’s enterprise incentive scheme, the entrepreneurs’ relief and the relaxation of planning. I would also like us to return to share ownership and consider how we can spread it more widely among those who work for start-up companies, particularly in the payment of dividends.

Secondly, we should consider how we make it easier for such companies to employ those who have been shut out of the labour market, and who might be viewed as too expensive or too risky to hire.

I welcome the Government’s initiative to reduce the number of cases going before employment tribunals. That is still a very serious barrier to employing more staff for small businesses. Finally, we need to make it easier for such companies to access the capital that they need; a number of hon. Members on both sides of the House have spoken about that.

I welcome the agreement on lending targets in the Merlin negotiations. Those need to be met, especially for smaller and medium-sized enterprises. Of course the banks are right to want more certainty on the capital and liquidity requirements, which are now being emphasised on all sides, from the Financial Services Authority to the G20 and so on, but I hope that there will be more focus on simpler business models with stronger regional networks, which can make lending to small businesses more worth while. We need such businesses to flourish, because they will create the jobs of the future.

The Chancellor was right in the Budget to help people to cope with the unexpected increases in the cost of living over the last few months, but I hope the Budget will also be welcomed for its long-term effects: keeping the public finances on track so that we eliminate the structural deficit that we inherited, putting Britain back into the black without huge changes in the tax and spending measures already announced, and helping to pump the oxygen of enterprise around the economy. It is nice, after 13 years under the previous Government, to welcome a Budget from a Government who believe in enterprise and are prepared to back it.

17:01

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

I was most impressed by the list of businesses that the hon. Member for Sevenoaks (Michael Fallon) has recently opened or visited in his constituency. Things could not have been too bad under the Labour Government if there is such vibrant activity, could they?

That aside, given the limited time available I want to concentrate on just one of the issues that I would otherwise have covered: the Budget announcements on the green investment bank. I am pleased that the Minister of State, Department of Energy and Climate Change, the hon. Member for Bexhill and Battle (Gregory Barker), is in the Chamber alongside Treasury Ministers.

I welcome the fact that the initial capitalisation of the green investment bank will be increased to £3 billion. However, I note that the increase in funding is to come from asset sales, and I would be interested to know how certain we can be that those proceeds will materialise as funding for the bank. As all hon. Members know, such funds can be diverted elsewhere if there are other urgent public finance needs, so I hope for a reassurance that that sum will materialise.

Although £3 billion is clearly better than £1 billion, it is still short of the sums that many say should make up the initial capitalisation of the bank. An Ernst and Young accountant said this morning that the bank should have been granted £4 billion to £6 billion, and I have heard that figure from other sources.

I and others are also concerned that the bank will not be allowed to borrow until 2015, and that it might not be able to borrow at all if the Government are unable to meet their debt reduction targets. The chief executive of the UK Sustainable Investment and Finance Association today said that linking funding of the bank

“to progress on the deficit does not give investors the certainty they need”,

which is worrying.

However, it is not just that the bank will be unable to borrow until 2015. Today’s comments suggest that that reflects a decision on what kind of bank the GIB will be. One commentator said:

“The decision was a victory for the Treasury, which for months had been embroiled in a tussle with green enthusiasts within the government, including climate change secretary Chris Huhne, over the powers the bank should have. It was originally intended much like a private sector institution, funding investments by taking on loans and issuing financial products such as green ISAs and bonds. One by one, these powers were whittled away.”

I hope that that is just press speculation, and I would welcome any ministerial refutation of it. There is a view within the Government that it is not a problem if the green investment bank cannot borrow until 2015, because the projects that will be devolved will be large projects that will take time to get going. I am concerned, however, that if the bank cannot borrow until 2015, it will send the message that it is too closely linked to the Treasury and could have its funding turned on, turned off or even taken back by the Treasury, depending on the wider financial priorities of the Government. Again, I would welcome reassurance from the Government that that is not the case.

Hon. Members will not be surprised to hear my second point: I want to emphasise the case for the green investment bank headquarters to be established in Edinburgh. I say that not just because it serves the interests of my city—although obviously it does—but because I genuinely believe it is the best location in the UK for it to be based. I would argue strongly that its headquarters should not be in London—too much of the financial services industry is concentrated there anyway—and it would certainly be a mistake for it to be run out of the Treasury, as some have suggested. It needs to be outside and independent of the Government.

If the green investment bank is to add to what can be provided by existing financial institutions, and not just be a brass plaque that reads “Green Investment Bank” without doing much that is different from what happens now, it needs to be proactive and to work with the energy and renewables sector, in particular; to work with industry and academics; and to have a good close relationship with financial experts. In my view, Edinburgh has the best combination in the UK of these sectors and skills, and I believe that basing the green investment bank headquarters in Edinburgh would be good not just for Edinburgh and Scotland, but for the north of England and Northern Ireland, and would be a good sign for the renewables and low-carbon sector throughout the UK.

I hope that the Minister can give a decision on Edinburgh in her winding-up speech. However, if she feels that she cannot, as I suspect she might, I hope that the Government will still give serious consideration to the matter. I think the view is shared across political parties that locating the bank’s headquarters in Edinburgh would allow us to make the best of the skills and expertise in many areas.

17:07

[Lorely Burt (Solihull) (LD)]

On behalf of the Liberal Democrat part of the coalition, I would like to make a few remarks on the business, innovation and skills measures in the Budget. Last year, we delivered a very tough Budget—one that members of neither coalition party would have wished to bring in as our first Budget—but it had to be done. Labour Members have conveniently forgotten just what a mess they left: they increased public spending by 5% year on year for 10 years so that the state accounted for more than half of all income; overheated the economy based on borrowing that this country could not sustain when the global banking problems struck; and left behind a deficit bigger than anywhere in the G20. And now they appear to be living in a parallel reality. They said that there would need to be cuts, but they never had the decency to tell the public where the axe was going to fall, and despite all the speeches we have heard this afternoon, they still have not.

We have an Opposition party that continues to oppose everything while proposing nothing. The simple truth is that if we had not taken strong measures, the country would today be in the same situation as Portugal: a whisker away from needing a bail-out and with all the draconian measures of higher taxes and bigger spending cuts that Greece and Ireland have had to endure. Our measures were tough, but they are doing the trick. They were endorsed by the International Monetary Fund, the OECD, the European Commission and, most important of all, the credit rating agencies, which confirmed our triple A credit rating. Today, therefore, families are not paying 12.9% interest rates like those in Greece, or 10% like those in Portugal, but 3.6%.

With this Budget, we need to support the growth that will pull us out of the situation we are in. The first thing we have to do is to start rebalancing the economy. We have arguably the best financial sector in the world—and we need it. We need it for jobs and we need it for tax revenues. Labour supported the financial sector. The then City Minister—now the shadow Chancellor—feted it with soothing words about light-touch regulation, and we all know what happened after that.

While Labour was in thrall to the financial sector, it neglected the manufacturing sector. Shockingly, the previous Government oversaw a decline in manufacturing that was greater than that seen in the days of Margaret Thatcher. My region in the west midlands has the invidious distinction of being the only region to lose private sector jobs when they were on the increase everywhere else, in the so-called good times. What do we have in the Budget to help to redress that imbalance? Not 10, but 21 enterprise zones have been announced. Each zone has a metaphorical “Open for business” sign outside, to attract the inward investment that each area desperately needs. The predicted 1% lowering of corporation tax this April has been doubled to 2%. By 2014, we will have the lowest corporation tax in the G7, which will attract more businesses and jobs to the UK.

For a long time we have been lobbied by small businesses about the burden of regulation. They are drowning under red tape. We have already made a start in that regard, with the one in, one out rule, the introduction of sunset clauses and the establishment of the Cabinet’s reducing regulation committee. I welcome the announcements that will assist local business: no more domestic regulatory burden for micro-businesses—that is, businesses with fewer than 10 employees—for the next three years; 200% R and D tax credits for small and medium-sized enterprises; increased entrepreneurship relief; and the extension of the small business rate relief. I could go on, but I shall not, in view of how many Members still wish to speak. I think the House gets the point, although I would like also to mention that more than £350 million of regulation for the smallest businesses has been done away with. However, we will need to look at equality legislation, which embodies rights that should be available to every working person, regardless of the size of the company for which they work.

Much mention has been made of young people. We need to encourage and develop our skills agenda. We have announced a further 50,000 traineeships and 80,000 work experience placements. We have also had the welcome doubling of the number of university technical colleges.

Fuel and transport costs—a tough area for the Treasury—are clearly things that business has lobbied about. However, business is suffering very badly, and although Opposition Members may mock the 1p reduction, let us not forget that their plans were for a 5p rise in the cost of fuel. At today’s prices, that would have increased the cost of filling up an average-sized car by more than £200 a year. I am glad that we have scrapped it.

However, it is important that we do not lose sight of our desire to be the greenest Government ever. That is an agenda that the Liberal Democrats are particularly keen to promote. The green investment bank will receive treble the capitalisation and be able to facilitate investment of £18 billion by 2014-15. It will also act like a real bank, able to borrow and invest from 2015. We have also set a carbon floor price, which will drive investment in low-carbon industry.

There is a lot more in the Budget that I would like to talk about, but I am conscious that other colleagues wish to speak. Together with all the other measures already announced, I am sure that the Budget will not only give business a helping hand, but put the “Open for business” sign up clearly outside the door of Great Britain plc.

17:10

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

All I can say about the contribution from the hon. Member for Solihull (Lorely Burt) is that it is a bit rich to hear her talk about the stance and policies of the Opposition when she represents a party that, over the years, has perfected and polished the art of opposition based on opportunism.

Some Budgets are remembered for decades to come. Some are instantly forgotten, and some are seen as a missed opportunity. I suppose that only time will tell how this Budget will be remembered. However, my best guess is that it will be seen as a missed opportunity to turn on to a different road that would lead to jobs, growth and long-term sustainable investment in our future.

Yesterday, we needed to see a change of direction, but what we got was more of the same from the Tories. Unemployment is now at its highest level for 17 years, and even more worrying is the latest youth unemployment figure, which now stands at 1 million. That is not only a tragedy for the individuals involved but a national catastrophe. The promise to help 100,000 youngsters is welcome, but it goes nowhere near far enough. It also raises the question of why the Chancellor abolished the future jobs fund last summer, condemning many of our young people to a bleak future. The real fear is that this Government are creating another lost generation, to go with the one that they created in the 1980s. That is my generation, and it has never recovered from the years of Thatcherism. If that happens, the Government will deserve all the scorn that will be directed at them.

Yesterday, we needed to hear how the Government were going to help to get people back to work, but, unfortunately, we heard very little of that. What is being offered pales into insignificance when compared with what the Chancellor has already done to damage our prospects for growth. The fact is that £80 billion is being taken out of the economy over the next four years as a result of the comprehensive spending review. That is twice the amount that we believe to be sustainable.

The 1.2% growth in the economy experienced in the spring of last year vanished in the cold of winter, to the extent that the economy contracted by 0.6% in the last quarter. With the first quarter figures for this year not expected to be much better, there is a real possibility of the country slipping back into the danger zone. Consumer confidence is at its lowest level ever, unemployment is on the up, living costs are squeezing people’s incomes hard, and the full ferocity of the spending cuts will start to bite in April, which is just a few days away.

All these factors have led the independent Office for Budget Responsibility to revise downwards its growth forecast for 2011, from 2.3% when this Government took power, to 2.1% after the emergency Budget, and now to 1.7%. Many people expect even that figure to prove optimistic, with the possibility of growth being even lower over the next couple of years. Even if the OBR is right, the lower growth figures will have dire consequences for people’s jobs and living standards. It is already being said that lower growth figures will add £10 billion a year to Government spending, because of increases in unemployment and welfare benefit costs. To me, that is the economics of the madhouse.

It does not have to be like this. In countries such as America, growth estimates are being revised upwards, not downwards. However, according to Mervyn King himself, we are now seeing the longest fall in disposable income since the 1920s as a result of this Chancellor’s policies, and the Institute for Fiscal Studies is saying that households will be 6% worse off than they would have expected to be for the period from 2008 to 2011.

There is more to come, with cuts in housing benefit and tax credits in April. Tax credits played an important role in cushioning people during the recession. They provided a cushion for many people who were put on short working hours and had their incomes cut following the financial crisis. I saw men at Corus being put on short time to save the company, and Corus was able to do that successfully, with the co-operation of the union, because tax credits helped to keep those men’s incomes at a high enough level to prevent them from hitting the poverty line.

On top of those cuts, many people are being badly affected by inflation, which is now running at 5.5% on the retail prices index, which is more indicative of the situation. That is much higher than the Chancellor’s initial forecast. We know that one of the reasons for that is the rise in VAT to 20% in January. When they were in opposition, the Conservatives and the Liberal Democrats promised that they would not raise VAT. It is no wonder that consumer confidence has fallen to record low levels over the last few months, yet this Budget does not offer any help for hard-pressed people who are struggling to cope.

While the increase in personal allowances is to be welcomed, it in no way fully compensates for the previous increases in VAT and other tax rises being implemented. In a sleight of hand, the Chancellor has moved the uprating of tax allowances, as we now know, from the retail prices index to the consumer prices index, which will cost every taxpayer dearly and bring in an extra £l billion to the Treasury by the end of the Parliament—more than covering the increase in personal allowances.

Even the Institute of Directors, not generally given to rigorous criticism of the Conservatives, commented recently that average earnings were falling and that household disposable income faced a big squeeze. It concluded that this was, at best,

“the jobless and joyless recovery”—

not exactly a ringing endorsement of the Chancellor’s policies.

This Budget gave the Government the chance to alter course, to reflect on a vastly changing global situation, to calmly look at the evidence and to realise that the country is not recovering. They talk about rebalancing the economy, and they could have changed their minds and invested in Sheffield Forgemasters rather than leave it hanging in the wind, but that is what they did.

What we have had instead from this Budget is the same old Tories making the same old mistakes and it is the ordinary people who will suffer with their jobs. We have a politically motivated Chancellor who is making cuts now to offer tax cuts at the next election. This is a Chancellor who puts his party and his politics first and the economic situation and prospects for the country last. The Chancellor said this Budget was all about growth, but independent growth forecasts have downgraded the prospects for it. In my opinion, this Budget is a missed opportunity to invest in the UK, to rebalance the economy and to help hard-pressed families all around the country to make ends meet. There is no doubt that the Chancellor’s policies are hurting, but in the end, just as under Thatcher, we will not see them working.

17:22

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

To listen to some of the speeches of Labour Members one would think that the debate about the prosperity of hard-working families and individuals is somehow totally separate from the debate about reducing the deficit and getting our country’s finances back into balance. The two, of course, are intrinsically linked. We cannot have long-lasting peace and prosperity for our people unless we live within our means. The Government are no different from any business, any family or any household in that regard.

In his opening remarks, the shadow Chancellor wanted to take us back to the period in the run-up to the last Budget. The forecasts coming from the City of London about British Government debt and the state of our economy spoke of a dire situation. I am not talking about only forecasting companies and organisations, some of which were criticised earlier, but organisations that have skin in the game, so to speak, whose job is to advise investors.

The managing director of one such company, PIMCO, which is one of the world’s largest fund management companies and also the employer of the shadow Chancellor’s brother, said in the run-up to the last Budget that British Government debt was

“resting on a bed of nitroglycerine”.

He published a chart of a “ring of fire” in which Britain appeared alongside other countries such as Ireland, Portugal and Mexico that have terrible problems with their debts. That situation, however, has been transformed by this Government’s policies. Everyone in this country should be glad about that; we will reap the rewards from that change in the future.

Household debt has been mentioned. Anyone looking at the Red Book can see that levels of household debt rose continuously during the 13 years of the last Government. That problem was driven by unsustainable levels of credit, with which this Government have had to deal, as it was an underlying problem in our economy.

Income tax has also been touched on. Like all Government Members, I welcome steps to take the poorest people and families out of income tax altogether. More than 1 million people have been taken out of it. We all know that one of the greatest stealth taxes pushed by the last Government was the failure to keep the income tax thresholds moving in line with inflation, so millions of people were paying taxes at higher rates and levels than they otherwise might have done. This Government have done something to address that.

I want to say a little about the plan for growth. Like many other Members, I take a keen interest in the enterprise zones proposed in the Budget. My part of east Kent contains pockets of considerable deprivation in national terms as well as in comparison with the rest of the south-east of England. Along with colleagues, I will use my local enterprise partnership to lobby for the creation of an enterprise zone in our area.

One of the aspects of enterprise zones that interests me most is that areas will keep the uplift in business rates generated by the zones to reinvest in their communities. A White Paper on local growth published last year by the Department for Business, Innovation and Skills proposed giving councils more powers and more incentives to generate greater business activity in their areas, and to keep that business rate uplift to reinvest in their communities. Local authorities throughout the country, whether or not they end up being part of enterprise zones, may be able to develop their own business plans for local growth. There is the potential for mini and micro enterprise zones in every area, or even on every high street, in the country.

I also welcome the announcement of incentives for local authorities and planning bodies to promote growth and increased business activity in their areas. During Question Time this morning, I asked the Secretary of State for Energy and Climate Change whether that announcement would apply to the national policy statement on energy, on which the Department is currently consulting. Nuclear power stations are deemed to be part of the national infrastructure rather than a matter for local authorities, but they can provide considerable economic benefits, and I have been campaigning for a new nuclear power station at Dungeness in my constituency. There is considerable economic deprivation in that part of Kent, which is part of an economic zone that also includes Pfizer’s Sandwich plant. The establishment of a new power station at Dungeness would boost the local economy and create thousands of high-skilled jobs, and if it can be achieved through the measures in the Budget, it will be greatly welcomed by my constituents.

The Budget also contains measures to boost the creative economy. The Select Committee on Culture, Media and Sport, of which I am a member, has been considering the funding of the arts and heritage, and our report will be published next week. It was completed before the Budget statement. I am particularly encouraged by the measures to incentivise private giving through legacies and gift aid, which will benefit charities to the tune of hundreds of millions of pounds. I believe all Members will welcome that. The Budget also provides for breaks for smaller businesses in the creative sector. A number of Members have referred to the measures to increase investment in small businesses. Many creative and high-tech businesses, such as those involved in the digital economy, are small and entrepreneurial. My hon. Friend the Member for East Surrey (Mr Gyimah) spoke eloquently about the benefits that the Budget provides for such businesses.

I also note from their paper “The Plan for Growth” that the Government intend to relax the restrictions on the performance of live music, especially in smaller venues. There has been considerable debate in the music industry about the restrictions introduced by the last Government in the Licensing Act 2003, which made it harder for people to organise live events by imposing more regulation and costs. The Government will introduce measures to make the position easier not just for live musical performances but for theatre and cinema, and I think we can all welcome those as well.

This was a Budget for growth, featuring a series of bold plans not only to make some of the poorest people in the country wealthier by reducing their income taxes, but to increase investment in smaller companies and the micro-economy to benefit people and businesses throughout the country and particularly in my constituency.

17:28

[Mr Chuka Umunna (Streatham) (Lab)]

Before I make my substantive point, let me make two observations, on growth and employment and on business confidence.

I do not think there is any disagreement between the two sides of the House on the need to reduce our debts. The controversial issue is the time frame within which we should do that. If we want to reduce the deficit, we will obviously need to produce growth and jobs, because people who are out of work do not pay income tax and we have to pay benefit. I believe that the cost of every 100,000 people out of work is about £500 million in benefit payments. According to the latest figures, 4,000 people in my constituency are claiming jobseeker’s allowance. I hope that we can get them back to work very soon.

The Office for Budget Responsibility’s downgrading of the growth forecast has been widely reported, but its revision of its autumn estimate of the number of jobseeker’s allowance claimants has not been commented on. The OBR revised upwards its forecast of the number of JSA claimants in this year and the following four years. For this year, unemployment has been revised upwards, and the number of people claiming JSA has been revised up by 50,000 compared with the autumn forecast. For next year, the forecast has been revised up by 120,000, and for 2013 it has been revised up by 130,000.

[Angela Smith]

Does my hon. Friend agree that such statistics say nothing about the tragedy that unemployment visits on the lives of individuals, and especially on the lives of our young people and on their prospects for the future?

[Mr Umunna]

I absolutely agree. As a former employment lawyer, I am well aware of the huge impact that loss of work has on individuals and their families.

We are entitled to ask why the unemployment forecasts have been revised upwards. That has happened because of sluggish growth, and the OBR’s autumn forecast clearly states that the sluggish growth has been caused in no small part by the extreme fiscal consolidation embarked on by the Government. Therefore, there are more people out of work, claiming benefit and not paying income tax due to the policies of this Government. The OBR has said that.

The Chancellor’s strategy on business confidence and investment is clear. As the Government hack off chunks of the public sector—causing, of course, mass public sector job losses—he says that the private sector will automatically step in to fill the gap, and he foresees private sector growth fuelled by a boom in exports and business investment. Business confidence is key, and since this Government took office confidence has fallen. The latest Institute of Chartered Accountants in England and Wales and Grant Thornton UK business confidence monitor shows a continuing downward trend in business confidence in this country for the fourth consecutive quarter. I sincerely hope that that confidence returns, because the people in the communities I represent in Streatham and parts of Clapham, Balham, Tulse Hill and Brixton will be among those who suffer.

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

Does my hon. Friend share the concerns that were raised with me yesterday and today by many green businesses that this Budget could have been an opportunity for growth specifically in the green sector, yet the ability of the green investment bank to lend has been delayed until 2015—if it will be able to lend at all? The Government talked yesterday about the green deal, but there are no details about what incentives to many householders across the country might be.

[Mr Umunna]

I agree, and my hon. Friend’s comments bring me neatly to the topic of the Business Secretary’s document, “The Plan for Growth.”

Aside from the two observations that I wanted to make, I want in particular to comment on the document’s proposal to scrap the planned extension of the right to request flexible working to parents of 17-year-olds. That has been cited as a way to ease the burdens of employment regulation on business. “The Plan for Growth” says the administrative burden of extending that flexible working will cost about £500,000. That figure is taken from the Government’s own impact assessment of the measure, published in October last year.

Although “The Plan for Growth” mentions the £500,000 figure, it does not tell the whole story. The assessment agrees that there are additional procedural costs to business in extending the right to request flexible working, which it quantifies as £1.3 million, including the administrative costs I have just mentioned. In addition, there is a £975,000 cost in making adjustments to working patterns. However, that is far outweighed by the savings to business, which are listed in the Government’s impact assessment: £1.1 million from higher productivity, £1.2 million from lower labour turnover and £63,000 from reduced absenteeism, totalling £2.4 million in the first year. Overall, the “net present value” of introducing the measure—the benefit to business—would be £41.2 million. Again that is not my figure, but the Government’s. Therefore, on pure cost grounds, I do not understand how that decision makes any sense.

It is a shame that the Minister for Employment Relations, Consumer and Postal Affairs is not here, because he signed off the impact assessment with the following statement:

“I have read the Impact Assessment and I am satisfied that…it represents a fair and reasonable view of the expected costs, benefits and impact of the policy, and…the benefits justify the costs”.

Never mind the costs of the measure, because there are some things in society that we do not price up and put a market value on—one is the time we spend with our family. That is presumably why the Prime Minister said on 22 January 2010 that he intended to head up the

“most family friendly Government we’ve ever had”

and why, in the lead-up to the general election, the Deputy Prime Minister said:

“We are not casual about the pressure that many parents feel”.

The impact assessment is clear, because under the heading “key non-monetised benefits”, it says that the measure will improve health and well-being, help employees achieve a better work-life balance and help improve family life. For me and my constituents, that is incredibly important, because we face a problem whereby a minority of our young people are engaging in serious violence. A number of stabbings and shootings are taking place in my constituency almost every month. There are many reasons for that, and there is no one magic solution to resolving these issues, but I am clear that we need to help adults spend more time with their families. Extending the right to request flexible working to parents of 17-year-olds—teenagers in that key group—is essential to helping them provide the guidance that many young people need in my community.

[Vince Cable]

rose—

[Mr Umunna]

I will give way shortly.

I have come to the Chamber from this morning’s Treasury Committee sitting, where I asked Jonathan Portes, who until February was chief economist at the Cabinet Office, about this issue. I asked him whether abolishing the right to request flexible working for the parents of 17-year-olds would make a big difference in increasing GDP or growth. He made it very clear that scrapping the extension will “do nothing for growth”. I then asked HSBC’s chief economist whether he would be revising his GDP figures as a result of the scrapping of the measure, and he told me that he would not.

This measure seems to be a gimmick, which tends to suggest that the Government think that watering down employee rights is a substitute for a properly thought out growth strategy. All the figures I have just presented and all the arguments I have just made for the introduction of the extension, which was planned for April, are in the Government’s own impact assessment of the measure. Will the Government think again about it? I grant that they do not and will not accept our arguments to revise their plan for fiscal consolidation, but I suggest that it would be very wise for them to think again on this small measure.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

I call Gavin Williamson, who has until 5.42 pm—about three minutes. I am sorry about that.

17:39

[Gavin Williamson (South Staffordshire) (Con)]

Thank you for calling me to speak, Mr Deputy Speaker. I am for ever astounded by Opposition Members and their total denial that their party had anything to do with the financial mess that this Government are sorting out. My grandfather always used to say to me, “You spend what you earn and you never borrow on the never-never.” The only economics that Labour Members seem to understand are the economics of the never-never—never worrying about how much money they were borrowing and never worrying about how much money they would ever have to pay back.

Ever since I left university in 1997, I have worked in manufacturing. I am proud of that and I am proud that the Government are doing something for manufacturing to reverse the decline we have suffered. It is about time that we had a Government who care about this and who will sweep away the regulations that have stifled manufacturing. When I was running a pottery business, I used to go to many countries across the globe—I can even proudly boast to be probably the only Member of Parliament who has sold chinaware to the Chinese— and whether I was in Germany, Italy or France, the Governments spoke to their businesses and wanted to know how to help them best, minimising regulation and helping businesses to succeed. That is the ethos that I believe has been spelled out in this Budget and it is one that I welcome.

I also want to pass on my thanks to the Chancellor for the fact that he has listened to representations from me and many other colleagues on community investment tax relief. In my constituency, that will help the Black Country Reinvestment Society, an organisation that is helping businesses, giving them small loans to help them grow and prosper. That will have a positive impact and I thank the Chancellor and colleagues on the Front Bench for listening.

This country faces many great challenges, which we have to deal with, and rebalancing the economy is the core one. I believe that this Budget makes strides to achieve that and that it will do so.

17:39

[Ian Lucas (Wrexham) (Lab)]

We have had an important debate this afternoon on a vital subject, following on from yesterday’s Budget statement—a statement that, unfortunately, largely followed the course mapped out by the Tory Government, with their allies, in the announcements that they have made in the last year.

I hoped today that the long-trumpeted plan for growth, which has been so elusive as far as the Department for Business, Innovation and Skills is concerned, would be revealed in more detail. We have had the document, but the Secretary of State barely referred to it. In his speech he did not even mention enterprise zones, or provide any more detail or information to expand on the fairly threadbare set of initiatives in the document.

The Government inherited growth and have taken it away, they inherited falling unemployment and have caused it to rise, and they have squandered the low inflation that they inherited. The result, in constituencies up and down the country, is a profound lack of confidence in the future. The prospect of falling living standards is restricting demand, businesses are failing to invest, and as a consequence, joblessness continues to grow. The Government need to recognise the malign effects of their policies, but unfortunately the Budget offers more of the same—the same policies that have taken the country backwards, not forwards.

At least now the Government are talking of growth. They took a long time even to do that, and they have now given us a document, but that document takes us backwards again—back to a Thatcherite prescription for what is wrong with the economy, reheating policies that led to an unemployment count of 3.5 million twice under Tory Governments in the 1980s and 1990s. As we have just heard from my hon. Friend the Member for Streatham (Mr Umunna), the same thing is beginning to happen again. The OBR has identified that unemployment will be higher than it predicted last year because of the Government’s policies.

Lest we forget, the legacy of those years in the ’80s and ’90s was not success but a wasted generation of young people. What is so depressing about this Budget is the realisation that the Tories have learned nothing from history and intend to repeat it instead—and it is shameful that the Liberal Democrat allies they now have are acting as their accomplices. It makes me sick to the stomach to see the Liberal Democrats being more vehement than the Tories in their defence of Government policy in the Chamber, because they stood on the hustings and told the people who were fooled into voting for them exactly the opposite when they were asking for those people’s support.

The proposals put forward by the Government offer nothing new. Even the names bring back memories of the 1980s, with enterprise zones coming back from the dead. Those of us whose politics were defined by the mistakes of the 1980s remember that enterprise zones were not a success then. As Helen Miller, a senior research economist at the Institute for Fiscal Studies, said in response to the Budget:

“Past UK experience with enterprise zones suggests that their main effect may be to cause activity to relocate rather than to create new activity.”

We must recognise that the introduction of enterprise zones follows the dismantling of machinery to deliver regional growth. Local enterprise partnerships are still nascent and the Budget does nothing either to resource them adequately or to take them forward any further. They must do their work without assets or resources, and decisions on the allocation of resources are still being made not locally but centrally by the centralised regional growth fund. The hon. Member for Redcar (Ian Swales), who is not here today, pointed out in a debate in Westminster Hall earlier this week that 97% of grants given out by One North East were for less than £1 million, which is below the threshold for securing financial assistance from the regional growth fund. Where will small businesses secure the finance that was previously available to them? We must wait to see the detail of the proposal for enterprise zones, as we did not hear any more detail about them today, but I suggest that there is a vital gap in relation to small businesses, which needs to be dealt with.

The Budget is made in the context of a crisis in the construction industry, but the Secretary of State did not mention that industry in his statement. This week, the Federation of Master Builders reported that the proportion of firms reporting higher work loads fell from 22% in the fourth quarter of 2010 to 19% in the first quarter of 2011. Even this Government have finally recognised that their rhetoric on planning change and localism has had a profoundly negative effect on the construction sector and the housing market. Their move, in the Budget, to introduce a presumption in favour of development is a tacit admission of that fact. Equally, the crisis regarding first-time buyers, which the Government have ignored until now, is real and has had a profound impact. Any move to assist first-time buyers is welcome, but the help for only 10,000 for only one year is, as the Construction Products Association has today pointed out,

“a very modest step and is unlikely to make much of a dent in the 100,000 shortfall of new build that this sector is currently facing.”

We hear a lot of rhetoric from the Government about deregulation, but the action is less convincing. We have the “one in, one out” soundbite, but what about the groundwork—the hard work—of taking forward the regulation agenda of the Better Regulation Executive and the Regulatory Policy Committee? Where is the Government’s forward regulatory programme? Will what was produced by the previous Government finally come through? I would love to see that programme, because the Government need to come clean about the regulations that are going to be introduced.

[Gavin Williamson]

Will the hon. Gentleman give way?

[Ian Lucas]

I do not have any time to give way; I am sorry. I know that the hon. Gentleman had only three minutes, but I have only nine.

We agree that the country needs to rebalance the economy, and that is why the Labour Government set up the Advanced Manufacturing Centre in Rotherham and the National Composites Centre in Bristol. I encourage the Secretary of State not just to reannounce projects that were set up by the previous Government, but to support manufacturing with some projects of his own. We welcome the progress made on the back of favourable exchange rates, but there are worrying signs in leading companies such as Pfizer and Novartis that we may be losing the edge that we previously enjoyed in hi-tech industry. There are real concerns that cuts in our universities sector will threaten our primacy in science.

When this Government set their course last year they made the wrong choice. Labour’s plan to reduce the deficit was measured and it was working. The Tory Government’s plan is reckless and is not working, a fact evidenced by the ending of growth in the last quarter. The Budget’s downgrading of growth figures is also a fact. They have undermined the fundamentals needed to deliver growth—adequate demand and confidence in the economy—and replaced them with a lack of confidence among businesses and consumers. The result is that there is a real risk of slipping back into recession. We believe that the evidence is there to justify the need for the Government to take a different course. They must change course before they create a further Tory—and this time Liberal Democrat—wasted generation.

17:50

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

We have had an important and, in many respects, illuminating debate this afternoon. I will try to refer to all the contributions that have been made, but time is short so it will be difficult for me to take interventions.

We have been talking about two halves of a solution to a problem that itself has two halves. The first half of the problem relates to the economy: the imbalance in jobs and a business model for UK plc that was simply unsustainable in relation to the sectors and its regional impact. The second half of the problem relates to what we can do to tackle the huge problem in the public finances and the structural deficit handed over by the previous Government.

The first point to consider is the broken business model that the previous Government created for UK plc, which was simply unsustainable. First, it was unsustainable in terms of sectors. An uncontrolled boom took place broadly in one sector—financial services—and in one region. During the mid noughties, for every 10 jobs created in the south-east and London, only one was in the private sector and outside financial services, which clearly shows that the previous Government’s model simply was not working. That had a huge cost, as my right hon. Friend the Secretary of State for Business, Innovation and Skills has said. Since 1997 manufacturing has been halved and lost two fifths of its work force, and exports from the UK fell behind the rate of growth seen in the rest of the world. Meanwhile, household debt ballooned. We had a huge property bubble that was worse than the USA’s. As the shadow Chancellor knows very well, he allowed the banking sector to get dramatically out of control. The sectors across the UK economy were totally unbalanced, and we need to change that.

Secondly, the imbalance was regional. There was huge job creation in the south-east, but what about the rest of the country? That shows why we are right to make proposals in the growth review for enterprise zones, and I very much hope that Opposition Members will not allow their political prejudices to get in the way of their local communities being able to ask to be part of the enterprise zones as they are developed.

On the public finances, I listened to the hon. Member for Hayes and Harlington (John McDonnell), with whom I have previously made common cause on other issues. I have great respect for him and for his consistency, but I must say that on this occasion I disagree with his analysis of what we need to do, which seems to be broadly in line with that of his party. What is their solution in a boom? It is to spend more. What is their solution in a bust? It is to spend more. That simply is not a sustainable way to run an economy. In fact, the previous Government left our country and our people weighed down with public debt after maxing out the nation’s credit card. They eventually decided that they did not support tackling the deficit now. Instead, we hear from the shadow Chancellor today that he wants to do that later. He wants to pass on Labour’s debt to our children and grandchildren, which is totally unacceptable.

The hon. Member for Derby North (Chris Williamson) talked about decline, but what does he think happened under the previous Government? He should go and talk to people in manufacturing who saw their own competitiveness decline dramatically.

My right hon. Friend the Secretary of State for Business, Innovation and Skills and my hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman) talked about the utter denial that still exists among the Opposition, about not just the deficit and the public finances, but their thoroughly broken approach to running the UK economy. There was no humility or apology for any of that, as my hon. Friend the Member for Sevenoaks (Michael Fallon) said, and the fact that there is no recognition of the problem surely means that there will never be any solution from the Opposition.

The right hon. Member for Wolverhampton South East (Mr McFadden) seemed to think that we could suddenly wish away those problems and get over them incredibly quickly, but the challenges that the Labour party left this Government—two parties that have come together to work in the national interest to sort out that huge mess—will take some time to be met. There will be no quick fix, but we have early, immediate and continuing steps to resolve the problems that have been left for the UK economy and for our people.

We took immediate steps in the spending review and in the emergency Budget to lift people out of income tax. The hon. Member for Washington and Sunderland West (Mrs Hodgson) seemed quite dismissive of them, but I hope that she will not vote against them when the time comes. We took steps in the spending review to bring public spending back under control, and yesterday we took the next step, which was a Budget for reform and recovery and a growth plan to rebalance our economy and put growth and sector issues back on a sustainable footing.

Opposition Members seemed to suggest that we have not talked to business, but we have actually had more than 1,000 meetings, and if they look through the growth review and “The Plan for Growth” they will see that we have taken well over 100 steps to help businesses throughout Britain. Our message to them is that Britain is open for business.

We will have the most competitive tax system in the G20; we will make sure that Britain is the best place in Europe to start, finance and grow a business, which, as my hon. Friends the Members for East Surrey (Mr Gyimah) and for Skipton and Ripon (Julian Smith) said, is absolutely critical; we will have a more balanced economy by encouraging exports and investment; and we will have a more educated work force, who are the most flexible in Europe. Those are the ingredients for a rebalanced economy that creates sustainable jobs.

The hon. Member for West Bromwich West (Mr Bailey) did talk about jobs, but if he is concerned he should read the OBR report to the end, because it clearly says that our plans are projected to create a net 1 million jobs over this Parliament. I hope that Members from all parts of the House will support that. By the time we have finished, we will have a corporation tax rate lower than America’s, France’s and Germany’s, giving us the lowest rate in the G7.

Our second ambition is to make sure that Britain is a great place to start, finance and grow a business. In the World Economic Forum global competitiveness index, we fell from fourth to 12th. The shadow Chancellor breathes out in frustration at me reading out that statistic, but it is absolutely true, and we have had to combat it by abolishing £300 million of regulations and by introducing a moratorium, exempting businesses employing fewer than 10 people from new domestic regulation for the next three years. But, we are going to go further than that. To stimulate growth, we will double entrepreneurs’ relief and help SMEs by extending the small companies business rate relief for an extra year. We are doing our bit to help business, and I wish the Opposition would support that.

We have a whole range of plans to support different sectors, but manufacturing is crucial to rebalancing our economy, as my hon. Friend the Member for Erewash (Jessica Lee) and the hon. Member for Solihull (Lorely Burt) said. One reason why our economy became so unbalanced, and so regionally unbalanced, was the skew towards financial services, and we have to encourage other parts of our economy to grow, so we will do what we can to help manufacturing in particular.

On enterprise zones, the boom left too many communities behind, and we are determined to ensure that as our economy grows, the communities that can benefit most from that will do so.

Our country should never again have to accept the economic decline that has taken place over the past decade —an irresponsible boom and bust, and an unbalanced economy that overheated and took our country to the brink of bankruptcy. The shadow Chancellor was at the heart of the decisions that were so catastrophic for our country: selling gold, PFI arrangements, structural deficit and catastrophic bank regulation. His utter denial of the role that his Government played in leading our country so near to ruin will leave the British public shocked and utterly bewildered as they watch this debate.

In conclusion, this Government are looking to right the wrongs of the past. Where others have failed, we will succeed.

18:00

The debate stood adjourned (Standing Order No. 9(3)).

Ordered¸ That the debate be resumed on Monday 28 March.

Business without Debate

Thursday 24th March 2011 Commons Chamber

Draft Defamation Bill (Joint Committee)

Resolved,

That this House concurs with the Lords Message of 23 March, that it is expedient that a Joint Committee of Lords and Commons be appointed to consider the draft Defamation Bill presented to both Houses on 15 March (Cm 8020).

Ordered,

That a Select Committee of six Members be appointed to join with the Committee appointed by the Lords to consider the draft Defamation Bill (Cm 8020).

That the Committee should report on the draft Bill by Tuesday 19 July 2011.

That the Committee shall have power—

(i) to send for persons, papers and records;

(ii) to sit notwithstanding any adjournment of the House;

(iii) to report from time to time;

(iv) to appoint specialist advisers; and

(v) to adjourn from place to place within the United Kingdom.

That Sir Peter Bottomley, Rehman Chishti, Chris Evans, Dr Julian Huppert, Mr David Lammy and Stephen Phillips be members of the Committee.—(Bill Wiggin.)

Private Members’ Bills

Motion made,

That, notwithstanding the provisions of Standing Order No. 14(4), Private Members’ Bills shall have precedence over Government business on 9 September 2011, 21 October 2011, 25 November 2011 and 20 January 2012.—(Bill Wiggin.)

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Since there is an amendment not supported by the Member in charge, I will follow the practice of my predecessors and treat it as an objection to the motion. Objection taken.

Maternity Services (Hastings)

Thursday 24th March 2011 Commons Chamber

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

18:01

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

I am worried and my constituents are worried. There are many issues that Members of Parliament campaign on in their constituencies, but those to do with health provision must be the most important. We can all agree that maternity services deserve to be a high priority in health planning. This is about the safety of mothers and babies.

Our hospital in Hastings, the Conquest, has a full-service, consultant-led maternity unit. Within East Sussex Hospitals NHS Trust, which we are part of, Eastbourne also has a full-service maternity unit. Four years ago, it was proposed that one of those units should close, and that we should have one midwife-led service and only one full maternity service for the area. The community rose up in arms. We campaigned in our thousands. We marched with babies and with prams. Every local MP objected, and we did not let up until we won—and win we did. I would like to pay tribute to the able, determined and dedicated campaign leaders, Margaret Williams and Liz Walke.

In September 2008, the decision was made by the Independent Reconfiguration Panel, which advised the then Secretary of State for Health, that both units should stay open with their full service. The chair of the IRP said:

“The needs of local women and their families were at the heart of this review…we concluded that women’s access to and choice of services would be seriously compromised if the proposals were implemented.”

The campaigners already knew that, but we were reassured and, indeed, jubilant that the final decision makers also took that view. This was nearly three years ago. Some people might, ask “What’s the issue now?” or “Why are you campaigning when there is no formal proposal for closure of either units currently on the table?” They would not share my concern—my unease—about the latest information coming out of East Sussex Hospitals NHS Trust. It is being signalled that there may be change in the air. It is not change itself we are frightened of, but the possible outcomes for mothers and babies.

The Care Quality Commission visited both hospitals in February this year, and it has raised concerns about the maternity services. The hospital trust, to its credit, was swift to contact stakeholders and MPs to inform them of this and to reassure us that action was immediately being taken to ensure high standards of safety and to address the concerns that the CQC had raised. I would like to thank the chief executive of the trust, Darren Grayson, for his swift action in disclosing this important information. I must confess, however, that we are not entirely reassured. We, the campaigners—my constituents—are still worried. I am not reading any motive or plan into the trust’s response to the CQC; I am simply here to highlight, once more, that the outcome of these concerns must not lead us down the very road we have travelled before—namely, having to protect our full-service maternity units.

We do not want to stick our heads in the sand. If there are problems with the maternity units that might impact on safety in any way, we must address them. However, this must not be a shortcut back on to the damaging road of trying to shut one of our units. We will not accept that. I urge the trust not to present that as the answer to the current problems. I would like the Minister to consider that in her response.

There are other answers, and they are in the very problem that the trust is highlighting—namely, staffing. The original decision to maintain both units urged the trust to address the issue of staffing by getting the right and safe mix of experience and qualifications among the doctors and consultants. The report of three years ago accepted that staffing was a problem, but critically it urged the PCT to

“consider alternative staffing models which have not been explored so far”.

It stated:

“It is incumbent on the local NHS to explore the potential of these roles to develop midwifery careers and support doctors’ roles locally.”

It agreed that there was a problem, but urged the local NHS to develop a strategy to deal with it. But here we are. As was anticipated by the report three years ago, we have a staffing problem that may be impacting on the service, and in such a way that doubt is once more being cast on the viability of having two full-service units.

Each hospital handles about 2,000 births a year. I am pleased to say that the strategic health authority recently commissioned an external head of midwifery to review midwifery, leadership and staffing levels, and she confirmed that the trust was safe. The latest annual regional report also praised the trust for having the lowest caesarean section rates in the region, thereby supporting women to experience a normal birth.

Eleven consultants cover both sites, and we have our designated number of junior doctors. However, we are short of middle grade doctors. There should be eight at each site, but there are only seven at the Conquest hospital and six at the Eastbourne district general hospital. The gap is filled by locums, which is expensive. An agency locum costs approximately £79 per hour, which equates to £18,000 per agency doctor per month, as against a trust doctor, who costs approximately £9,000 per month. In these times of increased pressure on funds, even though NHS funding is ring-fenced the NHS is still being asked to make efficiency savings and to improve services. The locum costs are therefore an unpleasant and substantial addition to the hospital overheads.

Unfortunately, the staffing issue is exacerbated by the European working time directive. I know that the arguments against the directive for parts of the medical profession are being examined, but in the meantime the outcome of restricting working time to 48 hours per week simply puts yet more pressure on the staffing levels in these units.

I appreciate that some might say that I am panicking early. We have been reassured by the trust’s chief executive that there are currently no plans to close either unit, and a consultation is about to be launched on how to maintain a top service at both units. In this reassurance, there is a sting. It signals that the challenges of staffing may require a change. I fear that that could include the closure of one of the units. We must not let that happen.

The town of Hastings in my constituency has high levels of deprivation. Its teenage pregnancy rate is one of the highest in the country and, as we know, this country has the highest rate in Europe. Some 22% of its residents are in the bottom 10% according to assessments of deprivation. Local doctors, to whom I speak regularly, tell me that young women can be reluctant to attend antenatal classes and often miss their appointments. These are the women who may encounter unforeseen difficulties, and who may need a full-service maternity unit at their hospital. They are not the women who are likely to hop in their car to go to Eastbourne for their check-up. In fact, in many parts of Hastings car ownership is running at only 40%, so many would have to rely on the local bus services and the local roads. If the maternity service were closed, it would effectively put up barriers to safety for that group of young women.

I wish to say a word about the local roads, on which I hope to secure a separate debate. If we look on the map, we see that Hastings is just over 20 miles from Eastbourne, and the AA tells us that the journey can be done in approximately 20 to 30 minutes. It is quite wrong. It is in fact the equivalent of a 40 or 50-mile journey elsewhere, and in my experience it takes at least an hour. The Royal College of Obstetricians and Gynaecologists recognises the need for investment to support smaller units, such as ours, where there are significant distances involved. That is what we have in Hastings and Eastbourne—because of the nature of the roads, the towns are a significant distance apart.

Those of us who campaigned on the issue before know the arguments well, but we are up against what feels like the establishment. It is creating a tide that pushes us one way—to super-size maternity units, beloved of managers and some doctors but not particularly of mothers. Expectant women want choice, safety and accessibility. I can quite understand management’s preference for large units. It is easier to manage a larger group of people, more efficient for those delivering the service, more convenient for the consultants who are in overall charge and more flexible for training junior and middle-ranking doctors. However, we must not let the one-size-fits-all principle dominate our maternity services. We must remain aware of local issues that are relevant to any changes in configuration. In Hastings, I have mentioned geography, deprivation and the particular needs of some of the youngest, most vulnerable mothers in my constituency.

Although I speak up for the residents of my constituency, I urge the Minister to pay attention to the trend of addressing staffing issues in hospitals by moving towards super-sized units, particularly maternity units. “Bigger is not necessarily better”—that may sound like an extract from a nursery rhyme, but it is actually part of the name of a highly respected paper about the centralisation of hospital services. Even the well respected King’s Fund questions the assumption that outcomes are improved in bigger units.

Despite the conflicting views about smaller or larger maternity units, one thing is clear: the staffing issue is about preparing and planning. That was highlighted to the health trust more than three years ago in Hastings. We must demand more from our trust now, and we do not accept that closure should be considered for either of our full-service sites. We need the complete service. We need in our communities the delivery of a safe, efficient local service, for the continued delivery of safe and healthy babies.

18:13

[Stephen Lloyd (Eastbourne) (LD)]

I thank my hon. Friend the Member for Hastings and Rye (Amber Rudd) for giving me an opportunity to speak in her Adjournment debate. I concur with everything that she said. I will take a limited time, because we want to listen to the Minister, but I wish to focus on a couple of separate matters. I add that my hon. Friend the Member for Lewes (Norman Baker) expressed specific concerns to me this morning, because many of his constituents in Polegate and Seaford use the district general hospital in Eastbourne.

I feel as though I have walked about 150 miles over the past few years for the “Save the DGH” campaign. It was an enormous, cross-party campaign with cross-community support, led in Eastbourne by a splendid lady, Liz Walke, and in Hastings by Margaret Williams. They are two fantastic, community-focused individuals who did a superb job in rallying their towns and all the political parties.

I shall quickly make a couple of points. I have never been a conspiracy theorist, but there is an exception to every rule. Just because I do not believe that there are conspiracies everywhere does not mean that they cannot sometimes exist. I have some good contacts in the district general hospital and I spent eight and a half years working in Eastbourne before gratifyingly winning the seat in the general election last year. I have developed some good contacts in the trust and, sadly, I must tell the Minister that I believe that the single-siters who originally wanted to move to one consultant-led maternity service have not gone away, despite being turned down by the Independent Reconfiguration Panel. I am afraid that they have used the pretext of the Care Quality Commission report to begin the process of moving to a single site.

As soon as we heard that, we were very active and we blitzed the media for 10 days solid. I believe that that led the trust’s chief executive to say that there were currently no plans to close one of the maternity wards even temporarily. The blunt reality is that there were such plans.

My hon. Friend the Member for Hastings and Rye mentioned middle grade doctors. Around the country, more than 30 different trusts with maternity wards deliver an outstanding quality of service without eight middle grade doctors. The issue is a smokescreen, I think that it has been seen as such and I will not tolerate it. I ask the Minister to speak to the trust board, expressly remind its members of the content of the IRP report and tell them to consider seriously options other than middle grade doctors. I think that this last option suits some of the consultants rather than the patients.

I am terribly keen to hear the Minister’s comments, so I will finish with a quote. I wrote to the IRP within 24 hours of the issue blowing up again two weeks ago. The other day, I got a response. For Hansard, I shall quote from it. It states:

“Dear Mr Lloyd…

As you note, in July 2008, the IRP completed a full review of the proposals to close the Eastbourne obstetrics service and advised that the case to do so had not been made. The IRP also made recommendations about what further action should be taken, all of which were accepted by the then Secretary of State for Health in making his decision.”

I urge the Minister to assist my hon. Friend the Member for Hastings and Rye and me to keep an eye on the trust over the next few months and years because we, my hon. Friend the Member for Lewes, and thousands of residents in Eastbourne and Hastings are not prepared to countenance in any way, shape or form the closure of either of the consultant-led maternity wards in Eastbourne.

18:17

[The Parliamentary Under-Secretary of State for Health (Anne Milton)]

I congratulate my hon. Friend the Member for Hastings and Rye (Amber Rudd) on securing the debate. There is no more important issue for a politician or, indeed, a politician’s constituents than the health services available in their constituency. My hon. Friend spoke with passion about her concerns and those of her constituents. I note that she and the hon. Member for Eastbourne (Stephen Lloyd) paid tribute to Margaret Williams and Liz Walke, the campaigners from last time. They must have a heavy heart listening to or reading tonight’s debate. I do not think that my hon. Friend is panicking early. She is doing exactly what is right: highlighting early her concerns and fears in the light of some vigorous campaigning three years ago.

I would like to join my hon. Friend, as I am sure other Members for the area would, in paying tribute to the NHS staff in her constituency for their hard work and dedication. In common with NHS staff throughout the country, the health and well-being of the public is their driving motivation day in, day out. It is not an easy time for them, and we should not lose sight of that. The Government will support them and ensure that they have the power to provide people with the health outcomes that are consistently among the best in the world.

It would be remiss to pretend that the NHS is free from problems. It is right for people to be concerned when they see something going wrong. I can therefore understand why people in Hastings may have been anxious following the Care Quality Commission’s recent inspection. As my hon. Friend knows, the commission found that inadequate staffing was putting patients at risk, and that that affected the quality of services being provided in the maternity units and in A and E. From the very beginning, the Government have made it clear that safety must be at the heart of the NHS, and that substandard care will not be tolerated. I trained as a nurse and worked in the NHS for 25 years, and from my point of view, nothing but the best well do for the people of this country.

We expect the trust to work hard to resolve the issues raised, and my hon. Friend spoke quite warmly of its response. I understand that it is working closely with the PCT and the strategic health authorities to address the issues by 31 March. I hope and expect that it will meet that deadline.

My hon. Friend spoke of her constituents’ fears that the CQC’s concerns about the safety of the local maternity units will lead to the Conquest’s consultant-led maternity service being closed, and of the previous campaign on that. My constituency is not so very far away from hers. My constituents were also victims of “Creating an NHS fit for the future”, which I felt at all times was fit only for the bin.

I know that in 2008 the independent review panel advised the then Secretary of State for Health that consultant-led services should be retained in both Conquest and Eastbourne hospitals. Both my hon. Friend and the hon. Member for Eastbourne felt that that would be an end to matters, and I understand why people in East Sussex now worry about a new threat.

I gather that East Sussex Hospitals NHS Trust has sought to calm those fears by stating publicly that there are no plans for the closure of either maternity unit. However cynical we might become when we have campaigned over time on local issues, we must take what we hear at face value and believe it. I am also aware that the trust has advised local MPs that it will look at various options for the future of maternity services, and that those services will be linked closely to paediatrics, emergency services and gynaecology. The review will have input from external clinical experts, which is crucial for the confidence of local people. Irrespective of their cynicism, it is important to stress that no decision has been made in advance, and that the trust has no plans to close any of the units.

However, I understand the concerns of local people and my hon. Friend. Whatever decisions are made, they must be guided by the trust’s principal responsibility to provide high-quality and safe care. Decisions must be made in an open and transparent way, with the involvement of GP commissioners, staff, patients and public, and with full, real and meaningful consultation. As she knows, I cannot speculate on or prejudge the optimum size of the unit or the outcome of the exercise.

It is right that decisions are made locally without central interference. The Government believe passionately that local decision making is essential in improving outcomes, and in driving up the quality and sustainability of services for different communities. My hon. Friend ably highlighted some of the deprivation and health inequalities in her constituency.

To that end, the Health Secretary has identified four crucial tests that all service changes must pass: they must have the support of GP commissioners; arrangements for public and patient engagement must be strengthened; there should be greater clarity on the clinical evidence base underpinning any proposals; and any proposals must take into account the need to develop and support patient choice, which my hon. Friend mentioned. That means that service changes that do not have the support of GPs, local clinicians, patients and the local community should not happen, which gives patients, local professionals and local councils a far greater role in how services are shaped and developed, and ensures that changes will lead to the best outcomes for local people. That is in line with our proposals in the Health and Social Care Bill, in which we have said that local NHS services must be centred on patients, led by local clinicians and free from political interference, whether from this House or the various layers of NHS management.

My hon. Friend raised, in particular, the working time directive. The coalition Government are committed to limiting the application of the directive in the UK. It has caused immense problems in the health service, and the Health Secretary will support the Secretary of State for Business, Innovation and Skills in taking a robust approach to future negotiations on the revision of the directive to achieve that greater flexibility.

I also draw my hon. Friend’s attention to the King’s Fund paper that questions the assumptions that outcomes improve in bigger units. The King’s Fund is right that an effective skills mix is important to get the best out of maternity units, and the Department of Health has commissioned the national perinatal epidemiology unit to undertake a study comparing the outcomes of births planned at home, in different types of midwifery units and in hospital units with obstetric services. That report is expected in autumn 2011 and will be very important in providing the evidence for further action on choice of place of birth.

I fully understand my hon. Friend’s reasons for calling this debate. She is right to raise the matter at this very early stage, so that local people are clear that they are getting the support from their local MP—that was quite apparent from the passion with which she spoke—and so that all those working in the health service are aware of her close involvement. I applaud her determination to press for local health services that best meet the needs of patients, and to ensure that whatever measures are taken, following the CQC report and this review, the overriding concern of those services must be the interests of the local people.

Question put and agreed to.

18:26

House adjourned.

Petition

Thursday 24th March 2011 Petitions

Thursday 24 March 2011

Student Visas

Thursday 24th March 2011 Petitions

The Petition of residents of Sheffield,

Declares that international students are a great social, cultural and economic asset and a key contributor to British Higher Education; that international students bring billions of pounds to the British economy, help forge vital business contacts and are important ambassadors for British culture globally; that the Petitioners do not agree with labelling international students as “immigrants” as they reside in the UK temporarily, make significant contributions and are in no way a burden to the country; that the petitioners believe that the proposed measures in the Home Office consultation on student immigration would restrict the freedom of choice of international students and would significantly damage their university experience; and that international students should retain their rights to find work experience in the UK for up to two years, to work while studying, bring their dependants to the UK, to apply for visa for a new course within the UK, and to study a second course of the same qualification.

The Petitioners therefore request that the House of Commons urges the Government not to accept the changes proposed in the Home Office consultation on the current student immigration system.

And the Petitioners remain, etc.

[P000910]

Westminster Hall

Thursday 24th March 2011 Westminster Hall

Thursday 24 March 2011

[Mr David Crausby in the Chair]

BACKBENCH BUSINESS

Thursday 24th March 2011 Westminster Hall

Coastguard Service

Thursday 24th March 2011 Westminster Hall

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

14:30

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

It is an honour to serve under your chairmanship, Mr Crausby. I congratulate all my colleagues from around the country—the whole of the United Kingdom—and from across the House who have turned up for the debate on a Thursday afternoon, which is definitely the graveyard shift. That underlines the huge importance of the issue to all of us and our constituents. I am pleased that we have secured a second debate in Westminster Hall so that hon. Members have the chance to let the Minister know their opinions on the Maritime and Coastguard Agency’s proposals to reorganise our coastguard service.

I welcome the Minister’s approach to the consultation process. He has listened to the concerns about the MCA’s modernisation proposals and requested alternative proposals from coastguards. He has already visited several coastguard stations and received alternative proposals from coastguards directly. I look forward to welcoming him to Falmouth. I will not repeat what I said during the last debate about Falmouth’s role in international rescue so as to allow more of my colleagues to make their points.

Every coastguard I have spoken to has stated that the service needs modernisation. The question is not whether to modernise, but how. Coastguard officers readily acknowledge the need to reduce the overall number of rescue co-ordination centres and are also ready to accept that reduced staff numbers come with that concept. There is a need to link the coastguard stations together.

However, in all the meetings that I have attended over the past few months, I have been struck by that willingness to change and the understandable disappointment that the small team in the MCA that developed the modernisation proposals did not work closely enough with its front-line coastguard colleagues. I have been surprised and disappointed by the inaccuracies in the consultation document and inconsistencies in answers to questions. Good policy can be made only with sound evidence that is open to public scrutiny. I shall go through some of the inaccuracies in the proposals, and I am sure that other colleagues will provide more.

The MCA’s proposals state that modernisation is urgently needed, as the service was last reviewed 40 years ago. That is not a true reflection and is patently designed to give the impression that the coastguard is archaic and seriously out of date.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

Will the hon. Lady give way?

[Sarah Newton]

Actually, I will not, as so many people want to speak. Sorry, Angus.

The service underwent a major review in the 1990s under Focus for Change. It was heralded at the time as the most detailed and thorough review for decades of the structures, work loads and running of the coastguard service. The coastguard service has experienced continuous technical improvements to advance and upgrade all its information technology and communications systems since then, and such an upgrade is being rolled out even now.

Coastguard officers recognise that modernisation is part of the natural development of the type of work that they carry out and are not averse to change. Historically, coastguard officers have been deeply involved in developing and refining a multitude of systems and programmes, and it is probably fair to say that many of those programmes would not work as they do today without that input.

Much is made in the document of the requirement for national resilience. The MCA proposal cites a scenario whereby both stations in the current pairing might suffer a failure and there is no further back-up. Has that ever happened? The answer is no. The technicians to whom I have spoken cannot envisage a situation in which such an event could occur. The coastguard station in Falmouth suffered a catastrophic failure when it was hit by lightning and was out of service for a period. However, our flank station at Brixham took over services by diverting all telephone lines, and contingency plans were in place to ensure that all international obligations were diverted to international colleagues to enable a normal service to be maintained. It worked, and it was resilient.

The senior coastguard told me that Falmouth suffers from fragile connections. I met with the members of BT senior management who have managed the communication links for the Falmouth coastguard for the past eight years. They said that there was no problem at all and foresaw none in the future.

The document also refers to paired stations being overrun with an increase in work load. Again, there is no evidence to support that. It is agreed that some stations can get very busy at peak times, but no station has ever suffered a loss of service as a result of being overrun. It is reasonable to assume that, for a proposal involving such major change, an extensive trial would have been set up to mimic the maritime operation centre and to establish what work load was expected and how—or, more importantly, whether—it could be managed.

[Sir Menzies Campbell (North East Fife) (LD)]

Will the hon. Lady give way?

[Sarah Newton]

I will carry on so that the right hon. and learned Gentleman can get in to speak later.

The MCA confirms that the only trial that took place was a table-top exercise at the training centre with a handful of invited staff who walked through the scenario and analysed incident data. I am afraid that that does not constitute a valid trial of such an important proposal. At the very least, a valid trial should shadow the work load of multiple coastguard centres on a busy July day, monitoring incidents and all other routine working, to determine accurately whether it can be done and, importantly, how many staff are needed.

The MCA has announced that when the proposal goes ahead, technical trials—this time involving operational coastguards—will be held to see how and whether it can be made to work. Such trials should be conducted before any proposal is announced, not after it has been approved.

Throughout the modernisation proposal document, much emphasis is placed on new or refreshed technology, but it has been confirmed that the technology referred to will be current technology, but refreshed. It is not clear what that means. Technology has a habit of promising much and failing to deliver—look at the debacle of the fire service proposals. Technology also has a habit of haemorrhaging money. The proposed savings from the plan will be wiped out quickly if the technological budget balloons.

The MCA refers to new technology that will allow coastguards to carry out surveillance and long-range monitoring of vessels at sea, helping to prevent maritime incidents from occurring or minimising the impact of such incidents. I agree that we can now monitor ships, flag up those showing a history of mechanical or structural deficiencies and involve the survey branch of the MCA in scrutinising them as they approach our shores. However, it is not correct to imply that such surveillance will prevent incidents around our shores. Ships are fitted with a vast array of navigational and sensory equipment, but they still manage to run aground and collide with each other, break down, catch fire, lose people overboard, injure their crew and sometimes even sink. That risk will remain.

A significant criticism of the proposals is the concern that vital local knowledge will be lost if all operations are centralised. The risk assessment on the proposals states that operational postures will require officers to harvest local knowledge. That is an acknowledgement that local knowledge will be required, but in the MOC it will have to cover a vast area, which will be extremely difficult to achieve.

Coastguard officers around the coast are required to know their area and are examined every two years to ensure that they do. That is laid down in their operational manuals. Each operations room views its area as being under its ownership and makes it its business to have thorough knowledge of it. To lose that knowledge would be a retrograde step and could increase risks.

The MCA proposal states that local knowledge will be provided by volunteers from the Coastguard Rescue Service, the Royal National Lifeboat Institution and the National Coastwatch Institution. Again, that is misleading. Those organisations can assist with local knowledge after an incident has commenced, but the vital time for local knowledge is when the call is received. That responsibility lies with the officer running the incident and it is needed immediately. Serving officers do that now, and do it well, because of the knowledge that they have built up over many years. They use technology to confirm as required, but it is only a tool, not the primary method of defining the location of an incident.

I welcome the proposals’ recognition of the importance of volunteers. When I first read the proposals, they made a compelling case. As a keen sailor and an MP representing a maritime constituency, I am very much aware of the volunteer Coastguard Rescue Service and the RNLI. I understand that if I were to get into difficulties sailing off the Isles of Scilly, it would be volunteers from the RNLI, or perhaps the Navy with helicopters from Culdrose, who would rescue me. I also know, however, that those volunteers come forward because they feel safe in the knowledge that the rescue missions in which they participate are co-ordinated by professional coastguards in the Falmouth coastguard station. The RNLI’s deafening silence on the proposals speaks volumes.

Only a few people sitting in RNLI headquarters, removed from the reality of rescues around our shores, are talking to the MCA. Those HQ staff might well be saying that they can take on more of the roles undertaken by the coastguards, but it is the volunteer coxswain and crew who risk their lives to rescue people at sea. Are their opinions being listened to? I do not think so.

The situation is similar in other organisations directly involved in our maritime environment, such as the Royal Yachting Association. I expect that it is the HQ staff who are talking to the MCA. They have not consulted with their members. Yacht clubs in my constituency that organise world-class yacht races and Olympic regattas are dismayed with the position that the RYA has taken on the proposals. I urge the Minister to ask both the RNLI and RYA headquarters staff to demonstrate that they have consulted all their members on the proposals, and to ask for copies of those consultations. Although I am not a betting person, I would wager that their responses do not support the MCA’s proposals.

During the debate, I hope that we can persuade the Minister that the best course of action is to accept that he was not given accurate information by the MCA team responsible for the proposals, which have developed over a number of years, and that he should cost and carefully consider reasonable alternative proposals that meet the criteria that he has set out. The safety of people at sea and the protection of our precious marine environment deserve no less.

14:41

[Bill Esterson (Sefton Central) (Lab)]

I am pleased to address this debate under your chairmanship, Mr Crausby. I shall begin by congratulating the Minister on the fine achievement of uniting the Members from nine parties in the House in opposition to the proposals. It is certainly good to see Members from so many parties present. Many of them represent Northern Ireland and it is welcome that they have crossed the divide on this issue.

[Mr Greg Knight (East Yorkshire) (Con)]

Will the hon. Gentleman at least give the Minister credit for extending the consultation period? At least we can live in hope that he is listening, which I am sure he is.

[Bill Esterson]

The right hon. Gentleman makes an important point. Many residents in our communities have welcomed the extension of the consultation period, as have the staff, because it provides an opportunity to suggest alternative proposals.

I have a number of points to make. I had only one minute to speak in the previous debate on this issue, so I warn hon. Members that I will take a bit longer this time. Safety is a big concern, and it came up at the consultation meeting that I attended. It was the Liverpool meeting, but it was held in Southport—about 20 minutes away from the coastguard station—but that did not deter the 250 people who turned up. A vote was taken on the proposals and all 250 people—every single hand went up—opposed the proposals, and that has been repeated throughout the country. Safety is a prime concern for everybody, particularly the question of whether the proposals adequately address the balance between cost and safety. The big issue that comes up again and again—it certainly came up in the Crosby consultation meeting—is that of local knowledge and whether it can be adequately transferred to the new marine operation centres.

[Nia Griffith (Llanelli) (Lab)]

My hon. Friend and I come from areas of shifting sands. Does he agree that local knowledge is vital in such areas? It is important to have up-to-date knowledge, but, in my area, we also have the problem of distinguishing Llangennech from Llangennith, and there are many similar instances around the coasts of England, Scotland, Wales and Northern Ireland. Does he agree that local knowledge is the key reason why we want to keep a much larger number of stations open?

[Bill Esterson]

My hon. Friend makes a vital point. We have exactly the same issue around the coast of Liverpool, where many different locations are known by the same names. Local knowledge is crucial, as she says. It was crucial in the Morecambe bay tragedy, which was called into the Crosby coastguard station. The one life that was saved was saved because of the ability to respond quickly. Although many lives were lost, the coastguard was able to save one life because it was able to get there quickly.

It is important to recognise the difficulty of transferring local knowledge to the two MOCs in Aberdeen and Southampton. Staff in Liverpool have told me that they will not relocate to either Aberdeen or Southampton, and I know that the same is true of many other stations. Moreover, however long the training might take—whether it takes months or several years—replacing the detailed local knowledge and hands-on experience is not the same as theoretical training. The inability to replicate that local knowledge which, for a lot of the staff, has been built up over many decades, is a big enough issue in itself to make the Government rethink their approach.

[Sir Menzies Campbell]

I agree with everything that the hon. Gentleman has said about local knowledge. I wonder, however, whether his experience at the meeting that he attended was the same as mine. I attended a meeting to consider the fate of Forth station, which is based in Fife Ness in my constituency. The officials who attended were considerate and went out of their way to attempt to deal with the audience’s questions. On many occasions, however, they simply did not have the information to enable them to deal adequately with the questions. Indeed, I ended up feeling slightly sorry for them. In particular, they had nothing to say about the point raised by the hon. Member for Truro and Falmouth (Sarah Newton) about what trials have been carried out in relation to the new proposals. They simply did not have an answer to that question.

[Bill Esterson]

The right hon. and learned Gentleman makes an important point about the importance of carrying out real tests on the robustness of the new system. There is no answer to that, because it is just not possible without running the two systems alongside each other, and I do not see that being proposed, even if it were desirable.

Another concern that staff and unions have is the lack of a risk assessment at the start of the consultation. I know that a risk assessment has been added, but the concern is that it was added late, as an afterthought, and that it is inadequate. I am sure that the Minister will address that. Another point made at length at the Liverpool meeting was the importance not just of local knowledge, but of the relationship between staff and the volunteers who carry out the search and rescue activity, and of knowing which search and rescue team is best placed to carry out any given rescue. They know them all personally, which is something else that will, I suspect, disappear as a result of remote stations.

The Select Committee on Transport held an inquiry, but its findings have yet to be analysed by Government. One of the results of a previous reorganisation was the high-quality new facility at Crosby, which I have visited a couple of times recently, but there has not been an assessment of the results of that reorganisation. Those two gaps have not been addressed by the proposals.

One of the strong themes of the Liverpool meeting was the impact on leisure users, such as people with leisure craft or fishing boats, as well as tourists and other visitors to the coast. Those people do not necessarily have access to the kind of technology that fits well with what is being proposed. Although commercial users would undoubtedly be able to use the new system, the issue of the leisure industry causes great concern not only to the people affected, but to the staff.

[Mr Mark Williams (Ceredigion) (LD)]

On the point about leisure activities in tourist areas, I represent a large tract of the west Wales coastline in Ceredigion. There is a rowing organisation in my constituency that enjoys a close relationship with one of the existing coastguard stations at Milford Haven. When those involved with the rowing organisation go out for their training, the knowledge they are able to give to the coastguards is reciprocated by the local knowledge in the coastguard centre. That organisation is fearful that such local knowledge will be lost. In addition, dialogue between the tourism sector and the coastguards could be lost.

[Bill Esterson]

The hon. Gentleman makes a good point that builds on what others have said. There is also an issue regarding the daytime stations that are being kept. I shall talk briefly about the option of either Belfast or Liverpool in the proposal. The same thing is happening in Scotland, where two stations are being pitted against each other.

[Lady Hermon (North Down) (Ind)]

Will the hon. Gentleman give way?

[Bill Esterson]

I will very happily give way.

[Lady Hermon]

It is very nice of the hon. Gentleman to do so for someone who has come across the divide—from the mainland of Northern Ireland—to visit England. Our respective coastguards are unfortunately pitted against each other. We have only one remaining coastguard in Northern Ireland based in my constituency in Bangor, North Down. Will the hon. Gentleman tell hon. Members, particularly the Minister, whether the coastguard in Liverpool would feel confident about looking after all of Northern Ireland, for example, Lough Neagh and Lough Erne—upper and lower—if the unthinkable were to come true? I am sure it will not do so, but in the event that it does and the Minister, who is responsible for shipping, decides in favour of Liverpool and not Bangor—I do not think he will—will Liverpool be able to look after Northern Ireland?

[Bill Esterson]

I am grateful to the hon. Lady for her points because it reminds me that, of course, originally Liverpool was excluded from the consultation. That is something that staff at Liverpool noticed. They have great concerns that the late inclusion of Liverpool as one of the options shows the true intentions of the agency.

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

Just for clarification, Liverpool was not excluded from the consultation; it was just not one of the stations that was proposed for closure. No stations were excluded from the consultation, no matter where they are in the country.

[Bill Esterson]

I accept the Minister’s point. I was merely expressing a concern raised by staff. To return to the point made by the hon. Member for North Down (Lady Hermon), staff at Liverpool do not feel equipped to address issues around the coast of Northern Ireland, and I am sure that staff in Belfast would say the same about dealing with issues around Liverpool. There is a very good reason why we have the current network. A lot of staff do not think that the proposals have addressed how the current network will be replaced without compromising safety. That is at the heart of the concerns that are being raised by staff and those who rely on the service.

The proposals were drawn up by former front-line staff who, it is fair to say, do not have recent front-line experience. That is a particular concern. The lack of input from front-line staff during the early stages of the process has caused a lot of disquiet. I know that a consultation is under way but, when things are done in such a way, there is always concern that the consultation is the wrong way round. I shall not accuse the Minister of anything stronger than that at the moment. He will have time to explain the matter.

[Andrew George (St Ives) (LD)]

The hon. Gentleman is making a very good case. A good thing that has come out of this particular exercise is that front-line staff in the maritime rescue co-ordination centres have clearly indicated that they believe they can make a positive contribution to the proposals. They recognise that things cannot be preserved in aspic and that there are ways of achieving both efficiencies and improved resilience. However, they also recognise that that cannot necessarily be done through the proposals. In his constituency, are those who are involved in the service engaging with constructive proposals as an alternative way forward to help the Minister to introduce a more acceptable scheme to modernise the service?

[Bill Esterson]

The hon. Gentleman makes an important point. In a meeting that I attended with the chief executive and staff at Crosby, staff said to the chief executive that they had in previous years come up with proposals that would lead to a reduction in the number of stations while addressing the issues of how to integrate new technology and maintain safety. However, no one has ever asked them for those proposals. Staff from around the coast are coming up with proposals, which I hope will be considered and taken on board. We should listen to people with front-line experience. That is certainly the direction in which we should go. By the way, I have not heard anybody say that they are against the introduction of new technology, although they do have concerns about the current set of proposals.

The volunteers who work with the Liverpool coastguard fear that their safety will be compromised by the changes and the loss of Liverpool if the proposal goes ahead. That would lead them to consider seriously whether to carry on. If that happened, the impact on search and rescue operations would be extremely serious indeed. I hope that that point is taken on board by the Minister. As I mentioned earlier, there is an issue about volunteers knowing the staff with whom they are working and trusting the judgment of those people who are sending them out on missions. Understandably, that is incredibly important to them and their safety.

Briefly, on the issue of maintaining stations as daylight stations, I have mentioned Morecambe bay. Another serious incident dealt with at Liverpool was the Solway Harvester. Both of those incidents happened at night. They would not be handled—whether by Liverpool or Belfast—from the station; they would be handled remotely. The point made to me by staff is that, if the proposals go ahead, there will be even less local knowledge. Those crucial minutes of delay make a difference to whether lives are saved. I hope that the Minister will comment on that.

On the number of staff, my understanding is that the proposal will lead to job losses of more than 220. We are talking about coastal communities that are already experiencing difficult economic circumstances. The impact on those communities of losing many jobs would be drastic. It would be challenging for people to find alternative employment. Coastguard workers are some of the lowest paid emergency service staff in the country and frequently take second jobs to supplement their wages. It is recognised that technological advances offer some opportunity for rescues to be co-ordinated from a distance. However, I have been told that technology should complement the knowledge of local coastal areas that coastguards possess, not supplant it. The loss of those jobs would threaten that .

A number of constituents have written to me on the matter. Mr Hughes from Crosby says:

“The proposals would see most co-ordination of incidents run from two Maritime Operations Centres—one based in Aberdeen and the other in the Solent area. This will mean a heavy reliance on yet to be designed software and a loss of what is often invaluable local knowledge. We believe technology should be used to complement the knowledge of coastal areas which Coastguard staff on the local stations possess, not replace them. The technology will be unable to cope with the new structure and could result in risks to people’s lives. We have already seen similar schemes with the fire service scrapped due to the fact that the technology would not work.”

My hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) has experience of those proposals, and no doubt, he will make comparisons when he comes to make his speech.

Another of my constituents wrote to me to raise something that concerns me greatly. He says that the chief coastguard—or some of his senior managers—has stated to staff on some of his visits that

“this afternoon’s debate will only be a few MPs whingeing about their own stations and is nothing to worry about.”

I do not know how other hon. Members feel about that statement.

[Mr MacNeil]

That statement shows unbelievable arrogance.

[Mike Penning]

rose—

[Bill Esterson]

I think that the Minister would like to intervene.

[Mike Penning]

If an accusation has been made against certain coastguard officers, will the hon. Gentleman indicate exactly who said that? Otherwise, will he withdraw that until he has the evidence to say who said it?

[Bill Esterson]

I have it in writing from a serving coastguard officer who has asked me not to give his name, so I am not going to give his name.

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

Would my hon. Friend give way?

[Mike Penning]

Who said it?

[Bill Esterson]

I am going to give way to my hon. Friend.

[Mrs Ellman]

I wonder whether my hon. Friend is aware that the Select Committee, which is about to open an inquiry into this issue, has received similar concerns from coastguards who feel that they may be victimised? The Committee has written to the chief executive of the MCA to seek reassurance that nobody making any form of representation will be victimised.

[Bill Esterson]

I am grateful to my hon. Friend, because I think that that is important. Staff are making those allegations, and I know they have made them to other Members.

[Mike Penning]

May I reiterate that any member of staff has the right to give evidence not only to the Select Committee, but to the consultation? The point that I was trying to make is that the accusation is about a senior member of staff. I think that initially the hon. Gentleman said that the chief coastguard had said that, and then he said, “Another member of staff”. If they are going to make that sort of accusation against a senior member of staff—not the person who was making the accusation anonymously—then they must indicate who that was. Was it the chief coastguard, or not? That is the point the hon. Gentleman was trying to make. If it was not the chief coastguard, then he must retract that. We have to have evidence about who the person was who was alleged to have said that, otherwise it is unfair.

[Bill Esterson]

As I said earlier, my constituent has indicated that he is concerned that if I give his name, or the name of other members of staff, they will be victimised. They are very concerned about that. Perhaps that is something that the Minister can discuss with me a little later, but I am certainly not going to give names now.

[Mr MacNeil]

The hon. Gentleman is right not to give the name. He has parliamentary privilege and is using it wisely. Perhaps the Department for Transport should find out in the MCA who exactly is saying that.

[Bill Esterson]

I am happy to talk to my constituent further to find out the information but, as I said, I am not going to give the name of my constituent.

[Mr Knight]

I am most grateful to the hon. Gentleman for giving way. He has been very generous in giving way and I think we all applaud him for that. I pay tribute to the Humber coastguard, but this is an important point. We are not asking him to reveal the source of the remark. We are asking who it is who is alleged to have made the remark—not who has told him, but whom we are talking about. Who is the mystery person who has made this outrageous comment? That is what we would like to know—not his source, which he is right to protect, but about whom are we talking.

[Bill Esterson]

I think I made it clear earlier that it was a senior manager. I do not have the name with me now, because that is not what my constituent has said to me, so I cannot give hon. Members any more information, but I will talk to the Minister separately if he wants to pursue that.

[Lady Hermon]

I am sorry to prolong this point, but in fairness I feel that I should put on the record that the chief executive of the MCA, Sir Alan Massey, and, separately, the chief coastguard, visited Bangor coastguard. They were courteous in the extreme. They listened very patiently and were very positive, and were receptive to the points that were being made by various MPs representing the Democratic Unionist party and the Alliance party. I just have to put it on the record that I did not hear them labelling MPs as “whingeing”.

[Bill Esterson]

I am grateful to the hon. Lady. I am grateful to hon. Members for their interventions on that point, but I am going to move on.

Another of my constituents, Derek Myers, has written to me with his concerns about search and rescue unit selection. His letter quoted the coastguard regulations:

“The unit selected should be able to reach the scene quickly, and should be suitable for at least one, and preferably as many as possible of the tasks of a SAR operation. Evaluating experience is more subjective and means weighing the normal primary duties of the agency furnishing the SAR unit against the specific operation in hand.”

Derek Myers and many others have said that the regulations indicate how important that local knowledge and those relationships are, and I hope that the Minister will address that point.

I appreciate that time has moved on and that other hon. Members want to speak, so I will conclude. I believe that the proposals are flawed. I hope that the Minister will take on board the alternative proposals from members of staff, and that he will consider the real concerns of the staff, as well as the concerns that emerged from the consultation meetings and the consultation process. I hope that he will reconsider the proposals and look at the proposals that maintain the safety to the level that staff are advising. Listening to front-line staff is very important.

15:06

[Peter Aldous (Waveney) (Con)]

It is a pleasure to serve under your chairmanship, Mr Crausby. I am grateful to you for calling me early in the debate. Regrettably, I have to leave for a previously arranged meeting in my constituency and I will not be able to stay for the winding-up speeches. I am grateful to my hon. Friend the Member for Truro and Falmouth (Sarah Newton) and to the hon. Member for Sefton Central (Bill Esterson) for securing the debate. I shall begin by paying tribute to the Lowestoft lifeboat, which was founded in 1801.

Earlier this year, the coxswain and crew of the Spirit of Lowestoft were honoured for showing great bravery and for a magnificent team effort in rescuing three crew from a craft stranded on rocks close to Ness Point, Britain’s most easterly point. The rescue took place at night in November 2009 in rough seas and strong winds. Coxswain John Fox received the thanks of the institution inscribed on vellum, while second coxswain Karl Jackson and crew members Ben Arlow, David Brown, Michael Beadle, Jonathan Flynn, Robert Lightfoot and Mark Ross each received a vellum service certificate.

While we debate the future of the coastguard in these comfortable surrounds, we must never forget the debt of thanks and gratitude that we owe to those people who risk their lives at all times of night and day, invariably in the most hazardous weather conditions. We owe it to them to come up with a sustainable, well-resourced and properly integrated coastguard service that is able to handle the demands of the 21st-century sea.

I recognise that there is a need for the service to be reviewed. There is a need to properly integrate the service and to fully utilise the new technology that is now available. I recognise the limitations of the system of pairing stations. There is a need for greater interoperability between stations. I agree with the reasons given in the consultation document for carrying out a review: the seas are becoming congested, ships are larger, the coastline is busier, and we are experiencing more extreme and variable weather conditions. That said, I have concerns, and I would be grateful if the Minister took them on board.

The proposed closure of the Yarmouth and Thames maritime rescue co-ordination centres has created worry and anxiety along the East Anglian coast. As the table in the consultation document shows, they are busy centres. With increased shipping activity envisaged off the East Anglia coast in the next few years, I urge the Minister to scrutinise those closures closely. If they are confirmed, there will be no centres between Dover and the Humber at a time when the seas off East Anglia are getting busier: some 1,000 wind turbines are going to be built, dredging continues, there is renewed activity in the oil and gas sector, and hopefully renewed activity in the fishing industry shortly. Construction work at Sizewell is to come, as well as ship-to-ship oil transfers, and increased shipping movements to and from Felixstowe and Great Yarmouth. There is also more leisure activity on the broads, on the numerous estuaries in Suffolk and Essex, and off the coast. The arrangements for the broads are an issue that is of particular concern to me, and to my hon. Friend the Member for Great Yarmouth (Brandon Lewis), who has other commitments that prevent him from attending this debate. He is particularly concerned about Breydon Water in his constituency.

Given the nature of the broads, which are made up of a network of rivers and waterways and which extend over many miles in Suffolk and Norfolk, as well as the fact that most of the vessels there are leisure craft and that responsibility for policing rests with a number of authorities, there is an added risk, which should be scrutinised fully in any review. I urge the Minister to look at those issues and to consider whether there is a case for an additional centre for the broads and the surrounding area, which would reflect proposals made in the consultation on the Thames.

I would be grateful to the Minister if he confirmed that, in proposing that there should be no stations along the East Anglian coast, Ministers had regard to the fact that any station in the region has the advantage of being close to the helicopter rescue service operating from RAF Wattisham and to the on-ship fire and rescue service provided by the Suffolk fire service, which covers the whole East Anglian coast.

An issue that will be raised time and again in the debate is how the new arrangements will make best use of and fully harness local knowledge, which, in many cases, has been built up over generations. As was said in the briefings that I attended, local knowledge is the putty that we stick in the gaps in the first five minutes of an incident. If it is not there, the outcome can be tragic. People’s main worry is that, without local centres, it will be more difficult for the coastguard to make best use of that local knowledge, which can be invaluable when the service is stretched.

The highest risks occur in the summer, when we often have leisure vessels crewed by people who do not know the area. In such a scenario, local knowledge of a long coast with many inlets can be absolutely critical when it is vital to get to an incident without delay. Whatever new arrangements are confirmed, they must demonstrate that local knowledge will not be thrown overboard, but retained and made better use of.

Some aspects of the proposals are attractive. Those aspects include providing high-quality jobs for coastguards, with job weight and pay reflecting the increased demands that will be placed on people. There is also the strengthening of the leadership and the support provided to volunteer coastguards. It is vital that the reorganisation is properly managed and resourced and that no effort or expense is spared in securing a successful transformation to bring about such improvements.

The Minister has previously given an assurance that the review is not just a cost-cutting exercise, but a genuine effort to restructure and improve the service and that adequate funding has been secured from the Treasury to implement his proposals. I am grateful to him for that. He has also indicated that this is a proper and full consultation, that alternative proposals for the future of the coastguard will be given full and proper consideration and that the current proposals will be amended if it is decided that improvements can be made to them. There is a worry that, in such a scenario, the Treasury might be an obstacle to securing the four-star service that we need. If that happens, I hope that the Department will do all it can to secure the additional funding needed.

My final request is for a service that not only is properly integrated, but works closely and in co-ordination with others to ensure that those on the seas receive the best possible service. The coastguard needs to be integrated with coastguard services in other countries and, from my constituents’ point of view, with those on the other side of the North sea. The UK is already connected to the safe sea net system, but we need to consider whether improvements can be made.

I am aware of the excellent work done by Coastwatch volunteers, including those at Pakefield Coastwatch in my constituency, who form part of the Sea Safety Group. It is vital that such volunteers are fully involved and consulted in the review, that the service provided by them is fully integrated with the new coastguard service and that they are not burdened with additional costs or unnecessary red tape.

I am grateful to you, Mr Crausby, for bearing with me, and I thank you for allowing me to speak early so that I can depart early. I apologise for the fact that I will not be here for the summings-up.

15:14

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Member for Truro and Falmouth (Sarah Newton) on bringing this matter to the House, and the number of Members present is obviously an indication of the interest in it. Those of us who represent areas where the coastguard is very effective and does a grand job are pleased to be here. We are perhaps a wee bit disappointed that we did not have the opportunity to debate the issue on the Floor of the House, but we are none the less pleased to have the opportunity to debate it here. We are also pleased that the Minister has been able to come along to respond.

The issue is not about mere numbers, but about life-and-death decisions, which affect us all, and that bears repeating. Winston Churchill, who has been one of my great heroes since I was young, said:

“I am easily satisfied with the very best”,

and it is my belief that we should be satisfied only with the very best. However, it is clear from the proposals that we are not being offered anywhere near the best, and we are certainly dissatisfied. The Minister has been at pains to suggest that no decision has been made and that the consultation document is not simply a paper exercise. The response to it has been overwhelming, and we welcome the Minister’s assurance. Indeed, I spoke to him before the debate.

My postbag has been bulging with letters on this issue, as I suspect many Members’ postbags have been. The only issue that beat it was the snow and ice that we had, and then there were the roads. We therefore had the roads and then the coastguard, as well. When I was first contacted by concerned members of the fishing industry along Strangford lough, the Irish coast and the Down coast in my area, I was immediately troubled. I was also contacted by members of local sailing clubs, as well as caravan park owners and residents.

It was apparent that the issue needed attention at all levels. Colleagues in local councils have also been active, as have Members of the Northern Ireland Assembly. Local groups and others have pledged to raise the issue at the highest level in the House of Commons, where the decision will be made. The hon. Member for Totnes (Dr Wollaston) brought the issue of the Brixham coastguard in her south-west constituency to the Floor of the House. There is UK-wide concern that Government cutbacks in coastguard provision are not simply an issue of people losing their jobs as a result of budgetary constraints, which is hard enough to accept in itself, but will put lives at risk.

With colleagues, I decided to table an early-day motion, and many Members have signed it and other early-day motions. I have taken the opportunity on two occasions to ask the Prime Minister about the coastguard at Bangor. On both occasions, he said that the consultation was ongoing, but we were obviously looking for something a bit more meaty. None the less, I accept that the consultation process is the way that these things are done and that is what we have to move forward on.

We have had total cross-party support on this issue. I give special credit to the hon. Member for North Down (Lady Hermon), who has energetically, forcefully and directly pursued this matter. As a neighbouring, new MP, I was pleased to support her in that campaign.

Those who use the waters around the Northern Ireland coastline need to be certain that they will have a reliable and speedy response from the coastguard if they get into distress or danger. I fear that the prospective closure of Bangor coastguard station will put all that at risk. With up to 1,000 people and a fishing fleet of more than 80 boats relying on the station, it is critical that safety on the seas is not jeopardised by money-saving schemes.

The proposals are not close to the right solution. They suggest that, even if Bangor closes down, there may not be a daytime operation in Belfast. We have been put in direct competition with Liverpool, which I feel quite aggrieved about. The hon. Member for North Down put that perspective very clearly in a question to a previous speaker.

All Belfast operations are based at Bangor coastguard station. However, it is not just the coasts that are the responsibility of the Bangor operation, but the inland waterways of Lough Neagh and Lough Erne. We should not forget that it also has responsibility for the mountain rescue teams for the Sperrins and the Mournes. All those things come within the remit of the coastguard in Northern Ireland.

[Lady Hermon]

The energetic MP for North Down rises—it was awfully nice of the hon. Gentleman to call me that. I am sure my good neighbour will acknowledge that this issue has united all the parties in Northern Ireland, including Sinn Fein, the Alliance party and the Social Democratic and Labour party. I am sure that he will agree that what makes Northern Ireland, with its one remaining coastguard, strategically different from the rest of the UK is the fact that it shares a land frontier with the Republic of Ireland. The co-operation between the Irish coastguard and the Northern Ireland coastguard is second to none—it is first-rate. I am sure that that point is not lost on the Minister and that he acknowledges it.

[Mike Penning]

indicated assent.

[Lady Hermon]

I thank the Minister for acknowledging that point.

[Jim Shannon]

I thank the hon. Lady for her contribution, which is very honest.

The hon. Lady and I, with the SDLP and the Alliance party, met some coastguard officials, and the meeting was excellent. I know that the Minister met the First Minister, Peter Robinson, and the Deputy First Minister, Martin McGuinness. We have come a long way in Northern Ireland. We crossed that divide a long time ago, and I want the Minister to know that we have moved on. It is great that we can have an issue that unites us all.

[Mike Penning]

I was due to meet the First Minister and the Deputy First Minister at my first engagement, but I had to delay it by a couple of weeks due to parliamentary business. I did not have the opportunity to meet them when I was in Bangor.

[Jim Shannon]

I thank the Minister for that intervention.

To move on slightly, there is also the issue of helicopter taskings in Northern Ireland, which includes the police and ambulance services. This is also a major issue in the Republic of Ireland, where helicopters for air-sea rescue are provided at no charge. The relationship that has been built between the Bangor station and its counterparts in the Republic would not be the same without those interpersonal dynamics. The Minister must agree that if we lost the help and support of the Republic, and the manner in which it is offered at present, that would most certainly result in loss of life. That is my concern.

We are encouraging people to holiday in Northern Ireland to take advantage of the most beautiful scenery the UK has to offer. I will take the opportunity to give a sales pitch for my area. We want people to enjoy the Fermanagh lakes and to make the most of all that the stunning Strangford lough and the north Down coast have to offer, yet we also face telling people that the reality is that if they get into trouble, the rescue will have to be co-ordinated on the mainland before anything is done on the ground. That is another concern that I must express today.

The consultation further proposes that either Liverpool or ourselves cover both regions with 50% fewer staff than Bangor employs now. I pay tribute to the coastguard staff. They do an excellent job, and we are very encouraged by what they do, but how could this be achieved without there being some shortfall in that area of the service? It could mean the extra five minutes between life and death. The matter involves not only the fact that Northern Ireland must have its own service provision, but how we ensure that we have the ability to save lives and to do that better.

I mean no disrespect, but if a distressed child had to ring an operator in Scotland to say that their dad had fallen out of their dinghy near the big rock on the Portaferry road, Newtownards, would the operator know where that was? No, they would not. I could take them there right now, but that is because I know the area. We have that local knowledge. Every Member who has spoken so far has mentioned local knowledge. Could an operator in Scotland give an accurate account of where to send the rescue service? They could not possibly do that because they do not have local knowledge. Ask someone in Bangor coastguard the same question and the answer would be immediate, and so would the response.

Bangor dealt with more than 700 incidents last year, and it is clear that on our seas we need a dedicated service that knows the area and knows best how to organise the rescue. At Bangor station in the past four years, the number of rescues is up, the number of people involved is up and the number of lives saved is up. Unfortunately—it is the nature of life—the number of those who have been injured or lost their lives is also up. This is about extra usage, but it is also about the response from the Bangor station.

People in Northern Ireland waters should not be put at risk by a budget. The wives of fishermen at sea need to have their minds put at ease. They depend on the coastguard system, which they have come to know and trust. It is a system that has saved hundreds of lives and must be retained. What is being offered is not the best, and Northern Ireland Members must keep pushing until the constituencies we represent get what they deserve—the very best coastguard service from a local station with local people and local knowledge. We are unique in Northern Ireland in that the coastguard also helps with mountain rescues, and that specialised service must also continue and be co-ordinated by those who have been doing the job for years and know the intricacies of the system, which saves lives.

There comes a time when we must focus on our own areas, and I would like to do so for a few seconds. As Members of Parliament, the hon. Member for North Down and I are fighting for the right things for all coastguard stations, but I must highlight the bonuses of the station that covers my area of Strangford. The majority of staff there are young and highly qualified. Numerous members of the Bangor station are trainers in different areas, and they provide training not only to the UK mainland, but to the Republic of Ireland. They are excellent staff, who would have to up sticks and relocate to the mainland if the proposals were accepted. Many of those with young families could not do that, and I must speak on their behalf as well.

As I have said on a number of occasions, I continuously fight against the “brain drain” from Northern Ireland—if I may use that terminology, which may not be entirely appropriate for this topic. Our students attend university on the mainland and end up living there or going where the jobs are. The difference here is that losing the high-quality staff we have in Bangor will have a detrimental effect on the coastguard as a whole.

[Lady Hermon]

I thank the hon. Gentleman for taking a second intervention. I invite him to say something to the Members gathered here today for this important debate about the alternative proposals submitted to the Minister by the coastguard in Bangor. They are very thoughtful and not self-seeking or necessarily confined to Northern Ireland, but address modernisation and building resilience throughout the whole UK. We are part of the UK and we want to play our part.

[Jim Shannon]

I thank the hon. Lady for her intervention. She must have read my mind, or she has been reading my notes, because that is the next thing I am coming to.

[Lady Hermon]

I cannot read your writing.

[Jim Shannon]

Nobody can read it.

The Minister and the Secretary of State for Northern Ireland were in Northern Ireland on 9 March. The Minister said earlier that that proposal—option B—was a breath of fresh air. I am not misquoting him; those were his words, and we welcome them. That perhaps indicates an understanding and an acceptance that there has to be change. We accept that. We are not in the business of saying that we are against everything all the time. We are trying to be positive in our comments.

We have an alternative and it has been put forward. It is not just a suggestion for Bangor; it is for all—for Swansea, for Humber, for London, for Aberdeen and for Dover. The proposals would help all Members here and all the areas we represent. That is what this is about. I feel that the proposals are very worthy of consideration, which perhaps shows our commitment to finding a solution.

I am conscious that time is flying on, so I will conclude. I stand today and urge the Minister fully to consider the proposals presented to him on 9 March. The proposals outline how every area—from the tip of Scotland to the bottom of Dover, and from the Shetland islands to the Fermanagh lakes—would achieve adequate cover and make the most of the experience of the staff at the major locations. It is my belief, and the sincere belief of many, that the retention of Bangor coastguard is an essential aspect of any proposal. The Minister and his Department should accept that and take it into account in response to the consultation document.

I have a six-point diagram on the proposals. It is a bit like a double Presbyterian sermon, in that a Presbyterian sermon has three points and this has six, and focuses on the strategy, which is cost-effective. That is one of the issues. It also focuses on the structure, which would be more successful through the roll-out and upon completion because it would enable the system to continue. The processes would retain possibilities for the future and on how best to do things. The people involved would have their motivation and good will enhanced, and the staff, who made the proposals and who want to work with the Minister and all of us as elected representatives, would be rewarded. That would mean safer lives, safer ships and cleaner seas.

I stand by the coastguard station in Bangor. I stand by the alternative proposals and urge that every consideration be given, not only to the issues raised here this afternoon, but to the proposals made by the people who know what they are talking about, who co-ordinate rescues every day and who can tell what will work and what will not. I would listen to them, as they co-ordinate rescues at sea; the hon. Member for North Down and I had the opportunity to do that down at Bangor coastguard. I would listen to them, as they seek to co-ordinate a better UK-wide coastguard service. I ask the Minister to do the same.

15:29

[Sir Menzies Campbell (North East Fife) (LD)]

I was sent here to whinge on behalf of my constituents, and if a senior member of the Maritime and Coastguard Agency predicted that, not only was he right, but he was conferring upon me and upon everyone else here a mark of distinction of which we should be nothing other than proud. I begin with an apology, Mr Crausby. Because I have an urgent matter waiting for me in my office, I will not be able to stay for the full duration of the debate, but I will, as a consequence, confine my remarks as much as I possibly can.

I have already mentioned the meeting that I attended where, as appears to have been the case in Liverpool and elsewhere, there were consideration and good manners but a distinct lack of answers. Local knowledge was the centrepiece of the discussion on that occasion, and it was most interesting that the seafarers were the most sceptical of what was being suggested.

The sea plays an important part in my constituency. It once played an historical part in relation to the fishing industry. That fishing industry is much smaller, perhaps, than it once was, but it operates out of Pittenweem and other harbours, and the coastguard is clearly an important part of the safety network required by that industry.

There is a great deal of leisure sailing on the River Forth. That has also been encouraged in the town of Anstruther, which was formerly a fishing port and is also in my constituency. In addition, the traffic on the Forth is substantial, as the Minister acknowledges by nodding his head.

In 2010, the number of Scottish lifeboat call-outs was 1,012. The 10 stations within Forth coastguard’s responsibility were involved in 373, or approximately 40%. That makes the point about the relationship between the coastguard and the lifeboat, and also the need for lifeboat services because of the intensity of the activity on the sea in and around the area for which Forth is responsible.

The Forth coastguard at Fife Ness has the lowest running costs in Scotland. If one takes out staffing costs, the bill for Forth is £44,662. There is a good reason for that: the coastguard owns the building and therefore does not have to pay rent. If economic advantage is being sought by closing Forth, it would be very much smaller than would be achieved at several other stations.

[Mr MacNeil]

The right hon. and learned Gentleman mentions the real estate at Forth, but is that not counter-productive and working against Forth? Had it been tied into an expensive lease agreement, it might remain, as is the case with Aberdeen, which seems to have a 25-year lease that is difficult for the MCA to get out of. Hence, it plans to put a maritime operations centre in Aberdeen.

[Sir Menzies Campbell]

I am always a bit nervous about the argument that one cannot take a decision on the merits because of the relative cost. My argument is that the decision on the merits properly ought to be to retain the Fife Ness coastguard station, serving the Forth as it does. On the basis of the statistics that I have given, I say respectfully that the case is overwhelming. I invite the Minister to reach the same conclusion.

15:33

[Albert Owen (Ynys Môn) (Lab)]

It is a great pleasure to follow the right hon. and learned Member for North East Fife (Sir Menzies Campbell), who referred to a public meeting that the MCA hosted. I attended the meeting in Holyhead, which was a public relations disaster for the MCA. I shall refer to it a little later.

The right hon. and learned Gentleman is right that no answers were given. There were many questions, and many knowledgeable people attended, including ex-seafarers who I worked with when I was in the merchant navy, and retired master mariners with direct experience of working with the coastguard. He makes an important point about those meetings, which I am sure the Minister will have heard. I echo what the right hon. and learned Gentleman said.

I congratulate the hon. Member for Truro and Falmouth (Sarah Newton) on securing another debate on the subject. However, I would have liked not only a debate on the Floor of the House, but an oral statement from the Minister, so that we could put direct questions to him. He is a reasonable person, and I believe that he would have been making exactly these same arguments had the previous Government made an announcement of such national importance and magnitude when he was in opposition. Discussing the mass closure of some of our coastguard stations is of significant national importance.

The Minister and I have had a brief private conversation about these matters, but I invite him to come to Holyhead in my constituency. I know that he has been to other places, but, as a fair man, he should go to all that face closure. The— [Interruption.] It is not impossible. There are only nine, so it is very possible. I have attended rallies in two or three places in a short period—the hon. Member for Carmarthen West and South Pembrokeshire (Simon Hart) will vouch for that—so it is possible. However, it is also important, because these are difficult decisions.

The Maritime and Coastguard Agency chief executive has been to those places. He has been very courteous, and we have had public meetings, but we have not had answers. It is important for the Minister to have direct contact with the people who work in our coastguard stations around the country so that he can dispel any myth that we are just whingeing Members of Parliament. He would hear people’s opinions first hand.

[Bill Esterson]

I asked the Minister to come to the House to make a statement so that we could have that cross-examination. Does my hon. Friend agree that it would be helpful if the Minister did that at the end of the consultation, when he announces his findings? Will he come to the House and make a statement so that we can have that conversation?

[Albert Owen]

I am grateful to my hon. Friend for that intervention; I am sure that the Minister heard what he said. Again, because of the importance of the issue, it would be in the Government’s interest to take questions on the Floor of the House. That would be a strong statement that they are indeed listening to the views of MPs.

The extension is welcome and it provides people with opportunities, but cynics among us, including me, would say that 5 May is an important day. It is a day of big elections in Wales, Scotland, Northern Ireland and many parts of England. I am sure that that was not the intention of the Minister, but cynics will be led to believe that it might have been a circumstance— [Interruption.] I am certainly not the only one. I can give empirical evidence of candidates who were on the lists for north Wales, for instance, who, when the announcement was made, said that the proposals would improve safety—Liberal Democrats and Conservatives were going with the Government line at the time—and that there would be no front-line closures. They received hundreds of e-mails, and, within weeks of receiving them, they were saying, “It’s a disgrace that the coastguard stations are closing.” That should be borne in mind. Cynics would arrive at the conclusion that people have done somersaults because of public pressure.

[Sarah Newton]

I am very disappointed with the line that the hon. Gentleman is taking, because there is genuine concern about the matter the length and breadth of the country. For him to turn it into a political football is most disappointing. The point has been well made by several Members that there are significant inaccuracies in the document. On the face of it, that document made a compelling argument. It was not until all of us had an opportunity to read it in detail and consult with our coastguards that the problems came up. I hope that he will refrain from taking that line. This has been an all-party, whole-House debate.

[Albert Owen]

I am sorry that the hon. Lady is upset by some of the truths I have just said. Candidates made statements to coastguards—not to me, but to coastguards—that the proposals were in their long-term interests and that our coastlines would be safer, and then had to retract them because of public pressure. That happens to be a fact, and I am sorry that it upsets her. I am a consensus politician, and I work with people from all parties, but that does not change the fact that the electorate in those areas are cynical about the somersaults done by some of the candidates. However, I shall move on.

[Mrs Ellman]

Does my hon. Friend welcome the fact that the Transport Committee is about to conduct an investigation on this very issue? That follows concerns expressed from all parts of the House and a session that the Committee had with the chief executive of the Maritime and Coastguard Agency in which we put certain questions to him, but were not satisfied with the answers.

[Albert Owen]

Absolutely. That will be my next point, but it does not detract from my first.

My second point is that the proposals from the Government and the MCA should be scrapped. The all-party Transport Committee is inquiring in detail into the workings of the MCA, and that inquiry is a good basis for the beginning of a debate, not the end of a consultation process. Detailed arguments from maritime experts, coastguards and people from coastal communities can be fed into the inquiry, which will be thorough.

[Sarah Newton]

Will the hon. Gentleman give way?

[Albert Owen]

The hon. Lady would not take interventions, so she is pushing it, but I am a gentleman, and in a spirit of consensus, I will give way.

[Sarah Newton]

I appreciate that. I made it clear that I would not take interventions because, during the first debate, I had a huge amount of time to make the case for Falmouth coastguard. On this occasion, I wanted to ensure that as many hon. Members as possible could make their case and put their concerns.

Does the hon. Gentleman agree that, on the extension of the consultation period, the Minister has said that if the Select Committee can expedite its work, all its findings will be taken into consideration? Furthermore, he has also said that at the close of the extended consultation there will be an additional period for proposals to be properly communicated, discussed and scrutinised.

[Albert Owen]

I am grateful for that intervention, and I hope that the Minister will indeed respond on the issues that I am raising about the Transport Committee, because they are important. We learned lessons from the 2003-04 inquiry, and we must learn lessons now. I am greatly in favour of the inquiry, and I wrote to the Chair of the Select Committee asking for such an inquiry. Perhaps the hon. Lady and the Minister will confirm that they are willing to wait until they have received the inquiry’s report and the Government’s response before making any decisions. That would be a positive way forward and I hope the Minister will comment on it. It would be not a way out for the Government, but a way forward for the coastguards, which is why we are all here today.

A debate needs the input of local coastguards. I agree with the Minister that coastguards, certainly in my area, have not been restricted in speaking their minds and saying what they think of the proposals. That is to his credit and that of the MCA. On top of the consultation, I have encouraged coastguards to write in, but that does not deter me from believing that these flawed proposals should be put to one side, so that we can have a proper debate, including on the Select Committee’s findings.

I make no apology for referring to local knowledge, as many hon. Members have done. It is essential, and as an ex-seafarer who worked on the coast for some 10 years and was also foreign-going, I know that our coastguard services provide some of the safest coastlines and seas in the world. I am proud of what they do, and I want it to continue and improve. Local knowledge is vital to initial responses, to knowing locations and, in north Wales, to the pronunciation of such locations.

During the first debate, I had a brief opportunity to speak—I say that to the hon. Member for Truro and Falmouth—and the Minister gave a written response to one of my questions, although it was not adequate. I will provide evidence of why it was not adequate. He said that pronunciation of place names would be sorted out by a new geographic information system, which would include phonetic spellings. I will give an example—empirical evidence—of where that has failed. I am raising the matter to help him.

The incident occurred during the coastguards’ dispute. The MCA said that the circumstances were exceptional, but it highlights the fact that people outside who do not have local knowledge might make errors, which might cost time, and perhaps lives.

[Mrs Anne McGuire (Stirling) (Lab)]

The problem is not just phonetics or pronunciation. In Wales and in Scotland—the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) is here—there are different languages, which are used to describe the areas where people fish and that tankers run through. Knowledge of the geography of an area is important, but so is understanding the basis of the language.

[Albert Owen]

I am grateful to my right hon. Friend for raising the issue of language. I wish to refer to the Welsh language and phonetics in relation to place names.

My first example is, fortunately, an empty canoe that was drifting of Morfa Nefyn in Gwynedd, which the coastguard had to spell phonetically as “mor fen evon” and which he wrote down as Morefen Effon. I shall give the Hansard reporters the correct pronunciations because I would not expect them to have that local knowledge, but the serious issue is that outside people would not be able to local Morfa Nefyn. A holidaymaker had failed to look after their canoe, which drifted off, but if the incident had been serious, and if someone had fallen out of it, they might have been lost for ever. I am making a serious point. I am grateful to the Minister for giving me the information, but the proposals would not have been adequate in such a situation and no team could have been tasked for that one.

In another incident at Cemaes in my constituency, in the north of Anglesey, a casualty had fallen down a 20-foot cliff. Like many parts of Wales and of the United Kingdom, we have some great coastal walks. According to the incident log, it took 13 minutes to make a decision, and the Holyhead coastguard was given the task when there was an initial response team located at Cemaes itself. That added to the time taken to respond. Following the request being made by the initial response team and Cemaes being paged, a staggering 48 minutes had passed since the initial call was made.

The terrain was so bad that a helicopter had to be scrambled for safe evacuation, and the irony is that the 22 Squadron search-and-rescue helicopter was just down the road on Anglesey. If there had been local knowledge, the scramble would have happened instantly and the victim’s injuries would have been less serious. My point about time factors is important. When RAF Valley was tasked to go to the incident, it was 68 minutes later.

[Dr Sarah Wollaston (Totnes) (Con)]

I agree with the hon. Gentleman, but the problem is not always pronunciation. Sometimes there are problems with the sheer number of locations with the same name and spelling. We have 12 Cod rocks in my area, and someone local wrote to me recently about a serious incident when he was stranded off Cod rock.

[Albert Owen]

I am grateful to the hon. Lady for that intervention, but I have moved on from pronunciation to actual mistakes.

My third and final example of problems with place names is extremely important. It involves a call to ambulance control about a person in the water at Tywyn in Meirionnydd in Gwynedd, but the Rhyl coastguard team was scrambled and departed to Towyn in Conwy. I hope that the hon. Lady is listening, because she has just intervened on this point. Towyn and Tywyn are 80 miles apart. It was realised that a mistake had been made, but it was some 16 minutes later that the air ambulance picked up the victim. That is serious and those examples are evidence.

The Minister may check that those incidents happened, because they were logged as errors. They are good examples of what might happen if outside areas were involved. In my area, the suggestion is that there might be a hub at Liverpool or Belfast, but they, let alone the marine operation centres at Aberdeen and on the Solent, could certainly not deal with such incidents. It would be impossible to have Welsh or Gaelic speakers in all those locations all the time. Local knowledge is extremely important and I make no apology for describing those incidents to the House.

Holyhead is the busiest seaport on the western seaboard and an extremely important location. It is a long way from Swansea, which would be the only day centre left open in Wales. I say to the Minister that coastal tourism must be factored into the matter, because many people go to the coast for their holidays and they need to know that coastguard stations are manned by people with local experience and local knowledge.

The flawed consultation document of 16 December was vague on leisure activities. Does the Minister have detailed information that was not in the consultation document about the different levels of leisure incident that have taken place? I know that some larger vessels have technical equipment—certainly, they are improving—but we must also consider walkers, sailors, climbers, hikers and people who go out on sea beds and drift away. We need that information, because a growing number of people are visiting our coastlines and they do not have the satellite equipment that is carried by, for example, many larger vessels.

There has also been growth in the number of incidents. The consultation document states that there has been a 25% increase in coastguard incidents off the United Kingdom coastline over the past five years alone. We have a growing industry that will be threatened by the mass closure of coastguard stations.

I understand that in 2009— [Interruption.] I am sorry, Mr Crausby, but I must refer to the MCA, who are smiling as I raise those issues. It is not helpful for coastguard officials to smile during this debate. I am not smiling, and I am sure the Minister would not be happy to see it. I am providing empirical evidence and giving my opinion on behalf of coastguard stations along the coast. I have experience of coastal communities and have worked at sea, so I do not like to see this happening and it is not fair. A degree of arrogance is coming from senior MCA managers towards local knowledge, and that is being echoed by somebody smiling at me while I am making pertinent points in the debate.

I support the upgrade and the modernisation of technology. That needs to happen and in the 21st century we must have more than two stations talking to each other; we need a fully integrated system. I back that idea and the review carried out by my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick), when he was Minister responsible for shipping, on improving the conditions and wages of coastguards. That needs to be looked at, but it is not necessary to have a mass closure programme to improve the safety of our coastlines.

Even at this eleventh hour, I appeal to the Minister to scrap the proposals, await the Transport Committee report and listen to what people—whether Members of Parliament or members of the public—have been saying. We need a proper debate so that we can improve our coastguard services and have confidence in an improved, 21st-century technology. We must have the safest coastlines so that people can feel safe, whether they ply their trade at sea or use the sea for recreational purposes. I know that the Minister wants that outcome. It is certainly the outcome that I want, but there are better ways of achieving it than having this flawed consultation.

[Several hon. Members]

rose—

[Mr David Crausby (in the Chair)]

Order. I will start the winding-up speeches at 5 o’clock. Shorter contributions will be needed if everybody wants to get in.

15:53

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

I intend to put a different slant on the debate, and I declare a special interest as the wife of a fisherman. I start by paying tribute to the men and women who man our coastguard stations, the National Coastwatch Institution, the look-out posts, the Royal National Lifeboat Institution and everybody else connected with sea safety. It is because of those people that fishermen’s wives such as myself sleep a little better at night than we otherwise would.

My constituency is served by both Brixham and Falmouth coastguard stations. Last year, 1,366 incidents were serviced by Brixham coastguard station, and 2,344 by Falmouth. History seems to be repeating itself. In the early 1990s, I was the secretary of the Plymouth Sea Safety Group. The national Sea Safety Group started the National Coastwatch Institution because the look-out posts around the coast that were manned by the coastguards were withdrawn. That movement started with the opening of Bass Point in west Cornwall, as a result of two fishermen losing their lives. I do not want the same thing to happen again.

Last Saturday, seven 13 and 14-year-olds were stranded by the high tide in my constituency, while eight people were stranded by the tide in other places in Cornwall. Brixham coastguard attended the seven teenagers, while Falmouth coastguard went to help the other eight people. Such individuals do not carry VHF transponders or radios. Mobile telephones are often not within range, so they have no means of communicating or accessing the wonderful equipment with which the two coastguard stations are equipped.

Recreational vessels do not have to comply with the global maritime distress safety system, and although many have digital selective calling included in their VHF radios, meaning that they can press a button rather than broadcasting a mayday call on channel 16, I am concerned about those that do not have the equipment for our coastguard stations to track—kayaks, for example, and the little dinghies that use our coast. Strandings often happen at night. I welcome the consultation and its extension, but when the Minister looks at the responses, I urge him to ensure that he considers replies from those who are not included in the GMDSS and do not have VHF radios with DSC. Other resources include Navtex weather reporting and navigational information, search and rescue equipment such as radar transponders—SARTs—and emergency position indicating radio beacons, or EPIRBs. Those without such things will be most vulnerable after the cutting back of local coastguard stations.

I do not believe that the coast of Devon and Cornwall can be served well by one station alone that operates from Southampton. As has been said, many names of familiar landmarks that can be used to identify a position at sea are often pronounced differently. I believe that just a couple of minutes’ delay in a very cold sea can make the difference between someone surviving or not. Hypothermia can set in, and everybody knows that people do not survive long in cold water.

The sea can be the most beautiful place in which anybody can spend their time, but it can change quickly—believe me, I know after living for 25 years in fear of seeing the sea change overnight or within hours. One thing my experience has taught me is that we must have respect for the sea at all times. If we lose that respect and believe that we can beat the sea, we are finished. While I welcome the extension to the consultation period, when the Minister looks at the responses, I urge him to ensure that he does not lose respect for one of the most dangerous but beautiful elements in the world. If he does, not only will he let down fishermen’s wives such as myself, the wives of sailors and other users of the sea, such as our young people, but he will let down the whole nation.

15:59

[Dr Alan Whitehead (Southampton, Test) (Lab)]

It is a pleasure to follow the hon. Member for South East Cornwall (Sheryll Murray), who I believe knows more about this subject from, among other things, direct experience than anyone else in the House. If people listen to no one else this afternoon, they should listen to the hon. Lady, because of what she says from direct experience of what it is to go to sea, what is involved in safety at sea and in calling out the people who can provide support and assistance for those at sea. What she says about the idea that all those things might be co-ordinated from somewhere in Southampton is something of which I am very aware.

Being the Member for Southampton, Test, I do not think that I fall into the category of Members who come along to the debate to whinge about their particular centre, so perhaps it is particularly important that I say a few words this afternoon because I am not a Member who could be accused of coming along to the debate and whingeing about their centre. As is generally known, although the MCA headquarters is not in my constituency, it is 85 yards away, so it is almost there.

According to the proposals, the Solent will have a brand-spanking-new centre, with 24-hour cover. One might say that that is fair enough: the Solent is one of the most congested areas of sea around our shores, so it should have that centre. However, it is also true, as we have heard, that our seas in general are becoming more congested. The volume of shipping is increasing in many areas. Many more large ships are confined to deeper water in restricted channels. As we have heard, large numbers of offshore renewable energy installations are being developed around our coasts, restricting the areas available to shipping.

Our shipping is getting larger. Today’s ultra-large crude carriers carry up to 500,000 tonnes of oil, some five times the capacity of the Torrey Canyon. The largest container ships—those coming into Southampton —are 1,000 feet long and can carry more than 11,000 containers.

Our coastline is getting busier. The UK has more than 10,500 miles of outstandingly beautiful coastline. Millions of people use our seas, coasts and beaches for an increasingly wide variety of recreational purposes, often in areas that are also used by commercial shipping, as is the case in the Solent.

Weather conditions are becoming more extreme. More frequent and more intense storms have been occurring. That increases the risk to ships. Therefore, there is an increasing requirement for the coastguard to provide navigational advice to mariners in the most congested areas.

As a result of all those factors, the number of incidents to which the coastguard has to respond has been rising—from 16,500 incidents in 2005 to 20,544 in 2010—and it is likely to continue to rise.

I have to make a confession now, Mr Crausby. All the words that I have said since the phrase “our seas are becoming more congested” are not mine; they come from page 12 of the consultation document. Anyone reading those words and then turning the page would expect to see many proposals to strengthen, expand and enhance the coastguard service, for precisely the reasons set out in the consultation document. The problem that we are grappling with is that it is very hard to see how the proposals in the consultation document would bring about that level of enhancement.

It is claimed that the service is being modernised, and I think there is widespread consensus in the Chamber that a lot of modernisation of what the coastguard service does can be undertaken. The problem is that the consultation document is not clear, and therefore the debate is not clear, about whether the proposals are designed to save a large amount of money, in which case the first thing that should have happened at the point of the proposals being made was a series of risk assessments to see whether a safe coastguard service would be retained after their implementation. However, as far as I am aware, no risk assessment, no modelling and no simulation tests have been done as a result of the proposals being made.

Alternatively, if the proposals are indeed modernising proposals to make the service better, an understanding needs to be reached of why the service will be better, and why a service based on two centres, one of which would be Southampton, with the other centres open only during daylight hours, would be better, more modernised and more efficient. In terms of the future for the service in Southampton, yes, it will have 24-hour cover. Nevertheless, it will be a maritime operations centre in addition to anything else it may do. The definition of that maritime operations centre includes, among other things, co-ordinating the whole service, as one of two such centres in the country. As we heard, taking calls and co-ordinating services across a huge expanse of coast is way beyond any experience that centre may have of what such a service would consist of. I wonder about the strain and stress that will come upon those people. Yes, they will have jobs in the centre, and yes, it will be a 24-hour service, but they will be co-ordinating a service on the basis of quite possibly nothing much being on the other end of it. We are talking about circumstances in which people are directing services in a remote part of the country and hoping that they have done a good job and got it right.

It was stated at a recent hearing of the Transport Committee, chaired by my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman), that the proposal was okay because 70% of incidents occur during daylight hours. Another way of putting that is that 30% of incidents occur during night-time. If a centre is co-ordinating a number of other centres that are physically not available during night-time hours, the strain on that centre will be quite considerable.

[Mr MacNeil]

Sometimes the issue is not the number of incidents. If we have one more Braer, we will have quite a disaster on our hands. Sometimes the magnitude of one incident can almost eclipse every other incident. That is the crux of the matter. We are talking about a maritime insurance policy, but unfortunately it seems to be being cast aside.

[Dr Whitehead]

The hon. Gentleman makes a very important point about what the service consists of and the problems that it encounters. That suggests to me that the idea that the consultation document is about modernising the coastguard service is only partially correct. Again, that was underlined by the evidence recently given to the Transport Committee by Sir Alan Massey, who made this curious statement:

“For my agency, I am required to find a 22% budget reduction in my programme between now and 31 March 2015. In seeking to find those savings, we have had to put forward a number of savings options. One of them does affect the coastguard modernisation programme.”

As I read it, that means that there was a coastguard modernisation programme and that the proposals for making savings have affected it. That may have been a misstatement, and it may deserve further analysis, but if the proposals are about savings that could affect a modernisation programme as opposed to being about the modernisation programme itself, that should be the basis for discussing the consequential examination of the proposals, and not otherwise.

[Mrs Ellman]

Does my hon. Friend share my concern that the proposals could be based on cost savings rather than safety, which makes it so important that we should consider all the proposals in detail, and consider all the representations?

[Dr Whitehead]

I share my hon. Friend’s concern. Indeed, if that is the basis on which the proposals were made, I believe that a careful examination should be undertaken of the consequences. If it cannot be shown beyond doubt that there will not be a substantial reduction in safety and call-outs, and that there will be a substantial reduction in confusion over place names and so on, the case is seriously flawed.

The consultation document sets out what the savings might be, suggesting that they will be in the region of £130 million over 25 years. That sounds a substantial sum, but it represents savings of less than £5 million a year. Those savings, which are not enormous, will result in substantial and fundamental changes, going from a system of area-by-area coastguard stations to one that has two centres, and daytime-only call-out centres in a reduced number of areas throughout the rest of the country. That, it seems to me, is not a supportable way forward for the future of the coastguard service.

I join other Members in realising that the service needs to be modernised. I understand that we are in difficult financial times, but there has to be a plan B for the service. It should be urgently reviewed as a better way forward. I commend all Members and others who have been involved in looking at what that plan B might be, and I am pleased that a further six weeks’ consultation has been agreed. However, if we do not seriously consider alternative arrangements to what at present is a muddied and uncertain document, we will regret it at our leisure.

16:13

[Mr Adrian Sanders (Torbay) (LD)]

May I say what a pleasure it is to serve under your chairmanship, Mr Crausby?

It is disappointing that this debate was switched from the main Chamber, as the subject could have been debated on a substantive motion. I find that Governments respond much more positively to substantive motions from time to time. However, I am sure that the Minister will be an exception.

The proposed reconfiguration of Her Majesty’s coastguard is of great concern to my constituents, as it is to those of other hon. Members. Although the consultation document published by the Maritime and Coastguard Agency is still open to comment from the public, the agency’s proposals appear severely to undermine the ability of the coastguard service to ensure

“safer lives, safer ships, and cleaner seas”.

Within an evolving maritime environment, I believe that the agency is right to reassess the efficacy of the coastguard service, to ensure that search and rescue teams can perform to the best of their ability. However, I fear that the current proposals, which are aimed at reforming the operating model of the coastguard, could reduce its capability to manage the use of our seas and protect those who live alongside them. I strongly believe that plans to replace the existing 19 centres with nine centres, of which only four will operate on a 24-hour basis, will significantly weaken the ability to conduct search and rescue operations. Plans to establish two nationally networked maritime operations centres would leave just six sub-centres spread thinly around the country’s coast, and most of them would operate only during the day.

The closure of 10 maritime rescue co-ordination centres would have a direct effect on my constituency of Torbay, which is currently protected by the Brixham centre. It provides an invaluable service to mariners and coastal users by receiving incoming distress calls, alerting the appropriate rescue assets and co-ordinating rescue efforts over the 130 miles of coastline of Devon and Cornwall. Under these proposals, the Brixham centre would be closed within two years, and that would have heavy repercussions for constituents and all who come to enjoy the south-west coast.

The most critical threat posed by the centralisation of the coastguard service is the considerable loss of local knowledge. Operators in local centres have a detailed understanding of the requirements of local communities and a strong knowledge of the key features of the local district. Operators in Brixham, as elsewhere in the country, obtain and maintain a high level of local knowledge by walking the coastal terrain, interpreting the topography and learning the tides and coastal hot spots, to understand the associated dangers in the region.

When search and rescue co-ordinators are faced with multiple incidents, as is often the case during the busy summer months in the south-west, it is crucial that distress calls receive prioritisation. Prompt and successful rescue missions are possible only if the operators have a high degree of local knowledge upon which they can make sound assessments. Of course, the proposed maritime operations centres may very well be better connected to larger vessels, where local knowledge is arguably less important.

The vast majority of search and rescue missions involve the leisure industry. This is where local knowledge is vital. Thousands of holidaymakers descend upon the south-west coast during the summer months, and many families make use of small craft and inflatable toys and enjoy our inshore waters, beaches, cliffs and coastal walks. On a recent visit to the Brixham maritime co-ordination centre, I was told by staff that on too many occasions children have been swept out to sea, people have been thrown overboard, swimmers have got into trouble, divers have gone missing, people have got into difficulty on rocks or cliffs and that any number of other life-threatening incidents have happened within the boundaries of my constituency when they had to act. In such instances time is critical; it is essential that operators know exactly where the incident is unfolding to ensure that the correct search and rescue asset is deployed to the correct location.

According to the consultation document, the loss of local knowledge is to be replaced by on-call coastal safety officers and the questionable modernisation of computer-based technology. Additionally, the RNLI and local coastguards will be expected to continue to hold the requisite local knowledge. That will require high-quality volunteer training from the Maritime and Coastguard Agency to ensure the integrity of information passed to the maritime operations centres.

[Albert Owen]

The hon. Gentleman makes a powerful point about the importance of coastguard volunteers and the RNLI. I declare an interest as a council member of the RNLI. The coastguard volunteers have spoken to me about the local knowledge that senior coastguard officers have of their shift patterns. That is a serious matter, because the officers know not to call them directly on certain days. That local knowledge could be lost if the coastguard stations in the vicinity close and no one knows the individuals or teams in question.

[Mr Sanders]

Many hon. Members have made precisely that point, and made it very well indeed.

Assuming that it is delivered, the significant amount of communication between operators and local volunteers needed to confirm that the correct actions are taken will lengthen the process of the search and rescue mission and place lives at risk. The over-reliance of these proposals on upgraded technology is another matter of concern. If new technology is fully integrated, the availability of video mapping and local tidal information covering the entire 11,000 miles of the UK’s coastline will undoubtedly improve existing services. Why can those systems not be installed and integrated within the existing structure? It is essential that the software can determine a unique position when the information is provided by those involved in an emergency. Given the large number of coastal locations with the same or similar name and often without a postcode, it is essential that human knowledge is involved in the process.

Despite constant reference to upgrading software and fully exploiting the capacity of existing technology, I remain unconvinced that a centralised maritime operation centre could effectively manage the large volume of emergency calls that can be expected during busy operation periods. Moreover, fire and rescue control rooms were only required to operate one communications system with their units. However, the mix of communications systems needed to operate search and rescue is far more complex, including very high frequency, medium frequency, satellite, mobile phone and pager systems and landlines. The enormous additional work load of the data processing element of operations officers’ activities has not been fully evaluated.

[Mr MacNeil]

Will the hon. Gentleman give way?

[Mr Sanders]

I will not, because I am trying to stick to the agreed time so that the Minister can make a full speech.

As with air traffic controllers, coastguard operators can only safely control a limited number of search and rescue missions at any one time. Last year, Brixham coastguard dealt with 1,300 incidents and co-ordinated the rescue of 300 people along the south-west coast. The Government accept that the cost of the loss of life is £1.4 million. Multiply that by 300 and we can see that Brixham alone possibly saved £400 million. The entire-cost saving over 10 years of this proposal is £60 million. It is crazy.

During the summer months, it is not unusual for both Falmouth and Brixham simultaneously to co-ordinate 15 to 20 incidents each during a 12-hour shift. Considering the proposed staffing cuts in the new operating model, it is impossible to imagine how two national centres could safely manage such large quantities of calls from across the country. Furthermore, the Department’s own risk assessment recognises that, although the likelihood of mission failure is slightly lower, the effects of a system failure are likely to have a much greater impact on the proposed operating model.

Equally concerning are the consequences that the plans pose to the economy of small coastal communities. That is particularly pertinent in my area, where many of my constituents are employed in tourism, fishing and maritime industries and rely heavily on the invaluable service provided by the operation centre. Of the proposed job losses, 24 will be from Brixham and the surrounding area. As an unemployment hotspot, the area can ill afford to lose a single job.

A parliamentary question that I tabled recently further highlights my concern that recommendations in the consultation document for a two-year transition period do not provide sufficient time for employees to adjust to the reconfiguration. The Minister’s response that a five-year transition period “was not necessary” fails to take account of the substantial impact that the proposals will have on the lives of those currently working in the service. Although career opportunities within the new operating model exist, current staff would be forced to compete for fewer jobs and to relocate.

I understand that the proposals are still open for consultation, and I welcome the Minister’s decision to extend the consultation period. Indeed, I am assured that the enormous public response will serve to broaden debate on coastguard reform, as is appropriate for an issue of such importance.

Given the ongoing nature of the consultation, I am not sure how much detail the Minister can give in response, but I want him to recognise that the link between coastguard operators and the local community is of the utmost importance for maintaining high levels of safety at sea. Equally, will he recognise that the proposals place too much faith in the capacity of untested technology upgrades in the planned operating system?

Ultimately, safety at sea, rather than cost-cutting, should be the priority. The proposals achieve neither. I hope that the Minister will assure me that the Government will reconsider their proposals on wholesale reform and instead conduct a sincere investigation into strengthening the existing structure of Her Majesty’s coastguard.

16:24

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

I thank the hon. Member for Truro and Falmouth (Sarah Newton) and her colleagues for securing this debate through the Back Bench Business Committee. I also thank Mr Philip Naylor of the Maritime and Coastguard Agency for listening to my pleas to include my area in the recent series of public meetings. My area has a coastline of some 200 miles with two ferry companies and a number of fishermen operating out of it, so it has a significant amount of maritime activity. It was good of Mr Naylor and his colleague, Bill McFadyen, to come to the maritime meeting last Thursday.

Before I run through a couple of important issues that were raised today, let me say that my hon. Friend the Member for Inverclyde (David Cairns) is not in the Chamber, although he would have loved to be here. He has made a submission to the consultation, putting the case for retaining the Clyde maritime rescue co-ordination centre. In a document on the planned closure of MRCC Clyde, a shipping industry expert says:

“I honestly believe this is utter madness and will end in disaster.”

The document is first class and worthy of consideration, as is the case made by my hon. Friend.

If I repeat anything that has already been said this afternoon, it is because of its importance and significance. We have heard a great deal about local knowledge today, but local dialect is important, too. We have heard many dialects in this debate. Members who live 300 or 400 miles apart are beginning to understand some of them. It is important that we get this matter right. There are two fundamental issues in the entire process: minimising errors and chasing the clock. When we talk about minimising errors, we are referring to the initial information-gathering processes: the location identification, the casualty incident description, the response required, the assurance of effective communication between the casualty or first informants and the resources and co-ordinators. Minimising errors also relates to work-load distribution and the management of resources.

Chasing the clock is as it sounds. We all recognise that when HM coastguard receives notification of an incident, the problem or the disaster has already taken place. Given that the incident is being reported after the event, action must be taken as quickly as possible. The race against time starts at the exact time of receiving the call. The time difference between call reception and incident commencement can be anything from a few minutes to a matter of hours. Irrespective of the amount of time that has passed, the search and rescue response is already lagging behind.

The remote handling of search and rescue co-ordination from the maritime analysis and operations centre increases the risk of error as a result of the many additional assumptions that the new system would employ in trying to establish area, nature and appropriate response from the initial call. That leads to the insertion of time into the process, which equates to the potential loss of life. It is about that information gathering and handling that information as appropriately and as quickly as possible

The hon. Member for Truro and Falmouth mentioned the table-top exercise that took place last year. If we proceed with this process, or any other process—I recognise what my hon. Friend the Chair of the Transport Committee had to say on this matter—all the information that goes through that exercise on its own must be what people will identify as being good, decent information. From what I can gather, that table-top exercise did not provide the full information that is required. I make a plea to the Minister: before we process any of this any further, that table-top exercise needs to be handled in real time. I accept that the exercise was based on information that came in about incidents on a specific day in summer 2006, but all that was done was a redistribution of each and every one of those incidents on to a map. There was no real-time activity, which would determine how individual sites might handle those cases as they came in.

I am not in denial—I recognise that this process is about making financial savings. It must be recognised that the process began back in 2007. There was an industrial dispute, and off the back of that dispute there was an agreement between the two parties involved: the management and the unions. I have not come across a single union member who is opposed to change in the process, provided that it delivers a service with which they are comfortable, and which they believe they can deliver to help to save lives. That is their duty; that is what they see as being paramount. So, even if there is little that the Minister can do, I hope that he will go back to that table-top exercise and ask for at least part of it to be conducted in real time. I will say nothing more than that because I want other colleagues to be able to make their contributions to the debate.

[Several hon. Members]

rose—

[Mr David Crausby (in the Chair)]

There are still five or six people trying to catch my eye, so I would appreciate it if Members could make their speeches a little shorter.

16:31

[Richard Drax (South Dorset) (Con)]

Mr Crausby, I will launch straight in. Thank you very much indeed for calling me and I offer my thanks to my hon. Friend the Member for Truro and Falmouth (Sarah Newton) for securing this debate. I pay tribute to all those who work in the rescue services, and I welcome the Minister to Westminster Hall today. As a former soldier and firefighter, if anyone knows what we are talking about and can listen to what we are saying it is him.

I have a personal interest in this subject, because one of the 18 centres that we are discussing is in my constituency of South Dorset. It is, of course, the Portland coastguard station and I am instinctively protective of it. It is one of the busiest stations in the country, perhaps 20 times busier than other centres. Anyone who has been down to Portland during the peak summer period will know how busy it is. In fact, hardly a day passes without one seeing the air-sea rescue helicopter in the air after it has been called out for one emergency or another.

I am delighted that the Minister has told me, both privately and in public, that the rescuers—the helicopter crews, the lifeboats and the volunteers—will remain. What I am concerned about is that they will not be co-ordinated by local people. To me, that is the Achilles heel of the new system, and I will say more about it shortly.

We are told that the operation will move to the new “super-centre” at Solent, for lack of another word. First, as I understand it from my local coastguards, it is unlikely that any of them will go there. They are local people who are busy with family commitments, and I can assure people that the journey to Southampton from Portland probably takes about 90 minutes, because the roads in Dorset are appalling.

Secondly, I ask hon. Members to imagine a busy, hot bank holiday on the south coast. Millions of people are enjoying our seas and cliffs. Staff at the new super-centre will be bombarded with minutiae, and there will be many different events running concurrently. Time will be lost as each call is assessed, questions are asked and instructions are sought. Currently, the local watchkeepers in South Dorset and around the country get out of bed and the first thing that they do is to look out of their window. They immediately appreciate what is going on around them. They do not have to look any further to know all about the weather and the wind. If those centres are lost, the ability to co-ordinate local knowledge, so that rescuers can be best targeted and the best resource used, will be lost, which will lead to delay. As I have said, that is the Achilles heel of this proposal.

Thirdly, if we lose that human link in the chain, even with the best will in the world, I do not believe that the super-centres and their staff—not all of whom, of course, will be familiar with the areas that they are covering—will have the knowledge that they should have. There is a great deal of complexity in my part of the world in South Dorset. Like many places, it has quirky names for bays, caves, cliffs, currents and tides. At the moment, coastguard staff walk their area of responsibility and know it intimately. I doubt that that will happen with the new super-centre. Computers will help, and reference has been made to the so-called “rescue by Google”. However, as the Minister and I both know, the best intelligence is “human int.” and the “mark 1 eyeball”, to use a military expression.

Fourthly, and leading on from my last point, technology is not always reliable. Computers tend to break down, and the fewer computers that we have, the bigger the catastrophe when things go wrong. Fifthly, speed is vital. We have heard about that already. One of my constituents, an ambulance dispatcher, summed it up neatly when he explained that it is the “golden hour” that counts on land, while on water it is down to minutes, or, as my hon. Friend the Member for South East Cornwall (Sheryll Murray) said, seconds.

Sixthly—and this is not to be underestimated—the uniformed presence in our constituencies is important. We live in a country that has many problems. The uniformed presence in my constituency adds to the role that staff play, with a ripple effect of seeing those men and women who are highly respected. Many people come into the coastguard station and ask for other things to be done, quite apart from the jobs that the coastguards are doing, which is keeping everyone at sea and along the coast safe. We must not ignore that uniformed presence.

We have all had a good whinge, and I am no exception, but may I offer a solution? We have 18 centres that are fully manned, despite the discrepancies in their work load. One reason is that they are not fully integrated. Surely, surely, surely, we can interlink 18 centres, so that they can be used more flexibly. They would not necessarily be open all the time, but they could be used more flexibly, so that in the summer the emphasis is on the south coast, and in the winter months it is on Scotland and Northern Ireland. I am not saying that there would not be any cover in the summer months, but Members can see what I mean and accept the logic of my proposal.

Under the existing system, if we lose one centre, we are down about 5% of our capacity. Under the new system, and certainly at night with the two new super-centres, we would be down 50% of our capacity. That is a huge difference. May I put two questions to the Minister? First, are the locations that he is considering for these super-centres—the substations that have not been chosen yet—being selected on the basis of cost or of strategic importance? Secondly, will he confirm who will monitor channel 16? As I understand it, that monitoring will cease. I am a sailor, and perhaps many other Members here today are too, and we rely on channel 16.

We know from bitter experience how expensive these things can be when they go wrong. The Minister has told me that the fire service reorganisation does not compare with these measures—I am afraid that I disagree with him—but it cost the taxpayer more than £400 million. I do not think that we can afford that today. Relying on these two super-centres for the whole country, albeit with bells and whistles, appears risky at best and foolhardy at worst. Will they provide the resilience and integrity that we need to cover 11,000 miles of coastline? I and many others do not think that they will. I am afraid that the idea of Aberdeen taking up the slack during a very hot and busy bank holiday weekend, because Southampton or Solent has gone down is pie in the sky.

Finally, I turn to the consultation. I sent one of my representatives to a recent consultation, which sadly I could not attend because I was speaking in the House. As I understand it, the coastguards who attended were told not to go in uniform and not to identify themselves. Personally, I found that a little sinister and threatening in what I thought was a democratic country. I believe that this is an open debate. Does the Minister agree with me that if coastguards want to go to such meetings in uniform they should be allowed to do so?

I come to my final, final point. I believe that we are in grave danger of wrecking one of our finest and proudest organisations. As we have heard, we have already cut it down from hundreds of watchtowers to the 18 centres that we are discussing today. I am grateful for the extended time that I have been given to speak, but will the Minister please, please, please consider this very serious issue? Let us try to hope that the solution that we arrive at leads to our retaining the integrity of a service that we have come to respect and love.

16:39

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

The hon. Member for Truro and Falmouth (Sarah Newton) was absolutely right when she opened her speech by saying that we were on the graveyard shift. I almost thought that I would be in the graveyard of the debate, so thank you for calling me, Mr Crausby.

Unfortunately, we are in here because of the machinations of the Backbench Business Committee, and that deserves a few words. We must ensure that more Members lobby the Committee so that we get on to the Floor of the House, as we hope to do, on 28 April—that is a possible window. I urge hon. Members to lobby the Chair and members of that Committee. I was very perturbed when, because of the internal politics of the Committee, the entire day that we were meant to have for this debate was given over to the debate on UN Women. I contributed to that debate, and was told by, shall we say, a senior voice to speak for as long as I could and to take interventions. It is my belief that we could have had our debate on the Floor of the House that day, with all the attendant publicity and spotlight that that would have given us. I know that the Minister would have been welcomed holding our debate on the Floor of the House, and that he, too, was perturbed when it was moved.

As a result of my complaints at the time, I was kindly given an Adjournment debate by Mr Speaker, but I pulled it to allow the Minister to go to Stornoway and Shetland—I am grateful that he did. I am also grateful for the extension, but I am perturbed that we are again in a situation in which we are rushed by time. In the previous debate, I spoke for three minutes and crashed my remarks together as quickly as possible. We are nine parties united on this.

[Andrew Percy (Brigg and Goole) (Con)]

I just want to demonstrate that point. I am the only Member here from the Humber, and I will be unable to speak due to the time available, so no one from the Humber will be able to put forward the case for our particular coastguard. The hon. Gentleman is entirely right that the machinations are stifling debate on this important subject.

[Mr MacNeil]

Absolutely. We want this issue to be considered on a substantive motion on the Floor of the House on 28 April, and with hon. Members’ support, I hope that we will achieve that.

I am delighted that the Chair of the Transport Committee, the hon. Member for Liverpool, Riverside (Mrs Ellman), is in the Chamber to hear our proceedings. I can but hope that I will see her and her Committee in Stornoway at some point in the future.

I am the MP for the longest chain of islands in the UK, and my constituency has probably the longest coastline. The right hon. Member for Orkney and Shetland (Mr Carmichael) might dispute that, but we are not going to walk every inch to find out whose coastline is longer. However, my constituency’s coastline is certainly disproportionate to its area.

The modernisation proposals coming from the Maritime and Coastguard Agency are concerning in the extreme. When the Minister was in Stornoway, he visited the Iolaire memorial. On new year’s day in 1919, 205 men out of a crew of 280 lost their lives when returning from world war one, and that is still a sore and well-remembered point in Lewis.

The reduction of the number of co-ordination centres in the UK from 18 to 10, with only two in Scotland, is the wrong decision. The hon. Member for Ynys Môn (Albert Owen) asked whether there should have been a statement to the House at the time of that announcement. I asked Mr Speaker for a statement on a point of order, but unfortunately I was not given one. I agree that we should have had something more thorough in the House at that time, so hopefully we will get that later.

The modernisation proposals will result in England having six co-ordination centres, while Scotland will have only two. The current proposal is that the two Scottish centres will be based in the north: one in Aberdeen, for real estate and lease agreement reasons, and one in Stornoway or Shetland. That proposal is unacceptable because both Stornoway and Shetland need centres, given the considerable distance between them. Only one of the two centres will be a 24-hour centre, while the other will be open only during the hours of daylight. When the MCA was in Stornoway, it was asked what hours of daylight might mean—would the centre ever close in summertime, and would it ever open in winter? There was no real answer. There was an answer on the hoof about the times being perhaps 7 am to 7 pm, but no consideration had been given to that very basic point.

Scotland will be left with just two stations to cover 60% of the UK’s coastline, yet the MCA thinks that that is more than adequate. According to its consultation paper, it feels that it could monitor the waters around the UK from one central location, but it has chosen not to pursue that argument. That feeling has been comprehensively destroyed by Members from the nine parties with concerns.

There is concern about the loss of local knowledge. The MCA feels that it can address the issue of local knowledge by using highly detailed maps or GPS technology, but I am referring to local knowledge—we heard about this in relation to Wales—that knows the difference between Marivig and Maaraig in my constituency. As the right hon. Member for Stirling (Mrs McGuire) mentioned, the area is predominately Gaelic, and the place names are Gaelic, or Norse but gaelicised in the intervening centuries. The local knowledge to which I am referring allows a co-ordinator to communicate a position to a rescue team down to a specific tree in a specific field, if they are an urban dweller, or down to a specific rock on the coastline, because they know the area so well.

We know that the life-saving helicopters contract has had its problems, and our rescue tugs will have question marks over them as well. I really do not understand how cutting our co-ordination centres and the assets that the coastguard uses to save lives will result in a better coastguard. To be fair, I do not think that the MCA has thought it through either—I have given some examples. I really do feel sorry for the Minister because he has been given a poisoned chalice by the MCA. If he could have looked in a crystal ball and seen how things would pan out, perhaps he would not have accepted that chalice quite so readily, but I will leave it to him to tell us that.

I was the first Member to raise the issues of risk assessments on the Floor of the House. From the Dispatch Box, the Secretary of State for Transport told me that a risk assessment had indeed been carried out. However, in a briefing in the House five days later, the chief executive of the MCA, Alan Massey, said that no formal risk assessment had been done. It was distressing to learn that the coastguard was considering the proposals without being able to know whether the basic work had been done to see if they were safe. A risk assessment was eventually published, of course, but who can trust a risk assessment that was done to fit the MCA’s story, which is what I suspect has happened, as opposed to one that leads the process? I do not trust it, and I am sure that many others do not either.

I also want to mention the Royal National Lifeboat Institution. Perhaps we could pressurise it to free up its teams—its crews and coxswains—to speak with a freer voice, instead of our just hearing something from the RNLI centrally. In my area alone we have teams in Stornoway, Lochinver, Mallaig, Castlebay, Portree and Kyle, and I would like to hear their opinions, including on a very formal basis. Some of the coxswains and crews tell me that they do not in any way praise the proposals. The RNLI has to empower its crews and enable them, their coxswains and their launch secretaries to enunciate their very real concerns, which are based on their knowledge of the areas in which they work.

The coastguard service needs to be improved and to adapt to the changing conditions at sea. The MCA has said in its consultation that the seas are getting more congested, ships are getting larger and weather patterns are getting worse. Scotland is responsible for 70% of UK fish landings, and we need to ensure that when our mariners go out to sea, their lives are as safe as possible. I reiterate how concerned I am that the proposal has been pushed in some ways by real estate considerations. In addition, the savings are minimal. I think that £120 million will be saved over 25 years, or £4.8 million a year, which is such a small figure that it was not mentioned in the comprehensive spending review.

A letter has come to me from Councillor Dominic Lonsdale of Weymouth and Portland borough council with reference to the Freedom of Information Act 2000. He wrote to Sir Alan Massey:

“The MCA lodged a planning application on 20 May 2010 with Gosport Council for a new MRCC at the Deadalus site.”

The councillor’s contention was that the planning had taken place long before the paper came out following the change of Government. In its first answer to him, the MCA had said that it was going to change the type of building, but he could see from the scale of the work that such serious plans were in hand that there was clearly another agenda. The letter goes on:

“I put it to you that the reply I was given of 9 June 2010 was neither full, honest nor within the spirit of the Freedom of Information Act.”

I will certainly pursue that issue further.

I am feeling harassed, because although there are a number of details and issues that need proper time for discussion, we are again not getting that because this debate will be truncated. I am aware that I have spoken for 10 minutes and that other Members wish to speak.

It is disappointing that our debate has been rushed and that we have not had the opportunity to consider a substantive motion on the Floor of the House. There are plans in the air among the coastguards that we would be happy to support in a motion, but a debate needs to be held on the Floor of the House. I hope that that will happen on 28 April. This is about safeguarding our coastguards—the maritime insurance policy around our coasts. That is an important issue, and it should be debated on the Floor of the House of Commons.

16:50

[Dr Sarah Wollaston (Totnes) (Con)]

I will cut my speech short, as other hon. Members wish to contribute. We are not disputing the need for modernisation. We accept that the technology of Her Majesty’s coastguard is outdated, but the staff are not. I dispute whether we can reduce the number of staff from 491 to 248 without a significant loss of local knowledge.

Detailed local knowledge is important, as is recognised in the fact that coastguard officers take rigorous local knowledge tests on their area of responsibility every two years and must receive an 80% pass mark to continue carrying out their highly professional role. I dispute whether two maritime operation centres could carry out such a role. To illustrate, if a child on a lilo is in difficulty off Blackpool sands, is the maritime operation centre likely to send the rescue effort to the west coast or to my constituency, which has a small cove by that name?

As time is short, I ask the Minister to consider the alternative proposals from Brixham coastguard. When he met Brixham coastguard, he invited its members to propose an alternative. They have discussed it with at least 14 other coastguards, who have endorsed their proposals. Time is short, but I hope that he will agree to consider them in detail.

To summarise the proposals, Brixham coastguard recognises the possibility of reducing the number of stations, but it proposes reducing that number to 14 rather than adopting the current proposals. It disputes the rationale for having two central maritime operation centres, but it understands that it might be necessary to review how duty rosters are managed and to use more of an evidence base to consider the details of call-outs, for example. That would be much more rational.

Brixham coastguard feels that it is possible to improve rostering, reduce staff and rationalise the management of the coastguard. For example, it disputes the need for regional management and suggests that we need only one national management centre for the coastguards. Again, that would generate considerable savings.

A review of technology is essential, but Brixham coastguard suggests that we consider electronic charts. It currently buys its own. Electronic charts are used by the RNLI and shipping, but not by Her Majesty’s coastguard. The current system is outdated.

Brixham coastguard asks the Government to reconsider the replacement of radio equipment. There is a strong feeling in the coastguard that the system has not been adequately piloted. I have heard, for example, that it has been difficult to page rescue teams. I ask the Minister to reconsider and definitely to pilot any new system before it is rolled out.

The Minister knows what issues have arisen with fire and rescue centres, so I will not reiterate them—many Members have already made the point—but I will mention the fiasco of the NHS’s over-reliance on IT. More than £12 billion has been spent on a system that has not been fit for purpose. It is a question not of just throwing money at the problem, but of piloting systems and ensuring that they do the job required of them.

The Brixham proposals ask the Minister to consider an alternative method of linking stations. We all recognise that resilience is an issue within the coastguard, but will he consider extending stations’ areas of responsibility, so that they cover the stations to either side and are linked in triplets? That would increase resilience, rather than having centralised maritime operation centres, about which all Members who have spoken have expressed concern. That way, we can retain local knowledge and improve resilience. We feel that that, as well as considering staff rostering, would be a much better way forward.

I reiterate the strength of feeling nationally. Within my constituency, my local paper, the Herald Express, published an article on the issue and had 6,625 signatures and letters. That shows the strength of local feeling. I am sure that every Member will have seen similar responses in their constituencies. It is a national matter that we hope the Minister will take back to the drawing board and start again with a blank sheet of paper. The coastguards who do the job on the ground feel that they were not consulted and that experts or coastguard officials who had been away from operational responsibilities for some years were involved. I ask him to consider proposals from grass-roots coastguards with multi-centre support.

16:55

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

Given the time available, I will restrict my comments entirely to the coastal community of Pembrokeshire. We are proud of our national park and of the people who look after it; we are proud of the industries that surround Milford Haven; and we are proud of the coastguard that has looked after it for such a long time with such skill and dedication. We are also proud of my hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb) for doing so much work on the topic, although his responsibilities in the Whips Office prevent him from being here.

If I may, I will turn the Minister’s mind back to 15 February 1996, when the Sea Empress went aground off St Ann’s head, spilling 72,000 tonnes of oil into our haven and on to our coastline. I remind him of the 200 km of damage to our coastline and the profound damage to our local community and tourism industry. I also remind him—as though I needed to—that the effect of that disaster is still being felt 15 years later.

Given our pride in our haven and the incidents that have occurred there over the years, there is a feeling of nervousness, which is made worse by the fact that the universal tug service has been withdrawn—some might add, with good reason. We are nervous about threats to the helicopter search and rescue service that has helped us all these years. That nervousness is the context of this debate and the background to the local community’s uprising in the arguments currently raging in west Wales.

There was a rally in Milford Haven last week, to which the hon. Member for Ynys Môn (Albert Owen) came. There were 17 political speakers; there are almost as many today. The town band was there, and the mayor came to put the case for the Milford Haven coastguard. A campaign has been run with great reasonableness by the Western Telegraph and the Milford Mercury, and a campaign by Save Milford Haven Coastguard has gathered many signatures.

Reasonable arguments are being put by reasonable people. I will not rehearse the arguments, but I stress the comments made about the Welsh language and flag up the need for healthy scepticism, technology reliability, risk assessments and back-up measures. I remind the Minister that when the 999 service was centralised not so many years ago, if someone rang 999 and asked for an ambulance to come to Newport, Pembrokeshire, it was not unusual for it to go to Newport, Gwent, 140 miles away. People are not particularly happy about that.

Real concerns are being expressed by real people making sensible arguments. History is relevant, especially in Milford Haven. There is confusion about whether the proposal is the MCA’s, the Government’s or, indeed, the last Government’s. The Minister’s visit last week to the Milford Haven area allayed many fears. It was a great success, and I urge him to do it again. Our community recognises the need for reform and changing technology and it recognises financial restraints, but I hope that as a consequence of his visit to Milford Haven, he will recognise that there is an obligation to balance those requirements with the hopes, expectations and fears of the community. They deserve nothing less.

16:59

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

It is a pleasure to see you in the Chair this afternoon, Mr Crausby. If I finish before 5.15, as I think I may, you might have time to indulge another colleague before the Minister gets his 15 minutes.

I congratulate everybody who has participated in the debate. It demonstrates the strength of feeling and concern across the UK about the proposals being consulted on for the future of the coastguard service. I am disappointed that we are debating the issue in Westminster Hall and agree with the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) that a debate in the main Chamber would have been better. I also support the suggestion made by my hon. Friend the Member for Ynys Môn (Albert Owen) that the Minister should make an oral statement when the matter is concluded. I am sure that he would welcome the opportunity to do so, and it would be a good way to allow colleagues to question his conclusions fully.

I thank the Minister for his correspondence on 8 March, which has already been referred to. He gave us more information, further to our previous debate on the issue, and the extension of the consultation allowed the Transport Committee, chaired by my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman), to carry out its investigation and to contribute properly to the consultation. I look forward to hearing more from the Minister about how far he has got on his UK tour and how many more visits he is likely to undertake.

Right hon. and hon. Members have raised various concerns. The hon. Member for Truro and Falmouth (Sarah Newton) opened the debate and challenged and asked about the validity of some evidence in the documents. My hon. Friend the Member for Sefton Central (Bill Esterson) indicated the strength of feeling among 250 people at his local public meeting and questioned the effect that the cuts would have on the confidence of volunteers if they were implemented. The hon. Members for Waveney (Peter Aldous), for Torbay (Mr Sanders), for South Dorset (Richard Drax) and for Totnes (Dr Wollaston) raised the issue of local knowledge. The hon. Members for Strangford (Jim Shannon) and for North Down (Lady Hermon) showed, again, the united front of, not all Ireland, but Northern Ireland on the proposals for Belfast and asked the Minister to address the alternative strategy.

We heard a right honourable whinge from the right hon. and learned Member for North East Fife (Sir Menzies Campbell), who correctly made the point that we are here to whinge on behalf of our constituents, although “strong representations” might have been a more complimentary way to put it—the word “whingeing” sounds a little derogatory.

My hon. Friend the Member for Ynys Môn made powerful arguments and cited real-life incidents, and the hon. Member for South East Cornwall (Sheryll Murray), who has personal knowledge of and family involvement in the fishing industry, made a very strong argument indeed. My hon. Friend the Member for Southampton, Test (Dr Whitehead) said that, because Southampton will, possibly, have a super-centre, he has no constituency axe to grind, and neither do I, because the London centre is being retained. My hon. Friend, however, asked serious questions about the reduced 24-hour cover throughout the country. The hon. Member for Carmarthen West and South Pembrokeshire (Simon Hart) raised other shipping concerns, such as the ending of the emergency towing vessels contract, which was mentioned by other colleagues during our previous debate.

At this week’s all-party maritime and ports group meeting, we heard from the chief executive of the MCA, Sir Alan Massey, and the chief coastguard, Rod Johnson, who outlined the proposals to the group’s members and other attendees. Questions were raised there, and have been raised here and previously, about the technology and about its being tried and tested.

Hon. Members have referred to the parallels, or not, with the regional fire controls, which we covered extensively in our previous debate. I was the Minister who accepted advice from officials that we should go down that route, but it has not worked out. The Minister and I share fire brigade background, so I know that he is sensitive to the issue. He has followed it closely and is looking at it in relation to the controls under discussion. The relocations, the redundancies and the willingness to transfer or not have been raised, as have the general resilience and robustness of the proposals.

It is important to say, as I did in our previous debate, that the Opposition do not oppose reform, reorganisation and improvement, but we have serious concerns about the proposals and whether they are cutting too far, too fast and too deep. Two super-controls seem to be one too few. If one control goes down, there will be only one left. If they work and the technology and communication equipment is effective, I am not sure whether the country ought not to have three. As I have mentioned, we have seen what has happened with the fire controls.

[Mr MacNeil]

The hon. Gentleman has mentioned cuts. Is he aware of any cuts in the upper echelons of the MCA?

[Jim Fitzpatrick]

I am sure that the Minister is more up to date with the proposals. He is nodding and I am sure that he will cover that when he winds up. I have said that the two super-controls seem to be one too few, and the number of day-staffed stations seems too restricted, which several colleagues have commented on. The overall numbers make the proposals look as though they are finance-driven rather than operationally driven. Given the historic pairing of stations, which has been explained to us on a number of occasions, there might have been stronger logic in suggesting that a single station from each pair should be maintained, with three super-stations on top. Obviously, the Minister will assess all the representations and submissions in due course.

The coalition document said that there would be no cuts to the front line. Notwithstanding that this is a reorganisation, what is the coastguard if it is not a front-line service? Many people are saying that these cuts go way too far. It is important to remember, however, that this is a consultation, that it has not concluded and that it is being extended. This is, therefore, a good opportunity to put the Minister under pressure. I have spoken informally to the Minister outside this Chamber and know that he is listening and learning, and other colleagues have said the same. We will look closely at the finished document and his conclusions.

I know, owing to my former ministerial positions, the conflicting pressure that the Minister is and will be under, but at least he knows from Prime Minister’s questions only a few weeks ago that the Prime Minister has expressed some scepticism about the proposals. He said that the Government remain to be convinced by the MCA’s proposals. That is a very reassuring starting point. Every Member who has spoken today and in our previous debate has expressed real concern. I hope that the Minister, in the restricted comments that he will be able to make during his winding-up speech—he has not yet reached the end of the consultation—will give some reassurance that the efforts of the brave men and women of the coastguard service and those who depend on them, as well as those who support them, will not fall on deaf ears and that we will see some changes to improve the proposals, which, at the moment, do not appear to command any support in the House.

[Mr David Crausby (in the Chair)]

Order. I am afraid that there is no time for any other hon. Member to speak, because we need to give the Minister adequate time to respond and the hon. Member for Truro and Falmouth needs to wind up at the end.

17:07

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

I pay tribute to my hon. Friend the Member for Truro and Falmouth (Sarah Newton) for being so diligent in securing the debate and for the tone in which the debate has, in the main, been conducted. I, too, would have liked to have had the debate on the Floor of the House. I do not dispute that argument, and I think that the issue should have that sort of airing. The decision is beyond my pay grade, but I note that the deputy Chief Whip, my right hon. Friend the Member for Orkney and Shetland (Mr Carmichael), is here to represent his constituents, even though he is not allowed to speak. If the issue could be brought back to the House, that would be right and proper.

This is a really important debate. I will sum up what others have said and my hon. Friend the Member for Truro and Falmouth will finish off the debate. I pay tribute to all coastguard staff—full-time, part-time and volunteers. More than 3,000 volunteers do it because they love their community and want to serve it, as do so many others throughout the country. I also pay tribute to the RNLI. It is an amazing organisation that looks after not only us in the United Kingdom, but the Republic of Ireland. That is really important. I also pay tribute to what are called private rescue boats, but which are really volunteers. There are hundreds of them. Some of the constituencies represented here today do not have any, and others have so many that it would be impossible to visit all of them in the time available during a Parliament. They are fantastic and are dedicated to, and love, their community.

Nine parties are represented in the debate. I am proud of that. I served in Northern Ireland for many years and never got the parties together, but I have managed to do it now—for a while. Many hon. Members have come to this Chamber on a one-line Whip, when they could have been in their constituencies. Instead, they are here doing what is right and proper, and what I would have been doing if I were a Back Bencher with a seat associated with the coastguard service.

I have listened to all the points made by colleagues, but the most important representations have come from the public and, in particular, from the coastguards themselves. I have heard some disturbing comments today. I do not want to dwell on the matter for too long, but if a member of my staff—they are my staff because I am the Minister responsible for shipping and the MCA works for me—has gone out and said, “Don’t worry about it; they are a bunch of whingers,” I do not want to know who they told; I want to know who said it because, believe me, I will come down on them like a tonne of bricks. Hon. Members who know me will know that that is the case.

It is important that employees of the coastguard feel confident that they can make submissions. Some have put submissions in anonymously and I understand that. However, they really do not need to do it anonymously. As I have gone around the country—I shall touch on some of the meetings I have had—people have been positive.

[Bill Esterson]

I am glad that the Minister has said that staff do not have to worry about what happens. I know that I am not the only hon. Member to have experienced this, but I have had more than one representation from a staff member who is very worried about the possibility of—and this is the word they use—recriminations if they take part in the process. I am glad that the Minister has made it clear that that will not be tolerated.

[Mike Penning]

As the hon. Gentleman knows, I have been to the coastguard station at Crosby and the people there did not hold back when they spoke to me. Everybody was in the room. The staff should feel confident that if they wish to do so, they can express their views robustly. By the way, as he may have noticed, I was robust back. That sort of confidence should be out there. The coastguard community is quite small and some people do not have that confidence. If they want to submit anonymous representations, that is understandable. Those representations will be dealt with in exactly the same way as those to which people have put their name.

I shall touch on some of the points raised by hon. Members. In the short time I have, it will not be possible to answer every individual point. However, my officials are here and, if necessary, we will write to hon. Members on individual points. I have a background as a member of the armed forces and, probably more significantly, as a member of the fire service for many years, so saving lives is in my blood. There is no way that this change to the way in which the coastguard operates is going to put lives at risk—far from it. To some extent, I inherited the plans from the previous Administration. Some hon. Members were at the briefing upstairs in, I think, Committee Room 9, when the chief coastguard and chief executive were present. When the chief coastguard was appointed over two years ago, he had the proposals on his desk. At that time, I was not a Minister and this coalition Government were not in place. The hon. Member for Poplar and Limehouse (Jim Fitzpatrick), the shadow Minister, knows that the proposals were on his desk and the desks of others for four and a half years-plus.

As I have gone around the country, no one I have met who is in the know has said that there does not need to be dramatic changes to how the MRCC is run. When I was in Crosby, one very senior officer said to me, “Minister, we know it should be nine. We have been saying it should be nine stations for many years.” That was said in front of the hon. Member for Sefton Central (Bill Esterson). I asked for the submission that actually said that.

I had a wonderful trip to Bangor in Northern Ireland. It was a trip down memory lane for me in many ways. There was a breath of fresh air at that and other meetings, and in some of the early submissions. I have not looked at them in detail because it is not right and proper for me to do so yet. However, if I am sat in a presentation, it is difficult not to listen to what is being said. The presentation at Bangor looked at having 10 stations—one headquarters, and of the remaining nine stations, about half would be full time and half part time.

There is an acceptance out there that the present 19 stations are an anomaly left over from previous closures. There were closures in the ’80s and in early 2000 and 2001. We are left where we are now. I understand fully the passion of every hon. Member and why communities are coming together and saying, “Don’t close my station. This is very important to us.” We have had more than 1,200 submissions to the consultation. They fall into three groups. One group of people are questioning my parent’s parenthood or my parenthood. Some of those submissions will have to be redacted before we publish, but we will publish every one that has been received.

Some submissions are based purely on individual stations—a bit like what we have heard in the debate. People are saying, “This is our station. We think it should stay and these are the reasons why.” That is fine. However, we have also had a number of submissions saying, “Let’s not just look at our station; let’s look at how we can have a national service.” That is what I heard in Crosby, in Bangor, in Milford Haven and what I know I am going to hear in Falmouth.

I have the honour of looking after the only national emergency service, and I am very proud of its history. However, it is the only national emergency service with no national resilience. There is more resilience in all the other emergency services than the one we are talking about today. That is not acceptable in the 21st century. This is not just about resilience in computers, which we are all a bit sceptical about. I share that scepticism on computers. I was shadow Minister for three and a half years. In the great city we are in now, the ambulance service control centre just across the river looks after 10 million people. People are transferred from a 999 call to that control centre. The operators have hardly asked the caller anything before they know where they are, within reason, and they are looking to see who they can dispatch. We do not have that sort of facility in the coastguard service. That is the sort of thing we need. It is a different sort of service because of the myriad methods of contacting the coastguard emergency service. However, we must have a better, more resilient service.

[Sheryll Murray]

Will the Minister accept that although the kayaker or the group of young people barbecuing on a beach who need help may be identified by a passer by, there is no means of being able to identify where they are electronically? That is my concern. His system relies not only on electronic ability at the coastguard station, but on—he has just given an example of this—being able to identify where somebody is with a 999 call. People using beaches and people kayaking might not have made the call; somebody else might have done so.

[Mike Penning]

I take the point that my hon. Friend is making. I pay tribute to the family and personal experience of the coastguard and the sea that she has gained over many years. She understands the sea better than anyone else in this Chamber. From my emergency service background—the shadow Minister also has such a background—I know that such a situation occurs in the other emergency services. It is not a be-all and end-all. It is not a case of this being the only method of doing it. I am not saying that at all. Only the other day, I was in Shetland. The communications there go down regularly when we have to send volunteers out—whether it is the BT line, the broadband line or our own communication systems. That happens around the country. I am not saying that if a new system is brought in, it will take away any of that local knowledge. It will augment the current situation as we go forward.

May I touch on what we have today? Many hon. Members and hon. Friends have said that we could leave the service roughly where it is, but we cannot. The coastguard service is telling me that it cannot—from the most junior person on the watch through to the volunteers and the Royal National Lifeboat Institution at the top. That organisation does not want to be dragged into the politics of the matter, and I can understand why. However, to use the modern slang, it is also saying to us, “Is the service fit for purpose in the 21st century? No, it is not.”

It is interesting to read about the twinning system—an issue that I raised when I was in Bangor. The arguments that were put to me in Northern Ireland on resilience, the special circumstances and how they liaise with the Republic of Ireland—particularly with regard to helicopters—were very powerful. I thank the Republic and pay tribute to it. We get helicopters for free and we help them in other parts of the coast on other matters. Of course, there is the issue of what happens if communications go down. What happens if a station goes down? Will the Clyde back us up? There is no logic to the idea that all that local knowledge is transferred instantly to the Clyde—it cannot be. I accept that, as we look at different stations around the country, but the present twinning system does not work properly. If we look at where stations are around the country at the moment, they are not set up with a proper regional structure, as we would probably expect them to be. There are some stations that are very close, and some that are very far apart. The Humber station, which was mentioned by two hon. Members, covers 300 miles of moving sands. How on earth could it transfer in a twinning system? How does that work? Where is the resilience there? We need to look at that.

We need to look, as I have said in previous debates, at a service which offers a basic starting salary of £13,500 per year. How would anybody survive on that in some parts of the country? The answer is with more than one job, just like when I was first in the fire services—I am sure that the situation is not dissimilar for firemen today. We have to offer coastguards a salary that is suitable for the 21st century and give them the skills and training, so that they can have a career progression, too. It is very much dead man’s shoes, looking at the age profile. There are very young people and people coming towards the end of their careers, but the middle section is very difficult indeed.

The whole country relies on the coastguard, whether on holiday, in the shipping industry, in their community or where they work. Is this a done deal? No, it is not. Will we come out of the end of this process with a different set of conclusions and a different modernisation programme from when we started? I am sure that we will—I am convinced of it.

[Mr Russell Brown]

Will the Minister give way?

[Mike Penning]

I am not going to give way, because I am really restricted on time. I apologise. I am not summing up—I have to hand over to my hon. Friend the Member for Truro and Falmouth.

Is this just about money? Yes, there are savings required, but if this was just about money, it would not be £4.8 million a year. As hon. Members have said, it is a tiny amount of money. Will there be savings throughout the MCA? Yes, at the top and at the bottom. In my own Department, every single member of staff has had to reapply for their own job. That is the sort of situation that we are working under. Did I come into politics to do that? No, of course I did not, but we have to be realistic about the money and the income that we have to work with.

I welcome the Transport Committee’s commitment to its own report. I welcome the fact that the Chair of that Committee, the hon. Member for Liverpool, Riverside (Mrs Ellman), has sat through the debate and been part of the debate. I say to her that I will not, under any circumstances—and neither will the Secretary of State—come to any conclusions until her Committee has reported. I promise and I make that commitment. If I can—it is difficult, because bureaucracy is involved—I will try and release to the Committee as much data that I have received, and which has been submitted to us, as I can, particularly the detailed submissions about reconfiguration. I will not release the submissions that are nasty about me, of course. If I can release that data I will do so. If I cannot do that, I might write back to those people who have made submissions and suggest that they send them to the Transport Committee. It is imperative that the Committee see that some of the submissions from the coastguard do not say, “We all should stay open; everything is perfectly fine”. They actually say, as I have alluded to, nine stations or 10 stations. There are others that say there should be more or less.

I think that this is the start of something new in government. Consultation had to start somewhere. I inherited a situation; we started somewhere. We listen. We come out with a service that is fit for purpose in the 21st century. Not everybody is going to be happy, because I have got 19 stations and there is a proposal for 10 closures or nine closures. Clearly, not everybody will be happy. There is, however, a sense in the coastguard service, without any doubt if people are really honest, that we have to move on from where we are now. We have to get away from the disputes that have been going on for so many years, which are divisive, and have a service that has the resilience, the modernisation and the service to the front line, which is being left untouched and will be enhanced.

Finally, channel 16, under international regulations, will be monitored in the stations. That will not be on headphones, but over loudspeakers. I apologise to my hon. Friend the Member for South Dorset (Richard Drax). I should have come back to him on that. On that note—I am sad that I have to cut my comments short, due to procedure—I will hand over to my hon. Friend the Member for Truro and Falmouth. This is a proper consultation. No deal is done. I have visited many stations and have one more to go. I cannot visit all 19—that is not possible. If hon. Members look at the political make-up of the stations that I have visited, that has nothing to do with party politics—it is to do with my job.

17:25

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

On behalf of all hon. Members who have attended this afternoon’s debate, I want to thank the Minister for such a helpful response. I will not take all the credit for today’s debate. I worked with a team of hon. Members, whose names are listed on the Order Paper, to secure the debate. I hope that as many hon. Members who have participated today—particularly those who did not have the opportunity to speak, or who felt under pressure and did not have the full amount of time—will join us on Tuesday to make further representations to the Backbench Business Committee to make sure that we secure more parliamentary time in the main Chamber. Today’s debate has demonstrated the strength of feeling and the range of issues that still need to be explored on this UK-wide issue, which is one of the unique occasions when we can represent all the people of the UK in Parliament.

[Albert Owen]

Had the Minister had more time, I am sure that he would have been able to answer this point, but does the hon. Lady agree that it would be helpful to have a breakdown of incidents, so that we know what kind of incidents the MCA is dealing with? That would be an important appendix to the extended consultation.

[Sarah Newton]

I will pass that question straight on to the Minister to answer.

[Mike Penning]

I will publish all the information we have.

[Sarah Newton]

Like everyone else, I am reassured by what the Minister has said: saving lives is in his blood; he will now make all the information available to the Transport Committee; no decisions will be made until the Transport Committee has published its findings; and there will be plenty of opportunities between now and then for further representations by coastguards, without fear. That was a very important point. Coastguards are frightened, and I think that there are volunteers in the RNLI and other organisations who are frightened to come forward. They can do so with the absolute guarantee that they have been given by the Minister today.

[Mr Russell Brown]

As the Minister would not allow me to intervene, may I, through the hon. Lady, ask if the table-top exercise will be undertaken again, but in real time to give a real indication of how that might develop on the day?

[Sarah Newton]

I am sure that the Minister has heard that. I had better let other hon. Members intervene.

[Bill Esterson]

The hon. Lady congratulated our colleagues, the hon. Members for Totnes (Dr Wollaston) and for Na h-Eileanan an Iar (Mr MacNeil), whose names also appeared on the Order Paper. I want to add to those congratulations.

I wanted to pursue with the Minister the point about the transition period. Whatever the outcome, we want to ensure that safety is not compromised in that period of change. The Minister touched on that in his remarks, but I want to be confident that that point has been taken on board, and that the transfer of local knowledge, and the issues around that, are addressed strongly in whatever system we end up with.

[Sarah Newton]

I am sure we all agree that safety has to be the paramount consideration.

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

My hon. Friend is right to say that we owe it to the army of people who voluntarily protect life and limb at sea to get this right so that people are confident about going to sea. Does she agree that that is the test on which we should judge these proposals?

[Sarah Newton]

That is right. As the Minister began by saying, it is the people of the country, as well as seafarers, who have to feel absolutely sure that, whatever happens when the proposals are introduced, safety is paramount. The transparent way in which all the proposals will be published and scrutinised by the Transport Committee, and the fact that hon. Members will again have the opportunity to examine and debate the proposals in the House, should give people the assurance that they desperately crave at the moment, and give the answers to the questions which remain unanswered.

Question put and agreed to.

17:29

Sitting adjourned.

Written Ministerial Statements

Thursday 24th March 2011 Written Statements

Thursday 24 March 2011

Rebalancing the Northern Ireland Economy

Thursday 24th March 2011 Written Statements

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

The Treasury has today published a consultation paper on rebalancing the Northern Ireland economy.

The paper, which meets a coalition programme for Government commitment, has been produced in consultation with the Northern Ireland Office and the Northern Ireland Executive (NIE). It reflects the joint commitment towards meeting the economic challenges Northern Ireland faces, in particular; increasing the size of the private sector while reducing dependency on the public sector, improving productivity, raising growth and increasing employment.

The Government have developed a range of UK-wide policies to rebalance the economy which will benefit Northern Ireland. The 2011 Budget announces new measures, including the Government’s enterprise zone policy and its plan for growth. The paper draws on these policies and describes devolved policies for rebalancing the Northern Ireland economy, bearing in mind that many of the key economic policy levers are already devolved.

The paper also discusses the option of devolving the power to vary the rate of corporation tax to the Northern Ireland Executive, given the unique circumstances in Northern Ireland, including its large public sector, the economic legacy of the troubles and the land border with Ireland. This includes discussion of:

The benefits and costs of devolving corporation tax varying powers to the Northern Ireland Executive;

Implementation issues;

Other possible tax options.

The consultation will conclude in June 2011. The Government, in consultation with the Northern Ireland Executive, will make decisions in light of the responses received.

Copies of the paper are being placed in the Libraries of both Houses and are available via the Treasury website.

Election and Referendum Guidance

Thursday 24th March 2011 Written Statements

[The Minister for the Cabinet Office and Paymaster General (Mr Francis Maude)]

Guidance has today been issued to civil servants in UK Departments on the principles which they should observe in relation to the conduct of Government business in the run up to the forthcoming elections to the Northern Ireland Assembly, the Scottish Parliament and the National Assembly for Wales, to local authorities in England and Northern Ireland, and the voting systems referendum.

The guidance sets out the principles on the need to maintain the political impartiality of the civil service, and the need to ensure that public resources are not used for party political purposes, and sets out the sensitive periods when the guidance comes into force.

Copies of the guidance have been placed in the Libraries of both Houses and on the Cabinet Office website at

http://www.cabinetoffice.gov.uk/resource-library/election-guidance.

Advisory Committee on Historic Wreck Sites

Thursday 24th March 2011 Written Statements

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

My right hon. Friend the Secretary of State announced on 26 July 2010 our intention to make a number of changes to the Department for Culture, Media and Sport’s arm’s length bodies. These changes included the abolition of the Advisory Committee on Historic Wreck Sites (ACHWS), which was set up to advise Government on the designation and licensing of historic wrecks under the Protection of Wrecks Act 1973. The ACHWS held its final meeting today, and will cease to exist as of 24 March 2011.

The ACHWS has served a valuable purpose over the years, but we believe that advice on the operation of the 1973 Act can be provided in a more streamlined way. In future such advice will be provided by English Heritage in relation to heritage assets located in UK territorial waters adjacent to England. As the Government’s statutory adviser on the historic environment, English Heritage already provides advice on the protection and conservation of terrestrial heritage assets in England and we believe it makes sense to bring procedures on land and at sea into line. The devolved Administrations will in future source their own advice for Ministers on the operation of the 1973 Act in their respective areas of UK territorial waters.

The Government remain fully committed to ensuring the continued conservation and management of underwater heritage assets in the UK’s territorial waters. We are confident that the new arrangements will ensure the continuation of appropriate advice to Ministers while allowing flexibility to meet the particular needs and circumstances of each country.

UK Youth Parliament

Thursday 24th March 2011 Written Statements

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

The Government will provide continuing support into 2011-12 to the UK Youth Parliament. Following a limited competitive bidding exercise the Department for Education proposes to award a grant of £335,000 to the British Youth Council to continue the UK Youth Parliament’s key functions and sustain its independence and distinct identity for six months from April 2011. This proposal will be discussed by the trustees of the current host charity for the UK Youth Parliament, Democracy for Young People Ltd, at its meeting on 30 March. The aim of this proposal is to secure continued support for the work of the 600 young people who are members of the Youth Parliament or their deputies. A short-term grant of £65,000 will be offered to Democracy for Young People Ltd to enable it to deliver a smooth transition. The Government are considering what arrangements would be appropriate to sustain the UK Youth Parliament in the longer term. I am pleased that the Speaker of the House of Commons has confirmed continuing support for the UK Youth Parliament in 2011-12 including for the annual debate in the Commons chamber.

Giving young people a voice in public decisions which affect them is a key principle underpinning the Government’s youth policy. Members of the UK Youth Parliament make a valuable contribution to making the voices of young people heard within formal democratic processes and these measures will ensure that their work can continue.

Year 1 Phonics Screening Check

Thursday 24th March 2011 Written Statements

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

It is vital that all children learn how to read early in their education. Despite the efforts of teachers and parents, 15% of pupils did not reach the expected level in reading at the end of key stage 1 last year. At the end of key stage 2, 16% of pupils were below level 4 in reading, and 8% of pupils were below level 3. These figures show that we need to do more to ensure that our children have the skills as early as possible, to develop into confident, enthusiastic readers.

Research evidence shows that systematic teaching of synthetic phonics is the best way of teaching reading. All children should benefit from high-quality phonics teaching, which will give them the tools to read widely and deeply. Phonics is a prerequisite for children to become effective readers, but it is not an end in itself. Phonics should always be taught alongside comprehension and other wider reading skills. The goal is for children to read fluently for comprehension and pleasure so that they can access the rest of the curriculum and develop a lifelong love of reading.

The Government’s intention to introduce a simple, light-touch assessment of phonic decoding was included in the recent schools White Paper “The Importance of Teaching”. The Government have been consulting on plans to introduce a year 1 phonics screening check. The consultation document proposed the check should be designed to confirm that children are able to decode using phonics by the end of year 1, and to identify those pupils who need additional support.

Over 1,000 responses to the year 1 phonics screening check public consultation were submitted. Having considered all these responses, alongside other evidence such as the pre-trialling of sample assessment materials and reviews of academic research, the Government will develop the phonics screening check for this purpose. The check will provide parents and teachers with the reassurance they need that each child has grasped the basic code of the language. In a recent Nation Council for Parent Teacher Associations survey, 73% of parents, from a representative sample of 460, supported the policy.

The phonics check will contain some non-words. Non-words are already used in many schools, and they are the quickest and fairest way to assess phonic decoding. Non-words are new to all children, and their inclusion in the phonics check is designed to ensure children have the skill to read any new word, rather than simply a good sight memory for whole words.

The responses to the consultation repeatedly emphasised that the check must be manageable for schools to administer, and appropriate for children in year 1. We have therefore made a number of adjustments to our proposals to give schools and teachers greater flexibility, including allowing a week long window for the screening check to take place across the whole year group, and allowing more than one teacher in each school to administer the check. We intend to include the data from the check in RAISEOnline for use by schools, to monitor their own performance, local authorities and Ofsted. Although schools and other education professionals will consider their pupils’ performance on this check in light of national benchmarks, this is not a “high stakes” test. We will therefore not be publishing school by school results in performance tables.

In November and December last year, the Department pre-trialled sample screening check materials in 16 schools. Pupils and teachers responded well to the materials. Pupils were not confused by the use of non-words, and the check of 20 real words and 20 non-words took an average of just 2-3 minutes to administer.

The screening check will be piloted in a representative sample of approximately 300 schools this June. We will continue to gather evidence and take advice from schools about the policy during the pilot stage before finalising the assessment arrangements. Subject to the pilot’s success, the year 1 phonics screening check will become a statutory assessment from 2012.

Environment Council

Thursday 24th March 2011 Written Statements

[The Secretary of State for Environment, Food and Rural Affairs (Mrs Caroline Spelman)]

My right hon. Friend the Secretary of State for Energy and Climate Change and I represented the United Kingdom at the Environment Council on 14 March in Brussels.

At the beginning of the Council, Environment Commissioner Potocnik updated Ministers on the situation in Japan and was joined by member states in offering condolences and support.

The Council reached political agreement on the first reading of the recast of the directive on waste electrical and electronic equipment (WEEE), agreeing more ambitious collection and recycling targets for these materials (to be introduced over time and subject to full impact assessment) and measures to reduce red tape. In discussions I stressed the importance of clarity for industry on the scope of the directive and the importance of reviews and impact assessments before any changes were made in this area. I also supported improvements to the methodology for calculating recovery targets to ensure greater certainty.

Ministers then exchanged views on the proposal for a regulation regarding the possibility for member states to restrict or prohibit the cultivation of genetically modified organisms (GMOs) within their own territory. The main focus of the debate was on the Commission’s proposed list of possible justifications for prohibiting cultivation. I argued that any agreement would need to improve the operation of the decision-making process in a legally sound, proportionate and pragmatic way. Like other member states, I stressed the need for a clear legal view of the compatibility of the proposals with EU internal market rules and our WTO obligations. I was also concerned that some of the suggested grounds for national bans were inconsistent with the existing robust EU system that takes a science-based approach in evaluating the health and environmental effects of proposed GMOs. Other grounds risked unintended consequences. I concluded it was not clear that the Commission proposal would improve the system and it could set an unwelcome precedent for other areas in moving away from a science-based approach.

The Council agreed conclusions on the review of the Community strategy concerning mercury. These welcome progress made in the EU and call for a successful conclusion to the international negotiations on a global legally binding instrument on mercury.

Ministers exchanged views on the common agricultural policy towards 2020. I welcomed the presidency decision to hold a discussion on this among Environment Ministers. I underlined the need for the CAP to have a greater focus on confronting the challenges of climate change, protecting natural resources and preventing environmental degradation. These challenges are well analysed in the recent UK Foresight report on global food and farming futures. I commended this report to colleagues in the Council and circulated copies for their information. I argued that the CAP is a key mechanism to achieve our environmental goals and explained that the UK sees pillar 2 of the CAP as the primary tool for doing this. The debate sent a strong message that the future CAP should contribute more to our environmental and climate objectives in line with the EU 2020 strategy.

I also spoke in the discussion on the Environment Council’s “Contribution to the EU Semester” (i.e. review of the annual growth survey) in advance of consideration by the European Council. I stressed the importance of moving early to a resource-efficient, climate-resilient, low-carbon economy if we are to achieve a sustainable economic recovery. Many member states intervened on comparable lines. The presidency noted that resource efficiency and climate change were integral elements in this process.

Several points were discussed under other business on non-climate environment issues, during which I introduced a joint note with Austria, France, Italy, the Netherlands, Slovenia and Spain on whaling. We emphasised the need for the EU to express its existing strong position of opposition to commercial whaling wherever appropriate, including the next round of International Whaling Commission discussions in July and also when negotiating the proposed accession of new member states. A number of member states spoke on a point raised by Austria on measures taken to reduce the usage of single-use carrier bags; other member states took the opportunity to describe a variety of successful actions taken for this purpose.

During the lunch discussion my right hon. Friend the Secretary of State led member states in welcoming the Commission’s 2050 low-carbon road map. There will be further detailed discussion of the road map at the informal Environment Council at the end of the month.

Under climate items, the Council adopted conclusions on the follow-up to the meeting of the UN framework convention on climate change at Cancun in December 2010. These welcome the progress made at Cancun and call for early action in taking forward the agreed work streams and outstanding technical issues. Discussion focused mainly on the legal form of a future comprehensive agreement and the EU’s position on a second commitment period of the Kyoto protocol. My right hon. Friend was supported by other member states in calling for the EU to maintain its position of being open to this, which had been well received at Cancun. Conclusions were agreed which reiterate the position adopted at the October Environment Council.

Under other business on climate change issues, the Council received updates from the Commission on the state of the EU emissions trading system registry and the joint procurement agreement for the single auction monitor; and information from Denmark on the use of industrial gas credits under the effort sharing decision.

Foreign Affairs Council and General Affairs Council

Thursday 24th March 2011 Written Statements

[The Minister for Europe (Mr David Lidington)]

The Foreign Affairs Council and General Affairs Council were held on 21 March in Brussels. I represented the UK.

Foreign Affairs Council (FAC)

The FAC was chaired by Baroness Ashton. A provisional report of the meeting, and all conclusions adopted, can be found at:

http://www.consilium.europa.eu/uedocs/cms data/docs/pressdata/EN/foraff/120084.pdf

The agenda items covered were as follows:

Japan

Ministers reviewed the EU’s response to the crisis in Japan. Commissioners Georgieva (International Co- operation, Humanitarian Aid and Crisis Response) and Piebalgs (Development) briefed Ministers on the public health situation and the requirement for humanitarian assistance. A key focus for current EU efforts would probably be temporary housing. (See also record of GAC discussion.)

Libya

Ministers agreed conclusions (see link above) which:

Called on Gaddafi to relinquish power immediately;

Expressed satisfaction with the adoption of UNSCR 1973;

Agreed further restrictive measures against the Libyan regime and agreed to work up further measures on the basis of UNSCR 1973;

Committed to support action provided under UNSCR 1973—noting that the EU would continue to provide humanitarian assistance to those affected;

Called for the High Representative to develop planning for assistance for humanitarian assistance in close co-ordination with the UN and NATO.

During discussions, I set out how military action under UNSCR 1973 had helped avoid a catastrophe in Benghazi. This action had been broad-based; a coming together of western and regional actors.



Libya was also discussed in the GAC in the context of the text of European Council conclusions which will be presented to the European Council on 24-25 March—see below.

Developments in the Southern Neighbourhood

Ministers agreed conclusions on both Bahrain and Yemen (see link above) expressing concern with the situation in both countries. In both cases, the Council urged all concerned—including the respective Governments—to engage in constructive dialogue. They expressed concern about reports of the arrest of opposition figures in Bahrain. And stressed the need for the authorities in Yemen to ensure respect for human rights and fundamental freedoms.

On EU assistance to the region, I stressed the need for conditionality, or, what others termed “mutual accountability”: a lot of money had been spent to limited effect in terms of economic development or political reform. The European neighbourhood policy (ENP) needed ambitious re-shaping to focus on supporting states pursuing reforms.

Bosnia and Herzegovina (BiH)

Ministers agreed conclusions (see link) that endorsed the external action service’s (EAS) proposals for a reconfigured EU presence in BiH. The conclusions raised concerns about the political situation in BiH and called on BiH leaders to form Governments which can address the reform agenda. The conclusions outlined the Council’s continued support for the Office of the High Representative (OHR), EUFOR (EU military mission) and EUPM (EU police mission). They also outlined the package of instruments, including restrictive measures, which would be available to the new EU representative and looked forward to further discussions on the reconfiguration of the international presence.

The Sahel

Council conclusions on a strategy for security and development in the Sahel were adopted (see link). The strategy’s primary focus will be on Mali, Mauritania and Niger, but it also builds on complementary activity in the Maghreb. Proposals made by the High Representative and Commission on the basis of this strategy will be considered by Brussels working groups before implementation. Action would be directed to development, good governance, and internal conflict resolution; security and rule of law; and countering violent extremism.

Somalia

Conclusions were agreed (see link above) which:

Confirmed the EU’s continuing support for the Djibouti peace process;

Stressed the need for the transitional federal institutions (TFIs) to help advance the peace process;

Expressed regret over the Somali transitional federal Parliament’s decision to extend its mandate;

Agreed that any future EU support to the TFIs, including stipends for parliamentarians, should be based on progress on reform;

Reaffirmed support for the AMISOM peacekeeping mission.

I supported the conclusions, stressing the importance of maintaining pressure on the TFIs, supporting AMISOM and greater EAS engagement in Puntland.

Iran

Council conclusions were adopted (see above link) without discussion on Iran/human rights. These gave agreement to introduce targeted sanctions against human rights violators while at the same time making it clear that the EU remains ready to discuss human rights issues with Iran. Work will now proceed in Brussels to draw up the sanctions legal act and list of individuals to be targeted.

Côte d’Ivoire

Under AOB, France raised recent developments in Côte d’Ivoire. There was broad agreement that the EU needed to continue to apply its targeted measures against Mr. Gbagbo and those that sustain his illegitimate regime. On the 18 March, the Foreign Secretary issued a statement:

“I utterly condemn the indiscriminate killing of more than 25 people in Abobo yesterday by forces loyal to former President Gbagbo. The launching of mortars into a market place and bus station is abhorrent and the UN should conduct a full investigation.

I call on all parties in Côte d’Ivoire to cease violence, to seek a peaceful resolution to the ongoing crisis and for President Ouattara to take his rightful position in line with the will of the Ivorian people”.

General Affairs Council (GAC)

The GAC was chaired by the presidency, Hungarian Foreign Minister Martonyi. A provisional report of the meeting can be found at:

http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/EN/genff/120082.pdf

Preparation for the March European Council

Ministers examined draft Council conclusions for the European Council to be held on 24-25 March. The European Council will discuss:

Economic policy: adoption of a comprehensive package of measures to strengthen EU economic governance and ensure the stability of the euro area.

Developments in Libya and elsewhere in the EU’s southern neighbourhood: follow-up to UNSCR 1973 and latest developments as regards Libya; implementation of measures agreed by the European Council on 4 February.

Crisis in Japan: assessment of the humanitarian aid effort, the situation in the energy sector and the broader economic implications.

Economic policy

On economic policy, I emphasised the need to focus on economic growth, building on the Commission’s annual growth survey. The European Council conclusions needed to have language promoting smarter regulation, reducing the regulatory burden on businesses and SMEs in particular, and improving the internal market for services. The EU also had to reflect on the importance of trade for future EU growth, delivering this through a conclusion to the Doha round this year and taking forward negotiations on free trade agreements (FTAs) with India, Canada and Singapore.

Libya and the Southern Neighbourhood

Following on from the earlier discussion in the FAC, Ministers focused on the detail of proposed short-term measures, including raising the ceiling of the European Investment Bank (EIB) operations in the region by EUR 1 billion. A number of member states emphasised the conditions that would need to accompany any such rise.

I also made a more general call for a set of ambitious European Council conclusions, reflecting our offer of a new partnership and a deeper coalition with the region in return for greater reform. To that end, we needed to better reflect the commitment set at the European Council of 11 March—which my right hon. Friend the Prime Minister set out for the House on 14 March.

Japan

Ministers briefly took stock of the EU’s response following discussions in the FAC. They noted that Energy Ministers were meeting separately in Brussels on the same day to discuss the nuclear crisis.

On the proposed European Council conclusions language, I stressed that while we wanted to ensure the highest safety standards in nuclear plants, we should remember that there was already much legislation in place and very capable national authorities were taking action. We should not do anything that undermined the clear responsibility which rested with member states in this area.

Sino-British Joint Declaration on Hong Kong

Thursday 24th March 2011 Written Statements

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

The latest report on the implementation of the Sino-British Joint Declaration on Hong Kong was published today. Copies have been placed in the Library of the House. A copy of the report is also available on the Foreign and Commonwealth Office website (www.fco.gov.uk). The report covers the period from 1 July to 31 December 2010. I commend the report to the House.

Entry Clearance Decisions (Removal of Full Appeal Rights)

Thursday 24th March 2011 Written Statements

[The Minister for Immigration (Damian Green)]

My right hon. Friend the Home Secretary is today laying before the House a copy of the United Kingdom Border Agency report on removal of full appeal rights against refusal of entry clearance decisions under the points-based system. Copies will be available in the Vote Office and online at http://www.official-documents.gov.uk/.

Section 4(3) of the Immigration, Asylum and Nationality Act 2006 requires provision of a report on the effects of section 4(1) of the 2006 Act, which is the mechanism by which appeal rights against refusal of entry clearance decisions overseas were removed for those applying under the points-based system.

The report is required within the period of three years from the commencement of section 4(1) on 1 April 2008, when the points-based system was first implemented overseas. Full appeal rights against such refusals were removed as each tier of the points-based system was implemented overseas. A new process of administrative review was introduced overseas under the points-based system to enable refused applicants to challenge any factual errors made in the decision-making process.

To meet the requirements as set out in the Act, the report provides statistical data on entry clearance decisions and administrative review requests made, it details the processes and criteria in place under the points-based system and records opinions made by the UK Border Agency independent chief inspector. To report on the effects of removal of full appeal rights, some comparisons have been made between the appeal system and administrative review process.

House of Lords

Thursday 24th March 2011 Lords Chamber

Thursday, 24 March 2011.

11:00

Prayers—read by the Lord Bishop of Exeter.

English Language Learning

Thursday 24th March 2011 Lords Chamber

Question

11:06

Asked By

[Lord Greaves]

To ask Her Majesty’s Government what is their assessment of the role that learning English as a foreign language plays in the integration of people from different backgrounds.

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)]

My Lords, the ability to speak English is important for playing an active role in society. Lack of English can be a factor in social exclusion and a barrier to the integration of migrants. English language skills allow individuals to realise their potential in education and in the workplace, to get on with others in their neighbourhoods, and to make informed decisions about health and other public services.

[Lord Greaves]

My Lords, I thank the Minister for that helpful reply. Today is a day of action in communities all around the country by people who are campaigning to save ESOL provision, which is threatened with big cuts. What meaning has the big society for people who cannot communicate with their neighbours or take part in their local community? In particular, restricting free ESOL classes to people on so-called “active benefits” will be disastrous for many people—for example, women who are full-time housewives in Asian households and who will lose their lifeline to the wider community. Will the Minister talk to the department responsible for these cuts, and does she think that that department is meddling in areas which it does not know much about?

[Baroness Hanham]

My Lords, in the current economic climate, different decisions have to be made on ESOL as well as on everything else. The Government are prioritising investment in training for unemployed people who are actively seeking work. We expect those who come from other countries to work in England, or their employers, to meet the cost of their English language courses. We will no longer fund ESOL in the workplace. On the division of responsibility between departments on this matter, I will make sure that the BIS aspect goes back to that department.

[The Earl of Listowel]

Does the Minister understand the deep concern of a head teacher of an outstanding primary school in inner-city Manchester, 80 per cent of whose intake is Somali children, that funding for its ESOL courses may be cut? Is she aware of the research that shows that what happens in the home—the support that parents give children in their education—is the single most important factor in achieving the best educational outcomes for them?

[Baroness Hanham]

My Lords, as far as I am aware, the education of children is not affected. Children are taught English in schools and will continue to be so taught despite this measure. The Department for Education, of course, is responsible for that.

[Lord Tebbit]

My Lords—

[Baroness McIntosh of Hudnall]

My Lords—

[Lord Tebbit]

Do sit down.

[Noble Lords]

Order!

[Lord Tebbit]

My Lords, does my noble friend not agree that the expression “English as a foreign language” is not quite correct? English is not a foreign language in this country.

[Baroness Hanham]

Yes, my Lords.

[Baroness McIntosh of Hudnall]

My Lords, I hope the Minister agrees that the remarks of the noble Lord, Lord Tebbit, do not entirely bear examination. However, while I largely agree with the remarks of the noble Lord, Lord Greaves, we in this country have a less than exemplary record in understanding the importance of learning other people’s languages. Does she agree that, as part of the thrust towards getting people to learn our language, it would be good if we got better at learning theirs?

[Baroness Hanham]

My Lords, the thrust of the Question was about people learning English so that they could integrate into our country, not about whether the education system should ensure that we can speak languages elsewhere. I am conscious that throughout the House someone will speak anything from Mandarin to German to French; we would have a handful of interpreters if we asked for them.

[Baroness Hussein-Ece]

My Lords, I declare an interest as someone who learnt English as a second language at school. Can my noble friend comment on the impact these proposals will have on women and low-paid workers who will no longer be eligible for English classes? How does it sit with the constant call for people from ethnic minorities to integrate if they cannot access classes to learn English?

[Baroness Hanham]

My Lords, people not covered by the full ESOL subsidy will still be subsidised by 50 per cent for the course. I am sure that, where colleges of further education and training organisations identify people specifically able to go into work and learn in their communities, the other 50 per cent will be found. I appreciate that there are members of communities who have come to live in this country who find it difficult to access, but I am bound to say that there has always been that difficulty.

[Lord Hunt of Kings Heath]

My Lords, I declare an interest as my wife is an assistant principal of a college that does extensive ESOL teaching and is impacted by the potential cut. Will the Minister look at the issue of women, particularly Asian women, in many of our major cities who will not be eligible for the full grant because they are not on active benefits? The noble Baroness has said that some of those women may be able to get access. Does she accept that the evidence so far is that thousands of women will not? Is she prepared to look at this matter again?

[Baroness Hanham]

My Lords, it is not entirely a matter for my department to look at this again. We are clear that people who are not on active benefits will get some support. I recognise that, as with any reduction in money, someone will not win out. However, the point about people who are in their homes and not accessing English as a second language is, I am afraid, covered by the 50 per cent reduction.

[Lord Roberts of Llandudno]

My Lords, as I address the Chamber in my second language, what provision is there, through the British Council or other overseas movements, to teach those who wish to come to the UK some basic English before they start on their journey?

[Baroness Hanham]

My Lords, under recent legislation, people who want to come here on tier 2 will have to speak English before they apply for a visa. English language tuition is widely available internationally, including through the British Council, and, as far as I am aware, there is no intention of changing that.

NHS: Reorganisation

Thursday 24th March 2011 Lords Chamber

Question

11:14

Asked By

[Baroness Williams of Crosby]

To ask Her Majesty’s Government what is their latest estimate of the cost of the reorganisation of the National Health Service and what proportion of that is due to redundancy and early retirement.

[The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)]

My Lords, the Government published an impact assessment alongside the Health and Social Care Bill. This estimated the costs of the transition at £1.4 billion. Just over £1 billion was estimated to be as a result of redundancy. The £1 billion has not been split into redundancy and early retirement as these decisions will be made at a local level. The proposed reforms will save £1.7 billion per year from 2014-15 onwards.

[Baroness Williams of Crosby]

I thank my noble friend for that Answer, but I am aware that the National Audit Office, on the basis of its own surveys, has indicated a considerably higher figure. In an important article written by the professor of medical health at the Manchester Business School, the estimates are between £2 billion and £3 billion. Could my noble friend tell us the cost of the redundancies that have arisen from PCTs being brought to an end and people moving into the new consortia, and whether that figure is part of the figure that he has given to the House?

[Earl Howe]

My Lords, I would do best to refer my noble friend to the impact assessment, which provides a detailed breakdown of the figures that I have just given. I acknowledge that we have had to make assumptions in drawing up the impact assessment. Those can be challenged, and I am aware of the figures that my noble friend has referred to. But I do not believe that changing the figures—and they are bound to change in the nature of the exercise—will make a significant difference to the overall cost. The assumptions made in the modelling are based on the best available evidence that we have at the moment.

[Baroness Thornton]

Among many others, the Conservative MP Sarah Wollaston recently argued in the Daily Telegraph:

“I cannot see that it makes sense to foot the bill for redundancies for the entire middle layer of NHS management only to be re-employing many of them within a couple of years”.

As the Minister has said, the Government’s assessment of the redundancies varies between 600 and 1,200. Can I tempt the Minister to give us his best guess of how many of those redundant managers will be re-employed within the NHS within two years? Indeed, does the Minister think that this is an acceptable use of taxpayers’ money?

[Earl Howe]

We expect that about 60 per cent of management and administrative staff currently employed in PCTs and strategic health authorities will transfer to the new GP consortia or the NHS commissioning board. Those are straight transfers. As for those who leave the service, we have included claw-back arrangements in the redundancy scheme so that, if any employee returns to work for the NHS in England within six months, they will be required to repay any unexpired element of their compensation.

[Lord Walton of Detchant]

Does the Minister accept that many members of the administrative staff of the NHS are acting as if the Bill were already in law? For instance, staff in the PCTs are melting away. It is crucially important that those who will be required to help to administer the GP consortia should be kept on. Equally, now that the Government accept that the NHS commissioning board will require some regional infrastructure to commission highly specialised services, what action are the Government taking to ensure that the experienced and dedicated staff involved in the regional strategic authorities who carry out those commissioning tasks will be kept on?

[Earl Howe]

I am very grateful for the noble Lord’s question, because it gives me the opportunity to pay tribute to the skill and dedication of our managers and administrators in PCTs and strategic health authorities, whose skills we will most certainly need once the modernisation plans have been completed. We are clear that those who are able to provide these skills and can give us continuity into the new system are people we want to keep. We are encouraging them to stay and hope that they will. We are encouraging also the pathfinder consortia to engage with the PCTs to enable that to happen.

[Baroness Jolly]

My Lords—

[Baroness Gardner of Parkes]

Following the question from the noble Baroness, Lady Thornton, could I ask my noble friend more about this transfer? Does he recall that, in previous reorganisations of the health service, large numbers of people claimed redundancy payments and then got very favourable jobs afterwards? Does he not think that the six months that he mentioned as the claw-back period is probably not enough at a time when the health service is very stretched? Also, will he consider what the noble Lord, Lord Walton, said about reorganising some of those posts now to avoid that situation?

[Earl Howe]

My Lords, we are beginning to reorganise the system. Under current rules, we are enabled to do so. I understand my noble friend’s particular point about the claw-back arrangements but there is perhaps a countervailing argument over what is fair and unfair in redundancy arrangements. In that sense, one cannot push the issue too far. Having said that, we are on track with the retirement scheme. We are seeing a deliberate and carefully managed process of reducing staff numbers at primary care trust level, leading up to the clustering of primary care trusts, which I am sure my noble friend knows about.

[Lord Patel]

My Lords, can the Minister say—

[Baroness Jolly]

My Lords—

[Noble Lords]

This side!

[Lord Patel]

Can the Minister say whether the Government have made any assessment of the transaction costs of the reform?

[Earl Howe]

I can tell the noble Lord, as I did before this Question began, that the transaction costs are not in my brief. However, we are in a different world now from the one we were in 10 or 15 years ago. We have a payment-by-results system which is well established. It is important to understand that the modernisation programme is not about competitive tendering, because it will streamline the whole process whereby providers to the health service will be enabled to offer their services to patients. It is not dependent on competitive tendering and the transaction costs should reflect that beneficially.

European Court of Human Rights

Thursday 24th March 2011 Lords Chamber

Question

11:22

Asked By

[Lord Marlesford]

To ask Her Majesty’s Government what means exist for them to challenge judgments of the European Court of Human Rights which have overruled decisions of the United Kingdom Supreme Court in ways which the Government consider unfounded in law.

[The Advocate-General for Scotland (Lord Wallace of Tankerness)]

My Lords, if a Chamber of the European Court of Human Rights gives a judgment against the United Kingdom, we may request referral of the case to the Grand Chamber. Grand Chamber judgments and Chamber judgments that have become final because there has been no request for referral, or because a request has been rejected, are binding on the parties and not subject to any further challenge.

[Lord Marlesford]

My Lords, I thank my noble and learned friend for that Answer. While we all obviously favour and support human rights, and endorse the role of the judiciary in supporting them, does he agree that the performance of the European Court of Human Rights has done little to enhance its reputation? Perhaps I may give him an example from an Answer given recently to the noble Lord, Lord Hylton, about seven people whom the previous Government sought to have extradited to the United States on terrorist accusations. This was between 2007 and 2009, and the European Court of Human Rights is still considering those cases. Is it really conceivable that it can take up to four years to consider such a case and is it surprising that, as a result, people are beginning to think that the European Court of Human Rights is weak on law but strong on politics?

[Lord Wallace of Tankerness]

My Lords, with the kind of cases that the European Court of Human Rights deals with, its judgments can inevitably be supported in some cases—as indeed they have been in many cases by the public—and not supported in others. On the point that my noble friend makes, the fact that there is a backlog of around 140,000 applications suggests that something is not working effectively. That is why the Government are committed to supporting and building on the process of court reform which is already under way in Strasbourg. As part of that reform process, the Government wish to see a strengthening of the principle of subsidiarity; that is, that the convention should principally be implemented at national level.

[Lord Anderson of Swansea]

My Lords, does the Minister agree that that backlog has been caused in part by Georgia and Russia flooding the court with applications and that there are new procedures in place to deal with it? Will he also confirm that we in the United Kingdom have an exemplary record, albeit with a delay in one case, in responding to judgments of the court and not seeking to pick and choose? If we now refuse to implement the judgment in respect of the rights for prisoners instead of negotiating to see what the best outcome is, what effect does he think that will have on serial defaulters such as Russia and Turkey when until now our record has been exemplary?

[Lord Wallace of Tankerness]

My Lords, the noble Lord makes an important point: this country’s implementation of ECHR judgments has been very good and consistent with our obligation to respect and implement our international treaty obligations. He referred to the number of additional cases. The process that was started at Interlaken, where the United Kingdom was represented by the distinguished former Attorney-General, the noble and learned Baroness, Lady Scotland, is under way, and it is hoped that when Britain has the chairmanship of the Council of Europe for six months starting in November this year, we will be able to build on these reforms.

The Government’s position on prisoner voting has been set out, but we have also requested that the court’s judgment in the case of Greens and MT v UK should be referred to the Grand Chamber of the European Court. If the Grand Chamber agrees to the referral, it will look at the case again and issue its own judgment.

[Lord Thomas of Gresford]

My Lords, given that there are 250 applications to the Supreme Court for appeals in this country and 2,700 applications from the United Kingdom to the European Court, do the Government have any plans for having two or three more divisions of the Supreme Court in this country, perhaps sitting in Downing Street, to hear human rights cases as a court of final appeal, with full legal aid, and thus give some succour to the legal profession?

[Lord Wallace of Tankerness]

My Lords, I am not aware that the Government have any plans to set up such additional divisions of the Supreme Court, but I am sure that the point made by my noble friend will have been noted by the Ministry of Justice.

[Lord Scott of Foscote]

My Lords—

[Baroness Scotland of Asthal]

My Lords, following the work that we commenced in Interlaken, is there now a timetable for reform? What specific measures do Her Majesty’s Government intend to take with others to ensure that the ECHR is as robust as we would all like it to be?

[Lord Wallace of Tankerness]

My Lords, as I have indicated, we hope that during the period of our chairmanship of the Council of Europe we will be able to take forward the reforms. All 47 members of the council believe that there ought to be reforms. We want to look at ways in which we can make the court more effective and efficient in dealing with the backlog and, as I have said, to reinforce the idea that the court’s role should be a subsidiary one; namely, that member states should have the primary responsibility for protecting convention rights in their own country. We hope that we can make progress on that during our chairmanship.

[Lord Neill of Bladen]

My Lords, will the Minister comment on the position of the Supreme Court? So far he has talked about government action, but the Supreme Court said in 2009, in a case called Horncastle, that it can decide not to follow a decision of the court in rare cases where that court has failed to “appreciate or accommodate” particular aspects of our domestic process. In such a case the Supreme Court can refuse to follow it, giving reasons, in the hope that that will then be picked up in a subsequent judgment by the court in Strasbourg. Do the Government have a position on whether that is a satisfactory arrangement?

[Lord Wallace of Tankerness]

I think that the specific case to which the noble and learned Lord refers has been heard by the Grand Chamber and a decision is awaited. The position under the Human Rights Act is that while our courts are not obliged to follow the precedent set, they must give proper consideration to it. In the more recent case of Pinnock, the Supreme Court indicated that it would generally follow Strasbourg’s decisions unless there were good reasons for not doing so.

Human Trafficking: EU Directive

Thursday 24th March 2011 Lords Chamber

Question

11:29

Asked By

[Baroness Royall of Blaisdon]

To ask Her Majesty’s Government what representations they have received asking them to help stop human trafficking by opting in to the European Union Directive.

[The Minister of State, Home Office (Baroness Neville-Jones)]

My Lords, the Government received a range of representations, including from parliamentarians, members of the public and non-governmental organisations. We said, referring to the opt-in, that we would make a decision about the finalised text at the end of the process, rather than at the beginning of the drafting. This is what we have now done. The Minister for Immigration has written to the parliamentary scrutiny committees in both Houses, seeking their views on our intention to apply to opt in.

[Baroness Royall of Blaisdon]

My Lords, I am grateful to the Minister for that Answer. I pay tribute to the Government, who are doing the right thing, although I regret that it has taken too long. I also pay tribute to the Anti-Slavery International petition, women’s groups and other campaigners, who have clearly brought to bear a great influence on the Government. The National Working Group for Sexually Exploited Young People has found that there are only 38 areas in the UK with a specialist service in place. What are the Government doing to ensure that there is effective intervention and consistent local delivery of these services around the country; and how will these nationally important functions be managed under the Government’s proposed politicised policing framework, as set out in the Police Reform and Social Responsibility Bill?

[Baroness Neville-Jones]

I can hardly accept the last point made by the noble Baroness. As regards the quality of the services that the Government wish to see in place, there are certainly some excellent boroughs that can act as best practice models, including such places as Hillingdon. The Government’s aim, obviously, is to ensure that all boroughs and local authorities operate at the level of best practice. There is constant consultation between the Government, local authorities and the NGOs involved to achieve that result.

[Baroness Goudie]

My Lords, I am very pleased that the Prime Minister has now done a U-turn and stated that human trafficking is a terrible crime. Will the Minister ask the Prime Minister whether he will put the issue on to the G8 and G20 agenda for November? As she knows, human trafficking is a now global issue and it should be on these international agendas. That is the only way in which we will see the end of it in our lifetime.

[Baroness Neville-Jones]

I do not think that the Prime Minister has made any kind of U-turn—he has made a very clear statement of the Government’s position on the evils of human trafficking. I will take back the point about the desirability of having this on the G20 agenda.

[Lord Boswell of Aynho]

My Lords, will my noble friend also consider the extreme importance of effective police co-operation in dealing with this vile practice? I cite in particular the very constructive relationship that has been formed between the Metropolitan Police and the authorities in Romania. It is very important that people should understand that this is a matter not just of one or two criminals but of very organised gangs who are quite prepared to clean out the young people in a particular district in an exporting country and to disseminate them round the richer countries of the world, under their orders and making profits for their vile trade.

[Baroness Neville-Jones]

My noble friend is quite right: human trafficking is a concern for all constabularies. It is also a concern for the Serious and Organised Crime Agency, which operates internationally. He is right to say that this is a global issue. It is also a matter in which the police take a lead in our ports of immigration, most particularly in places such as Heathrow and St Pancras, ensuring that when there is suspicion that a child has been trafficked, the suspicion is picked up immediately and the arrangements to handle the case are put in place.

[Baroness Massey of Darwen]

My Lords, what discussions are ongoing between the Government and the organisations concerned with the trafficking of women and children into this country? How will the identification of the number of people trafficked, which is very vague, be improved? How will the Government tackle situations involving employment and housing, rather than just prosecuting people?

[Baroness Neville-Jones]

I think that the noble Baroness is referring to the desirability, with which the Government agree, of having, in effect, an end-to-end process in which one is able, through contacts abroad, to understand the systems for trafficking; to pick up the children being trafficked as and when they arrive in this country; and then to be able, with the local authority, to ensure that proper care is taken of them. That, in fact, is the Government’s aim, and we are trying to bring together a system that ensures that that happens. We are in very close consultation with those NGOs that take a strong and constructive interest.

[Baroness Hamwee]

My Lords, I am sure that the Minister will agree that the end-to-end process must include healthcare. Many of the people who have been trafficked will have been very damaged by the process. What are the Government doing to support good healthcare for them?

[Baroness Neville-Jones]

The local authorities have overall responsibility if a child has been taken into care, and the local health authorities are involved in the process that they put in place.

[The Lord Bishop of Exeter]

My Lords, I am sure that the noble Baroness will be aware of the sterling work which has been undertaken by my friend the most reverend Primate the Archbishop of York in consistently pressing Her Majesty’s Government to achieve a united front across Europe for tackling this evil of human trafficking. But is she also aware of the Tearfund report, Silent No More, which was launched this Monday at Lambeth Palace with the support of both Archbishops, and which highlights the largely untapped potential of the church in preventing and reducing the impact of sexual violence, and the associated task of improving attitudes to women in many parts of the world? Will she join me in welcoming and commending this important report?

[Baroness Neville-Jones]

I pay tribute to the very notable work done by the most reverend Primate the Archbishop of York. It gives me great pleasure to be able to welcome this church initiative.

Business of the House

Thursday 24th March 2011 Lords Chamber

Timing of Debates

11:37

Moved By

[Lord Strathclyde]

That the debate on the motion in the name of Lord Lawson of Blaby set down for today shall be limited to four-and-a-half hours.

Motion agreed.

Statutory Instruments

Thursday 24th March 2011 Lords Chamber

Membership Motion

11:37

Moved By

[The Chairman of Committees]

That Baroness Berridge be appointed a member of the Joint Committee in place of Lord Campbell of Alloway, resigned.

Motion agreed.

Economy: Government Policies

Thursday 24th March 2011 Lords Chamber

Debate

11:37

Moved by

[Lord Lawson of Blaby]

To call attention to government policies to promote enterprise, growth and the fundamental rebalancing of the economy; and to move for papers.

[Lord Lawson of Blaby]

My Lords, I look forward enormously to this debate. There is a glittering array of speakers and, indeed, there can be no Chamber anywhere in the world that possesses so much expertise and experience in the fields of economics and business as this House does. I welcome in particular, as I am sure we all do, the maiden speeches that we will hear from my noble friend Lady Stedman-Scott and the noble Lord, Lord Hussain.

Inevitably, this debate is likely to focus very much on yesterday’s Budget, and that is what I intend to do in my opening remarks. I welcome the Budget for a number of reasons, the most important of which is that it has stuck—and my right honourable friend the Chancellor has been very firm about this—to what is commonly known as plan A. I am referring to the overriding need during the course of this Parliament to eliminate the structural budget deficit—the fiscal consolidation—or the cyclically adjusted fiscal deficit. As the highly respected Institute for Fiscal Studies has pointed out, in all the 34 countries of the OECD, only Ireland has a larger cyclically adjusted fiscal deficit than this country has. The cyclically adjusted fiscal deficit is that part of the deficit that is not due to the recession but is entirely due to the gross mismanagement of the public finances by the previous Government and by Mr Gordon Brown, in particular.

I congratulate the Chancellor, in difficult circumstances, on sticking to his guns on this central issue. It will be increasingly difficult over the next 12 months. We have a very difficult year ahead. The public expenditure cuts are only just beginning to take effect. There will be a great deal more unpopularity and many more problems than there have been already. There will be difficulties on a large scale with a number of public service trade unions. However, the Chancellor has to hold his nerve and go through it. The Budget yesterday is a sign that that is what he intends to do. In fiscal consolidation and in public expenditure cuts, he has set out to do the least that is needed economically. However, it is probably the most that is possible politically.

There is absolutely no need to hold back for fear of the fragility of the economy. It would be wholly wrong to do so. The world economy, and the British economy with it, is firmly on the recovery path. It is true that the recovery is slow, and is likely to continue to be so for the next 12 months. It is true that it will be bumpy, and that some quarters will be very uncomfortable. However, it is clear that the world economy is on a recovery path.

The Budget contained quite a few lollipops, as they were known in the Treasury in my day. Every Chancellor, including me, likes to put a few lollipops in his Budget. It is possible that there were rather too many in this Budget. Lollipops all have to be paid for and they also complicate the scene, whereas the Chancellor has rightly said that one of his watchwords will be simplification.

The lollipops are there for political reasons. I wonder whether there is not another approach that the Government could have adopted—and can still adopt—to a greater extent than they have so far. In the 1980s, we made a virtue of unpopularity. It carries a lot of conviction, because it happens to be true, if you say to people: “Look, no politician likes to be unpopular. We are politicians and we do not like to be unpopular. We would never do anything unpopular unless it was the right thing to do. We are doing it because it is necessary. We would far rather do popular things”. I know that noble Lords opposite think that many of us on this side are crazed fanatics powered by ideology. That might be the way that the Labour Party works—I do not know the inside of the Labour Party and I am not particularly interested, either—but not only is it a wholly inaccurate description of the Conservative Party and of our Liberal Democrat allies and friends, but the public know that it is complete nonsense, so all that happens is that the Labour Party loses all credibility.

The Government are doing the right thing, even though it is unpopular and will continue to be so. The criticism from the faint-hearts often comes from those—there are many in the media, as well as on the Benches opposite—who are obsessed with trying to fine-tune the economic cycle. One cannot fine-tune the economic cycle. The overriding need in economic policy for any Government—and this is what this Government are doing—is to focus firmly on the medium and longer terms.

In this context, the priorities are twofold. Eliminating the structural deficit is absolutely essential, as I have already said and as my right honourable friend the Chancellor made abundantly clear. There is also the need to cut back the relative size of the state in order to achieve the maximum rate of growth of which this economy is capable. That is where the growth strategy comes in. Greater growth will lead to a larger public sector and more public services in the future.

However, in the short run, it is necessary for the state to be only of the size that the economy at the time can afford. That is the essential path to improved economic growth, which we all want to see. There is no growth button that any Government can push. Growth comes from industry and from the inherent creativity of mankind. Of course, we had growth long before we had activist Governments with activist economic policies. You have to remove impediments, as the Chancellor is doing. Many of these impediments have very well-meaning intentions behind them but they remain impediments and they have to be removed wherever possible.

The Budget identifies three areas in that context. The first is deregulation, the second is tax reduction and the third is tax reform. On deregulation, I welcome what was in the Budget yesterday, particularly the proposed deregulation of the planning system. That is a very serious impediment and deregulation in this regard is long overdue.

It is clear that tax reduction will have to wait. Because of the appalling fiscal position and deficit that this Government inherited, there is no scope for tax reduction at present, but it will have to come. I was very glad to hear my right honourable friend the Chancellor say that he wanted the,

“most competitive tax system in the G20”.

That is quite a target. He has done well on the corporate tax side but, so far as concerns personal taxation, we have a very long way to go before we have the most competitive tax system in the G20. In fact, we are now well down the list. That is the context for his remarks about the 50 per cent top rate of income tax, which is way higher than that of most of our competitors in the G20. He saw it as temporary and is asking Her Majesty’s Revenue and Customs to inquire into whether there is any increase in revenue from raising the top rate to 50 per cent. Clearly the implication must be that if the inquiry shows no significant increase, or even any increase, in revenue, he will bring it down. I welcome that.

I hope that my right honourable friend will also look at the experience of the 1980s. When I reduced the top rate of tax from 60 to 40 per cent in 1988, it brought about an increase in revenue, not a reduction. Not only that but I have been accused of being a socialist because, as a result of this, we found that the highest taxpayers—the richest people in the country—were contributing a larger share of the total income tax revenue than ever before. Therefore, I think that that should be studied, as well as the effects of increasing the top rate from 40 to 50 per cent.

On tax reform, the Chancellor enunciated some principles. Those principles were absolutely right and I welcome them. However, the main thing that he announced was the amalgamation of the national insurance contribution and income tax systems. This was widely trailed in the newspapers and was announced in the Budget yesterday. I say to the Minister, and through him my right honourable friend the Chancellor, “Don’t go there.” There is nothing new about it. The first time I was involved in it, at a distance, was when my successor as Financial Secretary to the Treasury, the late Nick Ridley, of whom so many of us in this House have very fond memories, was very interested in doing it. Therefore, when my noble friend Lord Howe was Chancellor, there was an inquiry into what was known as NICIT in the Treasury. Some people thought that it was called that because Nicholas Ridley was in favour of it, but in fact it was an acronym for national insurance contributions and income tax. NICIT was looked at then and, very wisely, nothing was done.

However, after the 1987 Budget, I decided that my next Budget in 1988 would be a major reform of personal taxation. I was very keen on NICIT so, for nearly a year starting immediately after my 1987 Budget, I instigated the most thorough investigation into NICIT by the Treasury and the Inland Revenue that there had ever been. I did not abort it until January 1988, shortly before the Budget, because I had high hopes of it, but it could have been the biggest elephant trap that you could fall into. I do not have time to explain why, but that is the fact. If the Minister and my right honourable friend the Chancellor would care to look at page 827 of the original version of my memoirs, they will find an admirable summary of the main reasons why they should not go there.

Many noble Lords wish to speak in this debate and I do not want to take my full time allowance, as we wish to hear all the other contributions. We all want the Government’s policies to succeed. Inevitably, I understand that that is a problem for the party opposite, as it always is for Oppositions—there is nothing special about this Opposition. Oppositions tend to be slightly schizoid because they know that if the Government’s policies are successful, that is good for the country, but that might also be good electorally for the party in office and they are not very happy about that—but that is their problem.

On the electoral aspect, what is important is that this is, at bottom, what democracy is about. Democracy is a system that allows the Government of the day to do what they believe to be right and gives them a reasonable time in which to do it. At the end of the day, the people decide whether they should have a second innings. As we know from what is happening in much of the Arab world today, the essence of democracy is the ability of the people peacefully to eject a Government in whom they have no confidence. In this country, for many years, we have had an electoral system that fulfils that function better than any conceivable alternative would do, and that is an overwhelming reason for not changing it. I beg to move.

11:53

[Lord Sugar]

The House will be indebted to the noble Lord, Lord Lawson, for initiating this debate and for what he has said. He will recall that when he was Chancellor under the noble Baroness, Lady Thatcher, I was one of her blue-eyed boys. The young fellow from Hackney, who had done well, was a fine example of entrepreneurial spirit. She hauled me all over the place, displaying me as a prime example of what can be achieved. I was in and out of Downing Street more often than the window cleaners and possibly the noble Lord, Lord Lawson.

The thing is, people like me are a dying breed. When as a young man I went to a bank with my hand out, they thought I was part of a Morecambe and Wise team. “Do you have any collateral, a balance sheet, some history of profits?”, they asked. “No”, I replied. “Well then, clear off”, was their response. Like many others, I realised at an early stage that if you want something, you have to get it yourself. My idea of government support was: you supply me hospitals, schools, a police force, roads to drive on and a good environment for me to do business in, and that will do me fine; but do not poke your nose into my business.

To reflect on the past 15 years or so, it has been customary for a person dressed in a nice pair of designer jeans and a nice blue blazer with a white open-collared shirt, a bottle of Evian in one hand and a wonderful Microsoft spreadsheet in the other, to walk into a bank, mention the word dotcom and walk out with £5 million. Those days, I am afraid, are over. We all know what went wrong there; and we also know what a mess the banks got into recently; but the penny has not dropped with some people. We still have in some cases an expectancy culture, where people still think that there should be money freely available to finance lost causes, poorly run companies or a whim of an idea.

When I was employed as an adviser to Her Majesty's Government last year, I had occasion to visit many small to medium-sized enterprises across the country and spoke to several thousand people. The most frequently asked question of me was, “What can this Government do to help my business?”. My reply was not perceived as helpful. I told them, “Do not rely on any Government to assist you in running your business. You are people who have chosen to go into business, which is very enterprising, and I am pleased about that, but do not expect to get any advice from the Government about what products you should make, what ideas you should pursue, what services your business should provide or how you should market your products and generate income, because that is what you are supposed to do”.

More recently, I have asked people, “Who is there in government able to dish out such advice? Just step back and look at them”. Take, with the greatest respect, the current Business Secretary. He has never been in business or run a business. He has been an adviser or a politician all his life. He has never touched the coalface. Frankly, what does he know? It is this realism that brings me to my next point. In my opinion, the current Government are very good at window-dressing the demise of the economy by blaming it all on the banks. It is very convenient continually to repeat the same old broken record: “It’s not our fault. It’s the banks’ fault; it’s the previous Government's fault”.

Let us take a look at that for a moment. True, the banks were irresponsible, and they have been told in no uncertain terms to get their act together. However, having told the banks to get their house in order, the current Government are constantly bleating that the banks are not being helpful in lending money to small businesses, whereas the message to the small business community should be one of realism in understanding that no one is going to lend money to a lost cause. The banks are now looking at the traditional criteria of showing some assets or having some historic record of profits before parting with their money. They are definitely open for business. That, I remind your Lordships, is how they make some of their money. In my recent seminars, I have received comments from some people along the lines of, “The bank has been outrageous. It has actually asked me to put up some collateral—my house, for example”. Well, I am very sorry, but why not? Why should it take a risk on you if you are not prepared to take a risk on yourself?

In my capacity as a business adviser to the previous Government, I visited many Business Link centres, which I understand are funded in some way by government although I am not at all clear how. The cost of running these organisations was something in the region of £250 million per year. To be perfectly frank, apart from meeting a nice bunch of people, there was no real business advice dished out other than simple stuff you could pick up and learn for yourself by going on the internet. I urge the Government to redeploy money spent on these types of initiatives in other directions. As a simple example, there are so many empty premises around the country, large factories and warehouses, that can be converted and made into incubator factories. They could contain a core factory and a silo of workshops on the periphery. The core factory would be accessible to the individual businesses like satellites around a nucleus.

The noble Lord, Lord Lawson, said that sometimes you need to be unpopular. I think that the Government should come clean in their message to help small-to-medium-sized enterprises. You cannot on the one hand tell the banks, “You've been naughty by being irresponsible”, and on the other hand say, “Go and be irresponsible again. Go and help lost causes”. Give SMEs the facts of life. By all means be bold and be adventurous, but be realistic. Do not expect anybody in Whitehall to give you any hints and tips on how to do it because, basically, that is a case of the blind leading the blind. You are the business people, you are the ones with the ideas, and you are the ones who are going to drive your businesses forward, but regrettably, as with everything else in life, there are no free lunches.

All government can do is to provide a good business environment and assistance from HMRC—for example, export credit guarantees if you are successful enough to find an export customer, tax breaks for entrepreneurs who sell their businesses and tax deductions for investment in R&D. Here is the final point. To take advantage of the lollipops, as the noble Lord, Lord Lawson, called them, the wonderful tax incentives announced in yesterday’s Budget, perhaps I may just bring everybody down to earth again by saying that to benefit from them, you have to make a profit first. How to do that is something on which this Government, and perhaps some others, have not been capable of advising.

[Lord De Mauley]

I remind noble Lords that speeches are limited to seven minutes.

12:02

[Lord Newby]

My Lords, I congratulate the noble Lord, Lord Lawson, on getting such a timely debate on the Budget and economic policy—we normally debate these issues weeks after the event, so it is a pleasant change to be able to do it contemporaneously—and, like him, I look forward to hearing the maiden speeches in today’s debate.

The big political and economic question is whether there should have been a plan B at this point: should the Government have changed their broad macroeconomic policy? It seems to me that the only circumstances in which such a change would have been justified would have been if there had been a major change in the outturn or the outlook for the British economy. The OBR report published yesterday makes it clear that although there has been a short-term downward revision in growth, and therefore a slight rise in borrowing in the short term, its assessment is that, over the medium term, the Government’s plans are broadly in line to meet the targets set for the lifetime of the Parliament. Therefore, in my view, if the Government changed course, they would simple lose all credibility in economic policy-making.

Many commentators are asking, “Can’t we just ease the pain? Can’t we just spend a bit more?”, as if it would be costless. There has been a lot of argument about whether, if the Government had taken a soft approach last summer, there would have been major problems with the credibility of sterling and the cost of government borrowing. The Opposition have said, “We are not like Greece, therefore the fact that Greece has to spend 12.5 per cent on borrowing is irrelevant”. No, we are not like Greece, but we are not miles away from Spain’s current position. It currently has to pay 5 per cent on government borrowing compared with our 3.5 per cent. That is a big difference. If this Government, or any Government, were seen not to be taking their fiscal responsibilities seriously, you could bet your bottom dollar that those rates would zoom up. That cannot be in the long-term interests of the British economy.

I am looking forward to hearing the noble Lord, Lord Eatwell, explain the Opposition’s view on how they would meet their commitments under the Fiscal Responsibility Act. So far, we have heard not one word from the Opposition about how they would approach the circumstances in which we now find ourselves.

Before turning to the growth agenda, the main subject of today’s debate, I should like to say something about two issues. The first is tax avoidance. Broadly speaking, the Government’s measures here are extremely welcome, from the big-ticket items down to the reduction in low-value consignment relief on VAT, a subject that we debated in your Lordships' House a couple of weeks ago. Less welcome, however, is the rather supine approach to non-doms. The Government’s approach—basically to kick the issue into the long grass, as the predecessor Government did—is poor. A stronger approach should have been taken.

I should also like to probe slightly the Government’s intention regarding high-value housing. We know that many people avoid paying stamp duty on their houses by putting them into an offshore trust. There is a rather ambiguous sentence in the Budget speech about making sure that people with high-value housing pay their fair share. Can the Minister say whether the Government intend to do something about the stamp duty loophole; and if they do not, will they give the issue further consideration?

As for growth, much will depend on the extent to which people in the private sector, particularly the manufacturing sector, feel confident about the environment in which they seek to do business. The mood among manufacturers—and I have just come from a conference of small businesses in the manufacturing sector—is much more buoyant than one might think from reading most of the commentary. The Budget contains a range of provisions—on, for example, the planning rules, business rate relief and the business angels plan—that will help the sector. I am particularly pleased to see the additional support for apprenticeships which will cover 40,000 unemployed young people, and the 100,000 work experience placements that the Government have announced, with highly credible large companies taking the lead in making them available.

There are two issues on which I can give only two cheers. The first is the green investment bank. It has taken a long time to get the bank up and running, but I welcome the fact that it now is, and that it will have £3 billion available for lending to this sector. It is a pity, however, that it will not be able to borrow for the lifetime of this Parliament. I know all about the accounting rules but, frankly, there are times when you have to bite the bullet and decide what really matters. I would not have thought it beyond the wit of the Treasury to explain in its various documents the extent to which the liabilities of the green investment bank are separate from other government liabilities, and therefore to make it perfectly clear that a green investment bank that is able to borrow is not incompatible with reducing the overall budget deficit.

Enterprise zones are the second issue on which I can give only two cheers. Ever since they were introduced their track record has been mixed. One can only hope the fact that the zone boundaries will be determined by the LEPs—and therefore likely to cover the parts of the region with very good growth prospects, given the location—will make them more cost-effective than they have been in the past.

The key constraint facing many businesses remains their ability to borrow. The banks claim that there is no demand. I know that many manufacturers can get working capital from the banks for neither love nor money, so I just hope that the Government will keep the banks’ feet to the fire on the commitments that they have made but have yet to deliver on.

Finally, the challenge now is for the Government to implement this raft of measures and to keep listening to manufacturers in particular about further things to be done. The noble Lord, Lord Sugar, will be surprised to learn that the Secretary of State for Business, Innovation and Skills agrees with him to the extent that he understands that the Government cannot themselves generate growth, they can only create a climate in which entrepreneurs are encouraged to flourish. In my view, the Budget contains many positive steps in this direction, but there is much more to be done.

12:10

[Lord Brooke of Sutton Mandeville]

My Lords, it is certainly a pleasure to follow my noble friend Lord Newby, and it is always a privilege and a pleasure to follow the lead of my noble friend Lord Lawson of Blaby, just as it was during the four years of his outstanding chancellorship at the Treasury. I was the only Treasury Minister in those four years never to have worked in the City, a condition that will infect my speech today, although in the Treasury’s housekeeping role I could not have enjoyed more being on the Treasury Christmas card committee. My noble friend was its chairman and I was the only other member. He gave guidance and took the decisions, I did the work, and our cards were voted much the best of all the Finance Ministry Christmas cards in the European Union by the Commission in Brussels. My noble friend was in characteristically grand form today.

The Library briefing note is of its usual high standard, but I saw it only an hour and a quarter before the debate started, and I shall concentrate on the wider world than Whitehall and the City. However, I am wholly behind the present Chancellor’s policies as laid out yesterday. When I was in the private sector 40 years ago, I would give up an annual day to sit at the feet of that polymath sage, Herman Kahn of the Hudson Institute, who was confident that the UK would survive in the post-industrial society because of its recognised global eminence in government, education and medicine. I am therefore particularly pleased about the Chancellor’s backing for advanced manufacturing, for life sciences and for the creative industries, all of which play well to our national DNA.

We should all be grateful to my right honourable friend David Willetts, in my right honourable friend Vincent Cable’s department, to his success in protecting the science base and the science budget, for reinforcing the finances of universities and for helping to secure the recent revision of student visa priorities and procedures. I smiled when earlier this week the Official Opposition claimed credit for having closed down 140 bogus institutions of further education, as if it was a badge of honour that after 13 years there should be 140 such institutions available to be closed down.

After a quarter of a century as the Member of Parliament for the most inner of inner city seats in the land, I no longer live in London except when attending your Lordships’ House, and I observe the national economy from the far end of Wiltshire, a county with so long a history as to be a proxy for a national bellwether. Wiltshire has 40 per cent of the world’s chalk grasslands—I repeat that that is a global figure—and so was a magnet for Bronze Age man since there were no trees to cut down. It was where Alfred the Great achieved his victory over the Danes at the battle of Ethandun in 878 on the downs above the great priority church at Edington. That was built on the medieval wool finances of west Wiltshire, the latter being why Bradford-on-Avon in its built environment has proportionately more listed buildings than any other place in England.

Until recently, Wiltshire had no higher education institutions other than the Royal Military College of Science at Shrivenham—we are, since Alfred, a very military county—but the Sarum Missal was a key text in the evolution of the Church of England; the spire of Salisbury Cathedral was the highest in Europe and a copy of Magna Carta sits in the chapter house; Wilton, just outside Salisbury, was the medieval capital of Wessex and the Wilton Diptych, now in the British Museum, is the earliest surviving painting in England. Scarcely a year goes by without new archaeological evidence emerging from the mysteries of Stonehenge and Silbury Hill. Advanced manufacturing, scientific research and online consultancy occur all over the county. As I said in an earlier debate, 200 yards from where I live is a small engineering firm that builds buses in Brazil and trucks in China, and won Boris Johnson’s prize for the new Routemaster bus.

I say all this is because—and I understand that the Prime Minister would approve—Wessex is not only the first proper region outside the home counties but a classic tourism county. Although I cannot be sure of the background, the news from the Rialto is that the vibrant and ubiquitous Wessex travel agency, Bath Travel, has recently sold its single medium-haul aircraft, which was always seen off from the marvellously convenient airport at Bournemouth until his recent demise by its exuberant chairman, the late Philip Bath. He knew most of the passengers, and they knew the reliability of his service to exotic locations all round the Mediterranean, the Atlantic and eastern Europe. It might have had its last flight in its colours because of old age or because of the state of demand, but it is a great loss to those passengers and, in either circumstance, it is a classic case of family finance needing a return to normal conditions of credit.

Tourism is an activity that has dozens of component aspects. Successful tourism requires each part to play its part well, and good performance requires good morale. When I was in the private sector, I had as clients two major family firms that had come here during the depression, because Garfield Weston and Forrest Mars thought that England was a soft market and then proved it. There is much to be said for Warren Buffett’s mantra that hard times represent good opportunities, but for our economy to benefit from them we need morale that makes us look on the bright side and enthusiastic leadership.

To return to London for a final footnote, I declare an interest as president of the British Art Market Federation, which employs 60,000 people directly, and another 60,000 indirectly, behind a turnover of nearly £8 billion. For generations, London’s art market has been the second largest in the world, but it was reported last week that China last year overtook us, part of the reason being the commercial disadvantage from which the EU suffers through the unique application of droit de suite, or artists’ copyright. The noble Lord, Lord Myners, who is taking part in the debate today, asked a Written Question about this, which was answered on Tuesday by my noble friend Lady Wilcox. I know that she was not seeking to mislead the House, but her Answer relied in part on admirable academic research conducted four years ago, whereas I know that her advisers at the Intellectual Property Office, a week before her Answer was given, had a copy of the British Art Market Federation’s submission to the European Commission’s current consultation on this subject, which is four years more up to date. It takes one back to Harold Macmillan’s remark about looking up a train in last year’s Bradshaw. This sector of the economy is not only sufficiently important but so great a British success story as to deserve, in a fast moving market, government being wholly up to date. I am not expecting a reply to this in my noble friend the Minister’s winding-up speech, but I look forward to news of the Government’s policy on these negative developments.

12:18

[Lord Hussain]

My Lords, it gives me great pleasure to speak in your Lordships’ House for the first time. I am grateful to all the staff of this House for their kindness and help, and to noble Lords from all sides who have been so welcoming. My special thanks go to my introducing Peers, my noble friends Lord Rennard and Lady Hussein-Ece, who have been extremely helpful to me.

I might be one of very few Peers who have experienced migration in the early part of their lives. I arrived in the UK with my family from Kashmir at the age of 14 to join my father who was working in Rochdale in the textile industry. One Member of this House once said that his father got on his bike to look for a job; mine got on a plane.

I left school at 16 to work to help my family. I did a variety of jobs—anything that would pay a wage to support my family. I struggled through the new way of life with everything from culture to language, and from religion to the British weather, being very different from what I left behind.

From my early days in the UK, I was engaged in many different local issues, beginning with leading a successful campaign for facilities for young people. I helped to set up a youth centre called the Kashmir Youth Project in Rochdale back in early 1980s, the first of its kind. It was officially opened by a Minister of the time, Sir David Trippier. That visit was followed by visits by many other Ministers and dignitaries, including His Royal Highness the Prince of Wales. The project provided several vocational training workshops, including on office skills, childcare, sewing, carpentry, electrical work and computers, as well as recreational facilities and an advice centre.

My passion for equality and fairness led me to be involved in the Community Relations Council in Rochdale, where I served for many years. In Luton, where I made my new home in 1993, I served on the management boards of various schools, the law centre and the local trade union council. I also led campaigns for the rights of oppressed people in many parts of the world, including Palestine, East Timor and, particularly, Kashmir, which is still waiting for the right of self-determination granted to it by the United Nations in 1948.

For many years I have fought extremists of religious and/or political views emerging from many different sides. I believe extremists not only divide our society but damage the very fabric of the multicultural and multi-religious society that we all enjoy. Hence it is the duty of every one of us to challenge this behaviour in order to prevent that from happening.

In 1996 I became an elected councillor for Luton borough; I was the first in my family to become involved in public life in the UK. In 2003 it was the war in Iraq that forced me to leave the Labour Party and join the Liberal Democrats, which proved to be a turning point in my life. In the following few years, I served on the local council as a portfolio holder, a deputy leader of the council, a parliamentary candidate twice, and finally I find myself here in your Lordships’ House.

In my working life I have worked in many different fields, from textile manufacturing to banking and from insurance to community work. I have also worked for myself, as a small business person, for many years. This has given me an insight into the issues and problems, as well as the freedom and benefits, of small business people. My experience has given me an understanding of the importance of small businesses to the national economy. In my home town of Luton, around half the people in employment work for small firms employing fewer than 10 people. There is no reason to believe that in this respect Luton is different from any other towns in Britain.

The vital part that small businesses play in generating and maintaining employment must not be underestimated. In the history of British businesses there are hundreds, probably thousands, of stories of small businesses that have grown into very large ones, playing their part in the general well-being of our society, employing thousands of people and paying millions to the Treasury in taxes.

Small businesses depend on the ingenuity, enthusiasm, expertise and flexibility of their owners and workers. However, to grow into large ones they also need investment. Many of the small business owners that I talk to tell me that in order to get an investment loan from the bank they first have to prove that they do not need it. It is good to see that the Government have made a promising start on the process of re-educating the banks on their responsibilities to help small businesses to grow.

The owners of some very small businesses tell me that they have extreme difficulty in running their businesses and acting as immigration officers at the same time to make sure that their employees have the right kind of paperwork to work in the United Kingdom, or they run the risk of being liable to heavy fines and/or imprisonment.

I am confident that, both in the measures that have already been announced and those under consideration, the Government recognise the critical part small businesses can play—and are eager to play—in setting our economy on the path to steady and sustainable growth.

12:24

[Lord King of Bridgwater]

My Lords, it is a particular privilege for me to be the first to have the opportunity to congratulate the noble Lord, Lord Hussain, on his immaculate maiden speech. It combined exactly what the House likes to hear: a very interesting explanation of his background and experience, and then some very interesting thoughts on the situations that he has faced in the many varied activities in which he has been involved. I could not help thinking that he was almost a founder member of the big society, given the part that he has played both in Rochdale and in Luton, which makes it even easier for me to call him my noble friend. As he has been unsuccessful standing for election twice but has now been welcomed to these Benches, I hope that he will not have to stand for election again.

I was also pleased with the noble Lord’s commercial experience of having run things. He has passed the Sugar test as someone who has actually run something. I plead guilty myself: I speak in this debate as somebody who has spent all my life, apart from my time in government, trying to run things in business. I endorse strongly what the noble Lord, Lord Sugar, said. Given my noble friend’s particular background, the situation we face, the attempts to traduce the Muslim tradition in the world at present, and the need for people with the courage to speak out against some dangerous and evil people who are trying to mislead many of their community, he has a valuable part to play. I know that the House will listen with great interest to his further contributions, which we will certainly welcome.

I thank my noble friend Lord Lawson for the way in which he introduced the debate. I shall just repeat my previous remarks about elections: under a different form of House, I do not think that the House would have had the privilege—the day after the Budget—of having a debate led with the authority and experience that we had from my noble friend. However, I am afraid that I have just one comment, which is that I do not think that he is quite as good a Tory and exponent of Conservative economic policy as the noble Lord, Lord Sugar, but in other respects he was extremely good.

The debate is about the Government’s policies to promote enterprise, growth and the fundamental rebalancing of the economy. In my judgment, that is most certainly needed. My concern is that it is tougher than many people think. An old adage is often quoted that the future is not what it used to be. A lot of people are going on as though we have had a bit of hiccup—a bit of a knock—but that we will be back on the old track. So why do we not have normal growth coming back? The situation is infinitely more difficult. We face a record budget deficit. I noticed that the Chancellor mentioned the risk of a continuing sovereign debt crisis. We go home last night and hear that the Prime Minister of Portugal has resigned and that there is a crisis meeting this evening in Brussels, which I understand our Prime Minister will attend. Under the arrangement introduced by Mr Alistair Darling at the end of the last Government, if there has to be a substantial drawing down of assistance for Portugal, the implication is that it could cost this country a further £3 billion. I do not think that was known at the time.

An interesting passage in the Chancellor’s speech yesterday referred to the relative interest rates in various countries. He made the point that, although we have a deficit bigger than any of these countries, our interest rate is relatively comparable to that of Germany. As he said yesterday, it is half the rate payable in Portugal, a third of the rate of interest that Ireland has to pay, and a quarter of the rate that Greece has to pay. Of course, the figure for half the rate of Portugal is already out of date because I do not know what Portugal’s rate will be now. If it has no Government there will have to be an election, so there will not be any Government for another two months and it cannot agree on any of the public expenditure cuts and improvements needed to stabilise its position.

We have to earn our living in this world. As Will Hutton said in an interesting article, the present faltering recovery could easily be blown off course by any major crisis. When we look at earning our living in the world and ask where our markets are going to be, we must look at the situation in the eurozone. Ireland is a much bigger customer of this country than many people realise. How good is Ireland’s purchasing going to be? How good are our sales going to be to Ireland in the next year or two? Then there are Spain, Portugal, France and Italy. I am sorry if the catalogue goes on—I thought of marking my comments earlier by saying that anyone of a sensitive disposition ought to leave before I got too far into the difficulties that I see facing us. But of course we then have Japan. As we stand here today, we do not have any idea what will happen, with people running in and out of Tokyo. Is there or is there not a risk to the drinking water in Tokyo? How bad is that crisis going to be? Every day we see a different estimate of what the cost to Japan may be of the quite appalling disaster that has overcome that country.

Then there is the instability in north Africa and the Gulf—a part of the world of which I have had some experience. Those who would wish to see a change of Government and wish to see democracy introduced into many of these countries must also recognise what an appallingly difficult situation those new Governments will face. They will come in with a 50 per cent increase in food prices, and not only an increase but in many cases an acute shortage of food. They have increases in fuel prices as well and some very serious youth unemployment. That is the background against which there will be new, inexperienced Governments, and I do not give them a lot of chance to be enduring Governments who will be able to quickly establish the calm and stability that the market needs. It is against that background that I see the challenges that we face.

I used to sit in a school chapel under a poem by Sir Arthur Hugh Clough, which said:

“If hopes were dupes, fears may be liars”.

I remember the final line, quoted without a stutter by King George VI in one of his Christmas messages when America came into the war. He said:

“In front the sun climbs slow, how slowly,

But westward, look, the land is bright.”

I think that that needs changing now, because in economic terms I am not sure that the westward does look so bright. Eastward, yes, I hope—with the opportunities that we have not seized as we should in India and in China—and southward as well. South America and Africa are areas and markets that are much more interesting now. There is an interesting times conference going on at the moment, with African leaders asking why Europe and Britain does not take more interest.

There are great challenges ahead and undoubtedly it will be very difficult. But Iain Macleod’s first law of Budgets is that first impressions are usually wrong, and I have some hopes that, having seen this described as the most pro-growth Budget seen for a generation, we may at last slowly and in a most difficult situation start to climb out of the problems that we have inherited.

12:33

[Lord Renton of Mount Harry]

My Lords, it is always a great pleasure to follow a speech by my noble friend, who I have known for many years. I do not disagree with him, either with the pessimism or the optimism. However, I want to talk about a different matter in my few minutes. Before I do that, I join in what he said about the noble Lord, Lord Hussain, and his speech. It was a very great pleasure to hear him, and it was particularly good to hear about his small business. I wish him every continuing success both in his business and here in the House of Lords.

The Times has an article today about the Chancellor’s speech. The article said that the Chancellor has chosen the right sectors of the economy to dominate the world as London’s financial services do: advanced manufacturing, life sciences and creative industries. It is on that subject that I should like to speak. There are some aspects of the Budget that very much fit in, particularly in relation to the workforce, with the comments that the Times makes. Here we have the need to create a more educated workforce that is the most flexible in Europe. The next paragraph says that youth unemployment rose by 100,000 between 2004 and 2008 and has risen by a further 250,000 since the start of the recession. That, of course, is extremely bad news. It has to change and has to be helped to change. But then we hear that the Government will find an additional 80,000 work experience places for young people, ensuring that up to 100,000 places will be available over the next two years. That is a very important statement in the context of the Budget, to which we may not have paid enough attention. I very much welcome that. It gets down to the case of the additional apprentices. I was told earlier today that Nissan has reported that in making cars in north-east England it employs more apprentices than all the other manufacturers in the area put together. Surely this is the time when manufacturers have to get back to the habit of employing young people—those aged between 16 and 18—who have everything to learn.

I also welcome very much what is in the Budget speech about the expansion of university technical colleges. That is extremely important if we are to be at the top of the world in the new production about which we are hoping. Here I say a word about my own local university, the University of Sussex, which was founded exactly 50 years ago to concentrate on arts and sciences—about 50:50. I was lucky enough to be on the council for 10 years. The noble Lord, Lord Briggs was the first vice-chancellor, and he very much developed the arts side of the university. Now we have a scientist as the vice-chancellor, Professor Farthing, who has turned the university back to being into science—exploring and trying to help by finding out new opportunities in the scientific world. In one of his recent reports, he said:

“Research expenditure at our university has grown over the past few years, leading to the employment of enormously skilled and talented individuals and the promise of substantial future economic impact as much of the research will be commercialised. Our programme has recently expanded to include internships in the environmental, engineering, finance and accounting, pharmaceutical and media sectors”.

The point I end with is that if we can do that in Sussex, surely other universities should be following us into doing much the same. If we are to compete with the likes of India, China and Brazil, if we are to be at the top of the league, as the Chancellor put it yesterday, in advanced manufacturing or life sciences, we have to get closer to our universities and share with them the aim, the intelligence and the plans that will be necessary for us to be successful in the future manufacturing world. I regard that as a major but very important challenge, and I hope that universities will follow what my own university is doing at the moment.

12:40

[Lord McFall of Alcluith]

My Lords, I am delighted to participate in this debate and I congratulate the noble Lord, Lord Lawson, on choosing it. Enterprise, growth and the fundamental rebuilding of the economy are very relevant. I congratulate the noble Lord, Lord Hussain, on an excellent speech and I wish him well in his future in the House. I draw the House’s attention to the Register of Lords’ Interests as I make my speech.

This Budget is fiscally neutral but it is a gamble on growth because the underlying assumption is that there will be an economic rebound to trend. In fact, we need a thumping 3 per cent growth by 2015 if we are to keep on course. We have heard the mantra, “It’s the debt, stupid”, but regarding our present situation and the growth objectives the distinctive feature is the amount of private debt which we have in the country. We have seen a conversion of private to sovereign debt within this crisis, which is why we are talking about Portugal, Ireland and other countries today. Indeed, PwC illustrated that by describing it as a debt time-bomb, where we have a £10 trillion barrier to overcome by 2015.

Some people have stated that our having a public debt is to be celebrated, in the sense that Governments have intervened to save the private sector. While we should be mindfully relieved by that, we still have to attend to the issue of “too big to fail”. If we do not attend to that, we are going to come back to a crisis in future so we have to be mighty thankful. We are going to live with these consequences for many years and ordinary people will be paying the price. They will have to pay off debt but also increase savings. I am very conscious of that as I undertake to look at occupational pensions over the next few years for the National Association of Pension Funds. There is no doubt that responsibility will be transferred to the individuals.

On enterprise, for me the economy needs a spare tyre. Adam Posen made that very point; we need it to lend to manufacturing, to small businesses and to infrastructure. We do not have that in our economy at the moment. I have been calling for a national investment bank for a number of years and I asked the previous Government about that issue. However, I noticed yesterday that Zac Goldsmith has expressed his dismay at the Government for not being bold enough on the green bank. We need to be bold on a national investment bank. The noble Lord, Lord Skidelsky, was saying in an article in the Financial Times the other day that we could have a limited fiscal commitment of £10 billion, with subscribed capital being drawn down over the next four years. That would allow the new bank to finance sufficient spend to more than offset the £87 billion of spending reductions planned before 2015. One thing I am certain of is that we need to be bold.

As the noble Lord, Lord Lawson, has noted, we need a fundamental rebalancing of the economy. If we are to make our way in the 21st century, we have to make things. We have to complement the giant, productive economies of China, India and the rest of Asia and we should not be beguiled by the arithmetical GDP figures. We need development in all areas of our country and GDP has to embrace social as well as economic criteria. We must preserve the social fabric, not rupture it. A generation of unemployed young people or a high number of unskilled people will not help finances in the long term. Having unemployment at 2.53 million at the moment, with almost 1 million young people aged 16 to 24 unemployed, is an inauspicious start.

I witnessed the destructive nature of unemployment on young people when I was a schoolteacher in Glasgow in the 1970s and 1980s. I was reminded of that at the weekend when visiting an old family friend, Mr Andrew McGroarty. He is aged 95 and has just lost his dear wife Agnes after 70 years of marriage. He is a deeply humble, gentle and spiritual man who has led an exemplary life. However, as we were talking last week he left me in no doubt with the force, the clarity and indeed the eloquence of his remarks about how socially destructive the unemployment was following the depression in the 1930s, when he was a young man. His was an authentic voice, warning of the perils of leaving families and communities to their bleak fate if the Government do not work for the common good. Those are wise words indeed. I finish by delving into history for the wise words of Lord Keynes, who said:

“I do not understand how universal bankruptcy can do any good or bring us nearer to prosperity”.

That bankruptcy is not just a financial reference; it also affects people and society.

12:46

[Baroness Stedman-Scott]

My Lords, if anybody had suggested to me 18 months ago that I would be standing here, having been ennobled and making my maiden speech, I would never have believed them. Some noble Lords are worried that I do not know my right from my left and that I may not be sitting on the correct Benches. I have to tell your Lordships that all my political ancestors were Tories. I only know this because a cousin of mine has done our family tree since my ennoblement, and no one was more surprised than I to find that 10 of my ancestors were MPs and two were Barons.

At the outset, I must thank my two sponsors, my noble friends Lady Fookes and Lord Freud. Special thanks must go to my noble friend Lady Fookes; she is my mentor, and her support and counsel have been invaluable to me in acclimatising to the House. I pay tribute to the professional and dedicated members of staff who serve this House. Their help has been much appreciated.

I joined the House with no special qualifications, save that I am the chief executive of an independent charity, Tomorrow’s People. I hope that all your Lordships have heard of it; its mission is to help those furthest from the labour market to get and keep a job. If you can get somebody into a job, that is a good thing and if you can keep them there, that is a truly great thing. We work and support people on a one-to-one basis. We take them on an individual journey and their needs are at the heart of everything we do. In essence, we are more interested in their destiny than their history. Tomorrow’s People has helped me to understand the issues faced by the long-term unemployed in this country and has given me and my colleagues an opportunity to find innovative solutions to their worklessness.

An example of that would be the work that we have done in doctors’ surgeries—indeed, that was adopted by the previous Administration—as well as our work with whole families in which not one member has a job. I remember Dr Roy Macgregor, a GP, asking me what could be done about his “heart sink” patients. I have to confess that it was not a condition I had ever heard of. When I asked him what he meant, he told me, “There are people who come into my surgery and my heart sinks because I can do nothing for them. It is a job they need, not medication”. There is no doubt that, for the majority, work is the best route out of poverty and that we need a vibrant economy to create the jobs that are so desperately needed.

I thank my noble friend Lord Lawson of Blaby for securing this important debate. I am sure that it will come as no surprise to your Lordships to know that there are whole families in this country in which no one is employed. Even in economically successful times, when levels of unemployment were comparatively low, there were still whole households where no member worked. The Office for National Statistics stated in 2009 that there were more than 3.1 million households where no one aged 16 or over was in employment. That is such a waste.

That is why I chose this debate in which to make my maiden speech. The health and vibrancy of our economy is crucial to creating the jobs that are needed. We have to ensure that there is innovation not only in identifying solutions to help people overcome the barriers and issues that they face but in the development of different forms of finance. After all, this all has to be paid for.

I draw noble Lords’ attention to the bonds developed by Allia, where investors can make working capital available in the knowledge that they will be guaranteed to get it back, which I would think was a good thing, and also to the social impact bonds. Time prevents me from going into detail about these two bonds, but they should be given serious consideration. The need for us to help those furthest from the labour market is greater than it has ever been, and we are going to have to turn over every stone to find the resources to ensure that we can help these people in difficult times.

With jobs thin on the ground, it is imperative that we help those furthest from the labour market to manage their period of economic inactivity in such a way that they stay in good shape and can take advantage of the opportunity when it comes so that they are ready and can maximise what is given to them. There will be a cost to this—I understand that it has to be paid for—but the cost will be greater if we stand by and do nothing.

I look forward to working with all noble Lords in this House to try to achieve this, because none of us is as clever as all of us. On entering this House I received a card that read, “Some make it happen, some watch it happen and some ask, ‘What happened?’”. I know where I—and, I hope, all of us—stand in that respect.

12:51

[Baroness Hooper]

My Lords, it is a great privilege and pleasure to be the first to congratulate my noble friend Lady Stedman-Scott on her first-class and heart-warming maiden speech. Given her family’s political involvement in the past, which we now learn about, and her own background in volunteering, especially in relation to work with young people and employment services, most notably, as she has said, as chief executive of the Tomorrow’s People Trust, my noble friend speaks with authority and has underlined the human element in a debate that up till now has concentrated rather on the dry economic facts. She brings a wealth of hands-on experience to enrich our debate today, and I feel sure that she will continue to do so on many occasions.

I turn to my own short contribution. I have listened with great interest to the well informed contributions from the many eminent speakers so far and accept that the main objective for the Government, as my noble friend Lord Lawson said at the outset, must be to eliminate the fiscal deficit. My own focus, however, will be on government policies to promote enterprise and growth in relation to trade. The CBI has emphasised the need to galvanise our export performance. My right honourable friend the Secretary of State for Trade, Innovation and Skills has explained how the Government intend to help small and medium-sized businesses to engage more in trade, and has pledged strongly to support efforts at both national and EU level to remove barriers to trade, particularly for SMEs. The recent White Paper, Trade and Investment for Growth, published a month ago, sets out the steps that the Government will use to achieve that. All this is good news so far as it goes.

However, I draw attention to a part of the world where these efforts will be well received. Latin America—I am glad that my noble friend Lord King of Bridgwater made reference to its importance—provides a huge market of over 500 million people, from Mexico in the north, through the tropical countries of Central America and South America to Cape Horn on the rim of Antarctica. The combined GDP of Latin America is equal to China’s. It is a region rich in resources—oil, gas, gold, silver, copper and, not least, agricultural products.

The noble Viscount, Lord Montgomery of Alamein, called attention to all that potential in the debate that he introduced last June. Happily, the Government accepted the message. My right honourable friend William Hague acknowledged in his Canning lecture last November that not only does our country have a legacy of good will from the support given to the various independence movements 200 years ago in the days of George Canning but, over the centuries and years, British know-how, expertise and investment have gone into building railways, roads and banks, so there is a solid base on which to build.

The Foreign Secretary pointed out that at present UK exports to Latin America make up barely 1 per cent of all international exports to the region. He illustrated this by saying that we export more to Ireland than we do to the whole of Latin America. When I think of the efforts made over the years by a number of individuals and organisations to redress this balance, I am appalled. The Foreign Secretary, however, went on to say that in the past three years UK Trade and Investment has seen a 500 per cent increase in the number of British companies looking for help with the Brazilian market. Brazil, after all, is a leading BRIC, with a population of over 200 million.

What steps have been taken by the Government to promote this interest in Latin America, to make efforts to increase our trade with those countries and to meet the needs of SMEs? Furthermore, since trade and investment are not only bilateral but need a multilateral approach, what are the Government doing to press forward with the negotiations between the European Union and Mercosur, which comprises the southern-cone countries of Argentina, Brazil, Paraguay and Uruguay, and with the negotiations between the EU and the Andean region, which comprises Colombia, Ecuador, Peru and Bolivia? Those are countries with growth rates that most European countries must envy. What about the flourishing SICA countries of Central America? I look forward to hearing the Minister’s reply and to listening to the remaining speakers on a considerable and prestigious list.

12:57

[Lord Oakeshott of Seagrove Bay]

My Lords, I welcome my noble friend Lord Hussain, who is sadly not in his seat at this moment. I found his speech fascinating and moving. I also congratulate the noble Baroness, Lady Stedman-Scott. I think that she is the big society in person.

I thank the noble Lord, Lord Lawson for introducing this debate. He has lost nothing of his focus or timing. Some of us on these Benches might possibly have drawn our breath in slightly to hear ourselves described as his allies and friends. He is certainly a friend, ever since we used to discuss politics over the dinner table together at Nuffield College, Oxford, in the early 1970s—I am much fatter than I was then, sadly, but at least he is much thinner—but allies? Up to a point, Lord Lawson.

I declare my interest as a pension fund manager for the past 35 years and as an entrepreneur for the past 25. I started my own business in one room with a partner and a secretary and I am still running it today. Our size has increased to eight employees so I welcome Vince Cable’s pledge of no new regulations for the next three years.

I support the broad thrust of the Budget and the overriding need not to run risks with the markets while they have Britain over a barrel. On the day when Portugal’s Government have just fallen, when Greece is staring down the barrel of default on its debt and with Greek bonds yielding 13 per cent, Irish bonds nudging double-figure yields and Spain, as my noble friend Lord Newby pointed out, looking shakier by the day, we must err on the side of caution. When you have been dumped with a mountain of debt from the disastrous Brown/Balls double act at the Treasury and you have to borrow tens of billions every year just to buy time, I am afraid that you have to tough it out while you trade your way out.

I remember that Roy Jenkins, when I worked for him, always told me how much he regretted the biggest mistake of his chancellorship when he took over from Jim Callaghan after devaluation in 1967. He did not cut as much as he should have initially and had the agony of having to go back for a second bite a year later.

I also support, as do all Liberal Democrats, the further substantial move towards taking the low-paid out of income tax. The pledge that we made at the election to take everyone earning less than £10,000 a year out of income tax was very powerful and an important reason why people voted for us. It is at the centre of the coalition agreement, which says:

“We will increase the personal allowance for income tax to help lower and middle income earners. We will announce in the first Budget a substantial increase in … 2011”.

We have now done that twice. We must press on to achieve the full goal over the period of this Parliament. If we do, it will be our proudest Liberal Democrat achievement in government, and will give millions of people a real reason to vote for us. Do not forget—you can vote Tory, Labour, Liberal Democrat, UKIP or Green, but what you cannot do at the next election is vote for the coalition.

The other key point in how we will fund this is to give priority to increasing the personal allowance over other tax cuts, including cuts to inheritance tax. That is just as well. Do noble Lords remember the great triumph of the present Chancellor, George Osborne, at the Tory conference two or three years ago, when he announced that he would make big cuts in inheritance tax, funded by a new levy on non-doms? When the Minister replies, he might remind us of how much George Osborne claimed that levy would raise. In practice, last year 5,600 non-doms paid the £30,000 charge, raising the magnificent sum of £168 million. You do not get much of an inheritance tax cut from that.

In the coalition agreement we also promised to focus on tax avoidance, including detailed development of Liberal Democrat proposals. The Treasury has developed our proposals, but why has it ignored them? On non-doms, I am afraid the Chancellor has bottled out, just like Gordon Brown. What is particularly distasteful is the announcement that there will be no further change in non-dom taxation over the course of this Parliament, which is exactly what the previous Government did. The Guardian today rightly points out that there has been a “big sigh of relief” from people advising non-doms. Sean Drury, the international mobility partner at PWC said:

“I am checking the temperature with my senior non-dom clients but I think that ultimately there will be a big sigh of relief … It could have been worse”.

That says it all. For rich non-doms, £30,000 a year is a flea bite and £50,000 a year is a minor irritant. They will be laughing all the way to the Caymans.

On stamp duty, the Chancellor’s speech highlighted correctly the problem of abuse. Everyone who knows the property market in this country knows that precious few properties worth more than £5 million ever show up in the Land Registry with proper stamp duty having been paid when they change hands. However, the Budget speech highlighted the problem but offered no solution. We Liberal Democrats can; it was in our manifesto and was quite clear. The abuse is simple. Rich people hide their houses behind a company cloak, so stamp duty is payable at 0.5 per cent when they change hands, rather than at 4 per cent or—from 1 April—5 per cent on properties worth more than £1 million. That is what honest taxpayers have to find when they move. Therefore, we say: just strip away the sham companies and charge the full stamp duty on the underlying property value. What is the Treasury waiting for?

The Chancellor must stick to the course he has set, but it will be far easier if the country believes we are all in it together. That must include the non-doms and the super-rich, who are still paying nowhere near their fair share.

13:04

[Lord Higgins]

My Lords, I join those who congratulated my noble friend Lord Lawson on obtaining this debate, and particularly on his sense of timing. As he rightly says, we are able to debate in the context of the Budget, which we do not normally have the chance to do the day after the Budget has been delivered. I welcome what my noble friend Lord Lawson described as the “lollipops”. Given the context of a neutral Budget, the Chancellor has been very imaginative in that respect, particularly with regard to the proposals for charitable giving in relation to inheritance tax. That will be of great importance, particularly to the arts.

I also welcome very much the fact that we have suddenly reverted to a Red Book after years of glossy magazines—the printing of which costs huge sums of money—produced by the previous Government. I also welcome the analysis of the Office for Budget Responsibility. When we debated this with my noble friend on the Front Bench, no one mentioned that the OBR would need the full details of the Budget in advance of its being delivered. The traditional view in the Treasury was always that the overall picture ought to be confined to Treasury Ministers, the Permanent Secretary and, if he was lucky, the Prime Minister. There is no doubt that this arrangement increases the risk of leaks, which may of course be market-sensitive. None the less, the innovation of having these forecasts is a considerable advantage.

This debate is largely concerned with economic growth. There is dreadful confusion over what we mean by economic growth. We must make a distinction between a situation where there is excess capacity in the economy, as there is now as a result of recent crises, and the Government utilising that capacity, which in turn produces economic growth—a matter for demand management—and economic growth in the sense that we seek to increase the underlying productive potential of the economy. It is very important to keep the two separate. I have to say that the Red Book constantly confuses them. As far as the second situation—the underlying growth in potential for the economy—is concerned, the Chancellor has introduced several measures that will be very helpful.

I will say something about the other aspect: the extent to which the demand management of the economy enables us to utilise some of the resources that are being wasted at present. It is important to put this into context. I am particularly concerned about the lack of co-ordination between fiscal and monetary policy. Mr Gordon Brown did several things that we now see very clearly were mistakes, such as—certainly—his tax on pensions, which wrecked the previous system of defined benefit schemes in the private sector. Then there was the tripartite agreement, which everyone now agrees was a mistake.

His giving independence to the Bank of England has, on the whole, been reviewed as a good thing, but I have never taken the view that what he introduced was a good thing. It was not the case that he gave control over monetary policy to the Bank of England. He gave control of interest policy to the Bank of England and relied then on a single interest rate in the Bank of England, which was clearly inadequate as there are many different interest rates. The effect has been that until quite recently, with the introduction of so-called quantitative easing, the Bank of England has been concerned not with monetary policy, in the sense of the supply of money, but only with interest rate policy.

I am concerned by the Red Book’s executive summary. Under the heading “A Strong and Stable Economy”, it states:

“monetary policy will ensure price stability, and thereby support the wider economic stability”.

It is quite apparent, and has been for a considerable time, that the way that the Bank of England is handling these matters is not producing price stability. We are way above the target range. Therefore we need, at the very least, to revise the Bank of England’s terms of reference if we are to avoid that.

Secondly, I want to take up a particularly important point at the heart of the present political debate—whether the measures being taken to reduce the deficit are happening too fast. The leader of the Opposition in the House of Commons stressed this point very heavily indeed. He thought that the policy was too fast and too tough. One has only to look at the final page of the Red Book and the penultimate table, which includes the current forecast and takes into account all the Chancellor’s Budget proposals, to see that although it is true that cyclically adjusted net borrowing will reduce in percentage terms, that is the effect of the cycle. It is the effect of what I referred to earlier—taking measures that will enable you to mop up the productive capacity which at present is being wasted. However, in the March forecast and the absolute figures at the bottom line of the table, it is absolutely clear that net debt goes on increasing, despite the measures that the Chancellor has taken and despite the effect that the OBR thinks the cuts will have over the period until 2014-15.

Therefore, what the Chancellor is doing is the absolute minimum required to deal with the deficit. If one were to delay those measures as the Labour Party proposes—although we have no clear idea of what it is really proposing in that respect—we would find ourselves in a crucial situation that continues to deteriorate. If we were to delay more, the deficit would go on increasing for a very long time. It does that even on the Chancellor’s proposals. However, it would be far worse—and absolutely disastrous internationally in economic terms, as noble Lords have said—if we were not to go ahead on the basis that the Chancellor has outlined.

13:13

[Baroness Valentine]

My Lords, I congratulate the noble Lord, Lord Lawson, on securing this timely debate. I declare that I am chief executive of London First, a not-for-profit business membership organisation seeking to improve London's competitiveness.

My contribution comes in the form of a “SWOT”—strengths, weaknesses, opportunities and threats—although I have taken the liberty of reordering it into a “TSWO”. First, however, I should like to test the meaning of the phrase “rebalancing the economy”. Rebalancing can mean relatively less activity in the south-east and relatively more in the north, or relatively less activity in the public sector and more in business, or it can mean relatively less activity in financial services and more in green industries. However, ahead of rebalancing must surely come growth, to deal with our immediate debt problem. I am pro more growth in the north, but alongside, not instead of, growth in the 30 per cent more productive south. I am pro growth in the private sector, but we need to cut government spending as well. I am pro green industries, but also pro financial services that provide a million jobs across the country and currently contribute substantially more. If growth is our priority, our main challenge is international competitiveness. The UK needs to maximise its helping from the global banquet at the same time as the Government start to rebalance the shrinking pie of UK government spending.

I start with the threats. In the West, Germany and France compete with the UK for car design and production, creative services and high-tech innovation. London competes with New York for investment in global HQs, as it does for global deals in financial and associated markets. In the East, South Korea and Russia are increasingly competitive; and Shanghai, Singapore and Mumbai are also after London’s lunch. In the most recent Z/Yen Global Financial Centres Index, Shanghai, for instance, rose seven places from a year earlier to fifth place overall.

Of course the UK has many strengths. We speak the world’s favourite trading language, are in a convenient time zone, have stable legal and political systems and a heritage of openness to other cultures. Our membership of the EU brings a market of 600 million consumers. London is the preferred destination for Chinese investors as they seek to develop trading links with Europe and the US, while American investors see the UK as a bridgehead to Europe and the Middle East.

However, our weaknesses are of our own making. New immigration rules risk hassle and delay for valuable international professionals and students. Chinese tourists, who spent over $40 billion last year, are spending millions of euros in Galeries Lafayette, Paris, rather than pounds on tea in Fortnum’s, Piccadilly. Why? It is because only 110,000 were prepared to tackle our clunky visa application system. Heathrow is full, but government seems content for aviation policy to drift. New nuclear generation may be a difficult subject post-Fukushima, but we must address genuine concerns about energy capacity.

Our top rate of tax of 52 per cent, when national insurance is added, is the highest of the world’s 10 leading financial centres, and is now higher than in Germany and France—traditional tax-hungry regimes. I welcome the Chancellor’s acknowledgement that this is a temporary tax measure. I trust that the newly announced review of its effectiveness will take account of lost revenue from those who have chosen not to work in London as a result.

However, opportunities remain. In a time of global turmoil the UK is a stable and trustworthy regime. It can signal a competitive approach on tax, and stand by it. It can export expertise to the rapidly growing economies of the Far East. It can invest in its infrastructure; and, of course, we have the opportunity to showcase the UK at the Olympics next year.

Let me give the Minister some simple, specific ideas. First, minimise the bureaucracy of new immigration rules and simplify Chinese tourist visa applications. Secondly, as suggested in the Conservative manifesto, appoint a Minister to Brussels to influence emerging regulation, such as financial supervision and labour law, which have a disproportionate effect on the UK. Thirdly, tackle the 180,000 migrants who have overstayed their visas and crack down on bogus colleges, but look after and welcome legitimate international students, who will be tomorrow’s leaders.

In summary, let us not adopt the horseracing practice of handicapping winners, especially when younger colts are accelerating on the rails. Instead of bashing bankers, we should encourage creative, dynamic people—bankers, architects, restaurateurs or computer game developers—to set up and grow businesses here. The Government called yesterday a Budget for growth, but I remember so-called Budgets for prudence which proved to be anything but that. It is not the intention or the rhetoric that counts, but the action and the implementation.

13:18

[Lord Griffiths of Fforestfach]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Valentine, who has done so much to increase prosperity and jobs in this great city of ours. It is also a great pleasure to take part in a debate secured by the noble Lord, Lord Lawson, who has had such a distinguished record as Chancellor, and who is raising important issues in this debate. I should like to make three points.

The first is that I am delighted that the Chancellor has stuck with the medium-term fiscal strategy that he introduced in his first Budget last summer—namely, achieving a current balance in the public sector and ensuring that, by 2015-16, national debt as a percentage of GDP will fall.

The Budget recognises the pain that people are going through, but at the same time it is a Budget of hope. In 2009, output fell in this country by 4.9 per cent. In 2010, it rose by 1.3 per cent. This year, it is set to rise by 1.7 per cent. Between 2012 and 2016, it will go up by between 2.5 and 3 per cent. We are gradually recovering in the cycle; we will go above trend and then come back down to just over 2 per cent. This prediction of the Chancellor is based on two perfectly reasonable assumptions. The first is that the trend rate of growth of just over 2 per cent is based on long-term factors. Politicians cannot manipulate the trend rate of growth in the way that they can change taxes or government expenditure. The trend rate of growth depends on long-term factors such as trend productivity growth, the trend growth in average hours worked or demographic factors. Secondly, exports are growing at an annual rate of 15 per cent. The intentions of business investment look very good.

I spend most of my working life in the City of London. At the time of the Budget last summer, I felt that many people in this country did not realise what a knife edge we were on, and how easily, if we had ducked having a very tough medium-term financial strategy, we could have been in the same position as Ireland, Portugal and Spain.

I have one concern that has not been much mentioned in this debate: inflation, which at present is persistently above target. As somebody who has been thinking about the British economy ever since I started teaching at the LSE in 1965, I am sceptical about whether one can explain a rate of inflation that is consistently above target simply by reference to external factors such as indirect taxes, excise duties or the price of oil. I agree with the noble Lord, Lord Higgins, that when inflation seems to be permanently at twice our target rate, money and credit must be brought under control. No one wants to raise interest rates, but if that is the only way to make sure that inflation does not eat away at the core of our economy, they will have to be raised.

I welcome what the Budget says about deregulation and about encouraging enterprise. This takes me back a few decades to when I worked in No. 10. Regulation is crucial to a modern economy, but it is also a tax and it can be a dead hand on small business. The Plan for Growth, which I tried to read when I woke up early this ,morning comes forward with no fewer than 145 measures that the Government will take to implement a programme. It then adds:

“This list of areas is by no means exhaustive”.

I am all in favour of enterprise and deregulation, but who owns the 145 measures, and who will be accountable for their implementation? It looks like a huge wish list. The Government urgently need to prioritise, reduce the list to half a dozen things, then try relentlessly to make sure that they are implemented.

My third point concerns youth unemployment and training. I said that the Government recognise pain but offer hope. The greatest pain is felt by young people who leave school or university and have no jobs. There is nothing more dispiriting. Youth unemployment is not far off 1 million. The Government say that they will introduce 50,000 new apprenticeships and 100,000 work experience placements, expand university technical college programmes and introduce a new work programme. That is all fantastic, but it will take time and will require extreme concentration by the Government to ensure that it happens. It is easy to say things but not deliver.

In conclusion, this is a credible Budget in difficult circumstances. I am delighted that the Chancellor has stuck to plan A and is introducing greater deregulation and enterprise. I would like strategy to be more focused and I would like him to make job creation and youth training a priority for young people who are suffering.

13:25

[Lord Haskel]

My Lords, I, too, thank the noble Lord, Lord Lawson, for giving us the opportunity for an early debate on the Budget. The noble Lord urged the Chancellor to make a virtue out of unpopularity. His noble friends on the Lib Dem Benches must be confused, because they have the unpopularity without the virtue. As usual, we will have to wait for some time to see if the Chancellor's aspirations contribute to growth, and what will be the impact of the small print.

I will deal with one small aspect of the Budget, for the results of which we will not have to wait. Before I do, I congratulate the noble Lord, Lord Hussain. I am sorry that he is not in his place, because I see him as a kindred spirit. I, too, am an immigrant who built up a business. Mine was in Yorkshire rather than Rochdale. I, too, passed the Alan Sugar test: I put my house on the line. I say to the noble Lord, Lord King—I am sorry that he has just gone out—that I, like my noble friend Lord McFall, see business and industry as part of society. That is why I am on these Benches, not on those. The separation of business and society concerns me. I have never known a time when the two were more divided. Sadly, this is a time of hostility between them.

The cause is not difficult to find. We have seen extravagant pay deals, not only for bankers but for other executives. The noble Lord, Lord Oakeshott, spoke of tax avoidance. Businessmen move their businesses around the world to pay less tax. Martin Sorrell of WPP said on the radio this morning that now that he has got his way, he will move his business back. All this gives the impression that a business is just a money-making machine for a few lucky people—so much for the idea that we are all in this together and are all sharing the pain. Andrew Whitty, the chief executive of GlaxoSmithKline, one of our major corporations, strongly warned against this last week. I say, good for him.

However, the Budget seems to indicate that the separation of business and society is what the Government want. Does it matter? It does, because in today's business world it is from this interface that much growth and innovation come. We see this in the new ways in which we communicate with each other—and there is a lot more to come. There are new ways of keeping healthier, new and better ways of learning, new and imaginative ways of living a greener lifestyle, and new ways of harnessing our experiences as we go through life. Venture capitalists in America call this the experience economy. The Government are looking for innovative ways in which business can deliver public services—cutting back the state, as the noble Lord, Lord Lawson, put it. Surely it is from this interface between business and society that the new ideas will come, yet the Government's actions are going in the opposite direction.

Perhaps I may give a couple of examples. One is apprenticeships. Youth unemployment is a social problem crying out to be tackled and it is one where business can play an important part. The noble Lords, Lord Renton and Lord Griffiths, spoke about this. The Prime Minister said that we want to make all young people,

“feel more part of our country”.—[Official Report, Commons, 23/3/11; col. 947].

So why are the Government not doing something for all young unemployed people instead of speaking about 40,000 or 50,000 apprenticeships? Only one firm in 10 offers apprenticeships. Yes, we are told that there will be new technical colleges, but society is going to have to carry the pain of the resentment of the many who are left out.

Many noble Lords have welcomed the fact that planning restrictions are to be eased. This is the very procedure that protects society but the Government have chosen to listen to the special pleading of business. The problem with planning is the inefficient way in which it is managed. Yes, that could well be improved by localising it but councils have been told in this Budget to come down firmly on the side of business. How they may deal with this apparent contradiction in terms is a mystery to me, but it only reinforces the divisions.

The Budget is going to reduce red tape. Wonderful. Every Government in every Budget have promised to do that. However, the purpose of regulation is also to protect society, to ensure that we have clean water, clean air, safe food, safe transport, and protection for our children and old people. The way to cut regulation is not just to listen to the special pleading of business about the things that they find burdensome but to remove the regulations which no longer serve society. There are plenty of those. Until this attitude is changed to one that combines the interests of business and society, the promised bonfire of regulations will continue to be a damp squib.

We are told that our public servants stand in the way of innovation and that our deficit is caused by a bloated public sector. Yes, our Civil Service probably does need restructuring and modernising, but why is this not done by showing dynamic leadership and by modernising the way that the public service works with new structures, new equipment and new models? Then, those involved will want to make it happen. But no. The Government choose to demotivate and demoralise the very people who are going to have to implement their new policies and the result is yet more division.

Given the limited things that the Government can do, why are they cutting off this promising area of jobs and growth, or can this just be left to the market? Certainly in the past 20 years standards of living have risen and businesses have grown. Perhaps much of that was based on the credit boom, on the devaluation of sterling, and on North Sea oil, which the Government are milking again, but at least business and society shared the benefits. However, now that has come to an end and it cannot be repeated. The world has moved on to a place where innovation, new jobs and new businesses have as much of a social ingredient as a technical and scientific one. Surely sensitive and sensible involvement from the Government and regulators will help to speed up this kind of innovation and growth, moving it along. However, I am afraid that I see no signs of that in the Budget or, indeed, elsewhere in the economic policies of this Government.

13:33

[Lord Northbrook]

My Lords, like other noble Lords, I am grateful to the noble Lord, Lord Lawson, for initiating this debate. Before I move on to discuss the very important issues that my noble friend raises, I should like to congratulate the Chancellor on his vigorous approach in tackling the appalling legacy of the Budget deficit left to us by the last Labour Government. This had to be the first economic priority after the election. His deficit reduction policies have been approved by a whole range of organisations and individuals including the IMF; the European Commission; the OECD; Fitch, the rating agency; and Timothy Geithner, the US Treasury Secretary. This is all in contrast to the last Labour Government’s legacy.

I noted with interest the wise words of the noble Lord, Lord Myners, in his interview with the Guardian in August last year, when he reflected that the Labour Government had abandoned fiscal responsibility, that the former Prime Minister “grew to forget” the golden rule, and that Labour ran large deficits in the middle part of the last decade when the economy was clearly running at full capacity, that the party needed to come clean on what cuts it would make, and that it needed to prove once again that it is a credible party of economic management. The noble Lord criticised the current shadow Chancellor. He said:

“I don't agree with Ed Balls. I do think the Labour party has to wrestle with the fact that it tends to leave office with large deficits. And I think its licence to govern is weakened—and it would be weakened in the future—if it could not produce credible arguments to show that it is capable of sound economic management through the cycle”.

The Chancellor, having set out his fiscal policy, can now concentrate on promoting enterprise and growth. His key message was that he was boosting manufacturing, growth and jobs by cutting taxes for businesses and entrepreneurs, scrapping burdensome regulations, radically reforming the planning system, investing in science and innovation, and providing more support for young people with 50,000 apprenticeships and 100,000 work experience places. I will look at most of these areas in turn.

First, I shall focus on the help for business. I welcome the extra reduction in corporation taxes for large companies from April 2011, the reforms to the foreign profits legislation, the announcement of new enterprise zones and the proposed low rate of corporation tax for offshore finance companies. That will all be good news for larger businesses. Also, the Chancellor has dealt a very generous hand to VCTs and EIS investors, increasing the tax relief and the amount of investment while rightly warning against abuse of the rules. The slight improvement in the capital allowance regime for short-term assets is good news. I also welcome the relaxation of the rules for non-doms, allowing them to offset tax on money remitted here to invest in the UK.

Those positive aspects of the Budget far outweigh the negative ones for a few sectors of the economy. Terry Scuoler, chief executive of EEF, the manufacturers’ organisation, while praising the Budget in the main, said that,

“the significant rise in energy bills threatened by the Carbon Price Floor is unwelcome”.

The Financial Times today has also pointed out that the medium-sized oil companies will suffer from the new output levy:

“Britain’s offshore oil and gas industry is one of the biggest losers in the Budget, with industry representatives warning the surprise increase in the tax on production would not only deter investment in the North Sea but could also raise dependence on imports”.

In the banking sector, banks such as HSBC might be more inclined to move their headquarters overseas after yet another levy. Nor do I see much help for unincorporated smaller businesses on the tax front. Although they might benefit from scrapping existing regulation and easier planning laws, there is little assistance for them elsewhere—except in the R&D area, which I shall come to—particularly if they are in the manufacturing sector. New employment laws will come into force later this year, which might hinder companies taking on staff.

I move on to the subject of regulation. The Chancellor unveiled a series of useful measures, scrapping existing regulation that costs businesses £350 million a year and a moratorium on new domestic regulation for firms with fewer than 10 employees. However, the approach to regulation remains ad hoc, unfocused and, in the long run, in danger of being unsuccessful. The Government need to do three things: first, stem the flow of new regulation; secondly, rationalise existing regulation and eliminate barriers to competition and innovation; and, thirdly, reduce the costs of compliance. Without that strategic cross-departmental approach, the regulatory regime, rather than our growth rate, will keep growing.

In support of my view, I refer to the second report of the Regulatory Policy Committee issued in February this year. This committee advises the Business Secretary and is charged with reducing unnecessary regulations. It reviewed no fewer than 189 impact assessments in the last quarter of 2010. Of those 189, 57 were EU-sourced and 132 were from Whitehall. The RPC concluded that no fewer than 44 per cent of the impact assessments that it scrutinised were inadequate. It does not split the inadequacy between Whitehall and Brussels. In fact, its report is far less useful than it might have been, but at least it highlights that the tide of new regulation is even higher under this Government than the last.

Next, I come on to the proposed reforms of the planning system. These radical reforms to planning and regulation are to support economic development, including a presumption in favour of sustainable development. However, I ask the Minister how this change to the planning system squares with the current coalition policy of local plans?

Moving on to the area of science and innovation, I applaud the decision to support innovation and manufacturing with an additional £100 million this year for new science facilities and an increase in the SME rate of research and development tax credit over the next two years.

Overall, I welcome the 2011 Budget. The Chancellor has a difficult hand to play and no money in the kitty. His message is clear: Britain is open for business and it has produced major incentives to companies and individuals to create wealth, which I believe is the right approach for the future growth of the UK economy.

13:40

[Baroness Kramer]

My Lords, I suspect that when we look back on this Budget in a few years’ time, two measures will stand out: the Chancellor's commitment to raising the tax threshold, a commitment to fairness even at a time of tackling a major deficit and a significant economic crisis; and the green investment bank. The bank will start slowly, but in 20 years’ time when we look back it will be seen as key to achieving a response to climate change, which, as I think almost everyone in the House is aware, is an absolute imperative.

I am very supportive of yesterday's Budget, but in my speech I will raise some of the issues that were not tackled and ask the Government to look at them seriously. As the noble Lord, Lord Griffiths, who is not in his place, said earlier, we have a challenge to rebound to trend growth and then to sustain trend growth. For any developed country, growth at that pace is a significant challenge. We do not have the potential that countries such as India or China have, with relatively low GDP per capita, to accelerate growth beyond trend, and it requires many things being done correctly.

One of the issues that was not addressed in the Budget is capital accumulation. Without that in place, it is very hard to see how we achieve sustained growth. In plain English, capital accumulation is essentially savings. I think that the savings rate in this country—others will correct me—runs at about 2 per cent of GDP, and most economists would say that it needs to be about 10 per cent of GDP for there to be sustained trend growth. I know that that is difficult. People have wrestled with the issue of how to persuade people to focus less on immediate consumption and more on long-term savings. Without that in place, achieving successful growth in the economy over the long term will be a challenge and, rather than duck that, we have to address it head on.

My second issue is about infrastructure, which was hardly tackled in the Budget. There were some measures to invest in various rail improvements and I know that elsewhere transport investments are going ahead. Essentially, one pillar of economic growth that the Government can provide is infrastructure and, traditionally, we have spectacularly failed to do that in this country. We have allowed much of our infrastructure to fall into decay. I raise the possibility that we keep continuing at that pace partly because of the way in which we measure growth. We constantly use GDP, which, as this House will know, has no depreciation in it. Any depletion of resources is not reflected in GDP and gives us a distorted sense of what, in many ways, is happening to our infrastructure.

I have a very quick example, but I am not an economist so others may correct me. If you look at growth between the two troughs of the Thatcher period, you will see that growth was averaging about 1.7 per cent, but I am told by economists that, if you remove from that number the depletion of oil and gas in the North Sea—a non-renewable resource—growth would have looked pretty flat at zero. In other words, we were achieving that by what looked like fundamental growth but it was in fact usage of a depleting resource. We have not included that in the way in which we tackle our thinking. Surely now is the time to make that change.

Gordon Brown attempted to do it in many senses by the golden rule, but that became abused politically. The privatisation of utilities was a mechanism to get around some of that, and PFI, under the last Government, was probably the most expensive way to carry out investment into projects and infrastructure. Again, it circumvented some of the issues. I ask that we consider tackling this issue head on.

The noble Lord, Lord Sugar, raised the issue of credit and said that you cannot ask banks to lend to inappropriate companies and inappropriate projects. I do not think anyone in the House would expect them to do that. I say to the noble Lord, Lord Sugar, that when he began his business and went to British banks and was turned away, I suspect that if he had gone to a bank in Germany or in the United States he would have had a very different response. The high street banks in this country have lost the people, the skill base or the willingness of the institutions to carry out risk assessment, to look at a proposal or a project, to begin to understand a would-be entrepreneur and to recognise whether there is a business there for which they can provide financial support and in which they can participate.

All that has largely been discarded for a much more mechanistic and inexpensive way of assessing any request for a loan from a small business, especially from a micro or a new business, that ticks a number of boxes in a fairly superficial way and does not carry out the kind of skilled risk assessment that there used to be in the past. We have lost our Captain Mainwarings and, to be straightforward about it, it seems to be very difficult to spark the new ventures that everyone here sees as essential to underpin growth in the economy again. Banks will be required to lend 15 per cent more, but we cannot let them get away with lending just to medium-sized well established companies to meet their quota; we have to get them to do the work with the micro and new businesses or make them finance someone else to do it.

As my time is running out, I have one last comment—on localism. It seems to me that one of the best things that the enterprise zones can say to local authorities is, “Ease up on planning regulations and in return any growth in the business rate will go directly to you”. This seems to be the first time that we are reconnecting local authorities with business development within their own communities. The fact that the business rate goes to central government has removed every incentive. In the past, we had local authorities engaging with local businesses and local people who drove forward development, particularly of new and small businesses. We need that re-engagement. I ask again that the Government look at that issue.

13:48

[Viscount Trenchard]

My Lords, I am grateful to my noble friend Lord Lawson of Blaby for introducing the debate. Your Lordships' House is indeed fortunate to have this debate on the day following the Budget. In recent weeks and months your Lordships have spent an inordinate amount of time discussing tinkering with the constitution rather than concentrating on important, urgent matters such as the subject of my noble friend's Motion. It is good that we have an opportunity to redress the balance today.

I declare an interest in that I am employed by Mizuho International, the investment banking arm of the Mizuho Financial Group of Japan, but I speak in your Lordships' House in my personal capacity. Nevertheless, my employment circumstances—the fact that I also serve as a director of an investment company whose manager’s ultimate holding company is Prudential Financial of the United States and as a director of a chemical manufacturing company on Teesside, whose ultimate holding company is the Lotte Group of Korea, provide me with a basis to judge how attractive the United Kingdom is seen as a centre for investment by major foreign, financial and industrial groups. They will certainly welcome the Chancellor's decision to reduce the tax burden on controlled foreign companies.

My noble friend's Motion calls attention to,

“Government policies to promote enterprise, growth and the fundamental rebalancing of the economy”.

I believe that, in referring to rebalancing the economy, my noble friend means to rein in the bloated public sector in order to create the resurgence that we need in the private sector. The policies pursued by the previous Government produced more than 1 million new mainly unproductive jobs in the public sector but saw the loss of 1.7 million jobs in our already depleted manufacturing sector.

There are those who talk about rebalancing the economy between the financial and manufacturing sectors. They believe that the economy is a zero-sum game and that a withdrawal of resources from our flagship financial sector will assist the creation of a larger and more profitable manufacturing and industrial sector. I think that the reverse is the case. In order to nurture and build on our manufacturing base, it is essential to protect and preserve London's position as the leading global financial centre to ensure that innovative companies can obtain the funds that they need to grow; and that personal and corporate tax rates are low enough not to counterbalance the United Kingdom's other natural advantages over rival investment centres.

During the 11 years for which I worked for Kleinwort Benson in Japan, I was able to encourage Japanese companies to invest in the United Kingdom because of our relatively low tax rates, our sound and stable political system, a reliable accounting system, a respected legal system based on common law and our relatively benign regulatory regime. All those relative advantages have now been compromised to a greater or lesser extent.

The Chancellor's announcement that he will ask HMRC to find out the truth as to whether the application for the 50 per cent tax band is revenue-positive is welcome. The top rate will actually be 52 per cent from next month, and it is probably already counterproductive. It makes it too expensive for international companies to base their most talented employees in this country and adversely affects the competitiveness of our markets. However, I cannot help wondering whether HMRC’s study will be entirely objective. Far too much time and resources are now being wasted on the interplay between market participants and regulators. More importance is now placed on that than on the interaction between lenders and their clients. Senior executives of banks cancel meetings with their clients in order to be available at all times for the FSA, which is now overstepping the mark through its unwarranted incursions into matters such as the composition of subsidiary boards of directors and its unreasonably tough interpretation of capital adequacy rules.

I have some sympathy for the FSA, because besides its dismemberment it has been subjugated to the three new European level regulatory bodies: the EPA, the ESMA and the EOPA. I deeply regret that the previous Government acquiesced in the subordination of our regulatory regime to Brussels. The consequences, including the unnecessary and inappropriate regulation of hedge funds and, indeed, all alternative investment companies, are already having a negative effect on the promotion of enterprise and innovation in the financial sector, limiting the dispersal of risk among multiple players small enough to fail.

Financial markets are global, not European, and the new regulatory regime definitely hinders the City in playing the role that it should have in the promotion of cracks and enterprise in the wider economy. Do the Government fully understand just how serious the problem is, and what steps does my noble friend intend to take to mitigate its damaging consequences?

It is also crucial to ensure that the other formerly attractive features of United Kingdom markets are preserved and protected during a period when higher than optimum taxes need to be applied. I do not argue that lessons did not need to be learnt from the financial crisis, but bankers have been forced unfairly to take a disproportionate part of the blame. There is no evidence that we need more intrusive and more specific regulation. Rather, too much regulation lulls market participants into a false sense of security and tends to absolve them from responsibility for their actions. Will my noble friend bring his influence to bear on the Chancellor and persuade him to reverse the unfair attempt to exclude the banks from the welcome reduction in corporation tax through a further increase in the bank levy? That will do nothing to enable the banks to increase lending to SMEs, and it will have a negative effect on the competitiveness of British banks and of London as a financial centre.

Time does not permit me to comment on many of the other positive measures in the Budget. However, I ask the Minister two further questions. First, will he tell the House whether and when the Government will restore the personal allowance to all taxpayers, thus removing the disincentive caused by the 64 per cent effective band, which is of course widened by £1,200 by the new £600 increase in the personal allowance? Secondly, welcome though the 2 per cent reduction in corporation tax certainly is, will he set out a timetable for its further reduction to 20 per cent—or even the 15 per cent advocated by the Institute of Directors?

All in all, I congratulate the Chancellor on his pragmatic and courageous response to the critically high public sector deficit produced by the profligate and uncontrolled public spending policies pursued by the previous Government. The Chancellor is right to stick to his guns.

13:56

[Lord Hodgson of Astley Abbotts]

My Lords, I, too, thank my noble friend for giving us the opportunity to debate this important topic today.

With the passing of time, the reality of the economic record and performance of the previous Labour Government becomes clearer. Having inherited a decent economic situation in 1997, it is a pretty depressing story. To be sure, there were some nuggets amid the dross—the decision to stay out of the euro and handing over the setting of interest rates to the Bank of England— but the underlying theme was that the man in government, whether central or local, knows best. Complexity was piled on complexity, needing armies of enforcers. Measures were so complex that they often missed their target. They were presided over by a man who claimed that he had abolished boom and bust—hubris indeed.

Today, one of the most amazing features is the collective amnesia that seems to have overtaken the Labour Party on that whole matter. As the noble Lord, Lord King of Bridgwater, reminded us, the perilous situation in which we remain appears to the Labour Party to be nothing to do with its record in government but merely the result of a malign alliance between sub-prime mortgages in the US and rapacious bankers elsewhere in the world.

For me, the most depressing statistic of the past 12 years—here I echo my noble friend Lord Trenchard—has been the shift in employment from the private to the public sector. As my noble friend told us, more than 1 million jobs went out of the productive economy into the state sector, so that there are now parts of the country in which 40 per cent or even 50 per cent of the people employed are employed by the state. That trend leads to madness and is certainly no way to build a prosperous Britain.

I particularly welcome the Chancellor's efforts to rebalance the economy by stimulating private sector economic activity. It is true that because, as his Labour predecessor told him when he took office, there is no money, these measures are necessarily modest, but cuts in corporation tax, extending EIS tax relief, relief for small businesses from further regulation and so on are all very welcome.

Although the Government can set the mood and prime the pump, reviving the economy will need a much greater contribution from the private sector banks than there is at present. Here I follow my noble friend Lord Newby. When he winds up the debate, my noble friend will reply that the banks have promised to lend an additional £190 billion to SMEs. That is quite true, but stating the quantum is not the whole answer. The equally important issues are, first, the process by which the funding is obtained, secondly, the time it takes to complete it and, thirdly, to whom it is being offered.

The past few years have seen the end of what has been called relationship banking for SMEs. In prior years, the bank manager would get to know his customer over a period of years and would have a certain amount of latitude on extending credit facilities on his own initiative. Certainly his assessment of the credit-worthiness and likely success of the borrower would be taken into account in any lending decision. That is no longer the case. Now it is all down to credit scoring. The credit committee knows nothing about the business. It does not know whether the applicant has been a customer of the bank for five minutes or 50 years; it is all down to the credit score. In effect, the relationship manager in most of these banks now fulfils a function akin to the speak-your-weight machine that you find on a seaside pier.

Then there is speed. SMEs are time constrained. They do not always plan ahead as well as they should, so speed of response is very important. While it is true that the banks have made some progress in this regard since the darkest days of 2009, there is more to be done. Then there is the question of which firms will get the funding. Let me illustrate with a practical example. A firm of my acquaintance needs occasional short-term funding for one to seven days, usually of about £1 million. It is well secured and is therefore low risk. The firm decided that, in order to allow for a margin of error, the application to the bank should be for a credit facility of £2 million. You may imagine its surprise when the credit facility offered was £5 million and a covering note suggested that the bank would happily entertain a request for £10 million. Inquiries revealed that this lending would qualify to be part of the bank’s contribution to the £190 billion and because it was very low risk, so the higher the amount it could attribute to it, the better. I hope that my noble friend will monitor carefully not just the quantum of lending but the process by which it is made available and its destination.

This promise by the banks, like the Chancellor’s Budget, addresses the short-term tactical challenges. Looking further ahead, if we are truly to rebalance the economy, there will need to be much higher capital investments by SMEs in the future than in the past. This will require the availability of longer-term funding facilities than envisaged by the £190 billion pot. That in turn poses a challenge to the banks under the matching liquidity provisions envisaged by the Basel 3 proposals. I trust that the Government are keeping this longer-term issue firmly in mind as they navigate their way through the choppy short-term seas.

14:02

[Lord Tugendhat]

My Lords, I, too, thank the noble Lord, Lord Lawson, for introducing this debate and add my congratulations to those of others to the two maiden speakers who made such notable debuts in this debate.

I begin from a position where I feel much happier with the Government’s language on the economy now than when we had our last big economic debate in November on the comprehensive spending review. I am delighted by the commitment to growth and by the measures that have been launched to give that commitment substance: the tax changes, the reforms to the planning system, the scrapping of regulations and so forth. This is a welcome change from the emphasis that was too much the case last year on cuts, cutting back and looking at everything through the prism of cuts. I warned then that I feared that the Government had perhaps swung too far towards austerity and that that would prejudice the health of the economy over the period of the Parliament. I pointed out that ultimately over the period of the Parliament, this Government will be judged by the criteria of growth and employment. I very much want them to be judged favourably by those two criteria and to have earned a favourable judgment. I do not want them to be found wanting.

I fear that events since the debate we had in November have gone some way to bear out the fears that I expressed at that time. We have had the fourth quarter fall in GDP and have the very high level of unemployment, which at 8 per cent is the highest level for 17 years and, as my noble friend Lord Griffiths pointed out, is at a particularly severe level for young people, with very dramatic and detrimental consequences for a great many individuals in that age group.

Against that, I argued that the Government’s bravery in grasping the deficit nettle has enabled them to get ahead of the markets. No one now doubts the seriousness of the Government’s commitment to cutting the deficit or their strength of purpose. They have therefore succeeded in gaining some room for manoeuvre, and I believe that they should take advantage of it. They should use it not just for the reasons that I have already given, substantial and powerful though they are, but because on top of them we now face far greater risks to the world economy than was the case at the end of last year, or at least when last we debated these matters. We have the ongoing events in the Middle East and North Africa, we have Japan and we have the continuing intractable problems in the eurozone, exemplified in today’s papers by the news of the fall of the Portuguese Government.

In the autumn, the Governor of the Bank of England spoke of 500,000 jobs being created in our export industries. I wonder whether he would be willing to repeat that suggestion now. I think that the outlook for our exports and our major export markets is a great deal less good than it was then. All these things have occurred before the spending cuts and their consequential job losses in the private as well as in the public sector really begin to bite. They are nearly all still to come. At the same time, inflation is not just more than twice the target figure, it is continuing to accelerate.

This is a very dangerous and explosive mix: rising unemployment, rising prices and perhaps in the not-too-distant future rising mortgages, although I hope the Bank of England will heed the dangers of increasing interest rates in the present climate. In plain English, what this means is that a great many people in our country are going to suffer a lot of pain and anguish, and that is a prospect which we must take into account in assessing what the Government should be doing at present. I believe that economic policy is a matter of balance. A Government should have a clear direction and clear objectives, and I am delighted that this Government should have both of those things. But within that context, the priorities and the pace need to be varied from time to time to take account of changing circumstances. Failure to vary the pace and to vary to some extent the course and—we have seen this in the past, and some of us in this House go back to the Heath Government—failure to heed the warning signals can lead to smash ups and that dreaded term, the U-turn.

That is something that I very much hope that this Government will avoid and why I believe they should take advantage of the room for manoeuvre which they have earned in order to shift the balance somewhat back towards a modification of the cuts programme and an increase in capital spending. They should think again about both those factors. We have recently heard a great deal about the OECD. The Government should also take heed of the OECD’s warning in its recent report that the large cuts in public expenditure being planned are a risk to long-term growth. I hope they will take account of these matters and that they will bear in mind the fact that it is not only through cuts that deficits are reduced. With more investment, there would be more employment. With more employment, there would be more consumer spending, and that in turn would lead to higher tax revenues.

14:09

[Lord McKenzie of Luton]

My Lords, it is a particular pleasure to follow the noble Lord, Lord Tugendhat, particularly given the contribution that he has just delivered. I should like to offer my congratulations to the noble Baroness, Lady Stedman-Scott, and a fellow Lutonian, the noble Lord, Lord Hussain, on their excellent maiden speeches.

A short while back, when our rail infrastructure stalled and ground to a halt, it was because we had the wrong type of snow. Now it seems that our economy is stalling, not only because the snow is back but because we have had the wrong type of inflation—increasing spending on benefits but not having a commensurate increase in tax revenues. It is particularly timely that we are having this debate today and we should congratulate the noble Lord, Lord Lawson of Blaby, on giving us this opportunity. I remember well his 1988 Budget and the Finance Bill that followed. I was tucked away in a garret in Norman Shaw North scribbling amendments for the Labour Front Bench, all of which, sadly, were defeated.

However, in comparison to the autumn forecast, growth is down in 2010, and in 2011 and 2012. Unemployment is up in every year and spending on social security benefits is up by some £12 billion over the Parliament. The OBR expects the economy to be 0.7 per cent smaller in 2015 than it did in November, just a few months ago. Borrowing is up by £43 billion over the forecast period—£11 billion a year extra in 2015-16. The noble Lord, Lord Newby, talked about this being a slight rise in borrowing, which I find interesting terminology.

So what is happening? Last year, when we left office, the economy was growing strongly again. Inflation was lower and unemployment was falling. Everyone knows that the deficit has to be addressed but we continue to hold to the view that the Government’s approach is cutting too deep and too fast. In doing so, they are fuelling unemployment, thus making it more difficult for growth to take hold.

There can be a plan B. We could quite credibly halve the deficit steadily over four years, and not try to cut it further and faster than any other major economy in the world. That is not being faint-hearted. There would have to be tough choices to get the deficit down, including spending cuts and tax rises. But the most important thing in getting the deficit down is what happens to jobs and growth in the economy, which is why last year, as the economy started growing again and unemployment was falling, the deficit came in £20 billion lower than was expected. All that changed as the economy stopped growing at the end of last year, and unemployment is now rising again. As the Financial Times today reports, all the Chancellor’s tinkering yesterday, and all the lollipops with enterprise boosting, red tape cutting and planning regulations, has had no effect on the OBR’s assessment of long-term growth assumptions.

While yesterday may have made little change, we should remember what has gone before and the pain that is still to come. By 2015-16, the CPI switch will mean change for those claiming benefits, tax credits and public service pensions. There will be a hit of £10.5 billion annually. We know that the VAT cost is £13.5 billion annually. There are changes in restrictions to the employment and support allowance that will hit to the tune of £1.1 billion, cuts in child benefit of £2.5 billion and there are more.

Yesterday’s efforts by the Chancellor can reasonably be described as fiscally neutral and some of them nifty. He held true to the Lib Dem aspiration of increases in the income tax personal allowance but by the end of the forecast period equivalent amounts will be clawed back by changing the default indexation assumptions from RPI to CPI. This will apply to national insurance thresholds—until those far-off days should national insurance ever be merged with income tax. I think that we would be wise to listen to the comments of the noble Lord, Lord Lawson, on that matter. But it means that capital gains tax annual exempt amounts and ISA limits will be less favourable and generous in the future. The reduction in the national insurance contracting out rate is a further hit on business and on individuals.

We also heard from the Chancellor that his vision for growth encompasses the ambition that we should have the most competitive tax system in the G20 and that the system should be simple to understand and easy to comply with. In order to have the most competitive system in the G20 depends on how things are measured. Inward investors will not just look at headline rates; they will look at effective tax rates. Yesterday’s announcement of a further 1 per cent cut in the rate of corporation tax is no doubt welcome but the more substantial cuts announced in the June Budget last year were largely paid for by restrictions on capital allowances and investment allowances. We heard yesterday the simplistic line that our tax code is now the longest in the world. Frankly, that does not help. Tax law and regulations are structured differently in different countries. Try putting the US code with all its regulations and guidance end to end.

As for simplification, of course it makes sense to sweep away redundant provisions but I wonder how many additional pages of legislation will flow from yesterday’s announcements. We have heard about changes to the controlled foreign companies’ regime, the taxation of foreign branches, stamp duty land tax bulk purchasing and the taxation of non-doms, to mention just a few. There are a raft of anti-avoidance provisions, which we support, but these will not be dealt with by simplifying the tax system. Unless and until we have a general anti-avoidance provision, they will require specifically targeted changes to the law. That will then set new boundaries for the avoidance industry to assail.

The Government’s approach to regulation seems to be that it is inevitably undesirable and should be quashed at every turn. No one would argue for unnecessary regulation but just occasionally it would be good to hear the Government speak up for regulation which has been transformational. The Health and Safety at Work etc. Act was built on political consensus. It has helped to save many lives over the years and has been beneficial for business and society in saving costs and the misery of people who might have been injured or made ill by their work. We weaken all that at our peril. Dame Carol Black, in her review of the health of Britain’s working age population, estimated the annual economic cost of sickness absence and worklessness associated with working-age ill health to be more than £100 billion per year.

To conclude, there was nothing in the Budget yesterday which gives comfort on growth. Let us hope that this debate will provide ammunition to the Chancellor to enable him to rethink.

14:10

[Lord Bates]

My Lords, I join the noble Lord, Lord McKenzie, in paying tribute to my noble friend Lord Lawson for securing this debate. I also pay tribute to him for its title, which emphasises enterprise and the need for rebalance. I will come back to that in my remarks, particularly focusing on the north-east of England, which is where I am from and where I am for.

I also want to pay tribute to the excellent maiden speeches, particularly that of my noble friend Lady Stedman-Scott. Through Tomorrow’s People and its operation in Newcastle, she has made a profound difference to the lives of many people in the north-east. Tomorrow’s People takes some of the hardest-to-reach young unemployed people and puts them on a course. That gives them confidence, inspires them and builds their self-worth. It manages to get employment or training posts for 70 per cent of these young people. My noble friend is certainly someone who makes things happen.

The noble Lord, Lord Sugar, said that the test for being able to speak on these matters was being able to demonstrate that you run something. Having set up three businesses and currently being involved in two others, I probably just shave past the “Sugar test”. But, given the impact which my noble friend Lady Stedman-Scott has made on transforming the lives of so many in our inner cities, I am more interested in struggling a little closer towards a “Stedman-Scott test” of whether we are making a worthwhile contribution to society.

I want to focus on the north-east of England because to me it represents an excellent case study of the need for rebalancing the economy. The Centre for Economics and Business Research has shown that, over nearly 11 years of the previous Government, the public sector as a share of the north-east regional economy rose from 48.6 per cent to 63.9 per cent. This increase has gathered pace over the past two to three years and, if left unchecked, it is on a trajectory heading towards 70 per cent and perhaps even beyond. The claim is not that the north-east of England’s public sector is too large but that its private sector is too small. That is the reason for the imbalance and why we need to focus on growth.

The previous Government placed great emphasis on two things, one of which was the regional development agency One North East. Much was said in the debate last night lamenting its passing, as if the economy will stutter to a halt the minute it closes down. Yet, after 11 years of operation during which the agency received funding of £2.7 billion, the gap between the north-east and the rest of the country has widened: it was 83 per cent of the national average in 1998 and 78 per cent in 2010.

Moreover, during the recent recession, some in the north-east of England noted that the recession hit London, the banking sector and financial services, but that the north-east would mercifully be spared because a large section of the local economy revolves around the public sector and manufacturing—which I will come back to shortly—but that was actually not the case. The economy of the north-east contracted faster and more sharply, by 6.1 per cent, between 2008 and 2009 whereas London—at the epicentre of the shock, if you like—contracted by only 4.41 per cent.

My point here is that there is something fundamentally wrong with the understanding and the approach taken by the previous Government. We have seen a massive reduction in the number of manufacturing jobs in the north-east. Between 1997 and 2009, the reduction in employment in the manufacturing sector amounted to 95,000 jobs, and 56 per cent of those jobs were in the advanced manufacturing sector. That is important if we bear in mind that we need to do two things to get the economy of the north-east back on its feet and moving forward strongly.

First, we need to create an enterprise culture that is less concerned with state intervention and believing that organisations, strategies and structures will somehow deliver growth. Growth is delivered by businessmen taking risks; that is what creates wealth. Essentially, the Government can create the conditions for growth, but they cannot create the jobs. It was laughable when Ministers used to come up to the north-east and talk about agencies that had actually created so many jobs. I never came across an agency that created any jobs, but I did come across some that had destroyed a few. Businesspeople and entrepreneurs create wealth and jobs, and they are to be encouraged.

The second thing is the importance of manufacturing, which was what the Budget yesterday was all about. It talked about creating enterprise zones that will focus on manufacturing. It talked about the green investment bank that will invest in manufacturing. It talked about reducing regulation, which is important to manufacturing. It also talked about increasing apprenticeships and the new university technical colleges. All of these things are exactly what the economy in the north-east needs.

That is not to say for a moment that the Government have no duty to intervene in order to speed the economy of the north-east on its way. That is why they have announced significant investments in centres of excellence for renewable energy in Blyth and the Centre for Process Innovation on Teesside, and why they have invested £350 million in the Tyne and Wear metro and so on. The Government are taking an innovative approach while recognising that it is limited.

I shall close with this: a year ago almost to the day, the Labour Cabinet arrived in my home town of Durham in full gung-ho general election mode with a plan to announce a massive new trains order with Agility Trains for the north-east. Unfortunately, that happened to coincide with news of the closure of the Corus TCP plant and the loss of 3,000 jobs. The decision was that the good news of the trains order would be lost in the bad news of the steel plant closure and therefore the announcement was pulled. It is with great pride that I can say that over the past two weeks, the Corus TCP plant has actually been reopened by a new investor who is creating jobs, and that the Agility Trains order, stopped on that occasion, has been given the go-ahead. That is what this Government are doing for the north-east and I am proud of them.

14:26

[Lord Empey]

My Lords, I apologise for some unavoidable absences during the debate. I, too, congratulate the noble Lord, Lord Lawson, on bringing this subject forward because I am a new Member of this place. The issues that have been debated over the past couple of months since I joined the House, such as the AV referendum proposal, fixed-term Parliaments, the Public Bodies Bill and the European Union proposals, are all matters of considerable constitutional importance and therefore of great interest to me and, no doubt, to your Lordships. However, it cannot be said of the people on the streets of Glasgow, Manchester, Cardiff or Belfast that they talk of little else. On the other hand, this debate goes to the heart of what really does matter to the people on those streets as they wrestle with rising food and fuel costs, rising unemployment and, almost as bad, the threat of unemployment, along with increased borrowing costs and now the prospect of significant inflation. These are the things that people are talking about around the breakfast and the dinner table and at work. I am therefore glad that we are addressing these issues today.

This situation has not come about overnight. It has happened as a result of over-ambition, with previous Governments perhaps believing that we could spend our way to a better economic future based on financial and other services. It has long been believed that future jobs would come largely from the service sector, particularly the financial services sector. While of course we all value those jobs, there was a bias in Government against manufacturing. A view was held that it was old hat: “Never mind about smelly businesses and people getting their hands dirty. We’ll concentrate on financial services, on derivatives and insurance”. Important as those things are, there has to be a solid manufacturing base to create the wealth that we as Governments and Parliaments want to spend.

What a difference two years has made to our perception of where we should be going. Today, manufacturing is thankfully enjoying something of a revival, fuelled in part by lower exchange rates. Land-based businesses and food production have also held steady in this uncertain world of rising commodity costs. In short, there is no substitute for a significant manufacturing sector in order to generate the wealth to pay for our public services. We must pay more attention to this sector and hold it in higher esteem.

I turn to the other point I wish to make. There is an element of snobbery in this country that seems to value those seeking a career in the manufacturing sector rather less than those who choose a career in the professions. That pervades our education system at virtually all levels and must be discouraged. The Government can give a lead here and set the tone.

In recent days, as we have seen, our Armed Forces are in harm’s way yet again. Many noble Lords have been calling for a rethink of the recent defence review. That is entirely understandable. However, the principal reason for the review, apart from strategic issues, was lack of cash. That cash can come only from the wealth creators in this country, who generate the taxes needed to pay for our military assets. Like many in this House, I would like to see an aircraft carrier with aircraft that can fly from it, able to project power in a dangerous situation and protect our national interests. Who would not? However, that will not happen unless we get our economic policies right. I wish the Chancellor well in his endeavours to cure our country's problems. We will all benefit if he succeeds.

I want to mention two things that previous speakers said. The noble Lord, Lord Renton, mentioned apprenticeships, and the noble Baroness, Lady Stedman-Scott, in her maiden speech mentioned dealing with people in the harder-to-reach areas of the labour market. We have been pushing perhaps too many people towards university and higher education, and perhaps not enough towards apprenticeships, learning trades and learning skills that can keep our businesses going. We also need that; we need a balanced economy. The noble Lord, Lord Renton, mentioned internships, which are an excellent idea. Many graduates languish on the unemployment register, stack shelves in supermarkets or do whatever they can do, and maybe there are opportunities here to introduce them to work and give them a chance.

The noble Lord, Lord Bates, made the point that the public sector in his region now accounted for 70 per cent of the economy. I can reflect on that from my region, where we are in exactly the same position. The right approach is to say not that the public sector is too big, but that the private sector is too small. Will we be able in this country to revive the concept of entrepreneurship and treat it with the esteem that it deserves? The Government can take a lead here. That would encourage people to believe that there is a future outside the accountant’s office or the law practice, valuable as they are.

The noble Lord, Lord Sugar, gave us all a lesson earlier on what it means to be confronted with the reality of seeking funds to get started in business. You have to have an idea, some back-up and the will to succeed. As a nation, we need to raise the esteem in which we hold people who carry out this function in our economy, otherwise there will be no taxes for any of us to spend.

14:33

[Lord Lyell]

My Lords, I thank my noble friend Lord Lawson for giving us a chance to discuss the economy. He may be startled, since normally in debates like this there is a welcome period of silence from me. However, today I humbly put my toe in the water and refer to one particular part of industry.

Thirty-three years ago, I was sitting roughly where the noble Lord, Lord Davies of Oldham, is sitting. Early in January 1977, I was suddenly advised that the Patents Bill was going to start in your Lordships’ House. I was the junior member of the Front Bench, something in the nature of a reserve scrum-half at Murrayfield with the Titans wishing to seize the ball from him. I was told that part of the law on patents was applicable directly to industry. Lord Belstead suggested to me that I should take consultations—take lessons, indeed—from the pharmaceutical industry. I thought that that was ripe stuff—certainly from him—to a Member of your Lordships’ House with not one O-level in science, although it is fair enough that I did grind out the yardage as a chartered accountant. I went to speak to the pharmaceutical industry and through the years have followed everything that has gone on in that industry. The last figures that I had were that the UK had a £7 billion balance in overseas trade in our favour from that industry. It is the best of nine major industries, which will bring a glow to the heart of my noble friend Lord Lawson, let alone the Minister.

Why is that the case? First, there is the excellence of the people and facilities in research and development in the industry. It is also an example of a tremendous partnership between the public and private sectors. Since 1948 and the institution of the National Health Service, the industry has worked well with it. I understand that there is something called the VPRS, the voluntary price restriction scheme; my noble friend Lady Hooper may be able to correct me. There is another, the PPRS; I do not think that is a reference to pill-poppers, but she might be able to advise me on that later. The schemes have been enormously successful in providing tremendous and outstanding service—one that is unique in the world—to the United Kingdom for health. They are clearly something in the nature of a ritual dance between the Department of Health and Ministers in your Lordships’ House and the other place, let alone representatives of the industry either in your Lordships’ House or outside. The schemes seem to be something like a bean-bag or a squeegee: the Government push them in one direction and the beans scoot out in another. However, there seems to be a unique relationship between the Government, the public sector and the area of the private sector connected with health and outstanding success in production and industry.

Your Lordships may not be surprised that I have a blue tie today; I am from Scotland. I understand that 11,000 people are directly employed in full-time high-quality jobs in the pharmaceutical industry and the health industry in Scotland. In the United Kingdom, 72,000 full-time jobs are applicable directly to the pharmaceutical industry, and 27,000 of those are highly qualified persons in research and development. It is a huge sector of our economy, and it has interests throughout the community. Two companies give all sorts of little advice on a very local level. Certainly in my area of Dundee, as well as elsewhere in Scotland, one can find enormous help from two companies—enormous health companies—that give advice to Girl Guides, Scouts and other voluntary organisations.

Time is limited and, above all, there are many more important speakers than myself on these massive macroeconomic details, so I shall return to what I call the retail or consumer side of health. I take medicines. I declare an interest, that I am no stranger to the hospital ward, mainly thanks to what is so well known to my noble friend Lord Hodgson: winter sports. I have spent a good time on the ward with broken legs—both—shoulders, hands and other things; I tell him that it has been due more to orthopaedics than to liver problems or overindulgence in Switzerland. One day in June 2006, I was looking forward to taking part in your Lordships’ House and suddenly I was struck down with something called an ischemia—a light stroke. My noble friend Lady Hooper may be able to explain it, but not today. Within one month, I was back at home in Scotland watching the final of the football World Cup. That shows the enormous and matchless service that the health industry gives to everyone, and it gave it to me that month. It was perhaps luck on my part—I might even say divine intervention since I do not know many Members of your Lordships' House who have taken what I did but have been back in your Lordships' House in eight weeks—but perhaps your Lordships have mixed feelings on that.

I understand that the budget for the National Health Service is £120 billion each year. I believe that that is very well spent. Perhaps I may conclude by making a plea to the Minister. There is a very well known and widely respected worldwide company that has had some difficulties recently. He will know that it is in Sandwich in Kent. I am sure that he and his colleagues will attempt to alleviate the problem. Indeed, we found in yesterday’s Budget—I am not too sure in which section; I know that it was on page 18 of the guidance—references to innovation parks and research. My noble friend Lord Northbrook referred to this, too. The Babraham Institute in Cambridge and Norwich Research Park will share in a £100 million boost for science research funding. Any help that the Minister can give to this particular firm would be gratefully received.

I conclude with two mottos, both of which will be familiar to my noble friend Lady Hooper. One is nil satis nisi optimum—only the best will do. That applies to the pharmaceutical industry, and I hope that my noble friend the Minister will be able to give enormous help to it. The second motto refers to pill-poppers such as me, retailers and consumers: every little helps. It is because of the eternal watchfulness of my noble friend the Minister and the Government that we have in the United Kingdom some of the cheapest but best-value medicines in the world. Your Lordships have been very kind. I am very grateful and in good health. I look forward to listening to what the Minister has to say. I am especially grateful, for once, to my noble friend Lord Lawson for this debate.

14:42

[Lord Risby]

My Lords, it is a great pleasure to follow on from my noble friend Lord Lyell. I add to the congratulations already offered to my noble friend Lord Lawson on securing this debate and on being a truly reforming Chancellor. I also congratulate warmly my two noble friends Lord Hussain and Lady Stedman-Scott on their excellent maiden speeches. I know that they will greatly enrich the proceedings of your Lordships' House in the years to come.

We appear today to be in something of a circular situation, with consumers feeling bruised and nervous, their confidence weak and, in consequence, banks being reluctant to lend, especially to smaller and start-up businesses. Yet, ironically, the overall cash position of corporate Britain is very high by historic standards. Unleashing this would undoubtedly spur on economic growth and confidence, and this was at the heart of what the Budget was all about.

A fundamental necessity for any new Government after the general election was to convince the markets that the deficit would be tackled, and this has worked. While the interest-level cost of our massive borrowing has decreased, it has risen in other countries, as we have heard, such as Spain and Portugal. What has happened in the past 24 hours to Portugal absolutely says it all. Given that we have the highest deficit in the industrialised world, we had to respond to the sovereign debt crisis, which was and is pervasive in southern Europe. We avoided that, and had we not done so, the consequences would have been simply cataclysmic. Interest rates would have risen. Even now, with restraint, our total debt will be £1.36 billion.

[Lord Myners]

Trillion.

[Lord Risby]

Trillion. It is simply wrong and absolutely immoral to bequeath to our children and grandchildren a debt burden of this order, which would have been even worse because of the profligacy of this generation in government.

However, at the heart of this most difficult legacy was the behaviour of banks, so disproportionately important to the UK economy. This was due substantially to a failure of proper regulation. I have heard it described as a product of light regulation. The FSA’s bureaucratic procedures and micromanagement meant that it did not focus on the big picture—for example, the borrowing and lending practices of Northern Rock. The tripartite system ensured that neither the Treasury nor the FSA nor the Bank of England took the necessary pre-emptive action to stop what so tragically ensued. It diminished in consequence our credibility and ability to influence the pattern of emerging European financial services regulation.

Nevertheless, given the massive importance of the financial services industry, it is crucial that previous failed arrangements are replaced. No regulatory system is perfect, but at least the Bank of England previously closely monitored financial institutions and will do so again. Without this, overall economic recovery will not happen. While Governments can assist with an appropriate tax and regulatory framework, it is the private sector that will ensure this, with innovation and new enterprise crucial to it.

I declare an interest in this regard because I am deputy chairman of the Small Business Bureau. The renewed emphasis on smaller businesses is extremely important, as the weight of regulatory and tax pressure is for them inevitably disproportionate. Planning laws have been too restrictive and have benefited larger businesses such as supermarkets. They have also had the effect of distorting house prices. Therefore, I greatly welcome George Osborne’s recognition of this, and the reform of Business Link to assist budding entrepreneurs is welcome, too.

Of significant potential is the renewed government-supported export drive, which specifically includes small businesses. It is gratifying that the strategy outlined in your Lordships' House by my noble friend Lord Green includes financial support and advice to SMEs. The structure of export promotion in this country has been ill focused, with regions even competing with each other at international trade fairs. Our trade promotion activities compared with those of our rivals have been inadequate, and the strategy which has been outlined brings fresh coherence to a huge marketing opportunity abroad. The new enterprise finance guarantee scheme, a new working capital scheme, a new bond support arrangement and credit insurance are specifically targeted at SMEs and in that regard are particularly welcome.

This focus on acorn companies is long overdue. They account for half of all private sector output and 60 per cent of private sector jobs. Freeing them from new domestic regulation, limiting audit and reporting burdens, the small business rate relief and fresh access arrangements to increase finance to them, matched with easier planning consents, will help promote entrepreneurial activity. The increase in the SME rate of research and development tax credit is additional good news.

History has shown us that, in politics, defeat often produces a kind of introspection. It has certainly manifested itself since the last general election. It is as if the Opposition were not responsible at all for the economic crisis which engulfed us. In the context of the economy today, to have one policy, which is simply to say that reduction of the deficit should be slower, is frankly no policy at all. If there is a coherent alternative strategy, I hope that we shall hear it today.

14:49

[Lord Myners]

My Lords, I join other Members of the House in congratulating the noble Baroness, Lady Stedman-Scott, and the noble Lord, Lord Hussain, on their maiden speeches, and the noble Lord, Lord Lawson, on his timely securing of this debate. I pay tribute to the noble Lord as one of the three great post-war Chancellors of the Exchequer that this country has had in office.

Yesterday’s Budget, on which the noble Lord, Lord Lawson, said we were likely to focus in speaking to this debate, was characterised as a Budget for growth. However, rather sadly, the text did not follow the headline, because we had a story of declining growth—the third downward adjustment in growth forecasts for the current year in the space of 10 months. The only things that went up were the things we did not want to go up. Unemployment is going up by another 140,000; inflation is going up, including the important GDP deflator; and the deficit is going up.

On the growth front, the world is enjoying stronger growth. In all our major competitor countries, growth estimates have increased over the past three months. In the UK, we are going in the reverse direction. Even the long-term forecasts from the OBR on growth were due to a sleight of hand. The OBR has a simplistic model: if growth is not delivered this year, it adds it into future years, so it will always track back to a long-term trend growth of 2.25 per cent. There is asymmetrical risk in the OBR forecast. Put simply, the risk of us doing better than the OBR has forecast is, first, low; and, secondly, of little consequence. The risk of us doing a lot worse is high and could be devastating.

This was less a Budget for growth than a Budget which clings to growth assumptions to support the logic of the thinking behind the Budget. I do not see the party opposite as being one of “crazed fanatics”, as mentioned by the noble Lord, Lord Lawson. There is a logic to what the Government are doing—I do not deny that—but the Budget and the Government strategy is driven by ideology and is resting on some crude misunderstandings of economics. The challenge for this side of the House is to set out the facts and articulate clear and credible alternatives. We have not always done that.

Let us look to the facts. During the period 1997-2010 the UK achieved the second highest growth rate per capita in the G8 countries, surpassed only by Canada. That is a fact of achievement under the previous Government. The deficit in 2007, before the global financial crisis, was less than 3 per cent and borrowing as a percentage of GDP was in the bottom quartile for the G8 countries. In 2007, George Osborne endorsed the Government’s spending plans. Indeed, he said he would replicate the quantum of government spending. That is the backdrop to an economy which was then confronted by a global crisis. Its impact on us was emphasised—the Prime Minister was wrong to say that we were less exposed to the global and financial sector downturn than other economies; we were hit hard—because of our dependence on financial services. We were hit not on expenditure—it was not an increase in expenditure; the cyclical adjusters went up—but on taxation. That is a temporary phenomenon; once the economy recovers, taxation recovers.

In 2010, the economy was recovering: we had had two quarters of successive economic growth, the deficit was coming down—it was £20 billion lower than forecast—growth was re-established and unemployment was coming down. That has all been placed at risk by the economic strategy of this Government—a strategy that is based on a misreading of the economy; a misreading of the impact of their own talk of austerity, which is forcing down economic confidence, as we see from the nationwide index and other indices of business and consumer confidence; and a misreading of basic economics and finance.

I shall cite three examples. First, it is simply wrong to remove demand from the economy when we have significant excess capacity. The role of the public sector is to provide demand in those moments when the export sector or the private sector is not providing the demand. Secondly, there was no panic in the area of funding—quite the opposite. We were funding at record low rates, with maturities which, due to the wisdom of previous Chancellors of the Exchequer, were the longest of the G8 countries.

We must remember that a deficit in itself is not wrong; it is the purpose for which it is used. To have a deficit to run benefit payments over a long period of time is an inter-generational transfer which is difficult to justify. To have a deficit for capital investment—to build roads, hospitals, schools and infrastructure—is a good thing. That is where the ideology of the Government, which is centred on small government, is wrong because it is not supporting investment in infrastructure.

Many of the measures announced yesterday were sound—it is not my job to emphasise them—but there were a raft of inadequate headline grabbers: the double tracking of railways in the Cotswolds and an enterprise zone in Sheffield—I wonder how the Prime Minister and Deputy Prime Minister thought up those two; the filling of pot holes; a new home subsidy which will simply drive up the price of houses; and the non- doms hit again. That is a very bad thing for the economy; it is something that we did which I deeply regret. I also deeply regret the 50p tax rate. These measures are anti-growth and wrong for innovation and economic prosperity.

The new enterprise zones will simply move activity from one area to another, although I will be arguing the case that Cornwall should be one of them. If the gift is there, one might as well reach out for it. Interestingly, the 11 zones announced today are all in urban areas. I hope we will find some rural areas among the other 10 to be announced.

Where are the growth builders in this Budget? Infrastructure investment—cut; education—cut; workforce expansion—to be reduced. I welcome the simplification of the tax system but we need stable and predictable taxation. Yesterday we were hit by a sudden increase in oil tax. Last night the Chief Secretary guaranteed that the oil tax would not be passed on to customers; can the Minister give a similar guarantee that the bank levy will not be passed on to customers? I believe that it will be because the bank sector is not openly competitive enough. I am sure that the banks are now regretting deeply all the time they spent on project Merlin because, clearly, the Government’s word was not worth it in terms of what they expected to get out of it.

I hope that we also look to monetary policy. I am deeply concerned about the doubling of inflation. I am aware of the time; I am closing and there is no need for the Minister to gesticulate because I am sure that on this occasion he can cope with my questions. I am deeply concerned about inflation and it is a great shame that the Bank of England is losing its credibility because it is unable to do the right thing to combat inflation.

14:57

[Lord Ahmad of Wimbledon]

My Lords, I join other noble Lords in thanking the noble Lord, Lord Lawson of Blaby, for bringing forward this debate at an important time for our country. I, too, wish to pay tribute to the maiden speeches of the noble Baroness, Lady Stedman-Scott, and the noble Lord, Lord Hussain. One touched on the issue of youth engagement and youth employment, and the other on community cohesion and fighting extremism—issues which, I can assure both noble Lords, resonate with your Lordships’ House.

The Budget just delivered in the other place by my right honourable friend the Chancellor was about sustaining confidence in the markets; it was about demonstrating a willingness to continue to make difficult decisions to tackle the burden of debt; it was about implementing measures which are not governed by short-term headlines but aimed at long-term growth. I believe it achieves all three. Indeed, the influential ITEM Club has already alluded to the fact that the Government have achieved the aims of both controlling expenditure and increasing revenues.

It was interesting to follow a former City Minister after hearing him respond, in part, to my noble friend Lord Risby, who asked, “What is the alternative?”. I noted that he said that the Conservative Party and the coalition Government believe in small government. We do. What is the alternative—big government? We have had enough of that already.

At the height of this global economic downturn, I wish to focus on the City of London and its crucial role. Financial services account for a 10 per cent share of UK GDP—more than in many other major economies. On employment, UK financial services across the country employ more than 1 million people, with 3,000 people employed in financial services in more than 62 constituencies in the UK. Financial services generated a trade surplus of more than £36 billion in 2010, and the tax take of UK financial services amounted to £53.4 billion in the year 2009-10, accounting for approximately 11 per cent of the UK tax receipt. As regards UK GDP, we can see that the contribution that the UK makes with its financial services sector is greater than that of both France and Germany. At a time when the coalition Government are rightly making difficult decisions on expenditure, with the vital contribution made by the financial services industry to the Exchequer, even as the effects of the crisis wade across institutions in the City, the industry has demonstrated resilience in these challenging global economic conditions.

We need to ensure as a Government that we work with firms operating across the financial and professional services to see that the UK remains as a good place in which to invest and work towards creating a sounder environment for growth. Indeed, I welcome recent statements from the City in the preamble to the Budget about firms that have said that they would stay the course and remain in London. They recognise that steps were necessary in regulating certain markets and they see the need to address wider economic conditions. That means that they need to be part of the solution. We should move forward and stop blaming banks. The coalition does not blame banks, as was said earlier by noble Lords opposite, although we do hold the previous Government to account. But it is not about blaming banks; it is about working with banks.

Indeed, I am reminded of my early years. The noble Lord, Lord Hodgson, talked about credit scoring now becoming the core activity for banks—and banks need to look at that again. I am reminded of my own career. When I started and I walked into my first job as a lending officer within a bank, I was told, “Tariq, what you need to apply is Campari and ice”. As a teetotaller and a young trainee, I thought that was a rather strange acronym to put forward. It was a matter of looking at each small business, its character and ability and means to pay. We need to get banks focused on that style of lending. Therefore it is right that the current Government are working with the banks to ensure that we create the right conditions for small businesses and large corporates to prosper. We can take the example of Goldman Sachs and the programme for 10,000 small businesses, with free business and education courses. SMEs are reliant on bank lending, yet debt capital markets are another option. We need to work hard in ensuring that we remove some of the hurdles and barriers to diversify the financing sources for SMEs.

We are seeing new actions announced in the Budget, with reforms to the enterprise initiative scheme; raising income tax relief to 30 per cent from April; and the big society bank, dealing with the need to increase civil organisations’ financing through social finance intermediaries. On bank financing, there will be £190 billion in new credit for businesses and £76 billion to be allocated to the SMEs. We heard the noble Lord, Lord Sugar, allude earlier to those SMEs that have no collateral and those businesses that have no track record. The review and the extension of the enterprise finance guarantee in new lending, which should raise more than £2 billion in this Parliament, is also to be welcomed. Then there is the business growth fund for established SMEs with high growth potential. The UK banks have increased their contribution, bringing the total size of the fund to £2.5 billion. That is due for launch in May 2011. Then we will be working with the BBA to restore bank business relationships, which may have faltered, and to improve standards with lending and business mentoring. That demonstrates the willingness of this coalition Government to work with banks to deliver the solutions our economy and our country needs.

It is my belief that this Budget tackles the debt legacy left by the Labour Government. We have heard a string of Labour spokesmen offering us advice, but as my noble friend Lord Risby said, the only advice they can offer is that we are doing all of this too quickly. No alternative is offered. The approach of the coalition Government, with George Osborne as Chancellor, does not carry the support of the Benches opposite but it carries the support of institutions such as the IMF, the OECD and the IFS. It is a Budget of growth, focused on the long term and on the recovery of our economy and our country.

15:05

[Lord Selsdon]

My Lords, I have to confess that I have spent the bulk of my life in the financing of trade and in your Lordships' House. It is in the latter that I have probably had the greatest benefit, because I was told that I should listen to everything that noble Lords said over years and that I would be suitably drip-fed by geriatrics. Much therefore of what I have learnt I shall try to regurgitate today.

I ask and beg, as someone who has been involved in trade, that the Government should please return to using the word “trade” and restore the Board of Trade. I hate the word “business”, as it reminds me when in the morning my mother would say to me, as a small boy, “Take the dogs out for a walk and make sure they do their business”. When we came back she would say, “Was it little business or big business?”

We can learn much from history. Like the noble Lord, Lord Brooke, I like to return to things and go back into the history of trade. I go back only 500 years to when the Council of Trade was formed. Its mandate was to,

“take into … consideration the true causes of the decay of trade and scarcity of coyne and to consult the means for the removing of these inconveniences”.

Moving on another 70 years, the mandate for the Council of Trade was extended:

“Ye shall take into your consideration ye inconveniences the English Trade hath suffered in any parts beyond the seas. And are to enquire into such articles of former treaties as have been made with any princes or states in relation to trade”—

maybe even the EU. Your Lordships and those who produce such papers today should look at the latest one in the early 18th century, which was:

“To examine into and take an account of the state and condition of the general trade of England and of the several particular trades into foreign parts… to consider what means profitable manufactures already settled may be further improved and how new and profitable manufactures may be introduced”.

Why do we need all these statements when it is already there?

When I joined the House, I used to get put on committees by my noble friend Lord Jellicoe and the noble Lord, Lord Shackleton, because I was young enough at the time. One point they made to me was that, when things are really bad, that is the time for really good opportunities. I served on one of the first Select Committees on trade. I was told that it would not be appropriate for me to intervene or to speak but that, if I listened, I might learn something. That Committee was looking at trade and we had a visit one day from a very important Minister: my then right honourable friend who is now my noble friend Lord Lawson. He came and stood before us and gave us what we described later as a very interesting lecture on the different Ms—relating to the money supply—which I am afraid I did not understand. I did not dare to ask any questions but Viscount Amory, who had been a Chancellor, asked him a few. The noble Lord, Lord Lawson, responded with vigour—in those days, he had slightly more latitude than he has today—and Viscount Amory then said, “Thank you so much, Chancellor, for your clear and lucid explanation”. I admit I am still confused but happy to be confused at a much higher level. I am really grateful to my noble friend for what he has done today because some interesting matters have come out of this debate.

If I may return to the subject of trade, we have had a growing trade deficit since 1947, when my great-uncle Sir Stafford Cripps was effectively President of the Board of Trade and was followed in that by Harold Wilson. That deficit has grown and grown. I raise this in many debates as the noble Lord, Lord Myners, knows. We have a deficit in manufactures of around £100 billion, which has grown and grown. We have a surplus in invisibles—some of which are really becoming invisible now, such as the North Sea revenues and others—of about £50 billion and therefore an overall deficit of £50 billion. On the current account, can the Minister tell me what the UK budget deficit is at present? We seem to be a country of deficits. When we look at where we trade it is with 71 countries of the world, yet we have a surplus with only 12 of them. The biggest surplus we had was with Ireland, followed by the United States, but the Irish surplus has fallen away. It may not be important that we should have trade surpluses, but I have a feeling that, unless something is done about it, the situation could get worse.

On the subject of investment, over the years since the war we have always had a pretty even balance between inward and outward investment. However, what that investment is put into is of considerable importance; hence I welcome the concept of the enterprise zones. I spent a lot of time in inner-city projects, particularly in Docklands. I found it remarkable how quickly something could take off once it reached a certain height. The declaration of enterprise zones here is a good idea, as is the idea that foreigners who live in England might be able to get tax allowances from reducing their taxation levels if they genuinely invest in new projects. We should give the same thought to the United Kingdom’s activities overseas. We need to import food and therefore to invest in agriculture in Africa and in all the ancient areas where we went, because we only expanded our economies internationally or created an empire because we needed the materials and products that came from those countries.

If we do not have a lot of money, somehow the application of clawing money back by granting tax allowances on international and national investment appeals to me. I have said enough and I hope that your Lordships will realise that I did not intend to drip-feed you in any way at all. Please remember that we can learn an enormous amount from your Lordships. I have learnt very much indeed today.

15:12

[Lord Paul]

My Lords, as is customary I declare an interest: I am chairman of the Caparo Group, a manufacturer of industrial products. First, I thank the noble Lord, Lord Lawson, for initiating this debate. In September 1986, when he was Chancellor, he inaugurated our Caparo merchant bar plant in Scunthorpe. I am pleased that this facility, unlike many manufacturing units in the UK, continues to flourish.

It is clear that economic policy is the instrument that makes or breaks a nation. When so much of the UK’s destiny is at stake, we must examine the policies that will determine our economic future. There is a great deal of economic knowledge and wisdom in this House and when we discuss economic issues a good amount of debate is focused on dynamic, even glamorous, sectors of the economy such as information technology, financial services and new energy resources et cetera. That is well and good, but it sometimes underemphasises or overlooks the manufacturing sector.

Today, I focus on manufacturing because my entire life has been involved in the manufacturing industry and I am deeply concerned about the current state of it in this country. What is needed are some policy initiatives and a sustained follow-through. I shall suggest a few measures that I believe could soon create the environment in which UK industry could flourish once more.

First, reduce the administrative burden on industry. The present taxation arrangements, pension structures and human resources regulations are needlessly complicated. I congratulate the Chancellor on making an effort yesterday, and I hope that it will be successfully implemented. Secondly, there should be a tax distinction between financial services businesses and industrial companies. Manufacturing cash flow requires large outlays over long periods before any money can be recovered, which surely deserves tax recognition. We also need to revise R&D tax credits to encourage investment in practical production processes. Thirdly, we need to stimulate small enterprises, which are among the most innovative businesses, by giving them special capital allowances and lowering their tax thresholds.

Initiatives like the enterprise finance guarantee scheme are supposed to put cash into the economy, with the Government providing guarantees to the lending banks. In reality, banks are still asking small business owners to provide personal guarantees against borrowing. This is why, speaking in this House on 8 December 2008, I suggested creating a state-sponsored national industrial bank. We need that even more today.

Even the United States, the citadel of free enterprise, is talking about setting up a state-sponsored infrastructure bank because it is evident that this is one of the most effective ways to mobilize capital for national purposes. There is a shortage of engineers in manufacturing industry, partly because finance industries offer graduates better incentives. It is expensive for manufacturers to take new people and train them. Why not give capital allowances so that industry can hire people? That would solve the problem of skills shortages and give employment to university graduates, many of whom cannot find a job. There should also be incentives for larger businesses, public and private, to form closer links with universities such as my company has with Wolverhampton University, which has reviewed over 1,000 potentially commercial inventions.

We hear a lot about manufacturing success. However, in the past 30 years manufacturing’s contribution to GDP has declined from 30 per cent to 11 per cent. In spite of that, manufacturing is doing well thanks to the efforts of our managers and workforce, and I congratulate them. They have performed with exceptional capability in adverse conditions. Without them there would be hardly any UK industry. Conversely, given appropriate support of the kind that I have outlined, our workers could produce world-class results.

In the mean time, other countries have seized opportunities. China, India, Brazil and other countries have focused on manufacturing. Look at the numerous visits that Western leaders now make to these emerging economies. Statesmanship is now salesmanship. This is surely the grand paradox of our age—leaders who pay obeisance to manufacturing abroad while tending to neglect it at home.

UK Governments always begin by saying that they want to help manufacturing. I do not doubt the good intentions. We in manufacturing are waiting for this Government to put into practice an effective industrial policy, but we should not have to wait much longer. If we do, we risk evolving into a “comprador” nation, simply buying and selling the manufactures of others and servicing their needs. Manufacturing is the bedrock of our independence and, with sensible policy corrections, can be a powerful source of steady employment and social mobility. In the larger sweep of history and in the lives of nations, these are things that really matter.

15:18

[Lord Lexden]

My Lords, the great national tasks of stimulating enterprise and growth and of rebalancing our economy, to which this important Motion refers, create profound challenges for us all. Nowhere are these challenges more formidable than in Northern Ireland, in whose affairs I have taken a deep interest since the 1970s when I worked as political adviser to Airey Neave while he was Conservative Shadow Secretary of State for Northern Ireland. Sadly, the Belfast agreement of 1998 has not yet had the effect of setting the Province on the road to sustained economic progress. Nearly 13 years on, it remains the poorest region in our country. A higher percentage of its working age population is economically inactive than that of any other region. Its economy today is strikingly unbalanced. The private sector is small and the public sector is dominant, as it is in the north-east of England, to which my noble friend Lord Bates referred so tellingly earlier. Public spending in Northern Ireland has risen to the remarkable point where it is equivalent to more than two-thirds of GDP. This state of affairs is sustained by taxpayers in Great Britain, who provide the resources for roughly half of all government spending in Northern Ireland.

The Province’s grossly unbalanced economy is in part the result of the ravages of terrorism, with which I, like so many others, am personally familiar. I say this on the day that a memorial plaque is to be unveiled in another place to Ian Gow. I went around many Northern Ireland businesses with him. How Ian cheered and heartened them with the marvellous neo-Churchillian language that he loved to employ. The spirit of enterprise and the desire for private sector growth have not vanished from the Province, whose great private sector industries—shipbuilding, linen, rope-making and engineering—integrated its economy with Britain’s in the 19th century.

As my right honourable friend the Secretary of State for Northern Ireland stressed in a speech in Washington last week, the Province remains an excellent place in which to do business. It has first-class transport links to the rest of our country and to Europe; its education results are significantly better than those of other regions; and it is the first part of Europe to have 100 per cent broadband access. It is against this encouraging background that the Northern Ireland Executive, uniting representatives of both communities, is fostering a strongly pro-business climate. In this new pro-business climate a number of forward-looking economists, accountants and businessmen based in Northern Ireland recently came together to form the Northern Ireland Economic Reform Group.

In a report last May, the group examined the Province’s current unbalanced economy in great depth. It concluded that the key to rebalancing lay in a sharp reduction of corporation tax, enabling Northern Ireland to benefit in the way that the Republic of Ireland had done from its 12.5 per cent rate. On the basis of detailed calculations, the report predicted that Northern Ireland,

“would benefit from a much larger private sector, including 80-90,000 extra jobs over 20 years”.

The report also stated:

“A reduction in CT tax to a level close to that in the Republic of Ireland would quite quickly raise overall tax revenues”,

in Northern Ireland as new investment took place. Old fashioned Tories like me, imbued with the scepticism of Edmund Burke, treat the bullish forecasts of professional economists with some caution. Nevertheless, a case has surely been made for a low rate of corporation tax in Northern Ireland that deserves full consideration, not least because of the competitive disadvantage created for the Province by the Republic of Ireland’s current low rate. For some years that has been the firm view of my right honourable friend the Secretary of State for Northern Ireland.

The joint manifesto published by my party and the Ulster Unionists—then led by the noble Lord, Lord Empey—for last year’s election contained a commitment to,

“produce a government paper examining … mechanisms for changing the corporation tax rate in Northern Ireland, in order to attract significant new investment”.

The commitment was incorporated in the coalition agreement and, following an announcement by the Chancellor in yesterday’s Budget, a consultation paper entitled Rebalancing the Northern Ireland Economy was published this morning by the Treasury. It sets the scene for the full discussion of the,

“extent to which a phased reduction in the rate of corporation tax in Northern Ireland could support a rebalancing of the economy”.

It is my profound hope that the discussion that the consultation paper will produce will have a positive outcome so that the flame of enterprise, which has survived the Province’s long, dark years, can burn more brightly. Then Ulster’s new-found peace and stability would be matched by a new-found prosperity.

15:24

[Lord Eatwell]

My Lords, this has been a fascinating debate, enhanced by excellent maiden speeches from the noble Lord, Lord Hussain, and the noble Baroness, Lady Stedman-Scott. Reflecting on what was said by the noble Lord, Lord Lawson, in his customarily elegant introductory speech and on the remarks of many noble Lords opposite, it occurred to me that the economic policies being pursued by the Government may be characterised as good—good politics, that is.

Two elements of the Government’s stance bear the mark of good politics. First, it is always a good idea to have a scapegoat. We have today heard numerous references to the so-called “economic mess” inherited by the Government and to the “record deficit”. With a good scapegoat, you can justify almost anything. It is good politics. Secondly, it is good politics to inflict the maximum pain on the electorate in the first years of a new Government and save up all the sweeteners for the 18 months or so before an election, when the Government can triumphantly declare deliverance from the misery that they themselves have created. All this is good politics, but it is rotten economics.

On the scapegoat point, noble Lords might have noticed that yesterday in the Budget the Chancellor admitted that the UK debt ratio will peak at 71 per cent. I wonder how many noble Lords were puzzled by that statement. How could that be when there is purportedly such an awful financial mess and so-called record deficits that our debt ratio will peak at a level lower than in every other G7 country other than Canada, and at a level lower than in Germany when it entered the crisis? However, let us not go into another debate about debt ratios, use silly expressions such as Britain being on the brink of bankruptcy, or make foolish comparisons with Greece, Ireland or Portugal.

The scapegoating approach is rotten economics, not because the Government convinced themselves of this nonsense but because they have convinced the markets and business, too. By their own politically advantageous hysteria, the Government have, as my noble friend Lord Myners noted, destroyed business and consumer confidence. It is not surprising that the OBR revealed yesterday that business investment growth is down and has locked Britain into a bond-market straitjacket from which it is now almost impossible to escape without abandoning the scapegoating slogans. It is good politics, but rotten economics.

On the timing of sweeteners and elections, unfortunately that is rotten economics, too. The problem is that you cannot be sure that the economy will have recovered in time to deliver the goodies. As the Bank of England’s Monetary Policy Committee minutes published yesterday record, it is,

“not yet clear that the weakness in output growth seen in the latter part of 2010 would prove temporary, particularly in light of the latest indicators of a further weakening in consumer spending”.

That is the Bank of England’s view. This is before the savage government spending cuts hit the economy next month.

The low growth and increased unemployment that the Government’s policies have produced have, as my noble friend Lord McKenzie, also pointed out, cut projected tax revenues for the next five years. I repeat; they have cut revenues for the next five years, so there will be a lot less to give away. The fall in revenues and the consequent increase in government borrowing revealed in the Budget are an indication that we may have entered a terrible downward spiral in which higher taxes and spending cuts result in low growth and unemployment that in turn result in lower revenues, higher welfare payments and a growing deficit—exactly the scenario painted in the OBR’s economic report. That is what the noble Lord, Lord Higgins, should be afraid of. Instead of falling, borrowing is rising.

However, the real failure of this budget is the subject of today’s debate—the failure to promote the rebalancing of the economy that is necessary to enable Britain to grow its way out of recession, and out of deficit. Consider the measures that the Chancellor claims will create growth. Research and development tax changes sound good, until you realise that these will benefit just 7,000 out of the 4.8 million small firms in this country. The entrepreneurs’ relief sounds good, until you realise that the benefit will go to just a few hundred people. The new apprenticeships that will reach 12,500 young people sound good, until you realise that 60,000 young people have become unemployed in the past year alone, adding to the 1 million young people currently unemployed. The enterprise zones sound good—until one looks at all the academic evidence that demonstrates that they are the most expensive means available of creating jobs, because so many of those jobs would have been created anyway. Enterprise zones are just a neat way of avoiding taxes—perhaps in Cornwall, too.

What of the cuts in corporation tax and fuel duty? The OBR's verdict is that the effects will be “minimal”. No wonder, since the cut in corporation tax has been paid for by cutting investment allowances. How stupid is it to take from companies that invest and hand out the money as a tax cut to all companies, whether they invest or not?

The OBR's verdict on this Budget for growth is that:

“We do not believe that there is sufficiently strong evidence to justify changing our trend growth assumption in light of policy measures announced in Budget 2011”.

That is it: no change.

The real damage to the hope of rebalancing the economy is to be found not in the failure of the Budget but in the announcement on the day before that inflation was at 5.5 per cent, and in the Government’s admission that inflation is likely to stay that high for the rest of this year, and to be higher than previously forecast for the next five years. That point was emphasised by the noble Lord, Lord Griffiths.

This country has one goose that can lay rebalancing golden eggs: British manufacturing, as the noble Lords, Lord Renton, Lord Empey and Lord Paul, and the noble Baroness, Lady Hooper, noted. Over the past year, manufacturing has performed very well, with rapid export growth stimulated by the sharp fall in the value of sterling. However, the competitive advantage derived from the devaluation is being eroded by our relatively high inflation rate. Moreover, the high rate of inflation is likely to bring forward the day when the Monetary Policy Committee raises interest rates and seeks to reduce inflation by raising the exchange rate, weakening further the stimulus to exports. We have only one goose and we are in danger of killing it.

The danger derives not just from the Government's failed macroeconomic strategy, important though that failure is, but from the timidity of the growth strategy laid out in The Plan for Growth published yesterday. The essence of the plan is summed up under the heading: “What the Government will do now”. The main headings are: “minimise regulatory burdens”, “reform the planning system”, “improve the corporate governance framework”—by removing the need for audits—“provide finance for new and growing businesses”—by small tax incentives—“further improve innovation in the UK”—by small but useful measures—and, “improve competition”.

The clear theme is to reduce the role of government—something that surely pleases the noble Lord, Lord Ahmad—and create a slightly biased playing field relative to our major competitor countries. This is not what Britain needs, as my noble friend Lord Haskel pointed out. We do not need a biased playing field; we need a new game, as the noble Lord, Lord Bates, suggested. The rules of the new game can be learnt readily by studying the success of other economies—something that the noble Lord, Lord Risby, might care to do. What is needed is a secure, plentiful and stable flow of finance to fund industrial investment, together with a structure of corporate governance that fosters a commitment to long-term innovation and investment. Neither of these conditions is present in Britain.

Our fundamental problem is illustrated by the fact that more than 70 per cent of purchases and sales of industrial stocks and shares over the past year have been by day traders and short-term investors. British industry is owned by people to whom the long-term future of a company is irrelevant. The mantra that the duty of the board of a company is to pursue the best interests of the shareholders is vacuous when the shareholders change by the hour. Instead of secure sources of finance for industry, we have a fragile banking system that is overly dependent on short-term wholesale funding and in which a significant proportion of financial innovation is driven not by the demands of economic efficiency but by the desire to avoid taxes and/or the strictures of financial regulation.

Of course, better regulation would not be enough to secure the industrial financing that we need. That will require a fundamental reform of the UK's financial sector that goes far beyond the terms of reference of the Independent Commission on Banking. The reform should encompass not just the welcome creation of the green investment bank but the creation of an industrial investment bank, as called for by my noble friend Lord McFall, with the funding muscle to make a real difference to Britain’s small and medium-sized industries—the industries from which innovation and jobs predominantly come.

Nothing so radical was evident in yesterday’s Budget. Indeed, there was nothing radical at all. Whether there is fuel in the tank is debatable, but everyone can see that all the tyres are flat. That is because the other crucial component of a growth strategy is missing. The Government have chosen to throw away the ignition key. What will ignite growth is demand. Investment will take place only if there is the prospect of stable, growing demand. Without prospective demand, it does not matter how cheap or reliable funding might be, how generous the tax breaks or how innovative the technology. Without prospective demand, you simply stand to lose your money, and there lies the central failure. By consciously suppressing demand, the Government are consciously suppressing growth. That is why growth is down—not just now but for the foreseeable future. The noble Lord, Lord Lawson, described this as being least needed economically. I must say that I prefer the noble Lord of the Lawson boom rather than the one of fiscal masochism.

The OBR’s forecasts show growth recovering after 2013. However, one should not be misled, as the noble Lord, Lord Newby, has been. The OBR made it clear that its medium growth forecasts are based on the forecasts of potential growth—that is, on capacity and not on demand for that capacity. Only if there were some magic fairy that ensured that capacity was fully utilised would those growth rates be attained.

There is no magic fairy. This Chancellor has undermined Britain’s recovery from the consequences of the international financial crisis. Worse than that, by making the wrong choices at the wrong time he has weakened the growth prospects of the British economy for years to come. The characterisation of this Budget as a “Budget for Growth” is a title worthy to stand alongside Orwell’s Ministry of Truth. It was a Budget for stagnation. However worthy the micromeasures, the verdict remains that of the Office for Budget Responsibility—no impact on long-term growth. No impact at all.

15:37

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, we have had a tremendously interesting and wide-ranging debate, and I add my gratitude to my noble friend Lord Lawson of Blaby for having secured it on the day after the Budget. It has been a debate enriched in particular by notable maiden speeches, to which I shall return. I wish that I had the time to do justice to all the points made but I am very grateful for all the contributions, even if I am not able to cover more than a small percentage of them.

Last June’s Budget was all about rescuing the nation’s finances and paying for the mistakes of the past. Yesterday’s Budget was about reforming the nation’s economy so that we have sustainable growth and jobs. However, this will not be possible without sticking to our deficit reduction plan. It is that plan which has secured economic stability and our international credit rating, and it has been commended by the OECD, the IMF, the World Bank and many others. Therefore, I am very grateful for the starting point of my noble friend Lord Lawson, who, at the beginning of the debate, confirmed, as did many other speakers, that the prime duty of the Government—and it is what my right honourable friend the Chancellor did yesterday—is to stick to plan A to eliminate the structural deficit. That was touched on by my noble friends Lord Newby, Lord King of Bridgwater and Lord Tugendhat in particular, who stressed that these are difficult times in which we have to operate. Indeed, the consistent message across a range of speakers, including my noble friends Lord Oakeshott of Seagrove Bay, Lord Higgins and Lord Griffiths of Fforestfach, was that we must carry on with that plan. There were one or two discordant voices, but only one or two, led by the noble Lord, Lord McKenzie of Luton. But it flies in the face of all the advice, domestically and internationally, that we are getting.

I say to the noble Lord, Lord Myners, who tries to paint a very negative picture of where we are, that on the latest figures, which the EU has put out, the growth numbers for the UK this year are lower than those forecast last year, very largely due to the disappointing fourth quarter that we had last year, which flows on through to this year. I acknowledge that, but nevertheless, on the EU’s figures, the UK will grow faster this year than France; it will grow faster than the eurozone average and it will grow faster than the average of the EU. We must get out of the habit of talking down the prospects of the economy.

The action taken by the Government has allowed us to move from rescue to recovery. Yesterday’s Budget will encourage enterprise and increase investment; it will support exports, manufacturing and innovation; and it confronts a hard truth, which has been ignored for far too long, that for the past decade Britain has been losing ground in the global economy. While other nations have reduced their business tax rates, ours have increased; while other countries have removed barriers to enterprise, ours still stand; and while our competitors have improved their education systems, reformed welfare and increased exports, we have gone backwards on all those measures.

The legacy bequeathed to this Government was one where Britain’s future was gambled on a debt-fuelled model of growth that has clearly failed. It is no good saying there was growth as it was based on unsustainable debt and the private sector was crowded out. As we have been reminded, the state represents almost a half of all our national income. We simply cannot afford to continue down that path. It is a point that has been made forcefully today and most forcefully made by noble Lords on the opposite Benches, starting with the noble Lord, Lord Sugar. He made it quite clear that it was ill-discipline in the banking system—he did not quite get to say that it was ill-discipline that was allowed to go on by the previous Government. That was one element of it.

The noble Lord, Lord McFall of Alcluith, drew attention to another aspect of the legacy that we have in the too-big-to-fail challenge. My noble friend Lord Oakeshott of Seagrove Bay drew attention to excess debt and the noble Lord, Lord Haskel, again referred to debt-fuelled growth. I could not agree more. My noble friend Lady Kramer very rightly made the point that, if the growth is to be sustainable, we have to move from a debt-fuelled to a savings-fuelled basis for growth.

The noble Lord, Lord Myners, seems to have forgotten where he was on these matters only a few months ago. As he put it—I could not put it better:

“The mistake we made as a government was that we ran large deficits in the middle part of the last decade when the economy was clearly running at full capacity”.

I do not think he drew our attention to that today but, if I am wrong, I apologise—I missed it. However, the fact that we need sustainable growth is at the root of what the Government now have to fix.

Britain, like any other nation, has to earn its way as the world becomes more competitive. We have to reverse the trend that has seen us drop from fourth to twelfth in the global competitiveness league. We have to ensure that growth is to the benefit of every region of the UK, not just of London and the south-east, a point that has been made this afternoon. The alternative would be to accept this country’s economic decline and a continuing fall in living standards for our population. That is why my right honourable friend the Chancellor has set out the Government’s new vision for growth. It is a vision that has four key economic ambitions at its heart: that Britain should have the most competitive tax system in the G20; that Britain should be the best place in Europe to start, finance and grow a business; that Britain should be a more balanced economy by encouraging exports and investment; and that Britain should have a more educated workforce that is the most flexible in Europe.

First, I take taxation. Britain used to have the third lowest corporate tax rate in Europe; we now have the sixth highest. Our tax code has become so complicated that it has overtaken that of India to become the longest in the world. We have to address that. Our taxes must be fair, predictable, simple to understand and easy to comply with; and they have to be efficient in supporting growth. From April this year, corporation tax will be reduced not just by one percentage point, as we announced last June, but by two, and it will continue to fall by one percentage point in each of the next three years, taking our corporate tax rate down to just 23 per cent, which is 16 per cent lower than it is in America, 11 per cent lower than in France and 7 per cent lower than in Germany, and will give us the lowest corporate tax rate in the G7.

A lot of points on tax have been rightly raised in our debate. My noble friend Lord Lawson kicked it off by taking the big picture view: drawing our attention in particular to the need to look forensically at the top rate of income tax. Yes, of course, we will look at the lessons of his dramatic reduction of the top rate from 60 per cent to 40 per cent, and factor that in. I acknowledge and note that the noble Lord, Lord Myners, did not agree, and is prepared to say so consistently, with his Government's decision to raise the top rate to 50 per cent. My right honourable friend the Chancellor has made it quite clear that that is not part of what he sees as the medium to long-term regime for income tax.

On the question of the possible combination of income tax and national insurance, I take the warnings of my noble friend Lord Lawson to heart. Yesterday, my right honourable friend described it very precisely as an operational merger. We are conscious of the difficulties. Indeed, we keep a copy of my noble friend's memoirs on the ministerial floor; it is presently in the office of my honourable friend the Exchequer Secretary. We will take the lessons to heart. It will be a measure that will certainly reduce administrative burdens for employers. It will bring the two regimes operationally together. It has the capacity to allow us to smooth out some major inconsistencies, but we will take it stage by stage through the consultation process.

On tax incentives for entrepreneurs, I very much agree with the noble Lord, Lord Sugar, and my noble friend Lord Northbrook, who drew attention to those important measures. On fairness, which underpins everything that the coalition does in the tax system, my noble friends Lady Kramer and Lord Oakeshott of Seagrove Bay, rightly drew attention to the coalition's emphasis on measures to take 1.1 million people totally out of the tax system and measures that will lower income tax for 25 million people. While we are on fairness, I say to the noble Lord, Lord Haskel, that the pain is indeed being fairly shared. As was confirmed in the distributional analysis published in the Budget document yesterday, the top 20 per cent of households by income will make the biggest contribution to deficit reduction. That is absolutely right and proper. Lastly in this area, I am grateful to my noble friend Lord Higgins for mentioning measures on charitable giving. It is expected that the inheritance tax measure will result in about £300 million additional benefit to charities when it is in full effect.

Our second ambition is for Britain to become the best place in Europe to start, finance and grow a business. In this area, I agree with many speakers that there is a pressing need for reform. In the past decade alone, countries such as Germany, Denmark and Finland have overtaken the UK in the international rankings for competitiveness. The Government’s plan for growth has many actions in it, too many actions for a few of your Lordships who made references to lollypops and so on, but it is out of a process where we had the most intensive and wide-ranging discussions with representatives of business. These measures were widely welcomed yesterday by business as responding to what it asked of us and they are measures which we have been able to afford. I assure the noble Baroness, Lady Valentine, that we will see these things through. She is quite right that it is a plan for action that will be driven through. A similar point was made by my noble friend Lord Griffiths of Fforestfach who questioned the responsibility for seeing it through. I could recite the list of ministerial responsibilities, but I assure him that implementation will be vigorous.

I note that a number of contributions stressed the regional aspects. I am always refreshed to hear my noble friend Lord Bates reminding us of the vigour with which the north-east is responding to very difficult conditions. I welcome his recognition of how some of the proposed interventions target his region. We seem to have the north-east and the south-west in coalition in that corner. It was also good to be reminded that Wiltshire has been thriving and leading the way from the mid-9th century. I am grateful to my noble friend Lord Brooke of Sutton Mandeville for that.

Another very important and separate regional dimension was raised by my noble friend Lord Lexden and the noble Lord, Lord Empey. I am grateful to my noble friend for mentioning that the Treasury has today published a document on rebalancing the Northern Ireland economy as the Northern Ireland economy faces particular challenges. Another dimension mentioned by a number of noble Lords, including, in his inimitable way, my noble friend Lord Lyell, is the industrial sector. We have it very much in our plans.

When one steps back from all the measures, it is perhaps the issues to which my noble friend Lord Lawson drew attention at the beginning of the debate that are critical. They were also mentioned by my noble friends Lord Northbrook and Lord Tugendhat. They are the broad deregulatory measures. I think a new and concerted look at the planning system is important. I am grateful to my noble friend for stressing that.

The third of the Government’s ambitions is the need to have balanced growth to encourage investment and exports. I shall highlight a few of the measures we are taking. We have put a lot of effort into the sectoral cut when discussing them with numerous sector groups. For example, in life sciences, we will radically reduce the time it takes to get approval for clinical trials, which is critical if the UK is to continue to be at the cutting edge, and in the digital and creative industries, we will improve the intellectual property regime. The noble Lord, Lord Paul, quite rightly drew attention to the mixed picture in manufacturing. On the one hand, there has been very dramatic slippage in manufacturing over the past decade, but on the other, our manufacturing sector still has very great strengths. I am pleased to say that at the moment manufacturing is growing at a record rate with 14,000 more jobs having been created in the sector in the past three months. To help this to continue and to build on this progress, the Government are creating new export credits to help smaller businesses. We are launching Britain’s first technology and innovation centre for high-value manufacturing, and we are funding a further nine new university centres for innovative manufacturing.

Several noble Lords, including the noble Lord, Lord Sugar, in his fascinating speech, drew attention to the help to SMEs, which is critical. My noble friend Lord Newby drew attention to the difficulty of getting credit and my noble friend Lord Hussain, in his very clear, direct and interesting maiden speech, could not have been clearer about a number of things, but particularly the challenge facing SMEs. I also note that there will now be at least two doughty champions for Luton in this House and we shall be reminded of all the good things that are going on there.

I assure my noble friend Lord Hodgson of Astley Abbotts that we will watch very closely the process by which SMEs get credit. I am grateful to my noble friend Lord Risby for stressing the range of support that the Government are giving SMEs. I am grateful also to my noble friend Lord Ahmad of Wimbledon for his different perspective on these issues. In a related area, my noble friend Lady Hooper rightly stressed the need for us to press on with trade arrangements that benefit small, medium and large companies. Yes, we will place new emphasis on EU bilateral free trade agreements and, yes, we are working on Latin America. Only next week, the Deputy Prime Minister will be there and of course he will promote trade as part of his visit.

On the last of our four ambitions for growth, to create a better educated workforce that is the most flexible in Europe, it is alarming to see that Britain’s working age population has lower skills than the same demographic in America, Germany and France. That perhaps is the biggest problem facing our economy and is why the Government are committed to funding new university technical colleges, which will provide 11 to 19 year-olds with vocational training that is among the best in the world. But that will not alone solve the problem. Our attention quite rightly was drawn to that issue by a number of speakers. In the maiden speech of my noble friend Lady Stedman-Scott, she could not have been clearer about the challenge of getting young people, even those furthest away from the labour market, into employment. I can only commend the work that she has done and does with Tomorrow’s People and I thank her for her contribution. These issues were also touched on by my noble friend Lord Renton of Mount Harry and the noble Lords, Lord McFall of Alcluith and Lord Haskel.

The noble Lord, Lord Haskel, talked about 40,000 apprenticeships for the young and unemployed. It is perhaps worth remembering that that is incremental to what the Government had already announced. It brings the total number of apprenticeships available over the next four years to 1.2 million. As a result of this Government’s policies, and because this is so critical to the future of the economy, there will be some 250,000 more apprenticeships over that period.

In summary, the Government are looking to get the economy back on the right path. I say to the noble Lord, Lord Eatwell, that we will reverse the trend of the past decade that has seen our share of world exports decline, has seen the UK’s economy becoming increasingly unbalanced and has seen our businesses held back by a mountain of bureaucracy and a myriad of red tape. That is the legacy of the previous Government. Instead, we will make the UK Europe’s leading destination for enterprise, with the most competitive tax system in the G20, the most flexible workforce in the EU and an economy that is the envy of the world. That is how we will drive growth in this country, how we will create the jobs for the future and how we will build the more dynamic, prosperous and sustainable economy that this country deserves.

15:59

[Lord Lawson of Blaby]

My Lords, we have had a truly excellent debate. I suspect that your Lordships will be relieved to know that I intend to be very brief indeed as I have a plane to catch. I thank most sincerely all those who have taken part in the debate. I thank in particular my noble friends Lord Hussain and Lady Stedman-Scott, who treated us to two outstanding maiden speeches. We look forward to hearing them frequently in the future. With that, I beg leave to withdraw the Motion.

Motion withdrawn.

Adapting to Climate Change: EU Agriculture and Forestry (EUC Report)

Thursday 24th March 2011 Lords Chamber

Motion to Take Note

16:00

Moved By

[Baroness Sharp of Guildford]

To move that this House takes note of the Report of the European Union Committee on Adapting to climate change: EU agriculture and forestry (8th Report, Session 2009–10, HL Paper 91)

[Baroness Sharp of Guildford]

My Lords, it is a year now since the European Union Committee published our report on adapting EU agriculture and forestry to climate change. In that report, we acknowledged that there had been changes to the climate in the past and repeated the widely shared concern that current projections of climate change indicate a far higher level of uncertainty in the future. We quoted from a November 2009 statement made jointly by the Met Office, the Natural Environment Research Council and the Royal Society which said that scientific evidence of dangerous, long-term and potentially irreversible climate change had significantly strengthened since 2007. The statement went on:

“In the UK, we will be affected both directly and indirectly, through the effects of climate change on, for example, global markets (notably in food), health, extent of flooding and sea levels”.

Indeed, your Lordships will recall what happened in Cumbria in November 2009 when unprecedented levels of rainfall caused flooding that devastated much of the area’s infrastructure. Water levels in Cockermouth, for example, reached over eight feet at their worst point. Estimates suggest that the cost of the damage to homes, businesses and infrastructure has amounted to more than a quarter of a billion pounds. Your Lordships will also be well aware of the recent Foresight report entitled The Future of Food and Farming which identifies climate change as one of the major challenges that our global agriculture and food system face.

We carried out our inquiry against this wider background, but more specifically in relation to the White Paper, Adapting to climate change: towards a European framework for action, which the European Commission had published in April 2009, together with a linked paper, The challenge for European agriculture and rural areas. In general, and perhaps even more so in the light of the Foresight report, our feeling was that the White Paper failed to emphasise the urgency of these issues. Perhaps I may also say that we felt that also to be true of the Government’s response. The White Paper was rather too long on aspiration and on getting together to prepare models and strategies, but somewhat short on action.

The main focus of our report is on the actions that the UK and our EU partners can and should take to face the challenges posed to agriculture. This in turn sets the discussion in the context of the common agricultural policy, where there is a larger debate now under way about reform after 2013. I should also mention that our report related to forestry as well as agriculture. Because the Commission published its Green Paper, Forest Protection and Information in the EU: Preparing forests for climate change, only in March 2010 when we were concluding our inquiry, we returned to the forestry aspects of our inquiry in July of last year when we responded to the Green Paper. My remarks today will take account of that response as well.

The Commission White Paper of April 2009 foresaw a two-stage approach on adaptation measures. Phase 1, from 2009 to 2012, would prepare the ground for a more comprehensive EU adaptation strategy. Phase 2, from 2013 onwards, would see that strategy implemented. Emphasis was rightly placed on action at the national and local level, while the Commission’s role was essentially that of strategy setting.

As regards agriculture and forestry, in phase 1 the Commission proposed that measures for adaptation and water management be embedded in national rural development programmes from 2007 to 2013. We explain in our report that those rural development and environmental programmes are supported under Pillar 2 of the CAP, which at present makes up some 20 per cent of the CAP spend—some €96 billion over that seven-year period. There was an interim review of the CAP in 2008—the health check—which, among other things, led to an agreement by member states that several “new challenges” should be seen as priorities for funding under the second pillar. Among those were measures towards the mitigation of, and adaptation to, climate change.

We heard from witnesses to our inquiry, including a representative of the Commission's Directorate-General for Agriculture and Rural Development, that after the health check the take-up of climate change measures had been very disappointing, with only some 14 per cent of funds available used for this purpose and the bulk of the funding used by countries that had already been giving priority to such measures. We felt that there was much room here for greater transparency—perhaps a little naming and shaming—and recommended that member states should be required to spell out what they had done to promote measures for adaptation to climate change in the annual rural development programme reports which they are required to provide to the Commission.

In the White Paper the Commission also proposed that, before 2013, there should be an examination of the capacity of the CAP's farm advisory service to reinforce knowledge and adoption of new technologies that facilitate adaptation. That issue is very much at the heart of our concern about the future of agriculture in this country and in the EU more generally. One chapter in our March 2010 report deals with what we call research and knowledge transfer; and we are clear that the double challenge of feeding the world's growing population, at a time when climate change is likely to restrict the landmass that can usefully be cultivated, demands both developing new and innovative technologies and making use of those that already exist but where farmers need help with putting them into practice.

The White Paper proposed that by 2011 the EU should set up what it called a “clearing house mechanism” to serve as a database on climate change impact, vulnerability and best practices on adaptation. That is fine as far as it goes. However, more widely, we are concerned by the evidence that we received suggesting significant neglect of scientific research into agriculture generally and specifically into adapting agriculture and forestry to climate change. That was particularly true of the UK. We heard, for example, that between 1970 and 2010 there had been a significant fall in the number of agricultural research institutes in the UK, and in the number of university departments of agriculture and land management, paralleled by a large drop in the number of students in these subjects.

In our report, we therefore call on the Government to ensure that the UK's research capacity is strengthened. We also make clear our view that there is an important role for the EU to identify the research gaps, and to look to fill them with research supported by the Commission through the framework programme as well as by co-operative efforts between member states. Since our report, I am pleased to note progress in that respect. In March 2010, when our report was published, the first steps were being taken to set up a very promising co-operation between the UK's Biotechnology and Biological Services Research Council, the BBSRC, and France's National Institute for Agricultural Research, INRA, to carry out joint research into agriculture, climate change and food security.

A commitment to generating new knowledge is essential but not sufficient. It is also essential that such knowledge is translated into new products and techniques and that it can be applied in practice. Since last autumn our committee has been conducting a further inquiry, into innovation in EU agriculture. We were stimulated to undertake this latest inquiry by our work on adaptation to climate change and the seeming deficiencies in both the volume of agricultural R&D and the means of spreading best practice. In the past few months, we have learnt a great deal about the state of advisory systems in the UK and in other EU member states. In particular, I want to draw your Lordships' attention to the farm advisory system which all member states have been required to provide under the CAP over the past decade.

This requirement was introduced in parallel with the introduction of so-called “cross-compliance” obligations on farmers receiving direct payments under the CAP—obligations to meet certain conditions relating to environmental protection in their agricultural practice. Different member states have acted on the farm advisory system requirement in different ways. We have heard that, in some countries, FAS representatives are found to offer a very helpful service, while in others they are seen, in effect, as agricultural policemen.

We know that the Commission is reconsidering the role and functions of the farm advisory system and that the UK Government are looking again at arrangements in this country. We are clear that there is an unacceptable gap in the provision of advice to farmers—and that agricultural advisers could, and should, act as conduits for the application of research advances to farming practices. We look to the Minister to tell us more about the Government’s intentions in this respect.

The Commission’s White Paper looked to the period from 2013, the phase 2, for the implementation of strategies on adaptation to climate change. This coincides with the next funding period for the CAP, hence the shape of the CAP after the further reform which is now under discussion. In our report we said that the defining characteristics of the future CAP should be the “sustainable intensification” of agriculture, a term which was persuasively advanced in the Royal Society’s 2009 report, Reaping the Benefits.

In November last year, the Commission published a communication, The CAP towards 2020: Meeting the food, natural resources and territorial challenges of the future. We responded to it with a letter which drew heavily on our report on adaptation to climate change. In it we said that we welcomed the idea of the “greening” of Pillar 1 of the CAP, which would imply making some of the income support funding contingent on the delivery of environmental public goods. We have suggested that eligible activities might include incentives to mitigate agriculture's contribution to climate change and to adapt the impact of climate change on agriculture. We reiterated our view that there is no case for payments to be made available without an environmental justification. Again, we have stressed that better integration of environmental considerations in Pillar 1 must go hand in hand with vastly improved knowledge transfer systems.

I must say just a few words about the committee’s views on forestry in the context of concerns about climate change. In our July 2010 response to the Commission’s Green Paper, we agreed that there was no need to give the EU competence for forestry to match the competence which it has in relation to agriculture, while accepting that this still left scope for valuable action to be taken by the EU. Forests can play a key role in combating climate change, both as a carbon sink and as a source of renewable energy. We were much influenced by the evidence that we received from Professor Read, which suggested that restoring the proportion of UK land devoted to forestry to the 16 per cent at which it stood in 1980—compared with 12 per cent of our landmass today—could reduce UK carbon emissions by some 10 per cent, which is a very substantial amount.

However, we made clear our concern that the economics of forestry could prove the greatest obstacle to such policies. Given the wide range of experience across the EU, we recommended that the Commission should work with member states to exchange experience and develop an economic assessment of the viability of providing significant additional afforestation. I have to say that, so far, we have seen no strong signs of support from the Government for such a policy. I would welcome some comment from the Minister today on this recommendation.

Mr Jim Paice MP, the Minister of State at Defra, wrote to us at the end of June 2010 to set out the Government’s response to our report. I am glad to say that there is quite clearly a lot in common between our views and those of the Government on the issues with which we dealt in the report—not least on the longer-term shape of the future CAP. However, as I have indicated, we have not so far been able to persuade the Government in relation to our recommendations for future action on research and knowledge transfer. For example, in their response, the Government commented that,

“the number of agricultural institutes is not a good measure of agricultural research output”.

We accept that—but it could still be a debating point. There is certainly a whiff of complacency about such an answer, particularly in light of the widespread concern, as we heard from our witnesses, that there has been a significant decline in agricultural research in this country and a major failure in knowledge transfer down to farm level.

The Government also commented that,

“communication to farmers and land managers is important to ensure that research and knowledge are used on the ground”.

Given our analysis that in England such communication currently falls short of what is required to enable farmers to put innovative knowledge into practice, we expect the Government to take on board the need to make farm advisory services more effective. In June 2010, the response said that Defra was mapping advisory services “to inform future decisions”. I hope that the Minister will be able today to say something more positive about those decisions .

We have also received a response to our report from European Commissioner Sefcovic in a letter dated 7 September 2010. We were encouraged to read that the Commission agreed with most of our views and recommendations. It is fair to say, however, that the evidence of the extent of its agreement will come when there are more specific legislative proposals for the future of the CAP.

My remarks this afternoon have shown how intensive a debate is now under way in relation to the future of the CAP, in Brussels and in the capitals of the EU member states. As our report of March 2010 makes clear, however, the sustainable intensification of agriculture must be a key determinant of the future CAP and must include a range of measures aimed at adaptation to climate change. It is important that these measures are put into effect in not too distant a time. I beg to move.

16:17

[The Earl of Selborne]

My Lords, the House will wish to join me in thanking my noble friend Lady Sharp for the authoritative way in which she has introduced this important report. I wish to thank all members of the committee who contributed, a year ago now, to this report and I am grateful that we at last have an opportunity to debate it.

I warm to the concept enunciated by my noble friend of sustainable intensification, which is the key to future common agricultural farming policy in Europe. European farming has to be considered in a long-term context and needs to be reviewed in the light of adapting to climate change.

I declare two interests: I chair the Living With Environmental Change programme, which is a partnership of major UK public sector funders of environmental research; and I am a farmer.

The role that Europeans and the global population might expect to be the contribution of Europe to meeting the global needs of food production after 2013 needs to be put into the context of not only climate change but of environmental, economic and demographic change, and over a much longer period than in the past the CAP has been considered; it is perfectly reasonable to think in terms of 40 years. Of course, when we are thinking about food security, as we are in a global sense, we have to recognise that there is absolutely no validity in simply considering national food security, or even continental food security. It all has to be looked at in terms of the needs of the world. If we look at the rather chequered career of previous common agricultural policies, we recognise that the obsession, which was perhaps understandable, of trying to achieve European food security in some ways exacerbated the problems in poorer countries by undermining local production by subsidised exports and import tariffs. So the concept that the committee enunciates of sustainable intensification is not, quite frankly, a policy that in some member states will chime very warmly—but for all that it needs to be promoted very strenuously.

The issues that will face us over the 30 or 40 years, which we can predict fairly confidently, bear repeating. There will be a population of 9 billion or more, with increased purchasing power. That is a positive factor; it is excellent that there are now opportunities for people to assume the nutritional levels that we take for granted. It is not to say that the millennium goal of 2,100 calories per capita will be met in many parts of the world, but at least there will be very significant populations that will eat more meat and therefore will need more animal feed, so the demand for feed will increase. We know also—or it is perfectly reasonable to assume—that the land area for crops will decline, at the very best. If it increased, it would be clearly at the expense of environmental issues, not least the loss of biodiversity. The urbanisation of so many parts of the world demonstrates that it is highly improbable to expect new cropped areas. So there will be severe limits in reclaiming for agriculture new land areas, and there will be a limitation of other natural resources—water above all, but also fertilisers and fossil fuels, which we would wish to limit because of their impact on climate change.

To go back to water, one of the most critical of those natural resources, we must remember that of the available fresh water already 70 per cent is used on a global scale in agriculture, although not of course in this country. The figure is relatively low in this country. But when you look at how you are going to increase production, you have to recognise that fresh water is a finite resource and that innovation is clearly required. Against that there is the issue, which we have discussed regularly, about the increased demand for biofuels, which has land use implications, and the need for agriculture, to make a contribution and to reduce its adverse impacts, in terms of not only climate change but environmental pollution to soil and water.

Above all, the requirement is to ensure that with the new agricultural systems that we anticipate having to be produced through new technologies, we must ensure that the price of food remains within the capacity of the poorer countries, which at the moment find it difficult sometimes to compete for food. Indeed, the higher food prices threaten their development.

In the developed world, as opposed to the developing world, we face increased volatility in food prices, which arises quite rapidly and unexpectedly sometimes, as we saw last year, with food bans from Russia, Ukraine and other countries. In 2009, Chatham House said very reasonably that we can no longer afford to take our European food supplies for granted. We may not be short of food ourselves, but our purchasing power of European consumers leads to these adverse impacts, export bans and food droughts, which we have seen since 2009, as a direct consequence of our reliance on food that we can purchase more rapidly than others. Over the next 40 or 50 years, we need in Europe to promote increased production, particularly in countries where consumption will increase—that is, we want to promote production in poorer countries and reduce price volatility, which helps no one. Above all, we want to develop lower cost production systems, or low-cost production systems at any rate, because I fear that they will not be lower than at present. We need to reduce our dependence on inputs, particularly of fossil fuel, and to make much better use of water. That is what we mean by sustainable intensification, which has to be done with the same or a reduced land area. The bulk of future increases in production will thus have to come by greater output per hectare, which means higher yields and a dependence on good quality soils, adequate amounts of water and the development of appropriate technology.

Chapter 6 of this helpful report deals at some length with the research and development requirements. This is where, with our own role in the United Kingdom, we recognise that we are the repository of much of the underpinning science. That is certainly relevant to other European countries, if perhaps to a lesser extent. While it is true that applied agricultural research has declined over the past 20 years, the same has not been true of the biological sciences as a whole. All credit to the previous Administration, particularly while the noble Lord, Lord Sainsbury, was Science Minister. He did a lot to underpin the basic sciences. The tragedy is that much of that basic science is not being adequately applied in ways which are relevant to these production areas where we see problems looming ahead, so we need to build those bridges.

We need technology transfer that is appropriate to the users. I remember that when Archbishop Tutu was asked what had been the greatest and most important advance in Africa over the past 10 years, or perhaps in his lifetime, he said that it was the mobile telephone. That is because many African farmers will have access to a mobile telephone with a camera on it. Being able to photograph the crop or the disease, they can get instant transfer with the sort of technology they are looking for. Above all, we need the infrastructure to ensure that the development work moves the science, which has moved so fast. In molecular biology, we now have knowledge of the plant and animal genomes. All that gives us a great opportunity and there is huge potential for innovative approaches.

The problem is that we have not been prepared to embrace some of those new technologies, an obvious example being GM soya. We have to rely on imported protein for animal feed, which we cannot grow competitively in Europe. Soya is now largely grown as genetically modified. If we insist on importing the non-genetically modified, our production systems will simply be more expensive. Of course there is a great deal of hypocrisy anyway, because we import meat that has been fed with GM soya—in fact we cannot tell whether it has or not. That is simply a case of not embracing a new technology for reasons that are nothing to do with either the science or the risk.

New technologies that will be relevant are no-till agriculture, which has already been widely adopted in Europe and certainly has much more application elsewhere around the world, and better irrigation systems, where the report refers to the technologies developed in the Middle East. I particularly draw attention to the excellent work done is Israel in developing irrigation systems that have far less loss through evaporation. Above all, there is integrated cost protection. All of those lead to lower input farming systems and cost minimisation.

We need to fund this strategic and applied agricultural research. Over the past 20 years, we have lost momentum. I have heard of and read many reports, and it is encouraging to hear Ministers say that they recognise that this now needs to be addressed, but it takes 20 years to move from basic research right through to the applied end of the spectrum. We need to understand that it should surely be part of our overall assistance to developing countries around the world. We are the repositories of so much of this science and we have an obligation to make sure that it is properly transferred.

16:29

[Lord Giddens]

My Lords, the most reliable measurements we have of CO₂ in the atmosphere are those of the Mauna Loa observatory in Hawaii. As of February 2011, those showed levels of CO₂ to be still rising. It is up to 391.76 parts per million, compared with 389.85 parts per million last year. Not only are those rising, they are increasing at an accelerating rate from decade to decade. Because, as collective humanity, we are doing so little to change the situation, it is now unlikely that we will be able to confine global warming to an average to two degrees Celsius—as noble Lords will remember, the limit that most scientists regard as reducing risk to reasonably manageable dimensions.

Whatever we do now, there will be significant levels of climate change. Noble Lords should remember that that climate change is irrevocable and cumulative. Once the greenhouse gases are in the atmosphere they will be there for centuries, and we know of no way of getting them out again. That means that globally, regionally and locally we will be deeply in adaptation. The term “adaptation” sounds benign and almost reassuring, but the risks that we face are truly profound and scary. It is a myth to suppose that the most dangerous changes will be confined to the developing world; Europe is as vulnerable as anywhere else to the increasingly intense patterns of drought, flooding and extreme weather that will follow.

For that reason, because of its emphasis on adaptation, I welcome the report. It was produced before I became a member of the sub-committee but I congratulate my colleagues on its production and on their excellent work. It is a highly important report because agriculture and land use produce something like 10 per cent of the greenhouse gases produced by the European Union, including some very lethal ones, notably methane.

The report and the EU commissioner’s White Paper are both rich in detail so I will comment only on a few aspects, and then only briefly. First, a core point is that we have to think about adaptation proactively and in a long-term fashion. It is no good waiting for climatic changes to occur and then trying to adapt to them later; our defences against a newly aggressive nature would be quickly overwhelmed. We have to prepare and invest now for outcomes that may be 20 or 30 years off. This is a difficult situation because it involves the assessment of future risk and there are several different scenarios for what that risk will be, so preparing for the long term is complex—it is not a simple matter. However, it is easy to find instances of where the threats are. For example, the core agricultural industries that exist in the southern Mediterranean almost certainly will not be there at all 20 years down the line, so we face massive issues of adaptation and we have to prepare now, not leave them for the future.

Secondly, improving the resilience of crops, woodland areas and water management systems is going to be key. Science and technology will have a massive role here, and I agree wholeheartedly with the comments that the noble Earl has made on this issue. I agree with the report when it emphasises the importance of biotechnology, which is probably the only way of simultaneously increasing the productivity and the hardiness of crops in response to changing climatic conditions. I do not see any other way of doing that on the horizon.

Thirdly, it is right to point out, as has been pointed out, that forestry has a dual role. Over 40 per cent of the EU is still forested. Protecting the forests is crucial since deforestation is a major source of greenhouse gas emissions in Europe and across the world. Forests also absorb CO₂ and therefore act as a brake on emissions. I think that the Green Paper on forestry and the work on forestry that is currently being done in the European Union and, I hope, in this country will have a crucial role in adaptation in future.

Fourthly, it is important to stress that there is a positive side to all this, in spite of the real risks and dangers with which we will have to cope. We know that creating a low-carbon economy can have many positives, such as reducing our dependence on imported oil and gas, creating new industries and generating net new jobs. It is not often said that much the same goes for adaptation, which will also have to be creative and innovative. It will, I hope, at least have similar positive consequences. A good example is the research that is now going on into latest-generation biofuels. They can be grown in areas where no crops can be grown at the moment; they can be grown in the far north and, in the form of algae, in the oceans. There are many other examples of a proactively positive approach to adaptation. It is important not to lose sight of the significance of this.

The tasks facing us are huge. It is an open question whether, on a global level, we can cope with them. Certainly, in our region we must do so on a pan-European level, as it is obvious that climate change is no respecter of national boundaries. In conclusion, I would like the Minister to comment on anything he sees fit to comment on in what I have said, but also on one core question. Does he accept that adaptation to climate change must be proactive and demands a long-term strategy, as well as a pro-European one?

16:36

[Lord Teverson]

My Lords, unlike the noble Lord, Lord Giddens, I will speak more about mitigation. However, I must agree with him, after that very serious and penetrating speech, about how important adaptation is. If we do not make sure that our agricultural systems and crops are far more robust than they are at the moment, there will be a real problem in food security globally, especially in Europe, in the future.

The thing that I liked about this report was that it brought focus on to the agricultural sector. I am someone who gets particularly involved in issues of mitigation. I can never really understand why, effectively, mitigation is in DECC and adaptation is in Defra. It seems to split an important policy area, but we should not get into that in this debate. Agriculture does not come over very strongly; it is a theme that is sometimes, but not often, recognised. The steel, aluminium, cement and aviation industries get top billing, and we often forget about agriculture and forestry altogether. Why is that wrong?

I am very glad that this report highlights why it is wrong. First, agriculture accounts for around 14 per cent of global greenhouse gas emissions. In Europe, as the report points out, it accounts for almost 10 per cent—9 per cent, I think. In the UK, the figure is 7 per cent. However, I ask myself: if 7 per cent of greenhouse gas emissions in the UK are from agriculture, what proportion of GDP comes from agriculture in the UK? It is close to 1 per cent. Perhaps that is an unfair comparison and ratio, but here we have an industry that, as a percentage, contributes seven times more to greenhouse gas emissions than to national product. For all those reasons, this is an important sector.

This is further highlighted in the report by figures that I found quite staggering. Nitrous oxide is, as the report says, 300 times more lethal as a greenhouse gas than CO₂, but in agriculture accounts for some two-thirds of emissions. Agriculture accounts for almost half the emissions of methane, which I thought was 70 times more potent than CO₂ but the report says is somewhat less so. That means that this sector is important, and it is one that I ask the committee to keep focusing on in the future. It is one of which we should take a great deal of notice.

However, that is as nothing compared with forestry. When one looks at forestry on a global scale—as the noble Lord, Lord Giddens, said, climate change knows no boundaries—one sees 30 million acres of deforestation per annum creating more greenhouse gases than motor vehicle and truck emissions worldwide. It varies between 15 and 20 per cent, depending on the rate of deforestation in any one year. The sector is crucial for the rate of global warming in future. I will return to the relevance of this for Europe, which has already deforested most of its land surface. However, in a small but perhaps quite important way, it could perform better and reforest more.

Another area of mitigation that worries me—again, it relates to points made by the noble Lord, Lord Giddens—is that agriculture plays an important role even in Europe with biomass and biofuels. It has been disappointing that after the introduction of regulations such as the renewable transport fuel obligation, and the enthusiasm for biofuels, we had a very negative analysis of the sector which reversed the view about whether it could help with climate change mitigation. I urge the Government to stick with making sure that we get the sustainability criteria right for biofuels, so that we do not throw away this opportunity for the advancement of the agricultural sector in terms of mitigation of climate change by saying that it is too difficult or controversial. As we have already heard in the debate, whether it is algae or growing biomass in areas where it is not grown at present, we have a great opportunity. We in Europe should not give that away, nor rely on imports from the rest of the world.

I come back to the strength that Europe can have—and has had in Cancun—because of its status in the negotiations on the reduction of emissions through deforestation and forest degradation. Europe is crucial to enabling that programme to succeed, both because of its political leverage and through its financial contributions to making sure that that will become possible. It is one of the most crucial short-term programmes that we have to make a significant difference to climate change. What is the current state of negotiations on this part of the United Nations procedures? The Government have taken a lead in this area, but do they feel that Europe is putting sufficient emphasis on global deforestation to make sure that it is kept high on the agenda? I know that there has been movement in this area, whereas in others there has not. It depresses me that Europe, after the Lisbon treaty, still has pillars in the agricultural sector and in the common agricultural policy. We got rid of them in justice, home affairs, the CFSP and other areas, but we still have them in agricultural policy.

Something in the report that I liked is the idea of the carbon contract and carbon compliance. This is fundamental to reform of the common agricultural policy. Will the Minister and the UK Government champion this concept when considering where the CAP should go in future?

This is an excellent report. I hope that there will be renewed focus on this area, and I look forward to the Minister's responses on the crucial issue of the management of our climate for the future.

16:44

[Lord Cameron of Dillington]

My Lords, first, I declare an interest as a farmer, as a Lawes trustee at Rothamsted Research Station and as the new chairman of the Government’s global food security strategy board.

I was not on Sub-Committee D at the time of this report, so I come at the subject only from the evidence of my own experience, and I hope that your Lordships will forgive me if I extend my horizons slightly wider than Europe.

The Government’s chief scientist has, rightly, become famous for his “perfect storm” analogy, wherein the world has to produce at least 50 per cent more food over the next 40 years without damaging the environment, while emitting fewer greenhouse gases and using less energy and, above all, without depleting our water supplies. It is on this last issue that I should like to focus today in connection with agricultural adaptation. Indeed, the committee report highlights my point, saying:

“Effective water management lies at the heart of efforts to adapt EU agriculture to climate change”.

Although the Environment Agency gave evidence to the committee that water availability in England and Wales is going to be 15 per cent lower by 2050, it is elsewhere in the world, including southern Europe, that water problems are going to be really critical.

We actually have enough fresh water in the world to go around. We are currently using only 54 per cent of all accessible fresh water, which leaves 46 per cent untapped. However, even now, with today’s population, the reality is that a child dies as a result of poor sanitation every 20 seconds, amounting to some 1.5 million preventable deaths each year. Without serious political action, that situation can only get worse. Total world water demand is projected to rise by over 30 per cent by 2030. Many river systems, such as the Yellow River in China, the Murray-Darling in Australia, the Colorado in the US and the Indus in Pakistan, are already running dry due to excess irrigation. As we will all be aware, the Indus had terrible floods recently. However, it is the Indus delta, which is a very fertile and productive area of Pakistan, that has problems. It is being invaded by saline water and is thus becoming less productive.

Meanwhile, projections in Mediterranean countries such as Spain and Morocco indicate that declines in rainfall of up to 30 per cent might be expected in the future. Equally, the rainy seasons in Africa and India seem to be starting later and later. Perhaps because of this, Indian farmers are now taking 100 cubic kilometres more from their aquifers than are being replaced by rains. They have to drill deeper and deeper. Likewise, the water level in the aquifer under the Hebei Province of China, where much of the wheat is grown, is falling at the rate of 3 metres per annum.

As the noble Earl, Lord Selborne, has already commented, nearly 70 per cent of all water in the world consumed by man goes to produce food. Water availability becomes a critical issue when 40 per cent of the renewable resources are used for irrigation. It is at that point that difficult choices have to be made between agriculture and urban water supplies. By 2030, some southern European countries will be at or nearing this 40 per cent level, and, believe me, all politicians will choose to support the urban voter over his rural brother. Therefore, in all these countries and regions, adaptation and new practices will be needed, and I give a few examples.

The first is drip irrigation. Israel is at the forefront here, employing expensive sub-surface drip irrigation that puts the water right to the roots of the plant. There are not even pipes on the surface, and of course that is infinitely better than spray irrigation, where most of the water evaporates.

The second is recycling urban sewage. For example, faced with paying higher costs for imported water and desalination, Singapore has gone for self-sufficiency through treated sewage water. When the fifth plant opens this year, water from flushed toilets and so on will account for some 30 per cent of Singapore’s drinking water. There are other examples, such as in India, where the sewage effluent of Hyderabad is mixed with the waters of the River Musi and put into underground pipes to help to grow vegetables in Andhra Pradesh.

The third is better capture and storage. They do not have to be big reservoir schemes, as many small schemes for individual farms and communities are usually better. In southern Europe and elsewhere they will need government support either with grants or with cheap capital.

The fourth is better use of shallow aquifers. If you want to store water in a hot country, what better way is there than pumping the excess water in the rainy season down to the underground aquifer to store it so that you can use it later on? You have a ready built reservoir, free from the problems of evaporation and free from the problems of flooding people’s homes, as can happen when you build an above-ground reservoir. I realise that there are complications in doing that, but as a method it has been quite successfully used in many parts of the world.

The fifth is better use of modern farming systems, such as no-till cultivation techniques, which, again, the noble Earl, Lord Selborne, mentioned. That greatly reduces the evaporation of water from the soil and encourages better organic matter, which is very useful in developing countries as an important source of fertiliser.

Last, but not least, we need to make better use of modern plant-breeding techniques across Europe. For example, if you can silence the gene in maize which makes the plant transpire and therefore need twice as much water as it really needs in order to grow its cobs, you can help to feed more with less. Equally, plant breeders are finding varieties of rice and other staple crops that now require less water than old varieties. There is a variety of rice with the wonderful name of scuba rice which allows rice to survive underwater in floods for much longer periods than was possible in the past.

Europe simply must invest in new technology and it must not be frightened of persuading its consumers that these varieties are safe to grow and to eat. I have a view that if scientists, farmers and everyone involved in the food chain seriously focused on how to feed 9.4 billion people—our forecasted population—we will be able to feed them, providing, of course, politicians and other funders can take a long-term view.

On water, no one is denying that there will not be serious problems in some areas, which there already are, as there is some political unrest and strife in areas such as northern Kenya and the Middle East. As regards food shortages, if the nations of the world can continue to work together and trade together, water shortages will remain localised and not affect the overall supply of food. I agree that that is a big “if”, and the key phrase is “providing politicians can take a long-term view”—which, in the immortal words of Private Frazer, means: “We’re all doomed!”.

16:53

[Lord Framlingham]

My Lords, I am deeply honoured to become a Member of your Lordships’ House, and I am immensely gratefu1 for the warm welcome I have been given by everyone, not least the staff of the House who have been unfailingly helpful and kind throughout. I am deeply indebted to my sponsors for escorting me safely through my introduction: the noble Lord, Lord Geddes, who is an old friend from Suffolk, and the noble Baroness, Lady Boothroyd, under whom I had the great pleasure of serving as a Deputy Speaker. I am particularly grateful to them as a recent illness has left me temporarily unsteady on my legs. I suspect that they were as anxious as I was throughout the entire ceremony.

As Michael Lord, I was for 27 years the only Lord in the Commons. On my appointment to your Lordships’ House, I would have been a Lord in the Lords. I was advised by the powers that be that this really would be most confusing in so many ways, not least in debates in your Lordships’ House, where I would have been referred to as the noble Lord, Lord Lord. To choose another title was no hardship. On the contrary, taking the name of Framlingham, a delightful ancient and historic market town in my old constituency, where I was originally adopted as a parliamentary candidate in 1983, gave me, and will always give me, enormous pleasure.

For my last 13 years in the Commons, I was a Deputy Speaker. That has inevitably made me, among other things, a good listener. How often in the Speaker's Chair I yearned to intervene in a debate, only to realise later how glad I was that I had not.

Fairness and firmness are required of the occupant of the Speaker's Chair. To the extent that I have any of these qualities, I got them in due part from all the sport that I played over the years—particularly, in my younger years, Rugby football. I played for Cambridge against Oxford in the 1960 Varsity match. Our fair and firm, top international referee was a highly respected Welshman called Mr Gwynne Walters. Impeccably dressed, he always refereed in a blazer; he refereed impeccably too. Although the match was ferocious, as all such matches are, not one player spoke a word to him throughout the entire match. How things have changed. Modesty forbids me mentioning the outcome of the match, save to say that further details could be gleaned from the noble Lord, Lord Butler of Brockwell, who played on the opposite side.

A Deputy Speaker in the Commons must have a good memory. He or she must be able to name immediately what was, in my day, any one of 650 honourable Members at the moment that they rise to speak, however unexpectedly. It was not always so. In earlier times, the occupant of the chair simply pointed to whomever he wished to speak next. Then, on 19 May 1685, the House of Commons, in its wisdom, elected as Speaker Sir John Trevor, who appears to have been cross-eyed. The result was that every time he pointed, two people stood up. Ever since then, names have had to be remembered and called.

Before entering the House of Commons, I started and ran my own forestry company. I became increasingly involved in what is sometimes called urban forestry and, finally, in arboriculture. I was privileged for several years to be the president of the Arboricultural Association. Having listened to the debate so far, I am sure that your Lordships will be well aware that arboriculture is about trees for their looks; as opposed to silviculture, which is about trees for their timber.

I worked through the dreadful ravages of Dutch elm disease and on the subsidence problems caused by trees near buildings on shrinkable clay subsoils. When, some years ago, the Clore extension was added to the Tate Gallery, I was retained to ensure the survival of the adjacent London plane trees. Strangely enough, my experience proved useful soon after I arrived in the House of Commons. Someone had advised the felling of the Catalpa trees in New Palace Yard. I was asked what I thought, and I am delighted to say that, 25 years later, they are still there. I have a great interest in our ancient and historic trees as well. Before politics took over entirely, I lectured both in this country and in the United States.

One of the most pleasurable duties of a Deputy Speaker in the House of Commons, when the Speaker is not available, is to greet and entertain visiting Speakers or their deputies. Without exception, they were full of admiration and respect for our Parliament, its systems and traditions, and anxious to learn from us wherever possible. They still truly believe that we are the mother of Parliaments. I trust that we do too.

My great pleasure in being appointed to your Lordships' House was heightened by the fact that I have a huge affection for and belief in our Parliament, the way it works and all it stands for. We take it for granted, in this rapidly changing world, at our peril. I have always believed that one of the principal duties of any generation is to hand on to the next generation that which has been entrusted to its care. In this context, I say that I was deeply saddened that we have agreed to experiment with allowing the use of electronic devices in this Chamber. I believe that that will prove to be harmful and disruptive, and I sincerely hope that it will not become a permanent feature.

Politics is often said to be the art of the possible, but sometimes I think it is the art of having the courage to do the obvious. I also suspect that many great issues are essentially very simple and that we make them complicated when we do not want to face them. In this, the role played by your Lordships’ House in the great issues of the day, free from simplistic party politics, is so very important.

I thank the noble Baroness, Lady Sharp, for her comprehensive introduction of her report. The term forestry—one of the topics of this debate—means different things in different countries and to different people and organisations. In this country, it originally referred to the hunting domains of kings, thus we have Hatfield Chase and Cannock Chase, and it came to mean, until relatively recently, planting and harvesting trees, principally softwoods, for timber. Currently the word covers everything from the great Kielder Forest to copses on our farms, and from ancient woodlands to urban forestry in Milton Keynes. It includes large tracts of conifer-planted uplands as well as the New Forest, the Forest of Dean and, in my part of the world, Thetford Forest.

In many of these areas now, the amenity value of woodland is considered to be as important as its timber value. In this increasingly hectic world, it seems more and more people are turning to and appreciating the enjoyment provided by trees and the habitat that they create and preserve. Whatever the terminology, however, it is all about trees. Trees really are one of the world’s blessings. They take in our carbon dioxide and give us back their oxygen. They give us their timber and their fruits. They help to stabilise mountainous regions, are crucial in the battle against desertification and, on top of all this, they are a joy to behold. So whether they grow in our country, in tropical rainforests or in the developing world, we must do all we can to increase tree cover. Regardless of the pros and cons of climate change, let us do the obvious and plant trees, protect rainforests and generally treat trees with the respect that they deserve, not for their sake, but for our own.

I thank noble Lords for listening to me so patiently. I look forward to making further contributions to debates in your Lordships’ House in due course and to playing my part in the affairs of this noble House.

17:02

[The Earl of Caithness]

My Lords, it is a very great pleasure to congratulate my noble friend Lord Framlingham—the noble Lord, Lord Lord—on his excellent maiden speech and to welcome him to the House. Besides gracing the green grass at Twickenham, he is a great sportsman because he also captained the parliamentary golfing association and has participated in many other sports. He has also done lots of other things in his life. He has great experience, which he will bring to the House, in local government, having served on North Bedfordshire Borough Council and Bedford County Council before he contested the seat of Manchester Gorton in 1979 where he got over 38 per cent of the vote, and nobody has come close to that figure since then. He was realised as a good bet for the future, and he moved from a Labour stronghold to a fairly good Conservative stronghold in Central Suffolk which later became Central Suffolk and North Ipswich, which he served from 1983 to 2010. More important than that, he brings to this House huge experience in agriculture and, particularly, forestry, and we welcome him for that especially. He graduated from Christ’s College, Cambridge with an MA. Presumably he played rugby for Cambridge rather than for the rather superior Oxford, which I would have supported, although I did not go there. His knowledge of forestry will be important in the future. We welcome my noble friend. We all enjoyed his maiden speech very much.

Turning to the debate, I say to my noble friend Lord Henley that I sympathise with him because he has an utterly impossible job. Far too much is expected of Governments but Governments cannot manage the climate. There is too much sensational press reporting on climate change and utter confusion in the minds of a lot of people who cannot separate climate change and manmade or man-encouraged greenhouse gases. Underlying all that, there is a huge lack of scientific knowledge. What there is is often contradictory.

The noble Lord, Lord Giddens, talked about air temperature. Just to show that we are not all on the same side, I would rather welcome a change in air temperature and a little warming in Caithness. That would be good. After all, it was much warmer in the days of the bronze age, as can be seen from archaeological evidence. My noble friend Lord Teverson will know that from Dartmoor. I know it from Caithness. It was certainly warmer when my ancestors, the Norsemen, came over to this country and benefited by integrating with the Picts.

Air circulation, an issue on which we are short of scientific knowledge, concerns me more. We are told that because air temperature is going to rise it will be more stormy. But the storms that bring the rain to this country, mostly during the winter, arise very much because of the difference in temperature between the Arctic and the mid-latitudes. The wider that temperature, the greater the storms. If, as it is, the Arctic ocean is increasing in temperature, the gradient between the two temperatures is decreasing and the chances of storms are decreasing. We believe that that is what happened in the times of the Norsemen who went Viking. That could bring positive benefits but it could also mean that we will have very variable rainfall in the future. I am rather more sceptical than the noble Lord, Lord Giddens, as regards manmade climate change but I take the precautionary principle. I think that that is based on the fact that I am more of a countryman. I really believe that we have abused our planet in far too many ways.

On agriculture, the key to adaption, mitigation and changes for the future is the common agricultural policy, reform of which is essential. In her excellent introduction to the debate my noble friend Lady Sharp spelt that out clearly. However, what is more important about changing the CAP is the fact that it is the only way in which the EU will ever get close to playing a part—I hope a strong part—in feeding the burgeoning world population. I believe that to be a much more serious threat than manmade climate change. That is why paragraphs 68 and 69 of our report are so important and I welcome the Government’s reaction to that point.

I hope that my noble friend Lord Henley will work towards a reform of the common agricultural policy that is flexible because each area in Europe is different. Each area in the UK is different. Some of the solutions will need to be quite local. We have talked about the air circulation of the jet stream, which affected our weather this winter and brought on the early snow. Sutherland and Caithness are adjoining counties in the north of Scotland; one has hills and one has not. A local solution will be extremely important. Perhaps I may stress to my noble friend Lord Henley how worried some of us were about evidence that we received from the Commission, which seemed totally to lack comprehension that we are a maritime climate, unlike most of the rest of the continent. Therefore, our problems are different, particularly in the less-favoured areas.

As my noble friend Lord Framlingham said, there is a change of perception of forestry. There also is a change of perception as to how people view the countryside. That is why paragraph 150, in which we say that farmers and foresters must be compensated when they make a provision of public goods, is important. The Government gave a warm response to that recommendation. However, that is the easy bit. The difficult bit is how to value the provision of public goods. If my noble friend can say anything on that, it would be very helpful.

A point that has not been raised is regulation in agriculture and forestry. In our current report alluded to by my noble friend Lady Sharp, we took evidence from Rothamsted Research, which said:

“The disjunction between restrictive regulation in the EU and the lack of resources for agricultural research and innovation is probably the biggest threat to the long-term viability and competitiveness of EU agriculture”.

We will discuss that rather more fully next Tuesday evening, so I will not say anything more now.

I want to say a brief word about forestry, which was mentioned by my noble friends Lady Sharp and Lord Teverson. We do need more trees. That is essential not just for their significance as regards carbon but also for preventing the further degradation of soils. However, unless trees are profitable, they are not going to be planted. If they are not profitable, the taxpayer is going to have to subsidise the landowner or planter of the trees. That brings me back to paragraph 150, which I have just mentioned. Agriculture is one thing: you grow a crop and harvest it in the same year. When you plant a forest you are looking at what your grandchildren will harvest. Therefore anyone who is going to plant trees has to have confidence in the Government. As Governments change, we have seen time and time again that what one Government promise, the next may renege on. More importantly, the woodland owner has to compete with the Forestry Commission. As we discussed the other day, the Forestry Commission is both judge and jury in its own right. It controls anything a private owner can do and can set up in competition to the private owner. My noble friend faces a huge challenge in creating a climate in which people can have the confidence to plant trees for the future. It is necessary, but under the present structure with the Forestry Commission, it is not likely to happen.

I end with a brief word about innovation and research. There is no doubt that our research base, which, as my noble friend Lord Selborne said, has stood us in good stead, is now at severe risk. We were prime leaders around the world, something the noble Lord, Lord Cameron of Dillington, knows far better than me. British agriculturalists did a phenomenal amount of good work in Africa and elsewhere. Unless we put more into research and allow farmers to innovate by ensuring that the resulting knowledge reaches farming and forestry people, I am afraid that we face a fairly bleak future.

17:13

[Lord Taverne]

My Lords, I, too, congratulate the noble Lord, Lord Framlingham, on a delightful maiden speech. We look forward enormously to his future contributions. This is a fairly welcome and very good report which should be read together with the Foresight report and the later one from the European Commission, which has now been published. It is clear from these what the problems are: hunger, rising population, a shortage of good agricultural land, a severe shortage of water and all the effects of climate change.

I will speak only on the question of biotechnology. I have probably made more speeches about biotechnology than any other Member of this House. The reason is that it is not generally appreciated in Europe that while biotechnology is not a panacea for all our problems, and while an enormous amount of valuable research into greater productivity in agriculture is being done, which holds a lot of promise for the future, in Europe we have not recognised quite how important agricultural biotechnology is. Indeed, the Government demonstrate an attitude of considerable caution. Europe imposes severe restrictions on the import of food and feed, which has repercussions for those elsewhere who want to export to Europe. In many countries there are bans on biotechnology. As I have said, the Government are also cautious. In this report, the junior Minister for Agriculture said that the benefits of genetically modified crops have not yet been established. I do not know where he gets that idea from or whether he has really looked at the international evidence, which is quite clear.

What is not recognised is that, outside the European Union, agricultural biotechnology has been the fastest and most effective application of a new technology in agriculture ever. It is an enormous success story. There are now 148 million hectares on which genetically modified crops are cultivated, in 29 countries. Over 15 million farmers now grow genetically modified crops, over 14 million of them small-scale. There is no doubt about the crops’ success. One can look at the emphasis given to them in China, which regards agricultural biotechnology as one of the most important technologies for the future. In India, it is growing at a very fast pace indeed. So far as the problems in terms of greater productivity and dealing with drought are concerned, biotechnology has an enormous amount to contribute, as the noble Lord, Lord Giddens, said.

Under those circumstances, why is there still such opposition? I think it is because we tend to treat the green organisations—Greenpeace and Friends of the Earth—and the organic movement with extraordinary respect. We treat them as though they stand for motherhood. People are terrified of criticising them publicly, yet if one looks at their effect on agriculture one sees that they do far more harm than good. They keep saying that we must prove that the technology is safe, but there have been any number of reports. Every national academy of sciences in the world—those from Mexico, India, China, the third world, America and Brazil, the Royal Society and other European societies—has examined this time after time. Their conclusions are absolutely clear: that so far there is no evidence of harm to human health or the environment, despite 12 years of growth and consumption. That is completely ignored by Greenpeace and Friends of the Earth, and their opposition is not rational. Many years ago, when this House held an inquiry into genetically modified crops, Lord Melchett—then director of Greenpeace—gave evidence. He was asked:

“Your opposition to the release of GMOs, that is an absolute and definite opposition? It is not one that is dependent on further scientific research … ?”.

His answer was:

“It is a permanent and definite and complete opposition”.

That means that it is a faith—it cannot be influenced by evidence—and nothing has changed. All the evidence of the way in which genetically modified cotton has been a huge success throughout the world—it saved the Australian industry and has spread faster in India than anywhere else—is completely ignored or contradicted. The result is that the European Union is left behind.

Again, as far as the organic movement is concerned, I have made the point several times that at a time of cuts it is extraordinary that we spend £30 million a year subsidising the inefficient use of land; it is used to encourage conversion to organic farming. There is no question about it: organic production is a less efficient use of land. Why does organic food cost more? It is not because organic farmers want to rook the public, but because the yield is consistently lower. That cannot be denied, yet we subsidise it. If we spent that £30 million on agricultural research, it would be of enormous benefit. We would not have to cut the programme at all; in fact, we could give extra help to those excellent crop research institutes in Norwich—the John Innes Centre—and Rothamsted and to the Scottish research institutes.

The European Commission has issued any number of reports stressing the advantages of genetically modified food, explaining why it is no danger to health or the environment. But the Commission also subsidises Greenpeace and Friends of the Earth with €100,000 a year to carry out anti-GM propaganda in India. It is an extraordinary position.

In this country, the opposition to genetically modified food is superficial. That has been shown by some careful research done in Nottingham and Cardiff. The Government should speak out boldly, stop being cautious and give a lead. If we do not support this technology we will continue to be left behind, and Europe as a whole will suffer.

17:20

[Baroness Miller of Chilthorne Domer]

My Lords, I must remind the House of my interests; my husband and I own and run a 40-acre vineyard, and I am chair of the All-Party Group on Agro-Ecology. I warmly thank my noble friend Lady Sharp of Guildford for her knowledgeable and passionate introduction to the report, as it came to some important conclusions that were rather hidden behind a slightly anodyne summary and a less-than-passionate introduction. I am glad that she has redressed that today.

Agriculture and forestry are tremendously important; after all, they occupy the vast proportion of the entire land surface of the EU. For that reason alone, they offer tremendous opportunities for climate change mitigation to be incorporated into our land use. There are also some dreadful penalties to be paid by future generations if we do not manage to get adaptation right. Those penalties will be paid in food production, flooding and the very ability of future generations to able to produce food at all.

Is the Commission capable of altering the CAP in order to address some of this? That is where my worries lie. The difficulty was spelled out in some of the evidence that the committee received from Ms Andugar, which is on page 158 of the report. She said:

“The CAP is not a climate change policy, so it is impossible for this policy to provide all the tools, incentives or instruments”.

That is the crux of the issue.

I agree with my noble friend Lord Teverson that the debate hovers unhelpfully at the moment around pillars—pillars are depressing—and whether we should green Pillar 1 rather more or move further towards Pillar 2, where environmental goods are recognised as a desirable outcome. I am worried that the Commission might simply settle for the compromises that are needed to achieve any CAP reform by 2013. Those compromises will fall far short of what it must deliver in order to start addressing some of the critical issues that climate change puts before us and which your Lordships have touched on today. Here, I disagree with the noble Earl, Lord Caithness. Even without climate change, the issues of profligacy and waste would be no less critical. We cannot go on using water as we have. we cannot go on using artificial fertilisers as we have, and we would need three planets in order to farm as we have. I think that the noble Earl is nodding assent. Even if we set climate change aside, the CAP would still need radical reform.

It was cheering to hear in our evidence sessions of the multiple wins to be had from incentivising land users and farmers to take the right measures that address not only climate change but the crucial issues of soil quality, water stress and waste. For example, green cover crops slow down water run-off, stop soil erosion and allow better water absorption, with leguminous plants reducing the need for artificial fertilisers. All these provide more opportunities for beneficial insects and encourage biodiversity.

The report gets very excited about biochar—I agree that the evidence from Mr Prodi MEP was among the most exciting and compelling that the committee received. However, the committee could have extrapolated more fully the biochar lesson, which was that there should be no such thing as waste in the agricultural process. Waste at the start of the food chain is compost, mulch and manure; at the end of the food chain, and under some of the new technology coming forward, it is biofertiliser from the anaerobic digestion of food waste. We all agree that there is far too much food waste, but while it exists, let us use it. Biofertiliser is a liquid containing nitrogen, phosphate and potash, along with other trace elements, and it can be applied to farmland, reducing drastically the need for purchased fertilisers. That is another example of a win, win, win situation.

As other noble Lords have mentioned, this report needs to be read in conjunction with the recent government report from Foresight entitled The Future of Food and Farming. That report contains a critical, almost throwaway, sentence. It states that there is nearly as much carbon in the organic compounds contained in the top 30 centimetres of soil as there is in the entire atmosphere. That deceptively small statement contains an enormity of importance on which the UK Government and the Commission need especially to focus.

There are dangers in badly managed soils and potential in properly managed soils. In order to manage soil, farmers and land managers need the skills and knowledge, and indeed the right incentives, to restore its health and its properties. We have had more than 50 years of throwing on to it as much imported and artificial fertiliser as a farmer could afford. That has resulted in degraded, eroded soils and an industry addicted to artificial fertiliser.

I disagree with my noble friend Lord Taverne, who has offered biotechnology as the solution to the problem, but it will not restore the soils or supply more water. Before he is tempted to intervene, I should say that I have a very short time in which to speak and that I have kept my remarks as moderate as I can. We have to consider other ways of addressing this issue.

The UK response to the Commission communication and consultation, published in January 2011, also contained a worrying phrase. It said that,

“a minimum level of direct payment for small farms—however defined—would provide a perverse incentive to such farms to remain small and would impede consolidation”.

However, there is nothing magic about consolidation. Small farms might have seemed undesirable in the 1980s monoculture philosophy of maximising one-crop production as cheaply as possible without worrying about externalising the costs. Now we are thinking about carbon outputs, soil compaction from enormous machinery and, indeed, unemployment as the workforce is reduced. In today’s world, small farms can be seen as highly efficient units. Indeed, some studies of innovations on farms in south-east Asia have discovered highly efficient units of mixed production that re-use animal manures; they have a mixed polycultural approach and spread the risk for the farmers.

They also deliver a landscape that is attractive and rich in biodiversity. You do not find many tourists demanding to see the wheat fields of the Ukraine, but mixed farming areas such as Tuscany, Devon, Dordogne and County Waterford are attractive to tourists and wildlife alike—and they produce high quality food.

There is a huge amount of training to be done, knowledge to be imparted and research to be undertaken, and that message from the report is incredibly valuable. As noble Lords have mentioned, we need to build on the best of modern knowledge. The noble Lord, Lord Cameron of Dillington, mentioned drip irrigation, for example. How simple, but how very important. We also need to build on the tradition of what grows best where, not only geologically but climatically. Again, biotechnology cannot deliver that for us.

The EU and its member states had better address fast the appalling situation that has arisen whereby vast tracts of land—most recently, for example, 50,000 hectares in Kenya—are being sold off to European companies to produce biofuels. Smallholders in those areas are being dispossessed to become the urban unemployed. That situation is utterly immoral. It might be about meeting the EU climate change targets, but we cannot accept it and we should not encourage it.

Finally, I ask the Minister: what are our preparations for Rio 2012 on the agricultural side of the equation?

17:30

[Baroness Quin]

My Lords, this has been an extremely interesting debate. I, too, congratulate the committee on its report and congratulate the noble Baroness, Lady Sharp of Guildford, on how she introduced it today. Indeed, I thank all speakers in the debate, but give a particular warm thank you to the noble Lord, Lord Framlingham, for his impressive and very enjoyable maiden speech. It was a pleasure to listen to it. It is always a bit of a surprise to address long-standing colleagues in another place by a completely new name. Indeed, it might have been rather fun to talk about the noble Lord, Lord Lord, but I fully understand—and I think that we all appreciated—the reasons for his choice of title. It is a particular pleasure for me to be able to pay tribute to him, having been a colleague of his in another place. Because of that, I have known of his long and distinguished history of interest and involvement in agricultural and forestry issues. That was clearly illustrated today. His description of the role of trees in our world was better than any I have ever heard before. We greatly look forward to the contributions on these and other issues that he is going to make during his time in your Lordships' House.

The issue of the environment and climate change is obviously one on which action is needed at every level—from the dustbin outside your house to the stratosphere. Action is needed at local, regional, national, European, global and international levels. This report obviously looks particularly at the EU role in tackling these issues, and does so in a number of different ways, which I think are highly appropriate. It looks, very importantly, at the role of the common agricultural policy and at environmental policy more generally within the EU, as well as other EU policies that may have an influence on this area, whether they are policies on research and development or approaches to forestry, although there is not a formal EU forestry policy, structural funds and so on. All those issues need to be taken into account in looking at the EU’s role. Finally, the report refers to the EU’s role in world affairs and how its role in negotiations can affect the global outcomes on environmental and climate change issues. We have seen the Government’s response, which I understand is dated September 2010. The Minister may be able to give some updates. I notice, for example, that in the response to us it is mentioned that there will shortly be a formal response to the Commission’s forestry paper. I wonder what stage that is now at, whether that formal response has been submitted, and how favourable it was to the Commission’s ideas.

I turn to the areas relating to the EU’s role that the committee has identified. First, I think that the committee was right to look at the common agricultural policy in the immediate short term and to look ahead at the revision of the CAP in 2013, which is an extremely important moment for us. The committee is also right to have focused on the role of the second pillar, which has become one of the more important developments in the EU in recent years. I remember during my own time in the department when it was smaller than it is now. Although it has grown fairly slowly in comparison to Pillar 1, it is none the less an important development, and the committee is right to assess its potential for the future.

The noble Baroness, Lady Miller, expressed some frustration with having to talk about pillars all the time. However, that is how the CAP is organised at present and we have to look at that in order to decide how we would best like to see things change for the future. Certainly, to me, the second pillar has always had the great benefit of, first, being able to help sectors of agriculture which Pillar 1 traditionally ignored, such as pig and poultry producers and other areas. Secondly, I felt that it was a much more forward-looking part of the agricultural policy than Pillar 1, because it allowed farmers to identify new market opportunities. Thirdly, and perhaps most importantly, it factored in the environment in a way that agricultural policy in the EU had singularly failed to do up until then. I think we in the UK have tried to use that potential within Pillar 2 to good effect in the environmental schemes that have been brought in. Those have involved the delivery of important public goods. Since this is public money, it is important that some public goods are delivered as a result of it.

I also agree with the point made by the noble Earl, Lord Caithness, about the need for a more flexible policy. There is certainly no doubt that Pillar 2 has been a good deal more flexible than Pillar 1. Although I understand and appreciate how important many of the payments under Pillar 1 are at present, none the less that has been a rigid, ossifying policy as opposed to Pillar 2, which has the potential to both work with the market and bring in environmental factors. Furthermore, as the noble Earl said, it has the potential to respond to the different agricultural situations in different member states, and in different regions within them.

Interestingly, the committee itself identified some of the present needs of different parts of the EU. One passage in the report refers to the needs of southern European countries and I very much accepted what the committee said on that. In its response, the Government made the reasonable point that in terms of the projects supported, Pillar 2 is largely the responsibility of member states. However, I hope that will not prevent at least the encouragement of certain activities in the countries of southern Europe, where there was particular concern. Indeed, the sharing of knowledge and expertise is also a relevant task within the European Union.

Obviously, we are not sure at this stage how negotiations will proceed on the futures of Pillars 1 and 2 under the reform of the CAP but, whatever the balance in future, there certainly needs to be much more coherence between the two, particularly in view of the environmental and climate change goals that we feel are so important. There needs to be coherence in that respect with the structural funds as well, so that one part of the EU system is not working against some of the goals and commitments which we have, quite rightly, set ourselves. I should be interested to know whether the Government have already identified some of the gaps in the rural development programmes that they think ought to be filled in future, particularly when tackling environmental and climate change issues.

In their response, the Government also praise the voluntary approach adopted by farmers and the industry. That is important as during my own involvement with agriculture, I have certainly seen how much more environmentally aware the farming community is and how many useful initiatives have been taken. Those, such as the Campaign for the Farmed Environment, need to be recognised. There is also, for example, work being done in the dairy industry to identify ways of reducing greenhouse gases and so forth. At the same time and given the gravity of the situation, which was well put to us by my noble friend Lord Giddens, we have to monitor carefully what is happening and be prepared to take tough measures if necessary. The voluntary approach can deliver a lot but it cannot be entirely left to that, given the danger of simply slipping backwards rather than moving forwards, as my noble friend Lord Giddens mentioned in the statistics that he gave us.

The noble Lord, Lord Cameron, mentioned the importance of water. I will not repeat what he said but I thought that the comments he made about the situation both in the EU and more widely internationally were important.

Forestry is also part of the subject of the report. What action do the Government propose to take as a result of the Read report, which the noble Baroness, Lady Sharp, also mentioned and which was first produced in 2009? How might some of the issues that have been raised today be taken forward by the new panel on forestry that was announced recently? Its remit includes climate change mitigation and adaptation, along with a number of issues that have been raised during the course of this debate. Today’s debate will therefore be relevant to the work of that panel.

I have mentioned the vivid description by the noble Lord, Lord Framlingham, of the role of trees and the importance of urban woodland planting, which was mentioned by other speakers in the debate. I noted yesterday that my noble friend Lord Clark of Windermere, who used to chair the Forestry Commission, talked about the 1 million trees that had been planted in Wigan, the 1 million in Moseley, the 1 million in Ellesmere Port and the 2 million in Warrington. Although these trees were not planted for profit, they were planted with the public good and public benefit in mind, and that is an important aspect of what we are talking about today.

All Members of the House today have stressed the importance of research—the noble Earl, Lord Selborne, mentioned research into plant disease—and the potential of biotechnology. I agreed with the point in paragraph 180 of the report that an important aspect of the research work being undertaken by the Commission on biotechnology and GM will be ensuring that the conclusions of such publications are accompanied by public communication strategies. There is a real need for a rational debate on these issues to take place.

The noble Baroness, Lady Miller, mentioned the issue of soil management and use. I note that mention was made in the Government’s response to the committee’s report of the Defra research programme. Can the Minister give us an update on the work of that programme?

Sharing and disseminating information in the EU are obviously crucial and the committee is right to stress that. However, it is also right to stress that doing so needs to be translated into effective advice for farmers, farm workers, landowners and voluntary organisations and indeed throughout society. The role of the EU in world affairs was also mentioned. I very much support what the report said about it.

Overall, in our response to these challenges, we need to follow the words of my noble friend Lord Giddens who urged the Minister to be proactive and positive, despite the huge challenges that face us. I welcome the report and this debate, and I wish the committee every success in its future deliberations on this and related issues.

17:45

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Henley)]

My Lords, along with other noble Lords, I offer my congratulations to my noble friend Lord Framlingham on his maiden speech, particularly on bringing his expertise in both forestry and agriculture from another place to this House. I hope that in due course I can deal with some of those concerns. He raised some of his other concerns about the use of new technologies in this House. That is not a matter that I will try to address this evening, but will leave for the House authorities to address in due course.

Like other noble Lords, I congratulate not only the noble Baroness, Lady Sharp, on introducing this debate, but all the members of the committee—those who served on it, those who serve on it now and those who have spoken in the debate. We welcome the report on adapting to climate change. I can give a simple assurance to the noble Lord, Lord Giddens: yes, we take adaptation to climate change very seriously. We support it and it has all-party support. We will continue to work with the previous Government’s Climate Change Act. As the noble Lord will remember, we have the adaptation sub-committee, which is chaired by our own noble Lord, Lord Krebs. He will also know that we are required to lay the national adaptation programme before Parliament in 2012 and revise it every few years. We will make sure that we do so by January of next year.

As the noble Lord also knows, there are requirements on several key organisations to produce their own reports on adaptation to climate change. Only recently, we saw some of the key organisations, such as Network Rail, the water companies and others, produce theirs. I involved myself in the launch of Network Rail’s report, just to see how it was going on. We are very glad for what it did and the work it is doing, much of which could be described as being on the “stitch in time saves nine” principle. That is, if one does some work now it will save much greater work later, when changes that are sure to happen take place. As the noble Lord put it, certain things have already happened that make change inevitable whatever we can do in mitigation in the future.

We welcome the opportunity to discuss these important issues. As the noble Baroness, Lady Quin, put it, this is an opportunity to give an update on what the Government have been doing. As the noble Baroness will know, it is almost the anniversary of the publication of this report; it came out just before the election last year. If I can correct her, my honourable friend Mr Paice sent the Government’s response on 29 June. At least, that is certainly the date that the noble Lord, Lord Carter of Coles, cites in his letter of 7 July 2010, in which he thanks Mr Paice for submitting the Government’s response to the report on adapting to climate change. I just make that very small point. I will respond by giving an update on what has been happening since then, because we laid out our response in some detail last year.

We have listened to constructive comments that have been made by all noble Lords as we decide what further action is required to ensure that agriculture and forestry, in both the United Kingdom and Europe, are able to prepare themselves for the threats and—we ought to say, as others have implied—the opportunities that climate change might bring. I was grateful to the noble Baroness, Lady Sharp, for mentioning the Foresight Global Food and Farming Futures report, which was published in January. It provides further evidence of the challenges facing the global food system; and of the need to adapt to climate change to continue to produce food sustainably, and to produce more food for a population that, as the noble Lord, Lord Cameron of Dillington, said, is likely to rise to a little more than 9 billion by the middle of this century. We hope that at that stage, with a bit of luck, it might stabilise at that level.

I start by dealing a little with research and knowledge transfer, which was raised by many Members, particularly the noble Baroness, Lady Sharp. All noble Lords will be aware that only yesterday my right honourable friend the Minister of State for Agriculture and Food gave evidence to the committee’s new inquiry into innovation in EU agriculture. He answered questions on research and development capacity, programmes and adaptation to climate change. The Government have funded the development of climate change scenarios that provide an essential tool for predicting the impact of climate change. Defra has also commissioned research that used those scenarios to determine the impact on United Kingdom agricultural production and on wider ecosystem services. Therefore, we now have a reasonable understanding of what these impacts are, and are working to identify and prioritise measures for on-farm adaptation. Further discussions with key stakeholders will take place shortly.

The department will also continue to monitor the situation closely. Work is ongoing on the climate change risk assessment, which will draw together evidence and analysis to evaluate the risks, threats and opportunities for the UK posed by climate change. As I made clear in my opening remarks, the report will be laid before Parliament by January 2012, and will inform adaptation policy.

Under the United Kingdom cross-government food research and innovation strategy 2010, set out by the Chief Scientific Adviser, government departments, public funders, industry and academics are all working together to consider how they can stimulate R&D and innovation to meet the challenges posed by climate change and the threat to food security. In addition, the Government will invest up to £90 million over five years in match-funding industry-led applied research through the Sustainable Agriculture and Food Innovation Platform. That funding will stimulate the development of new technologies to increase productivity, and at the same time reduce the environmental impact of the food and farming industries. The aim is sustainable intensification.

I will refer briefly to the report, Science for a New Age of Agriculture, produced by my noble friend Lord Taylor of Holbeach when we were in opposition but adopted by the Government, which was published last December. We are committed in our structural reform plan to implement the recommendations of this report, and work is ongoing in that area.

The Government also feel that communication to both farmers and land managers is important to ensure that research and knowledge are used on the ground. We are considering ways to develop and facilitate knowledge transfer, to help farmers adapt so that they can produce food sustainably. In February, Defra started a study to look at how to develop and deliver integrated advice to farmers on a range of policy objectives, including climate change adaptation, mitigation, competitiveness and environmental outcomes. This integrated advice pilot is also expected to report early next year.

The current farm advisory system in England provides one-to-one advice via a telephone helpline service. We intend, as part of the development of a more industry-led approach to farm advice, to explore further the potential for face-to-face advice, and in particular to address areas where breaches of requirements are common. Defra is considering the future delivery of cross-compliance advice under the FAS and will develop options for a big-society approach that will fit in with other advice streams.

In the context of the EU, it is expected that the clearing-house mechanism that was foreshadowed in the European Commission's 2009 White Paper on adapting to climate change, which was referred to by a number of noble Lords, will go live at the beginning of 2012. It will be an aid for the development of adaptation strategies focusing on the needs of national and regional policy-makers.

I turn now to the long-term changes to the CAP. As noble Lords will know, last November the Commission published its communication, The CAP towards 2020: Meeting the Food, Natural Resources and Territorial Challenges of the Future. It identifies adaptation to climate change and fostering green growth through innovation as objectives of a reformed CAP. The Government have responded to the communication and are now taking an active part in discussions with the Commission and with other member states. As I think noble Lords will know, the Government’s view is that at this stage the proposals do not go far enough and they risk missing a vital opportunity to put farmers on the right footing. The challenges that farmers are facing are serious and require a long-term solution. Ambitious reform of the CAP is needed if farmers are to meet those climate change adaptation targets and other challenges in the future, as well as to make the most of the opportunities.

The Government agree with the committee that a reformed CAP should reward land managers for the provision of public goods, including land adaptation actions which would not otherwise be undertaken. The CAP should also support sustainable production, which may mean not supporting agricultural production where it would result in unacceptable environmental cost. The United Kingdom is already providing effective support for environmental public benefits through the various agri-environment schemes under Axis 2 of Pillar 2. There is already provision for adaptation actions under the existing Rural Development Programme for England—the RDPE—and measures that benefit soil, water or biodiversity also underpin adaptation action. This should continue to be supported under Pillar 2 as part of a reduced CAP supporting climate change resilience and correcting market failure.

The Government will continue to work positively within Europe to press for the greater ambition that we see as necessary on CAP reform. It will obviously be a very difficult matter, as anyone who has ever been involved in agricultural negotiations in Europe will know. I see almost a wry grin on the face of the noble Baroness, Lady Quin, but she knows what I mean, and I think other noble Lords do as well. However, we shall continue to work to that end.

We will also continue to work with the Commission and other member states on the implementation of the EU White Paper on adapting to climate change, which includes embedding adaptation in all EU policies and not just the CAP.

Perhaps I may say a word or two about forestry. This subject was raised initially by the noble Baroness, Lady Sharp, and then by all other noble Lords. Climate change represents a significant challenge to our trees and woodlands. It is possible that climate change is currently allowing some of the diseases that come into the country to take hold in our forests. There are also synergies between climate change adaptation, forestry and meeting a number of other environmental objectives, including the water framework directive. However, those synergies will be exploited only if land management is treated in a holistic way. The CAP reform process represents a real opportunity to develop that approach and for woodlands to play an integrated role with agriculture.

The noble Baroness, Lady Quin, and others referred to Professor Read’s report, which showed conclusively that woodland creation is a very cost-effective approach to helping to tackle climate change. The noble Baroness, Lady Sharp, stressed the evidence that Professor Read gave to the committee. As part of the work of the Woodland Carbon Task Force, the Forestry Commission has also commissioned analysis to examine further the returns of investment in different types of woodlands in delivering a range of ecosystem services, including mitigating and adapting to climate change. This will help to focus investment where it will deliver the greatest benefits for the least cost. It is also important to consider the implications for forests when developing and implementing EU directives and other legislation.

The noble Baroness, Lady Sharp, and my noble friend Lord Caithness also asked about support for forestry. I assure them that, as a result of recent controversies, if I may put it that way, we have set up a panel on the public forest estate. The panel will, as the noble Baroness, Lady Quin, will be aware from the terms of reference, range slightly wider than purely the public forest estate, which manages some 18 per cent of our woodlands. It will obviously consider these matters.

We will also always look at what other support forestry needs because, as my noble friend Lord Framlingham made clear in his maiden speech, forestry yields many benefits, not just in carbon retention but in many other public goods, and it provides timber that has uses. For that reason my noble friend Lord Caithness was very anxious to know what we can do to make forestry a profitable and sustainable industry. That might be too big a question to deal with now, but I think we all agree that forestry should be a sustainable and profitable industry for the good of the country in the future.

Monitoring the effects of climate change and the suitability of adaptation actions in the agricultural and forestry sectors will be essential to the development of robust and coherent adaptation strategies. Sharing that information at European level will provide added value for member states to develop their own programmes.

The noble Lord, Lord Cameron, and the noble Baroness, Lady Miller, stressed the importance of water and water quality and possible future problems in dealing with water shortages, not just in parts of the United Kingdom but throughout the world. I was very grateful for what the noble Lord said about making much more efficient use of water. We shall certainly continue to support research into improving water efficiency. I can give an assurance that quite a lot of work is going on in Defra in that respect. He is certainly right to talk about the problems that face us. We will also continue to discuss these matters, as we did only yesterday or the day before, with our water stakeholders’ forum. That was built around the water framework directive.

I have a brief comment to make about the remarks from the noble Lord, Lord Taverne, on biotechnology and GM crops, a matter that was addressed by other noble Lords. I can give him an assurance that the United Kingdom has worked towards finding a solution, with the Commission, to the low-level presence of non-approved GM in feed imports. That will certainly reduce the threat to feed suppliers bringing in food that might otherwise be contaminated, if that is the right word. We recognise that GM is, dare I say, a controversial issue and as the noble Lord made clear when he commented on Lord Melchett’s comments, it can be somewhat polarised. We believe that the argument should be based on the existing science and evidence; we will always make our decisions on scientific evidence for the future. I am sure that in the long run, once we have achieved a consensus on these matters, it will be right to go forward in a direction that will help to feed the world in the future.

I end by thanking the committee for its work. We look forward to future reports that the committee will bring forward. I can assure the House that the Government are committed to assisting agriculture and forestry in every possible way to adapt to climate change, and I can give an assurance that we shall continue to work with our domestic, European and international partners to achieve that end.

18:04

[Baroness Sharp of Guildford]

My Lords, I thank all noble Lords who have participated in the debate and, in particular, join others in congratulating the noble Lord, Lord Framlingham, on his excellent and very amusing maiden speech. Like the noble Baroness, Lady Quin, I shall treasure his words that trees are one of the world's blessings. That was one of the themes of our debate. With the exception of my noble friend Lord Caithness, who is somewhat of a sceptic on these things, all noble Lords who have spoken have stressed how vital the subject of the adaptation to and mitigation of climate change in European agriculture is to the future of the planet.

Noble Lords have spoken not only about the CAP but about water and soil management, forestry, research and its applications, and the role of GM technologies in raising productivity. All those issues are relevant and extremely important. I thank noble Lords for bringing them to the attention of the House; and I thank the Minister for his comprehensive response.

It has been a good and wide-ranging debate. With those thanks, I commend the Motion.

Motion agreed.

House adjourned at 6.06 pm.