House of Commons

Tuesday 26th April 2011 Commons Chamber

Tuesday 26 April 2011

The House met at half-past Two o’clock

Prayers

Tuesday 26th April 2011 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Tuesday 26th April 2011 Commons Chamber

The Secretary of State was asked—

[Barbara Keeley (Worsley and Eccles South) (Lab)]

1. What progress the NHS North West Specialised Commissioning Group has made in reviewing neuromuscular services in the region; and if he will make a statement.

[Mr John Leech (Manchester, Withington) (LD)]

14. What progress the NHS North West Specialised Commissioning Group has made in reviewing neuromuscular services in the region; and if he will make a statement.

[The Parliamentary Under-Secretary of State for Health (Anne Milton)]

I understand that the North West Specialist Commissioning Group received a report from its neuromuscular services review group at the end of March, and that it has since circulated it to all primary care trust chief executives with a request that it is shared with board members and GP commissioning consortia leads.

[Barbara Keeley]

The north-west has not seen the investment in extra services, such as transitional care and extra care advisers, that the report recommends, and now the Government’s proposed reforms are causing turmoil in specialised commissioning and real worries about how the commissioning of tertiary services will work in future, so will Health Ministers issue guidance to commissioners to ensure that the investment is made to cover those critical gaps in the north-west, and that emergency admissions are avoided?

[Anne Milton]

I thank the hon. Lady for her question, but I reject her assertion that the changes to the NHS—the modernisation of the NHS—have thrown the process into difficulty. Clearly, she feels that there is a problem in the first place. As I am sure she will agree, however, it will be down to the commissioning of the GP consortia and the primary care trusts to decide the best way to provide services in the light of all the information that they have. I understand that the commissioners will feed back to the specialised commissioning group on how they will deal with the recommendations.

[Mr Leech]

The report highlighted that, for an investment of less than £30,000, Manchester primary care trust could ensure that all muscular dystrophy sufferers, including my constituent Ben Dale, have access to specialist care adviser support, saving an estimated £5 million in hospital admissions costs. Does the Minister agree that that investment would be excellent value for money, given that it would help my constituent Ben to live a more fulfilling life and save money for the NHS?

[Anne Milton]

The hon. Gentleman specifically mentions a constituent of his, and I have every sympathy with people coping with muscle-wasting diseases, and indeed with their families. The burden can be quite considerable. The multidisciplinary group that examined services throughout the north-west deserves our thanks for its work, but the fact is that it is for NHS commissioners, PCTs and the emerging GP-led consortia to consider the evidence that they have. Indeed, if money can be saved by commissioning services in a different way, so they should be, but that decision should be taken locally.

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

2. What steps he is taking to ensure the provision of acute services in Trafford district.

[The Minister of State, Department of Health (Mr Simon Burns)]

This is a matter for the local NHS. Every NHS trust has a duty to provide the best quality care for its patients. The Government believe that the delivery of health services should be led locally, with clinicians working with GPs and patients to ensure that their needs are met.

[Kate Green]

I am grateful for that answer and for the Minister’s letter to me last week, but, having already lost paediatric and maternity services recently, and with the decision not to provide trauma services in Trafford, local people are understandably anxious about further services being lost. Is the Minister confident that sufficient independent oversight is in place to ensure that the needs and wishes of local people are adequately met?

[Mr Burns]

I hope that I can reassure the hon. Lady, because if there were to be any reconfigurations in the future—I put that in the conditional tense because the relevant trust is confident that there will not need to be any—quite clearly the four tests that my right hon. Friend the Secretary of State introduced last May would have to apply. There would have to be full consultation with local people and with clinicians, GPs and others in the health economy.

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

3. What processes he has put in place to allow lay members of the public and elected public representatives to contribute to discussions on the reform of the NHS.

[The Secretary of State for Health (Mr Andrew Lansley)]

Following formal consultation last year, and as I told the House on 4 April, we are taking this opportunity to pause, listen, reflect and improve the Health and Social Care Bill. A total of 119 events have already been organised centrally, and the regional and local NHS will organise many more. Those events will allow us to hear a full range of views from professionals, the public and patients.

[Simon Hughes]

The Health Secretary knows that colleagues welcome the pause and the opportunity to reflect on what changes might be beneficially made to the legislation. Will he assure us that lay people and elected representatives, such as councillors and others, will be fully engaged in the process? The professionals have had their say, and they have very strong views, but the patients and elected people need to have their say, too.

[Mr Lansley]

Yes. I am grateful to my right hon. Friend, and I can give him that assurance. Indeed, one reason why it is important to pause and to listen now is not least that shadow health and wellbeing boards have been put forward by 90% of relevant local authorities in England, and it is an opportunity for them to be very clear about how we can improve patient and public accountability. I hope that they and others will take that opportunity. As my right hon. Friend knows, the Bill already substantially improves both the public and the patient voice in the NHS, and we have to ensure that we take every opportunity now further to improve it.

[Mr Kevin Barron (Rother Valley) (Lab)]

If the Government do come back with some major changes to the Bill, will those changes go out to public consultation, and will this House have the opportunity to oversee and to look in detail at any further proposals they may make?

[Mr Lansley]

I think I made it clear to the right hon. Gentleman in the House on 4 April that we were looking to pause, to listen, to reflect and to improve the Bill, and we are taking the opportunity to do so now, before Report and Third Reading.

[Mr Stephen Dorrell (Charnwood) (Con)]

Can my right hon. Friend confirm that in the listening exercise it is his intention, in addition to listening to representatives of local authorities and the public, to ensure that we fully take account of the views of representatives of the full range of clinical opinion within the health service—nurses, hospital doctors and community-based clinicians as well as GPs?

[Mr Lansley]

Yes. My right hon. Friend will know that we have done that in the past, and we continue to do so. Just as early implementers of health and wellbeing boards have an important voice in how local authorities will strengthen public accountability and democratic accountability, we also now have an opportunity that we did not have in the consultation last year for the new pathfinder consortia, as they come together—88% of the country is already represented by them—to have their voices heard. I hope that the public generally will exercise this opportunity too. I know that groups representative of patients are doing so and very much want to get involved in these discussions.

[Ms Diane Abbott (Hackney North and Stoke Newington) (Lab)]

The Secretary of State will be aware that if Lib Dem MPs were seriously opposed to this reorganisation, they could have voted against it on Second Reading—so how can he expect the public to take these discussions and the listening exercise seriously? Are they not just a device to get the coalition through the May elections, and is he not determined to get away with as little substantive change as he can manage?

[Mr Lansley]

On the contrary—the hon. Lady should know, because I made it clear on 4 April, that my objective, and that of the Prime Minister, the Deputy Prime Minister and all of the Government, is further to strengthen the NHS, and we will use this opportunity to ensure that the Bill is right for that purpose. The reason Government Members supported the Bill on Second Reading, and Labour Members should have done so, is that, as the right hon. Member for Wentworth and Dearne (John Healey) said, the general aims of reform are sound.

[Mark Pritchard (The Wrekin) (Con)]

As part of the listening exercise, will the Secretary of State confirm that the public, patients and medical professionals will be listened to? Many of them want to see root-and-branch reform of the NHS in order to improve its effectiveness and efficiency and improve patient outcomes.

[Mr Lansley]

Yes, my hon. Friend is right. We have an opportunity, which we want to realise to its fullest potential, to improve many of the ways in which patients and the public are involved. For example, we want to arrive at a point where patients feel that the invariable response of the NHS to their need is that there is no decision about them without them. We are proposing in the Bill to strengthen the scrutiny powers of local authorities. We are also proposing to bring in a patient voice through HealthWatch and HealthWatch England that has not existed since the Labour Government abolished community health councils, and we are going to strengthen substantially democratic accountability through health and wellbeing boards.

[Keith Vaz (Leicester East) (Lab)]

4. What his policy is on funding for a national framework and quality of service guidelines for diabetes patients.

[The Minister of State, Department of Health (Paul Burstow)]

To support the NHS in improving outcomes, the National Institute for Health and Clinical Excellence has published a quality standard for diabetes building on the existing national service framework, which provides an authoritative definition of good-quality care. Under proposals in the Health and Social Care Bill, quality standards will have a central role within the new system’s architecture.

[Keith Vaz]

May I declare my interest as someone who has type 2 diabetes, and remind the Minister that we currently spend 10% of the NHS budget—£1 million an hour—on diabetes-related illnesses? Does he agree that what is central to this framework is providing funding for prevention? If we can prevent and assess diabetes, we will save a great deal of money in the long run.

[Paul Burstow]

I certainly agree with the right hon. Gentleman that prevention is undoubtedly the right way forward, but earlier diagnosis is also very important. That is why we continue, as a Government, to support the roll-out of NHS heath checks for people aged 40 to 65 as a way of ensuring that we detect more readily and earlier so that we can provide the appropriate support.

[John Pugh (Southport) (LD)]

Just 10 minutes ago, I met representatives of Diabetes UK, who want to see greater emphasis on integration and co-operation between and within services in the NHS Bill. Can I assume that they will not be disappointed?

[Paul Burstow]

As my right hon. Friend the Secretary of State has already indicated in today’s exchanges in this House, we are committed to listening and reflecting during this pause, and to ensuring that we come back with substantive improvements to the Bill to deliver its central purpose of improving health care for the people of this country.

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

5. How much his Department allocated to the provision of out-of-hours surgeries in the last 12 months for which figures are available; and if he will make a statement.

[The Minister of State, Department of Health (Mr Simon Burns)]

The Government do not allocate centrally how much money is spent by local NHS providers on out-of-hours services. However, in 2009-10, the last year for which figures are available, £403.8 million was spent on out-of-hours GP services in England and £1.6 million was spent on out-of-hours services in Coventry. We plan to give GPs and other health professionals greater powers to commission out-of-hours care to achieve high quality, integrated services that are focused on the needs of patients.

[Mr Cunningham]

Given that waiting times in emergency units are increasing, what will the Minister do to protect out-of-hours clinics?

[Mr Burns]

It was, of course, the hon. Gentleman’s Government who did so much to undermine the provision of out-of-hours services. We propose not only to review the existing framework, but to ensure that there are the real improvements that benefit patient care, which are so badly needed.

[Sir Peter Bottomley (Worthing West) (Con)]

Will my right hon. Friend ensure that there are no artificial constraints so that GPs, even though they may be commissioners, can ensure that they provide out-of-hours services in combination with clinics and ambulance services?

[Mr Burns]

I am grateful to my hon. Friend for raising that important issue. I assure him that there are mechanisms in the Health and Social Care Bill to provide protection so that there are not the problems that he anticipates.

[Mr David Hanson (Delyn) (Lab)]

6. What discussions he has had with Ministers in the Welsh Assembly Government on the cross-border implications of the Health and Social Care Bill.

[The Parliamentary Under-Secretary of State for Health (Anne Milton)]

The Secretary of State for Health met Ministers of the Welsh Assembly Government on 1 December last year to discuss the future of the cross-border commissioning protocol, and I am meeting the Under-Secretary of State for Wales in the next few weeks. It was agreed that until the forthcoming changes in the Health and Social Care Bill are finalised, no substantial changes to the cross-border protocol should be introduced, as is right. The protocol, which expired on the 31 March this year, has therefore been renewed for one year with minimal changes.

[Mr Hanson]

More than 200,000 people from Wales, including people from my constituency, access services in England at the Countess of Chester hospital, Clatterbridge, the Christie, and the Walton in Liverpool. More than 50,000 people from England access health services in Wales. What guarantees can the Minister give me that the proposed changes in the Health and Social Care Bill will not wreck those arrangements?

[Anne Milton]

There is absolutely no reason why they should. I thank the right hon. Gentleman for raising this issue. It is worth pointing out that there are many areas of commonality between the health services in England and Wales. Of course, it is up to the Welsh Assembly Government to decide what scale of finance and resource they provide. I am aware that there are some cross-border issues that clearly need to be resolved.

[Richard Drax (South Dorset) (Con)]

Will the Minister confirm whether funds will be held by the consortia or the GPs in the practices, because there is confusion among GPs in my constituency of South Dorset on that point?

[Mr Speaker]

With reference to the discussions that have been held with the Welsh Assembly Government.

[Anne Milton]

I am grateful, Mr Speaker. I was going to make that point. Although Dorset is a long way from Wales, I assure the hon. Gentleman that GPs will not have the money in their personal bank accounts.

[Hywel Williams (Arfon) (PC)]

The Minister will know from the Welsh Affairs Committee report that there is considerable traffic of people accessing GP services across the border in both directions, with the net benefit going to England. Will she reassure me that the interests of people on both sides of the border will be served when the Health and Social Care Bill is finally enacted?

[Anne Milton]

Yes, I assure the hon. Gentleman that the Health and Social Care Bill aims to resolve as many of the problems that we know about on the border as possible.

[Mrs Linda Riordan (Halifax) (Lab/Co-op)]

7. What estimate he has made of the number of local authorities which changed their eligibility criteria for social care in the last 12 months.

[The Minister of State, Department of Health (Paul Burstow)]

Decisions about eligibility criteria are a matter for local councils. As part of last year’s spending review, the Government committed an additional £530 million through the local government formula grant, and £648 million in direct support from the NHS, to support social care, as well as £150 million for re-ablement. By 2014, that will rise to £2 billion of additional support for social care.

[Mrs Riordan]

Is the Minister aware that according to a recent survey by the Association of Directors of Adult Social Services, 19 local authorities including my own, Calderdale, have had to raise the eligibility criteria for social care because of the cuts that they have received from the Government? Does he stand by his statement of 21 October that there is

“no justification for local authorities to slash and burn or for local authorities to tighten eligibility”?

[Paul Burstow]

I certainly stand by the idea that the Government provided adequate resources in the financial settlement last year, alongside efficiency savings, to ensure that every local authority could choose to maintain the current levels of eligibility and services in its area if it so wished.

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

Will the Minister examine situations in which domiciliary care contracts are awarded under the EU public procurement directives, to ensure that especially when they are awarded on price, they are not dumbed down and the level of service reduced?

[Paul Burstow]

My hon. Friend makes an important point about ensuring that competition is always based on quality, not just price. If she would like to write to me with more details about the matter, I would certainly be happy to follow it up with her.

[Emily Thornberry (Islington South and Finsbury) (Lab)]

Since the Government are no longer doing an assessment of the provision of social care by local authorities, I have done it for the Minister. My survey has found that not only have eligibility criteria been tightened, but 88% of councils are increasing their charges, 63% are closing care homes and day centres and 54% are cutting funding to the voluntary sector. Now that I have told the Minister the facts, will he take back his comment that

“no councils need to reduce access to social care”?

Would he like to start being straight with the public?

[Paul Burstow]

I will take Labour facts with a pinch of salt. Under Labour, social care was always very much the poor relation. Under this coalition, social care has received a £2 billion spending boost and an unprecedented transfer of resources from the NHS—something that the hon. Lady’s party, if it had been in power, would not have been able to do, because it would have been busy cutting the NHS.

[Simon Danczuk (Rochdale) (Lab)]

8. What plans he has to visit NHS services in Rochdale; and if he will make a statement.

[The Parliamentary Under-Secretary of State for Health (Anne Milton)]

My right hon. Friend the Secretary of State for Health visited the Pennine Acute Hospitals NHS Trust, which delivers services to the people of Rochdale, in June last year. There are no immediate plans to repeat the visit.

[Simon Danczuk]

The reason I asked the question is that the people of Rochdale are extremely concerned about how Rochdale infirmary is being run and believe that the Pennine acute trust is not accountable. The Minister and the Secretary of State will be aware of the recent Channel 4 “Dispatches” programme, which showed the trust and its chief executive in a very poor light. The reconfiguration of services there has been handled very badly. May I ask the Minister, as a matter of urgency, to act upon all the concerns and investigate the management of the Pennine acute trust?

[Anne Milton]

I thank the hon. Gentleman for his question. I am aware of the recent “Dispatches” programme and the fact that the Pennine Acute Hospitals NHS Trust is implementing a number of service changes in a number of areas, including Rochdale. Those changes are part of the “Healthy Futures” and “Making it Better” programmes, both of which have been subject to full consultation with local people. NHS North West has confirmed that both programmes meet the four tests for service change, but if the hon. Gentleman continues to have concerns, I am sure one of the ministerial team will deal with them personally.

[Chris White (Warwick and Leamington) (Con)]

9. What steps he is taking to maintain front-line services in the NHS.

[The Secretary of State for Health (Mr Andrew Lansley)]

We are increasing funding for the NHS in each year of this Parliament, amounting to an increase of £11.5 billion over its course. Over the next few years, planned improvements in the efficiency of use of NHS resources, increasingly led by front-line staff, will support modernisation of the NHS to respond to rising demand and new technologies. Not least, we are cutting administration costs across the system by one third, saving £1.7 billion a year, every penny of which will be available for reinvestment in front-line services.

[Chris White]

Will the Secretary of State join me in praising the work of chief executive, Glen Burley, and the excellent team of health professionals at Warwick hospital, who are improving community care while seeking to reduce management costs? Will the Secretary of State also take the opportunity to visit Warwick hospital to discuss how those things can be done at local level?

[Mr Lansley]

I am glad to endorse my hon. Friend’s congratulations to the staff and team at Warwick hospital. I hope to have an opportunity to visit that hospital at some future date. Across the NHS, we are setting out not least to increase productivity and efficiency, stimulate innovation, reduce administration costs and put more decision-making responsibility into the hands of those who care for patients, which the Labour party failed to do.

[Clive Efford (Eltham) (Lab)]

How can the Secretary of State convince people that he is protecting front-line services when a flagship Bill such as the Health and Social Care Bill is in such disarray? While he is pausing and listening and reflecting on that Bill, will he also consider whether the House will have a further opportunity to consider his reflections, because we are through the Committee stage? Will there be another Committee?

[Mr Lansley]

The hon. Gentleman misses the point that what matters to the public is the quality of services that are provided to them. When he asked his question, he might have reflected on the simple fact that the Labour party told us before the spending review to cut the budget of the NHS. We refused to do that, which means that this financial year, £2.9 billion more will be available for the NHS to spend than it spent last year.

[Harriett Baldwin (West Worcestershire) (Con)]

A crucial front-line service is the provision of stroke care. Can the Secretary of State confirm that under his proposed reforms, local clinical practitioners will have much more influence over the location of those stroke services than in the current situation, when management can make somewhat arbitrary changes?

[Mr Lansley]

Yes, I can confirm that. We are looking for commissioning consortia not only to lead from a primary care perspective on behalf of patients, but to work on commissioning services with their specialist colleagues. Of course, the stroke research network has formed a strong basis upon which such commissioning activity can take place.

There have been many improvements in stroke care. Over the last year, we have seen a significant improvement in performance in relation to responses to transient ischaemic attack, and I hope we continue to see improvements in future.

[Liz Kendall (Leicester West) (Lab)]

Last year, the Prime Minister made a very clear pledge to protect front-line NHS services. Will the Secretary of State confirm that in the run-up to next year’s Olympics, which will bring around 1 million extra people to the capital, the London ambulance service is cutting 560 front-line staff? Will the Secretary of State also confirm that nationally, A and E waits of more than four hours are up 65%, that the number of patients waiting more than six weeks for their cancer test has doubled, and that more patients are waiting for longer than 18 weeks than at any time in the last two years? Will he now admit that the Prime Minister’s pledge to protect front-line care is unravelling even faster than the Secretary of State’s chaotic Health and Social Care Bill?

[Mr Speaker]

There were three questions there, but I know that the Secretary of State will provide a characteristically succinct reply.

[Mr Lansley]

Thank you, Mr Speaker. None of those questions reminded the House that the Labour party wanted to cut the budget of the NHS, nor that in Wales, a Labour-led Welsh Assembly Government are cutting the NHS budget in real terms—there is no increase at all.

Let me tell the hon. Lady that waiting times in the NHS are, on average, nine weeks for patients who are admitted and three and a half weeks for those who are not admitted. That is broadly stable.

The hon. Lady will know that the chief executive of the London ambulance service, Peter Bradley, has made it clear that the ambulance service, like the NHS, needs to maintain front-line services while continually improving efficiency. That will happen in the ambulance service and it will happen right across the NHS.

[Karen Lumley (Redditch) (Con)]

10. What progress he has made on the establishment of local health and wellbeing boards.

[The Minister of State, Department of Health (Paul Burstow)]

Almost nine out of 10 local authorities have signed up as early implementers to press ahead with the setting up of health and wellbeing boards. Councillors, clinicians and local communities have told us that by working together through those boards, they can and will improve health and care outcomes for local people.

[Karen Lumley]

Does my hon. Friend agree that giving greater public health powers to the health and wellbeing boards will allow more targeted help in our local communities?

[Paul Burstow]

Absolutely. By bringing public health home to local government we will have the opportunity to ensure that many of the underlying causes of ill health can be tackled more effectively, and that is why we are making the reform in this way. By having a health and wellbeing board that brings together all the interested parties we can also ensure a far more integrated approach.

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

Will the hon. Gentleman persuade the Secretary of State to come to Yorkshire and perhaps speak to a small group of people—no more than 60—in a quiet room about what these boards are supposed to do? Who will be on them, how accountable and transparent will they be, and will they have any teeth?

[Paul Burstow]

My right hon. Friend of course is more than happy to go to all sorts of places to talk to people about the health reforms. However, local government fully supports this particular proposal and sees it as a vital innovation for the involvement of local government in the health service. It will be transparent because it will be part of the local authority and will meet in open.

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

11. What recent assessment he has made of progress by GP pathfinder consortia in delivering improvements in NHS services.

[The Secretary of State for Health (Mr Andrew Lansley)]

I am delighted that nearly 90% of the country is now covered by pathfinder consortia, including my hon. Friend’s constituency, where the eastern Devon consortia chairs board pathfinder is up and running. I know that one area on which these emerging consortia are focusing is providing better, more flexible services for patients in community settings. We are supporting all the pathfinders through the pathfinder learning network, which is already showing a wide range of examples of where clinician-led commissioning is delivering benefits for patients.

[Neil Parish]

I welcome the Secretary of State saying that the consortium in my constituency is up and running. Will he also take this opportunity to ensure that through these consortia patients can get better access to their doctors? Labour paid doctors a great deal more money, but patients actually got less access to their doctors.

[Mr Lansley]

That, indeed, will be one of the areas on which the quality and outcomes framework for individual GP practices will focus. In addition, however, through the commissioning outcomes framework for the NHS as a whole, one area in which we want to see continuing improvement in quality is patient experience and outcomes as reported by patients. GPs and their clinical colleagues will therefore be incentivised continuously to improve quality.

[Valerie Vaz (Walsall South) (Lab)]

Can the Secretary of State tell us how much this consultation exercise is costing the public purse?

[Mr Lansley]

No, I cannot, but I will write to the hon. Lady.

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

The Secretary of State knows that many of us have received e-mails from constituents, the majority of which have been cut and pasted from a left-wing website. The impression given of the role of the GP consortia bears little relationship to that of GP leaders in my constituency such as Elizabeth Johnston. Will he confirm that he will listen very carefully to the experience and expertise of my local GP leaders, and not a left-wing motivated campaign?

[Mr Lansley]

My hon. Friend will know, like I do, that his GPs in Reading have already commissioned a new care pathway for people with lower back pain, which means that instead of having to go to hospital appointments, patients can be seen in their own homes by physiotherapists or occupational therapists offering practical advice and assistance in managing pain. Those are practical steps led by front-line staff, the purpose of which is to improve care for patients.

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

12. What arrangements he has made for continuity of provision of existing hospital services under his proposed reforms of the NHS; and if he will make a statement.

[The Minister of State, Department of Health (Mr Simon Burns)]

Commissioners would remain responsible for securing continued provision of NHS services to meet the needs of their local populations. We are proposing to support commissioners in this by introducing a comprehensive system of regulation at national level and additional regulation for designated services.

[Luciana Berger]

The Minister told the Bill Committee that some accident and emergency services might be undercut by private providers, which could force them to close. Will the Government bring forward amendments to the Bill to safeguard existing A and E services in all areas, including Merseyside?

[Mr Burns]

I know that the hon. Lady does not want to mislead the House, but she is totally, factually incorrect in how she paraphrased what I said in the Health and Social Care Bill Committee. As any hon. Member who was there will know, I tried to be helpful to the hon. Member for Leicester West (Liz Kendall)—it is the last time I will—and gave her an illustrative example of how designated services would work. However, I did not say what the hon. Member for Liverpool, Wavertree (Luciana Berger) attributed to me.

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

Clinicians at the West Suffolk hospital in Bury St Edmunds are concerned that they will get the same tariff for an operation as a private sector provider, even though the NHS has to carry the cost of training whereas, on the whole, the private sector does not. What steps will the Minister take to address this perceived unfairness?

[Mr Burns]

I should like to reassure my hon. Friend. As he will know, we do not propose to introduce price competition into the NHS; rather, we propose to introduce competition based on quality. His clinicians are correct that the price will be the same. However, they must remember that we are going to stop the practice of the last Government, who, with independent sector treatment centres, paid the private sector over 11% more per operation than they were prepared to pay the national health service.

[Mr Speaker]

I call Mr Derek Twigg.

[Derek Twigg (Halton) (Lab)]

indicated dissent.

[Mr Speaker]

I thought that the hon. Gentleman wanted to come in on this question. That is what I have been told, but never mind: we will wait to hear his dulcet tones in due course.

[Helen Goodman (Bishop Auckland) (Lab)]

15. Whether he has made an assessment of the effectiveness of the 111 non-emergency number; and if he will make a statement.

[The Minister of State, Department of Health (Mr Simon Burns)]

NHS 111 is currently being piloted in County Durham and Darlington, Nottingham city, Lincolnshire and Luton, and a full independent evaluation of these pilots will be available in spring 2012.

[Helen Goodman]

In Durham, 111 calls are being answered by telephone receptionists without any medical training. They run through a list of pre-scripted questions and frequently divert ambulance paramedics away from 999 calls. Clearly that is risky. Will the Minister look into that before the number goes nationwide?

[Mr Burns]

I am sorry, but the hon. Lady is a little bit confused. She says, rather dismissively, that the calls are being answered by telephonists. These are non-medically trained people who have nurses and GPs available to give them help and advice as and when the callers demand it, because of the complaint or problem that they are raising. The beauty of the 111 service is that people do not have to wait to be called back, as they do with NHS Direct. Instead, the people trained to help callers will point them towards the appropriate care—which in some cases will be the emergency services—and they are right to do so when this has been clinically determined.

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

Can my right hon. Friend assure the House that 111 telephone operators will be trained to the same level as 999 telephone operators?

[Mr Burns]

Yes, absolutely.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

16. What amendments he plans to table to the Health and Social Care Bill.

[The Secretary of State for Health (Mr Andrew Lansley)]

As I told the House on 4 April, we are taking the opportunity presented by a natural break in the legislative process to pause, listen, reflect and improve our plans for modernisation of the health service. We will consider what amendments are required in the light of this.

[Jonathan Reynolds]

The Health and Social Care Bill is undoubtedly one of the most controversial pieces of legislation being proposed by the coalition. May I push the Secretary of State a little further on some of the answers that he has given my hon. Friends and ask him exactly how he will ensure adequate parliamentary time to scrutinise the amendments that he will bring forward?

[Mr Lansley]

I am not sure that I necessarily subscribe to the hon. Gentleman’s premise. This issue is important and it warrants the kind of attention that we are giving to it, and there is an opportunity to listen, reflect and improve the Bill because we want to ensure that we can thereby strengthen the NHS. On strengthening the NHS, I am surprised that the hon. Gentleman did not take the opportunity to refer to the £12.9 million increase in the budget for Tameside and Glossop PCT this year—something that Labour would not have offered. The truth is that we are going to strengthen the NHS through the Health and Social Care Bill, as we are strengthening it through our commitment to the priorities of the NHS.

[David Tredinnick (Bosworth) (Con)]

Has my right hon. Friend had any further thoughts on the effect of HealthWatch England’s representatives being included in local health and wellbeing boards? Does he think that the provisions are sufficiently robust to ensure that they have an impact on commissioning?

[Mr Lansley]

As my hon. Friend knows, we intend health and wellbeing boards to bring together HealthWatch, plus councillors, commissioning bodies and providers, as part of the process of local representation, so that we can link up NHS commissioning with public health and social care, to see how they collectively meet the joint strategic needs assessment led by the local authority.

[Mr Speaker]

I call Diana Johnson.

[Derek Twigg (Halton) (Lab)]

rose—

[Mr Speaker]

I apologise to the hon. Member for Kingston upon Hull North (Diana Johnson). The change of mind on the part of the Opposition Front Bench fazed me, for which I apologise. The hon. Member for Halton (Derek Twigg) wants his opportunity to ask a question, and he should have it.

[Derek Twigg]

Thank you, Mr Speaker. I think there was some confusion between questions 13 and 16.

We obviously want to see important improvements to the Bill, including the deletion of part 3, which drives competition to the heart of the NHS, and of clause 150, which removes the private patients’ income cap. I also want to ask the Secretary of State a specific question. On 16 March, during the Bill’s passage through the House, the Prime Minister said to the Leader of the Opposition:

“Perhaps he would like to…support our anti-cherry-picking amendment.”—[Official Report, 16 March 2011; Vol. 525, c. 292.]

Will the Secretary of State tell us whether it is still the Government’s policy to table such an amendment in this House, or whether they intend to do so at a later stage?

[Mr Lansley]

As I said earlier, when we have completed this process of listening and reflecting, we will table amendments to the Bill. I will tell the House about them then, just as I told them on 4 April that we were going to go through this process. Let me make it clear that we are intending not to allow cherry-picking. We intend to make it absolutely clear to the private sector or anybody else that they must not be able to compete with the NHS on uneven terms because, actually, that is what the last Labour Government did. Under that Government, we ended up with £250 million being spent on operations in private hospitals that never took place because of the poor nature of the private sector provision that they put in place. We are not introducing competition into the NHS through this Bill. Why does the hon. Gentleman suppose that the last Labour Government set up the competition and co-operation panel, if not—

[Mr Speaker]

Order. I am grateful to the Secretary of State. I call Diana Johnson.

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

17. How much funding he plans to allocate to local authorities in order to perform their new public health duties in each of the next three years.

[The Parliamentary Under-Secretary of State for Health (Anne Milton)]

We want local authorities to have the powers and the resources that they need in order to make a real difference to the health and well-being of their local populations. Shadow allocations for the local ring-fenced public health budget will be announced later this year.

[Diana Johnson]

Hull’s Lib Dem council does not have a very good record on public health. It is currently slashing services delivered to children through its children’s centres and early years services. We all know that public health can be improved by that early investment. What is the Minister going to do to ensure that councils take their wider public health responsibilities seriously?

[Anne Milton]

I thank the hon. Lady for her question. With resources come responsibilities. I am pleased that the hon. Member for Hackney North and Stoke Newington (Ms Abbott) has welcomed the shift in public health. There is no doubt about it: local authorities have a long history of delivering public health improvements, and this will give them the opportunity to see again some of the improvements that were long awaited under the last Government.

[Helen Jones (Warrington North) (Lab)]

20. What assessment he has made of progress in providing co-ordinated medical assessments for children with disabilities.

[The Parliamentary Under-Secretary of State for Health (Anne Milton)]

The Department for Education Green Paper, “Support and aspiration: a new approach to special educational needs and disability—a consultation”, was published in March and includes a proposal to develop a single new co-ordinated assessment for education, health and care plans by 2014. The consultation on the Green Paper continues until June 2011, and I hope that the hon. Lady will respond to it.

[Helen Jones]

That was a very interesting answer, particularly as the Prime Minister told me on 30 March that this

“idea is rapidly becoming Government policy.”—[Official Report, 30 March 2011; Vol. 526, c. 340.]

Can the Minister tell us whether she intends to table an amendment to the Health and Social Care Bill to ensure that those crack teams of medical experts that the Prime Minister promised would be set up will be set up by GP consortia?

[Anne Milton]

Families of children with disabilities and special needs will welcome the single, co-ordinated assessment. We have to see health and social care working more closely together, because those families bear a considerable burden of care. I would point the hon. Lady towards the consultation, and I suggest that she points her constituents towards it as well, as it is extremely important that we get their feedback.

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

22. What steps he is taking to extend the choice that patients have over the treatment they receive from the NHS.

[The Minister of State, Department of Health (Mr Simon Burns)]

The Government have consulted on proposals to give patients greater choice and control over their care and treatment. We have deferred publication of our response to take into account the results of the listening exercise.

[Mr Evennett]

I thank my right hon. Friend for that answer and refer him to the King’s Fund paper, “Patient choice”, which was published in March 2010. Does he agree that people value being able to choose and that the exercise of choice raises standards and encourages NHS providers to design services around patients and their needs?

[Mr Burns]

My hon. Friend is absolutely right. I am certainly aware of the King’s Fund publication. The report was cited as a key source of evidence in the consultation document, “Liberating the NHS”. The Department of Health welcomes this significant contribution to the evidence base, which will inform how we implement the choice commitments set out in the White Paper, “Equity and excellence: Liberating the NHS”.

[Fiona Mactaggart (Slough) (Lab)]

When I was first elected, I regularly received letters from constituents who were concerned about how long they had to wait for treatment. During the years of the Labour Government, those letters went away, but they are coming back again. What I know from my constituents is that their main choice is not to have to wait. Is that a choice that this Government are going to offer them or will waiting times increase?

[Mr Burns]

The choice this Government will offer them will make sure that they get the finest quality health care, where they can exercise their choice of which hospital to go to, which consultant to see, which GP to see, without having to wait unduly for that treatment.

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

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

[The Secretary of State for Health (Mr Andrew Lansley)]

My responsibility is to lead the NHS in delivering improved health outcomes in England; to lead a public health service that improves the health of the nation and reduces health inequalities; and to lead the reform of adult social care, which supports and protects vulnerable people.

[James Morris]

The Alzheimer’s Society predicts that by 2021, there will be a million sufferers from dementia in this country. Will the Secretary of State reassure my constituents that those people suffering from it will get the support they need—now and in the future?

[Mr Lansley]

Yes, I can tell my hon. Friend that the response to dementia is a key priority for this coalition Government. I think we have already demonstrated it in our commitment to dementia research. We need to improve both earlier diagnosis of dementia and the possibilities for treatment. We have demonstrated our commitment to improving standards in dementia care, both in hospitals and in care homes, and, indeed, in the further work we have done on reducing the use of anti-psychotic medicines.

[John Healey (Wentworth and Dearne) (Lab)]

How does the Health Secretary square the Prime Minister’s promise to pause in his changes to the NHS with the NHS chief executive saying a week later:

“I want to stress very firmly that we need…to maintain momentum on the ground.”

With the Government’s health Bill, are we not seeing both rushed pre-legislative implementation and confused post-legislative policy making? If the Prime Minister really gets cold feet about his NHS changes, let me ask the Health Secretary for a fourth time whether the Government will guarantee the extra time needed for this House to examine the changes fully?

[Mr Lansley]

Let me be clear about the right hon. Gentleman’s point. Both things are entirely compatible because there are 220 GP-led consortia that have come together as pathfinders to demonstrate how they can improve commissioning and the service to their patients; 90% of local authorities have come together in health and wellbeing boards; while at the same time, we have to deliver the challenge of improving productivity, quality and efficiency. All of that requires us, on the ground, to continue the momentum of improvement for patients. At the same time, we are listening not least to all those clinicians and members of the public who want to be sure that the Bill will provide them with the opportunities for involvement and the safeguards they are looking for in the NHS in the future.

[John Healey]

The Health Secretary ducked for the fourth time this afternoon the question of whether he will do right by this House in allowing sufficient time for proper scrutiny of any changes to the Bill that come forward. While he is listening, will he consider the risks he is running with the NHS? The Prime Minister promised a real rise in NHS funding, yet this year more than nine out of 10 hospitals are faced with cutting costs by more than 4%; one in seven by more than 8%; while nearly £2 billion for patient care is being held back to cover the costs of the internal NHS reorganisation. Will he admit that this reorganisation is now piling extra pressure on NHS funding and services so that patients are seeing waiting times rise, operations cancelled and front-line staff jobs cut as the NHS starts to go backwards again under the Tories?

[Mr Lansley]

I find the hon. Gentleman’s cheek astonishing. It was his party which, before the election, announced its intention of making up to £20 billion of efficiency savings, it was his party which told us after the election that the NHS should be cut, and it is his party which is actually cutting the NHS in Wales. It is the coalition Government who have made decisions that will give the NHS £2.9 billion—a 3% cash increase—and, because of the way in which we are tackling the costs of management, will put more people on the front line. Following the election, there are 3,500 fewer managers and 2,500 more doctors and nurses.

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

T2. The Secretary of State is well aware of concern in the Yorkshire area about the review of children’s heart units, and I thank him for his recent letter, but does he accept that there is a contradiction between the logic applied to the south of England and that applied to the north, where 14 million people rely on the fact that the children’s heart unit in Leeds is only a two-hour drive away?

[Mr Lansley]

I should make it clear that the review is being led by the Joint Committee of Primary Care Trusts, not by the Department of Health, and that it is being conducted by an independent team who are employing an independent consultative process. My colleagues and I have made no decisions so far, but we will expect all the points made by the hon. Gentleman and others throughout the country about paediatric cardiac surgery to be taken fully into account in the consultation.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

T4. The Secretary of State will be aware that, according to the quarterly monitoring report from the King’s Fund, waiting times have hit a three-year high. Does he accept that that is a direct result of his actions, particularly the abolition of the centrally managed target in June last year?

[Mr Lansley]

I can tell the hon. Gentleman that waiting times in the NHS are stable. The average waiting time for patients who are admitted to hospital is nine weeks, and the average waiting time for out-patients is three and a half weeks. I think that people in the NHS might reasonably say that it is not fair to cite February 2011, when patients waiting for elective operations could not be admitted because critical care beds were occupied in the immediate wake of a severe winter and the largest flu outbreak since 1999.

[David Morris (Morecambe and Lunesdale) (Con)]

T3. According to recent press reports, hospitals have used money earmarked for front-line NHS services to pay salaries to trade union officials. Does my right hon. Friend consider it acceptable to spend taxpayers’ money on paying union hatchet people, and will he order an investigation?

[The Minister of State, Department of Health (Mr Simon Burns)]

The Government consider it right for NHS staff to have access to trade union representatives at work, but that should not be abused. Arrangements for reimbursing staff for trade union activities should be agreed locally between trusts and unions. There are no current plans to review union facility time.

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

T6. Given that, according to the King’s Fund, waiting times are increasing as a result of the reorganisation, does the Minister expect things to improve now that the financial squeeze is starting to bite?

[Mr Lansley]

As I have already explained, I do not accept the premise; but would the hon. Lady apply the same logic to the fact that the number of cases of hospital-acquired and health care-acquired infection has fallen substantially over the past year, the fact that access to services for strokes and transient ischaemic attacks has improved, and the fact that diabetic retinopathy and bowel cancer screening are improving? Would she argue that those developments are a result of our reforms? No, because our reforms have not been implemented., but we are making the investment in the NHS that the Labour party would not make, and we are giving the NHS the credit, which the Labour party would not do.

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

T5. There is some concern about whether GP consortia will be given enough specialist support when commissioning integrated cancer services. Will my right hon. Friend use the pause in the passage of the Health and Social Care Bill to consider extending the guarantee for cancer network funding from 2012 to 2014, when the transition period ends and GP commissioning comes fully into effect?

[The Minister of State, Department of Health (Paul Burstow)]

I am grateful to the hon. Gentleman for his question. The listening exercise is a genuine one, and we intend to bring forward appropriate changes as a result. I can certainly give the commitment that we will want to take on board such representations. We are, and consistently have been, committed to such clinical networks for the valuable contribution they make.

[John Mann (Bassetlaw) (Lab)]

T7. If Bassetlaw council refers the reconfiguration of accident and emergency, paediatric and maternity services at Bassetlaw district general hospital to the Secretary of State, what criteria will he use to make a decision?

[Mr Lansley]

Under those circumstances, if a referral is made to me, I will wish to apply the kind of criteria that I set out last year for reconfigurations across the country for the first time: that they must meet the tests of being consistent with the result of any public consultation and with the public’s view, with the views of prospective future commissioners—such as the commissioning consortia that are coming together as a pathfinder in the hon. Gentleman’s constituency—and with the future choices made by patients about where and how they want services to be provided to them, and that they must meet clinical criteria for safety and quality.

[Philip Davies (Shipley) (Con)]

May I join my hon. Friend the Member for Leeds North West (Greg Mulholland) in urging the Secretary of State to protect the children’s heart unit at Leeds hospital as it is a very worthwhile facility for people in Yorkshire, and does my right hon. Friend the Secretary of State agree with me that doctors should go to where the patients are, rather than the other way around by expecting patients to travel for many hours to get to such an important service?

[Mr Lansley]

I am grateful to my hon. Friend for his question, but in response I will simply reiterate what I said to our hon. Friend the Member for Leeds North West: that these matters are currently the subject of consultation by an independent group representing the primary care trusts collectively, and not by the Department of Health at this stage.

[Yvonne Fovargue (Makerfield) (Lab)]

T8. Given the concerns of researchers and medical research charities and their belief that the research provisions in the Health and Social Care Bill should be strengthened, what discussions has the Secretary of State had with the medical research community during this pause?

[Mr Lansley]

The hon. Lady will know that the Health and Social Care Bill does make specific provision for NHS organisations to have regard to the needs for research. She will, I hope, also be very well aware that, by virtue of decisions made by this Government in the spending review, we have been able to sustain the level of research in the NHS. In particular, I was recently able to announce a new 30% increase in funding for translational research funded through the NHS.

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

When the consultation on the future of children’s heart surgery units is complete, will the Secretary of State bear it in mind that it would be a preposterous and perverse conclusion that the unit in Southampton, which is one of the two best in the country, should be threatened with closure?

[Mr Lansley]

I am, of course, aware of these issues, which have been raised by colleagues on both sides of the House. At this stage, may I simply reiterate that the consultation team should consider the points that I know my hon. Friend and others are making to it? After the consultation team has fully reflected on all the points, I hope Members will be able to see that it has fully taken them into account in whatever proposals it brings forward.

[Gavin Shuker (Luton South) (Lab/Co-op)]

T9. The Secretary of State has just appeared to blame the rise in waiting times on, as it were, the wrong kind of snow. Can we infer from that that if waiting times continue to rise over the coming months, he will reinstate the targets that brought waiting times down and kept them low?

[Mr Lansley]

The point I made was that average waiting times are stable. Maximum waiting times continue to be a right of patients under the NHS constitution. I recommend that the hon. Gentleman should go to Luton and Dunstable hospital and discuss with the staff there how they dealt with a combination of circumstances that led to there being unprecedented pressure on critical care beds. He must know that if hospitals do not have critical care beds immediately available, it is not in the patients’ interests for the hospitals to bring some patients in for elective surgery. That had an inevitable consequence on waiting times for a small minority of patients.

[Annette Brooke (Mid Dorset and North Poole) (LD)]

I have received representations from constituents regarding the reclassification by the primary care trust of elderly relatives for continuing health care funding, with severe needs apparently becoming moderate over time. Does the Secretary of State share my concern about this, and how widespread is this practice in the current climate?

[Paul Burstow]

My hon. Friend’s point is important and I regularly receive correspondence about this from hon. Members from all parts of this House. If she wishes to write to me, I will be happy to discuss the matter with her further, once I have had a chance to look at the details.

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

Given that Department of Health officials are actively discussing the privatisation of my local trust behind closed doors and are signing secret documents, will the Minister publish all those documents and will he make a statement in the House about the Government’s plans to privatise some of our NHS hospitals?

[Mr Burns]

I am afraid that I do not accept the premise of the question. May I tell the hon. Gentleman that this Government are not seeking and will not ever seek to privatise either the whole of the NHS or an individual trust? St Helens and Knowsley Teaching Hospitals NHS Trust is, like all other health trusts, currently agreeing plans to achieve foundation trust status by April 2014. That involves ongoing discussions with the North West strategic health authority and the Department of Health to determine the issues the trust faces and the actions needed to address them.

[Stuart Andrew (Pudsey) (Con)]

May I join my hon. Friends the Members for Leeds North West (Greg Mulholland) and for Shipley (Philip Davies) in supporting the children’s heart unit in Leeds? If the review fails to take full account of, and reflect on, the issues raised, what steps will the Secretary of State take to ensure that that is done so that we can fully understand the problems that would face families in Yorkshire?

[Mr Lansley]

I understand my hon. Friend’s concern and that of colleagues in other locations across the country. If—I repeat the “if”—the consultation were not to arrive at what he or others in any specific location regarded as justified conclusions, it would be open to them, as this is a service reconfiguration of the NHS, to seek a referral of the proposal to me as Secretary of State.

[Jim Shannon (Strangford) (DUP)]

Diabetes UK has a strategy to reduce the number of people with diabetes across the whole UK. Will the Minister tell the House what discussions he has had with the Northern Ireland Assembly—the matter is devolved in Northern Ireland—to ensure that the strategy of prevention, awareness and education is followed across the whole of the UK?

[Paul Burstow]

The hon. Gentleman is absolutely right, because this strategy must contain four elements; it must be about prevention, earlier diagnosis and appropriate self care, and we also have to have world-class research. Discussions with the Northern Ireland Assembly are ongoing.

[Duncan Hames (Chippenham) (LD)]

Professional autonomy need not come at the expense of transparency in the provision of public services. Given that the Department for Education was able to extend the Freedom of Information Act to academy schools, does the Minister agree that it would be healthy for the Act to apply also to GP consortia in the NHS?

[Mr Lansley]

I am grateful to my hon. Friend for that. The Health and Social Care Bill establishes the commissioning consortia as public statutory bodies and, as such, that Act will apply to them.

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

As part of his consultation exercise on NHS reform, the Secretary of State recently visited Liverpool, where he met nurses. When he was listening to the nurses at the Royal College of Nursing conference, what did he hear?

[Mr Lansley]

I heard many things, including the nurses’ concerns about front-line services, which I share; Dr Peter Carter has said time and again that he is very worried that the NHS might go through a process of trying to salami-slice services to the detriment of patients when it is actually possible to deliver greater efficiency through cutting out waste, administration and bureaucracy. I agree with many of the things I heard and I want to make sure, as a matter of urgency, that right across the country that efficiency is achieved and we do not act to the detriment of front-line services.

[Richard Graham (Gloucester) (Con)]

Will the Secretary of State join me in congratulating GP practices in Gloucestershire, all of which have decided to participate in the single consortium taking forward the commissioning of health services? Will he reassure those of my constituents who still have concerns that this whole process is about protecting front-line services and that it is absolutely not about the back-door privatisation of the NHS?

[Mr Lansley]

Yes. My hon. Friend makes an extremely important point and his pathfinder consortium in Gloucestershire is focused on how it can deliver more integrated services. One of the things that we are looking for is the integration of services, which has not happened sufficiently in the past. In Gloucestershire, both in the commissioning consortium as it comes together and in the work done by the local authority, we can see how, on the ground, there is determination and enthusiasm to make the modernisation of the NHS work for patients. We must ensure that the legislation supports it.

[Several hon. Members]

rose—

[Mr Speaker]

Order. I am sorry to disappoint colleagues but as is so often the case, demand has exceeded supply and we must now move on.

Escape of Taliban Prisoners

Tuesday 26th April 2011 Commons Chamber

15:35

[Paul Flynn (Newport West) (Lab)]

(Urgent Question): To ask what repercussions the escape of Taliban prisoners will have on United Kingdom soldiers.

[The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Alistair Burt)]

I am grateful to the hon. Member for Newport West (Paul Flynn) for raising the subject of this serious incident. It might help the House if I give some of the background to it.

At 4 o’clock in the morning on 25 April, 476 prisoners escaped from the national security unit in Sarposa prison, Kandahar. This prison is under the control of the central prisons directorate of the Afghan Ministry of Justice. A number of prisoners have been recaptured by Afghan security forces, and they continue to search for escaped prisoners. The Afghan Ministry of Justice will conduct a joint investigation into the escape with the national directorate of security. The head of the CPD, General Jamshid, is travelling to Kandahar and General Tahir, of the detention and investigation section of the NDS, is already there. In the meantime, all prisons in Afghanistan have been put on alert and have reviewed their security accordingly.

The UK has had no involvement with infrastructure builds, training, mentoring or any other support to Sarposa prison. We continue to support the development of the Afghan prison sector by assisting the Afghan Ministry of Justice’s central prisons directorate in developing prison infrastructure, policies and working practices; supporting and structurally maintaining the high security unit within Policharkhi prison in Kabul; providing training and mentoring to improve prison officer standards; and funding the construction of a prison in Lashkar Gah.

In answer to the hon. Gentleman’s specific question, this is a serious event that vividly underlines the importance of building a secure prisons sector in Afghanistan. We urge the Afghan Government to put every effort into recapturing those who have escaped in order to minimise the danger and damage to anyone—be they UK forces and personnel or anyone else—and to apply lessons learned from the planned investigation to ensure that this does not happen again.

[Paul Flynn]

The valiant professionalism of our soldiers in Afghanistan is as distinguished as that of any in our proud military history. They deserve our gratitude and they also deserve our vigilance to protect them against avoidable risks. This was not just a small incident—it was a disaster. Many of those who escaped were captured originally at grievous cost in blood and treasure. Now hundreds are liberated to attack our soldiers again.

The Government have been accused of being optimistic in their faith in the reliability and loyalty of the Afghan police and army. This is the second major escape from Kandahar. Three British soldiers were murdered by an Afghan soldier. This month, the Afghan police stood aside as United Nations peacekeepers were lynched. The Afghan security services have proved themselves, to a large extent, to be endemically corrupt, inept and probably, in this case, infiltrated by the Taliban. Their loyalty is often for sale. When will the Government realise that they cannot build an ethical reliable army and police force on rotten corrupt foundations? Will they now concentrate on a political solution in Afghanistan and abandon our misplaced trust in the Afghan army and police, which is now a deadly threat to the lives of our British soldiers? Optimism and trust become naivety when we do not know who to trust.

[Alistair Burt]

I understand, and go along with, a certain amount of what the hon. Gentleman has said. This is a significant event—a disaster, to use his term. It is a disaster in security terms; of course it is. Were those held in the prison detained at great cost? Yes, they must have been, to all who were involved. I understand that only three or five of them were originally UK detainees who were passed into the Afghan system, but that does not mean that others who were involved in capturing and holding them were not upholding the very standards that he was talking about, or that they have not been let down by the security situation. That is why there must be an investigation, and why we must find out what happened.

In answer to the hon. Gentleman’s other points, it is of huge importance to us all that there be a transfer of power and responsibility to allow Afghanis to be responsible for their security, because there is no other answer. Security cannot be held indefinitely by those outside Afghanistan. I am sure that he is well aware of the political process that is going on in parallel with the transition process and everything else. I do not think that those members of the Afghan national security force who, along with the international security assistance force, were involved so much in Helmand last year in clearing out the Taliban and working so hard to create a safe space for their fellow Afghanis would quite recognise his description of them. Of course, maximum effort must be given to the training of new security forces—both police and army. Loyalty must be an absolute basic and training must be rigorous, but it is not correct to dismiss them all because of individual incidents.

That this matter is serious there is no doubt. We must get to the bottom of it and there must be tightening regarding those responsible and the security system. The future for Afghanistan is, as the hon. Gentleman makes out, a political solution, but the military and tactical support we are providing to the Afghanis, who must ultimately be responsible for their own security and safety, must continue despite the setbacks.

[Patrick Mercer (Newark) (Con)]

Having been involved with several such prisons around the world, I know that reinforced floors and listening microphones were customarily fitted in them to prevent the digging of tunnels. Was such equipment fitted—and if not, why not?

[Alistair Burt]

Clearly, at this stage, not having the same experience as my hon. Friend, I am not able to go into detail about what equipment was available to protect security. The basic point is that if people have expended effort in detaining people to pass them into a secure system, the responsibility we owe to all those to whom those people might be a threat is to make sure that they are secure. It will be part of the investigation to look not only at what has been done to ensure security previously, but at what might be done in future to reinforce that and to make sure that in future, secure places are indeed secure.

[Mr John Spellar (Warley) (Lab)]

May I express our admiration and support for the work of our troops in countering the Taliban and inflicting heavy losses on them? Understandably, our troops will be concerned at the escape of some of those whom they risked their lives to capture. We fully recognise that these are early days in collecting information and framing a considered response. In that context, can the Minister give us an early assessment of the seniority, importance and capabilities of those who have escaped, especially as we approach the fighting season? We should be frank that this is a setback, but we also need to be clear about its significance.

Secondly, what assessment has been made about the—clearly failed—level of security at the prison, and what steps are being taken across Afghanistan to check on security arrangements at other prisons? Indeed, given the previous breakout, what had been done to make the prison more secure, and to vet the staff? Can the Minister give any assessment of those who have been recaptured—what level they are, and what level of co-operation has been given by the Afghan police and the local population in relation to their recapture?

Thirdly, has the Minister also asked for an assessment of recent intelligence gathering? Had any indication of an impending escape been picked up, and if so, was that information conveyed to the right level?

Fourthly, what discussions has the Minister had with our NATO allies, especially the US, about our immediate response and our assessment of the broader impact on progress in Afghanistan?

Finally, moving closer to home, has the Minister made, or will he be making, an assessment of the impact of the escape on the threat to our security in the United Kingdom?

[Alistair Burt]

I am grateful for the tone and the nature of the right hon. Gentleman’s questions, which mirror almost exactly the questions that we in the Department are asking. It is barely a day after the event, and the answers to his questions lie a little way in the future, but in fairness I must deal with them.

It is indeed crucial to find out who has escaped. Record keeping is not such that we can be supplied with a list immediately. It is a matter of huge concern to us to find out exactly who escaped, and their positions in the seniority of the Taliban. Estimates of who has been recaptured already vary. There are some estimates as low as 25 and others as high as 60, but we do not know. Again, it is just too early to find out, but we need to do that. The investigation into what happened will cover not only what has changed as a result of events but, as I indicated to my hon. Friend the Member for Newark (Patrick Mercer), what might be done in the future to make these places more secure.

The right hon. Member for Warley (Mr Spellar) made extremely good points about intelligence gathering. Again, we have not yet had the reports on what might have been picked up, but plainly it was not accurate enough to enable the escape to be prevented, or on threat levels to us, but those are at the top of our agenda.

What the incident demonstrates clearly is that in the process of working with Afghan authorities in the essential job that they do—taking responsibility for their own country, its security, its prison system and its justice system—it is vital for our engagement and the engagement of others to continue. Kandahar, the area concerned, is not the direct responsibility of the United Kingdom. Another nation is responsible for the provincial reconstruction team working with the authorities there, including the prison authorities.

Of course the incident is a huge setback, but it demonstrates why we continue to need to be engaged as much as any reason to say no, there should be no further engagement. I am sure that the right hon. Gentleman will join me, and the rest of the House, in saying that the work must continue and lessons must be learned every time there is an incident in order to prevent it from happening again, but ultimately Afghanistan must be responsible for its own security under a proper political process initiated by the Afghans themselves and supported by the international community.

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

This event will come as a heavy blow to our armed forces just as the fighting season begins. The handover of operations to Afghan security forces is integral to our exit strategy, yet it seems that they are incapable of even guarding the Taliban, let alone taking them on in the field. Although it is early, what lessons can be learned from this in terms of our eventual exit strategy?

[Alistair Burt]

I am grateful to my hon. Friend for understanding the essential nature of Afghanistan’s involvement in its own security. The lessons are blindingly obvious to all of us. Whatever security was in place there was inappropriate. The methods to detect what might be going on in terms of any potential escape were clearly inadequate, but we need to know a lot more before we can make definitive judgments and, more importantly, work out what needs to be done in the future. It is essential for the process to continue.

The Afghan security authorities and the Afghan Ministry of Justice are responsible for other installations elsewhere in Afghanistan that have not been subject to similar incidents. To draw from one incident the conclusion that none of them are working anywhere in the country would therefore not be appropriate or correct, which is why some provinces are moving towards transition, as was announced by the President just over a month ago.

[David Miliband (South Shields) (Lab)]

I very much welcome the sober and serious remarks of the Minister today, which stand in sharp contrast to the claim of the Defence Secretary in the House last July, when he said:

“In Kandahar, and under the direct oversight of President Karzai, Afghan security forces are leading operations as part of a rising tide of security”.—[Official Report, 7 July 2010; Vol. 511, c. 373.]

May I ask the Minister to respond to two points? First, there should be an absolute ban on that kind of happy talk. Secondly, is it not time for the United Nations to appoint a mediator to take forward precisely the political settlement that he and I agree is so essential to our exit from Afghanistan and its development as some kind of secure and stable society?

[Alistair Burt]

On the right hon. Gentleman’s second point, I do not necessarily make the same link as he does between this incident and the political process. That is continuing. There are further conferences this year on the peace process, which was authorised and supported at the Kabul conference earlier this year. There are processes in place, which are being followed by the international community and led by President Karzai. The UN is closely involved, but I am not certain that a call for a mediator is either enhanced or diminished by the events of the past 36 hours. I recognise what the right hon. Gentleman says, but that process is continuing apace.

As for remarks about optimism or otherwise, it is entirely appropriate that, as they have done in the past, colleagues make statements honestly as they see the circumstances and as they see security situations improving, or not improving. I am here to talk about an incident that has clearly set back the process, but there are other things to talk about in relation to Afghanistan that clearly show the process moving in a different direction. I think that it is right that colleagues should be able both to report honestly the optimistic aspects of what is happening in Afghanistan and, as the right hon. Gentleman suggests, to assess things soberly if they go wrong.

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

Can the Minister at least confirm the early report that suggests that instead of prisoners tunnelling out, accomplices tunnelled in to reach them? What does it indicate about the internal security of a prison if people are able to tunnel in and it proves possible to go from cell to cell assembling hundreds of prisoners so that they can take advantage of that outside help?

[Alistair Burt]

I am grateful to my hon. Friend for such a detailed question. However, I am sure that although he will be disappointed, he will not be surprised to learn that the Foreign and Commonwealth Office does not yet have sufficient detail to confirm the veracity or otherwise of that report. It is such reports that lead, understandably, to our great concern about this case, and the need to find out exactly what has happened—and, of course, how we can ensure that such circumstances do not arise in future.

[Mr Bob Ainsworth (Coventry North East) (Lab)]

The Minister is right that this is a blow of whose significance we cannot at this stage be certain, but surely it points to the fact that we cannot rely on the security sector alone to provide a stable situation in Afghanistan within the time frame that the Government have set—by 2014-15. We must now, as the Foreign Affairs Committee has called for, redouble out efforts on the political front, in conjunction with our allies. Will he ensure that the Government do precisely that without delay?

[Alistair Burt]

The right hon. Gentleman is entirely correct. He will not hear any voices from the Government side of the House, or indeed from his colleagues, indicating that the events of the past 36 hours or so suggest any lessening in the determination to find a political answer. Ultimately, the future of Afghanistan will be in the hands of Afghanis themselves. They will be responsible for security, whether through policing, justice or the army, and the work of training goes on apace. I read with great interest the Foreign Affairs Committee’s report about its concerns and how it wishes to see people proceed in future. The political process is an absolutely key and integral part of that, and the United Kingdom will continue to support it, while at the same time supporting the work being done to ensure that the transition to Afghan security control is as good as possible, but that work will continue beyond 2015. The House should remember that although 2015 is the date when combat troops will be withdrawn, it is not the date when the United Kingdom will finish its commitment to the people of Afghanistan and their future.

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

Does my hon. Friend agree that the news of 476 dangerous Taliban fighters escaping from detention risks seriously damaging the morale of our troops serving in Afghanistan, and that it is therefore essential not only to improve the security at the detention centres immediately, but to tell our troops on the ground what measures are being taken to improve security, in order to shore up their morale and give them the confidence to know that that will not happen again?

[Alistair Burt]

My hon. Friend makes a very good point. Armed forces from whatever background, whether Afghanis, other elements of ISAF forces or UK forces, must be absolutely reassured that when they have done their job, at great cost to themselves, by securing the detention of those who have caused harm or danger to others, the system at that stage is able to pick those people up and make them secure. It is certainly my intention to ensure that once we have a full report and the Afghan authorities have completed their investigation, that information is transmitted to forces so that they know that if they do their jobs, other people will do theirs.

[Chris Bryant (Rhondda) (Lab)]

I wholeheartedly support the calls that have been made this afternoon for redoubling the political effort in Afghanistan, but is not one of the most depressing facts about this event that in many cases it will have been British special forces who captured those people in the first place, and it may well be British special forces that have to capture them all over again? I do not expect the Minister to comment on operational matters, but is it not depressing that at this stage we are cutting 650 troops from the Royal Marines—precisely where those special forces are largely drawn from?

[Alistair Burt]

May I repeat something that I said earlier? Of the 476 detainees who escaped from the prison, as far as we are aware between three and five of them were captured and transferred into the system by United Kingdom forces: as the hon. Gentleman makes his distinction, I have to make that distinction back. A very small number of the total were involved with and detained by British security forces—but that does not avoid the main point, which is that of course there are 476 detainees who should be inside the prison today, not outside. The situation affects all the forces that have been engaged, and we do not draw a distinction as to who detained the prisoners.

[Mr Denis MacShane (Rotherham) (Lab)]

The Minister has made a very clear and good statement, but is the situation not proof again that events in Afghanistan are controlling us, rather than the other way around? I wonder whether, on the subject of Afghanistan, a lot more people in this House and in the country may be recognising the salience of Pitt the elder’s remark that we should retract while we can, rather than retract when we must.

[Alistair Burt]

The right hon. Gentleman—[Laughter.] Clearly, we understand the point that he makes.

[Mr MacShane]

You could ask somebody about Pitt.

[Alistair Burt]

Yes, I am very comfortable knowing a great deal more about Pitt than I did when I first took this role, having read some excellent books about him over the past few months. [Hon Members: “Wrong Pitt!”] All the Pitts.

In answer to the question, however, I must say no. This is an example—whatever the effort being made on military operations in Afghanistan and on the political process—of an immensely complex and difficult process in which there will be progress and setbacks, and it is no more fair to suggest that policy is run by all the setbacks than it is to say that progress can continue in an absolutely linear direction without any setbacks whatever.

It is perfectly proper to advance the process on the basis that the work that so many people are doing will increase and improve security month after month as time goes on. That is what everyone is working towards, but of course it is absolutely inevitable that there will be setbacks and difficulties. The responsibility of the Government, and my responsibility, to the House is to make sure that anything that can be done to prevent those setbacks is done, and that if things occur to which there was no opportunity to make any change or difference, lessons are learned from them in order to make improvements for the future.

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

I think the record will show that I have spent the best part of the past five years asking Ministers in successive Governments how many secure prison places they think exist in Afghanistan. So far I have not had a decent answer, but, given that the Minister said he thought that this was an isolated incident, can he give us an assessment of how many secure prison places he thinks currently exist in Afghanistan?

[Alistair Burt]

The short answer to the hon. Lady is that I do not know, and she must forgive me for that. I will endeavour to get a written answer—to the best of our knowledge—to her as quickly as possible, so that it is public. The picture is more flexible, depending on what one sees as detention, official prison places and the like, but if the hon. Lady has asked successively we must get the best answer that we can for her, and I undertake to do that as quickly as I can.

[Jim Shannon (Strangford) (DUP)]

That was a very sober statement to the House. The indications are that it took eight months to dig the tunnels and 450 prisoners on their hands and knees probably upwards of 12 hours to escape—but nobody saw anything. We in the United Kingdom have many governors and prison people with experience and knowledge, so will the Minister offer that knowledge to the Afghan authorities to ensure that they can improve on what has happened?

[Alistair Burt]

Yes, indeed. I have already had that discussion with officials. The inquiry and investigation must be carried out by the Afghans as the sovereign power, but we do indeed have great expertise in all aspects relevant to the escape, and it is absolutely clear that it should be made available to the Afghan authorities. We will certainly be doing that.

Middle East and North Africa

Tuesday 26th April 2011 Commons Chamber

15:59

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

With permission, Mr Speaker, I will update the House on recent developments in the middle east and north Africa.

Britain has continued to take a leading role in international efforts to protect civilians in Libya, and the case for action remains compelling: Gaddafi’s regime persists in attacking its own people, wilfully killing its own civilian population. Our strategy is to intensify the diplomatic, economic and military pressure on Gaddafi’s regime, and since the House last met we have made progress on all those fronts.

On the diplomatic front, I co-chaired the first meeting of the Libya contact group in Doha on 13 April. The 21 states and seven international organisations represented demonstrated clear unity, with participation from across the Arab world and the African Union in attendance. The group agreed that Gaddafi’s regime had lost all legitimacy, that the national transitional council should be offered further support, and that the UN special envoy should take forward an inclusive political process. I will attend the next contact group meeting in Rome on 5 May.

At the NATO Foreign Ministers meeting in Berlin on 14 and 15 April, I joined colleagues in showing our determination to increase the pace of military operations to enforce UN Security Council resolution 1973. The 28 NATO member states and six Arab countries that attended, 16 of which out of the 34 are engaged in military action, agreed a common strategy. That is an important milestone in world affairs, a sign of a growing ability to work across traditional regional divisions and a demonstration of the breadth and unity in the international coalition in support of the Libyan people.

On the economic front, since my statement on 4 April further Libyan entities have been sanctioned, and the regime is now subject to some of the most comprehensive economic sanctions ever agreed by the United Nations.

On military matters, since NATO assumed full control over all military operations on 31 March, more than 3,500 sorties and 1,500 strike sorties have been conducted. This action has seriously degraded Gaddafi’s military assets and prevented widespread massacres planned by Gaddafi’s forces. Gaddafi’s forces remain unable to enter Benghazi, and it is highly likely that without these efforts Misrata would have fallen, with terrible consequences for that city’s brave inhabitants. Yesterday, Italy announced that its aircraft would take part in ground strikes, and the United States Government have contributed Predator unmanned aerial vehicles to the coalition forces. My right hon. Friend the Defence Secretary is in Washington today to discuss the military situation.

Heavy fighting continues around the towns of Brega, Ajdabiya, Yefren and Misrata. The regime’s indiscriminate shelling of residential areas in Misrata shows that it continues to target the civilian population. Gaddafi has shown that he has no regard for civilian lives. The International Criminal Court prosecutor has said that there is evidence of a case against Gaddafi for crimes against humanity. We look forward to the prosecutor’s report to the UN on 4 May. By his actions, it is clear that Gaddafi has no intention of observing the conditions in Security Council resolution 1973 that I described to the House earlier this month. He has repeatedly ignored the ceasefires that he himself has announced. Our military action is defined by the UN Security Council resolutions. We are also clear that Gaddafi should go, and it is impossible to see a viable or peaceful way forward for Libya until he does so.

The Libya contact group’s statement made it clear that, in contrast to Gaddafi, we and our allies regard the national transitional council as a legitimate interlocutor representing the aspirations of the Libyan people. Our diplomatic mission in Benghazi is working with it. Our special envoy, Christopher Prentice, will shortly be succeeded by John Jenkins, currently Her Majesty’s ambassador in Baghdad.

Last week, I announced our decision to expand this mission with a small advisory team of British military officers. Their sole purpose is to support the NTC’s efforts better to protect civilians by advising on military organisational structures, communications and logistics. They are not involved in training or arming the opposition’s forces, nor are they executing or providing operational military advice. This is fully in line with the UN resolutions, and I reiterate to the House that we will remain wholly in accordance with the UN resolutions, retaining the moral, legal and international authority that flows from that. We have supplied vital, non-lethal equipment to assist the NTC in protecting civilian lives. So far, this consists of telecommunications equipment and body armour. We are considering with our international partners further requests.

In the coming week, we hope to agree internationally the process for establishing a temporary financial mechanism to provide a transparent structure for international financial support for the financial requirements of the NTC, such as public sector pay. Yesterday, Kuwait announced about £110 million of support for the NTC.

I am sure that the House will join me in paying tribute to the skill, bravery and professionalism of the men and women of the UK and our allies’ armed forces. Their actions in the NATO operations have saved many lives and their efforts are essential to bringing a lasting peace and a better future for the Libyan people, who have suffered so much at the hands of this brutal regime. I also pay tribute to those from the international humanitarian community who have put their lives on the line to help their fellow human beings.

The UK is supporting the other needs of the Libyan people in every way we can. The humanitarian situation in the west of the country is getting worse every day. Many civilians in Misrata lack access to basic necessities, including food, water and electricity. There is a shortage of some crucial medical supplies. That is why my right hon. Friend the Secretary of State for International Development announced last week that the UK will provide medical and other emergency supplies, and undertake the evacuation of 5,000 migrants stranded at Misrata port in squalid conditions. The UK has so far given more than £13 million to meet immediate humanitarian needs through funding for medical and food supplies and emergency shelter, and assisting in the evacuation of poor and vulnerable migrants. In Misrata alone, British support has given 10,000 people food and 2,000 families water and hygiene kits, and it has provided essential medical staff. The regime must guarantee unfettered humanitarian access and not just give broken promises, which put the lives of aid workers and volunteers at risk.

The wave of demand for change in the Arab world continues to gain momentum in other nations. As I said earlier today, we condemn utterly the violence and killings perpetrated by the Syrian security forces against civilians who are expressing their views in peaceful protests. That violent repression must stop. President Assad must order his authorities to show restraint and to respond to the legitimate demands of his people with immediate and genuine reform, not brutal repression. The emergency law should be lifted in practice and the legitimate aspirations of the people met.

The United Kingdom is working intensively with our international partners to persuade the Syrian authorities to stop the violence and to respect the basic and universal human rights to freedom of expression and assembly. Syria is at a fork in the road. Its Government can still choose to bring about the radical reform which alone can provide peace and stability for Syria in the long term, and we urge them to do so, or they can choose ever more violent repression, which can only bring short-term security for the authorities. If they do so, we will work with our European partners and others to take measures, including sanctions, that will have an impact on the regime. Given our concerns for British nationals in Syria, we changed our travel advice on Sunday to advise against all travel there and to advise that British nationals should leave unless there is a pressing need for them to remain.

On Yemen, the UK welcomes this morning’s news that the efforts of the Gulf Co-operation Council countries to resolve the political deadlock are close to success. I understand that President Saleh and the parliamentary opposition have accepted the GCC’s proposal. That is potentially good news. Both sides now need to come together to confirm their commitment to the peaceful, inclusive and timely transition process that the GCC has brokered. The UK remains committed to its long-standing support for Yemen in these difficult times.

Although the immediate situation in Bahrain is calmer, there continue to be credible reports of human rights abuses. I urge the Government of Bahrain to meet all their human rights obligations and to uphold political freedoms, equal access to justice and the rule of law. Dialogue is the way to fulfil the aspirations of all Bahrainis. I urge all sides, including opposition groupings, to engage with each other.

In Egypt, which I will visit shortly, we welcome the actions being taken by the authorities to move towards a broad-based, civilian-led Government and an open and democratic society.

In Tunisia, we are providing support with EU partners to help its Government meet the wishes of the Tunisian people. On 11 April, the commission responsible for bringing together opposition parties and civil society approved the draft law for the constituent assembly elections scheduled for 24 July. That is a step towards free and fair elections, and an open and democratic society.

The European Union has a crucial role to play in the southern Mediterranean. The great changes in the Arab world are truly historic, and the response from the nations of the EU should be bold and ambitious. The review of the European neighbourhood policy is due to be published in a fortnight. We have been making the case that we have the opportunity to use that policy to help the peoples of the southern Mediterranean achieve their desire for freer and more prosperous societies. A renewed neighbourhood policy should see the EU using its economic magnetism to encourage and support political and economic reform in neighbouring countries. A partnership of equals should reward those who make the necessary political and economic reforms and, importantly, withdraw benefits from those who do not.

Finally, it remains essential that progress is made in the search for a just and lasting solution to the Israeli-Palestinian conflict. That is what the majority of ordinary Palestinians and Israelis demand of their leaders. The extraordinary changes in the region are an opportunity to be seized, not an excuse for further prevarication leading to more frustration and discontent.

In our response to the dramatic events in north Africa and the middle east, we will continue to stand for reform, not repression, and for the addressing of grievances rather than brutal reprisals. It is a policy in accordance with our own beliefs, in line with our own national interest and in pursuit of the peace and prosperity of the wider world.

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

I thank the Foreign Secretary for advance sight of his statement this afternoon.

I join the Foreign Secretary by saying that the Opposition, too, support the Gulf Co-operation Council initiative to resolve the current crisis in Yemen and achieve a peaceful political settlement. I also associate myself with his remarks regarding the continued need for a focus on the Israeli-Palestinian conflict and the need for a review of the European neighbourhood policy.

I begin with Syria. Every Member will have been appalled by the recent reports of Government violence and repression there. First, on the question of UK nationals, can the Foreign Secretary provide an estimate of the number who are in Syria at present, and can he assure us that all contingency plans are in place should it prove necessary, in time, for them to leave?

Of course, I fully support the Foreign Secretary’s condemnation this afternoon of the actions of the Syrian Government, but it was only a few weeks ago, on 27 January, that he travelled to Damascus to meet President Assad. From those conversations, how likely does he judge it that President Assad will now heed the calls for restraint and reform?

I welcome the Foreign Secretary’s statement that work is under way at the United Nations. Can he provide more detail on what progress has been made regarding a statement and/or a resolution from the Security Council? In particular, will he outline what financial sanctions and freezes at UN or EU level are being discussed to make clear the international community’s condemnation?

In a statement this morning, the Foreign Secretary said:

“There needs to be accountability for the deaths that have occurred.”

Of course, I concur with that statement. What discussions have been entered into regarding the investigation of accusations of crimes against humanity and regarding Human Rights Watch’s call for an official commission of inquiry? Finally, what discussions has he held with the Turkish Government, among others, to marshal a unified condemnation of the recent actions and assess possible ways forward in the region?

Although news regarding Bahrain has subsided slightly, the reports of the arrests of opposition figures and deaths in custody, and allegations of torture and the denial of medical treatment, are of course extremely concerning. Will the Foreign Secretary update the House on the progress of the political reform process initiated by King al-Khalifa? Will he also tell us what recent discussions he has had with the Crown Prince, who, it has been reported, has been close to reaching agreements with the protestors? Britain’s historically close ties to Bahrain should give us all the more reason to be clear and unequivocal in our urging of reform, not repression, as a response to popular protests on those islands.

I join the Foreign Secretary in commending our men and women in the armed forces, and those of our allies, for their brave service in Libya while the House has been in recess. The specific operational steps announced by the Government during that time—providing telecommunications, body armour and 10 military advisers—each had an operational rationale reflecting the new realities on the ground. Although we understand that rationale, will the Foreign Secretary now update the summary of legal advice provided to the House to cover each of the announcements made during the recess? The ad hoc and apparently unco-ordinated manner in which they were announced, rooted in no clearly articulated plan, has, I fear, served only to increase anxieties held by many members of the public.

In truth, none of those specific measures is likely significantly to affect the strategic situation in Libya. As things stand, neither Benghazi nor Tripoli appears likely imminently to fall to either side. Can the Foreign Secretary therefore give the House a somewhat fuller assessment of the military situation than he has so far shared with us? I ask that because the Prime Minister’s official spokesman stated this morning, in summarising the Foreign Secretary’s report to the Cabinet, that we need to

“prepare for the long haul”,

yet a press release was published only this weekend on the Foreign Office website entitled, “Foreign Secretary denies claims of stalemate in Libya”. The situation on the ground led the US chairman of the joint chiefs of staff, Admiral Mike Mullen, to observe on Friday that

“Libya is moving towards stalemate”.

Can the Foreign Secretary share with the House the information or insight on military progress that was available to him that was apparently not shared with America’s most senior military figure?

That brings me to the question of political objectives and the military mission. On 21 March, the Prime Minister told the House from the Dispatch Box that resolution 1973

“explicitly does not provide legal authority for action to bring about Gaddafi’s removal from power by military means.”—[Official Report, 21 March 2011; Vol. 525, c. 713.]

On 14 April, in an article in The Times, the Prime Minister and the Presidents of the US and France said that

“so long as Gaddafi is in power, Nato and its coalition partners must maintain their operations so that civilians remain protected and the pressure on the regime builds.”

Would the House be correct to understand that the language in that article means that in the view of the British Government, UN Security Council resolution 1973 cannot be enforced without Gaddafi’s departure? Given the article’s explicit commitment to maintaining NATO operations “so long as Gaddafi” remains “in power”, will the Foreign Secretary clarify whether a Libya free of Gaddafi is a political aim—incidentally, that aim is shared by all in the House—or a military objective of the British Government? Will the Foreign Secretary further say whether, following that joint statement, American fighter aircraft have once again engaged in ground-assault operations, and whether that statement of aims has led to any significant alteration of the US force posture?

Does the Foreign Secretary agree that there is no plan, no mandate and no appetite for NATO ground troops attempting to fight their way into Tripoli to remove Gaddafi? If so, can he offer a clearer way forward, beyond the intensification of the current efforts that he spoke about in his opening remarks, to achieving the outcome that the Government seek? It is vital that he does so, not simply to ensure that the Government address the concerns at home and abroad, but, crucially, to convince Gaddafi’s henchmen that there is a credible strategy in place to ensure that his brutal attacks on civilians will not prevail.

We seek as broad a coalition as possible for these efforts, and in that spirit I add my welcome to the addition of Italian fighter aircraft to the mission, which we heard announced today. Will the Foreign Secretary update the House on the precise number of EU, NATO and Arab League countries that are participating in the military operation, and on what efforts are being made to expand those numbers further? Does he believe that the contact group is proving agile and effective enough to direct the mission? Does he further agree that the comparison last week by the Defence Secretary of the current mission in Libya with the Afghanistan campaign, where a decade on we have about 11,000 troops in theatre, not only ignores the different order of magnitude of threat posed by al-Qaeda and its supporters, but needlessly threatens support for the mission at home and abroad? In the light of that comparison, and given the continuing national security threat being confronted in Afghanistan, will the Foreign Secretary assure the House that no personnel or equipment will be redeployed from Afghanistan to Libya?

The Government are acting in Libya for principled reasons, but that does not remove our obligation to look at practical questions. In conclusion, in the light of this morning’s statement, which mentioned a “long haul” in Afghanistan, what further diplomatic measures are being pressed by the Government on the international community to strengthen the isolation of, and to increase the pressure on, Gaddafi’s regime?

[Mr Hague]

I am grateful to the right hon. Gentleman particularly for what he said about various countries at the beginning of his questions. I am sure that the whole House will join him in welcoming the seemingly successful efforts of the Gulf Co-operation Council in relation to Yemen. There is also agreement across the House, I think, about the importance of the middle east peace process and a bold and ambitious European neighbourhood policy.

The right hon. Gentleman asked some specific questions about Syria. About 700 British nationals in Syria are now registered with us, although some of them of course will be dual nationals with their families in Syria, and we should not assume that they would want to leave Syria whatever the circumstances there. However, we have contingency plans for their evacuation. Previous to the change of travel advice on Sunday, we advised them to consider leaving Syria by commercial means, and it is still possible to do so—for instance, over the land border to Lebanon and by commercial flights still running every day out of Damascus.

The right hon. Gentleman asked about the conversations that I had with President Assad at the end of January. From those conversations, I think I can fairly say that what has happened in Syria over the past couple of weeks will have come as a surprise to the President and the Government. I asked him then why he thought that Syria would be different from what had already begun to happen in Egypt and Tunisia, and he said that it was because of Syria’s clear ideology, the continuing resistance to Israel and the popular support for the Government in Syria. Clearly, however, there are common aspirations in many of these countries for economic freedom and greater political rights, and therefore the position of the Syrian authorities in relation to their population was not as strong as he and his Government assessed. Of course, we have many differences with the Government of Syria on many foreign policy subjects that I discussed with him. For a long time Governments of the United Kingdom have urged the Government of Syria in the direction of greater respect for human rights. Had they taken that advice, including from previous Foreign Secretaries, such as the right hon. Member for Blackburn (Mr Straw), they would be in a stronger position today.

The right hon. Member for Paisley and Renfrewshire South (Mr Alexander) was right to ask about work with the Turkish Government. I regard them as holding a central position in working with other nations on how we should proceed on Syria. I discussed the matter at length last night with the Turkish Foreign Minister, Ahmet Davutoglu, and we are in close and daily touch with the Turkish Government. The work on what may happen at the UN and in the EU is of course at a preliminary stage, and it will be difficult at the UN Security Council, because not all the permanent members will see this in the same light, so I do not want to raise expectations of action at the Council. That would be unrealistic. However, we are working closely with our European and American colleagues on the Council to see how we can proceed, and we are doing initial work on what action the EU could take. However, I cannot go into more detail about that at this stage.

On Bahrain, the dialogue between the Government and the opposition is not overtly progressing. However, the authorities there have reiterated to us their determination to proceed with and reignite that dialogue. I spoke recently to the Foreign Minister of Bahrain, Sheikh Khalid al-Khalifa, to ask for his commitment to that, as well as to investigation of the human rights issues that I have mentioned in the House, and he has given those commitments. As I said in my statement, therefore, we look to all sides in Bahrain to commit themselves to that dialogue. That is the only way forward for a country in Bahrain’s situation. However, I do not have any reports of success in that dialogue to give to the House now.

The right hon. Gentleman asked about Libya and our various announcements over the recess of non-lethal assistance to the transitional national council. It was my decision in every case to make public the information as soon as possible about every form of assistance. It might have satisfied his desire to avoid what he called ad hoc announcements had we waited to put them all together, but in my view it would not have satisfied the interests of full transparency and of giving Parliament the necessary information as soon as it became available by depositing it in the Library. This is a fast-moving situation. How we help the transitional national council has to be agreed with other countries in order that we do not duplicate what they do, so how we are able to assist the council will change from week to week. However, we will keep the House informed as rapidly as possible, as we did over the recess, even if that means that announcements come out at different times and are followed one after the other.

It is important to remember that the military situation remains fluid and has not settled into a stalemate. Hon. Members will be aware of how much the situation in Misrata has changed over recent days. Fighting has gone backwards and forwards on the western borders of Libya, and although there is a fairly static situation on what might be called the eastern front, between Brega and Ajdabiya, it has not yet settled into what one would call a long-term stalemate. The military mission is defined by the United Nations resolution, and what the Prime Minister said about that on 21 March absolutely stands. That has not changed, although it is the common assessment of all NATO and Arab League nations involved—there might be a difference of view in some African Union nations—that it is impossible to see a way of securing the full implementation of the UN Security Council resolution while Colonel Gaddafi remains. That is why it is quite right to reiterate, as we all do in this House, that Gaddafi should go. However, the military mission remains defined by the UN Security Council resolution, and there has been no change in the Government’s approach to that.

On the question of NATO participation, there are 16 nations participating in the military effort at the moment. The shadow Foreign Secretary asked whether the contact group of 21 nations and seven international organisations was unwieldy. My experience so far is that it is not unwieldy—provided that it is well chaired, which it has been—but works together well. Having such a wide spread of nations and international organisations might initially look unwieldy, but it allows the contact group to continue the international legitimacy and the broad-based coalition that are present on this occasion and in these operations, the lack of which has sometimes bedevilled our efforts and those of the previous Government in foreign affairs, so it is important to maintain that.

The right hon. Gentleman asked about the Defence Secretary’s remarks about Afghanistan. The Defence Secretary was simply saying that we wanted Afghans to be able to take on responsibility for their own security; he was not comparing the conflict in Libya to the conflict in Afghanistan, and we should not give that impression. I absolutely agree with the shadow Foreign Secretary that NATO ground troops will not be going into Tripoli to resolve this matter. It is clear in UN resolution 1973 that there should be no foreign occupation of any part of Libya. We will adhere strictly to that, as to all other parts of the resolution. The strategy going forward is what I set out in the statement—to intensify the diplomatic, economic and military pressure.

The point that I made at the Cabinet this morning was that in this situation, time is not on the side of Gaddafi. We are often asked in international conflicts whether time is on our side. We should be confident that in this situation—given this coalition, this range of sanctions and these intensifying efforts—time is not on the side of Gaddafi, and the members of his regime need to know that. The resolve of the international community to implement the UN resolutions—and our resolve, separately from those resolutions, that he should go—is undiminished; indeed, it is strengthened by the experience of recent weeks. We have already achieved the saving of thousands of lives, the assembly of a remarkable international coalition and the prevention of the regime’s re-conquest of Libya by force, which could also have destabilised Egypt and Tunisia. These things have been worth achieving in the last five weeks, and if we continue to intensify our work in the way that I have described, we will indeed go on to success.

[Several hon. Members]

rose—

[Mr Speaker]

Order. The Front-Bench exchanges, although enlightening and engaging in equal measure, have nevertheless consumed almost half an hour. I am very keen that there should be time for Back Benchers to contribute. Short questions and short answers are required.

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

May I suggest to my right hon. Friend that it may be over-optimistic to assume that the civil war in Libya will cease when Colonel Gaddafi departs the scene? As he knows, the estrangement of Tripolitania and Cyrenaica dates back to the Punic wars, which is why in 1946 Ernest Bevin wanted to restore Mussolini’s single Libya to its two historic entities. Moreover—if you will bear with me for a moment longer, Mr Speaker—we could impose an immediate partition on the country by air power alone. That would enable us to remove by sea those rebels on the coastal strip who found themselves on the wrong side of the dividing line, before they were massacred by the inland tribes.

[Mr Speaker]

It is always a pleasure to listen to the hon. Gentleman. When I have heard him, I invariably feel better informed, and somewhat improved.

[Mr Hague]

Well, so do I. I absolutely take my hon. Friend’s point about the Punic wars and the historical division between Tripolitania and Cyrenaica, but I have to say that I do not think that that is the solution in this particular case, in the 21st century. All the people we have spoken to in the transitional national council are very much committed to the territorial integrity of Libya as a whole. The country could not be so easily partitioned as my hon. Friend might think, in that there is strong support for the opposition forces throughout Libya, including in the west, in cities in the western mountains and in Misrata. The people of Misrata do not want to be taken away to the east; they want to stay in their own city, with their rights being respected and their lives being preserved. There is no simple east-west division in Libya now, in contrast to what has happened in previous centuries or, indeed, in previous millennia.

[Mr Bob Ainsworth (Coventry North East) (Lab)]

Fear is growing that, although we are doing enough to keep this operation going, we are not doing enough to bring it to a successful conclusion. If stalemate or de facto partition are unacceptable, and if the people cannot be properly protected while Gaddafi is in place, surely we need to make enough effort, now that we are engaged in this operation, to bring it swiftly to a conclusion, and to bring to an end the suffering in Libya. Surely that means doing more than is currently being done.

[Mr Hague]

I understand the right hon. Gentleman’s concern. Other Ministers and I went to the NATO meeting in Berlin to ask for an increased tempo in the military operations, as well as increased support from other countries for military operations, some of which we have secured. He will have heard us talking about Italy earlier. However, when he says that the situation needs to be brought to a conclusion more rapidly, he is really calling for a military effort that is very different in its scale and in its nature. I would say to him that that would not be in accordance with UN resolution 1973. The large-scale use of ground troops, for instance, would not be in accordance with the resolution. Whatever we do, it is vital to keep the legal, moral and international authority that comes from working within the United Nations resolutions. I must therefore resist his demands for a more rapid or overwhelming military solution to the situation. We have to continue to intensify the pressure on Gaddafi through diplomatic, economic and military channels, but we must stay within what is legal and internationally supported.

[Sir Malcolm Rifkind (Kensington) (Con)]

Does the Foreign Secretary accept that the Government’s twin fundamental aims of protecting civilians and requiring the departure of Gaddafi cannot be achieved by coalition air power alone—or, indeed, by diplomatic and economic pressure—and that the achievement of those aims will require giving military support to the insurgents? I welcome the fact that instructors have been sent to Benghazi, but does the Foreign Secretary not agree that much more military support could be given that would be consistent with the UN resolution, which allows all necessary measures for the protection of civilians throughout Libya?

[Mr Hague]

The first point to make to my right hon. and learned Friend is that these are not instructors. I would not refer to them as instructors. It is a military liaison team; it is working on headquarters organisation. I stress that these officers are not involved in arming or training the forces of the opposition side in Libya. Our position—my right hon. and learned Friend has brought it up before—is that we will help with non-lethal equipment. The British Government have taken no decision to arm or equip the opposition forces with lethal equipment. I have expressed our view of the legality of that before, which is that the arms embargo applies to the whole of Libya, but that it is legal under the UN resolution to supply equipment to protect civilian life in certain circumstances. Other nations may wish to do that or to interpret the resolution in a different way. We interpret it in that way and believe that the best way for us to help is to supply the non-lethal equipment that I have mentioned.

[Jeremy Corbyn (Islington North) (Lab)]

May I congratulate the Foreign Secretary on delivering an absolutely brilliant piece of Foreign Office speak for the last 10 minutes? He assured us that there was to be no ground intervention, yet military forces are being sent to assist the British diplomatic mission. He assured us that there was no intention of regime change, and then promptly called for a regime change. What exactly is the Government’s position on Libya? Is it to have a partition; is it the overthrow of Gaddafi; is it to hand over the oil and banking interests to Qatar; is it the sale of arms to the whole region? What on earth are the Government’s long-term intentions on Libya? Will he please explain?

[Mr Hague]

I accept the hon. Gentleman’s congratulations in the spirit in which they were offered, and I am tempted to go over my whole statement again. Our attitude to the whole issue of change in the middle east is that if it goes right, it will be one of the greatest advances in human freedom and world affairs that we have seen—certainly since the end of the cold war, and in some ways comparable to it. If it goes wrong, however, leading to more authoritarian regimes or a long period of violent disorder, it will provide a serious threat to our own national security and that of the whole of Europe, with new breeding grounds for terrorism, uncontrolled migration and threats of extremism. We therefore have to do what we can to make sure that change goes in the right direction, not the wrong direction. That is what we want for Libya and what we want for other countries. We are able to help in each country in different ways, but that is the context in which our Libya policy sits.

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

Notwithstanding my right hon. Friend’s careful and circumspect response to the shadow Foreign Secretary, is it not clear that the United Kingdom and France are disproportionately bearing the burden of the offensive air campaign? Why is it that our NATO allies are not making a better contribution, and is the Foreign Secretary disappointed by their failure to do so?

[Mr Hague]

It is certainly true that the United Kingdom and France make a huge contribution and, most of the time, the largest contribution to the campaign. I hesitate to use words like “disproportionate”, as I must say that the contribution—including an offensive strike capability—from countries such as Denmark and Norway is, considering their size as countries and the size of their armed forces, very much proportionate to the efforts that we are making. We should not think that only the United Kingdom and France are contributing. There are 16 nations involved in the military activity. As my right hon. and learned Friend knows, Arab nations are also involved. In response to our recent requests, other countries have brought other military assets into play—Spain, for example, providing additional air-to-air refuelling capability and Italy bringing in ground-strike capability. At all times, the United States continues to supply about a quarter of all sorties flown, even in periods when it is not taking part in ground strike. The right hon. and learned Gentleman can see that the burden is spread more widely than the headlines sometimes give the impression, but would we like a greater contribution from some other nations and did we say so at the NATO meeting in Berlin? Well, yes, we did.

[Tony Lloyd (Manchester Central) (Lab)]

The Foreign Secretary has quite rightly referred to the legal, moral and international base that resolution 1973 mandates, and it is imperative that we stick within it. In that context, can he restrain those voices calling to go beyond that—as, for example, the call to target Colonel Gaddafi and others—and make them desist, because that sort of thing will not keep the coalition together?

[Mr Hague]

I am trying to restrain them, as I restrained the right hon. Member for Coventry North East (Mr Ainsworth) a moment ago in relation to a parallel subject. As for the question of specific targets, we will not go into it. Who or what become legitimate targets depends on how they behave. I will not expand, and no Minister will expand, on who or what will be a target.

[Mr John Redwood (Wokingham) (Con)]

Given that the Libyan regime can place its forces in heavily congested urban areas and fight house to house, and given the terms of the resolution, is it not the case that the NATO forces are in no position to exert any influence over the outcome of this civil war?

[Mr Hague]

No. Although NATO air forces are constrained by having to operate entirely from the air—obviously there can be problems with air operations on days when the weather is bad—they have clearly had a huge and, so far, decisive impact. Had it not been for those NATO-led air operations, Benghazi would have fallen and Gaddafi would have reconquered the entire country; I think that Misrata would have fallen.

As my right hon. Friend says, it is very difficult when forces are making themselves look like civilians and fighting at close quarters in a city like Misrata. Nevertheless, there is a good deal of evidence that in recent days they have been pushed back. The use of a Predator unmanned aerial vehicle over Misrata is something that the regime forces have to worry about and, I think, have worried about greatly over the past 48 hours, however clever they may think they are at concealing themselves.

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

May I compliment the Foreign Secretary on his attitude to this difficult matter? May I also urge him to continue to resist the calls that have come from certain important Members of Parliament, notably a former Foreign Secretary and a former Defence Secretary, my fellow Coventrian the right hon. Member for Coventry North East (Mr Ainsworth)?

Difficult though the matter is, I welcome the Foreign Secretary’s reassurance that—as we all now accept—ground troops have no role to play, and his continued resistance to a deeper, heavier NATO involvement than that described by him and allowed by the United Nations resolution. I believe that this is the only way forward, and that, if pursued with sufficient patience and perseverance, it can achieve our objectives.

[Mr Hague]

I am grateful to the hon. Gentleman. We do operate under certain constraints. The United Nations resolutions are clear and comprehensive—they authorise “all necessary measures”—but they are not qualified in certain important ways, and we are clear about what those mean. It is more important to stick to the resolutions, and to achieve success within their constraints, than to expect a lack of support among the nations of the coalition for our action in continuing these operations as necessary, along with our other diplomatic and economic efforts. I think that we must indeed have the persistence and the patience to continue with that strategy.

[Richard Ottaway (Croydon South) (Con)]

The Foreign Secretary is working with our international partners to persuade the Syrian authorities to stop the violence, which he rightly condemns. Does he recall that the intervention in Libya came only after a request for intervention from the Arab League? Is there any sign of a further request from the Arab League for intervention in Syria?

[Mr Hague]

No. The work with international partners is very important—particularly the work with Turkey, as I mentioned in response to the shadow Foreign Secretary—but my hon. Friend is right: in the case of Libya there was a clear call from the Arab League for the United Nations to take action. That was a transformative intervention, in that it gave legitimacy and broad international support to our work at the United Nations Security Council. We should hesitate to draw direct comparisons between what we may do in Libya and what we may do in other countries in the region.

[Joan Ruddock (Lewisham, Deptford) (Lab)]

The reported use of cluster bombs against civilians by the Gaddafi regime has been rightly condemned. Equally worthy of condemnation would be the use of depleted uranium. Has the Foreign Secretary sought any assurances from his United States counterparts that depleted uranium weapons have not been, and will not be, used in this conflict?

[Mr Hague]

The right hon. Lady is absolutely right about cluster munitions—and we might add land mines as well; there are reports of the Gaddafi forces laying them in the vicinity of Misrata. I am certainly not aware of any use of depleted uranium weapons. I would be very surprised if any such weapons were being used, and I think I can give her the assurance she seeks.

[Mr David Davis (Haltemprice and Howden) (Con)]

It has been reported that NATO intelligence believes that some 450 of Gaddafi’s mercenary army are in fact Algerian-backed Polisario guerrillas paid for to the tune of some millions of dollars. Has the Foreign Secretary taken this matter up with the Algerian Government, and can he tell the House what we have done, beyond the freezing of British, European and American bank accounts, to deny access to the money that enables this sort of action to take place?

[Mr Hague]

Yes, there are many such reports. My right hon. Friend mentions reports concerning Algeria, and there are also reports of fighters for the Gaddafi regime coming from other countries in north Africa. We are taking these reports up; we have taken them up at the diplomatic level with some of the countries concerned. We need more specific evidence than usual in these situations, in order to be able to say squarely to the countries involved that they are in breach of UN Security Council resolutions, but whenever we have that evidence we will act on it, and at the ministerial level as well.

On the question of denying Gaddafi the ability to pay for such fighters, we have done two sets of things. One of them is the asset freeze, to which my right hon. Friend referred. Tens of billions of dollars of the regime’s assets have been frozen, particularly in the United States and our country, although that measure is also widely observed across the world. Secondly, the sanctions that we are implementing also deny a great deal of income to the regime. That is why I say that there is no future for this regime. Time is not on the side of Gaddafi. It will be very difficult for the regime to amass the resources required for it to be able to continue with this effort for the longer term. We will seek the rigorous implementation of those measures, and, of course, if any nation appears to have sanctioned the employment of people from its own country as mercenaries in Libya, we will pursue that matter with it.

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

This morning, the BBC was reporting that four European Union countries were working up a new resolution for the Security Council. The Foreign Secretary did not refer to that in his statement. Is that because of the reluctance on this issue of the Arab League, to which he previously alluded? Is there not also a danger, however, that many people in the Arab world will perceive double standards if the UN Security Council does not at least adopt a strong resolution condemning the Ba’athist repression in Syria?

[Mr Hague]

I think the report in question was about the possibility of a presidential statement, rather than a resolution of the UN Security Council. Certainly, France, Germany, Portugal and the United Kingdom are working together at the Security Council to raise the issue of the situation in Syria. The hon. Gentleman asks about double standards. Different countries will have their own opinions on this subject, and I sounded a note of caution about the attitude of some of the other permanent members of the Security Council. Particularly on Syria, they will be very cautious about adopting statements, and especially about adopting resolutions. The position of the Arab League is a matter for its members. It is, of course, up to them to decide whether to be consistent in their statements or to regard the situation in different countries as requiring different responses. We have certainly had no call or clear message from the Arab League on the situation in Syria in the way that developed in respect of Libya.

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

If, as my right hon. Friend suggests, there is such general international agreement that Gaddafi should go, is any work being done in the United Nations to change the resolutions to reflect that, because otherwise we will continue with a military objective that is at odds with the political objective?

[Mr Hague]

I have had no indication that it would be possible to pass a new and—what one might call—stronger resolution in the UN Security Council than the ones that have already been passed: resolutions 1970 and 1973. I think there would be a good deal of opposition to that. I think it is unlikely at this juncture that such a resolution could be adopted in the UN Security Council, which is why, as I have said in answer to earlier questions, we must work within the resolutions we have and maximise the diplomatic, economic and military pressure, consistent with those resolutions.

[Keith Vaz (Leicester East) (Lab)]

May I welcome what the Foreign Secretary has said about developments in Yemen, and commend his efforts and those of the GCC? If the President signs the agreement tomorrow, there could be a new Government in 28 days. Are our Government ready to assist that new Government? What matters then is the stability of Yemen.

[Mr Hague]

Yes, we absolutely are ready to do that. At that point we will, of course, want to revive, with some vigour, the Friends of Yemen process, which was started under the previous Government—we have continued it, but the group has not been able to have meaningful meetings in recent weeks, given the situation. We will very much look to revive that, working closely with Saudi Arabia as co-chairs of the Friends of Yemen. There is a great deal we can do to encourage stability and peace in Yemen, and we will be highly active in doing so.

[Jo Swinson (East Dunbartonshire) (LD)]

May I ask the Foreign Secretary about Saudi Arabia, as there have also been reports of protests—albeit on a smaller scale—met with repression there and as its contribution to finding a peaceful solution to the unrest in Bahrain was to send in its troops? Does he think that the Arab spring could have a positive influence on human rights improvements in that oppressive regime? How can it be encouraged to take a positive attitude to the dialogue towards democracy that is so needed in Bahrain?

[Mr Hague]

Given the previous question, it is important to recognise in this context the strong and, it seems, successful efforts of Saudi Arabia to bring mediation to Yemen. The hon. Lady is right to say that Saudi forces are in Bahrain—at the request of the Bahraini Government—but I think that Saudi Arabia, like other states in the region, is very anxious that there is a successful national dialogue in Bahrain. I have no reason to doubt that at all, having discussed the situation at some length with Prince Saud, the Saudi Foreign Minister, over recent weeks. Of course, we do ask all Governments in the region to respect the right to peaceful protest and freedom of expression.

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

No one disputes the brutality of the Gaddafi regime, which of course we were selling arms to, along with other western powers, right up to recent events, but may I urge the Foreign Secretary to resist the calls that we have heard today from what I would describe as the “war party”, which wants to escalate the conflict? Some of us believe that what is really required is a genuine effort to bring about a ceasefire. I am aware of all the difficulties—I know that Gaddafi cannot be trusted—but if there is a chance of stopping the bloodshed on both sides in the civil war, that opportunity should certainly be grasped.

[Mr Hague]

Of course we all want a ceasefire. One of the stated goals of resolution 1973 is a ceasefire—a genuine end to violence—but it would have to be a genuine ceasefire in which the regime’s forces pulled back from the populated areas they were attacking and really ended the violence and stopped the suppression of all opposition in the areas that they controlled. Although it is important, as the hon. Gentleman says, to resist calls to change the nature of this conflict and go beyond the resolutions, it is also important to resist any temptation to weaken in our implementation of the resolutions. That is why we must continue carefully and persistently with the strategy we have set out.

[Robert Halfon (Harlow) (Con)]

Given that there are now 300 dead in Syria and hundreds more imprisoned, is it not time for Britain to lead the way with a United Nations resolution to try to stop what Syria is doing?

[Mr Hague]

As I mentioned in answer to earlier questions, it is not a simple matter to pass a United Nations Security Council resolution on Syria—of course that may change as the situation in Syria develops. The important thing for today is to emphasise that, as I said in my statement, the Syrians are at a fork in the road and are coming to the last point at which they can say, “We are going to embrace the reform that is necessary in our country and that will be supported nationally and internationally.” If they continue down the alternative route of ever more violent repressions, our concerns will of course be shared more widely at the UN Security Council and the situation there may change.

[Chris Bryant (Rhondda) (Lab)]

I sympathise with the Foreign Secretary, but I am afraid I agree—I do not often say this—with my hon. Friend the Member for Islington North (Jeremy Corbyn) in that the arguments that the Foreign Secretary is using increasingly sound casuistical, especially when he tries to draw a distinction between why we are engaged in Libya but not in Syria or anywhere else and, in particular, when he says that although we are providing equipment, that is all right because it is non-lethal, or that although we are providing military personnel, that is all right because they are not instructors. Surely we are coming to a fork in the road: either we want rid of Gaddafi and we should get rid of him, or we should get out of there.

[Mr Hague]

Sympathy from the hon. Gentleman is entirely unnecessary in my case; I can assure him that I will be fine without it. Anyway, I suppose I am grateful for it. Let us think about the alternatives for which he seems to be calling. One is to weaken in what we are doing, to say that we do not really care what happens in Libya, and to allow Colonel Gaddafi to run amok in murdering thousands of his own people, destabilising everything else in north Africa. I reject that alternative. The other alternative to our policy is to say that we are not really going to abide by the UN resolutions and that we will do whatever we are urged to do, because we think that our public’s patience is too limited in any matter of international relations and so we will be panicked into doing other things. I reject that alternative, too. For too many years, we have been accused of not having the necessary legality or moral support for, or an international coalition behind, what we are doing. We are going to maintain those things in what we do in Libya and that requires persistence in the policy we have adopted.

[Mr William Cash (Stone) (Con)]

The Foreign Secretary and I have had a number of exchanges on this subject. I have a great deal of sympathy with what the hon. Member for Islington North (Jeremy Corbyn) said, because the Prime Minister has written to me today saying that

“we do not rule out supplying lethal equipment, but we have not taken the decision to do so, and there remain legal and practical questions which need to be carefully considered.”

That is the Government’s policy, the legal basis of which seems to be as clear as mud. The problem, very simply, is that we want to relieve the pressure on civilians and to ensure that the people in Libya are properly protected. Unless they are given arms and the right kind of equipment under the resolutions—including paragraph 9(c) of resolution 1970, which I have mentioned before—there will be hand-to-hand fighting and they will not have the ability to deliver. That is where the problem lies and the policy must be made clearer. Why does not the Foreign Secretary go back to the sanctions committee and find out?

[Mr Hague]

I hope the policy as I have set it out is very clear about the Government’s understanding of what is legal under the UN resolutions and about what we are doing, which is different from going the whole way under the resolutions towards arming civilians and the opposition in certain circumstances. We have not taken the decision to do that, as my right hon. Friend the Prime Minister said in his letter to my hon. Friend. We are giving a great deal of other assistance. We should remember that what the United Kingdom is doing as regards the deployment of the Royal Air Force and its military action over the past five weeks, which has potentially saved the lives of hundreds or thousands of people, is a greater help to the civilians of Libya than we can provide to them in any other way.

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

As we have seen in the House today, to many outside this House Britain’s intervention in Libya looks like a blood-soaked political shambles. As we have moved from the protection of civilians to regime change, promises of no boots on the ground have been undermined by the presence of advisers’ boots on the ground. Now a limited intervention has moved to being a long-haul engagement. Have the Government given any consideration whatsoever to conflict resolution and taking up the offers from other countries of mediation to secure a peaceful settlement?

[Mr Hague]

Attempts at mediation by other countries so far have run into the problem of Colonel Gaddafi’s refusal to depart. Without that departure, it is hard to see a solution being arrived at in Libya. That is the difficulty. We have agreed in the contact group that it is primarily for the UN special envoy, Mr Khatib, to take forward the work of trying to search for a political settlement—that is absolutely what the UN special envoy is for. We have in no way lost sight of that aim, but it will require a genuine ceasefire, which seems also to require the departure of Colonel Gaddafi. The hon. Gentleman speaks of a blood-soaked result to what we have been doing, but there really would have been a blood-soaked result had we done nothing five weeks ago, allowing Benghazi to be overrun, thousands of people to be killed and tens of thousands to be driven towards the border. That would have been a blood-soaked result, and I think that was the policy that the hon. Gentleman favoured.

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

The debate and vote on Libya was couched very much in terms of humanitarian aid, but it has since become clear, from the rejection of the African Union peace proposals and from the joint statement, that Britain, the US and France will accept nothing less than Gaddafi’s removal. Will the Foreign Secretary sanction a further debate and vote on this issue in Government time?

[Mr Hague]

No. Of course, I will make statements to the House whenever possible and I am in no way resistant to long debates about the matter, but I do not think the Government’s policy has changed in any material way that requires a fresh vote in the House of Commons. We are absolutely within the United Nations resolutions and within the policy we expressed at the outset.

[Stewart Hosie (Dundee East) (SNP)]

Could the Foreign Secretary explain how it is that the Italians are now providing strike aircraft and the Americans unmanned Predators? He described how the 1,500 strike sorties have seriously degraded Gaddafi’s military capacity and he described the severity of the UN sanctions, but those are all actions undertaken by external bodies—the UN, NATO and Arab allies. Will he tell us whether there is a plan—not a time scale, but a plan—so that the House can know how the national transitional council might be in a position to offer Libyan political and military leadership, which would bring an end to the problem?

[Mr Hague]

The national transitional council has organised itself over the past five weeks. It has a president in Mr Jalil and an executive prime minister figure in Mr Jabril, and it is seeking other adherents and allies in Libya—and not just in the east, where it is based, in Benghazi. In recent days, towns in the west—on the western border—have also declared their adherence to the national transitional council. It is making a genuine effort to include people in its work beyond its current base and operations. It believes in the territorial integrity of Libya and in being able to bring the Libyan people together in future. I think it does have a political plan and a plan for a political transition, but the behaviour of the regime’s forces at the moment prevents it from carrying that out.

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

It seems fairly clear that the western Sahara and the Tindouf refugee camps are being used as a recruiting ground by General Gaddafi, yet the Polisario Front maintains an office in many western capitals, including London. What pressure can we put on the Polisario formally or informally to make it very clear that any co-operation with Gaddafi is unacceptable and highly unlikely to help its cause?

[Mr Hague]

If we have clear evidence of what my hon. Friend raises, we will make that very clear and there will certainly be consequences, but we would have to have clear evidence.

[Mrs Madeleine Moon (Bridgend) (Lab)]

The Foreign Secretary might well have the agreement of the Libya contact group, but does he have the support of the British public for what is happening? When we had a debate only weeks ago in the House we were assured from the Government Benches that there would be no mission creep and no targeting of Colonel Gaddafi. We were assured that regime change was not our objective and that there would be no boots on the ground, but we now have quite a strategic change. How will the right hon. Gentleman assure the British public that there will not be further mission creep when those military liaison officers advise that further support is needed on the ground?

[Mr Hague]

I hope that I have made it clear in the House today—indeed, on all days—that there will be no ground invasion of Libya and that we are not planning to send troops in any large numbers into Libya. I have made clear the terms on which the military liaison advisory team has gone into Benghazi. I think that what people would worry about with mission creep is a ground invasion—a protracted ground battle involving British troops in Libya—and that is not on the cards. It has no part in our plans and it is not consistent with the UN resolutions, so I can reassure people about that and I hope that the hon. Lady will join me in doing so.

[Laura Sandys (South Thanet) (Con)]

From contacts of mine in Libya it is clear that morale among the opposition fighters, whether they be in the east or the west, differs greatly depending on their military successes and on what the international community does and how it acts. One thing that many people are calling for is the British Government's recognition of the TNC as the legitimate Government, albeit a transitional one. Are we considering that measure?

[Mr Hague]

The wording that we agreed for the whole contact group at Doha and the wording that I used in my statement earlier is that in contrast to Gaddafi, whom we do not regard as having legitimacy any more in leading the Libyan people, we regard the transitional national council as a legitimate interlocutor representing the aspirations of the Libyan people. I think that is the right way to put it. My hon. Friend will say that that is not formal recognition of the council, and it is not, because we recognise states rather than Governments within states and there are very good reasons to continue that policy, but it means that our diplomatic mission in Libya is in Benghazi, not in Tripoli. Our active daily work is with the transitional national council, so for all intents and purposes our approach, and that of France and Italy, for instance, which have formally recognised it, is identical in practical terms.

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

Does the Foreign Secretary accept that our activities in Libya have now gone well beyond the terms of a no-fly zone to protect civilians? Is he not concerned that we will be giving the impression that we are taking sides with the intention of regime change, rather than protecting civilians? Is that impression not being strengthened by the fact that we are not even calling for sanctions in Bahrain and Syria, in spite of the atrocities being carried out there?

[Mr Hague]

Well, no. It will be evident that I do not agree with that. I think we are operating within the UN resolutions and so do the vast majority of other nations—so does the whole of NATO and the vast majority of the Arab world, including the Arab League. I stress again the importance of the legitimacy of our actions internationally, which means that where the Arab League has called for assistance, as it did in the case of Libya, we are in a different situation from other countries and regarded as such at the United Nations Security Council. We are operating in response to the calls from the Arab League and with the authority of the United Nations Security Council, and we will continue to operate within those constraints.

[Several hon. Members]

rose—

[Mr Speaker]

Order. A very large number of colleagues are still seeking to catch my eye. As right hon. and hon. Members know, I always seek to accommodate as many as possible. I know that the Foreign Secretary regards occasions such as this as the political and intellectual equivalent of one of his judo routines, and I am sure he makes no objection, but I need a degree of economy if we are to accommodate the interest of colleagues.

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

At the end of February, I and a number of colleagues visited Syria. It was obvious to us then that that country was at a tipping point. Two things were obvious: first, young people wanted economic and social reform; and secondly, the reformers and the hard-liners were locked in battle inside the Government. We now have a report that Iran has been invited in to crush the reformers. What robust message can we send that aligning itself with Iran is in the long term a losing game for Syria?

[Mr Hague]

Since it is possible to make quick, deadly judo moves, I will try to give quick answers. We have consistently given the message to Syria, including when I saw President Assad in January, that aligning Syria with Iran is a great mistake, and it would be a great mistake to intensify that in the current crisis.

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

May I remind the Foreign Secretary that with a heavy heart I voted in favour of the intervention in Libya? I and many colleagues did so because we believed that it was imperative to stop the death of innocent civilians—men, women and children. That was the reason that I voted for it. I am very concerned about some of the right hon. Gentleman’s remarks today, which did not address the report that many of us heard on Radio 4 this morning from a respected British journalist about the 1,000 deaths in Libya in recent days. We are not doing enough to stop that. I do not want ground troops; I am not a warmonger; but what has happened to the American intervention that seemed to be more effective in the early days?

[Mr Hague]

Just because we cannot do everything does not mean that we should not do something. It has of course not been possible to save every life in Libya—this is an extremely messy and difficult situation—but the hon. Gentleman should be proud of the fact that, although he voted with a heavy heart, the vote in this House, and that in other Parliaments, to support military action has probably saved thousands of lives and saved tens or hundreds of thousands of people from a desperately difficult humanitarian situation. It is better to vote with a heavy heart than to be a faint heart about this situation.

[Duncan Hames (Chippenham) (LD)]

The Foreign Secretary carefully draws the distinction that the equipment supplied by Britain to the Libyan transitional national council is of a non-lethal nature, but in an era of improvised explosive devices how confident can we be that even telecoms equipment might not ultimately have a lethal use?

[Mr Hague]

We can be fairly confident that the transitional national council very much wants to use the telecommunications equipment that we have given it as telecommunications equipment, as it is doing. It would not be productive to divert that into other things. The other equipment that we have given is body armour, and it is quite difficult to use that in any way other than to save life.

[Barry Gardiner (Brent North) (Lab)]

On 18 March the Prime Minister said:

“The resolution helps to enforce the arms embargo, and our legal understanding is that that arms embargo applies to the whole of Libya.”—[Official Report, 18 March 2011; Vol. 525, c. 623.]

That has been reinforced by the Foreign Secretary today. Can he therefore tell us what active measures NATO forces are taking to stop the supply of any arms to the rebel forces from outside Libya, or is it in fact the truth that NATO is the military wing of the rebel forces in a civil war?

[Mr Hague]

The NATO operations, in which ships of many nations are involved, including those of our own Royal Navy, are dedicated to enforcing an arms embargo on the whole of Libya. They are positioned in order to do that, so the hon. Gentleman can be confident that they are doing that.

[Mr Matthew Offord (Hendon) (Con)]

Given the permeable nature of the Libyan border, particularly around the Sarra triangle, will the Foreign Secretary please advise us on what actions he has sought from the countries surrounding Libya to prevent foreign mercenaries from entering the country and assisting the Gaddafi regime?

[Mr Hague]

We have made that point to neighbouring countries and have been particularly active with the Government of Tunisia in trying to stop any flows into Libya of matériel or arms that would be used by the Gaddafi regime and that would enter the country in contravention of the Security Council resolutions.

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

Over the weekend I met a number of constituents who are very concerned about their families and the situation in Yemen. Yesterday, two protesters were killed there and hundreds were injured. The Foreign Secretary spoke about the Gulf Co-operation Council’s efforts to break the political deadlock and a revival of the Friends of Yemen group, but what specific representations are the British Government making to call on President Saleh to end the violence?

[Mr Hague]

We have made those representations all the time. I went to Yemen and saw President Saleh at the beginning of February to urge him to come to an agreement with the opposition parties, which he seems to have done in the past 24 hours, thanks to the mediation of the GCC countries, so we have been very heavily involved in that. Our ambassador in Sana’a has been particularly heavily involved on a daily basis for many weeks with both the Government there and the opposition, and the British Government have been heavily involved.

[Geoffrey Clifton-Brown (The Cotswolds) (Con)]

Will my right hon. Friend take this opportunity to remind the Assad regime that ordering the army’s tanks to slaughter its own people is completely unacceptable, that it will have repercussions for Syria’s international relations for years to come, that it may well be a war crime, and that it will undoubtedly lead to sanctions?

[Mr Hague]

Yes, I will. On top of that, such actions will not even bring longer-term security to the regime itself, so it is a thoroughly bad idea.

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

We have sent in a small team of military advisers, as have the French and, for all I know, some other countries. What co-ordination is there between those various teams of military advisers in order to provide coherent, rather than contradictory, advice?

[Mr Hague]

As ever, that was a very perceptive question from the hon. Lady. That is a very important issue. A French team is going, and there may well be a team from another European country. They are working very closely together, and the effectiveness and experience of the British team is helping to ensure that everyone there works together.

[Kris Hopkins (Keighley) (Con)]

Does the Foreign Secretary agree that it is important to communicate to the critics—in this country and abroad—of previous military conflicts that the intervention in Libya is not just another western intervention? Can I ask the Foreign Secretary, therefore, how many Muslim countries are contributing to the implementation of UN resolution 1973?

[Mr Hague]

My hon. Friend makes a very powerful point. The coalition includes countries from the Arab League, and the specific answer is that two Arab nations are involved in enforcing the no-strike zone, and in one case in ground strikes as well. Several other nations are providing logistical, humanitarian and, indeed, financial support. I have already mentioned the case of Kuwait, and Turkey is of course heavily involved in enforcing the arms embargo and in giving humanitarian support, so a wide range of Muslim nations is involved.

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

The Foreign Secretary sounds increasingly like Dr Pangloss —that this is the best possible policy of all possible policies—but in tone and content his statement is very different from the speech that the Prime Minister made here last month. There has been a clear defining of objectives on regime change and on taking one particular side in a civil war. I regret that the Foreign Secretary has already said that he will not organise a debate in the House on a voteable motion, and I hope he will reconsider that, because it is better done on a Government motion than on a Back-Bench one.

[Mr Hague]

Those are of course matters for the House anyway, but my point is that I do not regard the Government’s policy on the issue as having changed. I have said today that Colonel Gaddafi must go, and the Prime Minister said that in the debate on 21 March. I have said also that we will continue to take all necessary measures to protect civilians, although the nature of those measures may change from week to week, and that is what we said in the debate of 21 March that we would do, so we have not changed our approach.

[David Rutley (Macclesfield) (Con)]

Given the Gaddafi regime’s constrained refining capability, what assessment has my right hon. Friend made of the merits of strengthening the restrictions on supplies of petrol and diesel to the regime’s forces?

[Mr Hague]

It is very important to enforce the existing sanctions on the regime. We are doing a lot of work to make sure that they are rigorously enforced by other countries, and that takes in my hon. Friend’s point. So we are looking at that at the moment.

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

May I press the Foreign Secretary on the subject of the contact group? What discussions has it had about the need for humanitarian troops to go in and provide aid, and specifically what discussions has he had with Turkey and other Muslim nations about that role?

[Mr Hague]

The contact group has not discussed troops going in for humanitarian purposes. It did of course discuss in Doha the need for effective humanitarian relief, particularly for people in Misrata, and we have been successful in providing a good deal of that over the past couple of weeks, but the group has not had discussions about military provision to assist the humanitarian effort. We would be guided by the United Nations and, in particular, by the Office for the Co-ordination of Humanitarian Affairs on requesting any military support for humanitarian needs, but no such request has been made.

[Christopher Pincher (Tamworth) (Con)]

I welcome my right hon. Friend’s announcement of a proper financial structure to provide short-term finance to the Libyan national transitional council, but he will be aware that one of the many challenges facing the rebels is the need for cash to fight Gaddafi as well as to provide important public services, so will my right hon. Friend consider releasing to the rebels the many hundreds of millions of Libyan dinars that are printed or held in this country in order to help to finance their fight?

[Mr Hague]

Those Libyan banknotes are held in this country as part of the asset freeze, and since they are held as part of the asset freeze they remain frozen. [Interruption.] Indeed, that is not surprising. The Government have not so far seen any legal way of releasing those banknotes from the asset freeze.

[Fiona Mactaggart (Slough) (Lab)]

May I add my voice to those on both sides of the House who have called for a further debatable resolution of the House about the future of this action? Does not this whole issue illustrate the importance of the International Criminal Court’s being able to take effective action against despots before their people rise up against them, and what is the Foreign Secretary doing to make that more possible?

[Mr Hague]

Of course it would be helpful if the ICC were able to do that. As the hon. Lady knows, there are cases such as that of the President of Sudan where we have all supported the ICC’s being able to come to its indictments. There is then the problem of the people of those countries not being able to turn over those despots to the ICC. However, we certainly support the ICC’s being able to make investigations in circumstances short of what we are seeing in Libya now.

[Bob Blackman (Harrow East) (Con)]

In the weeks leading up to the most recent major religious festivals, Jerusalem suffered the first suicide bombing for nearly three years and ordinary Israeli citizens experienced an escalation of rocket attacks from the Gaza strip. What has my right hon. Friend done to apply pressure to Islamic Jihad and Hamas to cease their terrorist activities and return to the negotiating table?

[Mr Hague]

The UK is very clear: we have expressed our outrage at those attacks. We have also called on Israel to exercise restraint in responding to those attacks, because we believe that there is an overriding need to put new life into the middle east peace process and for Israeli and Palestinian leaders to make the necessary compromises—compromises which Hamas leaders have never yet shown that they are prepared to make. It is necessary to do that in order to bring long-term security to the middle east and an end to the kind of appalling incidents that my hon. Friend mentions.

[Jim Shannon (Strangford) (DUP)]

I thank the Minister for his statement. Right across the whole of Libya a great many new battles are starting—for example, on the Libya-Tunisia border. Is NATO and the western alliance aware of all these battlefronts in places where people are fighting for freedom, and what help is it able to give them?

[Mr Hague]

Yes, I believe that the NATO command—NATO plus the Arab allies, I should stress—are aware of these situations, some of which are difficult to help for the reasons of close-quarters fighting that were described earlier. NATO air strikes have been used in recent days to relieve the pressure not only on Misrata but on towns in the west of Libya, with some effect. That will continue and, if necessary, intensify.

[Stephen Phillips (Sleaford and North Hykeham) (Con)]

It was plain from my right hon. Friend’s answer to my right hon. and learned Friend the Member for Kensington (Sir Malcolm Rifkind) and to my hon. Friend the Member for Stone (Mr Cash) that the Government have received very clear legal advice on the action that has been announced while the House has not been sitting. The Government made a great advance in publishing a summary of the legal advice on Libya before the last debate. Will my right hon. Friend undertake to update that advice by placing a copy of the Attorney-General’s advice in the Library?

[Mr Hague]

We provided the note on the legal advice in order for the House to have a debate and for it to take a very important decision. History showed that the House really did want to know more about the legal advice in such circumstances, but I am not going to commit the Government to doing so on a case-by-case or continuous basis.

[David Morris (Morecambe and Lunesdale) (Con)]

Should Colonel Gaddafi be deposed, or go by whatever means, would he be subject to the 1970 human rights Act—I am sorry, not human rights—[Interruption.] If I may carry on, would he be subject to the war crimes part of UN resolution 1970?

[Mr Hague]

That depends on what Colonel Gaddafi has done. The International Criminal Court is looking into that at the moment. As I said, we expect a report from the prosecutor of the ICC to the United Nations next Wednesday, 4 May. That will be the next development in this subject and it is the ICC that will come to a view about it.

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

Does my right hon. Friend agree that over the last few weeks, not only have the eyes of much of the world been on Libya, but, unfortunately, so have the eyes of the leaders of many of the most brutal and oppressive regimes in the world? If Colonel Gaddafi manages to cling to any form of power having turned heavy weapons on his own people, it will make such behaviour far more likely in other countries across the region, costing many tens of thousands of innocent lives and potentially putting back the cause of democracy for decades. Is it not for that reason that Gaddafi must go, by one means or another?

[Mr Hague]

That is one of the reasons. Certainly, if Gaddafi had been able to do what he intended to do, the Arab spring, as many have called it, and the desire for democracy and greater freedom in the Arab world would have suffered an enormous setback, with potentially damaging consequences for this country.

[Mr Speaker]

I am grateful to the Foreign Secretary and colleagues for their co-operation in what were very full exchanges.

Points of Order

Tuesday 26th April 2011 Commons Chamber

17:26

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

On a point of order, Mr Speaker. Vicky Haigh, a horse trainer and former jockey, was the subject of an attempt by Doncaster council to imprison her for speaking at a meeting in Parliament. There was discussion earlier today as to whether that case was sub judice. An application was made to the court, a copy of which I have provided to your office. Additionally, I have provided to your office a copy of the court order in which it was deemed that she would not be jailed. I assume, therefore, that the case is not sub judice, in accordance with sub-paragraph (b)(ii) of the relevant resolution:

“Any application made in or for the purposes of any civil proceedings shall be treated as a distinct proceeding.”

[Mr Speaker]

I am grateful to the hon. Gentleman for his attempted point of order and for notice that he was to raise the matter this afternoon. I do not intend to have a discussion on the Floor of the House, notwithstanding what he said about documents that have been deposited, on whether a particular case is or is not sub judice. One of my duties is to uphold the resolution of the House with respect to sub judice issues. As far as this particular matter is concerned, I am perfectly prepared to discuss it privately with the hon. Gentleman. I will not take any further points of order on this matter today, and I feel sure that he will take his cue from the clear response that I have given.

[John Hemming]

On a separate point of order, Mr Speaker.

[Mr Speaker]

The hon. Gentleman may have a separate point of order, but it is a bit greedy to have two in one go. We will have someone else first so that he can save his vocal cords and we will revert to him in due course.

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

On a point of order, Mr Speaker. Have you had notice from the Secretary of State for Defence that he will come to the House to make a statement on the decision to refuse the invitation of Belfast city council for a homecoming parade for the men and women of the Royal Irish Regiment and the Irish Guards, who have recently completed tours of duty in Afghanistan? That decision has been greeted with incredulity and anger across Northern Ireland. Given that there was a parade the last time they returned and tens of thousands of people turned out in the streets of the capital city of Northern Ireland, which the troops appreciated greatly, surely the Secretary of State owes it to this House to come and at least explain the decision, if not to announce its reversal and allow these brave men and women their moment of appreciation in the capital city of Northern Ireland.

[Mr Speaker]

I fully understand the strength of feeling of the right hon. Gentleman, and I know that the House will respect the sincerity and experience with which he registered his concerns. I hope that he, as an experienced parliamentarian, will readily understand that I cannot join the argument. However, he has put his point forcefully on the record in the presence of Ministers. In particular, it has been heard with courtesy by the Deputy Leader of the House. If the right hon. Gentleman wants to pursue the matter in other ways, he can. I have not as yet had any indication that a Minister wishes to make a statement on the subject.

[John Healey (Wentworth and Dearne) (Lab)]

On a point of order, Mr Speaker. This afternoon in Health questions, the Health Secretary told the House that waiting times were stable in the NHS. In fact, for the first time in three years more than one in 10 in-patients are waiting more than 18 weeks for their hospital treatment; the proportion of people waiting more than four hours for emergency treatment is the highest for six years; and the number of people waiting for diagnostic tests for more than six weeks has doubled. Those are the Government’s figures, confirmed recently by the independent King’s Fund. Can the House, through you, Mr Speaker, ensure that the Health Secretary sets the record straight and, in future, gives a full and accurate account of the changes in waiting times that we have seen over the past year?

[Mr Speaker]

What I would say to the right hon. Gentleman is as follows. First, Ministers are responsible for the content, including the accuracy, of the answers that they give and the statements that they make to the House. Secondly, I hope he will understand when I say that I cannot get involved in the question of the quality of an answer. Thirdly, I think it would be well beyond the limited powers and capacities of the Chair to join an almost theological debate about what constitutes stability, in respect of either the health service or any other feature of our national life. However, the shadow Health Secretary has put his point on the record.

[John Hemming]

On a second point of order, Mr Speaker, of which I also gave notice, I wish to make another point about sub judice. There is a tendency for people to issue injunctions on the basis of a claim that they intend to issue proceedings, but then not actually issue those proceedings. One such case is AMM, in which no proceedings have been issued. One would therefore presume that such a case never becomes sub judice.

[Mr Speaker]

The ingenuity of the hon. Gentleman is almost boundless, and that fact will not have gone unnoticed in any part of the House. However, the initial observations that he made demonstrate to me that the second issue that he has raised is also one for consideration at our private meeting, which I feel sure he is eagerly awaiting.

[Barry Gardiner (Brent North) (Lab)]

On a point of order, Mr Speaker. You will know that during the parliamentary recess over Easter, a number of Members wished to see the recall of Parliament in order to debate Libya more fully. Indeed, that was borne testament by the number of contributions following the statement this afternoon. Is there a way that is in order to thank you for extending the statement by almost half an hour to enable all Members to get in?

[Mr Speaker]

Well, there is, because the hon. Gentleman has just proved that there is and done it. We are grateful to him for his point.

[Chris Bryant (Rhondda) (Lab)]

On a point of order, Mr Speaker. Over the Easter break—an unfortunate term, perhaps—News International confessed to the fact that there had been a very significant degree of criminality at the News of the World, in direct contradiction to the evidence that it had provided to two Select Committees of this House. In other words, it had misled the House. In addition, Rebekah Brooks, who on 11 March 2003—I can see that the Clerk is worrying, Mr Speaker. I am not—

[Mr Speaker]

Order. What I would say to the hon. Gentleman is that it is clear to me that he is raising a matter of privilege. That is certainly my very clear understanding of what he has said—it is about privilege and the breach or invasion thereof. It seems to me, therefore, obviously a matter that should be pursued with me in writing in the first instance. I readily expect and almost invite the hon. Gentleman to take that course if he so wishes.

[Chris Bryant]

rose—

[Mr Speaker]

I am being very generous, but I will give the hon. Gentleman one last go at a point of order.

[Chris Bryant]

I am grateful to you for your generosity, Mr Speaker.

In addition, Rebekah Brooks, who in March 2003 said that she had paid police officers for information, wrote to the Home Affairs Committee only a couple of weeks ago to say that what she really meant was that other newspapers had done so. That is a blatant lie. Before I write to you about standards and privileges, Mr Speaker, may I ask whether you have had any apology from News International? The House should no longer put up with being lied to.

[Mr Speaker]

I am not aware that the House has received any apology, and I certainly have not. Notwithstanding the intellectual and political ingenuity of the hon. Gentleman, his second set of observations merely confirm the truth and wisdom of what I said in my first answer, which is that he should pursue these matters with me in writing in the first instance. He and other Members know that on this matter, as on others, I am very receptive to hearing what the House has to say. These matters should be aired, but they must be aired in the appropriate forum and at the appropriate time.

If there are no further points of order—the creative juices of the House are always on display when we have had a long recess—we will move on.

Industrial Relations (Voting Procedures)

Tuesday 26th April 2011 Commons Chamber

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

17:35

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

I beg to move,

That leave be given to bring in a Bill to prohibit strike action in the emergency and transport service sectors unless a majority of employees in the unionised workforce has voted in favour of such action; to make procedural provision in relation to balloting for industrial action; and for connected purposes.

The right to peaceful protest and collective action are inextricably linked to, and bound up with, this country’s struggle for liberty, democracy and basic rights. The House will recall that it was a criminal offence to strike in Britain until 1875 and the Administration of Benjamin Disraeli. We should never forget the sacrifices made by those who went before, including the Chartists, social reformers and the early union movement, those who campaigned against child labour in the poor house and virtual slave labour under the poor laws, and those who campaigned for greater democratic representation.

Industrial action played its part in securing reform, from Annie Besant’s match girls union striking against the use of yellow phosphorous in match-making, which caused bone cancer, to the 1889 dockers’ strike in east London against the mercenary exploitation that pitted desperate workers against one another in competition for casual labour on the very harshest terms. I wonder what those heroic campaigners would have made of recent strikes over travel perks, annual bonuses and the right to retire at 50.

Despite a massive expansion of health and safety regulation, employment law and various other social protections, Britain is still episodically held hostage by a vocal minority led by militant union bosses. The damage to the British economy and jobs is immense. In 2002 and 2007, we lost more than 1 million working days because of strike action—[Interruption.] Opposition Members may find that a laughing matter, but the tax-paying public do not.

In 2009—a comparatively quiet year—we lost almost 0.5 million days, which is way more than in Germany, Italy, the US and Australia, and the last tube strike cost the capital £50 million each day, disrupting more than 1 million commuters. What is worse still is the way in which union bosses frequently rely on a minority of members to corral and coerce the majority into strike action. That is what the Bill addresses.

The number of strike ballots carried on a minority of members is increasing at a rapid rate. The National Union of Rail, Maritime and Transport Workers, led by Bob Crow, is one of the worst offenders. A third of members supported his tube strikes in the autumn of 2010. The current ballot, for which results are due tomorrow, seeks to escalate previous strike action on the Bakerloo and Northern lines and carried just 35% and 20% of support from members.

In 2010, the Public and Commercial Services Union, claimed legitimacy for a strike ballot on redundancy pay that carried the support of only 20% of its members. Unite and the Broadcasting Entertainment Cinematograph and Theatre Union have also recently led strikes with minority support.

My Bill will address that by amending the Trade Union and Labour Relations (Consolidation) Act 1992 to require the support of a majority of members—not simply a majority of those voting—for strike action in the emergency services and the transport sector to be lawful.

Let me be absolutely clear: the Bill would have stopped not the majority of recent strikes, but just those not supported by a majority of union members. Some will say, “Yes, but politicians are elected only by those who turn out to vote,” but strike ballots and political elections are fundamentally different—[Hon. Members: “Why?”] I am coming to that very point. Strike action takes advantage of an express immunity created by an exemption to the law. Without that exemption, unions could be sued in contract and tort law for the damage that they do, just like everybody else.

Strike action based on minority support allows union bosses to corral, cajole and sometimes even bully the majority of union members into supporting strike action and losing pay, when actually they want to get on with their work and their job. Guidance issued by many unions instructs all members to support strike action regardless of whether they voted for it. Then there are the widespread reports of bullying. When British Airways sacked and suspended almost 100 workers after the 2010 strike, it stated that they were mostly for allegations of bullying or intimidation made by other colleagues. The pending RMT ballot was called by Mr Crow in defence of a tube striker sacked after being accused of abusing another tube worker during a strike in 2010, and just last month his right-hand man at RMT, Mr Steve Hedley, was convicted of assault after attacking a fellow worker who crossed the picket line to work. It speaks volumes that the RMT leadership backed Hedley over the victim of that assault.

This kind of bullying is bad enough in any circumstances, but it is particularly reprehensible during strikes that cannot command a majority of support among a union’s own members. Why should a militant minority coerce, intimidate and bully the silent majority? [Interruption.] I think we are hearing the answer from the mutterings from Labour Members. Nor should the same militant minority be licensed to disrupt the wider public and damage the UK economy. This Bill will focus on strikes in the emergency services and the transport sector, where the scope for such disruption is particularly acute. The CBI, Policy Exchange and the London Mayor have all called for a threshold for strike action. Other countries, such as Denmark and the Czech Republic, have a threshold, and the Prime Minister has agreed to consider the case for reform in this area.

In truth, this is just one of the changes we need. However, the Bill is framed in terms that would at least allow for a wider debate, if Labour Members can stomach it, particularly on, for example, the case for a requirement that strike ballots specify the grievance, so that—God forbid—members are actually told what they are being asked to strike for, and so that union bosses cannot exploit a successful ballot on a specific grievance in pursuit of their own wider vested interests. Likewise, there is a case for requiring individual ballots for strikes against each legal public sector employer, so that nationwide strikes cannot be instigated on the thin pretext of some localised dispute.

The main aim of the Bill, however, is to give strikes greater democratic legitimacy. Union bosses on six-figure salaries, some elected by a small fraction of their membership, have grown out of touch with their members and with reality. The number of minority strikes shows that they are often less interested in representing all their members, and more interested in pursuing their own political agendas. Our law gives them too much power, and they are abusing it, not just to blackmail the Government, but to coerce their own members and inflict maximum damage on the wider taxpaying public. The question for the House, therefore, is: who is prepared to stand up for the hard-working majority in this country? These proposals will support the silent majority struggling and striving across both the public and private sectors. I commend the Bill to the House.

17:43

[Tony Lloyd (Manchester Central) (Lab)]

Obviously, I rise to oppose the Bill. Let me be honest: it was not just the sight of the salivating rants of Tory MPs and their Lib Dem friends that got me to my feet; it was probably this sense of déjà vu, this groundhog day. I was looking round for Lord Tebbit—I have been in the House a long time—because this proposal is cast very much in the mould of what we have seen before. [Interruption.] Those same old Tories indeed.

The beginning of the speech by the hon. Member for Esher and Walton (Mr Raab) was interesting, because he invoked some of the great industrial disputes of the past, when people fought for their basic legitimate rights and the kind of things that people are now fighting for in Egypt, Syria and wherever else. However, the instinct of the parties of Government is to crush exactly that right of people to proper demonstration against injustices imposed on them whether by employers or someone else. That is what is so sad. Once again, we have a rewind of history.

I know that the hon. Member for Esher and Walton does not have the opportunity to reply to this debate, but there are some serious points that I hope he will consider. He did not mention where else our national legislation sets out such a terrifically high threshold. Not even the advocates of AV propose such a high threshold. The bizarre thing in all this is that any election with a turnout of 70% where 70% of those voting supported a proposition would fail the test for legitimacy under the hon. Gentleman’s Bill. A turnout of 70% with 70% in favour would be seen as an overwhelming victory for the proponents of a particular course of action, whether a politician standing for elected office or anyone else.

I will make an offer to Government Members. If they accepted the same concept—a 50% threshold among all those available to vote—as a means of determining the 2010 general election, when the coalition parties got under 40% of the vote between them, and if on that basis we reverted to the status quo of a Labour Government, then many people in this country would accept the legitimacy of that threshold. What they would not do, however, is accept that the Bill has anything to do with modern industrial relations.

It is interesting that in proposing the Bill, the hon. Gentleman failed to mention the fact that in many cases bad employers are involved. Bad employers have consequences for the work force. They lead to increases in, for example, absenteeism, sickness and, of course, the capacity of the work force to think about taking industrial action. The other thing that the hon. Gentleman did not mention is the fact that in many disputes the turnout would pass his threshold—a threshold that I do not think he managed to pass in his general election results. He did not get 50% of eligible voters voting for him in the general election. [Interruption.] I am told that he did. Will all Government Members who got the support of 50% of those eligible to vote put their hands up? [Interruption.] We see three—a very poor test of democracy among representatives of the governing coalition.

The important point is that this Bill has nothing to do with modern industrial relations or ensuring that we bring parties in dispute to the negotiating table. At no point did the hon. Gentleman mention the fact that we need an industrial framework that involves ACAS at an early stage, and includes a capacity for arbitration, and give and take on both sides. Instead, for Government Members, this issue is about domination—one side being the victor under all circumstances—but that is not the modern world that Britain wants. That mentality is why, when the Conservatives and their friends were in government in the ’80s, more than 1 million days were lost every year in industrial action. That dropped by a third when a Labour Government took office, because the industrial relations climate was very different.

Members in all parts of the House—even on those on the Government Benches—should pause and ask whether this Bill is really the direction of travel that modern Britain wants to take. I have been in this House for quite a long time, and I remember the days when rather bizarre ideas were thrown up by Back Benchers in ten-minute rule Bills, early-day motions and so on. We dismissed them and laughed at them as the fancies of the rabid right-wing of the Conservative party—and now its Lib Dem friends—but the problem was that quickly afterwards those ideas were translated by those on the Front Bench into Government policies. That is why it is so important that the House and the country should recognise the irrelevance of this Bill when it comes to having any practical impact on modern Britain or addressing its need for improved industrial relations.

I invite the hon. Gentleman to get out a little more and to talk to people who work and who are not bullied by trade union bosses but who cast their vote in secret. That is the nature of the balloting process for trade unions; it is a secret ballot in which individual members cast their own votes. Those members are sovereign. Most aspects of the balloting process for industrial action are widely accepted by trade unions and by employers as the legitimate way of doing this. Very few of them are arguing that we should increase the height of the hurdles to make it difficult for legitimate industrial action to take place.

The reality is that when we restrict the capacity for people to register this kind of protest, we do not improve industrial relations. There might be short-term gains, but in the end, such action merely entrenches the disaffection of those employees who feel that they have been badly treated and increases the arrogance of the bad employers. That is exactly what we had in the 1980s: an arrogant management culture; attempts by the Government to support arrogant managers; the de-industrialisation of Britain; an increase in the number of days lost through industrial action; and the very shameful record of previous Conservative Governments on industrial relations.

Perhaps the hon. Gentleman should come over and talk to some of the people on the Opposition Benches who know employers and employees, and who know what good industrial relations look like. Perhaps we could give him a quick crash course on how to move forward with a measure that makes sense in modern Britain. If his Bill is not defeated today, perhaps he could gracefully withdraw it and say, “Yes, I admit that I got this wrong. I was influenced by those around me who simply wanted to turn the clock back to the 1980s. On that basis, I withdraw my Bill and we will start again with a better concept and a way of looking at industrial relations as something that involves the employer and the employee in partnership, rather than in permanent conflict.” I urge hon. Members to oppose the Bill.

Question put (Standing Order No. 23)

17:51

Division 255

Ayes: 121

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Conservative: 117
Democratic Unionist Party: 4

Noes: 171

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Labour: 140
Liberal Democrat: 20
Plaid Cymru: 3
Scottish National Party: 3
Conservative: 2
Green Party: 1
Independent: 1

Finance (No. 3) Bill

Tuesday 26th April 2011 Commons Chamber

[Relevant document: The Tenth Report from the Treasury Committee on Budget 2011, HC 897]

Second Reading

[Madam Deputy Speaker (Dawn Primarolo)]

Before calling the Minister to move Second Reading, I inform the House that Mr Speaker has selected the amendment standing in the name of the Leader of the Opposition.

18:04

[The Chief Secretary to the Treasury (Danny Alexander)]

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

The clauses that we are here to debate are another important step on the long road to economic recovery. They will promote growth and provide support for households and small businesses under pressure. They will encourage investment as well as enterprise, and they will help us to clean up the mess that the previous Government left behind.

As we start this debate, it is worth recalling the state of the economy that this Government inherited nearly a year ago. Britain had endured the longest and deepest recession in living memory. We were borrowing one pound for every four we were spending. We had the largest budget deficit in our peacetime history, one of the largest in Europe and the largest in the G20, yet no detailed plan was in place to deal with it—and that was not the end of the story. In the preceding decade Britain had slipped down the international league of competitiveness from fourth to 12th. We had seen our share of world exports decline, and we were considered to be a worse place to start a business than many of our European neighbours.

That was the coalition Government’s inheritance, which is why we have set about restoring confidence and stability to our economy, with a clear strategy for growth. At its heart is a credible plan to tackle the enormous deficit—a plan we are already implementing—so that the current structural deficit will fall in each and every year of this Parliament, and is forecast to be eliminated by 2015. National debt is forecast to fall as a proportion of gross domestic product in the same year, so that we can finally start to reduce the huge interest payments with which this country has been saddled—the lasting legacy of Labour’s failure.

The action we have taken on the deficit has shown that Britain’s economic future is now in safe hands, that this is a Government who know how to manage the country’s finances and that we have a credible plan to deliver the strong, sustainable and rebalanced growth that this country needs.

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

If things are so rosy, why has the Office for Budget Responsibility forecast for growth gone down from 2.6% to 1.7%? Why has it projected that unemployment will increase by 200,000 as a result of this and previous Budgets? Why is it that we are doing so badly under this Government?

[Danny Alexander]

I do not think I said that the position was rosy. I was going out of my way to describe the calamitous state of the public finances that the Labour party left.

I would like to touch on growth first. In the Budget we set out four economic ambitions: 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 we should be a more balanced economy by encouraging exports and investment; and that we should have a more educated work force who should be the most flexible in Europe. The clauses in the Bill set us on the road to meet those objectives.

For the past decade Britain has been losing ground in the world economy. While other nations have reduced their business tax rates, ours have lost competitiveness. While other countries have removed barriers to enterprise, ours have grown higher still. We cannot afford this to continue. Instead, our plan for growth is based on private sector enterprise, not public sector borrowing—growing businesses, not growing debts—and on securing sustainable long-term investment.

Essential to that is creating a competitive tax system—one that enables our businesses to compete on a global stage. That is why clause 4 will see our corporation tax rate fall by 2% this year. As the House already knows, we will implement further cuts of 1% in each of the next three years, so that by 2015 we will have the lowest corporate tax rate in the G7, allowing businesses to invest more of the money that they earn, hire more workers, export more goods and support the recovery.

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

The right hon. Gentleman says that in order to encourage business growth he will drop corporation tax. Why has he taken a completely opposite approach to those who are developing the North sea oil and gas reserves?

[Danny Alexander]

For the simple reason that the very high price of oil on the world markets is having a direct effect on consumers and, I am sure, on motorists in the constituency of every Member. It is right, I think, to ask the one industry that is benefiting substantially from the high price of oil to make an additional contribution to help us to reduce fuel duty.

[Dame Anne Begg]

rose—

[Danny Alexander]

I will deal with the supplementary charge in more detail later, and the hon. Lady might want to come back to me at that stage, but I shall make some progress now, if I may.

An efficient tax system is not just about lower rates. To be competitive we must also look at how we tax, how that affects our businesses, and what has been holding them back in the past. The Bill legislates for reform of the taxation of foreign branches, as well as making interim changes to the outdated controlled foreign companies rules—a process started and consulted on under the previous Government. This will stem the tide of businesses leaving our shores for more favourable climes, and will ensure that the UK is an attractive place to locate and headquarter. This shows that Britain is once again open for business.

[Mr Andrew Tyrie (Chichester) (Con)]

Has the Chief Secretary had a chance to look at the six tax principles set out in the Treasury Committee’s recent report? Will he tell us whether he agrees with those principles, and if so, how the changes in the North sea tax regime accord with one of them—namely, that there should be certainty over time to enable businesses to plan?

[Danny Alexander]

I have looked at those principles. The Government will, of course, respond to the Committee’s report—along with other reports—in the usual way, but the principles seem very sensible.

In fact, this is among the Finance Bills on which there has been the most consultation in advance. I believe that 260 of its 390-odd pages were published in draft some months before its publication. [Interruption.] I am replying to the question asked by the hon. Member for Chichester (Mr Tyrie). We have taken on board some of the principles to which he referred, but the Government must be able to respond to economic circumstances with their tax policy. As I have said, one of the predominant economic circumstances that we face is the high price of fuel. The Government considered that in order to relieve motorists of some of the burden on them—which we felt was incredibly important—we should ask the oil industry to pay a little more tax in the form of a supplementary charge.

[Dame Anne Begg]

At what point—it was certainly not during any discussions, because there were none—did the Chief Secretary discover that slightly more than 50% of the business of offshore oil operators is in gas, and that the price of gas is the equivalent of about $55 a barrel?

[Danny Alexander]

As the hon. Lady knows, the price of gas has also been on an upward path. However, we have discussed the matter with representatives of the industry, including Centrica, which has raised it directly with me and with other Ministers. We said in the Budget that we were willing to consider extensions of the field allowance regime to provide breaks for particular fields in the event of particular problems, and we are doing that at the moment. Existing rules allow breaks for very deep oil wells and heavy oil, for example. The discussion continues. It is right for us to engage with the industry openly, in recognition of the issue raised by the hon. Lady.

[Stewart Hosie (Dundee East) (SNP)]

rose—

[Danny Alexander]

I will give way to the hon. Gentleman, but I must make progress once I have heard his intervention.

[Stewart Hosie]

The right hon. Gentleman says that the price of gas is rising. It will be driven up by, possibly, a third because the $75 trigger point established by the Government is equivalent to about 80p a therm. The gas price is currently about 57p a therm. The Government’s actions will drive the price up to an extraordinary extent. Did they not understand that before they set their Budget?

[Danny Alexander]

I do not accept the hon. Gentleman’s analysis. As he will know, we are currently consulting and engaging with the industry on precisely that question of the trigger price.

I am sure Members in all parts of the House agree that on the road to sustainable growth, access to finance is also a critical issue. For that reason, clause 42 increases the relief available for the enterprise investment scheme to 30%, encouraging further investment in small and growing businesses; clause 9 doubles the lifetime limit on entrepreneurs’ relief from £5 million to £10 million; and clause 43 raises the rate of research and development tax credits for small and medium-sized enterprises to 200%. As we announced in the Budget, from next year it will rise again to 225%, providing real support for small firms investing in research and development.

Small and medium-sized enterprises are the driving force behind the recovery. They employ 60% of Britain’s work force, and contribute to about 50% of all output. Their success will help to define the future of our economy. The last Government planned to increase the small profits rate of corporation tax, but we have chosen to do the opposite. Clause 6 will reduce the rate paid by small businesses to just 20%. The Budget also revealed that we would continue to provide business rate relief for small firms for another year, which will support growing businesses up and down the country.

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

Many firms will, of course, be grateful for the reduction in corporation tax, but will not the slashing of investment allowances go a long way towards offsetting any benefit that might have been gained by small companies in particular? According to the Institute for Fiscal Studies, the real beneficiaries of both measures will be the less capital-intensive service sector,

“historically typified by the financial sector”,

rather than the small companies that export and depend on investment which the Chief Secretary is seeking to help.

[Danny Alexander]

I believe that the reduction in corporation tax will benefit businesses in all sectors. As for the question of capital allowances, the changes in relation to short-life assets have been welcomed throughout the business community, and particularly by the Engineering Employers Federation.

In 2007 the last Government reduced the writing down allowances from 25% to 20%, and we are reducing them from 20% to 18%. That is a balanced move which will ensure that firms in all sectors, including manufacturing, benefit from the new corporation tax environment that we are introducing.

[Ms Angela Eagle (Wallasey) (Lab)]

The Chief Secretary has mentioned small business. It is clearly agreed throughout the House that the SME sector will make a vital contribution to future growth in the economy. Does it worry him that, once again, it has been demonstrated that lending to small business fell in the first quarter of this year, despite the attempts to boost it in Project Merlin? What is he going to do about that?

[Danny Alexander]

Of course I am worried if lending to small businesses is falling. The Merlin agreement, which we announced at the end of February, was an agreement with the major United Kingdom banks to secure an additional £10 billion of lending to small businesses this year. We will monitor the position, the figures will be made available, and we will watch the banks like a hawk to ensure that they deliver on the agreement. That is critically important: this Government have acted as the last Government did not manage to.

[Ms Eagle]

rose—

[Danny Alexander]

I am going to press on now. I want to deal with the issue of fairness.

Although growth is key to improving everyone’s prospects in the medium term, we know that many families face real financial pressure now. The Bill therefore includes measures to help hard-working people with low and middle incomes, and to support families who are struggling to make ends meet. The Government are committed to real increases in the personal allowance every year, until no one earning less than £10,000 is caught in the income tax net. Clause 3 takes the first step towards meeting this objective by increasing the personal allowance by £1,000 for this tax year. That is the largest single rise in history. It means that 23 million taxpayers in Britain will be £200 better off this year in cash terms, and that more than 800,000 people will be taken out of income tax altogether.

The Budget also revealed the next step in the process. An increase of £630 next year will keep us on track to deliver the £10,000 allowance by 2015, as promised. That is progressive action by a coalition Government who recognise that those with the broadest shoulders should continue to bear the largest burden, and that those on the highest incomes should pay their fair share.

The Bill includes 11 new measures to close tax loopholes that have remained open for too long. For example, clause 26 will help to end the unfair practice of disguised remuneration. No longer will highly paid employees be offered virtually tax-free lifetime loans which, in truth, will never be repaid. Such arrangements are completely unacceptable. We will ensure that they cannot continue, and that all income is properly taxed. We have consulted to ensure that the impact of the legislation on commercial arrangements is limited, and we intend to make further changes when the Bill is considered in the Public Bill Committee.

Those measures will give us more resources to help families who pay their taxes, but who are struggling with the daily cost of living. The same motivation lies behind clause 7, which increases the supplementary charge on the large profits being made from oil and gas extraction in the North sea.

I understand that the increases in the supplementary charge are controversial, at least in the oil and gas sector. Given that the sector is benefiting hugely from the rapid rise in the world oil price, which currently stands at $124 a barrel, it was right to ask it to share some of its profits with motorists, but we are listening carefully to its concerns about specific investments. As we said in the Budget, we are discussing with several firms the possibility of using the field allowance regime to continue to support investment. The industry is understandably concerned about the stability of the tax regime, given the long-term nature of investments in the North sea. That is why we committed ourselves in the Budget to working with the sector to provide certainty about the long-term future of decommissioning relief, and why we announced a fair fuel stabiliser to reduce the supplementary charge if oil prices fall below an agreed trigger level.

However, we should not lose sight of the fact that this money is financing a much-needed package of support for motorists. First, it is funding the 1p reduction in fuel duty to which clause 19 refers. Secondly, it has helped to cancel Labour’s inflation uprating until January next year. As a result of these two changes, fuel is 6p a litre cheaper now that it would have been under the plans we inherited.

I should also remind the House that this Government inherited plans for above-inflation increases in fuel duty for 2011, 2012, 2013 and 2014. The increase in the supplementary charge has allowed us to abolish this fuel duty escalator, so that duty will not rise above inflation for the rest of this Parliament. As with fairness, so in understanding the issues facing hard-pressed motorists it is this coalition Government who are looking to share the burden of higher oil prices.

Let me now turn to the issue of taxing Britain’s banks. The previous Government announced and implemented a temporary tax on bonuses for one year only. Indeed, it was the former Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), who advised against repeating that. Clause 72 introduces a permanent levy on bank balance sheets, which will raise £2.5 billion in each and every year of this Parliament. That amounts to £10 billion of additional tax from the banks over the next four years, and, thanks to the decision announced by the Chancellor in February, an extra £800 million for this year too. There will be extra money to help us support jobs and growth this year, such as by providing the finance for an additional £100 million of investment in new science facilities at Cambridge, Norwich, Harwell and Daresbury, and £250 million of investment in the FirstBuy scheme for new-build homes, giving a helping hand to 10,000 people as they climb the first rung of the property ladder.

The Bill will also deliver fairness over the longer term. The changes to the requirements on annuitisation set out in clause 65 have long been called for, and will give people more control over their finances. They will allow those approaching retirement to make their own choices about how they use their pension savings, and they will offer greater flexibility in planning for old age. The introduction of automatic enrolment that is supported by the taxation changes in clauses 68 to 71 will help ensure that a low-cost pension scheme is available for the 5 million employees expected to save in the National Employment Savings Trust. The simpler, fairer rules on pensions tax relief in clauses 66 and 67 will limit the amount of tax relief received by those who make the highest pension contribution. From this year, the annual allowance will be set at £50,000 and the lifetime allowance will be reduced to £1.5 million. That will generate about £12.5 billion by the end of this Parliament, and it will ensure that the pension system remains generous for savers, is fair to taxpayers, and is affordable for the Exchequer. At the other end of the age range, clause 40 introduces individual savings accounts for children, offering a simple and tax-free way to save for a child’s future

Turning to the environment, the introduction of a carbon price floor in clause 77 is a revolutionary move. It demonstrates this Government’s commitment to being the greenest Government ever, and it makes us the first country in the world to introduce such a measure for the power industry.

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

Does the right hon. Gentleman accept, however, that there is concern about the amount of hidden subsidy for the nuclear industry in the Finance Bill, and given the coalition agreement that there is to be no subsidy for nuclear power, does he share my concern on behalf of manufacturers, particularly in my constituency, that if there is any windfall tax it should be directed to promoting energy and waste-resource efficiency in terms of manufacturing? Is there not a complete mismatch here?

[Danny Alexander]

I understand the concern, and I know that it has been expressed by a number of lobby groups, although I have to say that I think it has been grossly exaggerated. The purpose of the carbon price floor is to ensure a stronger, and strengthening, market over future years for investment in low-carbon energy. It will deliver a genuine incentive for green and renewable energies to be developed and invested in. Meeting the carbon reduction targets, which I think all Members support, will require several tens, or even hundreds, of billions of pounds of new investment in renewable and other energy sources, and I think that introducing a carbon price floor is exactly the right mechanism to achieve that.

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

Does the right hon. Gentleman not accept that raising the carbon price floor initially to such a level above the EU emissions trading scheme will not actually reduce emissions across Europe because they are fixed on a European basis, will risk investment moving to the other end of the interconnectors, and will move us substantially away from consultation on the issue of £1 above EU ETS, which I think most people would have accepted as a starting point for a longer-term carbon price floor to move towards the 2030s? Does he accept that he has got that price floor wrong, and that he needs to review it so as to make it actually work by genuinely increasing investment and reducing emissions?

[Danny Alexander]

No, I do not accept that we have got this wrong; I think we have got it right. The level of the carbon price floor was set out in the consultation. A range of options were given, and we have taken a mid-point of the various responses we received. I think it is right that this country is the first country to introduce a carbon price floor. That is a very important mechanism to help us deliver on the low-carbon power generation to which I thought those on the hon. Gentleman’s side of the House were as committed as we are on this side. Of course this will have an impact; it is designed to have an impact. It is designed to have the impact of ensuring that companies and industries seeking to invest in low-carbon power generation have a clear sense of certainty about the price they will receive for that energy over future years. As a result of that, our country can ensure that we deliver on our targets for renewable energy and carbon emissions reduction, which are, I hope, very important to every Member of this House.

[Sammy Wilson (East Antrim) (DUP)]

Does the right hon. Gentleman not see any contradiction in terms in what he has said about making industry more competitive by giving it tax breaks? Introducing a carbon price floor will take more money from industry than corporation tax reductions give to it. Does he not recognise the point made by the hon. Member for Southampton, Test (Dr Whitehead): that in places like Northern Ireland this will simply push investment in electricity into the Irish Republic because of the single electricity market, rather than keep electricity production in Northern Ireland?

[Danny Alexander]

I recognise the force of the hon. Gentleman’s concerns, and I have great respect for the detailed way in which he puts them forward, which I have learned about through the relationship we have had as a result of his role as Finance Minister in the Northern Ireland Assembly Government. On this point however, I have to say that I think he is wrong. I hope that the carbon price floor will, alongside other measures, encourage investment in low-carbon power generation, including in Northern Ireland. That is what we are seeking to achieve through this mechanism. I think he also referred to energy-intensive industries, and we have announced that the climate change agreements, which are to the benefit of such industries, are to be rolled forward for another phase and that the relief given through those agreements is to be significantly increased. I hope that will ensure that such energy-intensive industries will be able to make the transition to lower, or different, energy use in a way that does not have the economic effects he describes.

[Joan Walley]

Given what the right hon. Gentleman has just said about the importance of investment, does he agree that the Budget should actually be giving the advantage to energy efficiency? Because of the delays in developing the green investment bank, are there not now real concerns about where we are going to get the resource efficiency from?

[Danny Alexander]

I agree that energy efficiency is important, of course. That is precisely why the Department of Energy and Climate Change has been working so hard to bring forward the green deal scheme, which will start next year. It is designed precisely to give additional encouragement and incentive, and to provide a mechanism for people to engage in the sort of action on domestic energy efficiency in which they have not previously engaged over the years, which I hope the hon. Lady agrees is very important. Also, there are not delays in respect of the green investment bank. Quite the contrary; we announced in the Budget both a trebling of the amount of public money going into the bank, partly through asset sales, and that it will start its operations in September next year, thereby providing yet another strand to the additional investment we all want to see in green energy.

The measure I have been discussing will make us the first country in the world to introduce a carbon price floor for the power industry. It will help to provide an incentive for the billions of pounds of investment in cleaner sources of energy that this country needs, so ensuring we are on course to meet our carbon reduction targets. We have also preserved the link between the climate change levy and prices, through clause 23, to act as a further incentive to low-carbon investment.

The Bill will also help to address other important social issues. The new duty on high-strength beers in clause 15 will help to tackle problem drinking, increasing the cost of a typical can of high-strength lager by 25p. That is coupled with a reduction in the duty on lower-strength beers to help encourage the consumption of alcohol in a more responsible way.

[Andrew Griffiths (Burton) (Con)]

I agree with the intention of the measure, which is to encourage people to drink lower-strength beers. However, does the Chief Secretary agree that what would help both the industry and the health of the nation would be if the Government were to go to Europe to argue for that level to be raised from 2.8% to 3.2% or 3.4%, so that brewers could brew something tasty and drinkable that would nudge people to reduce their alcohol consumption?

[Danny Alexander]

The hon. Gentleman makes a very good point. He will perhaps know that the Economic Secretary, having taken this measure forward, is making that case for greater flexibility at a European level. As this country has taken a lead on having greater flexibility in beer duties, we are in a stronger position to argue this case. Similarly, as this country has taken the lead on deficit reduction, we are in a stronger position to argue the case that we must argue at a European level, which is that further increases in the EU budget are unacceptable. So in a number of ways the actions this Government have taken put us in a position to make strong cases at European level.

[Kelvin Hopkins (Luton North) (Lab)]

Are the Government not just tinkering with the alcohol measures, rather than facing up to the reality of the drink problem that Britain faces? Would it not be much better to have a significant unit price for alcohol, which would not affect pubs, beer drinkers in pubs or the average bottle of wine, but would raise the floor price for those who drink to excess, particularly the young?

[Danny Alexander]

If the hon. Gentleman were being fair, as I hope he would be, he would recognise that this Government have taken a number of measures to tackle problem drinking and that our approach on beer taxation, which is the subject of part of the Bill, will send further right signals. I hope that many hon. Members would agree that the consumption of high-strength beer is a particular problem in relation to antisocial drinking, and that allowing this sort of differentiation within the tax system should help to send the right signals. The Bill also includes a further step to help people to stop smoking, as clause 16 raises the duty on tobacco.

In conclusion, the Bill sets out changes that will enable our businesses to grow and succeed, supports the necessary plan to deal with the deficit, helps to tackle the rising cost of living, supports growth and supports fairness. I commend it to the House.

18:32

[Ms Angela Eagle (Wallasey) (Lab)]

I beg to move an amendment, to leave out from “That” to the end of the Question and add:

“this House declines to give the Finance (No. 3) Bill a Second Reading because whilst the Minister of State for the Cabinet Office acknowledged that the country faces an ‘immediate national crisis in the form of less growth and jobs than we need’ this Bill does not address it; because the economic approach set out by the Government in this Bill puts jobs and growth at risk; because the Bill cuts capital allowances to businesses who invest in growth; because the Office of Budget Responsibility estimates that after all the measures in the Bill are taken into account the number of unemployed will be higher by up to 200,000 than forecast in November 2010; because the Bill fails to reverse the higher petrol prices faced by families as a result of the Government’s VAT increase in January 2011; because it does not address the damage done to family living standards caused by the wider tax and benefit changes this month; and because without a repeat of the bank bonus tax, the bank levy alone will mean lower taxes for the banks at a time when families and children are bearing the brunt of the Government’s cuts to household incomes.”

At the beginning of the Second Reading debate on a Finance Bill, it is appropriate to take stock of the situation that we face in the UK and of the Government’s handling of our economy almost a year into their time in office. This was the self-styled “Budget for Growth” that downgraded the growth figures. When one in five young people were out of work, it was a Budget that forecast higher levels of unemployment. This was a Budget from the deficit cutters which forecast £46 billion of higher Government borrowing.

After listening for months to his analysis of the economic challenges facing this country, I must confess that I am very worried about the credibility of the Chancellor. His explanation of the origins of the banking crisis and the recession that it caused is partisan fiction—it has very little connection to economic reality. It seems that I am not alone in worrying about his grasp of the facts, because over the weekend he has been attacked by the enemy within. He has been accused of “fiddling the figures” and telling “untruths”, threatened with a lawsuit and told to withdraw “completely unfounded” claims or risk losing “his credibility as Chancellor”—that is just what the Energy Secretary is saying about him.

The Chancellor is clearly also a founder member of the enemy faction identified by the Deputy Prime Minister in his interview with The Independent over the weekend as

“a right-wing elite, a right-wing clique who want to keep things the way they are”.

Perhaps the Chancellor could tell us, if he bothered to turn up—[Interruption.] Perhaps the “Orange Book” Liberals are part of that right-wing clique. Perhaps the Chancellor will tell us whether this right-wing clique all have a uniform as fetching as the Bullingdon club tux?

What about the Chancellor’s deputy, the Chief Secretary? In response to the Chancellor’s wild accusations last week about the funding of the “Yes to AV” campaign, the Chief Secretary said:

“I think it is a real shame that this sort of pretty desperate scaremongering is going on.”

Well let me tell the Chief Secretary that I know just how he feels, because the Chancellor has been indulging in pretty desperate scaremongering about the threat of a UK sovereign debt crisis since his theatrically named “Emergency Budget” last June, and he has been aided and abetted by none other than the Chief Secretary. As the Energy Secretary said in his letter to the Chancellor over the weekend:

“Robust debate is normal in British politics. Persistent resort to falsehoods is not.”

So the Energy Secretary is off to consult his lawyers, and the Chancellor, the Prime Minister, the Foreign Secretary and the chair of the Conservative Party all appear to be in his sights.

In the meantime, will the Chief Secretary now admit, in the interests of not persistently resorting to falsehoods, that the banking crisis and global recession were not caused by the previous Prime Minister? The truth is that he helped to avoid a global depression and that the current Chancellor got every important call in those days of world crisis wrong. Will the Chief Secretary also have the decency to admit that the deficit was not caused by too much spending on schools and hospitals or by the profligacy of nurses and teachers? The truth is that the crisis was caused by unforgivable excess in the banking sector. Will he also take this opportunity to disown and stop repeating the Chancellor’s irresponsible and pretty desperate scaremongering about Britain being on the brink of a sovereign debt crisis like Greece or Portugal, when it is obvious that it is not?

Like the Energy Secretary, I believe that robust debate is normal in British politics, but persistent resort to falsehoods is not. Will the Chief Secretary therefore now disown the “pretty desperate scaremongering”—I use his own words—about the supposed threat of a UK sovereign debt crisis? The truth is that it was the banking crisis that had a disastrous impact on the public finances. Between 2008 and 2009, nominal GDP fell by 1.8%—that cost £20.6 billion—and tax receipts dropped by 3.7%, costing £19.9 billion. Will he acknowledge that this sudden collapse in economic activity is responsible for the bulk of the deficit? This is not a deficit caused by too much public spending before the crisis, but a deficit caused by the crisis. The truth is that the deficit is the price that we are paying for the failure of the banking system and the recession that was caused by that failure. It is also the price that we paid to prevent a global recession from turning into a worldwide depression, and it was essential to our future well-being as a nation that a depression was averted. We could all have a more mature and relevant debate in this House about the formidable economic challenges facing us, if we began with an acknowledgement of the truth of these facts.

Last June, in their first Budget, this Government embarked on a risky and dangerous experiment with the future of our economy. Last year, they abandoned Labour’s plans to halve the deficit in four years and decided to plough full steam ahead with a deficit reduction plan that went further and faster than that of any other major economy in the G20. So preoccupied were they with their desire to make the biggest public spending cuts since the second world war that they also failed to ensure that growth formed a key part of deficit reduction. They opted for a high-risk approach, and this Finance Bill continues that dubious experiment.

It appears that the Government are in thrall to the economic dogma of a long-dead 19th-century economist, David Ricardo, and their ideological preference for a small state. They imagine that the smaller the government, the less taxation and spending there will be. They think that the private sector will somehow automatically fill the gap left by cuts and that the economy will just grow. That is why they have embarked on a drastic programme of deep and immediate cuts that, if their theory is correct, should already be turning the economy around by now and why they are so uncomfortable with publishing their wholly inadequate self-styled, “Plan for Growth”, which was meant to be the public relations centrepiece of the Budget. Their laissez-faire economic approach assumes that growth will happen automatically without the need for any Government support, much less a plan. That is why the plan was so delayed and of such dubious merit when it finally arrived. Keynesians, however, believe that the economy works very differently and that the Ricardian equivalence dogma is wrong. We ignore the insights of Keynes at our peril, which is why the Government’s economic policy, as set out in the Bill, is taking us in the wrong direction.

The great banking crisis of 2007, which began in the American sub-prime mortgage market, administered a huge and near-fatal shock to the world’s financial system.

[Kelvin Hopkins]

I agree entirely with everything my hon. Friend has said. The Government have completely failed to understand the importance of demand in the economy if we are to get growth, and demand looks as though it is weakening. Even the Treasury now estimates that by the end of this Parliament, borrowing will overshoot by £11 billion. The Government are driving the economy in precisely the wrong direction.

[Ms Eagle]

That is essentially the insight that Keynes developed from his experience as a practising economist. We ignore his insights at our peril—[Laughter.] Hon. Gentlemen on the Government Benches can laugh, but if we get this wrong and the economy does not grow or develop, the price will be paid through a smaller economy, fewer opportunities and lower standards of living for men and women up and down the country. That is not something that the Government or the Government parties should be making a joke of.

The great banking crisis transmitted itself to the real economy in the form of a synchronised global recession. Nothing so serious has been experienced in the advanced economies since the Wall street crash. That great crash destroyed the economic and social fabric of many societies in the interwar years, causing untold hardship and misery. Governments in the 1930s were in thrall to the same Ricardian dogmas as now hold sway in both the Government parties. They did not see a role for the state in protecting the economic and social well-being of their citizens. Their lack of vision and hands-off approach to economic policy led to the great depression and ultimately, the collapse into dictatorships and a cataclysmic world war.

Fortunately, in 2007 the previous Labour Government and economic policy makers the world over did not make the same mistake. They had absorbed the lessons of the interwar years, and they took actions to prevent the recession from turning into a global depression, but before the recovery had become securely established, the deficit hawks reasserted themselves, demanding austerity despite warnings from leading experts around the world that that would be the wrong approach.

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

And from the Liberal Democrats.

[Ms Eagle]

That is true—the Liberal Democrats gave us such warnings before the election.

Undeterred by the lessons of history and without an electoral mandate for such drastic cuts, the new Administration in the UK have proved to be the most extreme of the deficit hawks. They decided that dealing at breakneck speed with the deficit created by the banking crisis was more important than any other consideration, including protecting people against long-term unemployment or against cuts in vital public services. So, before the patient was long out of the emergency room, the Government decided to start administering a deficit reduction shock therapy that could end up being worse than the original illness. There is nothing in economic theory that dictates that Governments should plan to eliminate deficits in four years rather than eight.

The sheer scale and speed at which the Government have proceeded came as a surprise, not least to the 6.5 million people who voted Liberal Democrat at the last election. The Business Secretary warned about the dangers of cutting too far and too fast before the election, only to go along with the most savage cuts that we have had in the UK in peacetime straight after it. Meanwhile, in his speech to the Liberal Democrat Scottish conference last year, the Chief Secretary promised to

“create…jobs and boost the recovery”.

Instead, he has followed the example of the leader of his party when it comes to election promises—he has done the exact opposite of what he said he would do.

Just today, Mr Gary Millar, a councillor in Liverpool, has quit the Liberal Democrats in disgust over their broken promises. He said that he was once

“happy to call myself a Lib Dem, today they make me question my integrity and reputation.”

Like so many others, he feels personally betrayed by the Liberal Democrats, which is why they will face the wrath of an angry electorate next week.

At the time of the election last year, the economy had begun to improve from the depths of the banking-induced recession. Growth was up, inflation and unemployment were falling and borrowing had come in £20 billion better than forecast in the 2009 pre-Budget report. Formidable problems lay ahead, of course, but we were moving in the right direction and growth was seen as part of the solution.

Since the fiscal hawks rolled up at the Treasury, our economy, which was improving, has ground to a halt. Unemployment is higher, inflation is double the Bank of England target and the Chancellor has presided over a collapse in consumer confidence to lower levels than it reached in the depths of the 2009 recession, because he made the political choice to inflict on ordinary families the largest and longest squeeze in living standards since the 1920s. As the cost of living rises and wages fall, he has chosen to impose the increase in VAT, huge cuts in local services and a reduction in the support for child care that threatens to drive many women out of their jobs. His VAT increase alone will cost the average family with children £450 this year, far more than they will gain through increases to tax thresholds. Little wonder, then, that the Office for Budget Responsibility has downgraded the growth forecast again and again.

In his Budget speech, the Chancellor boasted:

“Our country’s fiscal plans have been strongly endorsed by the International Monetary Fund, by the European Commission, by the OECD, and by every reputable business body in Britain.”—[Official Report, 23 March 2011; Vol. 525, c. 951.]

The IMF has lowered its growth forecasts for the UK, however, and its head, Dominique Strauss-Kahn, has warned against cutting budgets too far, creating long-term unemployment and abandoning entire generations to a workless future with no hope. The recent interim OECD assessment of G7 economies predicted that the UK was expected to grow more slowly than any other G7 country except Japan, which has just been hit by powerful earthquakes, devastating floods and the ongoing battle against a nuclear disaster.

[Kelvin Hopkins]

Again, I agree entirely with my hon. Friend, who is making an absolutely excellent speech. There is another factor, however, driving deflation, and that is the fear of unemployment. When people are frightened of losing their jobs, they stop spending their money and try to pay off their mortgages. That is what is happening now and that is why demand will be savagely cut by this Government’s policies.

[Ms Eagle]

My hon. Friend makes an extremely good point about confidence and sentiment in the economy transmitting their way into the real figures through their effect on demand.

Even those who gave their personal stamp of approval to the Chancellor’s aggressive cuts agenda last year in a letter to The Daily Telegraph are now voicing their doubts about weak growth. Ex-Tory MP Archie Norman is worried that the Government’s growth predictions are too optimistic and former Asda boss Luke Bond is predicting a two-year retail recession, which picks up on the point that my hon. Friend the Member for Luton North (Kelvin Hopkins) has just made.

The Government are going too far too fast, and we are paying the price in lost jobs and slower growth. Their phobia about the deficit means they are cutting public expenditure much further and faster than any other major economy. They have made deficit reduction the only thing that matters, regardless of how terrible its social or economic effects will be; they appear to be blind to the lessons of history; they refuse to listen to public concern; and they fail to recognise the absolute necessity of re-establishing growth to get the deficit down. Without growth, austerity measures simply make the deficit worse and impoverish the society they are inflicted on. The Chancellor should, as he so notoriously lectured us in February 2006, “Look and learn from across the Irish sea”. Ireland is on its fourth austerity budget with no end in sight. The evidence shows that all the countries that implemented drastic austerity measures saw their economies go into reverse in the fourth quarter of 2010. Those economies shrank in Greece by 1.4%, in Iceland by 1.5%, in Ireland by 1.6%, in Portugal by 1.5% and in the UK by 0.5%. In contrast, both the German and the American economies grew.

The Chancellor is not solving the problem; he is in danger of making it worse. The day after the Budget, the ratings agency Moody’s embarrassed the Government by suggesting that the UK’s triple A rating might be at risk not because of the deficit but because of slower growth. I would take any pronouncement from the rating agencies with a very large pinch of salt, as they are hugely compromised by the part they played in making the banking crisis worse and they need to be reformed, but, unlike the Chancellor, we have neither made their flawed and partial judgments the central justification for our economic policies nor installed them as the most important judges of our success by giving a dangerous credence to the fiction that the UK’s ability to finance its debts is at risk for reasons of petty party politicking. Their influence makes the inconvenient point for the Government’s political cuts narrative that growth is equally important to successful deficit reduction. Without growth, the deficit will not be sustainably reduced.

[Mr Love]

According to the Government, one of the major contributors to growth in coming years will be an increase in net exports, but with all our European partners struggling, as has been shown, how are we meant to get that increase in net exports and demand?

[Ms Eagle]

With a 25% devaluation in the value of our currency, we certainly ought to be seeing strong increases in economic performance, but my hon. Friend makes an important point about demand in other areas of the economy, especially in the European Union, which is our largest export partner—60% of our exports go there.

The Chief Secretary will already have seen the growth figures for the first quarter of 2011, and I am looking at his face for any scrutable or inscrutable reaction. The figures are due to be released tomorrow, so he has an advantage over the rest of us. I do not know whether he is going to give us any facial hints as to what is in them, but if the OBR’s three-times downgraded forecast of 0.8% is right, the economy will have grown a tiny 0.3% over the past six months against the 1.8% it achieved in the previous six months under the influence of the previous Government’s policies for recovery. As the Financial Times says today,

“it will be difficult to claim that the recovery is self-sustaining unless Wednesday’s number is at least 1.2 per cent and possibly as high as 1.7 per cent.”

The Government’s growth strategy is a hotch-potch of reheated Thatcherite fiddling on the supply side. At its centre is the dubious belief that the most important driver of economic growth is creating a low corporate tax jurisdiction for multinationals, but the economic literature shows that growth tends to be higher in countries that have a higher investment in social and intellectual assets, as well as good capital infrastructures. The Government have a simplistic view that cutting corporate taxes will automatically lead to more investment, but we believe that an investment strategy is needed and that it sends the wrong signal to cut investment allowances. The £200 million one-off extra investment in science and apprenticeships, although welcome, is dwarfed by the £5 billion-a-year cost of reducing corporate taxes, which will help growth only if that money is reinvested in business activities in the UK. The Government’s decision to abolish the regional development agencies and cut regional growth funding by two thirds has set back many viable plans for development that could even now have been building an economic recovery in every region of the UK.

Despite the biggest squeeze in living standards since the 1920s, the OBR is forecasting that one quarter of economic growth this year and a third next year will come from UK households and will be financed by a sharp increase in household debt. Close study has revealed something that the Chancellor chose not to mention in his Budget speech: the OBR expects families to go deeper into debt each year between now and 2015 and expects household debt to rise to a record high of 175% of disposable income, or £77,000 per family, by the end of this Parliament. The Chancellor claims that the only thing that matters is getting Government borrowing down, but he does not say that his plan is to pass that debt directly on to already hard-pressed families. Although they did not cause this crisis, ordinary hard-working people and families are being made to pay for it. People are suffering under the pressure of the Chancellor’s hike in VAT, sky-high petrol prices and inflation, and we know that his real economic strategy is to force people to take on even more debt just to make ends meet.

What then of the sector that caused the crisis? Instead of making the banks pay more this year, the Government are giving them a tax cut. Project Merlin, the Government’s so-called final settlement with the banking sector, is a damp squib. As the majority shareholder, the Government have just approved, for the chief executive of the nationalised Royal Bank of Scotland, £7.7 million in pay and bonuses for last year despite the bank’s having lost £1 billion. It has also emerged that bank lending to small businesses fell again in the first quarter of the year. Lending to small businesses is vital to recovery and despite all the promises from the banks it is going down, not up. The Government should not be giving the banks a tax cut, but should follow Labour’s suggestion and repeat the bank bonus tax this year. That extra money could be used to build 25,000 extra affordable homes, to create more than 100,000 jobs to help tackle youth unemployment and to boost enterprise in the regions.

The Government are hellbent on taking us back in time to the divided Britain of the 1980s. The Tory leaders in the coalition are trying to re-enact the failed Thatcherite policies of the past, which resulted in one part of our society being divided against another. Not only are they making life tougher for people, but they are kicking away the ladders to a better future. They are teaching people to blame the weak and despise the poor. It is happening all over again, just like in the 1980s, but this time the Liberal Democrats are helping them to do it. At the weekend, the Deputy Prime Minister accused the Prime Minister of “defending the indefensible”, but I think that the Deputy Prime Minister and his Government colleagues are doing a pretty good job of that themselves. In public they complain, but in private they roll over and agree to every damaging Tory plan.

The Government fail to recognise the pain that their economic strategy is inflicting on people up and down the country. They want Britain to have a smaller state; they want to create a nastier, meaner, shabbier society that leaves people to fend for themselves; and they are trying to fool the country into believing the myth that the economic storm was all Labour’s fault and that this extreme and dangerous fiscal consolidation programme is the only option to deal with it. The Government need not have cut this far or this fast, because there is a better, fairer and safer way. They need to wake up and accept that their economic polices are not working and are just hurting, and they need to change course before it is too late.

18:58

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

I welcome the Finance Bill, which will reform the economy, deliver real growth for business and create jobs. One of the very special parts of the Bill is what it does for the very smallest businesses, as they are going to be the key to re-growth in our economy. I am sure that the House is well aware that two thirds of our businesses are so small that they have fewer than five employees and a turnover of less than £250,000. They may represent only 15% of our economy but they are vital because, first, all our successful businesses have to start somewhere, and it must be there, and, secondly, without those very small businesses—whether it is the plumber or the electrician—some of our rural communities and some deprived urban communities would find it difficult to keep economically active. For these very small businesses, I am pleased to see a mandate for growth.

I shall elaborate on some of the provisions mentioned by my right hon. Friend the Chief Secretary and look at what they deliver and how they might be developed in future. Businesses rates are, for me, one of the most important issues and the subject of many complaints from small businesses in my constituency. I am delighted that the small business rate relief has been extended for a further year, and pleased that half a million businesses will benefit. In the south-west, which is my part of the country, 68% of businesses will see some economic benefit from that relief.

Will my right hon. Friends and the Treasury team look carefully at business rates in future? An awful lot more needs to be done. Issues such as turnover are relevant criteria. It is not uncommon for me to walk into a pub and to be told by the publican that the way in which the business rates have been calculated is biased against small pubs. It is not uncommon for me to walk into a small retail business and to be told, “This used to be the high street but it’s not any longer, and I feel that my business rates are disproportionate and inappropriate.” A shake-up of business rates is needed.

I welcome the reduction of fuel duty by 1p and the removal of the escalator. Without that, the projection from the Federation of Small Businesses that all small businesses would find their bills going up by £2,000 in six months would have become a reality. To me, that reduction is crucial. I am sure that those on the Opposition Benches would be the first to say, “But at the pump, prices don’t seem to have come down.” My response is that they would have been an awful lot higher but for these changes. We need to consider how to ensure that those who are delivering petrol at the retail end are passing on those reductions to the customer. A number of people have expressed concern that the help that we as a Government are giving has not been passed on to the consumer.

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

If I follow the hon. Lady’s logic correctly, she welcomes a policy, the results of which, she admits, have not been passed on to the customer, so what benefit have most of her constituents received from the fuel duty cuts?

[Anne Marie Morris]

They are 6p a litre better off than they might otherwise have been. The challenge that we face is the retailer, but I do not believe that the Opposition would have been able to do anything different. That is another aspect that needs to be looked at going forward. But we digress. Let us move on to some of the other issues facing small businesses, such as income tax and national insurance.

For many small businesses, national insurance is a headache and it is one of the key reasons why they will not take on new employees. We have the largest tax code in the world. One of the things that I am pleased to see predicted for the future, though not in the Bill, is a move to simplify tax and to consider combining income tax and national insurance. That would be a great step forward and a huge saving in administrative time and burden for very small businesses. I was sad to see that the NI holiday was not extended further for existing businesses, a matter that I have raised with the Treasury team on a number of occasions. If in future we could find a way of combining income tax and national insurance, that would be a good step forward.

I am pleased that corporation tax is coming down to 26%, and I am pleased to see a move to deliver the lowest corporation tax in the G7. That is extremely good news. Given that my mandate is to shout loud for the very smallest businesses, it would have been even better for the small companies rate to have come down further. I appreciate that it has already come down to 20%, which is a good move, but anything further that can be done going forward would be welcomed. The special provision to increase the SME rate of research and development tax credit to 200% is extremely welcome. I thank the Treasury team very much for that as it will make a significant difference.

The crucial challenge for many small businesses is finding investment, so I am particularly pleased to see entrepreneur relief changes which will increase the capital gains tax lifetime limit to £10 million. That is a hugely welcome step. I am pleased that the enterprise investment scheme has been also been developed so that the income tax relief has moved from 20% to 30%, and the eligibility criteria have changed so that larger businesses will be included in EIS. However, I would be grateful if the ministerial team would look at how we can extend EIS so that it attracts investment for the very smallest businesses. At present it is much more geared towards a small or medium-sized business and corporations. It is not intended for a sole trader or a partnership. If we could come up with EIS-lite in some form, that would be extraordinarily helpful.

In summary, I am delighted to see the focus on the smallest of businesses. I sincerely hope that that will be a trend to be welcomed for the future. One thought I have for the Treasury team is that, going forward, we might look more closely at a specific definition of a micro-business, a small business and a medium-sized business. If we did that, as happens in other countries, we might find that the Treasury team had a little more flexibility to give particular help to the very smallest businesses, from which growth will ultimately stem.

19:06

[Mr Frank Doran (Aberdeen North) (Lab)]

I shall speak about the oil and gas industry, to which the Chief Secretary gave prominence in his contribution. I am sorry that he has gone. He claimed the credit for the policy, but he may in future regret that rather naive political claim. He has produced a system that is too clever by half and does not pay much attention to the reality of the oil and gas industry.

The oil and gas industry is probably the single most important industrial investor in the UK. Some £6 billion was invested last year alone, with anticipated increased investment this year, led by the high oil price. The industry supports nearly half a million jobs throughout the UK, either directly or in the supply chain. A substantial proportion of those jobs are located in just four constituencies around the city of Aberdeen—my own constituency, Aberdeen North, and Aberdeen South, Gordon, and West Aberdeenshire and Kincardine, where we have a grand total of just over 132,000 oil and gas-related jobs. That has a huge impact on our local economy.

Oil jobs exist in other parts of the country too. There are, for example, 14,250 such jobs in the City of London, where many of the major companies have their headquarters, nearly 8,000 in Reading East, and over 8,000 in Poplar and Limehouse. Uxbridge has 2,170 oil and gas-related jobs, and Stockton North has 2,270. Even the Prime Minister in rural Witney has about 1,000 such jobs, according to figures produced last year by Oil and Gas UK. So it is not just a regional issue or one that involves only East Anglia or the north-east of Scotland. The last time such a survey was done—this one was carried out about a year ago—the Economic Secretary to the Treasury would have been able to claim several thousand jobs in her constituency, but Kellogg Brown and Root, which used to be located in Putney, has moved on. The industry affects the whole country.

Last year, the industry paid £8.8 billion in corporation tax and the estimates show that £13.4 billion is likely to be paid in 2011-12. Of that, £3 billion to £4 billion in revenue is linked directly to the oil price, so the Government are already benefiting from the spike in oil prices. Before the Budget the industry was already the most heavily taxed sector in the UK economy, with 50% to 75% of all UK continental shelf profits going to the Government. Given that we own the oil after all, since it was nationalised under the Petroleum (Production) Act 1934, such a split does not look excessive on either side.

However, exploiting our oil and gas resources is a dangerous and expensive operation that requires high levels of commitment and investment. Investment decisions in the UK industry are not all made in the UK. It is a genuinely global industry and UK sector decisions are made in Houston, Dallas, San Diego, Paris and Vancouver as well as in London and the middle east. Competition for investment is fierce. UK management has to fight against bids from other oil provinces, such as Brazil, Australia and India, and from emerging oil provinces such as west and east Africa and from a host of other foreign company headquarters.

The managers who make those decisions consider a number of factors in addition to the most prominent one—the likely return on investment. The key factors are a stable political background and a stable financial background. Above all, for long-term investment the oil industry needs certainty in the tax regime, and I am sure that the Economic Secretary had that message hammered home very seriously by the industry when she visited Aberdeen not so long ago.

Ever since the 1960s, when oil exploration started in the North sea, we have done very well on investment, mainly because we have had a stable political system and a more or less stable tax system, but it is getting much harder. The UK continental shelf is a declining province and the Government’s aim should always be to ensure that that decline is managed and is as shallow as possible. That means keeping the tax regime attractive enough to encourage investment while ensuring that the public purse gets its fair share. The Chancellor’s decision, which the Chief Secretary apparently claimed was his idea, will accelerate that decline rather than slow it down.

Professor Alex Kemp and Linda Stephen from Aberdeen university recently produced an authoritative study on the impact of the tax changes. The report looks at the impact of the Budget on a range of oil and gas price scenarios. It finds that at a $50 a barrel oil price and 30p per therm of gas, over the 30-year period to 2041, there could be a reduction of 23 new field developments and substantial incremental developments undertaken. There would be a cumulative reduction in production of 920 million barrels of oil equivalent and a reduction in field investment of £19.2 billion, at 2010 prices. Total field expenditure would be reduced by £34.9 billion and tax revenues would be reduced by £12.8 billion.

Under a $70 a barrel scenario, with 50p per therm of gas, there would 62 fewer new field developments, loss of production of 1.7 billion barrels and a total field expenditure loss of £33.2 billion, but for the Government the tax revenues would increase by £23.3 billion. The analysis for the $90 a barrel scenario, with 70p per therm of gas, shows that even at the top of oil and gas price scenarios damage is done—79 fewer fields, 22.54 million barrels of oil equivalent lost and total field expenditure of £52.2 billion—but, again, tax revenues would increase by £51.6 billion. The question we must ask in these scenarios, which have come from a very authoritative source, is whether that is a price worth paying, given the reduction in our oil and gas producing capacity and the importance of the industry to the country. The Government increase their tax take, but at a considerable loss elsewhere.

I have known Alex Kemp for many years. He is the country’s leading expert on oil and gas taxation and many hon. Members in the Chamber with an interest in the oil and gas industry will have had many conversations with him. He has advised many companies, emerging oil countries around the world on their tax systems and various Select Committees in this House. He is completely independent. He and his colleague have produced a damning indictment of the impact of these tax changes.

The approach that the report takes is extremely important. The oil price is volatile and can change dramatically. For example, I remember that in 1985, when I was a young and aspiring parliamentary candidate ploughing my furrow in Aberdeen, the oil price dropped from $32 to $8 a barrel virtually overnight. The oil industry is, if nothing else, extremely focused and unsentimental. If a company is not making the returns it anticipated, it will quickly change direction. In 1985-86, the price we paid was that a huge number of projects were quickly shut down. Estimates showed that around 50,000 oil jobs were lost, mainly in the north-east of Scotland. That is the sort of picture that Professor Kemp and Dr Stephen paint for us in their report.

The House of Commons Library has produced a valuable report on oil prices which shows just how serious that volatility is. For example, the Library’s figures show that in 2008 the minimum price for a barrel of oil was $39.25 and the maximum was $132.40, all in one year. Of course, that was the year when the global banking crisis was at its height. That was a huge shift in extraordinary times, but these are extraordinary times, too. Who can predict the oil price next month, never mind next year?

The average price for 2011 will be higher, mainly because of the crisis in the middle east. Perhaps the price will go as high as it was in 2008, but again, who knows? Will we still have the disruption in the middle east next year? Will the world economy have improved, increasing the demand for oil, or will it still be bumping along the bottom? What new technologies will come along? Shale gas is transforming gas industry economics and new oil provinces may be discovered, along with massive oil fields, as new technology allows us to explore in more difficult areas.

In the meantime, UK oil and gas production continues to decline. It is sustained by investment, much of it coming from new entrants in the North sea introducing new techniques to improve recovery from existing oil fields, many of which are the most heavily taxed under the new proposals. The development of much smaller fields relies on existing infrastructure, much of which is well beyond its expected working life and requires constant investment to maintain it. The report by Professor Kemp and Linda Stephen shows just what the impact of these tax increases on investment will be.

As other Members have said, there is also real concern about the application of the tax increases to gas. Gas projects in the UK are highly marginal and the economics of gas are very different from those of oil. The price of gas is much lower and is likely to stay that way, particularly given the continuing discovery of substantial gas deposits around the world and the growing impact of shale gas on the economics of gas. The current value of gas, as has been mentioned in previous interventions, is the equivalent of $55 a barrel, well below the Government’s proposed threshold for the tax increase, but there is no sign that gas revenue will be excluded from the increase. To pick up on the point made by the Chief Secretary to the Treasury in response to interventions, I do not think that tinkering with the field allowance will have much of an impact on the gas industry. It needs a lot more than that and a recognition of the different economics.

The west of Shetland area is estimated to hold around 17% of the UK’s remaining resources, and much of it is natural gas. Development will be challenging and expensive, but the Laggan and Rosebank developments, for example, would open up other areas west of Shetland and provide a lifeline for the Sullom Voe terminal on Shetland. By the way, roughly 1,100 jobs on Shetland and Orkney are sustained by the oil and gas industry. Development in this area is crucial to the national interest, but these are just the sorts of projects that are threatened by the tax increases and the lack of any differentiation between oil and gas as products for the application of the increase, which makes the threat much more serious to all future gas projects in the UK.

It is worth adding that those consumers who are saving a penny on their petrol bills may well end up paying it back in other ways. One major gas producer gave me figures showing that the extra cost of importing gas into the UK from abroad to replace gas which would otherwise have been produced before the introduction of the tax increase could be as high as £100 per household per year, which is a significant potential increase. There would obviously be other major effects on the economy because of the loss of an indigenous resource and the need to import gas to replace it.

Of course, this is not the first time a Government have increased oil taxation. The previous Conservative Government did it in 1993. The reception then was as bad as this one, as it came out of the blue without prior consultation, and a number of companies were hit hard. In 1998, the Labour Government proposed an increase in taxation on the industry, started a formal review and consultation process and flagged up the possibility of a supplementary charge. For the record, I have never been opposed in principle to taxing the profits of multinational companies, but on that occasion I opposed the measure. At the time it seemed the wrong thing to do, even by my own Government, because we were going through a sustained period of low oil and gas prices. It was the wrong time to apply a tax increase, and the review concluded with exactly the view that I take: the industry was suffering a sustained period of low prices, and it was not the time to increase taxation. The then Chancellor accepted that view, and no increase was imposed in that Parliament. He also made it clear that the decision would stand for the life of that Parliament.

In 2002, things in the industry had changed and the supplementary charge was introduced. It was increased in 2006, and just for the record I did not oppose those measures, because I thought that the industry could afford them at the time. On each occasion, in 2002 and 2006, as in 1998, however, the Chancellor made it clear that the tax decisions would be for the duration of the Parliament, and that was a crucial reassurance to the industry: nothing would happen in the following year’s Budget or the one after that; the decisions were sustained for the Parliament.

When Labour took office in 1997, it quickly understood the importance of the oil and gas industry to the economy—and how little it was understood by government and civil servants. The Oil and Gas Industry Task Force was created as a regular forum for discussion between the industry and government, and relations between both sides improved considerably. Treasury officials were not initially involved, but in the past few years they have attended as observers, and there was a strong feeling that right across Whitehall, and particularly in the Treasury, government understood the oil industry much better than it had in the past.

In 2006, the Labour Government, again, started a review of the offshore oil tax regime, and it has been clear for a long time that the regime, which developed for a growing industry, has to be changed to take account of the decline in the industry and, particularly, the needs of decommissioning. That review survived the change in Government, and all the feedback that I have had from industry and from some Ministers is that the process was being dealt with constructively on both sides, and that good progress was being made, particularly on some of the more difficult issues, such as decommissioning.

All that work has been undermined by the unexpected decision to increase the tax rate. The Chancellor, with the increases, has taken UK into the top three in the world league of high oil and gas tax payers. I think that we were No. 2 in the league table that I saw, a long way from the mid-point where we used to be. He is playing a dangerous game with a crucial but declining industry that will continue to need foreign investment to survive. At a stroke, he has destabilised the industry and prejudiced the view of potential investors. All new developments offshore have long lead-in times, and many can take as much as 10 years to plan, design and construct, with expenditure in the billions of pounds before a single barrel of oil is produced or a penny earned. The oil and gas industry wins big rewards, but it takes big risks.

[Malcolm Wicks (Croydon North) (Lab)]

I am enjoying my hon. Friend’s remarks on what remains one of Britain’s greatest industries, but does he agree that there is a national security and geopolitical dimension to the issue? As events in northern Africa and in the middle east show, much of the gas and oil in the world is in areas that are unstable and not readily associated with democracy or human rights, so the more energy we can produce ourselves in Britain or offshore, the better for our national security. That is a crucial defence reason why we should cherish the industry.

[Mr Doran]

My right hon. Friend is absolutely right, and he makes his point with the authority of having been Energy Minister for many years in the previous Government. The security that our indigenous oil and gas industry gives us is one of its most important benefits. We have never had full energy security, but the industry gives us a considerable edge in the current climate.

I mentioned the volatility of oil prices and the tax system in the UK, and the risks to future investment are real. The Chancellor has introduced even more uncertainty into the system with his proposal to link oil tax with fuel prices. We have a volatile system, and most predictions for oil prices in the medium to long term are wrong. We have not seen the Chancellor’s scheme for the new tax system, but it seems clear that it will add to more uncertainty about the tax rate.

The Government are absolutely right to express their concern about rising fuel costs, particularly given the impact on taxation, but I cringe a little when I hear Ministers talk, as the Chief Secretary did, about the Labour Government’s escalator. The escalator was introduced by the previous Tory Government, and during the Labour Government, particularly after the fuel crisis at the turn of the century, it was dropped. In 11 out of our 13 years in power, the escalator was suspended. That is the reality.

The current Government could have dealt with the problems faced by motorists in another way, without introducing all this complexity and the confusion that it will cause—particularly if the crisis in the middle east recedes and the oil price declines again. They have made a serious error by linking fuel costs to the taxation of the oil and gas industry.

Importantly, the oil industry has reacted very badly to the increases, with one senior figure describing them as a “drive-by shooting”. The industry relates to government in a very sophisticated way, and it probably has more contact than any other industry with government, but there is clearly genuine shock and concern about this Government’s decisions.

I have had many years of contact with leading figures and companies in the industry, and in the past I have seen the industry cry wolf more times than I care to remember. At the end of the day, it makes whatever adjustments necessary and gets on with it. This time, however, it seems very different. The sense is that there has been no proper consideration of the needs of the industry, as an industry in decline but one that will make a major contribution to our economy with the right support and management from government.

The sense is that Treasury Ministers in particular do not understand the industry and simply see it as a cow to be milked. They have taken a short-term decision, and the sense is that the cow has been milked for short-term political reasons—to throw some crumbs to the motorists and to accelerate the reduction of the deficit. Both are perfectly respectable aims, but not at the cost of causing the severe damage that Alex Kemp’s report envisages to our indigenous oil and gas industry.

19:27

[Richard Harrington (Watford) (Con)]

I came to this Second Reading debate to get an outline of the Government’s case on the Budget and the Finance Bill, as I heard from the Chief Secretary to the Treasury, and because I felt that the Opposition spokesperson, the hon. Member for Wallasey (Ms Eagle), would give us the Opposition’s view. I tried to follow her as best as I could, but we seemed instead to get a lengthy diatribe on any spats that there might have been over the AV referendum, and a repetition of the arguments used after the emergency Budget some several months ago about public spending cuts.

We heard the cliché that the coalition wishes to turn the country back as far as government is concerned into a “small state”, to use her expression. That ignores the fact that the size of the state in public expenditure terms after the five-year programme will be back to that of 2008, which I am sure the then Government would not have described as a “small state”. We heard also great support for the Liberal, Lord John Maynard Keynes, which I found interesting, and the blaming of everything on “a synchronised global recession”.

Those are yesterday’s arguments, however, because we are here to talk about this Budget and this Finance Bill. The debate is about one thing above all others: after the budget deficit is dealt with, the plan for which the Government explained clearly in the emergency Budget, how do we ensure that the economy can expand without the problems of the past? Such problems occur when the economy expands, imports are sucked in without a commensurate export boom and migrants come to work here because we have unemployed people who do not have the necessary skills or, indeed, ability to fill the available jobs. Whether it is because they are unwilling, live in a different part of the country or do not have the necessary skills, that has been a problem. In my constituency, about 2,000 people, including young people aged 18 to 24, are on jobseeker’s allowance, yet companies still have to bring in labour from Poland, because their alternative is to shut the factory and move it abroad. The long-term purpose of the Budget is to deal with such fundamental core problems.

It is not just a question of consumption. The media and, to some extent, the Opposition are obsessed with retail sales numbers, but in the past booming retail sales have led to some of our problems, with imports being sucked in and household debt expanding to fund consumption. Adam Smith, a great hero of Conservative Members who has some support even among Labour Members, said:

“Consumption is the sole end and purpose of all production”.

When he said that, the economy was far less sophisticated than it is today, and he did not mean that retail spending is the be-all and end-all. Indeed, the Office for Budget Responsibility expects British households to account for about a fifth of economic growth this year and about a third next year. There is a lot more to it than just consumption and what is spent in the shops.

The Daily Telegraph said in an editorial just after the Budget:

“The Chancellor bets on business coming to the rescue”.

That is absolutely true. The coalition’s strategy is based entirely on allowing business to produce the necessary jobs, exports and consumption so that the economy can expand, this time on a firm base rather than on the basis of property debt and financial services—although I am pleased to say that financial services, particularly international financial services, are very important for this country. Comments about the banking crisis and bankers’ bonuses tend to push to one side what I would regard as the core argument, which is how we can be competitive as an international financial centre. As the Chief Secretary to the Treasury said, the Government’s strategy is based on allowing us to be one of the best places in the world to do business and to be competitive. That includes the financial sector, but it does not exclude the rebalancing of the economy that is one of the main aspects of the Bill.

The test of the Bill is whether it facilitates real growth given that we have a skills shortage—there is no question about that—and a work force among whom some, particularly in the south of England, where there has been a shortage of labour, regard it as acceptable to be on jobseeker’s allowance for very lengthy periods. Watford is in the south of England, and it has 2,000 unemployed people. Does the Budget bring about a change in this climate to deal with people who lack of skills and those who lack an ability or a desire to get a job? I would argue strongly that it does. Many aspects of the Budget help with that through incentivising people to set up businesses and allowing investors more tax relief through the enterprise investment scheme and other schemes.

The Government’s approach to tax cuts has been the best that they can take in the economic climate that they inherited. The corporation tax reductions are a good start, as is the relief for investment in enterprise. However, tax is a major issue for businesses and individuals. I believe that the 50% tax rate will prove to be a disaster, first, in the money that it brings in—we are waiting for the numbers on that—and, secondly, in providing a disincentive. In one of the first speeches that I heard after the 50% rate was brought in, my right hon. Friend the Member for Wokingham (Mr Redwood) said that he feared that business people will, to use his expression, go on strike—that they will reach a certain age and say, “Why should I work harder if significantly more than half of what I earn is to be paid over to the Government?” My point is not to do with any principles of mine. I am very much in favour of taxation being used as a form of redistribution of wealth and of wealthier people paying a much higher amount than people at the lower end of the income scale, but the unfortunate fact is that it provides a disincentive. It is a free country, and when someone gets to a certain level of income they can decide whether to work a lot harder or to do what the Americans call “going to the beach”. I hope that I am wrong, but I believe that 50% tips the balance in the wrong way.

In the long term, it is in the best interests of this country for us to be able to provide the kind of public services that we all want to provide. Notwithstanding what the hon. Member for Wallasey said, a Conservative-led Government, just as much as a Labour Government, want to provide really good-quality public services. The way to do that in the long run is to reduce the burden of taxation to encourage people to enter new businesses or to work harder in the businesses that they are in. They will not do that in return for progressively higher amounts of tax. I wish it were not the case, but it is human nature and unfortunately we will see it happening.

Business is a bit lumbered, in a way, because there are no direct votes in business. In the past, it has been easy to impose taxes as a burden on business—high business rates, employers’ national insurance and corporation tax are the obvious examples, as well as many other taxes—because there is not the immediate reaction from business that there is from the public. We now have to decide that what is good for business is good for the country, because employees make up businesses. People who demonstrate against companies that pay a small amount of corporation tax forget the billions of pounds paid by the employees in their national insurance and income tax and the VAT on what they spend.

As for skills, the Red Book points out that unfortunately 9.4% of all 16 to 24-year-olds are unemployed and not in education. A few weeks ago, I visited a company in my constituency that makes lenses—Davin Optronics. The business is 100 years old. It has declined a lot in the past 10 years, but it still turns over £4 million and employs 50 people. I was told that its biggest problem is that its skilled work force are getting older. The managing director said, “Young people don’t want to work here. They want to work in Top Shop or TK Maxx, or wherever, but they don’t want to work in a factory.” I am very pleased about the apprenticeship scheme that was introduced in the Chancellor’s Budget. We must somehow make people regard qualifying to do a skilled job as being as important and high-status in society as getting a degree. The 80,000 extra work experience places and the extra apprenticeships are very good news.

Small businesses are different from large businesses, not only in relative size but because many do not have the facilities to set up training schemes to recruit in a systematic manner and to deal with local further education colleges as regards the training side of apprenticeships. I hope that what the Budget and the Bill are doing in relation to finances will be enhanced by the training of people at further education colleges, at Government expense, to find businesses that would never have dreamed of offering apprenticeships and to show them how good such apprenticeships are for those businesses.

Confidence is everything in the economy, and the measures that this Government have taken have done a lot for the confidence of employers. I read in that great oracle The Sunday Telegraph, no less, that according to its City editor business has got £71 billion of cash in reserves; presumably that is worked out by some piece of software that adds up everything on the balance sheets of all the companies at Companies House. That money needs to be invested. In bad times, companies hoard cash because they are frightened of what might happen if sales go down, there are problems with exports, and so on. It is confidence that will make those companies spend that cash in investment. The tax breaks help a lot, but the fundamental benefit of this Finance Bill is that it is employer confidence that will get these jobs provided.

We have to get the economy right, and I think that the Finance Bill passes that test. We have to get the tax regime right, and there have been great improvements on that, although I realise that it has to be done very slowly. We have to get the work force right, which means having skilled workers and incentivising people to work. If we can do all that and incentivise companies that make profits to keep and reinvest them, I think that the economy will enjoy a proper, genuine boom in time, and not one based just on debt or consumer spending. In my view, the Budget and the Bill go a long way towards achieving that.

19:40

[Stewart Hosie (Dundee East) (SNP)]

The Finance Bill follows the Budget in March. On the opening day of the Budget debate, I laid out the SNP’s opposition to a large number of the measures in the Bill. Today, I will take the lead from the hon. Member for Aberdeen North (Mr Doran) and concentrate on the most damaging single proposal: the Chancellor's and the Chief Secretary’s determination to see a 60% increase in the corporation tax supplementary charge on oil and gas production in the North sea from 20% to 32%. The proposal will take about an extra £2 billion a year in tax from the sector, and that is on top of last year’s £4 billion windfall as a result of the rising oil price and this year’s windfall, which is over and above the 2010 forecast as a result of oil trading at about $120 a barrel.

The proposal also runs counter to the Chancellor’s stated objectives: his objective in 2010 of providing tax stability for the North sea; his objective of delivering a growth agenda, which was meant to be at the heart of this year’s Budget; and his objective to see production here in lieu of imports. The proposal will drive a coach and horses through those worthy objectives laid out over the past year by the Government.

When the tax raid was announced, it was reported almost immediately that the leading figures in Oil and Gas UK, the sector’s trade body, gathered in a state of disbelief over the Government’s plans. It was reported almost immediately that oil companies were preparing to cancel and suspend investment plans, and that up to 40,000 new and existing jobs were at risk. It was reported that Statoil was suspending the development of the heavy crude Mariner field, putting the development of its sister field, Bressay, at risk. That led Jeremy Cresswell, the editor of The Press and Journal’s “Energy” supplement, to say:

“Statoil’s decision to stop the massive Mariner development and probably Bressay too represents a huge blow to future investment in the North Sea.”

That is significant. For those who are unaware, The Press and Journal in Aberdeen covers oil and gas in a way that no other newspaper in the UK can or does. When its energy correspondents and editors view what is going on, they do so with huge experience of the sector and of the implications that tax changes might bring.

To help us understand the impact of the Chancellor’s decision on his own strategy, a senior UK oil executive has warned that a slowdown in North sea activity will increase the country’s reliance on imported oil and gas, with the consequence of an even higher balance of payments deficit and a corresponding suppression of GDP growth. On tax receipts, Alan Booth, the chief executive of EnCore oil said:

“Undeveloped and undiscovered oil and gas pays no taxes”.

Of course, he is absolutely right. He was talking about future development and revenues. However, Valiant Petroleum acted immediately and said that its near £100 million project was no longer viable because of the surprise Budget move. Even the oil giant Chevron, the second largest US oil company, has warned that there will be unintended consequences from this move. Oil and Gas UK is clear that it has

“shaken investor confidence to the core.”

All we have from the Chancellor and the Chief Secretary is complacency. The Press and Journal reported that when the concerns had been put to the Chancellor, a Treasury spokeswoman said:

“Mr Osborne did not expect investment to be damaged.”

I am not sure who he was listening to, but that quotation proves that he is complacent, and I think that he is wrong.

Jim Hannon, a founding partner of the drilling analysts Hannon Westwood, warned that 30,000 people could lose their jobs if exploration activity drops by only 15%. The hon. Member for Aberdeen North quoted Professor Alex Kemp and Linda Stephen at length. I was delighted to hear all the various scenarios described in detail, because it is important that nothing is ignored, and that was particularly helpful. Professor Kemp and Linda Stephen have warned that 2 billion barrels of oil and gas equivalent could be left in the North sea because of this decision. Derek Leith, the oil and gas partner at Ernst and Young, has warned of projects being delayed and cancelled:

“I think Statoil is only the tip of the iceberg…There are a lot of companies that will not pursue projects but will not go public about it.”

He repeated the point that the Chancellor and the Chief Secretary clearly fail to grasp:

“barrels left in the ground do not provide energy, do not pay tax and do not support jobs”.

Oil and Gas UK tells me that the tax increase announced in the Budget saw the value of investments in the UK continental shelf fall by 24% overnight. That is bound to have an impact on activity. This is a global industry and the ability of the UK to compete for capital to explore and develop new fields and, importantly, to extend existing fields will be impacted significantly. The level of the impact is explained in the research by Professor Kemp, who revealed, as we heard in some detail, that the tax increase could reduce UK oil and gas investment by up to £30 billion and production by up to a quarter over the next three decades.

I have spoken mainly about oil, but one of the biggest casualties is gas, which accounts for 46% of UK continental shelf production, and yet trades at prices substantially below the $75 trigger price proposed by the Government. Gas production is not seeing the same price increases, and the tax change will result only in less investment and lower recovery of this important asset. It is worth noting that although I am concentrating on the increase in the supplementary charge, the Government have also decided to reduce decommissioning relief, which might accelerate the decommissioning of essential infrastructure and make the extension of fields by the new entrants that we have heard about more difficult. The combination of those proposals leads to an 81% marginal tax rate for mature fields—not just the 62% proposed under the supplementary charge increase.

I am indebted to Centrica for its detailed assessment of the problem in relation to gas. It makes the point that gas projects are highly marginal and that gas economics are very different from oil economics. Brent crude trades at about $120 per barrel, whereas UK wholesale gas trades at about $57 per barrel equivalent. Centrica is convinced that the proposed increase will result in the decline of the North sea, as gas projects become uneconomic, which is likely to have a direct impact on jobs in the sector, the regional economy and the wider economy.

Centrica has a broader concern that the increase will add to existing upward pressures on customers’ energy bills. It makes the technical point that oil markets are deep and global in their nature, whereas gas markets are regionally priced and shallow. Increases in UK tax costs that result in reduced UK investment will therefore mean that lower-priced North sea gas production will be replaced by higher-priced gas imports. That leads to the conclusion that there may well be further increases in prices for gas and power consumers in the UK, with increasing wholesale energy costs adding to existing upward pressures. That was alluded to earlier by the Chief Secretary when he said that gas prices are rising in line with oil prices. We do not want to see the gas price hit the oil price. That would be the equivalent of an increase of a third in the cost of gas, which would be catastrophic for families and heavy energy-using businesses.

Centrica argues that the tax increase should apply to gas, but not at the equivalent trigger price to that for oil. The $75 a barrel trigger for oil proposed by the Chancellor is the equivalent of 80p a therm, which is much higher than the 60p a therm or so at which gas is currently trading. Centrica’s overall warnings are actually starker than those from the oil sector. It believes that the tax changes will result in an annual cost to the UK economy of up to £8 billion a year by 2013, undermining the Government’s intention to reduce the deficit. It believes that that will influence investor sentiment in other sectors as well, because of the global nature of energy companies. There will be an impact on the low-carbon agenda and the security of supply and jobs, and up to £100 billion-worth of energy investments and associated jobs will be put at risk. Those are frightening figures.

Of course, the warnings did not just appear for a day or two after the Budget when the industry was in shock; they have continued almost daily for a month. PricewaterhouseCoopers has said today that the increase in North sea oil taxation could cut offshore investment. It argues that whereas mergers and acquisitions in the oil and gas sector worldwide in the first quarter were not down on last year, the emphasis in deals was on frontier territories such as India rather than mature provinces such as the North sea. The chief executive and chairman of ConocoPhillips, Jim Mulva, has joined the chorus of condemnation and said that the “unexpected nature and scale” of the increase has damaged investor confidence and will hamper investment. He has said:

“Although the chancellor has shown an appetite to consider granting companies tax relief for new field developments, these can be rendered ineffective by tax increases…The industry has lost confidence in the UK’s fiscal landscape. With three major tax increases in less than 10 years, it is now a difficult place for future investments.”

Instead of being complacent, the Government ought to heed the warnings. I cannot believe that the Chancellor and the Chief Secretary are right and Oil and Gas UK, Statoil, EnCore, Valiant, Chevron, Professor Kemp, Ernst and Young, Hannon Westwood, Centrica, PricewaterhouseCoopers and ConocoPhillips are all wrong. It strikes me as inconceivable that a month of warnings should be ignored simply to fill a hole in the Government’s books.

I hope that the Government will think again. They have an opportunity on the first day of Committee, as early as next week, to bring forward sensible amendments that recognise the difference between gas and oil and the dangers to investment and jobs. They can do so before the investment profile of this country becomes so bad that we begin to lose not only investment but many new and existing jobs, as has been warned about for more than a month since the announcement in the Budget.

19:53

[Peter Aldous (Waveney) (Con)]

I largely support the Bill and the Chancellor’s Budget proposals. He has inherited a poor hand, which he has played well. He is sticking to his plans to reduce the budget deficit, a strategy that is supported by the International Monetary Fund and the OECD and that will ensure the country’s long-term prosperity.

The Bill contains proposals that will help achieve two important objectives. First, the Chancellor is creating an environment that will encourage businesses to grow and to create new jobs. Policies such as reducing corporation tax, getting rid of red tape, reforming the planning system, investing in science and innovation and promoting apprenticeships will help create a business-friendly environment in which businesses can flourish and create jobs. The proposal to create 21 new enterprise zones is to be applauded, and I am an enthusiastic participant in the competition that he has launched, helping to promote an energy enterprise zone in Lowestoft, in my constituency, and the adjoining Great Yarmouth.

Secondly, the Chancellor has made proposals that will help to rebalance the economy in the move towards a low-carbon future. The establishment of a carbon floor price, the renewable heat incentive and the green investment bank will help achieve that objective. My personal preference would have been for the green investment bank to have had borrowing powers straight away, but I recognise the difficult financial constraints in which he has had to work and commend him for providing an additional £2 billion of investment to be added to the £1 billion already allocated, and for bringing forward the bank’s start date to 2012.

The Chancellor is to be congratulated on recognising the difficulties that people and businesses are experiencing due to high fuel prices, and on coming forward with proposals to ease the burden by cutting fuel duty by 1p, by deferring future fuel duty increases and by abolishing the fuel duty escalator and replacing it with a fair fuel stabiliser. However, those proposals are to be funded by an increase in the taxation of the oil and gas industry, which I believe requires further scrutiny and refining.

I make my observations having listened to people and businesses in my constituency who work in the oil and gas industry in the southern North sea. There is concern that, as matters stand, the proposals will discourage further investment, which could jeopardise jobs and threaten the move towards improving the nation’s energy security.

I have two specific concerns, which are along the lines of those set out in detail by the hon. Members for Aberdeen North (Mr Doran) and for Dundee East (Stewart Hosie). First, a flat-rate tax would unfairly penalise smaller oil companies looking to work marginal fields. Such an approach could well result in such projects becoming financially unviable and companies diverting their activities to other countries where the taxation regime is more favourable. Not only would that lead to the loss of local jobs and income to the Exchequer, but it would mean that, as a country, we would become increasingly reliant on energy imports, often from areas of high political risk. It is important that the Government do all they can to ensure that we utilise our own oil resources fully.

Secondly, I am worried that the proposals will have a significant adverse effect on the gas sector, which is particularly important in the southern North sea. As we have heard, the financial parameters of gas projects are very different from those of oil schemes. Gas prices are considerably lower than oil prices. Whereas Brent crude is trading at approximately $120 a barrel, UK wholesale gas trades at approximately $57 per barrel equivalent. Although development costs are lower, they are not lower by a proportionate amount, so a tax increase would push lower gas returns down ever further. That would result in gas projects becoming uneconomic, with the result that schemes would not proceed and lower-priced North sea gas production would be replaced by higher-priced gas imports. That would feed through to higher gas and power prices for domestic and business consumers.

The East Anglian coast has the opportunity to play a vital role in providing for the country’s future energy needs. I am worried that the proposals in question jeopardise that role, and I wish to make three further observations about them. First, they could discourage investment by energy companies that work on a global stage and are footloose in deciding where to invest. Britain has a proud record of providing a stable political and fiscal regime that is conducive to attracting such investment, and it is vital that we do not lose that reputation.

Secondly, offshore renewables provide an exciting future and can help towns such as Lowestoft and Great Yarmouth reverse years of economic decline and create new long-term jobs. Many of the skills employed in the oil and gas sector are transferable to wind and wave technology. If we discourage investment in oil and gas in the North sea, there is a danger that the supply chain and skills base could be irretrievably damaged. In due course, that could deter investment in renewable energy.

[Joan Walley]

The hon. Gentleman, like me, serves on the Environmental Audit Committee, and he speaks with great knowledge about the renewable industries. Does he agree that the problem that he describes would affect not just constituencies such as his but manufacturing areas such as mine? We are seeking to manufacture the ingredients, if I can put it like that, of the renewable energy industries. If the Government do not adjust their plans towards his vision, we will not have the manufacturing capacity that we need or the ability to get people back to work.

[Peter Aldous]

I agree wholeheartedly with the hon. Lady. I would love that manufacturing to take place in my constituency, but if it is not to be there, I hope it is in hers.

Finally, there will be a time lag before investment in offshore renewables results in electricity coming on stream. Until that happens, the gap needs to be plugged so that the nation’s lights do not go out. That could be achieved by making the best and full use of our national oil and gas assets in the North sea, thereby providing a triple dividend of more jobs, additional income for the Exchequer and improved energy security.

I request that the Government look closely in Committee at their proposed tax increase and that they address two issues. First, smaller oil companies should not be discouraged from making investments in marginal fields. Secondly, there should be a different taxation regime for gas to reflect the differences between the oil and gas sectors and the lower profitability of gas.

The Bill has a great deal to commend it, but it contains a fundamental flaw that I urge the Government to address.

20:00

[Malcolm Wicks (Croydon North) (Lab)]

This is a very useful debate. I particularly enjoyed the three well-informed and well-evidenced speeches on energy policy and the implications of the proposed tax changes for the North sea. A bit of my past tempts me to follow the theme of energy, but instead, I shall talk about the impact of the Budget decisions and statements, and of the Bill, on aspects of social security.

Welfare states across the world, not least in Europe, are in many respects on the defensive and under political attack. They are in difficulties because of demography—the ageing of our populations—and the impact of the economic situation on public finances, but also because of a loss of confidence in parts of public opinion in the foundation stones underlying our welfare states.

I shall ask two questions of the Budget. The first is on the future of our national insurance system and the crucial contributory principle, and secondly, I want to address whether we are wholly right to pursue the policy, which we are now doing quite rapidly, of raising the age at which our people can claim old age pensions in the light of increasing life expectancy.

On the contributory principle, I would welcome Ministers’ comments on paragraph 1.77 of the Red Book, which states:

“The Government believes that integrating the operation of income tax and National Insurance Contributions…can remove distortions, reduce burdens on business and improve fairness.”

However, what are the likely impacts of that on the contributory principle? To be fair—I want to be fair, because I do not think that I am making a partisan point—the Government say that they

“will maintain the contributory principle”,

which I welcome, but how can we bring about that administrative change, which presumably affects people of different age groups and income levels differently, while maintaining the contributory principle? That is a genuine question to which I am seeking an answer.

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

The right hon. Gentleman touches on the important point of the contributory principle, but does he agree that the longer-term project of amalgamating national insurance and Inland Revenue contributions would at least do away with the nonsense of reducing the amount that people pay in income tax while increasing the amount that they pay in national insurance contributions, and of selling that as a policy of reducing the amount that they pay?

[Malcolm Wicks]

Such policies have regressive implications and I understand why the hon. Gentleman asks that question—a not dissimilar one could be asked of VAT contributions. Deeply regressive changes to how we gather money in from the wider community are taking place.

Although the contributory principle has for many years, and arguably for several decades, been withering away—it certainly looks tired and rusty—we need it in the 21st century. One reason why is that if we are to maintain our broader welfare state and social security system as an instrument for redistribution and for tackling the emerging needs of this century, not least those associated with long-term care and the ageing of our population, we need an ethical foundation to underlie social security, rather than bits-and-pieces mechanisms that can be hard to communicate to a wider public.

One basic concept in that respect is that of citizenship. What is it to be a citizen in the 21st century? What are our rights as citizens? Equally importantly, what are our duties and responsibilities? For me, in moving from that simple piece of social philosophy into policy mechanisms that work, we would do away with or neglect the social insurance contributory principle at our peril. That principle says that when people are able to work and to contribute to that community chest, they should do so. That is a duty. However, as of right as citizens, people should be able, at certain times in their life cycles or at times of social need, to draw out not means-tested benefits, but benefits that they have earned through their contributions.

Of course, that was the principle underlying the Beveridge report—that great Liberal—and the one that the 1945 Attlee Government sought to introduce after the war. I am arguing that we should today try to bring about a renaissance of belief in that principle, and to make it an underlying concept of our social security system.

The principle is well understood historically. Long before the advent of the modern welfare state in the 20th century, there were friendly societies, building societies and co-ops, and trade unions emerged. It was well understood that members had rights, but also that they had duties and responsibilities. People paid contributions to trade unions and building societies—interestingly, that was in the early days, when building societies actually built houses—and to friendly societies. As of right, they could then draw benefits when eligible.

It is no coincidence that when we wander through Members Lobby, we see great statues of pioneers of the national insurance system. We could even argue which party has done most for social insurance, as it used to be called, or national insurance. Churchill can lay claim to have done much of the work in the pre-war years, and Lloyd George had more than a hand in it, as did Clement Attlee and his 1945 Government. Our entitlements to claim social security, and our rights and duties, are not simply technical matters that should be detailed somewhat obscurely in social security manuals, but a social philosophy foundation stone that folk in this country can understand as fair.

Of course, the national insurance system as devised in the modern era by the Beveridge report and the Attlee Government was not perfect. Rightly, it was subjected to critique by women’s organisations and feminists, who said that it had more to say about a typical man’s life cycle than a woman’s. Past Governments have done their best to rectify the inadequacies of the system when a mother leaves her career, which happened for quite a long period in the past, to care for her children, and to deal with what happens to the insurance contributions of family carers, who are usually but not always women, who have had to leave the labour market. Labour Governments and others have done their best to modernise the national insurance system, but not with total success. I am therefore saying, not that the principle of national insurance has worked perfectly historically, but that it is a basis on which we should build.

One of the biggest difficulties with national insurance over recent years has been that increasingly our friends in the Treasury—both Ministers and officials—have regarded national insurance as just another form of taxation. To be blunt I would point my finger at Labour Governments as well as Conservative Governments. The Treasury has lost sight of the Beveridge report and the philosophy of citizenship. When considering how to raise revenue, it tends to ask, “What share should come from income tax, corporation tax or VAT, and what share should come from the national insurance system?” That is illustrated by the fact that when, a while ago, the two major parties were having that ding-dong—that argument—about whether extra revenue should be raised by VAT or national insurance, that is how it was viewed. There was very little in that debate about what national insurance should be about and how it should relate to a modern social security system. One reason why the contributory principle has grown rather tired-looking is a failure of communication and presentation. Governments have not gone out there to argue, as I hope to do—albeit inadequately—that social insurance and the contributory principle remain valid foundation stones for this aspect of our social policy.

The other aspect of the contributory principle I want to raise concerns the plans set out by the Department for Work and Pensions and, in particular, the Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb), to move towards a far simpler state pension system in which everyone would be guaranteed a certain state pension. On paper, that looks like an interesting concept. I understand that, in theory, everyone is in favour of greater simplicity, but let us consider the matter in relation to the social insurance principle. I am alarmed by bits in the DWP document, “A State Pension Age for the 21st Century”, which was mentioned in the Budget. Although it states that in the future people should get the new simple pension after 30 years of qualifying, which addresses the issue about women—so far so good—it seems to imply, unless I have seriously misunderstood it, that no one would get more than a pension to which they had contributed for 30 years.

The Government are at pains to tell us that more and more people will have long life expectancies and will work longer in the labour market. What happens, therefore, to those who work 40 or 50 years? I might have misunderstood, but I was alarmed by paragraph 96 of the document, which reads under the heading, “Impact on individuals”:

“Groups who would expect to build up more significant amounts of State Second Pension, such as those with longer working lives and higher earners, would not be able to do so under this option.”

Well, why not? Is there not a danger of being so besotted with the idea of simplicity that we undermine the idea that if someone contributes more through their working life because they are working harder, they should be able to get more out of it at the end through a decent state pension scheme? I have serious concerns about that. Although there are many doubting Thomases in respect of social insurance, we must bear in mind the principles underlying it, such as citizenship and its common-sense nature: people can understand that they should make a contribution when they can and draw out of a community pot when they need to. If we sacrifice those things, we sacrifice a lot in our social security system.

I want to touch briefly on a matter that relates to a paper I published on my website last week. I question whether we are in the right place when it comes to raising the state pension age in the light of increasing life expectancy. May I say first and foremost that I am signed up—not least as a former pensions Ministers—to the reality of increasing life expectancy for most people. It cannot be right that we stick to state pension ages and occupational pension ages devised 40 or 50 years ago, given that more and more of us—hopefully—will live into our 80s and 90s.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

Hear, hear!

[Malcolm Wicks]

My hon. Friend wants to become one of the centenarians. Indeed, to warm us up for difficult decisions, the DWP is now telling us, courtesy of statistics from the Office for National Statistics, that 11 million people alive today can expect to live to 100. That is an extraordinary piece of demography. I accept the logic, therefore, that most of us should expect to leave the labour market, retire and draw our state and occupational pensions at a later age. However, the main reason for raising this matter in the House today is that this is insensitive to, and has no understanding of, social class variations. There is an assumption that these broad figures about life expectancy apply equally to all of us, regardless of geography, constituency, whether people live in the north or the south, or the kind of work undertaken.

When I looked at some of these issues in the light of social class, I am afraid that, not for the first time, socio-economic status reared its ugly and unequal head. Nineteen percent—almost one-fifth—of men from social class 7, which encompasses those with routine occupations, such as cleaners, packers, van drivers and unskilled labourers, many of whom have been in work since the age of 15 or 16, are dead before 65. They never live long enough to draw their state pension. That compares poorly with those from the professional and business classes. There is a difference for women as well, but it is not so stark. I question, therefore, whether a one-size-fits-all scheme of increasingly raising the state pension age—the Government now want to consult on raising it even further to 68—is a sensible way ahead in this area of social policy. Furthermore, a second pension penalty is, of course, paid by the poorest men and women in our communities. Although most people from those social classes reach pension age, they enjoy far shorter pension lives than those from the better-off social classes. So a second pension penalty is paid.

The arguments for raising the state pension age across the board are based on the assumption that the labour market is sufficiently dynamic and flexible to provide the jobs for those people. Again, however, this ignores social status and the realities of many people’s working lives. It can be no coincidence that many who compete in a kind of macho competition to say how late we should draw our state pension—66, 67, 68, why not 70?—tend to be people from big business, the political class or the media, who may be able to continue their working lives almost indefinitely, writing articles, having portfolios, doing consultancy or, if they are unlucky, in the House of Lords. These people might be able to continue their work, but what about the van driver, the bus driver, the woman who cleans offices, the steel workers, the people with creaking backs and aching limbs, who come their 60s need to retire in a very old-fashioned sense?

The DWP would need to work on the details, but surely we could say that people in those social classes who typically started their working careers not in their early 20s, which will have been the lot of many of us, or their mid-20s, which will be the lot of many of our children and grandchildren with postgraduate qualifications, but at 15 or 16, and who often have worked hard ever since, once they have worked for, say, 50 years—we could check that in national insurance, tax and employment records— deserve a rest, in an old-fashioned sense. They need to retire. Given that the demography shows that those people are, sadly, likely to die four years before the average age, it would surely be only fair and just if they could draw their state pensions four years earlier than most of us.

20:20

[Stephen Williams (Bristol West) (LD)]

After the sound and fury of the Budget debate, every year we follow it up with a Finance Bill with its technical clauses, amendments to previous Finance Acts and anti-avoidance measures, that does not grab people’s attention in the way that the Budget does. All this will be considered when we reach the Committee stage, which I am sure will drag on for many sittings, as those who have served on it before—some of us have done that on many more occasions than others—will know from past experience. However, the Bill proposes many far-reaching and fundamental changes to the taxation system, paving the way for further reform, as the right hon. Member for Croydon North (Malcolm Wicks) said, in what was quite a thoughtful speech. I want to dwell on three of the Bill’s provisions: those dealing with income tax and national insurance—which we just heard about—environmental taxes, and taxation of the banks.

Clause 3 raises the income tax threshold to £7,475 this month, April 2011. That raising of the income tax threshold was the cornerstone of the coalition agreement between the Liberal Democrats and the Conservatives, and implements the Liberal Democrats’ No. 1 manifesto commitment from the 2010 general election. The benefit of that commitment being implemented in government will be felt by wage and salary earners up and down the country in their payslips at the end of this month. Some 900,000 people will be raised out of the income tax bracket altogether, while those still in the basic rate bracket will see a tax cut of up to £200. The Budget also announced next year’s rise in the threshold—which will no doubt be implemented by next year’s Finance Bill—in April 2012, lifting a further 1.1 million people out of tax. This Finance Bill and this Budget help the poor and reward work.

I look forward to the review of the operation of income tax and national insurance which was announced in the Budget, which the right hon. Gentleman also spoke about. National insurance was introduced in 1911. This year is the centenary, which would be a good point for that review to announce its ending, at least for employees. Although I agree with quite a lot of what the right hon. Gentleman said, there was a touch of Victorian values in some of what he said about the contributory principle, which is what the founders of national insurance—he mentioned Churchill and Lloyd George—wrestled with. They were very much products of the Victorian era, but the right hon. Gentleman’s own party forebears—Aneurin Bevan in particular—rejected the contributory principle when founding the national health service, insisting that it should be based on broad taxation, not individual contributions into an insurance fund.

The right hon. Gentleman made many thoughtful points that will have to be considered in the review of national insurance, but the contributory principle has failed. He mentioned women and the fact that people sometimes find that they have not accrued the pension rights that they might reasonably have expected. He talked about citizenship, and that is where a citizen’s pension will be relevant. I hope that this Government will introduce one. However, it would be right to recognise the contributory principle for unemployment benefit, which he did not mention. I would not want someone in short-term unemployment to have to undergo a means test to claim unemployment benefit. One benefit of the contributory principle at the moment is that people who are unemployed for up to six months do not have to undergo a means test to claim a benefit to which their national insurance records prove they are entitled.

We will therefore need to retain some contributory benefits in the existing national insurance scheme for employees to which the right hon. Gentleman referred. None the less, the scope of the changes in the Finance Bill and the Budget to our income tax and—if we get them—our national insurance regimes represent the biggest shift in our direct taxation system for many decades. The reforms in the 1980s, particularly to income tax, tended to favour the better-off; the reforms of this coalition Government will help the low-paid.

The second area in the Bill to which I want to refer contains the provisions dealing with environmental taxes. Clause 25 raises landfill tax from £56 to £64 next year, giving local authorities a further incentive to achieve a step change in recycling. My local authority—Bristol city council, which is controlled by the Liberal Democrats—has shown a steady increase in the rate of recycling. We now have the best record of any city authority in the country, recycling close to 50% of our recyclable domestic waste, and we are aiming for 90% over the next few years. In the Easter recess, the Chief Secretary to the Treasury and I visited the plant being built at Avonmouth, just outside my constituency, by New Earth Solutions, which will screen the residual waste that people have not recycled from their doorsteps in order to extract the remaining recyclable materials. Landfill tax is a well-established tax that is achieving its aim, but we know that we have some way to go in many parts of the country.

A new tax in the Bill that several people have mentioned is the setting of a carbon floor price, at £16 a tonne this year, which it is proposed should rise to £30 a tonne by the end of the decade. There will obviously need to be much debate and thought about how the carbon floor price will operate, but it is an essential reform if we are to incentivise a switch to a low-carbon economy and make renewable sources of electricity generation competitive with carbon-intensive forms of electricity generation. There is an important debate to be had about how that affects nuclear power, and I am meeting Greenpeace later this week to discuss its concerns. I am also working with party colleagues to develop Liberal Democrat ideas on how the carbon floor price and carbon taxes can operate, in order to inform the debate as it unfolds.

A third aspect of the Bill that I want to mention briefly is the introduction of something that has been talked about for some time over the past year—the bank levy; it is almost hard to believe that a statutory basis for it did not exist until now. The detailed provisions governing how it will operate are in schedule 19, which I am still trying to plough my way through and understand. [Interruption.] Judging from their facial expressions, I am sure that Opposition Front Benchers are trying to get their heads round it as well. I am sure that they will be well advised by colleagues outside the Chamber.

The operation of the bank levy is incredibly important, but its introduction is incredibly important as well. The shadow Chief Secretary to the Treasury referred earlier—as does the Opposition amendment to the motion—to the bonus tax that the previous Government introduced. This bank levy will raise more money year on year than that bonus tax. It is also renewable every year, unlike the windfall tax, which could be levied only once, in the unique circumstances of 2009. Such a levy on the balance sheets of banks is the first component of something that many people, including myself, have campaigned for—a Robin Hood tax. I hope that the Government will now move towards adopting the second component of such a tax plan—a financial activities tax—in order further to bring about reform in this area. That would require European Union co-operation, and I hope that the Government are seeking to achieve that co-operation among our fellow member states.

The Bill contains 91 operational clauses and 26 schedules. It is a particularly fat Bill, although not actually a record-breaker. As is the nature of Finance Bills, probably not much of it will endure in the memory. Several elements of it will stand the test of time, however. The reform of income tax, the reform of national insurance promised in the Budget, the lifting of the low-paid out of taxation and the further reforms to environmental taxes will be an enduring legacy of the coalition Government.

20:30

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

Despite what the hon. Member for Bristol West (Stephen Williams) has just claimed about the Bill’s great achievements, I am afraid that the Liberal Democrats will be remembered for only one thing—the fact that they all, including their leader, pledged not to raise tuition fees. That is never going to go away, and everything else that they say will be seen in the light of that betrayal of the future of our young people in this country.

I was pleased to hear the thoughtful contribution from my right hon. Friend the Member for Croydon North (Malcolm Wicks) on the proposals on pensions, and particularly on pension ages. If we look back at the history of the actuarial analysis that was used to set the pension age at 65, we see that it was set at that age because most working-class people—there were many more people in heavy industry then—died before they reached the age of 65 years and six months. The calculation was made to minimise the amount that would have to be paid to the working class for their pension contributions. The change that is now being introduced adheres to that same principle. It does not involve earned rights through contributions. Rather, as my right hon. Friend said, it is seen as an imposition if someone without an adequate income lives too long, and has to rely on the state for support.

I am going to disappoint my right hon. Friend now, because I am going to return to the subject of the oil and gas industry. The contribution by my hon. Friend the Member for Aberdeen North (Mr Doran) was important but, like that of the hon. Member for Dundee East (Stewart Hosie), it related to the upstream industry—the oil and gas exploration and production industry. I shall quote from the June report of the House of Commons Select Committee on Energy and Climate Change, which the Government do not seem to have read. It says:

“The oil and gas industry operating on the UK continental shelf currently faces a quadruple whammy of high costs, low prices, lack of affordable credit and a global recession. Unless the fiscal and regulatory regime is well designed and highly attractive then the likelihood is that the UK may not recover anything like as much of its reserve as would be desirable.”

The Committee did not realise that there was another spectre to add to the quadruple whammy—a predatory Chancellor who did not even consult the industry when he brought in a £2 billion rise in the tax burden. This is not so much about the level of the rise as the method of its introduction. Changing a tax regime overnight without consultation creates uncertainty, which increases risk. According to the economists with whom I trained when I was studying, when the net present value calculations are made when looking at board bids for investment, such activity can reduce the investment’s attraction. We heard that again and again from the Members who spoke about the upstream industry.

I have been pursuing the so-called responsible Department with questions about the downstream industry—the UK oil refining industry. I tabled an early-day motion on 29 March drawing attention to the fact that two oil refineries were up for sale. They have since been sold to overseas investors. I said at the time that 150,000 jobs were involved. Those jobs are now genuinely under threat.

We have looked at the opportunities as well as the warnings, however. One opportunity involves the fact that there are massive deficits in low-sulphur, high-quality diesel and in aeronautic fuel in the EU at the moment. With the right incentives, it would be attractive for someone to invest in those. The Budget proposals that the Government are putting forward in the Bill should therefore provide those incentives.

It is interesting to note that an opportunity was spotted by Mr Ifty Nasir, who owns Essar, an Indian oil company, which bought a refinery at Stanlow. He said on 11 April 2011 that he intends to expand Stanlow’s shipping terminal in the Mersey to provide a UK entry point for diesel and petrol produced at the Vadinar refinery in India—one of the biggest refineries in Asia, which is in the midst of a £1.7 billion expansion that will allow it produce euro high-quality, low-sulphur diesel. That is the very opportunity that should exist for our refineries, for our companies and for British workers.

I wrote about this to the Minister of State, Department of Energy and Climate Change, the hon. Member for Wealden (Charles Hendry). I asked what future support for our refineries in the UK would be forthcoming. In his reply of 5 April, he said:

“We work closely with the downstream oil industry and its representatives to understand the impact of policy on the sector and to ensure this understanding is shared across a range of Government Departments.”—[Official Report, 5 April 2011; Vol. 536, c. 886W.]

We had an hour and a half’s debate this morning in Westminster Hall about oil refining. I come here tonight to ask Ministers about the Treasury’s understanding of this issue and what its response has been, as I can find no indication that the Chancellor is joined up to the real world in any way in respect of his Budget proposals that will affect the UK refining industry.

Let us consider the background to oil refining. When the climate change levy and the EU emissions trading scheme were brought in, they were to have an impact on manufacturing, but were also to be tax-neutral. The scheme was about redistributing energy-reduction incentives in other parts of the economy, and it is about to become the European trading system mark 3. It puts £15 million a year on to the cost of refining oil in Grangemouth, a refinery in my constituency, alone. That is a high price to pay, but the industry accepted that environmental standards meant accepting it.

What we have effectively is a 15% disadvantage in EU refining, of which we are part, in comparison with the rest of the world, including India. If we bring in the new carbon tax, which the hon. Member for Bristol West seemed to be lauding, it will add another 10% disadvantage on top of that 15% one—and for UK refining alone. We will be disadvantaged in Europe by 10%, and in the rest of the world by 25%, in terms of the environmental taxes we pay. The cumulative cost to UK manufacturing business in general—we should remember that the Government said that they were going to “rebalance” the economy with their taxes and incentives—will be £9.3 billion. That price will not be faced by other parts of Europe or other parts of the world.

I want to know from Treasury Ministers what thought went into this policy. What extrapolation did they make? What cost-analysis or impact-analysis did they do when they thought up this scheme? The scheme does not attract me, when 1,350 jobs are at stake in the refinery in my constituency. Beyond that, another 4,000 or 5,000 jobs in Scotland are dependent on that downstream work. About 150,000 people working in the refinery industry can see someone coming over from India to import a product that is refined in India where the pollution standards are much lower than here, yet the Indian owner does not have to pay either the emissions trading scheme costs or the carbon floor price. I want an explanation of why that tax is in this Budget.

Let me illustrate what happened on the day of the Budget because of the announcement that a carbon price will be introduced in 2013. A forward pricing exercise run by Heren shows what happened to electricity prices on that day. The electricity price for 2013 went up by £2.20 per megawatt-hour because of the fear and risk that had to be factored in. We spoke of the same thing earlier in connection with the impact of the Government’s decision to plunder the profits of the offshore industry. The price has now risen by another £3 to £56.50. That 5% increase will affect all industries that are heavy electricity users. The oil refining industry cannot pass it on, because its margins are so small. The Government said that they would rebalance the position in favour of the manufacturing base of our economy, but instead they have laid that burden on it.

The second tax that I wish to discuss is the carbon reduction commitment, which was designed by the Labour Government as a tax on office spaces and other entities that could not be reached by the emissions trading scheme. It has since been simplified, and we understand that it will also apply to the manufacturing industry and to United Kingdom refining. The UK Petroleum Industry Association has described it as no more than another general tax. Will the Treasury exempt manufacturing industries and the UK refining industry from that tax? If not, it will impose another burden on the UK’s manufacturing capability.

[Sammy Wilson]

Not only has the tax been extended to a wider range of bodies, but the Treasury has removed an incentive for firms to reduce energy consumption. Some of the money that they had paid into the scheme used to be returned to them, but that will no longer be the case.

[Michael Connarty]

The hon. Gentleman has hit the nail on the head. That incentive has gone. Ports such as Grangemouth, in my constituency, cannot pass the tax on to those who rent or are sublet property. It will not make people who rent property more energy-conscious, although it was originally designed by the Labour Government—who employed an excellent methodology involving a great deal of consultation with the industry—as an incentive for the reduction of energy use.

The Department for Business, Innovation and Skills is probably partly responsible for matters involving the oil refining industry, although it seems to be burying its head in the sand and kicking that responsibility over to the Department of Energy and Climate Change. The two Departments are supposedly engaged in a study of the cumulative impact of climate change and energy policies. However, the Treasury must be involved as well, and it must take responsibility for the damage that it will do if it does not moderate its carbon taxes. Specifically, anyone who pays the costs of the European emissions trading scheme should be exempt from them. It has been calculated that the carbon price in the UK is likely to reach €54 per tonne, while the price on the European mainland will be only €36 per tonne. We are therefore at a disadvantage in relation to Europe, let alone the world.

There is a further tax that the Treasury consistently hang on to. Those who import a fuel oil must pay tax on what they land at the depot or terminal. If, for example, Grangemouth refinery supplies the terminal in the north of Scotland by tanker, it will pay tax on the amount of product that it puts into the tanker. However, an evaporation factor places an additional burden on every tanker load, so no one with any sense will convey fuel from a UK refinery to any UK destination. INEOS in Grangemouth prefers to import it from Lavera in France, because it pays less tax on the same tanker load, because of evaporation. Regardless of which party is in Government the Treasury has retained that tax, but it is time to reconsider. If we want products to be made in this country and taxed in this country, we must have a tax system that gives incentives to industry rather than punishing it.

20:44

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

There is more rejoicing in heaven over one sinner who repenteth than over the 99 who are not in need of repentance, and it has been wonderful to listen to the hon. Member for Linlithgow and East Falkirk (Michael Connarty), because he made a wonderfully Conservative speech, saying that taxation and over-regulation are fundamentally bad things—bad for the economy, bad for business, and bad for Britain. That is absolutely true, but unfortunately it misses the point that when this Government came into office, the coffers were bare. There was no money left, and therefore tough action has needed to be taken on both spending and taxation. I want to see taxes fall in every possible area—I want taxes on income, capital gains, companies and oil companies all to be reduced—but I only want Her Majesty’s Government to do that when it can be afforded.

We need to look back at the seriousness of the situation we inherited, and at what this Government are doing. Gross debt issuance from 2008-09 to 2010-11 is £540.5 billion. That is money that has to come from savers and from foreigners, and a good chunk of it actually came from the Bank of England: some £205.9 billion—getting on for half the total—was just printed by the Bank of England. That is not a way in which any responsible Government could ever have carried on; to have done so would have been desperately inflationary.

I want to come back to the point made so eloquently by the shadow Chief Secretary about Ricardian equivalence, because that is relevant. No one is saying that every £1 in debt is necessarily going to relate to £1 in future taxation, but the broad principle is right. The electorate understand this; they understand it from their own financial affairs and they see it from the Government’s. They understand that if a huge debt is built up, it has to be repaid, and it will be repaid by them out of their earnings or their assets. We already see not far short of £50 billion a year being spent on interest payments. The British electorate know that that £50 billion is coming out of their taxes, as will the repayments. Indeed, as we get on to the repayments and refinancing, we will have a further gilt issuance of £578 billion between now and 2015. Enormous amounts of money are still being raised on the debt markets even when the Government are implementing a programme of tough cuts and some tax rises, which people do not like, but that is because of the severity of the situation the Government inherited, and if they had not implemented that programme, the confidence of the markets would have evaporated.

That confidence is what allows the Government to finance themselves. This is where the gilt market is so important. The five-year gilt is trading 5% away from its historical real average; that is 500 basis points, which is a gigantic amount in gilt market terms. The five-year gilt is usually at a 2% premium to the retail price index, but it is currently at a 3% discount to RPI. That shows that the financial markets believe that the Government have got it right.

Most economic decision making takes some years to come into effect, and I must confess that in this regard we have heard a lot of nonsense about quarterly growth figures relating to decisions on cuts taken before any of their consequences had actually come through. It takes much longer than that for economic results to happen, and I would therefore say that the figures for this quarter, the last quarter and the one before that are to the credit of the Opposition, and not as yet to Her Majesty’s Government; it will be to the credit of Her Majesty’s Government when we have got 2.5%-plus growth. The gilt market and the currency market are, however, immediate responders to Government policy, and the response that they have given is a vote of confidence. They know that the Government have broadly got it right. The currency has strengthened, and is continuing to strengthen, against the dollar—an indication, perhaps, that the United States has not got its fiscal situation as well sorted out as we have here.

Let us consider some of the specific things that the Government are doing in this Bill. I particularly welcome, as does my hon. Friend the Member for Bristol West (Stephen Williams), the increase in the tax threshold. A wonderful pamphlet produced by Lord Saatchi and Peter Warburton a few years ago asked why poor people pay tax and why we have this merry-go-round whereby we take money out of someone’s pocket and put it back into their other pocket having taken some element of it to finance our bureaucracy along the way. The more the Government can raise the tax threshold, the less of that money will be wasted as the machine churns through and the more people will be taken out of tax.

I will add one point that may not be deemed helpful. My hon. Friend mentioned that over a couple of years 2 million people are to be taken out of tax, but Her Majesty’s Government might like to know that the Chinese Government have just succeeded, by increasing the income tax threshold from 2,000 renminbi a month to 3,000 renminbi a month, in taking 76 million people out of tax. That is something for the Treasury to aim for, because that number exceeds the entire population of the United Kingdom.

The increase in the tax threshold is extremely welcome, as is the reduction in corporation tax. Being competitive on corporation tax is something that the Irish were so clever about, and may we wish them well in their fight against the European Union’s attempts to make them increase it. By reducing corporation tax we attract businesses that could otherwise go anywhere in the world. We know that businesses can move and that WPP is thinking of moving back to the United Kingdom because of the right trend in taxation. In that regard, I encourage Her Majesty’s Government to avoid any of this nonsense about a Robin Hood tax. Robin Hood was not as good as he was made out to be—particularly for the sheriff of Nottingham—but even if such a tax were as heroic as the late Robin Hood, it would still be a very bad tax for this country.

[Steve Baker (Wycombe) (Con)]

I was just wondering whether my hon. Friend would agree that Robin Hood actually took from the state to give back to the people.

[Jacob Rees-Mogg]

I am not entirely sure that that is what he did. I think he also stole from the Church, which is why I have my doubts about him; I am not really in favour of people pinching things from holy mother Church.

The other great thing about this Budget—this is why it should be welcome—is that it recognises the limitations of governmental power. Let us consider what has happened in Japan since 1990. The Japanese Government have tried loose monetary policy and loose fiscal policy, sometimes at the same time and sometimes at different times, and they have managed to take the fiscal debt to 200% of GDP without managing to achieve any growth in this period. Governments cannot command economies in the way that some socialists think that they ought to be able to do. Governments can only set the right terms for business to be done, and that is where the deregulation programme is so important.

If the Government can follow through on that programme and sweep away the burdens that stop business doing business, that is how we will be able to get economic growth. It will not be Government expenditure that leads to the economy recovering rapidly because—let us return to Ricardian equivalence—people will recognise that there is great waste in Government expenditure. It will not necessarily even be very low interest rates that will do that, although I am in favour of a loose monetary policy, because eventually we reach the point where there are no borrowers there to borrow—we may be in that position. The Red Book points out that total private sector debt is 450% of GDP. If that does not make your blood run cold, Mr Deputy Speaker, I do not know what will, because that is an extraordinary level of private sector debt and it is very hard to pretend that an economy can grow by further private sector debt being taken on. So we are back with the real opportunity being a deregulatory one for the Government to push that agenda as hard as they possibly can so that businesses can do business, investors can invest and people can work. That will then lead to the tax coming through at lower tax rates and the expenditure being made that the Government wish to make, and we will be back to the glorious time that we had when Nigel Lawson was Chancellor of the Exchequer.

20:55

[Sammy Wilson (East Antrim) (DUP)]

As a Member who represents part of the United Kingdom that has seen the highest increase in unemployment and that will see £4 billion taken out of public spending over the next four years as well as a 40% reduction in capital spending, may I say that I trust that the Chief Secretary was right to say what he did about the purpose of this Finance Bill, the objectives the Government have set for it and their hopes for it? That might seem strange from someone on the Opposition Benches, but if we consider the impact of the recession and the absence of growth on my constituents and on the public across the United Kingdom, we can only hope to get back on to a growth trajectory as quickly as possible. I am not so sure, however, given the proposals in the Finance Bill and the Budget, that that will be the case.

As the shadow Chief Secretary said, there is a lack of ideas on the demand side. Indeed, over the next five years, the Bill will put only £20 million additional money into the pockets of businesses and consumers, which is hardly a big increase that will allow the public and businesses to spend money. We know that Government spending is curtailed. As for investment, I believe that it will not have the impact that the Government hope that it will. The Government are relying on one other aspect of aggregate demand—exports. As I shall point out, some policies in the Bill will make it much more difficult for firms to be competitive. On the supply side, firms will invest only if there is a degree of confidence, if there is consumer demand and if there is the infrastructure that can give them that confidence. With cuts in the capital budget, in particular, I am not sure that that will be the case.

I do not want to get into a macro-economic analysis of the Finance Bill, as I want to follow on from the theme taken up by the hon. Member for Linlithgow and East Falkirk (Michael Connarty) and to consider the impact of some of the environmental taxes. Specifically, I want to consider the distorting impact that they will have on growth, industry and consumers in places such as Northern Ireland.

Some Members will know that I am not a great fan of green taxes—indeed, for many reasons, I do not believe that the adjustments that such taxes will make and their impact on CO₂ output in the United Kingdom will save the world or have a great impact on the climate in 100 years’ time. They are not designed to be behaviour changing and, as the hon. Member for Linlithgow and East Falkirk has pointed out, some that have been claimed to be behaviour changing have resulted in nothing but stealth taxes. If we consider the Government’s predictions for the revenue from such taxes, it is clear that the Budget is dependent on their not changing behaviour. Otherwise, revenue predictions will be short of what the Government anticipate. The final reason why I do not support the taxes was shown in the illustrative example about the oil industry. Rather than helping to achieve the objective set out by the Government, namely to make our tax system the most competitive in the G20 and to encourage investment and exports, these taxes will make industry less competitive.

Let me deal with one tax to start—the carbon price floor. We have heard from the hon. Member for Linlithgow and East Falkirk about the impact on the oil refining industry. If one considers the Budget figures published by the Government, one can see that over the next five years firms will, as a result of the reduction in corporation tax, save approximately £1.1 billion in year five. As a result of the imposition of the carbon price floor, they will pay £1.4 billion. All the gains from the reduction in corporation tax will be wiped out and more by one specific environmental tax. Of course, that cost will fall more heavily on the very industry that the Government hope will lead the charge for growth, namely manufacturing, which is one of the biggest consumers of energy. As energy prices go up as a result of the carbon price floor, it will have an impact on business costs. We have heard the example of what will happen in the oil industry. The Government have published figures showing that for some heavy energy consumers, such as firms that make glass, tyres or metal products, the impact will be a rise of as much as 9% on their energy bills.

The carbon price floor will also have an impact on consumers. If the Government’s figures are anything to go by, electricity prices will have gone up by 6% by 2015. Let me put that into context: it means an increase of £30 a year on an average household electricity bill of £500. However, as a result of the Budget and the tax changes in it, households with income at the 10th decile—the lowest-income households—will receive an increase in household income of £1.42 a year. So, the impact of this tax, which the Chief Secretary has proudly said we are the first in Europe to impose, will be to increase fuel poverty among the lowest-income households and to make manufacturing industry less competitive at the very time when we want it to lead the charge for growth.

The tax has specific connotations for places such as Northern Ireland, because we are part of a single electricity market that links us to the Irish Republic, which has not gone down this route. The way in which the single electricity market runs means that electricity is drawn from the cheapest producer first and then, as demand increases during the day and at peak times, it is drawn from more expensive producers. The impact of the tax will be that the cheapest producers will be in the Irish Republic, which will have two impacts on people in Northern Ireland. First, our security of supply will become imperilled, because we will become more reliant on producers from the Irish Republic. Secondly, as the tax will be imposed on gas, which is used in Northern Ireland mainly for electricity generation, the cost of extending the gas network in Northern Ireland will fall on consumers as the consumption of gas goes down. The whole purpose of exempting Northern Ireland from such measures for a number of years was, first, to try to deal with fuel poverty by increasing gas distribution across Northern Ireland, thereby making businesses more competitive by ensuring there was a gas network, which enabled them to use cheaper fuel, but the carbon price floor is likely to put all that in jeopardy.

I welcome the discussions with the Treasury and the fact that it wants to investigate more fully the impact of the carbon price floor on places such as Northern Ireland. I hope that there will be a revision once the full extent of that impact is seen in terms of what it does to the electricity market, to the cost of energy for consumers and businesses and to the ability to increase the gas distribution network. Those who are concerned about carbon dioxide output and production will find it ironic that the tax could drive power production towards coal-fired power stations in the Irish Republic—so it will not even achieve, on a European basis, the objective that the Government have set out for it.

The second tax that I want to consider, which has been frozen for this year, is air passenger duty. The tax was designed to cut air travel and, in doing so, supposedly to reduce the amount of CO₂ produced by people who fly around the world. One of the problems in a region such as Northern Ireland is that the Government of the Irish Republic, who received a loan of £7.5 billion from the Government here in London, have used part of that to reduce their air passenger duty to €3 and intend to reduce it to zero. That has an impact on the one international flight from Northern Ireland. Members may say, “Big deal—one international flight,” yet a large part of our economic strategy involved attracting investment from north America. We have succeeded in getting Citibank, the New York stock exchange and a range of other big investors into Northern Ireland, bringing high quality, highly paid jobs on the basis that there was a direct transport link between Northern Ireland and north America, as north American business men wanted.

As a result of the distortion of the air passenger duty, we are likely to lose that Continental Airlines flight, our only link with north America, as the airlines find that it is much more competitive to fly from Dublin, 100 miles down the road. That is one of the ways in which an ill-thought-out tax can cause distortion. It is not as though there is not an answer to it. Recognising that air passenger duty caused problems for areas away from the centre, the Government have already introduced an exemption for the highlands and islands of Scotland. An exemption could be made as part of the rebalancing of the economy of Northern Ireland. I look forward to the discussions with the Treasury on the impact of the tax, which may or may not be beneficial. I leave Members to make up their own mind about it. It may reduce air travel, or simply make it more difficult and more expensive for our constituents, but the distorting effects must be taken into account.

The third topic is the aggregates levy credit scheme—

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

Before my hon. Friend moves on to that, does he agree that the carbon issue, as well as the issues of air passenger duty and corporation tax for Northern Ireland, arises because Northern Ireland has a land frontier with the Irish Republic, which is a unique circumstance within the United Kingdom? [Laughter.] That is not special pleading, but a recognition of the special circumstance in which Northern Ireland finds itself, because it shares a common land frontier. England, Scotland and Wales do not; we do, and therefore people find it easy to go down the road and fly out of Dublin, as opposed to Belfast. Government Members may laugh at these matters of fact and economics, but they are harsh realities for those of us who live in Northern Ireland, who try to make the economy work and who are trying to grow the private sector. All we are asking is that a Government committed to the private sector should help us in that, not diminish us or reduce our efforts to do so.

[Sammy Wilson]

One can see the mirth of Government Members. I can understand why the Liberal Democrats are keen to see regulation, interference and high taxation, but I would have thought that Members on the right wing of the Conservative party would sympathise with the case that I have been making, which is that less regulation helps to grow the economy and that less of the distorting impact of the influence of Government can help to improve the economy of Northern Ireland and enable people to stand on their own two feet.

[Jacob Rees-Mogg]

I thank the hon. Gentleman—if I may say so, my hon. Friend—for giving way. Many of us on the Government Benches sympathise with that point of view.

[Sammy Wilson]

I knew from the hon. Gentleman’s speech that he has sympathy with that view. Indeed, I hope that such sympathy will also be found among Treasury Ministers as we discuss these matters.

The problems with the aggregates levy credit scheme are also a result of the land boundary with the Irish Republic. The aggregates levy was designed to encourage the recycling of building materials and reduce the use of virgin stone from quarries. It is good not to waste building materials, and the levy made sense in an area that is surrounded by sea and does not have a land boundary with another country that also quarries stone but does not impose such a levy, so allowances were made for firms in Northern Ireland. The Government are sympathetic to the continuance of the scheme, but as a result of a referral to the EU Commission it has been stopped. I notice that provision has been made in the Bill for a new scheme, albeit an altered one, which can be made available once discussions have been held with Europe. Again, I look forward to that and hope that we will get a positive response from Treasury Ministers.

I very much doubt that there is a great deal of sympathy for my views on the green taxes, but I hope that there will be sympathy and support for the need to look at their distorting impact on a part of the United Kingdom that is up against competition from a country that does not impose the same level of taxation. The Government have said that they want a competitive tax system; we want that. They say that they want to create a situation in which exports and private industry can grow; we want that. I therefore think that cognisance must be given to the points that I have made.

21:11

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

I welcome the Finance Bill in so many ways, many of which are to do with creating growth and jobs. The former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), noted in his comments after the Budget that it will create growth, so it is interesting that some of the newer members of the shadow Cabinet on the one hand praise him for the things he said but on the other ignore his praise for a Budget that creates growth.

The Budget is helping to rebalance the economy, which is never an easy thing. We need to get more from private sector, as we have been over-reliant on the public sector. An important point that is often missed when discussing the private and public sectors and whether the Government should spend more money here or there is that the Government do not have any money. It is not our money; it is the public’s money. It is the money we take off people and businesses and from trading throughout the world. It is not our money for us to do with as we like. It is the public’s money, and we should ensure that we deal with it responsibly.

[Mel Stride (Central Devon) (Con)]

I am following my hon. Friend’s powerful argument closely. Will he add that, to the extent that we go into debt, it is actually our children’s and grandchildren’s money?

[Alec Shelbrooke]

Absolutely. My hon. Friend makes an important point. That leads me to the problem, which I had not intended to mention, of how indebted the nation was personally. Indeed, my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) made the point that a total private sector debt that is 450% of GDP is something to fear and shake at.

One reason I believe we did not see the increase in the public’s spending in certain areas despite the historically low interest rates—the Bank of England brought interest rates down and I think we understand why—was because people saw the opportunity to use the extra money they had in their pockets from the reduction in their mortgage payments to start paying off credit card debts, although many were on fixed-rate mortgages. That money was not poured back into the economy as was originally envisaged because people saw the writing on the wall and started to reduce their personal debt, and the Government should take a big lesson from that. We need to get debt down if we are to sustain future growth. We talk about interest of £50 billion a year on £1 trillion-worth of debt, but that does not mean anything to people because those numbers are huge. However, when we tell them that £120 million is being given to foreign nations every day because of the money we have borrowed, they start to realise the situation we face.

We all face such situations in our constituencies, where certain services are being cut—there is some politics involved, but that is not my point—and local councils need more money, which they cannot have because of the situation we are in. People realise that rather than going to foreign nations, that £120 million could be used to go some way towards addressing, for example, the closure of a leisure centre in my constituency that is losing £100,000 in a year.

That is why we needed to rebalance the economy. We became far too reliant on public debt and public money—public money that comes from private money—and we cannot keep magicking public money out of the air, because in the end it leads to hyperinflation. Indeed, the shadow Chief Secretary to the Treasury, the hon. Member for Wallasey (Ms Eagle), made some link, which I could not follow, between our policies and the rise of the far right in the 1930s, which in turn led to the second world war. Hyperinflation certainly played a big role in nationalism among Governments, however, and it came about precisely because of the economic circumstances that we were moving towards recently.

I take issue with the hon. Lady when she says that we are attacking ordinary hard-working people. That is, quite frankly, a disgraceful comment to make. There is not a person on either side of the House who deliberately wants to attack the ordinary hard-working person, so let us just put down a few facts. We have just brought in an income tax cut for 23 million people and taken almost 1 million people out of income tax altogether. Let us compare that with doubling income tax for the lowest paid in society.

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

indicated dissent.

[Alec Shelbrooke]

But you cannot deny that your Government doubled income tax for the lowest paid in society and destroyed pensions—not you, Mr Deputy Speaker, but the previous Government. The previous Government destroyed pensions, leaving many people whom we would class as the most vulnerable in society to take their pensions with fear and trepidation. At least we have brought in the triple lock on pensions, meaning that people should never again get the 75p rise in their pension.

[Matthew Hancock (West Suffolk) (Con)]

In addition to the facts that my hon. Friend is bringing to bear in this debate, is it not shocking that the amount that the Government have borrowed only over the past year is equivalent to more than £2,000 for every family?

[Alec Shelbrooke]

Again, that illustrates my earlier point: when the figures are brought down to a smaller level, people can understand their full impact and the state of the nation’s finances. When I compare that to our personal finances, I say to people, “For every £1 we’ve spent, we’ve borrowed 25p. How long would your household finances survive with that sort of economics?” They simply would not. Indeed, the increase in private debt and in people’s credit card debts, with some even committing suicide because they used credit cards to pay off credit cards, is a lesson that Governments should learn.

Let us look at the growth and debt figures. Our debt is 10.4% of GDP, Spain’s is 9.2% and Portugal’s is 9.1%, but I do not see our interest rates on the gilt markets being as high as Portugal’s. My hon. Friend the Member for North East Somerset made an excellent point when he described the percentage rates being below RPI by 300 unit points, or 500 unit points below normal. That shows that a credible plan had to be put in place.

I find it distressing when we get into this argument with the Opposition, who say, “You don’t need to do all this.” I will give the House an analogy. For 13 years, the previous Government fed everybody chocolate and burgers, and every person in this country now weighs 35 stone. Along comes the doctor, in the form of this Government, who says, “I’m afraid if you don’t lose at least 20 stone you are going to die very young and it is going to be disastrous for you.”

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

Your doctor said that?

[Alec Shelbrooke]

Yes, probably! I am in a rotund position to say this, and I certainly speak with a certain authority on these matters, but it is never easy to lose weight, as indeed I can testify. I am getting married in a month’s time—[Hon. Members: “Hear, hear!”] Thank you. I am desperately trying to lose weight, and it is not easy, but it is never easy for someone if the previous lot who fed them when they were trying to lose weight say, “Go on, have another bacon sandwich, it won’t do you any harm. Have another chocolate. We’ll pay for that on the credit card by the way, which we’ve nicked off you.” But seriously, if we do not get the economy under control, we will find that it leads to the situation that we see in Portugal.

What does that mean to the public? The Opposition have attacked the Government and said that they have not done anything to protect people, but what would higher interest rates do to people? We have had an interest rate of 0.5% for well over a year. We used to think that 3% or 4% was a low interest rate when the Bank of England maintained it at that level for a good period of the last decade. If the interest rate went back to 4% in the next six months, what effect would that have on the people of this country? Having spent a great deal of time with interest rates at an historically low rate, they have learned to live within those means. We do not have the option to go back to 4% interest rates—that would be a disaster for hard-working families. Ironically, it could increase the pound’s value against the dollar, reduce the oil price and reduce petrol prices—I suppose there is a quid pro quo to everything—but let us not get away from the fact that going back to what we then thought were historically low interest rates would be seen as an absolute disaster.

I get annoyed with the twisting of the Keynesian argument when people say that in times of recession Governments should pour money into an economy. That was only half the truth: the other half was to invest it in capital investment.

[Ben Gummer (Ipswich) (Con)]

My hon. Friend misses the other half of the other half, which was to accrue a surplus in a time of plenty.

[Alec Shelbrooke]

My hon. Friend pre-empts me, because I was going to say that the Swedes put aside 2% of gross domestic product during the good times and the Australians paid off their national debt in the last quarter, leaving them well placed to deal with these issues.

People often say that the new deal in America, with its Keynesian attitude, dug the American economy out of its hole. No, it did not—that was achieved by the second world war and the fact that America was able to lend money and sell armaments to the rest of the world while not having its mainland invaded. That put the Americans in the economic driving seat, from which they have never looked back.

I want to talk about fuel prices. The Opposition were going to add another 5p to the price of petrol. I know that it is difficult to prove a negative. If we say to people, “We’ve cut 6p off a litre of petrol,” they will say, “No, you haven’t—you only cut a penny,” because if they are not paying that 5p it is difficult to prove it to them. However, at least we have done something to help, and we have to pay for that somehow. We cannot just go on printing money and saying, “It doesn’t matter. It’s the Government’s money—we’ll supply it, don’t worry about it,” because that completely misses the point and gets us into these problems. Under the previous Government, fuel prices rocketed because of taxation; under this Government, fuel prices have gone up because of the oil price, over which we do not have influence. If we are to believe what is said, we may have reached peak oil. We could have a discussion for three hours about whether that is so, and people would say, “Well, more oil comes online because at the current high oil price it becomes more economical and there is plenty of oil out there—it isn’t going to run out.” However, the key to that argument is that it relates to the current oil price. Let us not forget that the oil price is controlled by the oil traders and speculators, and if they believe that we are at peak oil, that oil price is here to stay. We have tried to cushion the impact and help hard-working families, and it is pretty cheap for Labour Members to snipe at that.

Drawing on the comments by the shadow Chief Secretary to the Treasury, at the same time as the argument that we should try to reduce our carbon emissions, we hear that we should not build any nuclear stations or put any subsidies into moving forward with nuclear power. We have seen an absolutely terrible and disastrous event in Japan—something that shocked the world and daily covers the newspapers, and still gets talked about constantly, with Russia now making criticisms. As far as I am aware, that nuclear reactor has not killed anyone. It is funny how quickly people completely forget about the 20,000 people who died in the tsunami: the real human cost. But no, they focus on a nuclear power station hit by the third biggest release of energy the world has ever seen and a 30-foot tsunami doing 60 mph, and everybody says that that is why we should not have nuclear power. Nobody adds that more than 20,000 people have been killed by this natural disaster. Let us get some perspective. We know that nuclear power may not be the best way forward, but it is the best way forward at this moment. Until we develop the technology so that we can get to nuclear fusion and perhaps some better green technologies, these are our options and this is what we face. We cannot keep saying no to everything.

The Opposition always want it both ways. They want to cut the fuel price, but they do not want to tax oil companies. They want the banks to lend more, but they want to tax them so much that they would leave the country. They want to reduce carbon and to have secure energy, but they do not want to go nuclear. They are a joke. Their speeches vary from Member to Member. Some could be on this side of the House, some could be old Labour and some could be new Labour. I do not know what their policy is, but the blank sheet of paper is certainly something that they are all sticking to vigorously. We have seen very little in the local election campaign except for criticism of the Government.

[Jim McGovern (Dundee West) (Lab)]

The hon. Gentleman speaks about nuclear energy and fossil fuel energy. Does he have an opinion on the Scottish National party’s view on nuclear energy?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. The hon. Gentleman must sit down. He has asked his question. Members should not just walk into the Chamber and intervene.

[Alec Shelbrooke]

I am not aware of the SNP’s policy. It may have escaped the notice of the hon. Gentleman, but I stand here as a Conservative Member of Parliament.

I have a final plea to the Minister. I know that there are problems with the European Union interfering in all aspects of alcohol and that we cannot do certain things, but can he look at putting higher taxation on non-draught beer? He may have done so already and it would be interesting to hear about that when he sums up. That does not involve saying that if beer is sold in a supermarket it will be taxed more, which brings competition law into play, but just that draught beer will not be taxed as much as other beers. The reason for raising tax on non-draught beer is that draught beer is served in pubs and publicans have a responsibility to ensure that people do not drink out of control, because they are licensed and controlled. I think that that idea would go some way towards countering the binge drinking problem. It may be that we cannot do that under European law, but I make the plea to the Minister. I will be interested to hear whether it is something that he has considered.

I support the Bill and believe that it is the only way we can secure growth. It is an intelligent and credible way forward that, frankly, is not just trying to get a good headline in The Guardian, which the shadow Chancellor seems keen on.

21:27

[Ian Murray (Edinburgh South) (Lab)]

The hon. Member for Elmet and Rothwell (Alec Shelbrooke) has taken political propaganda to an all-time low this evening in trying to convince the Chamber that he has not eaten out on Labour’s chocolate and burgers, to use his words. That is a bit rich. None the less, I wish him well for his wedding, which is coming up shortly, and I hope that his battle with the bulge means that he will eventually fit into the dress come the big day.

I am delighted that the Chief Secretary to the Treasury is back in the Chamber, because I want to wish him a happy anniversary. It is exactly a year since the leader of the Liberal Democrats said in a TV interview with Jeremy Paxman:

“Do I think that these big, big cuts are merited or justified at a time when the economy is struggling to get to its feet? Clearly not.”

I wish the Chief Secretary a happy anniversary a year on from that bombshell from the Deputy Prime Minister. It is still the contention of Labour Members that the coalition Government are going too far, too fast, and that that approach is killing growth and causing rising unemployment in this country.

The Chancellor announced with a fanfare that this would be a Budget for growth that would add fuel to the economy. He gave his bold growth fanfare against the backdrop of the economy shrinking by 0.5% in quarter four, even though it was clearly on the road to recovery in quarters one and two of last year under the previous Government. On top of that came a huge embarrassment: the Chancellor’s trumpeted Budget for growth downgraded economic growth in every year of the economic cycle and predicted increased unemployment. The Chancellor’s own Office for Budget Responsibility concluded that the Government’s Budget for growth, which he said would “go for growth”, reduced the economic growth figures. Astonishingly, the hon. Member for North East Somerset (Jacob Rees-Mogg), who is still in his place, blames Labour and not the snow.

We cannot pay back any deficit with lower growth and more people out of work. The Government’s decisions contained in this Finance Bill do nothing to help hard-working ordinary people and families up and down the country. We have heard several times this evening about the potential decimation of the UK oil industry, which will cost yet more jobs.

[Dan Byles (North Warwickshire) (Con)]

Is the hon. Gentleman therefore opposed to the measures taken in the Budget to reduce fuel taxation on hard-working motorists?

[Ian Murray]

No one would ever deny that a 1p cut would help motorists, but there are certainly no petrol stations in Edinburgh South where fuel is now cheaper than it was before the Chancellor’s Budget. Indeed, money is being taken off the oil and gas industry, and billions of pounds in jobs and future research and development are being put in jeopardy for a 1p cut in fuel prices that nobody is actually seeing at the pump. The Government have to take that on board and act with ferocity.

I agree with the Minister of State, Cabinet Office, the right hon. Member for West Dorset (Mr Letwin), who let the cat out of the bag during an Environmental Audit Committee hearing just before the Easter recess. He said that prior to the Budget, the Cabinet had discussed the fact that there was

“an immediate national crisis in the form of less growth and jobs than we needed”.

The Government’s response to that crisis was to produce a Budget that would make growth and unemployment levels worse—the “Dad’s Army”, “Don’t panic, Captain Mainwaring” approach to what they claimed was a “national crisis”.

Of course we need to get the deficit down, but by cutting too far and too fast, by hitting children, women and families the hardest and by following an ideology that attacks the economic drivers of this country, the Government risk a vicious circle of perpetual slower growth and fewer people in work. With fewer people paying tax, there will be more people drawing benefits and not spending hard-earned cash. The Government have presided over a set of decisions that have resulted in a collapse in living standards not seen since the 1920s.

On the subject of living standards, the Prime Minister promised to lead the most family-friendly Government ever. The Chancellor said, “We’re all in this together,” but changes to tax and benefits this month will hit those least able to pay—ordinary, hard-working people up and down the country—the hardest.

We have been through a global financial crisis, not a recession that was made in Britain. Like every other major economy in the world, the big challenge for us is how to get the deficit down. It cannot come down while confidence is low. VAT will cost a family with children an average extra £450 this year, draining much-needed funds from tight family budgets and potentially harming consumer confidence.

Of course, from this month, there are also cuts to the amount that parents can claim for child care; the freezing of child benefit for three years; the scrapping of the baby element of child tax credit; the setting of benefits on a permanently lower path, with a real-terms cut that means less generous benefits this year and every year in future; the cutting of the second income threshold for the family element of child tax credit; and the increasing of withdrawal rates for tax credits to 41%.—and of course the Liberal Democrats’ champion policy of increasing the tax threshold at the lower level is outstripped tenfold by the VAT increase and the change from the retail prices index to the consumer prices index for uprating tax thresholds, which will erode any threshold increase over time.

The message of this Finance Bill is not growth but the fact that the Government are giving with one hand and taking away with many other hands. They have demonstrated in the Budget and the Bill how out of touch they are. They do not get the fact that hard-working people are being hit by VAT and now face cuts to tax credits and child benefit too. They do not get the fact that communities throughout the country are being damaged by cuts to local services. Even the director of the Institute for Fiscal Studies said after the Budget that

“there is an awful lot of giving with one hand...and taking away with lots and lots of other hands.”

That was an independent commentator talking about what the Government are doing.

The Government often look overseas to build up their justification for this austerity Budget and the Bill, but we have only to look at Ireland to see what too far, too fast austerity measures produce—yes, Ireland, a country that the Chancellor declared had an austerity package that was something of a success story. I suspect that no one in Ireland would agree with him now.

Let us turn, as I might be expected to do, to the Conservatives’ bedfellows on praise for Ireland, the Scottish National party. The SNP held up Ireland as the foundation for their arc of prosperity and as the economic model that an independent Scotland should follow, but look what happened! The SNP not only no longer talk of independence, but they never talk about the arc of prosperity. If Scotland were independent, our banks and our economy would have collapsed, and Scotland would be worse off than Ireland, Greece and Portugal combined.

To be fair to the SNP, not only Ireland formed its arc of prosperity policy, but Iceland too—another economy shattered by the worldwide economic crisis. The Irish austerity measures went too far and too fast, and now the Chancellor and the Chief Secretary to the Treasury never mention Ireland, and neither does the SNP—they have changed indeed.

I could go on and savage the SNP’s 4.8p local income tax proposals, but I know that that is not to do with the Bill, which I shall finish by addressing. The Bill is driven by ideology—an ideology that some have developed in exchange for ministerial Mondeos. The Bill does not improve growth or reduce unemployment, and it continues to hit families and ordinary people the hardest. It kicks away the ladder of opportunity for our country’s young people. It is hurting but certainly not working. For those reasons alone, we should not give it a Second Reading.

21:36

[Matthew Hancock (West Suffolk) (Con)]

I am grateful for the chance to speak briefly at the end of this debate. This Finance Bill is but one part and but one significant change to the economic policy framework in the UK. The significance of some of the details in the Bill is matched only by the modesty of the amount of comment that they attract. We are debating many of the detailed changes, such as expanding gift aid, helping low earners, supporting motorists and improving the environment for enterprise. I support all those measures and will speak about them later, but I first want to address the context and background set for the Bill by changes to the economic policy framework.

One of the big changes has been referred to explicitly and implicitly throughout the debate. The hon. Member for Edinburgh South (Ian Murray) spoke about the Office for Budget Responsibility, and every Labour Member has referred to its figures. In that magnificent British way, we have managed to establish and accept a new tradition—the OBR—as if it were ever thus. I argue that that innovation in economic policy and others are significant and noteworthy for the long term. Over many years, evidence grew in the academic economic debate that economic policy is best set for the long term, and the short-term dash for growth became discredited. In the ’80s and ’90s a consensus grew that fiscal policy should be set for the long term, and that monetary policy should be set through an independent Bank of England and used to regulate demand in the shorter term—to keep inflation low and growth going. In fact, that became the cross-party consensus in the House. The shadow Chancellor even wrote a book on what a magnificent set-up that was.

The problem with that arrangement is that it stabilised only one part of the economy, and it was far too narrow. Where discretion was allowed, and within closely prescribed rules, policy worked reasonably well, and policy makers hit the inflation target with commendable accuracy. However, the success of that narrow area of economic policy making led its creators to believe—absurdly—that they had solved the problems of economic policy making. We know the phrases. They said that boom and bust had ended, but that hyperbole led them to ignore the growing signs that all was not well elsewhere, and to commit vast policy mistakes that led to the enormous crisis that we have gone through, and that Government Members are trying to help to clear up. The Labour Government admonished anybody who claimed that Britain’s economic policy framework was anything other than perfect, and that belittled debate.

The problem was that by aiming at one target only—inflation, and consumer price inflation specifically—everyone missed the huge and unsustainable growth in balance sheets throughout the economy. There was unsustainable public debt and unsustainable private debt—a classic debt bubble. The problem first became obvious in fiscal policy. The now discredited fiscal rules allowed the Labour Government to claim that all was rosy—indeed, the shadow Chancellor still claims that all was rosy. In fact, they were borrowing an unsustainable amount at the height of a boom. They then tried the classic trick of borrowing to fund their re-election. As the House knows, they fiddled the figures and moved the goalposts to keep on spending when the facts started to prove otherwise.

The new OBR will bring long-term independence to fiscal policy making, which will constrain not only the current Government, but—I hope—all Governments to come. Crucially, the OBR’s forecasts will define the discretion within which policy makers can operate, and will bring this constrained discretion, similar in structure to monetary policy, into fiscal policy. Different though the execution will be of course—because the policy levers will be different—the structure will be similar.

Although having an OBR in the past might have meant not entering the crisis with unsustainable public finances, what of those unsustainable private finances? No one can argue that the amount of debt in our economy—in our banks and households—was sustainable. Britain entered the crisis as the most indebted nation in the G7 ever, and also had the biggest banking bust in the world. Those are not unconnected, however, because household debt and the banking debt that supports it are a reflection of each other—one group lends to the other. That combination of unsustainable public and private debts means that Government Members have a huge mess to clear up.

The combination of targeting only narrow consumer prices inflation in one part of a tripartite system and the regulation of individual banks in another meant that the crucial piece of the jigsaw—looking at how bank balance sheets affected debt across the economy—was missed. It is a bit like a balloon: we pushed down on consumer prices and kept control of them, but all the extra liquidity shot out into prices of other assets, including, as we know from our personal lives and those of our constituents, the biggest asset of all—housing. We had a bonanza housing boom: equity withdrawal; get-rich, buy-to-let schemes; more than 100% mortgages. We all know about them. The bubble lasted all the longer, however, because it had a credible story behind it—of the extra savings being made in China and the rising Asian nations—and was harder still to argue against.

Nobody was there to pull the punch bowl away when the party got going. As we know to our cost, the power to do that was removed from the Bank of England in 1997. At the time, my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) predicted it would cause problems. The link between looking at the sustainability of individual banks and looking at the macro-picture had been broken. Now that link is being restored. First, clause 72 and schedule 19 will introduce and increase the bank levy. It will be a levy on banks’ balance sheets, not bonuses, so will contribute to financial stability. Secondly, and crucially for the context in which we think about the Bill, the proposed financial policy committee, which will first operate in shadow form, will monitor that link. It will link the management of the country’s debt and balance sheets with the management of the macro-economy, linking fiscal policy and monetary policy through financial policy, and therefore allow for a holistic big picture of how we are managing our economy. Instead of allowing a bubble to build up by omission, the FPC’s job will be to look for it and act on it. Unlike under the former system, in which the Bank of England could complain and raise concerns but not act, the FPC will be empowered. Crucially, because the discretion is embedded in a respected institution, it will have the authority to exercise that discretion. For whereas discretion without rules gives us tyranny, rules without discretion give us futile bureaucracy.

The changes have been praised by the OECD and the IMF, and they represent a substantial and fundamental shift in how we run our economy. However, we should resist the hubris of saying that these reforms will ever be finished or that the ancient challenge of economic management, first recorded in Genesis, is complete. As we debate the details of the Bill today, we should consider how the context of those changes, in strengthening our economic framework, is about learning the lessons from the past and helping us to be stronger as we face the inevitable challenges ahead.

21:46

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

If a week is a long time in politics, then a year—and perhaps some aspects of tonight’s debate—is an eternity. Yet a year ago, when we were all candidates and none of us was allowed to stand in this place, things were very different. The economy was beginning to recover, as unemployment was falling and growth was returning. Crucially for today’s debate and the provisions in the Bill, that meant that the deficit came in at £21 billion lower than was forecast. Well, here we all are, a year later, and just as the faces in the Chamber have changed, as have the sides that we are sitting on—some would say not for the better—so too has the economic picture. Given where we were last year, one would have expected the economy next year not simply to have recovered, but to have begun motoring; and yet now, thanks to snow it seems, it appears that the reverse is true. By cutting too fast and too deep, this Government are delivering slow growth and higher unemployment, which is why they will now have to borrow £46 billion more than they planned.

However, the question that this Bill raises is about not just whether to cut the deficit, but how we do so and who ultimately pays. Our national Exchequer certainly will: slower growth plus higher unemployment will make it harder to get the deficit down. As we pay out in jobseeker’s allowance, we will also lose out as families fear spending money that they do not have. That is what I want to highlight this evening. We have a duty to consider how the proposals will help or hinder the finances of families across this country, because it is not just the Chancellor who will have to go cap in hand for extra funds. Contrary to what the hon. Member for Elmet and Rothwell (Alec Shelbrooke) seems to think—I am sorry that he is not here; perhaps he is in the gym preparing for his wedding—public debt and private debt are linked. Although public debt is down by £43 billion, private household debt is up by £245 billion—five times as much.

The hon. Member for West Suffolk (Matthew Hancock) is a man for whom I have tremendous respect—both him and his pullovers. He lauds the role of the Office for Budget Responsibility, but like Rosencrantz and Guildenstern, he is hoist by his own petard, because the OBR forecast last June that household debt would increase from an average of £58,000 in 2010 to £66,000 by 2015. The OBR now expects the figure to be £77,000. That is the downside of the Chancellor’s deficit reduction plan. As taxes increase and public spending squeezes households’ disposable income, they will be forced to take on more and more debt in an attempt to maintain their living standards. In fact, the OBR’s March forecast shows household debt rising from £1.6 trillion this year to £2.1 trillion in 2015—or, from 160% of disposable income to 175%. The OBR reports that households will have to borrow more money than forecast in order to maintain their living standards. With the planned cuts in public spending, the only way the Government will see an improvement in the OBR’s forecast for growth is for that ratio to increase.

I know that many Members will be sick of hearing me talk about credit and debt. Many may also argue that it does not matter, because we are a nation that is comfortable with debt—something the hon. Member for West Suffolk talked about. We have always had a different approach to personal debt from many other countries. We are a nation comfortable with borrowing in ways at which other cultures baulk. It is no surprise that we have the highest level of personal debt in the G7. That is not a problem if it can be managed. Much of the money that this country owes is housing related, which reflects a culture in which mortgages are routine. The truth is, however, that the debt that families are now getting into is not related to such investment in their future or about luxury living; it is about the money that they spend on everyday items. That is what is missing from their family finances.

In the current economic climate, UK adults face an average shortfall of £165 each month, with 26% unsure whether they can pay their bills on time. Recent research shows that more than 2 million people have used credit cards to pay their mortgage or their rent. That is an increase of almost 50% in a year. Since the recession, nearly a third of Britons are now spending more than they have coming in each month, and 22% of consumers will carry a credit card debt throughout 2011, with 7% of people saying that they will still be paying for Christmas 2010 after June 2011. It is estimated that 5 million people are now permanently overdrawn, and that 18 million have gone into the red at some point in the past 12 months. Nearly 8 million of us failed to pay at least one bill in the past year.

It is not just the poorest consumers in our society who are affected. According to Experian, the biggest rise in insolvencies in 2010 was among the people whom it calls “suburban mindsets”, a consumer group comprising married, middle-aged people. That situation has not come about by chance. It is a direct consequence of how this Government have chosen to address the deficit.

[Matthew Hancock]

I do not wish to extend the love-in much further, but the hon. Lady’s arguments, which are being passionately put, would carry much more weight and credence if she were to disappoint her Front-Bench team and accept Labour’s role in bringing about this situation.

[Stella Creasy]

I am sorry that the hon. Gentleman has not been listening closely. Let me make it very clear: the figures from the Office for Budget Responsibility that I cited refer to this past year. Forgive me, but as far as I am aware, his party has been in power during that time and it has presided over this increase in the private debt that households are now taking on.

Let us talk about some of the things that are causing that increase. VAT is costing a family with children an extra £450 this year, on average, due to the rocketing cost of buying basics such as telephones and clothes and of getting a boiler or a washing machine fixed. That is before they even consider getting out and about to spend money. Many Conservative Members have talked about fuel prices, but the increase in VAT is adding £1.35 to the cost of filling up a 50-litre tank with unleaded fuel. The cut in fuel duty gives back only 1p, but the VAT increase costs us almost 3p a litre.

Those who are in work are finding it even harder to make ends meet as a result of the Budget. Since 5 April, 750,000 more workers have been dragged into the higher rate of income tax, and benefit recipients have lost £2.7 billion-worth of payments. Cuts to child care support have taken £1,500 a year from families. The £48 that people will get through the personal allowance increase in the Budget is barely a tenth of the amount that families will have to pay back through increased VAT. In two years’ time, 1.5 million families—including many in places such as Walthamstow—will lose all their child benefit. Credit Action has pointed out that, of the 45 changes to the tax and benefit system made in the Budget, 26 will have a negative impact on households.

There will also be fewer chances of getting a better-paid job, or of getting back into work, because unemployment is set to be higher in every year of this Parliament as a result of this Government’s actions.

[Jim Shannon (Strangford) (DUP)]

Those in the 16-to-25 age bracket who are unemployed will soon top the 1 million mark. Does the hon. Lady share my concern, and that of many other hon. Members, about what the future holds for them?

[Stella Creasy]

I absolutely agree with the hon. Gentleman. I have been a close reader of the work of Paul Gregg at Bristol university, who has shown how unemployment can scar young people and affect their earning potential for life. I am extremely worried about young people in this country who are facing unemployment and have little prospect of a place on a training scheme or in a university.

There is little sign that these pressures on family finances will ease. With the current wage squeeze expected to continue until at least 2013, average wages are expected to fall to less than £25,000, which is more than £1,800 lower than in 2009. People do not have the pounds in their pockets that they need in order to keep spending in the way our economy needs if it is to grow. If we add to that the anticipated rise in interest rates and mortgage payments, which has been one area of respite in the past few years, we can see that things are going to get a lot bleaker. As our newspapers warn daily, and as the Bank of England has pointed out, interest rates are likely to climb, piling pressure on the 60% of low to middle-income families who are already struggling to pay their bills.

It is no wonder that four in 10 people are worried about their current level of debt, with 4 million fearing redundancy and 4 million more having taken on debt in recent months. We know that the cuts that we have seen so far are just the beginning. The ones that families across the UK felt this month accounted for a mere 10% of the total savings planned before 2015 from changes in the tax credit and benefit system. More than 40% of the cuts kick in in 2013.

Loading debt on to households helps this Government to cut the deficit at the pace they desire, but it is the job of Opposition Members to challenge them on the cost and consequences to all of doing so. In an economy where jobs and growth are in short supply, such debts do not just mean lower consumer spending, higher levels of bankruptcy or repossessions. Nearly 30% of British parents admit they are arguing over their family finances and a third of parents are suffering the stress of sleepless nights because they are worried about money.

Such changes also directly impact on our chances for economic recovery. As the Bank of England pointed out,

“prospects for consumption…have an important bearing on the outlet for activity”,

but it added:

“Near-term prospects have weakened further over the month. The squeeze on households…was likely to dampen consumption materially over the next year or so.”

Even after a sharp reduction in its private consumption forecasts, that favourite of the hon. Member for West Suffolk, the Office for Budget Responsibility, expects British households to account for just over a fifth of economic growth this year and for almost a third next year. The truth is that if the average family is not willing to dig itself deeper into debt, those figures might have to be revised.

The Bill reflects the Government’s complacency about the challenge. There is no commitment to act on these problems—only a general sense of unease, summed up best by the Minister for Equalities, the hon. Member for Hornsey and Wood Green (Lynne Featherstone), who wrote:

“What is tough—and will get tougher—is losing jobs. People in work will mostly get by—somehow. People on benefits will mostly get by—somehow. But for those who lose their job—it will be devastating. The cuts were announced last year. Their impact has yet to fully hit. This budget promised growth. The proof will be in the pudding. And the question will be whether there’s a new job to be found within a time frame that can keep health, hearth and home together—and we need to keep a watch over that.”

Well, I want to do more than keep a watch over that, and I hope to answer a question posed by Government Members about what policies Labour Members could suggest.

Today, I argue that we could do more than squabble over Keynes or the Ricardian equivalence; we could do something to help those people in immediate danger of insolvency and bankruptcy. At present, this Bill is missing that. Given the large numbers of people facing financial difficulty, we should be deeply concerned about the strategies that families have to cope with these pressures and how the Bill could do something to help.

To cover costs, more and more people are turning to sources of credit, which might seem like short-term solutions but quickly become long-term problems. The number of people who say they are likely to use an unauthorised overdraft this month has nearly doubled since July last year—from 900,000 to 1.6 million. Similarly, the payday lending industry in the UK, with its 4,000% interest rates and more, has quadrupled in the past 18 months.

Being able to borrow in a way that does not leave a long-term scar on the family finances is the new dividing-line in our society. Those who can access mainstream credit might just scrape by in austerity Britain. Those with little option but the legal loan sharks, maxing out their credit cards or racking up unauthorised debt, could spend a generation or more trying to become debt-free.

This Government want to pretend that such kinds of personal debt are solely a private matter, but Opposition Members see the social and economic consequences and we must beg to differ. A lack of regulation of the high-cost credit market in comparison with other countries allows that industry to go unchecked in the UK. Recognition of the problems caused by casino banking in the City is widespread across the House, but that is only half the battle; we should not forget the financial needs of those in our communities. For the sake of our economic recovery and for the sake of those families, credit should not be lent in a way that is detrimental to consumers without those who profit from exploiting them being made liable for the consequences.

When this Government announced their Budget, I asked a simple question: how can they be so keen to show that they are so tough on national debt, yet so blind to the growing crisis of personal debt that their policies are stoking? Today, with this Bill before us, we are no closer to an answer, but thousands more edge closer to personal financial problems as a direct result. That is why I will table amendments to review whether the supplementary charge or the bankers’ levy could be applied in a way that would disincentivise negative, high-cost credit lending. It is time that this Government put the fortunes of every family first. Other countries have done that to protect their consumers, and I do not see why British consumers should be denied the same opportunity.

Let me offer an open invitation to Treasury Ministers to do what their colleagues in the Department for Business, Innovation and Skills have signally failed to do, and respond to the concerns of Members throughout the House. I invite them to meet us to discuss how we could cap the total cost of credit. Campaigners all over the country who support such action—Churches, trade unions, community groups and consumer associations—would thank them for taking it.

I hope that Members who share my concern about personal debt will support my amendments, and will join me in holding the Government to account for what they are doing to the personal finances of families in every constituency in the country.

22:00

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

Thank you for allowing me to contribute to the debate, Mr Speaker.

Many Bills are based on evidence, but this Bill takes a huge gamble on the judgment of a Chancellor who regards his plans for fiscal consolidation more as an article of economic faith. The extent of the tax rises that it imposes, when added to the effect of the Government’s decision to reduce spending by £81 billion over the next four years, threatens to remove about 2% of GDP from output. As Anatole Kaletsky wrote in the most recent edition of Prospect, that is the equivalent of the annualised growth achieved in the whole of 2010.

The theory that underpins the measures in the Budget and the Bill is that of expansionary fiscal contraction: the idea that cutting deficits as quickly as possible while also making a massive reduction in the scope of the state will liberate private sector capital to fill in the gap, and will create higher levels of growth. That theory is deficient for two reasons. First, in countries where it has been applied there has been a marked expansion in the export sector, normally accompanied by a depreciation of the currency. Secondly, it has tended to be applied in countries pursuing a policy of monetary easing. Neither factor is likely to obtain in the circumstances faced by the UK economy. In the last quarter of 2010 the country recorded the worst trade figures since 1985, there is weak demand in the rest of Europe apart from Germany, and inflationary pressures are making a rise in interest rates more likely than not this year. Nor is it credible for the Chancellor, who in January 2009 described printing money as

“the last resort of desperate governments”

whose other economic policies had failed, to rely on further quantitative easing to provide any additional monetary stimulus beyond the £200 billion already utilised by the Bank of England.

Government Members have prayed in aid of their fiscal consolidation plans the experience of the Canadian Government of the 1990s who faced the largest deficit in the G7. In a report entitled “Whose Canada?”, Mario Seccareccia of the university of Ottawa noted the real reasons for the success of the Canadian fiscal consolidation programme. High growth in the United States, Canada’s largest trading partner, a sharply declining Canadian dollar and the implementation of the North American Free Trade Agreement combined to push the export sector’s share of Canadian GDP to 45% by 2000. In addition, an expansionary monetary policy raised consumer spending, and continued until the financial crisis. None of those factors is likely to obtain in the United Kingdom.

Here we have a Finance Bill that imposes the largest squeeze on living standards for British households since the 1920s. As was ably pointed out by my hon. Friend the Member for Walthamstow (Stella Creasy), its most worrying feature is the massive rise in personal debt and borrowing that underpins its provisions. The Office for Budget Responsibility expects total household debt to rise from £1.56 trillion in 2010 to a staggering £2.13 trillion in 2015, a rise of 36.3% in just five years. Whereas debt represented 160% of household income last year, the debt-to-income ratio will reach 175% by 2015. Through the higher taxes in the Bill and his Budget’s spending cuts, the Chancellor is transferring the burden of debt from the state to private individuals. As the International Monetary Fund’s recently published global economic outlook report finds, the global recovery remains unbalanced. High unemployment is likely to persist in the coming years. In the European Union economy, an underlying low rate of potential output is the biggest problem. The managing director of the IMF, Dominique Strauss-Kahn, noted in a speech at the Brookings Institution on 13 April that the global economic crisis had cast 30 million people into unemployment, and that over 200 million people across the world are currently seeking work. He says:

“The jobs crisis is hitting the young especially hard. And what should have been a brief spell in unemployment is turning into a life sentence, possibly for a whole lost generation.”

He further states that

“fiscal tightening can lower growth in the short term, and this can even increase long-term unemployment, turning a cyclical into a structural problem. The bottom line is that fiscal adjustment must be done with an eye kept keenly on growth.”

Those are wise words indeed.

The Office for Budget Responsibility’s upward revision of projected unemployment for the remainder of this Parliament shows that there is little in this Bill to help tackle youth unemployment and to stop it nearing 1 million and surging over 20%. Indeed, the Government are cutting investment allowances to small and medium-sized enterprises by £2.6 billion in total, which will hurt manufacturers, particularly in the automotive and renewable sectors, and will most benefit high-profit but low-investment companies. As Richard Koo of the Nomura Research Institute in Tokyo says, drawing on his analysis of the Japanese economy in the 1990s, many businesses may remain in a “balance sheet recession”, preferring to pay down debt and protect cash flows and yet shun investment.

Despite this Bill’s lifting of some poor families out of income tax, there are cuts in child tax credits and child care support, and an increase in the withdrawal rates for tax credits to 41%. So the £48 per year which the Chancellor is giving through the increase in the personal allowance in income tax is more than exceeded by the increases in VAT, lower tax credit entitlements, and the slashing of child care support by 10%.

By the decisions the Chancellor has made in his Budget and by the tax rises introduced in his Finance Bill, he has boxed himself into a corner, and has made the economy the prisoner of the OBR’s growth forecasts. Missing the target for growth, as has already happened three times in the last year, means less revenue for the Treasury and a higher than expected deficit.

With tomorrow’s publication of the UK quarterly growth figures, we may get more of an idea of whether it was just the snow or, more likely, the Chancellor’s policies that put the economy in reverse in the last quarter of 2010. For output to bounce back from the calamitous fall in the autumn, the growth rate would automatically need to achieve the minimum level of 0.7%. If the OBR is correct in its above-average estimate for 2011, growth in the first quarter would need to fall in at around 1.2% tomorrow for the economy to be in recovery. If it does not, the Government will have to say how far they will be prepared to see unemployment rise before they decide to change course. It is not too late for a plan B, and I urge the Chancellor to take on board the advice from Gus O’Donnell and the Institute for Public Policy Research on a plan B and a slower rate of deficit reduction.

This Finance Bill is an example of faith-based economics and cynical politics from a Chancellor in whom this country is losing its belief. Britain deserves better, and only with alternative fiscal and taxation policies will we have a fairer way to sustainable public finances and rising living standards for the British people once again.

22:09

[Mr David Hanson (Delyn) (Lab)]

The amendment before the House declines to give the Finance Bill a Second Reading for simple reasons: because it will increase unemployment, it fails to tackle higher petrol prices, and it lets off the banks with their bonus tax being lower than it need be. The Bill will fail the British people and we will oppose it this evening.

We have had a good debate, in which we have brought out the differences between the Government and the Opposition on these key issues. There has been some agreement, for example, as the hon. Members for Watford (Richard Harrington) and for Elmet and Rothwell (Alec Shelbrooke) said, on the need to tackle the deficit. We do agree that we need to grow the economy and to reduce unemployment, and we should do those things in a fair and equitable manner.

However, the differences between the Government and the Opposition are wide and deep, and during the passage of this Bill they will be shown to be based on principle. The backdrop to the Bill is important and cannot be spoken about in isolation—indeed, hon. Members have not done that today. From January, VAT increases have cost families with children an average of £450 extra. As my hon. Friend the Member for Edinburgh South (Ian Murray) has said, we face cuts to the amount parents can claim on child care. We face child benefit being frozen for three years and the scrapping of the baby element of child tax credits, which is worth £545 a year to people. Benefits are being set on a permanently lower path of inflation, and basic and 30-hour elements of the working tax credits are being frozen. The second income threshold for family elements of tax credit is being cut and the withdrawal rates for tax credits are being increased to 41%.

This Government are clearly determined to hit families hard, and this Budget and Finance Bill do nothing to take those issues forward in a positive way. The Government’s argument is that we need to tackle the deficit. We agree with that and we had a plan to tackle the deficit by cutting it over four years—the Department in which I was a Minister in the previous Government planned to save £1.4 billion. This Government’s measures go too far and are too deep, and they will increase the debt in this country considerably through the levels by which unemployment and benefit expenditure will increase.

The Labour Government had a plan to lower the debt, and before the worldwide crash our national debt was lower than that of America, France, Germany and Japan. The actions of the banks caused the recession and the deficit, and without the support of active government, from which this Government seek to withdraw, we would have faced even more unemployment and even more house repossessions. We are clear that these cuts are too deep and that they are being made too fast, as my hon. Friend the Member for Walthamstow (Stella Creasy) said.

If the Minister does not wish to agree with me, perhaps he will agree with the Member who said:

“If spending is cut too soon, it would undermine the much-needed recovery and cost jobs.”

He also said:

“Do I think that these big cuts are merited or justified at a time when the economy is struggling to get to its feet? Clearly not.”

Those things were said by the leader of the Liberal Democrats one year ago this very week. He called for no cuts in public spending. He wanted cuts to be not so deep and not so fast, but he has changed his tune now.

We accept that getting the deficit down is important, and what happens to jobs and growth in our economy is crucial. That is why when last year the economy started growing, unemployment was falling. But cuts in public spending are now hitting not only people in the public sector and families and people who need support; they are hitting the private sector and private sector businesses harder. I heard the hon. Member for Newton Abbot (Anne Marie Morris) say that she was concerned about the private sector. This morning, I visited businesses in Ipswich and I was told that because of the fear of public spending cuts and the actual public spending cuts people were not buying things in the shops any more. I was told that the cuts were too deep and too fast, and that they were damaging the growth in our economy as a whole.

Last year’s Budget should have contained a bank bonus tax creating more than 100,000 jobs, building 25,000 affordable homes, rescuing construction apprenticeships and boosting investment in businesses, but this Government have failed to take those actions. As well as cancelling the fuel duty rise—we did the same in government when oil prices were rising—the Government should have reversed the VAT rise on petrol, which adds £1.35 to the cost of filling a 50-litre tank. The 1p fuel duty cut in the Bill does not go anywhere near far enough towards offsetting the increase in VAT that the Chancellor imposed in January this year.

The Finance Bill contains no real plan for growth. In clause 10, the Government cut Labour’s proposed allowances for manufacturers by £75,000, using that money to give a corporation tax cut that disproportionately benefits the banks when we could have had more investment in research and development and tax relief for small businesses as a whole. On living standards, the rise in allowances given to people in the Bill is taken away by the VAT increase in January. The House of Commons Library has shown that families will be £1,700 a year worse off because of the Government’s tax and benefits changes.

We know that the Government have not done enough to help drivers. We have seen the planned fuel duty rise delayed, which Labour Governments did when world oil prices were rising, but the Chancellor has done nothing to help individuals by increasing VAT, which has added to the cost of filling up tanks with unleaded petrol over the past three months. The cut in fuel duty gives only 1p back, while the VAT rise has cost almost 3p per litre.

We know that this year there have been tax cuts for the banks. Labour said we wanted an additional bank levy from the Government this year and that we should have repeated the bank bonus tax and raised at least £2 billion so that the banks did not get a tax cut and so that funds were provided to invest in jobs, growth and housing. The Government have said no. In future years, the Government should increase the bank levy to ensure that the banks continue to pay their fair share of tax, so that taxpayers are not left to pick up the bill for the banking crisis.

Finally, clear concerns have been expressed by my hon. Friends the Members for Linlithgow and East Falkirk (Michael Connarty) and for Aberdeen North (Mr Doran) and by the hon. Members for Dundee East (Stewart Hosie), for Waveney (Peter Aldous) and for East Antrim (Sammy Wilson) about the investment proposals for North sea oil and the risks that the Government are taking. At the very last minute, with no consultation, the Government have made proposals to tax North sea oil still further. Oil and Gas UK has criticised the Government’s decision and uncertainty has been expressed from organisations across the board about this hasty move. The Government took the decision at the very last minute with no consultation and next Tuesday we will seek to discuss the matter in more detail and to ensure that we get further consultation.

The Government are cutting too far and too fast and the Finance Bill does nothing to help gain confidence, increase employment or secure the future for our society as a whole. The Government have implemented front-loaded cuts, which are hitting vital services and families, while giving the banks a tax cut. The Government need to think again about the devastating impact of their policies on our economy. We shall scrutinise the Bill in Committee and we shall undoubtedly welcome certain aspects of it in due course. Tonight, however, I ask my hon. Friends to vote for the amendment and against the Bill. The Bill will damage our economy, it does nothing for our society and I urge my hon. Friends to reject it.

22:18

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

We have had a very useful debate this evening with a number of contributions. In particular, I thank my hon. Friends the Members for Newton Abbot (Anne Marie Morris), for Watford (Richard Harrington) and for Waveney (Peter Aldous), who spoke about the measures for small businesses in the Budget and the Finance Bill, my hon. Friend the Member for Bristol West (Stephen Williams), who brought his expertise in tax matters to the debate in a wide-ranging speech, my hon. Friends the Members for North East Somerset (Jacob Rees-Mogg) and for Elmet and Rothwell (Alec Shelbrooke), who, in their different—but both eloquent—ways, set out how a Government must live within their means, and my hon. Friend the Member for West Suffolk (Matthew Hancock), who brought his economic expertise to the fore by highlighting the circumstances in which we find ourselves.

I remember our debate on last year’s Finance Bill following the June Budget, and this has been a somewhat shorter debate. I listened with great care to the speech of the hon. Member for Wallasey (Ms Eagle) and I think that only two of her 26 minutes were devoted to the Finance Bill. I wonder whether the Labour party’s interest in these matters is diminishing. If so, I would like to think that that is because much of the content of the Bill is uncontroversial, and because we have relatively few areas of contention. The Bill has been widely welcomed. It promotes growth alongside fairness, encourages investment and responsibility and provides for those who need help by supporting a more balanced economy on the basis of a credible and sustainable position.

We have set out our plans to reduce corporation tax—by 2p this year—moving us towards having one of the most competitive tax systems in the world once again, and meeting our objective of having the most competitive tax regime in the G20. We have set out our reforms of the taxation of foreign branches and our interim changes to the controlled foreign companies rules, which are resulting in companies looking to move back to the UK, not away from it. Britain is open for business again. We have set out our plans to double the amount of entrepreneurs’ relief to £10 million, and we have increased the research and development tax credits for small and medium-sized enterprises to 200%. Clause 42 increases the relief available through the enterprise investment scheme to 30%. Of course, tax rates matter as much to small companies as to large ones. Last year, we announced that instead of increasing the small profits rate we would cut it, and clause 5 reduces it to 20%.

Clause 1 increases the personal allowance by £1,000, which is the largest ever increase. In doing that we are removing 800,000 people from income tax altogether, as a step towards meeting our objective of a personal allowance of £10,000. Indeed, we announced in the Budget further measures toward achieving that objective.

Although supporting business is a necessary part of all this, it is important that the sectors with circumstances on their side contribute sufficiently to helping society. That is why we have increased the supplementary charge on profits from oil and gas extraction in the North sea. That will fund the 1p cut in the fuel duty that my right hon. Friend the Chancellor announced in the Budget and will delay the increase legislated for by Labour. As of 1 April, average pump prices have been approximately 6p a litre lower than they would have been had we continued with the previous Government’s escalator.

On VAT—this point was ignored entirely by the shadow Chief Secretary—it is remarkable that the shadow Chancellor still wants to talk about reducing VAT on fuel, which would take six or seven years to negotiate if it could be achieved at all. There is an easier way of cutting tax on fuel: it is by reducing fuel duty, and this Government have done it.

There are long-term proposals in the Bill dealing with annuitisation, the national employment savings trust and the taxation of pensions. At the other end of the scale, clause 40 introduces individual savings accounts for children, and my right hon. Friend the Chancellor has announced that support will be available for looked-after children through junior ISAs.

We are providing for a better environment. Clause 77 introduces a carbon price floor, which will provide the incentive for billions of pounds-worth of investment in cleaner sources of energy. The fact that we have ensured that the climate change levy maintains its real value adds to that incentive.

The Bill also helps to address other issues. The new duty on high-strength beers will help to tackle problem drinking by adding 25p to the price of a can of super-strength lager. That is coupled with a reduction in the duty on lower-strength beers to help to encourage the more responsible consumption of alcohol. I cannot promise my hon. Friend the Member for Elmet and Rothwell that there is anything in the Bill on draught beer, although we note his comments. I can only suggest that as he is dieting for his wedding, perhaps he should stay off the draught beer for another month or so. On behalf of the whole House, I wish him well. It is clearly the wedding of the year, and everyone will be looking forward to it.

We have set out to have a better tax system in the way that we make tax law, through a more deliberative and consultative approach, with greater emphasis on simplification. First, the corporate tax road map published last year set out changes to the regime. By introducing the changes to foreign branches and controlled foreign companies, the Bill takes the first steps alongside the corporate tax road map. Secondly, we published the majority of clauses in draft in the autumn. The Government have allowed proper time for better developed proposals and consultation. More than 200 responses were received on the draft clauses. Through the tax professionals forum which we set up, I received a large number of positive comments on our decision to consult.

[Malcolm Wicks]

Will the hon. Gentleman give way?

[Mr Gauke]

If the right hon. Gentleman will forgive me, I should like to proceed. The House has already sat quite late.

[Malcolm Wicks]

rose—

[Mr Gauke]

The tax system needs to be simpler. Simplicity reduces the burdens on businesses—[Hon. Members: “Give way!”] Let me finish this point, then I will give way to the right hon. Gentleman. Simplicity reduces the burdens on businesses, individuals and HM Revenue and Customs. The Office of Tax Simplification set up last summer has already provided the first in a series of recommendations, and the Bill takes forward the first of those recommendations by removing tax reliefs. We will introduce further abolitions next year, after a period of consultation.

[Malcolm Wicks]

I am grateful to the Minister for so graciously giving way. He has spent most of his speech listing the contents of the Bill. Will he find time soon to respond to the debate?

[Mr Gauke]

I am not sure that it is necessarily wrong to describe what is in the Bill when we are debating that matter. I know it is not an approach that the shadow Chief Secretary took.

The Bill sets out our objectives. We need a competitive tax system. We must respond to the needs of the British people, who are facing higher fuel prices. The Government have been able to respond. Most of the debate today has not been about the specific measures; it has been about the broad approach. The Government believe that the structural deficit needs to be eliminated by the end of the Parliament. That position has the support of the International Monetary Fund, the OECD, the CBI, the British Chambers of Commerce, the European Commission, the World Bank, the Governor of the Bank of England, Tony Blair, credit rating agencies, the leading bond traders, the Institute for Fiscal Studies and a host of business leaders.

It is the lonely position of the official Opposition to believe that the biggest problem facing the UK economy is that the Government are not borrowing enough, but what have we seen in recent weeks? We have seen the likes of Portugal, after its Parliament could not reach agreement on a credible deficit reduction package, having to seek a bail-out. We have seen credit rating downgrades for the likes of Portugal and the Republic of Ireland. We have seen long-term interest rates rising, and we have seen, in response to the situation across the world, President Obama setting out a deficit reduction plan that is faster than that proposed by the Government.

It is clear that this is no time to be complacent about the dangers to our economy from failing to reduce the deficit. To abandon our plans for fiscal consolidation, as advocated by the Opposition, would risk a credit rating downgrade. It would put at risk our long-term interest rates and even put us back in the danger zone of a sovereign debt crisis. Those are not risks that the Government are prepared to take. That is why, in the Budget and the Bill, the Government remain determined to stay on course. I commend the Bill to the House.

Question put, That the amendment be made.

22:29

Division 256

Ayes: 215

---

Labour: 203
Scottish National Party: 4
Democratic Unionist Party: 3
Plaid Cymru: 3
Independent: 1

Noes: 313

---

Conservative: 272
Liberal Democrat: 40

Question accordingly negatived.

Question put forthwith (Standing Order No. 62(2)), That the Bill be now read a Second time.

22:43

Division 257

Ayes: 315

---

Conservative: 273
Liberal Democrat: 41

Noes: 208

---

Labour: 198
Scottish National Party: 4
Democratic Unionist Party: 3
Plaid Cymru: 3

Bill read a Second time.

Ordered,

That—

(1) Clauses 4, 7, 10, 19, 35 and 72 be committed to a Committee of the whole House;

(2) the remainder of the Bill be committed to a Public Bill Committee; and

(3) when the provisions of the Bill considered by the Committee of the whole House and the Public Bill Committee have been reported to the House, the Bill be proceeded with as if it had been reported as a whole to the House from the Public Bill Committee.—(Mr Vara.)

Committee tomorrow.

Ordered,

That the Finance (No. 3) Bill Committee shall have leave to sit twice on the first day on which it meets.—(Mr Vara.)

Business without Debate

Tuesday 26th April 2011 Commons Chamber

European Union Documents

Motion made, and Question put forthwith (Standing Order No. 119(11),

Short Selling and Certain Aspects of Credit Default Swaps

That this House takes note of European Union Document No. 13840/10 and Addenda 1 and 2, relating to the draft Regulation on Short Selling and certain aspects of Credit Default Swaps, and No. 7379/11, relating to the corresponding Opinion of the European Central Bank; and supports the Government’s position that proposals should not impact market efficiency and liquidity, in particular in relation to sovereign debt.—(Mr Vara.)

The Speaker’s opinion as to the decision of the Question being challenged, the Division was deferred until tomorrow (Standing Order No. 41A).

Removing Cross-border Tax Obstacles

That this House takes note of European Union Document No. 5037/11 and Addendum, relating to the Commission Communication on Removing cross-border tax obstacles for EU citizens; recognises the Government’s continuing commitment to strengthening the single market while upholding the principles of tax sovereignty and subsidiarity; shares the Government’s view that any resulting legislative proposals should be examined carefully for their implications for UK tax policy and competence; and supports the Government’s position that decisions on tax proposals within the EU should be subject to unanimity.—(Mr Vara.)

Question agreed to.

[Mr Speaker]

Order. Just before the hon. Member for Milton Keynes South (Iain Stewart) gets under way, I appeal to Members leaving the Chamber to do so quickly and quietly so that he gets a fair hearing.

Funeral Payments

Tuesday 26th April 2011 Commons Chamber

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

22:58

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

I am grateful for the opportunity to bring to the attention of the House the issue of funeral payments and to seek some answers from the Minister.

I sought this debate following a direct request from a constituent of mine, Ms Teresa Evans, who contends that she was not given good advice following the tragic death of her 20-year-old son, Boyd Evans. I have raised the issues with the Minister via correspondence and written parliamentary questions, but they have not been dealt with to my constituent’s satisfaction, which is why I wish to raise them on the Floor of the House.

I should say at the outset that my constituent is not seeking personal recompense for her situation, but rather wishing to prevent similar problems being encountered by others. Newly bereaved people can be responsible and in control only when they are afforded sound information to make well-informed decisions.

Let me start by providing the background to the case. Teresa Evans’s son, Boyd, was killed as a result of passenger injuries sustained in a car crash in Staffordshire—some distance from his home in Milton Keynes—in 2006. Quite apart from having to deal with the emotional trauma of losing her son, my constituent also had to deal on her own with the practicalities of the funeral arrangements. She is a lady of very modest means. She had no money when she lost her son, so applied for a funeral payment and overdrew at the bank to provide a funeral. In her own words:

“It wasn’t a lavish funeral but a dignified one. In terms of distance and the cost per mile allowed from the social fund payment, I could not claim a total refund for the fee to return my son back to Milton Keynes from where he died in Staffordshire. The inescapable charge was £220, but despite an appeal to the DWP I was only paid £170. This left a shortfall of £50”.

However, she later found out that despite her son undergoing a post-mortem, she was within her legal rights to collect her son in her own vehicle and would have done so had she been aware of this at the time.

My constituent was also informed by the undertakers that the cheapest coffin available cost £680. Subsequently, she found that she could have bought the same coffin online for considerably less or buried her son in a shroud, which she had the legal right to do. In addition, had someone told her that she could still claim a funeral payment without using an undertaker, she would have done this, especially because she claims that the undertaker misled her with false information resulting in her not being able to return her son to his home to lie in wait for his burial. She would have done all these things had she been aware of her legal rights. This has led to her creating a campaign for the rights of newly bereaved people to be made known to them in sudden and unexpected circumstances.

Four years after her son was buried, my constituent discovered that no one had informed her that she could have recovered the fees for the burial rights to her son’s grave within three months of the funeral. If the system had worked properly, she would have received an additional £304 for the burial rights. Consequently, she was forced to surrender her life insurance policies to buy the burial rights, and she feels aggrieved that no one is held accountable for this action. She believes that the Department for Work and Pensions is overly reliant on the funeral industry to provide guidance to the relatives of a person who has died, specifically on what fees can be recovered. She claims to have evidence that proves that undertakers point applicants of a funeral payment to Jobcentre Plus for guidance. In addition, she claims that the National Association of Funeral Directors had no knowledge of the most technical information in existence—the DWP booklet SB16, which the Minister has stated is the most comprehensive guide. That this piece of literature is known only to some professionals would suggest that the bereaved may often not be aware of the full extent of their rights.

My constituent has also commented to me that a bereavement charity, the Alice Barker Trust, identified the same problem a long time ago. She is calling for much clearer guidance to be made available on the options open to relatives, particularly given that they will be in a highly emotional state. As the literature for the applicant may be understood only by those with technical knowledge, it needs to be written in plain language more readily intelligible to anyone. At present, the DWP relies upon undertakers to explain the rules to eligible claimants, resulting in the sort of problems experienced by my constituent. This generates unnecessary mystery and dependency, when we should be promoting education, self-help and self-reliance. A very simple and no-cost solution would be to amend the available literature in both print and online formats, making obvious what fees can be paid by the DWP in relation to the funeral, costs for opening the grave and burial rights for a fixed number of years.

I have already raised Teresa Evans’s case and her request for action with the Minister, but she has been dissatisfied with the response and with what she claims to be a lack of urgency in addressing the situation. She has therefore asked me to pose the following questions to the Minister. First, can he state, from records for the last financial year, how many claimants received payments for burials and what proportion of that number also received payments for what are technically known as burial rights, so they did not use what are known as pauper graves? Secondly, will the Minister consult the Alice Barker Trust to revise the wording of the advice that the DWP produces for printed, internet and other information? Thirdly, does the Minister agree that had the wording suggested by the charity been used before Boyd Evans was killed in 2006, his mother would have received her full entitlement to a funeral payment and would not have had to cash in her life insurance policies to cover the burial rights to her son’s grave? Fourthly, when it comes to the big society and developing strong communities, does the Minister agree that it is essential to empower all claimants in order to help them act independently and responsibly?

Nothing can bring Boyd Evans back, but his mother is hoping that her experience will result in the Department for Work and Pensions learning lessons, so that others do not encounter unnecessary emotional turmoil and financial hardship. Once again, Mr Speaker, I am grateful for the opportunity to raise this matter on the Floor of the House.

23:06

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

I congratulate my hon. Friend the Member for Milton Keynes South (Iain Stewart) on securing this debate and on raising these difficult and important issues in a measured, succinct and sensitive way.

People sometimes say, “What’s the point of these Adjournment debates?”, because there is no vote at the end of them, or, “Does anything ever change?” One thing that these debates do is, quite properly, require Ministers to focus on the issue that has been brought before the House. In response to this debate being called, I have looked at my hon. Friend’s constituent’s website. As he well knows, her tragic circumstances and the death of her son five years ago led her to campaign on these issues. She has her own website, which I have looked at today. I pay tribute to her for the way in which she has sought to turn her tragic circumstances into something more positive, so that others do not have the same difficult experiences that she did in dealing, as I understand it, not just with funeral grants and the DWP, but with a range of other public bodies and organisations. The way Ms Evans has pursued the issues over the following years is enormously to her credit. I hope that I can offer my hon. Friend some reassurance this evening that that campaigning has led to changes, and that the situation that someone who has been bereaved now encounters is a good deal better than it was five years ago. Clearly there is always room for improvement—we will continue to look at that—but we have made changes even this month in response to the points that his constituent has raised with us, which I will set out more in due course.

It might be worth briefly putting on record some background to how the social fund funeral payments system works, because it is not always well understood. Essentially, the system is designed for those on a low income. The presumption is not that the state will pay for funerals for all people—or indeed pay for the full costs of funerals—but that it will make a significant contribution for people in receipt of income-related benefits and tax credits. The idea is to provide a contribution towards the cost of a simple, respectful, low-cost funeral. The payment is in two parts. We, the DWP, will pay in full the costs of a cremation or burial, including the purchase of a grave with exclusive burial rights. That is a point to which I will return, because I know that it was important in Ms Evans’s son’s case, and it is something that might not have occurred to any of us unless we were faced with that situation. I can well imagine that it must have been very difficult to discover some time after she had buried her son that she did not have exclusive burial rights. I fully accept that we must ensure that that situation does not arise again.

The scheme meets those costs in full, which can vary quite considerably between different parts of the country. In addition, we will make a maximum payment of up to £700 for other costs, such as the coffin, church and the funeral director’s fees, if appropriate. I will return to whether one has to have a funeral director—which one does not—and to making people aware of that fact and how we will take this forward. Over the months, I have received a number of letters from hon. Members who have been contacted by funeral directors in their constituencies who have made the point—entirely accurately—that £700 does not cover the full cost of a funeral. We accept that; we do not dispute it. The typical total amount that we are paying is about £1,200, which includes the other costs plus up to £700.

There is a presumption that many people will take out funeral plan insurance, because they want to ensure that they are covered and do not want to leave a financial burden for their heirs. If that has not happened, many families will meet the costs themselves, but we also need to ensure that a safety net is in place. We also want to ensure that there is additional provision for those people for whom the £700 cap is a barrier. We are therefore taking powers in the Welfare Reform Bill that is now going through the Commons that will, for the first time, bring funeral costs within the scope of the budgeting loans system. I raised this matter before Christmas in a meeting with the National Association of Funeral Directors, and with the all-party parliamentary group on funerals and bereavement. They very much welcomed the change, saying that it was a further provision that would help to ensure that people who were very short of money at a difficult time would have sources of finance available to help them to meet the costs of a decent burial and to ensure that funeral directors’ proper costs were reimbursed through the individuals. The measures will therefore be welcomed. We also need to ensure that the way in which we respond to people is correct and helpful, and that it makes life easy for them at this difficult time.

I shall go through the questions that my hon. Friend has raised and try to give him what information I can. I shall also tell him what we have changed as a result of his constituent’s campaigning. He asked for a factual breakdown of the numbers of people who received financial support towards exclusive burial rights. Unfortunately, the way in which the information is held does not allow us to provide such a breakdown, as I think I have already indicated to his constituent in writing. I can confirm, however, that in the last full financial year, 2009-10, there were 39,000 funeral payments at a total cost of £47 million. We cannot give a more detailed breakdown, because of the way in which the information that my hon. Friend has requested is stored.

The information and guidance that goes to relatives is at the heart of the issues that my hon. Friend has raised. In Ms Evans’s case, the information that came to her from the funeral director was incomplete, for whatever reason, and led to her making choices that, had she been fully informed, she would have made differently. I have made some inquiries into where the right information should come from, and the key is the fact that, on becoming bereaved, the family or its representatives will register the death. That is the point at which we aim to ensure that people get the relevant information. We will not have to rely on funeral directors to provide it. Indeed, there might not be a funeral director involved. The Government as a whole want to ensure that the information gets through to people at the point at which they register the death.

This is already being rolled out more or less nationwide, and we will continue to develop this “tell us once” service. The idea is to allow customers to report a birth or a death to multiple central and local government departments, agencies and services just once. This will help to reduce some of the complexity for customers at this particularly difficult time. The service is currently offered on a face-to-face basis by a number of local authorities, and we expect it to become a national service covering about 90% of local authorities by the end of this year. The remaining authorities will, in many cases, be remote ones for which this might not represent the right mix of services, but it will be pretty much a national service by the end of the year.

The idea is that a person can have a face-to-face session with someone from the local authority, or, if they are a DWP customer, as many people are, they can have a telephone session with someone from the Department. That one conversation will enable us to end benefits that no longer need to be paid, as well as triggering the possibility of applying for other benefits, including bereavement benefits and funeral payments. That is the crucial point. In the phone conversation with our bereavement service, for example, all the questions about what is covered and what payments are available can be answered. Our member of staff will have the latest information.

My hon. Friend has mentioned the technical information relating to what is covered and what is not, and we will have all that information to hand. In fact, the bereaved person will not have to fill in a form at all. They will be able to give all the information over the phone, which will constitute a claim that can be progressed pretty quickly. Speed is obviously of the essence, because people need to feel confident that, if they are eligible, the payment will be made. We want to do anything we can to remove delay or anxiety at this difficult time.

The “tell us once” process is being rolled out, as I say, across the country. To clarify, with the informant’s consent, information about the deceased, a surviving spouse or partner and the people dealing with the estate can be shared with up to 24 different benefits and services. It is going out far and wide. At the moment, 43 local authorities offer a service, and I believe my hon. Friend’s local authority, the Milton Keynes unitary authority, is due to offer its “tell us once” service from July this year. That will be an important step in the right direction.

My hon. Friend raised the issue of forms and paperwork. I can tell him that this month, in response to some of the points that his constituent raised with us, we have made a number of changes to the claim form for the funeral grant. Let me briefly run through them, as she would be interested to know what those changes are.

There are two documents. The first is a note sheet that accompanies the funeral payment application, and we have made three changes to it. On page 6 of the form, we have added a bullet point that says people can send

“evidence of the costs incurred if the funeral arrangements were made without using a funeral director”.

That is one of Ms Evans’s points—that people do not always realise that they do not have to use one and do not always realise that they can get their costs reimbursed if they have not used one. We have made it explicit that evidence of costs can be provided if a funeral director has not been used.

On page 7, we say, and it is worth reading into the record:

“Although most people use a funeral director to make the necessary arrangements, you may have chosen to make the…arrangements without using a funeral director. A funeral payment can be made whether or not you have used a funeral director. If you have arranged the funeral independently, you will have to provide evidence of the costs you have incurred.”

Anyone reading the notes will get the message quite quickly that they have choices and can choose how they want to proceed.

The third change we made to the explanatory notes is in the bullet point list of what can be included in the funeral payment. The second bullet point refers to

“the cost of opening a new grave and burial costs”,

and we have now added

“including any exclusive right of burial fee”.

That deals with Ms Evans’s point that she did not get the money because she did not claim it at the time because she did not incur it at the time because she did not realise the distinction. We hope that if we can get that information out at the start, the figure of about £300 or so, which my hon. Friend mentioned, would be covered in full and not be subject to the cap. We make that explicit in the notes to the form.

As to the form itself, we have made a couple of changes. On page 15, we inserted a new question:

“Have you used a funeral director to arrange the funeral?”;

and on page 20, the wording about making a payment has been amended to cover payments to claimants

“if you have not used a funeral director”.

I hope that those incremental changes—I know that Ms Evans has corresponded with my officials and others about this for some considerable time—will help. The forms are changed up to twice a year—we try not constantly to change them—and the April change has just taken place. It incorporates the important points that my hon. Friend’s constituent raised.

[Jim Shannon (Strangford) (DUP)]

I believe that the figure of 45 or 46 local authorities was mentioned. Is it the Minister’s intention to give this information out to all local authorities across the whole of the United Kingdom, including Northern Ireland? Does he also intend to ensure that the explanation given by the local authority is based on this information so that authorities can explain to people exactly what they have to do? I think that the explanation is important.

[Steve Webb]

I am grateful for that question. I will clarify the point about the scope. The idea is that local authorities would respond in a way that is tailored to their local circumstances. That is why some local authorities will adopt a particular local response, perhaps if their area is strongly rural. We also think it important, however, to give people the possibility of a face-to-face encounter. I will get back to the hon. Gentleman about whether the scope will be extended to include Northern Ireland. I am certainly aware that we are talking about the whole of Great Britain, but I will write to him about the applicability to Northern Ireland. The idea is that local authority folk can, to use the jargon, “wrap around” other support services at this important time. The DWP is concerned with bereavement payments and funeral payments, but obviously people may want or need a host of other services at the time of a bereavement. We want to ensure that local authorities can provide all the support that people need through a single point of contact. That can be done face to face, but we will also deal with specific DWP issues through the bereavement service.

My hon. Friend mentioned the Alice Barker Trust, and we are grateful for its input. It has worked closely with Ms Evans on the wording of the forms. We will certainly continue to consider its suggestions, although I do not want to give the impression that all the existing literature is rubbish. We carry out surveys and ask people what they think of the literature that they were given. We have, for instance, asked people—at an appropriate time—what they thought of a leaflet called “What to do after a death”, of which many Members will have heard. We found that 97% of people considered the leaflet to be very or quite helpful in answering their questions, and 95% agreed that it was easy to find the information that they wanted in it. There is good material out there, but I accept that more can always be done.

My hon. Friend asked about the way in which information was communicated to his constituent. Obviously I cannot comment in detail on what happened five years ago, but it is clear that the £300 was not paid because it was not claimed, and it was not claimed because exclusive right of burial was not part of the funeral. I hope that I have explained how we will try to ensure that people understand that they can claim the full amount, and that the unfortunate thing that happened to Ms Evans will not happen again.

Let me say something about funeral payment law. We provide general information, and, as my hon. Friend said, SB16 contains encyclopaedic guidance to the social fund as a whole, but we also provide leaflets which, inevitably, cannot be exhaustive. We have tried to strike a balance. Although a leaflet that covers every possible combination of circumstances is very useful, it may be off-putting for people who do not receive the key messages that they need. On the Directgov website we have tried to provide a wide range of information on what to do following a death, including arranging a funeral and registering a death. The site also lists organisations that offer help and advice following a bereavement. My hon. Friend mentioned the big society. We want to “signpost” people towards the many charities and voluntary organisations that provide effective support for people at this difficult time.

[Tessa Munt (Wells) (LD)]

If local authorities are to be involved, might it be suggested that the electoral register should be altered automatically? On Saturday I knocked on a door and found someone who had lost her husband three or four months earlier. She was still receiving letters addressed to her husband, because she had completely forgotten to let the district council know that he had passed away. Altering the register automatically would save a great deal of distress to people like that lady.

[Steve Webb]

My hon. Friend is right. I think that we have all encountered such examples when canvassing because the electoral register is out of date. We may have written letters to deceased people, and perhaps caused distress to relatives. The “tell us once” system would deal with that. I do not think that local authority electoral services are explicitly part of the process, but I will convey what my hon. Friend has said to our right hon. Friend the Deputy Prime Minister, who I believe oversees electoral matters.

We have come a long way. The Department’s bereavement service was fully rolled out in March 2011, and we have recently surveyed customers who have used it. They have ranked it

“above many other well known organisations that customers have to deal with when reporting a death”.

One customer said:

“I ...was surprised that a Public Service was that good and sympathetic and the staff were well trained. It really made a difference to something I was dreading. I was treated like a human being”.

Another said:

“I was impressed that it was all done in one call, it was also a huge sigh of relief for me”.

Let me give one final quote:

“We spoke about help with funeral costs and she completed the form there and then for me. I couldn’t have done this on my own.”

I am most grateful to my hon. Friend the Member for Milton Keynes South for raising this set of issues. They are clearly vital and all our constituents will face them at one point or another in their lives. Ms Evans faced a very difficult and tragic situation five years ago, which was not helped by her dealings with the Department for Work and Pensions or other Government bodies. I pay tribute to her for taking the issues forward in such a constructive way, and I hope I have reassured my hon. Friend that we have listened and responded.

Question put and agreed to.

23:25

House adjourned.