House of Commons

Tuesday 28th June 2011 Commons Chamber

Tuesday 28 June 2011

The House met at half-past Two o’clock

Prayers

Tuesday 28th June 2011 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Tuesday 28th June 2011 Commons Chamber

The Secretary of State was asked—

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

1. What steps he is taking to reduce the sums spent from the public purse on repeated appeals in immigration tribunals.

[Gordon Henderson (Sittingbourne and Sheppey) (Con)]

11. What steps he is taking to reduce the sums spent from the public purse on repeated appeals in immigration tribunals.

[The Parliamentary Under-Secretary of State for Justice (Mr Jonathan Djanogly)]

As announced in our response to the consultation “Reform of Legal Aid in England and Wales”, published on 21 June, we are removing most immigration cases, including appeals, from the scope of legal aid. We are also removing legal aid for certain repeat judicial reviews in immigration and asylum cases, subject to certain exceptions. We expect those measures to save more than £20 million a year. The Government have also consulted on introducing fees for appeals to the immigration and asylum chamber of the tribunal.

[Dr Coffey]

I thank my hon. Friend for that answer. Many of my constituents are becoming increasingly exasperated at the fact that some solicitors seem to exploit changes in circumstances and decisions, such as those on article 8 of the Human Rights Act 1998, simply to string out cases for as long as possible. What is he doing to ensure that legal aid is spent appropriately? What conversations has he had with the Immigration Minister on the reform of the immigration decision process?

[Mr Djanogly]

I can confirm that we are removing legal aid from most immigration cases. That will mean that the taxpayer is no longer funding those cases, which we think are relatively low priority. My hon. Friend has also spoken about cross-departmental co-operation, and we have had a number of discussions with the Home Office about our legal aid proposals, which go in the same direction as its proposals—for example, on making changes to the rules on how relatives of migrants are allowed to come into the UK. That close working will continue.

[Gordon Henderson]

Does my hon. Friend agree that the coalition Government inherited an immigration appeals process that is slow, unwieldy and routinely abused by applicants and their legal advisers? Does he further agree that the system needs a root-and-branch overhaul to make it fit for function?

[Mr Djanogly]

A number of the consultations did address this issue, including those with the judges, so we are acting to contain an avenue for abuse which my hon. Friend identifies. The Government intend to remove legal aid for immigration and asylum judicial reviews, where there has been an appeal or judicial review to a tribunal or court on the same issue or a substantially similar issue within a period of one year, as well as for judicial reviews challenging removal directions, subject to certain exceptions.

[Kate Hoey (Vauxhall) (Lab)]

As we are talking about immigration appeals and judicial reviews, what message does it send out to the law-abiding member of the public when someone such as Phillip Machemedze, that appalling Zimbabwean who was responsible for torturing, killing and doing dreadful things in Zimbabwe, is told by a judge that he cannot be sent back because he might be tortured or his human rights might be affected? Surely immigration and asylum is about people who have behaved well and are running away from tyranny, and not about people who are part of that tyranny.

[Mr Djanogly]

Where human rights are concerned and where someone risks being terrorised in their country of origin—I am not saying that it is right or wrong that they should go back—it is right that they receive legal aid to defend their interests.

[Mr John Spellar (Warley) (Lab)]

2. What discussions he has had with the Secretary of State for the Home Department on steps to remove foreign national prisoners.

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

Home Office and Ministry of Justice Ministers have frequently discussed the issue of foreign national prisoners, and our officials are in regular contact. The removal of foreign national prisoners and offenders awaiting deportation is a mutual priority.

[Mr Spellar]

The Department says that it wants to reduce the prison population. I am dealing with a case where a long prison sentence was rightly given, the tariff has been reached and the UK Border Agency is trying to deport the man, but the Minister is letting the Parole Board block this. What benefit is there to the British taxpayer or the safety of the British public in keeping him here? Can we have some joined-up government on this?

[Nick Herbert]

I can tell the right hon. Gentleman that this is the kind of thing we want to address, and I understand that it is being addressed in the Legal Aid, Sentencing and Punishment of Offenders Bill. We wish to improve our performance on the removal of prisoners. I should point that out that more than 5,000 foreign national prisoners were removed last year. We intend to continue to take every possible step both to reduce the foreign national prisoner population and to remove prisoners from this country.

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

One of the problems with removing convicted foreign prisoners is an interpretation put by the courts on their rights, such as their right to a family life—they are absolute, rather than conditional. What steps are the Government taking to recognise in law that people have rights which can be qualified by their own bad behaviour?

[Nick Herbert]

I am aware of my hon. Friend’s concern and that of the House about this issue and about whether it is appropriate in such circumstances that the removal of offenders is being blocked. I hope that the commission we have announced on the Human Rights Act 1998 will pay the closest possible attention to the operation of the human rights legislation in such cases, because it is in the public interest that we remove foreign national prisoners who have forfeited their right to remain in this country.

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

Can the Minister say how many British nationals are held in foreign prisons, whether he expects them to be repatriated and, if so, what provision has been made in the prison estate to accommodate them?

[Nick Herbert]

I understand from my hon. Friend the prisons Minister that the number is about 2,000. The EU prisoner transfer agreement will come into force in December and will alleviate the position as regards the number of foreign national prisoners in our jails. The principle should be that if someone has committed a serious crime in this country, they cannot expect to remain at the end of their sentence. We seek the removal of prisoners in such circumstances.

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

It is laudable that the total number of foreign nationals in prison has gone down since Labour left office from 11,000 to 10,000, but does the Minister agree that that is 10,000 too many? Is it not time we sent the whole lot of them home?

[Nick Herbert]

I agree with my hon. Friend that we want to make greater progress and that is why we have set out provisions in the sentencing Bill on, for example, conditional cautions, which will be available as an alternative disposal to remove foreign national prisoners in some circumstances if they agree not to return for a period of time. The question of whether foreign national prisoners could serve their sentences abroad relies on the consent of other countries. We are attempting to negotiate more agreements, but even if we no longer need the consent of the offender, we cannot remove them without the consent of the country that receives them.

[Mr Philip Hollobone (Kettering) (Con)]

3. If he will take steps to ensure that judges and magistrates are informed of incidents of reoffending of each offender they have sentenced.

[The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke)]

We have begun work to improve access to local criminal justice statistics. For example, criminal justice and sentencing statistics are now broken down to court level and are available online. In terms of individuals, pre-sentence reports provide the court with details of a defendant’s offending history and compliance with any previous sentences.

[Mr Hollobone]

That is not quite what I am after. Although it is important to have judicial independence, surely it is not beyond the wit of the Department that each judge and each magistrate should be given an annual report card on the effectiveness of their sentencing decisions. If they have given out a string of sentences and the convicts have reoffended regularly, that judge or magistrate will know that something is wrong with their approach.

[Mr Clarke]

As I said, we have begun work, and that is certainly an interesting suggestion. A massive amount of data would be involved in providing every judge and magistrate with full information about everybody they had ever sentenced, but I agree that we should consider the feasibility of doing so. I gather that someone in Seattle advocates that and has given interesting evidence to the Select Committee on Justice.

[Alun Michael (Cardiff South and Penarth) (Lab/Co-op)]

There is considerable evidence that judges do not know enough about what happens once they sentence prisoners and those sentences have been disposed of. Will the Justice Secretary do what he can to increase the experience obtained by judges of those disposals and will he ask the Sentencing Council to advise, with a particular focus on what works in preventing offending and reoffending?

[Mr Clarke]

The Sentencing Council is already under a duty to provide information about the effectiveness of sentencing practice and I am sure that it supplements that advice and information in every possible way. As I have said to my hon. Friend the Member for Kettering (Mr Hollobone), we will certainly consider the feasibility of doing such a thing, as it would be valuable, but we are talking about a vast number of cases and not every judge will find it possible to find out exactly what happened in later years to everybody who appeared before him.

[Andrew George (St Ives) (LD)]

4. What steps he plans to take to protect the public from persons convicted of violent offences.

[The Parliamentary Under-Secretary of State for Justice (Mr Crispin Blunt)]

We have made it clear that we are committed to retaining the statutory multi-agency public protection arrangements, known as MAPPA. Within MAPPA, the police, prison and probation services are required to work together to manage known violent and other dangerous offenders and so protect the public, including previous victims.

[Andrew George]

I hope that the Minister agrees that the primary purpose of custodial sentencing must be public protection. Does he accept that the greater use of mandatory sentencing runs the risk of judges not being able to use their discretion to ensure that the public are protected in the long run?

[Mr Blunt]

The only element of mandatory sentencing we are contemplating relates to knife crime, so that it is absolutely clear that this House sends a very clear message on that. I am sure that right hon. and hon. Members will think it appropriate that people spend six months in prison when they threaten people with a knife.

[Mrs Madeleine Moon (Bridgend) (Lab)]

5. What representations he has received on his proposals to transfer functions from the chief coroner.

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

12. Which organisations his Department consulted on its decision not to establish the office of chief coroner.

[The Parliamentary Under-Secretary of State for Justice (Mr Jonathan Djanogly)]

I have discussed our proposals with a number of interested parties, including peers, MPs and civil society groups such as Inquest and the Royal British Legion. We have, where possible, sought to take into account those discussions in developing the proposals announced on 14 June to transfer a number of the functions of the chief coroner while retaining the office on the statute book. We believe that represents the fastest and most efficient way of delivering reform of the coronial system, although we accept that some stakeholders would prefer us to proceed with full implementation of the office of the chief coroner.

[Mrs Moon]

I am still concerned about how, without the office of the chief coroner, we are going to ensure that there is greater consistency in the recording of verdicts, because having that consistency would mean that information was available that provided research capability and informed service development, so that we could prevent future deaths.

[Mr Djanogly]

I have had a number of discussions with the hon. Lady on a number of matters appertaining to coroners and chief coroners and I know that she takes a great interest in this area. The new arrangements we announced on 14 June, coupled with the draft charter for the coroner service, which we published for consultation on 19 May, will deliver proper oversight of the non-judicial aspects of the coroner system and will help to drive up standards of service across England and Wales. The national charter, with its uniform expectations of what those coming into contact with the system should expect, will be key in helping to ensure a greater level of consistency. At the same time, a new ministerial board will be able to consider national statistics gathered from across the coroner service and to consider what action could be taken to address any shortcomings.

[Chris Evans]

I wonder whether the Minister has spoken to Cardiac Risk in the Young, which believes that replacing the chief coroner’s office with a ministerial board will not deliver the improvements necessary for the 21st century.

[Mr Djanogly]

I can assure the hon. Gentleman that the absolute priority as far as we were concerned was to put the reforms in the legislation into practice but in a way that was not going to incur the cost that I am afraid we cannot afford at the current time. That is what I believe our proposals will do.

[Robert Flello (Stoke-on-Trent South) (Lab)]

Following the Secretary of State’s most recent announcement in June, Chris Simpkins, director general of the Royal British Legion, has said:

“Ensuring there’s a functioning Chief Coroner is the least we can do to honour the ultimate sacrifice made by our Armed Forces and to ease the pain those left behind will always feel.”

Helen Shaw, co-director of Inquest, has said that instead of having a chief coroner,

“the government proposes to dismantle the office of the Chief Coroner and add yet another layer to the current, fragmented structure where lines of accountability are opaque and clear leadership is absent.”

How many organisations that, unlike the ministerial team, actually know what they are talking about will the Secretary of State ignore? As he is in the mood to do U-turns, will he do the right thing and leave the chief coroner out of the Public Bodies Bill?

[Mr Djanogly]

If the hon. Gentleman looks at the RBL manifesto he will see that we are meeting most of its requests for reform without having a chief coroner. If we were simply leaving the office on the statute book and not implementing any changes, I would agree with that claim. However, regulations about training for coroners, including for service personnel cases, will be possible for the first time under our proposals. We will be implementing powers to transfer cases more easily within England and Wales—and for the first time to Scotland—when required for cases involving the deaths of service personnel abroad. Those are real and significant improvements to the system that will directly improve the experience of service personnel families who come into contact with the coroner system.

[Mr Speaker]

One of the difficulties with these long answers is that Ministers are reading out great screeds that have been written for them. On the whole, it is better to keep that for the long winter evenings.

[Tony Baldry (Banbury) (Con)]

6. What progress has been made on the proposals in his Department’s rehabilitation revolution Green Paper.

[The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke)]

The Government published our response to the Green Paper last week and I made a statement to the House about it. We have also introduced the Legal Aid, Sentencing and Punishment of Offenders Bill to give effect to proposals that require primary legislation. We will debate the Second Reading of that Bill tomorrow.

[Tony Baldry]

We need to encourage charities and social enterprises to invest in helping offenders and ex-offenders with their rehabilitation. In addition to payment by results, could my right hon. and learned Friend consider introducing Lord Chancellor’s awards for those charities, non-governmental organisations and social enterprises that are among the best at helping to support rehabilitation and prevent reoffending?

[Mr Clarke]

We all wish to give support to the many people who, through voluntary or charitable activity, try to help society as a whole by tackling the reoffending and rehabilitation problems of ex-offenders, so I shall certainly consider my hon. Friend’s interesting suggestion. I would love to give Lord Chancellor’s awards to a large number of worthy people, but unfortunately, the financial crisis that the Government have inherited does not enable me to give an instant response to his idea.

[Helen Goodman (Bishop Auckland) (Lab)]

Surely the Secretary of State has gone backwards. He has done a U-turn on early guilty pleas; he is reviewing his review on indeterminate imprisonment for public protection; and he has made massive cuts to probation services. I have had letters from probation services, and in Gloucestershire the cut is 7.9%, in West Yorkshire, it is 9.8%, and in Kent, it is a staggering 13.6% this year. How can we have a rehabilitation revolution if there are no community resources?

[Mr Clarke]

As the hon. Lady knows, we are debating the Bill tomorrow, which is enormous—I apologise for that—and has huge implications, but we are having to reform fundamentally a criminal justice system that does not help society as it should, because it does not cut reoffending. We are having to reform on a very wide scale a legal aid and civil justice system that encourages unnecessary litigation and is not particularly user-friendly. We have taken over a mess, and we are going in for massive reform of it. We may have changed quite a lot of proposals in light of consultation, but the underlying need for a balanced package of radical reform is certainly there, and we will tackle it.

[Philip Davies (Shipley) (Con)]

According to the Ministry of Justice, the number of people released from prison after serving an indeterminate sentence was 206 at the end of last year. The number who have reoffended since they were released is just 11—a reoffending rate of 5%. The Lord Chancellor says that what is most important to him in the criminal justice system is reoffending rates, so why on earth does he want to scrap the single part of the criminal justice system that is best at reducing reoffending?

[Mr Clarke]

About 200 people have been released, but 6,000 are in prison serving indeterminate sentences, and we are adding about 80 a month. They are released only when they can demonstrate to the Parole Board that they are a minimal risk to society—that is the present test—but in a prison cell they find it almost impossible to satisfy that test, so they are in a Catch-22 situation. We need long, determinate sentences for serious criminals; that is the way that the criminal justice system works. The experiment introduced by the previous Government has most undoubtedly failed; we will have one in 10 of the prison population serving indefinite sentences if we do not find a better alternative soon.

[Keith Vaz (Leicester East) (Lab)]

May I welcome the thrust of the Green Paper, and ask the Lord Chancellor or his officials to meet User Voice, a group that consists of ex-offenders who are very keen to work with the Ministry of Justice, and to work with current offenders to stop them taking a path of crime?

[Mr Clarke]

I am sure that I can arrange for one of the team to have a meeting with that interesting organisation. A large number of ex-offenders—not too many, but some—do very valuable work in stopping other people making the mistakes that they made. The social impact bond financing the payment-by-results contract that we have with Peterborough prison is largely delivered by an organisation called St Giles Trust, which has an excellent record of using ex-offenders as mentors. Anything that we can do to encourage that, where there are suitable ex-offenders who really are able to give valuable advice, would certainly be welcomed.

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

A national inquiry, “Community or Custody?”, commissioned by Make Justice Work, has highlighted the success that effective alternatives to custody can have in tackling reoffending and diverting petty criminals from a life of crime. Does the Secretary of State expect his proposals to lead to a reduction in the number of offenders serving short-term prison sentences for non-violent offences and a rise in the number of those involved in tough community sentence programmes?

[Mr Clarke]

We need the right sentence for the individual circumstances of each offender. I have never suggested that we get rid of all short-term sentences of imprisonment because sometimes magistrates and others have absolutely no alternative, but we are interested in strengthening community punishments and giving more confidence to magistrates and the public that those can have a genuine effect. We are proposing to strengthen the community payback scheme, which is unpaid work. Improving the extent to which tagging and curfews are available is one part of trying to make sure that, where they are likely to work, non-custodial community sentences are employed with some confidence by the courts concerned.

[Yvonne Fovargue (Makerfield) (Lab)]

7. What assessment he has made of the potential effect on group action litigation against multinational corporations of his proposals for reform to civil litigation.

[The Parliamentary Under-Secretary of State for Justice (Mr Jonathan Djanogly)]

The Government introduced the Legal Aid, Sentencing and Punishment of Offenders Bill on 21 June. The Bill contains provisions to take forward a fundamental reform of no win, no fee conditional fee agreements, as recommended by Lord Justice Jackson. I believe that strong claims, including those against multinational corporations, could still be brought under conditional fee agreements, or CFAs. The Government are also proposing the use of damages-based agreements, or DBAs, in all civil litigation, which might be particularly suited to funding group action litigation.

[Yvonne Fovargue]

An array of human rights experts, including several non-governmental organisations, human rights lawyers and the UN special representative on business and human rights, have all criticised the Government’s reforms of civil litigation. On what basis can the Minister assure the House that his proposals to reform civil litigation will not impact negatively on access to justice for victims of human rights abuse?

[Mr Djanogly]

I have been in correspondence with many of the people whom the hon. Lady mentions, and I repeat that the Government believe that it will still be possible to bring claims against multinational companies once our reforms are implemented.

[John Howell (Henley) (Con)]

8. What steps he is taking to change incentives for claiming compensation.

[The Parliamentary Under-Secretary of State for Justice (Mr Jonathan Djanogly)]

The Government introduced the Legal Aid, Sentencing and Punishment of Offenders Bill on 21 June. The Bill contains provisions to take forward a fundamental reform of no win, no fee conditional fee agreements, as recommended by Lord Justice Jackson. These changes will encourage claimants to take an interest in the costs being incurred on their behalf, and will deter frivolous or unmeritorious claims from progressing to court.

[John Howell]

Does the Minister believe that implementing Lord Justice Jackson’s proposals will clamp down on bloated compensation payments, given that in the past some solicitors have profited from cherry-picking claims and are claiming high success fees from defendants, particularly public authorities?

[Mr Djanogly]

My hon. Friend is right to raise the position of public-funded authorities such as the NHS Litigation Authority and local councils, which currently have to pay substantial additional legal costs to conditional fee agreement claimants. We believe that our proposals will ameliorate that position.

[Mr Jack Straw (Blackburn) (Lab)]

But will the Minister acknowledge that what is in the Bill that comes before the House tomorrow implements only part of Lord Justice Jackson’s recommendations; that, critically, the Minister has failed in that legislation to tackle at all the scandal of referral fees paid all the way along the chain, from the informant who passes on individuals’ details up the line to insurance companies, where it is then also paid by the insurance companies; and that this scandal will continue, notwithstanding any changes to be introduced in the structure of ownership of solicitors firms, until he and his colleagues implement in full Lord Justice Jackson’s recommendations, which are to abandon and outlaw referral fees altogether?

[Mr Djanogly]

It was Labour who brought in the ability to recover success fees and ATE—after the event—insurance premiums in 1999. This became the key mechanism of the rotten compensation culture, of which referral fees are a symptom. Claimant costs represented 56% of damages in 1999, but by 2010 they represented 142% of damages—and yes, we are looking at referral fees in the context of the reforms as a whole.

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

Why does the Minister not merely look at referral fees, but give us a clear commitment that that outrage will be removed under the Bill?

[Mr Djanogly]

The Legal Services Board reported on that only a matter of weeks ago. We are looking at its recommendations, which go much further than a ban and, in particular, deal with transparency, which was what the Select Committee on Transport focused on. We will look carefully at all these issues.

[Caroline Nokes (Romsey and Southampton North) (Con)]

9. What consideration he has given to those responses to his Department’s consultation on legal aid that raised concerns about his Department’s definition of domestic violence.

[Alun Cairns (Vale of Glamorgan) (Con)]

13. What his policy is on the provision of legal aid support for victims of domestic violence.

[The Parliamentary Under-Secretary of State for Justice (Mr Jonathan Djanogly)]

We published the Government’s response to the consultation on 21 June. Legal aid will remain available for applications for protective injunctions, as at present. However, for disputes about children or finance following the breakdown of a relationship, legal aid will be available for victims of domestic violence where there is objective evidence of the need for protection.

[Caroline Nokes]

Will the Minister give an assurance that, in cases where domestic violence has been a factor in family breakdown, all other associated costs incurred in bringing about a resolution will be covered by legal aid?

[Mr Djanogly]

For family matters, including disputes about finance or children arising from the breakdown of a relationship, legal aid will be available for victims of domestic violence where there is evidence of a need for protection. Of course, we will also provide civil legal aid for victims of domestic violence to apply for protective injunctions, such as non-molestation orders.

[Alun Cairns]

It is reassuring that victims of domestic violence will remain eligible for legal aid under the changes, but the evidence is not always clear, because many victims will not report domestic violence to the police. What sort of evidence is the Minister expecting to see in order for people to qualify for legal aid?

[Mr Djanogly]

We listened to the concerns expressed in the consultation that our criteria for evidence of domestic violence were too narrow and we have expanded them. The key issue is that the triggers must be objective.

[Ian Paisley (North Antrim) (DUP)]

In the light of the ongoing debate on this matter, does the Minister share the concerns expressed by the Westminster Public Accounts Committee about the dilution of the quality of Crown representation in all these cases, or does he take the view of the Northern Ireland Audit Office, which states that there is a lack of transparency in how the fees are calculated for taking on such cases?

[Mr Djanogly]

We are certainly concerned about the transparency of fees and how they are calculated. We are looking at this very carefully as part of our overall reform of legal aid, particularly for the Legal Services Commission.

[Mr Andy Slaughter (Hammersmith) (Lab)]

Women are often at risk of domestic violence when relationships break down, even when there is no previous history of it. According to the Association of Chief Police Officers, attempts to end a relationship are strongly linked to partner homicide and a higher risk of physical violence and sexual assault. Now no legal aid is proposed for divorce or child custody cases, and the definition of domestic violence is still very narrow and requires a history of complaints. How will the Minister ensure the safety of women now that they have to negotiate face to face with potentially violent partners?

[Mr Djanogly]

I think the hon. Gentleman misunderstands the present system. At the moment, perpetrators rarely receive legal aid; it is the victims of domestic violence who receive it. That means that in the current system the victims face the perpetrators of the crime. The reality is that on a day-to-day basis the judiciary are having to deal with this and have set procedures that they go through to make the process as good as possible for the victims.

[Lindsay Roy (Glenrothes) (Lab)]

10. What the reason is for the time taken to implement agreements on the compensation of victims of terrorism overseas.

[The Parliamentary Under-Secretary of State for Justice (Mr Crispin Blunt)]

We are examining this issue in tandem with the domestic criminal injuries scheme and will publish our proposals on victims in the coming weeks.

[Lindsay Roy]

I thank the Minister for his response. Has he made an assessment of how other countries, such as France and Australia, have been able to implement promptly the agreements on compensation for such victims outwith their natural boundaries?

[Mr Blunt]

As the hon. Gentleman will know, the House decided when we passed the Crime and Security Act 2010 that it was likely that the forward-looking scheme would relate to the criminal injuries compensation scheme. We are coming forward with proposals on the criminal injuries compensation scheme and are taking these things in tandem.

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

Will the Minister give the House an assurance that any such ex gratia payments will regard Foreign Office advice as having been followed at the time of the terrorism incident?

[Mr Blunt]

My hon. Friend is correct to say that that was a factor alluded to during the passage of the 2010 Act. For the precise details of the scheme she is talking about, which would apply retrospectively, I am afraid that she will have to wait until we come forward with our proposals in due course.

[Mr David Hanson (Delyn) (Lab)]

Can the Minister confirm that, whatever scheme he brings forward, it will operate from January 2010, as proposed by the Act that I took through the House on behalf of the Ministry of Justice and the Home Office 18 months ago?

[Mr Blunt]

What is in the Act is that date, as I understand it, and the forward-looking scheme will operate from there. If it is not on the face of the Act, it was the clear statement of the Government at the time, and the policy of the then Opposition was to support it, so I can confirm that it would be our intention for any forward-looking scheme to deal with victims from that time.

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

14. Which organisations his Department has consulted on future procedures for remanding defendants in custody.

[The Parliamentary Under-Secretary of State for Justice (Mr Crispin Blunt)]

More than 1,200 individuals and organisations contributed to the consultation on the Green Paper, “Breaking the Cycle: Effective Punishment, Rehabilitation and Sentencing of Offenders”. Numerous criminal justice organisations commented on the remand proposals in the Green Paper, both in relation to restricting the availability of remand in custody and to new arrangements for defendants under 18. The latter were also discussed in a series of consultation events that the Youth Justice Board undertook following publication.

[Mark Tami]

What does the Minister say to the senior judges who rightly point out that it is wrong to link decisions on remand with the eventual sentence received?

[Mr Blunt]

What the hon. Gentleman has to understand is that in magistrates courts 10,098 people were remanded into custody, a very substantial number of whom did not receive a custodial sentence, so we have to deal with that reality.

[Sadiq Khan (Tooting) (Lab)]

We believe that victims and witnesses should be at the heart of our justice system, and that they are crucial to its effective functioning. Victims groups have expressed alarm about the proposals in clause 73 of the Legal Aid, Sentencing and Punishment of Offenders Bill, and there is a concern that judges will be forced to prejudge cases prematurely, which could lead to the remanding on bail of people—offenders—who might interfere with witnesses, and could reoffend or fail to attend court. The Commissioner for Victims and Witnesses is against the plans as well. Does the Minister understand that the proposal could deter witnesses and victims from coming forward?

[Mr Blunt]

No. What the shadow Secretary of State needs to understand is that if there is any doubt about the issue, it will be up to the judge or the magistrate to make the appropriate decision on remand. The only factor that will be considered is whether imprisonment is at all likely in a particular case. If those other factors are in play, they will come into effect. We have listened during the consultation, and even if those other factors are not present, it will still be possible to remand in custody people in domestic violence cases.

[Sadiq Khan]

It is not just the shadow Justice Secretary who does not understand the proposals: the Council of Her Majesty’s Circuit Judges is “wholly opposed” to them, and the Sentencing Guidelines Council, the Magistrates’ Association, the senior presiding judge of England and Wales and the vice-president of the Queen’s bench division have all responded to the consultation and are against them. The Minister has given no evidence to the House to justify the change other than the cost savings, involving 1,400 prison places and £40 million, so will he take this opportunity to explain why he is limiting judges’ and magistrates’ discretion?

[Mr Blunt]

Because we need to restrict the availability of custodial sentences on remand when there is no real prospect of the defendant being sentenced to imprisonment if convicted—[Interruption.] Thousands of people who are remanded in custody and then convicted do not receive a custodial sentence—and in the case of those whom magistrates remand, the numbers are very significant indeed.

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

15. What recent representations he has received on the breach of court orders by those entitled to assert parliamentary privilege.

[The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke)]

We have received correspondence from a number of hon. Members on behalf of their constituents, raising issues relating to privacy and the use of anonymity injunctions and super-injunctions. In some instances this has included reference to statements made in Parliament concerning the identity of individuals who have obtained injunctions.

[Stephen Phillips]

I am grateful to the Lord Chancellor for that answer. He will share my concerns, and those expressed by the Lord Chief Justice, at the recent breaches of court orders by Members of this House, and indeed Members of the other place. The rule of law and the separation of powers require that we observe the self-denying ordinances to which we are subject, so may I ask whether my right hon. and learned Friend intends to have any discussions with the Speakers of both Houses on the subject, and if so, what the nature of those discussions will be?

[Mr Clarke]

This is obviously a point of concern. I agree that essentially it should be a matter for both Houses of Parliament, and Members of both Houses, to address themselves. As a parliamentarian as well as a member of the Government, I defend absolutely the rules of parliamentary privilege, but we have to consider whether it is a proper use of parliamentary privilege to defy court orders. I hope that the matter will be urgently addressed, as we all have to come to some conclusions on it.

[Bob Stewart (Beckenham) (Con)]

16. What recent representations he has received on his proposal to reduce sentences for certain offences for offenders who enter an early guilty plea.

[The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke)]

The proposal to increase to 50% the maximum sentence discount for a guilty plea at the first opportunity produced numerous responses when it was canvassed in the Green Paper “Breaking the Cycle”. The majority of those who commented were not in favour, including the judiciary, whose opposition was especially influential in persuading me that we should not proceed.

[Bob Stewart]

Can the Secretary of State assure the House that when a defendant pleads guilty at the last minute because he has been presented with overwhelming evidence against him, judges will still have discretion not to give him the maximum statutory sentencing discount of 33%?

[Mr Clarke]

I am glad to say that the guidelines have always said that, and it was never my intention to propose any change. The guidance on sentence reductions for guilty pleas recommends that a last-minute plea should attract no more than a 10% discount. It also says that where the prosecution case is overwhelming, even an early plea should receive less than the maximum, and recommends 20%. That is obviously a sensible rule. There is some discount because we are still saving the victim and witnesses the ordeal of going into the witness box, but the current one third, let alone 50%, is obviously far too generous for someone caught red-handed.

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

If the Justice Secretary’s aim is to spare the victim, why does he not turn things round and insist on an additional sentence for offenders who waste court time in the face of overwhelming evidence and subject victims to further hurt by their behaviour in court?

[Mr Clarke]

It is simply a result of the culture of the last 50 years, at least, that this has always been described as a “discount” for a guilty plea. Most of the general public do not appreciate that a discount applies. If members of the public are asked whether a discount on the sentence should be given for someone who pleads guilty early, they say no. But if they are asked, “Should someone who puts the victim through the ordeal of the witness box get a longer sentence than someone who pleads guilty?” they answer yes. Because we could not find a resolution to the risk of some of the more serious offences attracting too short a period in custody, and judicial discretion could not be devised to cover that, we have now decided to stick with the long-standing process whereby a one-third discount is available for an early guilty plea.

[John Glen (Salisbury) (Con)]

17. What steps he plans to take to reduce rates of reoffending.

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

The Government set out their radical plans to reduce reoffending in response to the “Breaking the Cycle” consultation. We will pay by results to incentivise rehabilitation programmes that successfully prevent offenders from returning to a life of crime.

[John Glen]

I thank the Minister for that helpful reply. As a serving JP, one of the things I find particularly frustrating when considering sentencing is the several pages of antecedents involving multiple short sentences and failed attempts at drug rehabilitation. What work is being done to improve the effectiveness of drug rehabilitation, which is so crucial in stopping reoffending?

[Nick Herbert]

I welcome my hon. Friend’s comments. The good news is that in April this year the Department of Health assumed responsibility for funding all drug treatments in prison and in the community. That joint commissioning of services by the health and criminal justice agencies will facilitate a more co-ordinated approach. We must move to programmes that ensure that we are dealing with the problem properly and getting people off drugs, not simply maintaining them, as has too often been the case in the past.

[Chris Williamson (Derby North) (Lab)]

18. Which organisations his Department has consulted on reforms to the Criminal Injuries Compensation Authority and the scheme for compensating victims of overseas terrorism.

[The Parliamentary Under-Secretary of State for Justice (Mr Crispin Blunt)]

In the coming weeks we intend to launch a public consultation on victims services, which will include the criminal injuries consultation scheme. We will not make up our minds about any changes until we have carefully considered responses from the public and other interested parties. We will make an announcement about compensation for victims of terrorism overseas at the same time as we launch our consultation.

[Chris Williamson]

The Justice Secretary’s party signed up to the provisions of the Crime and Security Act 2010 that granted compensation to victims of overseas terrorism. He will know that victims fought hard for those provisions, including the backdating of compensation for those severely injured in atrocities such as the Bali and Mumbai attacks. I do not understand why he has snubbed those victims, who were led to believe that the compensation scheme would come on stream last September. How much longer will victims of overseas terrorism be expected to wait while he and his Ministers dither over this important and just scheme?

[Mr Blunt]

I am afraid that there was a certain amount of confusion under the previous Administration, when for some reason the Department for Culture, Media and Sport had responsibility for overseas terrorism issues. These issues have now been brought together, and we will bring forward our proposals on victims of overseas terrorism in tandem with our proposals on criminal injuries compensation.

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

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

[The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke)]

On Thursday the Government signalled their intention to lead by example by launching a new dispute resolution commitment. From now on, Government Departments and agencies are committed to using better, quicker and more efficient ways of resolving legal disputes, and to seeking alternatives to court action wherever possible. The commitment will save time, money and stress for those involved, and will reduce the number of cases unnecessarily clogging up the courts. This is an important part of our commitment to make the justice system radically more user-friendly and to cut down on the amount of expensive, painful and confrontational litigation in our society.

[Mr Raab]

I thank the Justice Secretary for that reply. Getting offenders clean of drugs is one of the best ways to get them to go straight on release. What progress has the Justice Secretary made in reducing the previous Government’s excessive reliance on methadone prescriptions, and increasing abstinence-based drug rehabilitation in our prisons?

[The Parliamentary Under-Secretary of State for Justice (Mr Crispin Blunt)]

As my hon. Friend heard from the previous answer of the Minister for Policing and Criminal Justice on the centrality of rehabilitation, clinical interventions are the responsibility of the Department of Health. It is important that we work with clinical services to ensure that there is a proper path towards detoxification and abstinence, not only in prison but during the transfer between prison and the community. We are working hard with our colleagues in the Department of Health to deliver that.

[Sadiq Khan (Tooting) (Lab)]

Last week the Prime Minister announced the Justice Secretary’s new law on self-defence. However, there is no mention of it in the Green Paper, the Government response or the 119-page Bill. Is the Justice Secretary aware that the Director of Public Prosecutions is on record as saying that the current guidelines, which permit people to use reasonable force to protect their property, work well? Will he spell out how his proposal differs from the current law?

[Mr Kenneth Clarke]

We intend to clarify the law on self-defence by amending the Bill at the earliest possible stage. We are finalising the drafting of that. Essentially, we are clarifying the law. It will still be based on a person’s undoubted right to use reasonable force when they choose to defend themselves or their home against any threat from an offender.

[Mr Marcus Jones (Nuneaton) (Con)]

T2. Although I welcome my right hon. and learned Friend’s policy to create drug-free wings in our prisons, does he agree with me, and my constituents, that the whole of our prison estate should be completely free of illegal drugs? Will he explain to my constituents how that can be achieved?

[Mr Clarke]

I would love to announce just such a policy. My hon. Friend probably shares my comparative amazement that drugs are so readily available in our prisons. The fact is that that is so endemic in the system that we have to start from where we are. We have a definite programme to introduce drug-free wings. As soon as we establish those successfully, a prime objective of the Government is to eliminate the presence of drugs and to establish proper rehabilitation of offenders that does not depend simply on maintenance and methadone.

[Chris Williamson (Derby North) (Lab)]

T5. To return to the point made by my right hon. Friend the Member for Tooting (Sadiq Khan), the Prime Minister said that there would be provisions on self-defence included in the Legal Aid, Sentencing and Punishment of Offenders Bill, but the Bill as it stands is silent on the issue. Michael Wolkind QC, who represented Tony Martin, says that allowing householders to use any force that is not grossly disproportionate would amount to “state-sponsored revenge”. Can the Justice Secretary clarify how his legislation will differ from what is currently in place?

[Mr Clarke]

The Prime Minister was not advocating state-sponsored revenge, nor is anybody else. What we are doing is clarifying in statute the basis upon which people can use reasonable force to defend themselves in their property. [Interruption.] I am not quite sure what aspect of that Labour Members seek to oppose, but I think they will be reassured when they see the amendments that we propose to introduce.

[Graham Evans (Weaver Vale) (Con)]

T4. What steps is my right hon. and learned Friend going to take to ensure that the Government send out the strongest possible message on knife crime?

[Mr Clarke]

We are going to create a new offence of aggravated possession of a knife, which means carrying a knife and threatening with it, to make the clearest possible statement that we are not prepared to tolerate knife crime in this country.

[Jim Dobbin (Heywood and Middleton) (Lab/ Co-op)]

T7. The Youth Justice Board has support right across the political spectrum. Indeed, the House of Lords voted to retain it. I cannot understand why a Government who pride themselves on listening to the people cannot do a U-turn that, on this occasion, would be popular.

[Mr Blunt]

There is a clear case for bringing the responsibilities of the Youth Justice Board within the Ministry of Justice, and for making Ministers directly accountable for youth justice. We are going to reintroduce that case to the House, and I am sure that it will command the House’s support.

[Karen Lumley (Redditch) (Con)]

T6. Last week I visited HMP Hewell in Worcestershire, where I met the restorative justice manager Clifford Grimason. He showed me the excellent work that has been done there with prisoners. Will the Secretary of State join me in commending HMP Hewell, and Cliff and his team, who have been working together with Conservative-controlled Redditch borough council on innovative schemes to help get prisoners ready to go out into the world of work?

[Mr Kenneth Clarke]

I am sure that my hon. Friend’s description of that work is correct, and I readily commend the work that is being done there and in other places. The main feature of the reforms that I am introducing is the concentration on cutting reoffending, which means rehabilitating offenders. I try to avoid giving the impression that nobody is doing that already, but instead of looking to particular spectacular examples, I want to see that running through the whole system. To reduce crime we have to reduce the number of criminals who are going to offend again as soon as they are out of prison, which is an objective of reform that has been missed for many years.

[Julie Elliott (Sunderland Central) (Lab)]

T9. In the light of the Ministry of Justice’s own impact assessment, which says that increased criminality, less social cohesion and increased costs are all likely to result from the Legal Aid, Sentencing and Punishment of Offenders Bill, which is currently going through Parliament, have the costs to other Government Departments been considered and costed? If so, what are they?

[The Parliamentary Under-Secretary of State for Justice (Mr Jonathan Djanogly)]

We have worked closely with other Departments to examine the impact of our proposals, and that is ongoing.

[Mr Robert Buckland (South Swindon) (Con)]

T8. I welcome my right hon. and learned Friend the Secretary of State’s commitment to reducing reoffending rates. Does he agree that increasing the scope of judicial discretion, as outlined in the Bill, will go a long way to help to achieve that?

[Mr Kenneth Clarke]

I do, and I can reinforce my hon. Friend’s point with a remarkable statistic showing how the last Government were falling down in that respect. Some 29% of all sentences for indictable offences in 2010 were given to offenders with 15 or more previous convictions or cautions—up from 17% in 2000. We need a more intelligent and sensible system of sentencing, and I agree that a proper degree of judicial discretion is an important part of the system.

[Paul Goggins (Wythenshawe and Sale East) (Lab)]

The Minister will be aware that in October last year, Citizens Advice in Manchester signed a three-year contract with the Legal Services Commission for the provision of community legal services, which involves four new advice centres, one of which is in my constituency. On the strength of that, Citizens Advice entered into a series of leasing and employment obligations. Will he cut through the increasing uncertainty and confirm this afternoon that that contract will be honoured in full?

[Mr Djanogly]

That is, of course, a matter for the Legal Services Commission, with which the contract was agreed—but about 50% of CABs have legal aid contracts, which last for different periods. The proposals will work through over the period of the contracts.

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

Given the costs of delay when court papers do not turn up on time, what are the Government doing to expand the use of e-mail to deliver court judgments and papers?

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

I am happy to tell my hon. Friend that the Government think that it is time the criminal justice system caught up with the rest of the world. Our plan is that information documents will be sent by secure e-mail between all agencies in the system by April next year, so that we can eliminate that wasteful paperwork and drive efficiency in the system.

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

Can the Minister update the House as to what discussions he has had with the Minister of Justice in the devolved Administration concerning proposed changes to the legal aid system?

[Mr Djanogly]

I can confirm that I have had discussions, correspondence and a meeting with the devolved Administration to discuss the implications for legal aid and to ensure that we are all moving in the same direction.

[Esther McVey (Wirral West) (Con)]

Following the Milly Dowler trial, does the Secretary of State agree that measures need to be taken to protect the families of the victims of crime from intensive questioning in court? If a footballer can be afforded privacy from the public arena, cannot the father of a murdered child?

[Mr Kenneth Clarke]

It is obvious that members of the public generally were appalled by the experience through which that family were put as a result of that criminal trial going ahead and the nature of the defence. Such cases are exceedingly difficult, because any defendant has the right to put forward a defence, however distasteful or distressing that may be to the victims. That sometimes happens. The straightforward process of calling the victim a liar can be extremely offensive to someone who has suffered grievously at the hands of the accused.

The judge has a discretion to cut out all irrelevant and unnecessary lines of questioning. I have no reason to doubt that the judge considered his discretion in that case. The Crown Prosecution Service actually applied for an order to ban the reporting of the relevant pieces of the cross-examination. I respect the decision of the judge, who decided that the principle of open justice should prevail. It was therefore all reported. The newspapers made their own judgments on the extent to which they reported those incidents.

In that case, which was exceedingly distressing, there was never a question of an early guilty plea, but it is useful to remind ourselves of just what an ordeal it can be when victims and witnesses have to go to a court to face someone who is denying the crime.

[Mr Speaker]

Order. It is not an ordeal to listen to the Secretary of State—indeed, one might almost call it a leisure pursuit—but unfortunately, we have not the time on this occasion to do so uninterrupted.

[Paul Flynn (Newport West) (Lab)]

Does the Government’s U-turn on shorter sentences, which could have led to a reduction in the prison population, mean that in future under the coalition, any Minister caught in possession of an intelligent idea is likely to be doomed to a brief unhappy ministerial career?

[Mr Clarke]

I made a few slightly light-hearted remarks about U-turns last time—but the Government have a process of consultation, and this is another Catch-22 situation. If we modify our proposals we are accused of making a U-turn, and if we proceed with our proposals we are accused of being deaf.

We explored every possibility of encouraging more early guilty pleas. We still intend to make such proposals, and some of the legal aid reforms are designed to encourage early guilty pleas. Anything that can be done to get early guilty pleas saves a lot of people distress, and also saves a lot of wasted time and cost for the police, the CPS, the courts and the prisons.

[Mr Stewart Jackson (Peterborough) (Con)]

What message is sent to potential offenders and police officers—one of whom is my own brother—by the guidance of Sir Paul Stephenson, the Metropolitan Police Commissioner, that even the most offensive language used against a police officer will not now result in an offence under public order provisions.

[Nick Herbert]

I share my hon. Friend’s concern. We should all agree that it is wholly unacceptable for people to swear at police officers. Whatever the merits of that guidance or the legal position, we should stand by our police officers in the job that they do. They should not have to expect that kind of treatment.

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

Last December the Justice Secretary promised me that he would consider reviewing the maximum sentence for dangerous driving, which currently stands at two years regardless of the severity of the injury caused, short of death. It might well be against his liberal instincts to increase tariffs, but what progress has he made?

[Mr Blunt]

The hon. Gentleman may know that his hon. Friend the Member for Kingston upon Hull East (Karl Turner) secured an Adjournment debate on that subject. We are considering it, and will look at ways of doing it without having to legislate, if possible. We are considering what sanctions are available to us, and I am in discussion with the Solicitor-General and the Attorney-General to see how we can deliver the objective that we both share.

[Margot James (Stourbridge) (Con)]

Following on from the question asked by my hon. Friend the Member for Peterborough (Mr Jackson) about people not being convicted of abusive language and behaviour towards the police, does my right hon. Friend agree that it is even more ridiculous that some of the people concerned are then compensated for wrongful arrest? Will he please review this as a matter of urgency?

[Nick Herbert]

Again, I share my hon. Friend’s dismay. It is precisely to avoid such a situation that the Metropolitan police issued the guidance on the existing position. I repeat that it is not acceptable for police officers to be sworn at, and nor are we happy about the suggestion that it is. We wish to consider this issue because we need a system that ensures that we stand by our police officers when they are executing their duties.

[Kevin Brennan (Cardiff West) (Lab)]

I want to ask about the drug-free wings that the Justice Secretary is introducing in prisons. Will prisoners be able to choose whether they enter a drug-free wing or a wing where drugs are rife?

[Mr Kenneth Clarke]

It might cost more to send a prisoner to prison than it does to put him in a room in the Ritz hotel, but there are limits to how much choice we give prisoners over the suitability of their accommodation. There will be a process of careful assessment. We wish to spread the provision of drug-free wings and eliminate drug dealing in prisons as rapidly as is practicable.

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

Will the Secretary of State consider, within a year of the legal aid proposals being implemented, assessing the ability of those on low incomes to access the courts, the availability of appropriately qualified lawyers prepared to undertake publicly funded work, and the sustainability of legal services provided by bodies such as Citizens Advice?

[Mr Djanogly]

We have just commissioned research on those topics, and there will also be a post-impact assessment within three years.

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

Further to Question 7, will the changes to civil litigation make it easier or more difficult to take action against multinational companies? The consensus among non-governmental organisations is that it will be more difficult.

[Mr Djanogly]

People will still be able to be assessed by solicitors to decide whether they are prepared to represent them in multinational actions.

Petition

Tuesday 28th June 2011 Commons Chamber

Andrew Stephenson (Pendle) (Con)

- Hansard - - Excerpts

Thank you for allowing me to present my petition, Mr Speaker.

Sam, a constituent of mine, has had his application for a long-term visa refused by the UK Border Agency, which plans to send him back to America within days.

The Petition of residents of Pendle, Lancashire, and others,

Declares that the Petitioners believe that Sam Fontana Wright should be allowed leave to remain in Britain.

The Petitioners therefore request that the House of Commons urges the Government to encourage the UK Border Agency to halt his deportation and reconsider his case.

And the Petitioners remain, etc.

[P000932]

School Closures (Thursday)

Tuesday 28th June 2011 Commons Chamber

15:33

[Andy Burnham (Leigh) (Lab)]

(Urgent Question): To ask the Secretary of State for Education to make a statement about the school closures on Thursday and advice to parents worried about the situation.

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

The Government are currently in discussion with trade unions representing public sector workers to reach a fair deal on pension reform. Our proposals draw on the widely praised report from Lord Hutton, who was Secretary of State for Work and Pensions under the previous Government. The state of the economy that we inherited and major demographic changes mean that reform is vital. We want to ensure that all public sector workers enjoy pensions that are among the best available, but we need to balance that with fairness to other taxpayers. Talks between the Treasury and the TUC yesterday made real progress, which is why it is so regrettable that two of the classroom unions are planning industrial action this Thursday. This action is unnecessary while talks are still going on, will cause massive inconvenience to hard-working families and will hit working women particularly hard.

In order to minimise the impact of the strike on working parents, I wrote last week to all local authorities, as the employers of teachers, and to all schools, emphasising their duty to keep schools open wherever possible. In response to requests from governors, I also laid out the flexibilities at the disposal of schools to ensure that they stay open. Schools can vary staff-pupil ratios, they can depart from the national curriculum and they can draw on voluntary support from the wider community, with those who have been checked by the Criminal Records Bureau able to provide particular help. Nothing can replace the great teaching offered by gifted professionals, but I would far rather see schools staying open and offering a restricted curriculum than see hard-working families having to lose a day’s pay or paying for ad hoc and expensive last-minute child care.

When I wrote last week, I also asked local authorities and academy heads to let me know which schools they knew would be closing. We collated data from them last Friday, and these data were updated yesterday. At that stage, 118 out of 152 local authorities, and 379 out of 707 academies had replied. The initial returns suggested that 2,206 local authority schools would be partially open and that 3,206 would be closed, while the situation with a further 10,872 was not known at that stage. The figures showed that of the 707 academies, 158 would be fully open, 128 partially open and 84 closed. Nine were still uncertain and 328 had not yet responded. I asked last week that those figures be updated as of 3 pm today, and that exercise is ongoing. Once the provisional data are examined, we will provide updates tomorrow and on Thursday.

It is the responsibility of individual schools to inform parents if they are closed, but the ability of individual heads to determine if and when a teacher has decided to strike—and therefore their ability to make contingency plans—is governed by the employment law that we inherited. Individual teachers have no obligation to tell their school or employer of the intention to strike in advance. Of course, we always keep the law under review.

I remain committed to discussing pension reform with all the teacher unions openly, honestly and constructively. The current generation of teachers in our schools is the best ever, and I want to see them properly supported; but this strike, at this time, will not help our schools, as those unions that are not striking this Thursday know. This action is unnecessary, premature and disruptive. I hope that all parts of the House will join me in working constructively to support those hard-working families who are the victims of this action.

[Andy Burnham]

Let me start by making one thing clear: on Thursday, children should be in school and their parents at work. Opposition Members have said consistently that these strikes are a mistake. We support reforms to make public sector pensions sustainable, and it is wrong for action to be taken now, while talks are ongoing. However, the Government cannot evade their share of responsibility for the disruption that millions of families will suffer on Thursday. We are worried that the Secretary of State has once again not properly thought through the consequences of his statements and has left parents in the dark, because it is we who have brought him here today. For the first time, Members have some information about the likely scale of disruption. Will he give us a commitment that he will keep Members in all parts of the House regularly updated from here on in?

Secondly, what reassurance can the Secretary of State give to parents today that where schools are open, children will be properly looked after, and remain safe and secure at all times? His letter to head teachers urged them to keep schools open, but was silent about children’s safety. We want schools to stay open, but will he say more about what roles he considers it acceptable for parents to perform? What is a safe balance between trained and untrained staff? Are advanced checks advisable or necessary? He has said today that those with CRB checks may be able to do particular jobs, but will he spell out exactly what those roles are? This is not an area where he can afford to look like he is making it up as he goes along, so I would be grateful if he could answer those specific points.

Thirdly and most importantly, what steps are the Secretary of State and the Government taking over the coming hours to try to avert the strike? His letter acknowledged the

“very strong feelings in the teaching profession about teachers’ pensions”.

Does he not accept that those feelings have been inflamed by the Government’s reckless and provocative handling of the issue from start to finish? In retrospect, does he believe that it was wise or fair to pre-empt the Hutton report by slapping a 3% surcharge on pensions, costing some teachers an extra £100 a month, or for the Chief Secretary to the Treasury to announce a raising of the retirement age at a crucial moment in the negotiations? Does the Secretary of State recall saying this to the Association of Teachers and Lecturers’ conference while in opposition?

“I…think that, for people who’ve been in the profession, we shouldn’t alter the terms on which they entered. I think that’s part of the sort of broad contract that you expect.”

Is not that exactly the point? Pensions are a contract, and they should not be changed unilaterally in this high-handed way.

During the Labour Government, the number of days lost through industrial action fell to its lowest level ever. Will not parents take a dim view if this Government return us to the 1980s so that the Secretary of State and his friends can rerun the battles of their youth? Do not those parents want a Government who play fair with the professionals who teach their children, rather than one who play politics with people’s pensions?

[Michael Gove]

I was grateful to the right hon. Gentleman for the constructive way in which he began his response, but I think that, on reflection, he will consider the way in which he concluded it to be irresponsible at this time. The whole House wants to see people keeping level heads and maintaining an even temper at this time, and the fact that he chose to ratchet up the rhetoric in that way was not appropriate.

I am grateful to him for supporting the direction of Lord Hutton’s reforms and for his initial words about the responsibility of all local authorities and heads to keep schools open in order to ensure that we do everything possible to minimise disruption. Because teachers are employed by local authorities and individual heads, individual local authorities and heads have to depend on teachers telling them whether they will be on strike before making contingency arrangements. That is a direct consequence of the labour laws that we inherited from the right hon. Gentleman’s Government. If he believes that those laws should change, and that we should reform trade union laws, I should like to know about it.

The right hon. Gentleman asked us to update Members of the House with data, and we will do so. At the first available opportunity when the data are reliable, we will share them with hon. Members, with local authorities and with individual parents. He also asked us to do everything possible to keep children safe and secure. The safety of children is always my first concern, and that is why I want to see schools remain open, and why I have written to local authorities and outlined the flexibilities that they have. It is also why I have drawn their attention to the statutory guidance that covers health and safety and child protection.

The right hon. Gentleman referred to the 3% surcharge that is being placed on pensions. As a former Chief Secretary to the Treasury, he should be aware that every aspect of the pension reform that we are bringing forward is a direct result of the dire mess in which he and his colleagues left our economy. If people want to know why our pensions have to be reformed, they need only look at the financial mess that was made—[Interruption.] I am afraid that the intemperate response coming from the Opposition Benches reinforces the guilty consciences on that side of the House.

The right hon. Gentleman also quoted from a speech that I gave to the Association of Teachers and Lecturers. It is important that he not mislead the House or anyone listening—[Hon. Members: “Oh!”] I am sure that he would never do so intentionally, which is why I hope that he will stress that the proposals that we are putting forward respect the accrued rights of all those who have been in state pension schemes up until this moment—[Hon. Members: “Withdraw.”] I know that he would wish to make that clear.

The right hon. Gentleman also said that, in the last year of the Labour Government, we had the lowest number ever of days lost to strike action. The truth is that, in the past year under this coalition Government, we have lost even fewer days to strike action. If we are to maintain that record, we need calm on both sides of the House, and not the pandering to the union gallery that we heard at the end of the right hon. Gentleman’s comments.

[Mr Graham Stuart (Beverley and Holderness) (Con)]

Does the Secretary of State agree that it is irresponsible for union leaders in the teaching unions who are on six-figure salaries to lead teachers out on strike when two thirds of their members did not even vote in the ballot? Does he also agree that this action will undermine and damage the education of children and the status of the teaching profession?

[Michael Gove]

We all listen with respect to the Select Committee, and its Chairman is quite right. The general secretaries of those trade unions have, throughout their careers, shown a commitment to improving state education. I therefore believe that their motives are right in most circumstances. On this occasion, however, they have made a mistake and they should acknowledge it.

[Mrs Jenny Chapman (Darlington) (Lab)]

I went to school in Darlington in the ’80s and I remember being sent home from school because not all the teachers had informed the head that they were going on strike. I was sent home and sat on the front door step before a neighbour came to fetch me. What guarantees can the right hon. Gentleman give about the fact that, although schools might be open, some teachers unexpectedly might not be present? The most important consideration here is the welfare of children. What is the right hon. Gentleman going to do to ensure that we do not see a return to strike after strike after strike under this Tory Government just like we did in the ’80s?

[Michael Gove]

I am grateful to the hon. Lady for making her point, but as the right hon. Member for Leigh (Andy Burnham) made clear from the Opposition Front Bench, this strike is unjustified at this time, and the responsibility rests on those general secretaries and trade union members who are going on strike. They are causing inconvenience to hard-working parents and they should not be going on strike: that is the united position of both Front-Bench teams, and I am sorry that the hon. Lady does not share it.

[Tracey Crouch (Chatham and Aylesford) (Con)]

I have a huge amount of respect for the hard work that teachers do, but share the disappointment of many parents in my constituency that Thursday’s strikes will cause massive disruption to their children’s learning. Will the Secretary of State advise how people such as myself and other colleagues who have a CRB certificate can help schools to stay open on Thursday?

[Michael Gove]

One of the things I would stress is that all of us can play our part in helping to ensure that children are kept safe and have a fruitful and constructive time in school on Thursday. Any Member—and, indeed, any member of the public—who is CRB checked can volunteer to help in their local school. I am sure that the head and the chair of governors would welcome that level of support. I have already received a number of letters from head teachers who have asked me if they can ensure that those who are CRB checked can help. They can help in many ways, by providing cover, by supporting trained teachers and by ensuring that children spend a fruitful and constructive time in school.

[Mr Tom Watson (West Bromwich East) (Lab)]

To those people who follow industrial relations it is remarkable to see a union like the ATL vote for a strike for the first time ever. I understand the Secretary of State’s desire to keep schools open, but in view of that, is it not better that he leave the Chamber now, phone those general secretaries, invite them in and spend the next 24 hours trying to secure a solution for these strikes? It is not too late.

[Michael Gove]

I am grateful to the hon. Gentleman who, as we all know, was a union negotiator before he came to the House and therefore has some expertise in these matters. As an expert union negotiator, he will know that it is unwise for anyone to call the dispute in the middle of talks. Talks are ongoing: we had talks yesterday with the TUC; I have arranged telephone calls with the individual general secretaries of trade unions for later today—and I took the precaution of doing so before coming to this House. [Interruption.] I have already talked to all the general secretaries in person and explained to them the lack of wisdom in what they are doing. The question for the hon. Gentleman and for other Labour Members is: what are they doing to keep our schools open? Are they doing everything possible to encourage the unions to lower the temperature or are they, sadly, once again engaging in the sort of opportunism that has given their party a bad name?

[Dan Rogerson (North Cornwall) (LD)]

I regret, as the Secretary of State clearly does, the decision by two unions to cause the strike this week, and I am pleased to hear that the right hon. Gentleman is engaging in a constructive way. Will he set out what will be happening over the coming weeks to further the talks, to allay the concerns of teachers, perhaps by going against the message sent to them by the people at the top of their unions?

[Michael Gove]

My hon. Friend makes a very good point. There has been misinformation and propaganda about this dispute, and it is important that the facts are known—and that they are known by every Member. It will be the case at the end of this process that all public sector pensions will be among the best available. In particular, teachers’ pensions will remain strong because we recognise the importance of ensuring that those who work in our classrooms are well protected. Because discussions are ongoing and because they are based on Lord Hutton’s report, I think it quite wrong to prejudice those discussions by pre-empting them and stating what an end-point should be. By their very definition, discussions allow for both sides to make constructive suggestions, which is why it is such a pity that the trade unions have deliberately chosen to pre-empt that process.

[Jeremy Corbyn (Islington North) (Lab)]

Does the Secretary of State understand the degree of anger and frustration among so many teachers who have given years to their profession and feel that they have been forced into taking strike action, thus losing a day’s pay, in order to try to protect the pension for themselves and for a future generation of teachers? Instead of trying to work out cockamamie schemes to keep schools open, why does he not deal with the issue, retain the pension and support the teaching profession?

[Michael Gove]

I understand that there will be anger and frustration on Thursday: anger from parents whose child care arrangements have been disrupted, and frustration about the fact that schools remain closed. The question for all of us is: why is this reform necessary? I am afraid that the answer is: because of the dire economic situation that we inherited from the Labour Government. We are pledged to negotiate openly, honestly and constructively, but that negotiation has been pre-empted by the unions, and the hon. Gentleman’s responsibility is to ensure that schools in his constituency stay open.

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

I can inform my right hon. Friend that 35% of schools in the borough of Wokingham and well over 50% in the borough of Reading will close. Will he join me in thanking teachers at schools that are staying open, such as E P Collier and Reading girls’ school in my constituency, where staff have put the needs of children and parents before the pre-emptive action of their unions?

[Michael Gove]

As I said in my statement, not every teaching union has chosen to go on strike this Thursday. While I am well aware of the strong feelings that exist about the future of teachers’ pensions, I know that many people who will be taking industrial action feel understandably concerned about what will happen when schools close, and I think it important for all of us to recognise that people who are working hard to keep schools open are operating in a public-spirited fashion and deserve our support.

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

Are the Secretary of State and other members of the Cabinet aware that many public sector workers, including teachers, believe that a war has been declared against them over their standard of living and their pensions? They are sick and tired of a Cabinet, consisting of a fair number of multi-millionaires, which takes such a hostile attitude to people who want to work for the community—as teachers do—but whose standard of living is constantly being undermined.

[Michael Gove]

I have a lot of respect for the hon. Gentleman, who has been in the House for many years and has stood up for many unpopular and noble causes, but I think that he is quite wrong in this instance. We are not declaring war on anyone. We want to ensure that our public finances can be restored to balance after what happened under the last Government, and we also want to ensure that public sector workers have the best pensions available. It is critical for us to ensure that our reforms proceed. The right hon. Member for Leigh made it clear that we need to work constructively on the basis of Lord Hutton’s proposals. I hope that the hon. Gentleman will reflect on his rhetoric, and recognise that it is not helpful to parents or to his own community.

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

The shadow Secretary of State, the right hon. Member for Leigh (Andy Burnham), said that the Government could not evade their share of the responsibility for what is happening. Earlier, he said that the Government must accept their share of the blame for causing disruption to millions of families. Can my right hon. Friend reassure me, and the whole House, that he will not consider taking an ounce of blame for the strikes until the Labour party apologises for the dreadful financial legacy that he and the Government inherited?

[Michael Gove]

My hon. and learned Friend has made a good point, but notwithstanding the dreadful financial situation that we inherited, teachers, and all public sector workers, will retain a defined-benefit pension scheme. Defined-benefit pension schemes were the norm in 1979, and indeed in 1997, but I am afraid that after what happened with the Labour Government, they became a rarity in the private sector. That is why we are so anxious to ensure that they are reformed in the public sector so that they can be secure for the future.

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

The Secretary of State asked what Labour Members were doing to help to resolve the strike. Unfortunately I am not the Secretary of State, but if I were, I would be ringing those general secretaries, bringing them together, and trying to resolve matters before Thursday. What is the Secretary of State going to do between now and Thursday to prevent the strike and the disruption to children’s education?

[Michael Gove]

I have met, and enjoy meeting, the general secretaries of all the trade unions, and I am glad that I enjoy cordial relations with them. As I told the hon. Member for West Bromwich East (Mr Watson) earlier, I am talking to all the general secretaries of all the trade unions later this afternoon. I made sure that yesterday’s negotiations and discussions were concluded so that the general secretaries had a chance to reflect on them before I contacted them today. I think that that is the wise and moderate way in which to proceed, and I am sorry that there are Labour Members who believe at this stage that anything else is appropriate.

[Lorraine Fullbrook (South Ribble) (Con)]

I received an e-mail from a teacher in Eccleston in my constituency who was concerned about the proposed strike action on Thursday. My constituent is concerned that, despite being a member of the ATL, he did not receive a ballot paper. Does my right hon. Friend agree with my constituent and me that, if members of the ATL are being disfranchised in this way, the legality of the strike is in question?

[Michael Gove]

I am grateful for my hon. Friend’s question. I am sure that the ATL will want to investigate any irregularity in the ballot. As has been pointed out, it was not the case that a majority of those who were members of the union voted in favour, but a majority of those who did cast their ballot clearly voted in favour of the strike, so we have to respect that democratic vote, even though I strongly believe, like the right hon. Member for Leigh, that the unions are mistaken to go on strike.

[Mr Dennis Skinner (Bolsover) (Lab)]

Does the Secretary of State agree that it takes two sides to create any conflict and this smug, arrogant Government have revelled in the part they have played in this dispute? In the real world, trade unionists have to fight for every penny and every pension, but the bankers just wait for the Government to give in and to line their pockets. That is the real contrast.

[Michael Gove]

I respect the passion of the hon. Gentleman, and I know that he has a distinguished record as a trade unionist. Members of trade unions have an absolute right to take industrial action in defence of their interests if people believe it is right, but trade union leaders should decide whether it is wise to strike at any given moment. I do not believe that it is wise to strike at this point.

On the specific question of bankers, I have to say that they are paying more in tax under this coalition Government than they ever did under a Labour Government.

[Craig Whittaker (Calder Valley) (Con)]

Six years ago a lot of blue-chip companies closed their final salary schemes to new employees and within the past three years they have closed them full stop. Does my right hon. Friend the Secretary of State agree that now is the right time to reform public sector pensions to make sure that they, too, are sustainable going forward?

[Michael Gove]

My hon. Friend makes a good point. We have to be fair to all taxpayers. Of course it is important that we make sure public sector workers have a decent pension, but we must also make sure that others in the private sector who are paying for those pensions have their position respected. Given what happened to private sector pensions under the previous Government, Labour Members are in no position to lecture anyone about the integrity of benefits in retirement.

[Helen Jones (Warrington North) (Lab)]

Does the Secretary of State accept that it is no use his calling for calm from the Dispatch Box when the words of the Chief Secretary to the Treasury and the implied threats that he has made today to review the laws on strike ballots simply serve to inflame the situation? Why does he not stop posturing, get the employers and the teachers around the table and find a way of avoiding this strike conflict?

[Michael Gove]

My right hon. Friend the Chief Secretary has a duty to ensure that our finances are back in balance after the terrible situation that we inherited. The speech that he made just over a week ago outlined proposals for discussion. It was not an end position; it was an opening position. The hon. Lady should have the responsibility to recognise that.

As for keeping the law under review, it is my duty to do so. It has nothing to do with strike ballots and everything to do with making sure that heads and local authorities are informed so that parents can be protected. I would have thought that the hon. Lady was on the side of parents and would support any review that might enhance protection for them.

[Andrew Percy (Brigg and Goole) (Con)]

I declare an interest as a member of the teaching union Voice, the cardinal rule of which is that teachers will not strike in any circumstances because of the impact on young people. Today, so many children are brought up by just one caregiver and in many families both parents work. Rather than looking at thresholds, is it not time to consider requiring teachers, in the interests of young people and school pupils up and down the country, at least to inform their school that they plan to go on strike? Too many schools in my constituency will be closed this Thursday because head teachers do not know whether teachers will be arriving to teach or not.

[Michael Gove]

My hon. Friend, as ever, makes an informed and constructive point. I think that workers should retain the right to call for a strike and to take part in industrial action—absolutely. But we also have to recognise that public sector professionals have a wider responsibility. One of the questions that my hon. Friend puts is whether we should require individuals to inform their workplace that they intend to take industrial action and give appropriate notice. It is a matter for review and one that we will have to review after Thursday when we have seen the effect on schools and parents.

[Clive Efford (Eltham) (Lab)]

Teachers up and down the country will be appalled at the attitude that the Secretary of State has taken, implying that the people going on strike do not care about the children they educate. When did the Government change the law on portable Criminal Records Bureau checks in order to allow these parents into the schools? Unless they are CRB checked for these particular schools, those CRB checks are not appropriate. When did he change the law?

[Michael Gove]

The hon. Gentleman will be aware that it is already the case that there are parents who have been appropriately CRB checked and can support the work of schools. It is also the case that parents can support the work of schools without a CRB check. Of course parents have to be supervised by an appropriate member of staff, but it is perfectly possible, as we all know from the example of parents who have helped with school trips and journeys, for any parents to support them.

[Gavin Barwell (Croydon Central) (Con)]

Does my right hon. Friend agree that it is perfectly possible to understand the anger that teachers and other public servants feel at being asked to pay the price for the economic mess we inherited from the previous Government, but also to believe that it cannot be fair to ask those in the private sector to work longer and pay more to pay for pensions that they themselves can never hope to receive?

[Michael Gove]

My hon. Friend makes a very good point. Obviously, all of us who are parents want to ensure that teachers receive good pensions in the future and appropriate reward for the hard work that they do. However, we also have to recognise that the average level of pension enjoyed by people in the private sector is significantly lower, so we have to ensure fairness across sectors.

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

I can recall when, during the last Conservative Government, a Secretary of State was booed at a teachers’ conference. May I advise the Secretary of State to cut out the rhetoric and get his friends on the Government Benches to calm down? Let us instead have some negotiations that can resolve the problem before Thursday.

[Michael Gove]

I am grateful to the hon. Gentleman, as I know he takes a strong interest in educational matters, but, as I have said, negotiations are ongoing. The reason why both the Labour Front-Bench team and the Government believe that these strikes are wrong is because they pre-empt the conclusion of negotiations.

[Mrs Anne Main (St Albans) (Con)]

Can my right hon. Friend give me some advice, because I am very concerned that this strike will not only affect young people’s education, but will have a negative impact on businesses, particularly small businesses? On Thursday, many small businesses may find themselves without a significant number of staff, as they may have to look after their children. What advice can he give to businesses that are going to be hit by this, especially if the strikes are ongoing or repetitive?

[Michael Gove]

I absolutely sympathise with the points made by my hon. Friend and I recognise that there will be an economic cost as a result of the disruption caused by this strike. We will, of course, do everything we can to ensure that schools remain open so that the economic and social impact is lessened.

[Tony Lloyd (Manchester Central) (Lab)]

If the Secretary of State really is sincere about wanting to bring this to a resolution, will he go back to the teachers’ leaders and negotiate on the basis that the 3% Treasury tax on pensions will now be subject to review—will he get rid of that, because if he does not do so, he is not negotiating in good faith?

[Michael Gove]

I am grateful to the hon. Gentleman for the point he makes. The truth is that the specific increase in contributions applies not only to teachers, but to public sector workers across the piece—it is one of the issues that affects all public sector unions. The public sector unions affected, apart from the teachers’ unions and the Public and Commercial Services Union, are not going on strike on Thursday. We can thus infer that there are other unions that, whatever their views on the requirement to increase contributions, believe it is important to conclude the conversation and dialogue about the state of public sector pensions overall before taking any decision about action.

[Richard Fuller (Bedford) (Con)]

The fair but difficult changes to teachers’ pensions and the pre-emptive call for a strike by the trade unions will leave many teachers this week wrestling between their loyalty to their union and their concern about the impact of this on the esteem of the profession. On Friday, I welcomed Taiwanese students to St Thomas More school in my town. Teachers in Taiwan are not able to strike and, as my right hon. Friend knows, Confucian tradition reveres teachers. What advice does he have for teachers who are wrestling with the concerns about the impact of this strike on the teaching profession in our country?

[Michael Gove]

My hon. Friend makes a very good point. One of my concerns—[Interruption.] I am grateful to the hon. Member for Garston and Halewood (Maria Eagle) for the attention that she pays to this very important question. One of the things that this Government have been seeking to do over the past 15 months is to raise the prestige of the teaching profession. We have sought to work on changes that were instituted under the previous Government and under preceding Governments. I said in my initial response to the right hon. Member for Leigh that we were lucky to have the best generation of teachers ever in our schools, and that is in no small part due to the efforts made across parties to ensure that. I am delighted to take this opportunity to underline that, but I did say on Sunday, and I will say again, that the reputation of teachers risks being affected by action on Thursday. I hope that, whatever action is taken, all of us recognise that we need to operate responsibly on Thursday, because it would be a grave shame if the respect in which teachers are held is, in any way, undermined.

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

Will the Secretary of State clarify whether he claimed earlier that the shadow Secretary of State misled the House? Yes or no?

[Michael Gove]

I said that he would never wish to mislead the House and I hope that he will take the opportunity, in this House or elsewhere, to make it clear that our proposals respect the accrued rights of all public sector workers. My concern is that the right hon. Member for Leigh (Andy Burnham), in his understandable anxiety to make a political point, will fail to make entirely clear to every teacher the reality of the position that the coalition Government are proposing.

[Christopher Pincher (Tamworth) (Con)]

Last Friday, I met all the head teachers of primary schools in Tamworth and they told me that many of their staff have no intention of following their highly paid union leaders out on strike because they want to stay in their schools and teach. Will my right hon. Friend commend the attitude of those teachers and of the teacher at Rawlett high school who sent a message to me only this morning saying that the strikes will serve the interests only of the unions and not of children?

[Michael Gove]

The point has been made—and has been made well by the Leader of the Opposition—that no one benefits from this precipitate action. It is entirely right that all the teachers reflect on those points. Of course we respect the decision of any individual to take industrial action, but we all agree that the position of teachers will be stronger and public support for them greater if they do not take such action this Thursday.

[Bill Esterson (Sefton Central) (Lab)]

The Secretary of State is a staunch trade unionist and I know he has experience of going on strike, so he will understand the difficult decision that many teachers face this week. Will he clear something up for me? Is the pension decision to do with long-term demographic change, as discussed in the Hutton report, or is it to do with cutting the deficit, as he implied earlier? Either way, will he sit down with teachers’ leaders before Thursday and sort out the problem rather than provoking strikes through his macho posturing?

[Michael Gove]

I am grateful to the hon. Gentleman, who makes two fair points. On the first, yes, I went out on strike and indeed I lost my job as a result of taking industrial action. One of the reasons I am therefore so opposed to industrial action this Thursday is that I recognise that strikes do not solve problems. Any one of us, on either side of the House, who has taken industrial action and lived with the consequences recognises that strikes do not solve deep-rooted problems. On the broader question of the way in which pension reform is designed to deal with the problems we have inherited, as I mentioned in my statement we are seeking to deal both with the terrible state in which our public finances were left by the previous Government and with the demographic challenges that force us to conclude that there is a case for reform.

[Jane Ellison (Battersea) (Con)]

In my constituency, the impact of Thursday’s strikes will be felt not by the bankers who live there but, most acutely, by lower paid people, lone parents and, especially, women who rely on fragile networks to provide child care, based on education, family and so on. Does he not share my astonishment that that point does not seem to be fully understood by those on the Opposition Benches?

[Michael Gove]

One of the critical points my hon. Friend makes is that the Opposition seem to be curious in their desire to make political points rather than seeking to work constructively with local authorities and others to keep schools open. As the right hon. Member for Leigh (Andy Burnham) made clear in his response to my statement, it is wrong for strike action to be taken at this point when discussions are still going on. The victims will be working women who will lose out as a direct result of the disruption to family life.

[Several hon. Members]

rose—

[Mr Speaker]

Order. We must now move on. I have taken 25 Back-Bench contributions, but we have an important statement to follow and considerable pressure as regards progress on the Finance Bill. The Secretary of State has shown his willingness and desire to keep the House regularly updated and that is, I am sure, appreciated.

Higher Education White Paper

Tuesday 28th June 2011 Commons Chamber

16:09

[The Minister for Universities and Science (Mr David Willetts)]

With permission, Mr Speaker, I should like to make a statement on the higher education White Paper, which sets out how our reforms will build on the changes to student support announced last year. We will put higher education back on to a sustainable financial footing. We will put students at the heart of the system and improve the academic experience, with universities and colleges being more accountable to their students than ever before. We will also take steps to improve social mobility without compromising academic excellence or institutional autonomy.

We inherited an enormous deficit, which has required difficult decisions. We could have reduced student numbers or spending per student, or we could have provided less help with living costs, but those options would have been unfair to students, to universities and to the country. Instead, we are introducing a pay-as-you-earn system that provides more support for students, that does not require reductions in student numbers and that increases the cash flowing into higher education. We estimate that there could be a cash increase in funding for higher education of around 10% by 2014-15.

Our reforms ensure that no first-time undergraduate will have to pay fees up front and that they will be asked to contribute to the cost of their education only when they are earning more than £21,000. That increase in the repayment threshold—up from £15,000 under the current system—means that graduates will benefit from smaller monthly repayments than under the current system. For example, someone earning £20,000, which is the median starting salary for graduates, repays £38 a month under the system we inherited from the previous Government; in future they would pay nothing. At the moment, a graduate earning £36,000, which is the median salary for all graduates, pays £158 a month; under our scheme that would fall to £113 a month.

Our reforms also recognise that for many people higher education does not mean a full-time, residential degree. Some students want to work or take care of their family while studying. To support them, many part-time students and distance learners will become entitled to loans to cover their full tuition costs for the first time. Also, I can announce today that my right hon. Friend the Secretary of State for Health and I have agreed that for undergraduate medical and dentistry students starting their course in autumn 2012, the NHS bursary will be increased in years 5 and 6 to cover the full costs of tuition. For graduate entrants starting in autumn 2012, access to student loans will be made available so that there are no additional up-front tuition costs. We will consider arrangements for subsequent years; more information is being placed in the Libraries of both Houses.

These changes to higher education funding enable us to put financial power in the hands of learners, but to make that effective we need to liberalise the system of quotas we inherited from the previous Government so that more students can go to universities that offer a good-quality, good-value student experience. The White Paper therefore proposes unconstrained recruitment of the roughly 65,000 high-achieving students, scoring the equivalent of AAB grades or above at A-level. Quotas for those students will be abolished and funding will go to whichever university offers them a place they accept. In addition, we will create a flexible margin of about 20,000 places to reward universities and colleges that combine good quality with value for money and with average tuition charges, after waivers, at or below £7,500 per year. That adds up to around 85,000 student places—roughly one in four places for new entrants contestable between institutions in 2012-13. We aim to expand this further year after year.

We will also extend the scope for employers and charities to offer sponsorship of extra places, provided that they do not create a cost liability for the Government, and provided, of course, that there is fair access for all applicants, regardless of ability to pay, and no sacrifice of academic standards.

The reforms put students in the driving seat, but if they are to use that power to best effect, more than a liberalising of the quotas regime will be needed. Prospective students also need to know far more about the academic experience on offer. We will therefore transform the information available to them about individual courses at individual institutions. Each institution will make available key items of information, such as contact hours and job prospects. Information will also be available to outside bodies, such as Which?, so that they can produce their own comparisons. That will lead universities to match their excellence in research with a high-quality academic experience.

We also want our universities to work with business to improve the job prospects of their graduates by providing the knowledge and skills employers value. The sandwich course, giving students practical experience of work, declined under the Labour Government; we want to reverse that. We have therefore asked Professor Sir Tim Wilson, who made the university of Hertfordshire one of our most business-friendly universities, to review how we can make England the best place in the world for university-industry collaboration. We want our universities to work with business across their teaching and research activities to promote better teaching, employer sponsorship, innovation and enterprise.

Student choice will be more real if we liberalise quotas and transform information, and if there is a greater diversity of institutions to choose from. We will therefore remove the barriers to more provision from the Open university, further education colleges and private providers. We will simplify the regime for obtaining degree-awarding powers. We will also review the artificial barriers to smaller higher education institutions taking the title “university”.

We want students from a wide range of backgrounds to benefit from the reforms. We are increasing maintenance grants and loans for nearly all students, introducing a national scholarship scheme, and strengthening the Office for Fair Access to make sure that institutions fulfil their outreach and retention obligations to people from disadvantaged groups. That will not be at the expense of institutional autonomy; the director of fair access will continue to have a duty to protect academic freedom, including institutions’ right to decide whom to admit, and on what terms.

So that universities and academics can focus on educating their students, we will strip back the burden of excessive regulation and form-filling. We will explore whether it is possible to reduce costs associated with corporation tax returns. Her Majesty’s Revenue and Customs has today announced a consultation on the possibility of introducing a relief to remove some of the VAT barriers that currently deter institutions from sharing costs. We will reduce burdens that result from information collection. We will give students power to trigger quality reviews where there are grounds for concern, but will cut back the burden of automatic review for high-performing institutions. The Higher Education Funding Council for England will be the lead regulator, taking on a new role as consumer champion for students and promoter of a competitive system.

We are now inviting people to comment on our proposals as part of a broad consultation. Subject to the availability of parliamentary time, that will be followed by a higher education Bill next year, to make the necessary legislative changes to deliver the reforms.

The White Paper offers universities the prospect of more funding, provided that they attract students. At the same time, it saves the Exchequer money by asking graduates to pay back more as their earnings increase. Our universities already transform people’s life chances; we expect them to do even more. We will protect their autonomy and reduce their regulatory burdens. Above all, our proposals benefit students by driving universities to focus on the student experience. They will have real choice, better information, and a wider range of institutions to choose from. I commend the White Paper to the House.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

I am grateful to the Minister for advance sight of his statement. Is it not true that as higher education teaching has been cut by 80%, far more universities are charging £9,000 than the Government planned, causing huge political embarrassment for the Government and creating a funding crisis with the Treasury? Is not the real substance of the White Paper a desperate drive to cut fees, no matter what the effect on quality?

Is not the truth that this is another example of the Government’s failure to think things through, their disregard for the consequences, and the wrong choices being made for the country’s future? Is it not true that the Minister has slipped out on his Department’s website today a report on the impact on exports to this country of the proposal on tuition fees and of visa changes, suggesting that the total impact is some £8 billion of revenue lost to the UK?

It is

“difficult to recall a worse example of public policy making…wishful thinking has followed the apparent failure to do any serious modelling…the whole thing is a mess, and getting messier”—

not my words, but those of Sir Peter Scott, one of Britain’s leading experts on higher education and the former vice-chancellor of the Secretary of State’s local university. Is not the real truth that any expansion in university places is set to come on the cheap, with the Government cutting student places at the majority of universities—so much for student choice now—in order to fund the race to the bottom; an auction of places—who can charge the lowest?

The Prime Minister promised that universities charging the maximum would be the exception, yet is not the truth that two thirds of universities will charge the full £9,000? Is not that a devastating example of the neglect and incompetence that the Prime Minister routinely shows to the hopes and dreams of the next generation? The Secretary of State threatened to cut student places even more or university funding even further. Guaranteed places have been floated for those who want to buy their way in, and last-minute cut-price degrees. Almost 24,000 student places are already axed or are going. The Minister is in secret talks with the banks to help him out.

Forests, the national health service, prison sentences, universities today—it is “Carry on up the Khyber” in Whitehall, the Minister the latest to do the Hattie Jacques role. I am all for vigorous competition, but on for-profit higher education corporations, has he not been warned by both the Higher Education Funding Council and the Higher Education Policy Institute? Too many examples of the worst quality higher education, not for every student, but shocking drop-out rates, appalling degree completion rates, and aggressive recruitment practices that make pensions selling seem a walk in the park, are too often their norm.

The market has not protected against poor quality there. We need to be able to spot and stop students and their families being taken for a ride. Should not new providers have to prove themselves more rigorously, more regularly? How will making it easier to get university title and degree-awarding powers improve quality or the reputation and value of particular degrees, or boost the employability of those studying for such degrees? Nobody could be against the principle of an increase in places at high quality universities, but does it sit with the Secretary of State’s promises on social mobility when 50% of those getting AAB grades are from selective or independent schools? Will contextual data be truly embedded in university admissions or has he caved in to the Tory right?

How will the Secretary of State prevent, as the Institute of Physics has warned, students being deterred from studying the sciences or maths? Student charters and better information will be little compensation for trebling fees. I accept that there have to be safeguards, but will students be able to move courses with their loan intact if they realise that their course is not suitable or if their complaints are not taken seriously? Who will be the consumer champion—the representative of students and their families—at the new providers? Why should not students paying vastly increased fees know if their university has financial problems that might affect the quality of their teaching?

I welcome the end to at least one area of uncertainty today—the NHS bursary increasing for 2012-13—but what about future years? Why no certainty on that now? On research quality, why no mention that the rest of the world is increasing its science spending, yet here in the UK British researchers are having to cope with cuts of 40% or more in the funding to invest in world-class research facilities at our universities? Because of the bungled visa changes, universities face even more intense challenges to recruit the brightest and best research students and their lecturers to work with our brightest and best. No mention of cuts in funding for postgraduate courses or the impact on postgraduate recruitment of graduates leaving university with £40,000 worth of debt. Will we see as a result of his complacency a new divide opening up between those who have a postgraduate qualification and those who do not?

On the day it was revealed that 80 graduates are chasing every graduate job, which is double the figure for last year, all we got on university and business collaboration is a review. Where is the financial plan to incentivise universities to do more to stimulate new jobs in the industries of the future? Regional development agency funding has gone, HEFCE funding has been reduced and Technology Strategy Board funding has been squeezed, so this is yet another example of opportunities for economic growth being spurned, and of Ministers fiddling while Rome burns.

It could have been so different. Why were university cuts not in line with other public service cuts? Tuition fees would have been far lower, with no black hole, and chaos and confusion would have been avoided. Universities would have concentrated on getting their research and skills into businesses to drive jobs and new growth and there would have been a rigorous drive to ensure that every student gained employable skills. The Government did not need to leave the next generation of engineers, police officers and nurses having to pay so much more for so much longer. The Minister did not need—

[Mr Speaker]

Order. I should explain to the shadow Minister that his response should be no longer than half the expected length of a ministerial statement of 10 minutes, so I think that he is on his last sentence.

[Mr Thomas]

I am extremely close to it, Mr Speaker. Is it not true that the Minister did not need to axe Aimhigher and—

[Mr Speaker]

Order. I was being gentle about it. This is the hon. Gentleman’s last sentence, and it needs to be a short one.

[Mr Thomas]

I am grateful, Mr Speaker. The Government may think that lower quality, poorer standards and a race to the bottom are a price worth paying for their incompetence, but we do not.

[Mr Willetts]

I have to tell the shadow Minister that I am informed that Hattie Jacques was not even in “Carry on up the Khyber”, and many of his other statements were no more reliable. There were no questions, only a set of random scares that bear little relation to what we are proposing in the White Paper. Let me make it absolutely clear that there are no number controls on overseas students. We continue to welcome to this country overseas students who have the ability to benefit from studying at our universities.

The hon. Gentleman seems typically confused. One moment he complained about fees of £9,000, and the next he complained about our measures for providing a clear incentive to charge £7,500 or less. Our proposal for 20,000 places to be awarded on that basis is intended to ensure that students face a range of fees as they choose a university, which we think is the right thing to do.

I should also make it clear to the hon. Gentleman that we are reducing the burdens on universities, supporting them and liberating them from some of the impositions placed on them by the previous Government. It was his Government who introduced quotas and fines of £4,500 per student for universities that infringed their quotas. We are liberating 85,000 places from such a quota regime.

I make no apology for the measures that we are taking on access. It was under Labour, despite their claims to care about social mobility and opportunity, that—to quote Sir Martin Harris’ report—the

“most advantaged 20 per cent of young people were six times more likely than the most disadvantaged 40 per cent to enter these institutions in the mid-1990s. This ratio has risen to seven times more likely by the mid-2000s”.

That refers to Russell group universities. Those figures are scandalous. Under Labour’s watch, the ratio got worse. We are committed to equality of opportunity, which is why we have set out in the White Paper proposals for strengthening the Office for Fair Access.

Not only were there no sensible questions from the hon. Gentleman, but there was no indication whatsoever about what Labour would do. Are they advocates of a graduate tax, as the leader of the Labour party is, or do they accept the need to increase fees, as Lord Mandelson did? We are none the wiser after the hon. Gentleman’s random rant.

[Several hon. Members]

rose—

[Mr Speaker]

Order. There is extensive interest in this statement, and I am keen to accommodate that interest, but I must appeal for brevity from Back Benchers and Front Benchers alike.

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

I have spent the past six years on the advisory board of the London School of Commerce, a private higher education provider, and I wholeheartedly support the Minister’s proposals to provide diversity and innovation in the sector, but does he share my bemusement at the Opposition’s stance, given that the biggest beneficiaries of such a policy will surely be students from less well-off backgrounds?

[Mr Willetts]

My hon. Friend is absolutely right. We believe that a more diverse sector with a greater range of institutions offers the greatest opportunity for students with a range of requirements to find the form of higher education that best suits them.

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

This White Paper was originally scheduled for January. I understand that one reason for the six-month delay was No. 10’s concern to ensure that it did not herald a repeat of the NHS reform fiasco. What guarantees can the Minister provide that in “widening participation” and bringing in more of the private sector, we do not have a repeat of the any-willing-provider fiasco?

[Mr Willetts]

OFFA is considering proposals from universities to improve access to their institutions, which is what they will have to do if they wish to charge fees above £6,000. The conclusions will be announced in the next fortnight, and I very much hope and am confident that they will show how it is possible to deliver wider access while maintaining high academic standards.

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

I welcome the White Paper and, particularly, the additional money announced for those dental and medical students who will start their courses next year. May I assume that Ministers are clear that the White Paper’s two key effects will be increased access at decreased costs for students and, particularly, that students will have the power to influence their courses and the quality of their teaching? It would be helpful if the Minister were to explain how they will be able to do so, and that there will be plenty of time for students and universities to respond to the White Paper before the announcements are finalised in policy.

[Mr Willetts]

I pay tribute to the right hon. Gentleman for his very constructive engagement in this very important area. At the university of Loughborough, I sat in on a fascinating meeting in which students gave their feedback on their academic programme that year, raising with the academic staff issues such as the right balance between essays and lab work and the extent to which there should be continuous assessment during the year and final exams. We want to see more of that; we want universities to provide such information on their websites; and, yes, we believe that if students are concerned about the quality of academic standards and work at a university, they should have the opportunity to raise that with the Quality Assurance Agency.

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

In responding, my hon. Friend the Member for Harrow West (Mr Thomas) referred to the assessment of the impact on university income and on the local and national economy of discouraging students from across the world from coming to Britain, and of the shambolic visa changes, which were clearly not put together by the two Departments responsible. How can the Minister come here this afternoon and say that we want to be the best in the world while discouraging the best in the world from coming to Britain?

[Mr Willetts]

The changes in the visa regime were very carefully worked out by the Home Office and BIS working together, and they tackle the problem of bogus colleges and students who wish to come to a university but do not have the academic qualifications that would enable them to benefit from a university course. The changes absolutely keep open, however, the opportunity for legitimate students who have achieved the necessary academic standards to come to this country, with no quota or limits on the number that should be able to do so.

[Mr James Clappison (Hertsmere) (Con)]

I welcome what my right hon. Friend has said today on the Floor of the House and, especially, what he has said on institutional autonomy over admissions. Will he say a little about how that is to be guaranteed? Does he agree that it is academics who should determine admissions to university, not politicians?

[Mr Willetts]

In that respect, I hope that we will be able to maintain a cross-party consensus, because the previous legislation that the previous Government introduced provided a clear protection for universities, making it clear that ultimately they determined their own admissions. We will keep that legal protection.

[Mr David Lammy (Tottenham) (Lab)]

I look forward to studying the White Paper in detail. It is surprising, however, that in his announcement the Minister made no reference at all to postgraduate study. Does he appreciate that the trebling of debt means that British students are being put off going on to taught masters courses, with only 23% of students taking such courses? If we are to compete with India and China, must he not now come to the Dispatch Box and say what he is going to do to ensure that British students can go on to postgraduate study?

[Mr Willetts]

I recognise the expertise of the right hon. Gentleman, who was previously a higher education Minister, and I accept the need to monitor very carefully what happens with postgraduates. We have asked Sir Adrian Smith—I think that the right hon. Gentleman originally asked him to do this—to investigate the whole issue of postgraduate education. We want him to reopen his inquiry and keep the matter under close review, and we will of course watch very carefully what happens.

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

I regularly meet the three principals of the FE colleges that serve my constituency, who are keen to deliver innovative degree-level courses. Does the Minister agree that we should be looking at a model whereby institutions of further education can deliver innovative higher degrees?

[Mr Willetts]

I absolutely agree with my hon. Friend; he is right. This is one of the main ways in which we can improve access to higher education. Perhaps one of the biggest beneficiaries of the 20,000 places that will be more flexible will be higher education delivered in further education colleges. We are all working together as Ministers in BIS—I pay tribute to my right hon. Friend the Secretary of State and to my hon. Friend the Minister for Further Education, Skills and Lifelong Learning—and we are committed to ensuring that that opportunity is available to young people.

[Frank Dobson (Holborn and St Pancras) (Lab)]

Does the Minister not recognise that in marketising the whole system of higher education he is creating several markets, with a sort of Harrods at the top that gains prestige from charging the highest fees and a sort of Poundland at the other end that has to cut its costs and cut corners in order to attract the worst-off and most impoverished students?

[Mr Willetts]

I have to break this gently to the right hon. Gentleman: Government Members believe in choice and in empowering students. We believe that there should be a wider range of institutions and a wider range of fees, and that is what these reforms are all about.

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

I welcome many aspects of my right hon. Friend’s White Paper, particularly the better information about contact hours, job prospects and quality of teaching experience. Does he agree that there is a real need for more part-time courses so that more people can get the opportunity to study and work at the same time?

[Mr Willetts]

I absolutely agree with my hon. Friend, and I respect his expertise as a former FE college lecturer. One of the reasons we are extending loans for fees to part-time students is to address that long-standing injustice.

[Nic Dakin (Scunthorpe) (Lab)]

Will the Secretary of State guarantee that these proposals do not allow charitable private schools to buy places at university?

[Mr Willetts]

That is not the purpose of these reforms.

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

I welcome the broad thrust of my right hon. Friend’s statement, particularly the increased competition and supply-side reforms, which will lead to a much more dynamic HE sector. I hope to respond separately to the consultation on OFFA. In the White Paper, what lessons have been taken from the community college system in the United States, where business plays a part not only in designing but in funding courses?

[Mr Willetts]

Again, my hon. Friend has a long-standing commitment to this. He describes exactly the type of innovation we hope to see as we liberalise the system. We very much wish to encourage the American model of two-plus-two courses, whereby someone may do two years at a community college and then move on to do one or two years on an honours degree at a university.

[Jon Ashworth (Leicester South) (Lab)]

Does the Minister agree that higher education should be one of our greatest exports? Over many years, thousands of students have come over to study at the two universities in Leicester, yet with his comments on contact hours, the mess over student visas and the cuts to the teaching budget, more and more international students will choose institutions in Australia, Singapore and the USA instead of the UK. Is he not concerned about that?

[Mr Willetts]

There certainly is growing international competition for students. Higher education is becoming more of a global market. I am confident that British universities, with high standards and no limit on the number of legitimate overseas students, will continue to attract many overseas students.

[Duncan Hames (Chippenham) (LD)]

Fourteen years ago, the Dearing report identified employers, alongside students and the state, as stakeholders in higher education. What measures will the Minister use to facilitate the contribution of employers to the costs of the higher education that they require of the graduates they recruit?

[Mr Willetts]

This goes back to an earlier question. Let me make it absolutely clear that one of the proposals in the White Paper is to make it easier for employers and charities to sponsor additional places at university. That is an additional flexibility in the system. Already, 6,000 university places are sponsored by employers in that way. However, it is not our intention that these proposals be abused by people to purchase places at university that they could not achieve on academic merit.

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

The Minister knows that this is the day of the launch of the higher education commission. All of us who care about higher education want to digest the White Paper, hope that it has green edges, and will see whether we can improve it. The Minister constantly talks about the student being in the driver’s seat, and about consumer satisfaction and student satisfaction. Our universities are made of other materials. Their values and principles come from their academic staff and long traditions. Getting the balance right is a difficult task. Please do not let us go just down the consumerist route.

[Mr Willetts]

There is a real dilemma here and I respect the hon. Gentleman’s raising it in the House. I believe that putting more power in the hands of students, introducing the choice that we put forward in the White Paper and recognising that the student is in many respects a consumer will not destroy the traditional values of higher education, but strengthen them. I think that the proposals will bring traditional, high-quality teaching and close academic engagement with students back to centre stage. We should not fear these forces. Respecting the autonomy of universities is the best single mechanism we have to drive the traditional high academic standards that we believe in.

[Jason McCartney (Colne Valley) (Con)]

I had an enjoyable night last Monday at the students’ union awards at Huddersfield university, where many students are enjoying their student experience. When students are exercising their choice and picking their university and course, what additional information does the Minister envisage being made available to them?

[Mr Willetts]

There is a lot of important information that we think prospective students should have, ranging from the contact hours through to the employment prospects at the end of a course. We think that such information should be widely available. Which? has given a clear indication that it will deploy the information and help prospective students to assess it.

[Bill Esterson (Sefton Central) (Lab)]

According to the House of Commons Library, there is a funding gap of between £600 million and £1 billion as a result of the mistakes the Minister has made. Are the Government not going too far and too fast on higher education, as on so much else? Is it not true that quality will suffer from his attempts to deal with the funding gap, as we have heard from my hon. Friends? To use his own words, that will be “unfair to students, to universities and to the country.”

[Mr Willetts]

There is no such funding gap, we are not going too far and too fast, and there is no threat to quality.

[Andrew Percy (Brigg and Goole) (Con)]

When I voted against the rise in tuition fees, I did so because of the impact I thought it would have on some of our more vulnerable young people. I welcome much that is in the White Paper, particularly the increase in choice. However, the problem with increasing choice is that it can increase confusion. Many young people can access advice from their financially literate and educated parents, but for vulnerable children choice can result in confusion. What work will the Minister do with schools and colleges to ensure that proper support mechanisms are in place to support vulnerable young people?

[Mr Willetts]

This is about the importance of information, advice and guidance in our schools and colleges. Again, I pay tribute to the right hon. Member for Bermondsey and Old Southwark (Simon Hughes) for his work in examining the matter carefully. I urge Members of all parties to take every opportunity to visit schools and colleges and get past some of the misinformation, and be absolutely clear to young people that no young person or their family will have to pay up front for the opportunity of going into higher education. I regret the anxiety about the matter, but it is misplaced and all Members, whatever their political views, have a shared responsibility to tackle it.

[Paul Blomfield (Sheffield Central) (Lab)]

There is concern on both sides of the House about the expansion of the for-profit sector in higher education. Will the Minister not learn from the experience of the United States, where the for-profit sector has a higher failure rate than other universities and is currently being investigated for misrepresentation to prospective students? Will he listen to the concerns of HEFCE, which says that the expansion of the for-profit sector here will damage the reputation of our university system?

[Mr Willetts]

We are not Americanising our higher education system. There are important differences between the system that we are proposing and the American one, not least of which is universal access to Exchequer-financed loans, which is not possible in the US. Also, there is a robust quality assurance system, the Quality Assurance Agency for Higher Education, which we are keeping. We are not Americanising the system.

I noted that in what the shadow Minister said there was no recognition of the fact that under the previous Labour Government, five private providers were awarded degree-awarding powers. That seems to me an indication that even the previous Government were not opposed to the private provision of higher education. I very much hope that Labour is not abandoning that position.

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

When all sorts of universities were obliged to charge the same, a student from a modest economic background had only to consider how well he or she would do in examinations and interviews in order to get a place at the best universities. Now, that potential student will have to consider how much he or she will be paying to go to a good university compared with the lesser amount required for a lesser university. Is that a step forward for meritocracy or a step backwards?

[Mr Willetts]

My hon. Friend talks about how much they will be paying, but we should remember that no student will pay up front. What will be crucial in determining their repayments is their earnings, and because we have raised the threshold, their monthly repayments, regardless of the university fee, will actually be lower under our proposed system than under the system we inherited from the Labour Government.

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

I noted the Minister’s answer to the question about the funding gap, but I have to say that I found it quite inadequate. Will he tell the House by how much he will have underestimated the cost to the UK taxpayer should universities choose to charge an average of, say, £8,000?

[Mr Willetts]

I will happily share with the House the arithmetic on which we have made an estimate, although nobody can know the exact figure. [Interruption.] I can tell the shadow Secretary of State exactly how it is done. We start by assuming that 350,000 students will apply to English universities in October 2012. We assume that 90% of them will take out a student loan, which is actually a rather higher proportion than do so at the moment—who knows whether it will be more or less than that? We assume an average loan, which is not the same as the fee—people may borrow less than the fee—of £7,500. Multiplying all that, we get approximately £2.4 billion of student loans. We are in an uncertain world, but if the hon. Gentleman is claiming, as the hon. Member for Sefton Central (Bill Esterson) did, that there will be £3.4 billion of student loans, I have to tell him that that is very, very unlikely.

[Robert Halfon (Harlow) (Con)]

Is my right hon. Friend aware that Anglia Ruskin university is opening a university campus in Harlow later this year, which will be the first time in the history of the town that we have had a university? I noted that he said in his statement that the Government would extend the scope for employers and charities to offer sponsorship, and talked about the national scholarship programme. Will he explain what that means in practice, so that disadvantaged students in Harlow can benefit from our new university?

[Mr Willetts]

I do not fully understand my hon. Friend’s proposition, but we are committed to access for students in the circumstances that he describes. Perhaps we can meet to go through his proposition more carefully, but it sounds interesting and imaginative.

[Helen Jones (Warrington North) (Lab)]

Will not the real effect of the Minister’s White Paper be to allow private institutions to cherry-pick those courses that are easiest to deliver, and to drive down costs by driving down quality? What modelling has his Department done of how many courses will cease to exist, and how many existing universities will be non-viable as a result?

[Mr Willetts]

The hon. Lady and the Labour party must decide whether they are to approach the future of higher education assuming that the private sector is the enemy. If they decide to take that approach, which, as I have said, is different from the one they took in government, they will be making a serious mistake. Students do not think about the exact legal status of the institution they study at; they want to focus on the quality of the education they will receive. We will ensure that any institutions for which students can receive student loans are properly audited, regulated and monitored. That is the right way forward.

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

I very much welcome the plans to increase the role of business in higher education. Four out of five FTSE 100 companies have sponsored their staff through courses at the Open university in my constituency. Will the Minister say a little more about how he plans to incentivise businesses in that respect, for part-time as well as full-time courses?

[Mr Willetts]

I pay tribute to my hon. Friend’s strong commitment to the Open university and his close involvement with it. The OU could be one of the main beneficiaries of the new flexibility with the 20,000 extra places, and we very much expect that it will be able to offer its degree for delivery at a range of local FE colleges and other providers. Our proposals make the funding available for that.

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

The Minister has talked a lot about what will happen to the top university institutions and those that were formerly polytechnics, but I am interested in my local university. Hull university is a good, local university, but under the proposals in the White Paper, it will be part of the squeezed middle and will lose places. What is the future for institutions such as Hull university?

[Mr Willetts]

The future is one in which, year after year, we try to increase the flexibility in the system. We have had to strike a very fine balance in the first year. We wanted a significant shift to more openness and flexibility, but we fully recognise that there is a limit to how much change the system could take in that first year. I do not know the exact intake of the university of Hull, but I very much hope that in future, it, too, can participate in the types of flexibility that we have set out today.

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

I welcome today’s statement. Does my right hon. Friend envisage an enhanced role for colleges such as West Thames college in my constituency in delivering better outcomes in higher education?

[Mr Willetts]

West Thames college can put in a bid to HEFCE under the 20,000 places scheme that we have launched today. I very much believe that some further education colleges that offer higher education can take advantage of the new flexibility that we have launched.

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

I very much trust that as a result of the Minister’s White Paper, excellent colleges such as Newman college, in Bartley Green in Birmingham, can call themselves universities. However, may I take him back to the question from my hon. Friend the Member for Warrington North (Helen Jones)? The Minister must have made an assessment that some institutions will no longer be viable. How many will there be, and what provision has he made for the students who will be caught halfway through their courses if their institution becomes non-viable?

[Mr Willetts]

Successive Governments have never given a guarantee that every institution will carry on. However, it is unlikely that the changes we have launched today will of themselves make any institution unviable—I do not know that, but it is unlikely. Of course, it is also clear that there would be a commitment that any student should be able to complete their studies.

On the hon. Lady’s first point, I very much hope that it will be possible for institutions that have a clear focus on higher education to take the title “university” when they were previously prevented from doing so because they had fewer than 4,000 students. We have said that that should be reviewed, because some excellent higher education institutions would like to take the name “university”. I am sure that any such proposal will be very carefully considered.

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

I welcome the furthering of links between business and universities. Which developing and emerging economies does the Minister think we have most to learn from, and when will Sir Tim Wilson produce his report?

[Mr Willetts]

I hope that it will be possible for Professor Sir Tim Wilson to report to us by the autumn on his observations. Having visited our main trading partners, encouraging legitimate overseas students to study in the UK and building education contacts, I think there are opportunities for us to learn from them, but equally there remains a great desire among them to learn from us. Some of our vocational qualifications are well respected, especially traditional, well-established qualifications such as City and Guilds, HNCs, HNDs and BTECs. I want to see those expanded, as do the Secretary of State and the Minister for Further Education, Skills and Lifelong Learning. Indeed, one of the new flexibilities will be to have a BTECU. It will be possible to take BTECs beyond A-level, so we could imagine a level 4 or 5 qualification—it might not be a full-blown honours degree, but it could be called a BTEC even though the organisation offering BTECs is not a teaching institution. That is the type of new flexibility that we are going to make possible so that higher-level vocational qualifications can be properly studied in our country.

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

I have met the Minister to discuss the difficulties faced by the university of Cumbria in recent years. That institution is trying the difficult process of turning itself around, but does he not accept that the chaotic package of reforms he is suggesting today could increase the risks faced by this university and others like it, which are critical to the economic success of the areas in which they are situated?

[Mr Willetts]

We on the Government Benches believe in openness, flexibility and innovation, but every time we propose it, Labour Members call it chaos. We are not going to have a central plan, and we are not going to say exactly what the quota is for each individual university—and rightly so. We believe in openness and diversity, and the hon. Gentleman ought to be able to recognise that moving away from a centrally planned system, which of course will mean less central control, does not mean chaos; it means students getting the higher education they want.

[Mr Speaker]

Order. As I said to the Justice Secretary the other day, Ministers at the Dispatch Box should not operate like rotating cruise ships, constantly turning round to their own side. It is entirely understandable, but we want to see the right hon. Gentleman.

[Graham Evans (Weaver Vale) (Con)]

I very much welcome the White Paper, particularly the provisions for part-time students. Will my right hon. Friend give me more details about his idea for student charters?

[Mr Willetts]

We invited the outgoing president of the National Union of Students and a vice-chancellor to work together, and they have produced a useful pro forma, which we refer to in the White Paper, and which gives an example of what universities are entitled to expect by way of student behaviour, and what students are entitled to expect by way of respect for them from their higher education institutions.

[Kevin Brennan (Cardiff West) (Lab)]

I want to ask about the Minister’s private providers. My right hon. Friend the Member for Holborn and St Pancras (Frank Dobson) mentioned Poundland. Has the Minister thought about approaching BrightHouse? First, BrightHouse university is a great name, and secondly it is expert at loading heavy debt on to people who cannot afford to repay it.

[Mr Willetts]

If Labour is going to take this approach to private provision, it is making a serious mistake. We are focused, quite simply, on the quality of the student experience, and this kind of snobbery—that some kinds of provision are okay and others are wrong—is out of place in modern Britain. The hon. Gentleman should remember that all universities are, strictly speaking, private institutions; they are not public sector bodies. Government Members believe in maintaining their autonomy. We wish to see a greater range of universities but all sharing the same feature—that they are not part of the public sector.

[Mark Pawsey (Rugby) (Con)]

When the previous Government increased fees, students started to ask about the value for money provided by their courses. What steps is the Minister taking to ensure that in future students get better teaching and a better overall experience at university?

[Mr Willetts]

Universities will have to provide far more information about that than they have in the past. We hope that they will provide the kind of information that local authorities now provide to council tax payers—that is, about how the money that students have paid in fees is being used. The more information, the better.

[Clive Efford (Eltham) (Lab)]

The Minister has made much of wanting to introduce equality into the system, but one thing that infuriates many students, particularly from my constituency, is having to watch those who go to so-called charitable private schools easily obtaining places in the best universities. I did not hear the Minister say no in answer to the question from my hon. Friend the Member for Scunthorpe (Nic Dakin), so will he now say whether those students will be able to purchase places? If they will, they could get into the best universities not on merit but on their ability to pay.

[Mr Willetts]

No, they will not be able to do that.

[Mr Robin Walker (Worcester) (Con)]

I welcome my right hon. Friend’s statement. Like many Government Members, I particularly welcome the support for universities working with business. Will he ensure that Professor Wilson’s review does not just cover sandwich courses, but covers the support that they can provide their graduates, such as that provided by the very good paid graduate intern scheme supported by the university of Worcester?

[Mr Willetts]

I am aware of that scheme at the university of Worcester, which was very imaginative. My hon. Friend is right that the review will go beyond sandwich courses. Again, because we will expect universities to publish information about the employment outcomes for their graduates, this will give them a much stronger incentive to make more efforts to ensure that their graduates are indeed employable.

[Neil Carmichael (Stroud) (Con)]

I welcome this excellent statement because it paves the way for more quality and better choice. How will we encourage businesses to co-operate with universities to encourage research and development?

[Mr Willetts]

There are some barriers here. One of our frustrations—I am sure that we have all come across examples of this—is that small and medium-sized enterprises might like the use of a piece of equipment that they could not afford to buy themselves, or they might like some technical advice on a project, but they do not realise that there is a university in the area that might have that piece of equipment or those technical experts. The SME does not necessarily ever step foot inside the university, and does not know what is available. We want to break down those barriers, and that is what we are looking to Professor Tim Wilson’s review to tackle.

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

Although I support relaxing the Stalinist quotas that we have had in our universities, I am concerned that a flat AAB hurdle may disincentivise people from taking subjects such as science and maths, which state school students are already half as likely to take as their independent school counterparts. What can the Minister do to address that?

[Mr Willetts]

In a letter that the Secretary of State and I have sent to HEFCE today we make clear our continuing commitment to strategically important and vulnerable subjects. We will of course monitor the effects of the change in the first year, but we wish to take it further, so that gradually more and more A-level grades are included in the system.

[Christopher Pincher (Tamworth) (Con)]

Will my right hon. Friend work with the Secretary of State for Education to introduce a system of post-A-level university applications? The current system, whereby many students are offered places based on their predicted grades, is bureaucratic and inefficient, and undermines the opportunity of many of our most disadvantaged students to get places, because their grades are routinely under-predicted. Will my right hon. Friend consider this long overdue reform?

[Mr Willetts]

I have a lot of sympathy with my hon. Friend’s points, which are important. The current system is exceptionally complicated, with a large amount of interaction between the prospective student and the university. We have asked UCAS to look into the situation, and we will await its proposals. The idea would take some time to implement—I suspect that successive Governments have wrestled with this challenge—but it is also one that we put forward in the White Paper.

[Mr Philip Hollobone (Kettering) (Con)]

Does the Minister believe that these proposals, together with the Government’s previously announced reforms, will lead to more two-year degrees, as opposed to three-year degrees, and is that something that he would wish to encourage?

[Mr Willetts]

I agree with my hon. Friend. That is exactly the kind of flexibility that we wish to see in the new system.

[Mr Marcus Jones (Nuneaton) (Con)]

Will the White Paper strengthen the link between universities and employers, so that we can get even more of our graduates into employment, post-university?

[Mr Willetts]

The White Paper is absolutely committed to that, and there are many different ways of doing it. For example, we could do it by encouraging the revival of the sandwich course, or by ensuring that university courses were kitemarked as ones that employers valued. And yes, it might indeed be the case, as we have seen with KPMG, that employers wish to sponsor students at university. If there were no Exchequer costs involved, that could provide extra places, so there are lots of different ways we could achieve what my hon. Friend quite rightly wants.

Point of Order

Tuesday 28th June 2011 Commons Chamber

17:05

[Vernon Coaker (Gedling) (Lab)]

On a point of order, Mr Speaker. Yesterday, the case of Mr Raed Salah was raised in the House. Today, we have learned from the media that that man was banned from entering the UK on the ground of extremism. Apparently, however, he has just strolled through the border past border control, and we now learn from the papers that the Home Secretary has ordered the police to track him down and arrest him. Do you not think, Mr Speaker, that rather than briefing the papers on this matter, the Home Secretary should be briefing the House on what has happened and how this incompetence has arisen? She promised tougher border controls, but there is no evidence of that in this case. There is just chaos and confusion. Mr Speaker, have you the power to ask the Home Secretary to come to the House and explain exactly how a banned extremist has apparently just walked into this country with no one able or willing to stop him?

[Mr Speaker]

I thank the hon. Gentleman for his point of order. I am not aware of any intention on the part of the Home Secretary or other Ministers to make a statement to the House on that matter, but his point of order will have been heard by those on the Treasury Bench. Such a statement might of course be forthcoming, but, as the hon. Gentleman knows, there is a range of means by which the presence of Ministers can be secured. I hope that that is helpful to him and to the House.

Bail (Amendment)

Tuesday 28th June 2011 Commons Chamber

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

17:07

[Andrew Stephenson (Pendle) (Con)]

I beg to move,

That leave be given to bring in a Bill to confer upon the prosecution a right of appeal against judges’ decisions to grant bail; and for connected purposes.

The prosecution’s right of appeal in bail cases currently applies only to bail granted by a magistrates court. I present this Bill in response to the murder of my constituent, Jane Clough. Jane was murdered on 25 July last year by her ex-partner Jonathan Vass, who was out on bail at the time despite a series of charges having been brought against him. Jane Clough, a 25-year-old accident and emergency nurse, was murdered by Jonathan Vass in the car park of Blackpool Victoria hospital just before she was due to start her shift at work. On 14 October last year, Jonathan Vass was sentenced to a minimum of 30 years in jail, but the failure of the justice system before that trial is the reason that I am bringing forward the Bill today.

Jane’s murder occurred while Jonathan Vass was on bail following a series of charges for previous crimes that he had committed against Jane. He had been charged with nine counts of rape, and with four counts of common assault and sexual assault against her. By murdering Jane, Jonathan Vass ensured that the only witness to his crimes could not testify against him. Jane had displayed great bravery in going to the authorities to report the abuse that Jonathan Vass was subjecting her to while she was pregnant with their child. Like many victims of domestic violence, she put her faith in our legal system, but our legal system failed to protect her. Before granting Jonathan Vass bail, Judge Simon Newell was advised by the police and the Crown Prosecution Service that he should not grant bail due to the severity of the crimes with which Jonathan Vass had been charged. However, Judge Newell failed to provide Jane with the necessary protection from a man who posed a real danger to her.

In a statement made by the Judicial Communications Office following Jane’s murder, it was said that Judge Newell was acting within the bounds of the Bail Act 1976, working under the general assumption that bail should be granted in all cases except in specific circumstances. The statement went on to say that the judge was not told of any of Jane’s concerns and that no evidence was presented to make him aware that Jonathan Vass would go on to commit further crime, having been seen as a paramedic with previous good character—a statement that Jane’s parents and the Crown Prosecution Service would strongly contest.

The law needs to be changed to allow the prosecution a right of appeal, so that in such a case the CPS or the Attorney-General could have challenged Judge Newell’s verdict. We need to rebalance the legal standing of bail verdicts. At the moment, the system is unfairly weighted towards the defendant. Even if Jonathan Vass had been denied bail, he would have been able to appeal that decision almost indefinitely, whereas the prosecution currently has no right of appeal to judge-made bail decisions. Even if my right hon. and learned Friend the Attorney-General wanted to appeal the granting of bail to Jonathan Vass, he could not have done so.

We can all see from the murder of Jane that the warnings given to the judge by the police and the CPS should have been heeded. Jonathan Vass’s history of offences towards Jane should have persuaded Judge Newell that he posed a serious threat to her, which would only escalate once she had reported him to the authorities. The bail conditions applied to Jonathan Vass provided Jane with little protection from any retaliation. In her diary, Jane wrote of her fear that Jonathan Vass would break bail and come for her and her daughter, that he would do something to hurt her and that nothing would stop him once he was released. While Jonathan Vass was free, Jane became a prisoner in her own home: the doors were always locked; she was afraid to go anywhere alone. Jane was scared for her own and her daughter’s safety from the moment she heard that Jonathan Vass had been released. Effectively, the wrong person had been locked up.

It is my opinion that the Bail Act 1976 should be amended to provide more protection for victims of crime such as Jane Clough. If Jonathan Vass had not been granted bail on the 13 charges against him, he would have been able to appeal the decision—a luxury not currently afforded to the prosecution. The amendment I propose would not only give the right of appeal to the prosecution, but give victims and their families more influence over the legal process.

I imagine that many of us here today know of many other legal proceedings where victims and families of victims have felt they had little knowledge or influence over what was being decided. We need to give victims of crime, and particularly of domestic violence, the reassurance that their voices will be heard and that their abusers will not be able to intimidate or hurt them.

The problem appears to be widespread in our legal system. The most recent figures I have been able to find were released in 2009 under the Freedom of Information Act and show that in excess of 30,000 crimes were committed by suspects who were on bail at the time. Most disturbingly, at least 27 murders were among those statistics. Although bail decisions will never be easy to make, surely those figures are a cause for alarm.

At the time that those figures were released, my right hon. and learned Friend was quoted in The Daily Telegraph, making the point that the legal system is set up in such a way that bail is too readily given and too weakly enforced. He went on to say that it was shocking that so many serious crimes were committed by people awaiting trial and that the Government must put public protection first. I hope that as Attorney-General he is still committed to that, as my Bill would empower him or the CPS to challenge bail decisions that are clearly wrong.

By allowing the prosecution to appeal against bail decisions, we will make sure that judges can be held accountable for the decisions they make. Even the best judge will not get every decision right and surely there should be a safeguard for when a decision is made that clearly looks ill-advised or incomprehensible. Making such a change would also protect the rights and freedoms of victims of crime and their families. As I previously mentioned, Jane became a prisoner in her own home. It strikes me as totally unacceptable that Jonathan Vass was allowed to roam free, while Jane lived under the constant shadow of her tormentor and rapist. I have received support from across the House from more than 50 MPs who want to see this issue addressed. We must ensure that victims of crime are protected from further punishment.

The murder of Jane Clough has highlighted several issues in our legal system that need to be addressed. The case raises questions relating to the accountability of judges, the granting of bail, the treatment of victims of rape, and sentencing policy. I pay tribute to John and Penny Clough, who are in the Public Gallery today, to their friends and family, and to all who are working with them to ensure that there is justice for Jane. They have shown tremendous courage in fighting not just for their daughter but, as they would put it, for all the other Jane Cloughs out there.

I commend the Bill to the House.

Question put and agreed to.

Ordered,

That Andrew Stephenson, Esther McVey, Heather Wheeler, Robert Flello, Mrs Madeleine Moon, Bob Russell, Lorraine Fullbrook, Paul Maynard, Hugh Bayley, Tracey Crouch, Jackie Doyle Price and Lorely Burt present the Bill.

Andrew Stephenson accordingly presented the Bill.

Bill read the First time; to be read a Second time on 20 January 2012 and to be printed (Bill 210).

Finance Bill

Tuesday 28th June 2011 Commons Chamber

Consideration of Bill, as amended in the Committee and the Public Bill Committee

New Clause 1

Medical insurance (pensioner tax relief)

‘(1) This section applies where—

(a) on or after 6 April 2012 an individual makes a payment in respect of a premium under a contract of private medical insurance (whenever issued),

(b) the contract meets the requirement in subsection (2) below as to the person or persons insured,

(c) at the time the payment is made the contract is an eligible contract,

(d) the individual making the payment does not make it out of resources provided by another person for the purpose of enabling it to be made, and

(e) the individual making the payment is not entitled to claim any relief or deduction in respect of it under any other provision of the Tax Acts.

(2) The requirement mentioned in subsection (1)(b) above is that the contract insures—

(a) an individual who at the time the payment is made is aged 65 or over and resident in the United Kingdom,

(b) individuals each of whom at that time is aged 65 or over and resident in the United Kingdom, or

(c) two individuals who are married to each other at that time, at least one of whom is aged 65 or over at that time, and each of whom is resident in the United Kingdom at that time.

(3) If the payment is made by an individual who at the time it is made is resident in the United Kingdom (whether or not he is the individual or one of the individuals insured by the contract) it shall be deducted from or set off against his income for the year of assessment in which it is made; but relief under this subsection shall be given only on a claim made for the purpose, except where subsections (4) to (6) below apply.

(4) In such cases and subject to such conditions as the Commissioners of Her Majesty’s Revenue and Customs (“the Commissioners”) may specify in regulations, relief under subsection (3) above shall be given in accordance with subsections (5) and (6) below.

(5) An individual who is entitled to such relief in respect of a payment may deduct and retain out of it an amount equal to income tax on it at the basic rate for the year of assessment in which it is made.

(6) The person to whom the payment is made—

(a) shall accept the amount paid after deduction in discharge of the individual’s liability to the same extent as if the deduction had not been made, and

(b) may, on making a claim, recover from the Commissioners an amount equal to the amount deducted.

(7) The Treasury may make regulations providing that in circumstances prescribed in the regulations—

(a) an individual who has made a payment in respect of a premium under a contract of private medical insurance shall cease to be and be treated as not having been entitled to relief under subsection (3) above; and

(b) he or the person to whom the payment was made (depending on the terms of the regulations) shall account to the Commissioners for tax from which relief has been given on the basis that the individual was so entitled.

(8) Regulations under subsection (7) above may include provision adapting or modifying the effect of any enactment relating to income tax in order to secure the performance of any obligation imposed under paragraph (b) of that subsection.

(9) In this section references to a premium, in relation to a contract of insurance, are to any amount payable under the contract to the insurer.’.—(Sir Paul Beresford.)

Brought up, and read the First time.

17:16

[Sir Paul Beresford (Mole Valley) (Con)]

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

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

With this it will be convenient to discuss the following:

New clause 2—Eligible medical insurance contracts—

‘(1) This section has effect to determine whether a contract is at a particular time (the relevant time) an eligible contract for the purposes of section [Medical insurance (pensioner tax relief)].

(2) A contract is an eligible contract at the relevant time if—

(a) it was entered into by an insurer who at the time it was entered into was a qualifying insurer and was approved by the Commissioners for the purposes of this section,

(b) the period of insurance under the contract does not exceed one year (commencing with the date it was entered into),

(c) the contract is not connected with any other contract at the relevant time and has not been connected with any other contract at any time since it was entered into,

(d) no benefit has been provided by virtue of the contract other than an approved benefit, and

(e) the contract meets one or more of the three conditions set out below.

(3) The first condition is that the contract is certified by the Commissioners under section [Certification of contracts] at the relevant time.

(4) The second condition is that, at the time the contract was entered into, it conformed with a standard form certified by the Commissioners as a standard form of eligible contract.

(5) The third condition is that, at the time the contract was entered into, it conformed with a form varying from a standard form so certified in no other respect than by making additions—

(a) which were (at the time the contract was entered into) certified by the Commissioners as compatible with an eligible contract when made to standard form, and

(b) which (at that time) satisfied any conditions subject to which the additions were so certified.

(6) Where a contract is varied, and the relevant time falls after the time the variation takes effect, subsections (1) to (5) above shall have effect as if “entered into” read “varied” in each place where it occurs in subsections (4) and (5) above.

(7) For the purposes of this section a contract is connected with another contract at any time if—

(a) they are simultaneously in force at that time,

(b) either of them was entered into with reference to the other, or with a view to enabling the other to be entered into on particular terms, or with a view to facilitating the other being entered into on particular terms, and

(c) the terms on which either of them was entered into would have been significantly less favourable to the insured if the other had not been entered into.

(8) For the purposes of this section each of the following is a qualifying insurer—

(a) an insurer lawfully carrying on in the United Kingdom business relating to insurance;

(b) an insurer not carrying on business in the United Kingdom but carrying on business in another member State and being either a national of a member State or a company or partnership formed under the law of any part of the United Kingdom or another member State and having its registered office, central administration or principal place of business in a member State.

(9) For the purposes of this section a benefit is an approved benefit if it is provided in pursuance of a right of a description mentioned in section [Certification of contracts] (3)(a).’.

New clause 3—Certification of contracts—

‘(1) The Commissioners shall certify a contract under this section if it satisfies the conditions set out in subsection (3) below; and the certification shall be expressed to take effect from the time the conditions are satisfied, and shall take effect accordingly.

(2) The Commissioners shall revoke a certification of a contract under this section if it comes to their notice that the contract has ceased to satisfy the conditions set out in subsection (3) below; and the revocation shall be expressed to take effect from the time the conditions ceased to be satisfied, and shall take effect accordingly.

(3) The conditions referred to above are that—

(a) the contract either provides indemnity in respect of all or any of the costs of all or any of the treatments, medical services and other matters for the time being specified in regulations made by the Treasury, or in addition to providing indemnity of that description provides cash benefits falling within rules for the time being so specified,

(b) the contract does not confer any right other than such a right as is mentioned in paragraph (a) above or is for the time being specified in regulations made by the Treasury,

(c) the premium under the contract is in the Commissioners’ opinion reasonable, and

(d) the contract satisfies such other requirements as are for the time being specified in regulations made by the Treasury.

(4) The certification of a contract by the Commissioners under this section shall cease to have effect if the contract is varied; but this is without prejudice to the application of the preceding provisions of this section to the contract as varied.

(5) Where the Commissioners refuse to certify a contract under this section, or they revoke a certification, an appeal may be made to the relevant Tribunal by—

(a) the insurer, or

(b) any person who (if the policy were certified) would be entitled to relief under section 1 above.

(6) Where a contract is certified under this section, or a certification is revoked or otherwise ceases to have effect, any adjustments resulting from the certification or from its revocation or ceasing to have effect shall be made.

(7) Subsection (6) above applies where a certification or revocation takes place on appeal as it applies in the case of any other certification or revocation.

(8) In this section the reference to a premium, in relation to a contract of insurance, is to any amount payable under the contract to the insurer.’.

New clause 4—Medical insurance: supplementary—

‘(1) The Commissioners may by regulations—

(a) provide that a claim under section [Medical insurance (pensioner tax relief)] (3) or (6)(b) shall be made in such form and manner, shall be made at such time, and shall be accompanied by such documents, as may be prescribed;

(b) make provision, in relation to payments in respect of which a person is entitled to relief under section [Medical insurance (pensioner tax relief)], for the giving by insurers in such circumstances as may be prescribed of certificates of payment in such form as may be prescribed to such persons as may be prescribed;

(c) provide that a person who provides (or has at any time provided) insurance under contracts of private medical insurance shall comply with any notice which is served on him by the Commissioners and which requires him within a prescribed period to make available for the Commissioners inspection documents (of a prescribed kind) relating to such contracts;

(d) provide that persons of such a description as may be prescribed shall, within a prescribed period of being required to do so by the Commissioners, furnish to the Commissioners information (of a prescribed kind) about contracts of private medical insurance;

(e) make provision with respect to the approval of insurers for the purposes of section [Eligible medical insurance contracts] and the withdrawal of approval for the purposes of that section;

(f) make provision for and with respect to appeals against decisions of the Commissioners with respect to the giving or withdrawal of approval of insurers for the purposes of section [Eligible medical insurance contracts];

(g) make provision with resepect to the certification by the Commissioners of standard forms of eligible contract and variations from standard forms of eligible contract certified by them;

(h) make provision for and with respect to appeals against decisions of the Commissioners with respect to the certification of standard forms of eligible contract or variations from standard forms of eligible contract certified by them;

(i) provide that certification, or the revocation of a certification, under section [Certification of contracts] shall be carried out in such form and manner as may be prescribed;

(j) make provision with respect to appeals against decisions of the Commissioners with respect to certification or the revocation of certification under section [Certification of contracts];

(k) make provision generally as to administration in connection with sections [Medical insurance (pensioner tax relief)] to [Certification of contracts].

(2) In subsection (1) above—

“eligible contract” has the meaning given by section [Eligible medical insurance contracts], and

“prescribed” means prescribed by or, in relation to form, under the regulations.’.

[Sir Paul Beresford]

The new clauses would provide tax relief on medical insurance premiums for people above a certain age. “Pensioners” might be a better description of them. As a very part-time dentist, I must declare a potential interest, but I had better declare a further potential interest, as birthdays keep relentlessly coming upon me—and the rest of us.

As in much of the south-east, life expectancy in Surrey is somewhat higher than the England mean. The average life expectancy in England is about 78 for males and 82 for females, while in Surrey the figures are about 82 and 86 respectively. Moreover, the proportion of those aged 65 and over in my constituency is about one in five, or 20%. It is obvious to me, as one with a professional interest in health and as an observer of my constituents’ health, that that longevity brings with it a higher demand for health care and imposes large demands on health services, especially cardiac, carcinoma and orthopaedic services. A planeload of Surrey Saga tourists would really set the airport metal detectors buzzing as the hip and knee replacements proceeded towards take-off.

The Mole Valley constituency is served by three good national health service hospitals: East Surrey hospital, Royal Surrey County hospital at Guildford, and Epsom hospital. Those hospitals have expanded in certain health areas to meet the increasing demand for treatment from the elderly, the best example being Epsom, which has a special orthopaedic unit where more than 3,000 hip and knee replacement operations are carried out annually, almost entirely on elderly people from surrounding areas such as Mole Valley. As a result of those medical problems there has been a call for an enhanced and enlarged cardiac unit at Epsom as part of the retention and refurbishment of that much-loved hospital. I have given those two examples to illustrate the increasing demand for national health service care from, predominantly, those aged over 65. That increasing demand is not specific to Mole Valley or even Surrey, but is, to a greater or lesser degree, nationwide among that age group.

My older constituents are also served by private hospital services. Some are relatively local and some are in London, but there is choice for patients. Approximately 12.5% of the United Kingdom population are currently covered by private health insurance, and about 70% of that cover is corporate while about 30% is individual. On retirement, many may wish to take over their corporate private health insurance, but the personal cost becomes a heavy factor. Additionally, many of those who fund their health insurance personally may not feel able to do so when a regular personal income is just a pension or savings. That means that, just as their need for health care is likely to increase, those individuals turn to the national health service and absorb facilities and costs that they would not use if they could be persuaded to retain or take out private health insurance and use the private sector.

Before March 1997, when tax relief was available to those over 60, it was estimated that tax relief was paid in respect of 400,000 contracts to cover about 600,000 individuals.

[Mr Edward Leigh (Gainsborough) (Con)]

I warmly congratulate my hon. Friend on his new clause. Is he aware that a ComRes poll of 150 Members of Parliament found that 66% of Conservative MPs supported the return of tax relief on private insurance for pensioners? That is hardly surprising when even the Major Government gave that elementary service to our elderly people.

[Sir Paul Beresford]

I thank my hon. Friend. One of the delightful things about his intervention is the increase in my education.

Over seven years from 1990, tax relief for the over-60s cost £560 million. However, that included a period when the relief was across all taxpayer rates. In 1994, that was reduced to apply to the basic rate of tax only. Unlike in my proposal, the relief started then at 60, not at 65, so my proposal would reduce the cost to the Revenue in real terms compared to pre-1997.

In 1997 the Labour Government cancelled the tax relief for pensioners, and Western Provident Association estimated that 40% of pensioners would discontinue their private health service. Which? magazine reported in 2002 that private health insurance coverage was lowest in the 65-plus age group. Those who choose to have personally funded private health insurance pay twice for their health—premiums and tax. It would be safe to assume that nigh on 100% of those aged 65 and above are personally funding their health insurance. It is their choice, and for many it may mean sacrificing other choices that may affect their lifestyle.

[Mr John Redwood (Wokingham) (Con)]

Can my hon. Friend also give us some idea of the saving in NHS expenses that results from people taking out cover and going privately?

[Sir Paul Beresford]

I would love to, but I am numerically dyslexic and English is my second language so I have some difficulty. I am sure that the next time I raise this possibility, I can bring those facts forward.

[Oliver Heald (North East Hertfordshire) (Con)]

I am grateful to my hon. Friend for giving way and proud to support the new clause. Does he agree that there is real concern about the cost to the NHS as estimates of longevity rise, and that his measure is likely to carve out a portion of that and protect the position for the over-65s, who will be an ever larger group?

[Sir Paul Beresford]

I agree with my hon. Friend. Not only that, it would allow spaces for the NHS to provide choice and opportunity.

The new clauses would allow basic tax relief at 65-plus and rising, and the age would rise as the pensionable age increased. It would encourage people either to keep or take out health insurance just as they reached the period of life in which demand can be expected to increase. If they do not have or cease to have insurance, they will add to the call on the NHS. This approach in no way degrades my or, indeed, their respect for the NHS, but it is intended to take some of the load of numbers and cost off our tax-paid national health service.

As UK life expectancy increases, as my hon. Friend the Member for North East Hertfordshire (Oliver Heald) just mentioned, and as the wonders of medical research improve, our pensioners’ life expectancy and well-being will increase. That will be an incentive for more to choose not only to pay their taxes—thus supporting the NHS—but to use health insurance to take an increasing load off our NHS, to the benefit of others.

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

I rise to oppose the new clauses. I have to say that it is pleasing to see the real Conservative party still alive and kicking on the Back Benches, wanting to create a privilege for a small section of the population. I understand that when tax relief was in operation, it affected only about 5% of the population. It feels as if we are going back in time a little, because if we accepted the new clause we would be stepping back to the late 1980s, when the Conservative party introduced relief on private health insurance—I acknowledge that the new clause would apply to the over-65s, rather than to the over-60s, as was the case then. That was introduced to address a lot of the arguments put by the hon. Member for Mole Valley (Sir Paul Beresford); the aim was to try to ensure that people would be given choice. I hasten to add that people have a choice if they can afford it, but they have no choice whatsoever if they cannot. I believe, as I understand the Conservative Front-Bench team does these days, that we should seek to improve the health service and opportunities for all, rather than give a tax cut and perk to a very small section of the population.

[Mr Leigh]

Surely the point is that the proposal applies to pensioners, that they have paid tax all their life and that, just at an age when they might need private medical care, they find that their insurance premiums rocket. Surely it is only elementary natural justice that they should get tax relief on those insurance premiums.

[Mr Jones]

I disagree with the hon. Gentleman. I do not understand why a low-paid worker in South Stanley in my constituency who has worked hard all his or her life should be given no tax relief or assistance and should pay their taxes just to give a tax relief and perk to individuals who not only might be able to pay for care, but who have an advantage over them. We should seek to ensure equal access to health care.

I understand what has been said about waiting lists and the health service, but when I was elected in 2001 my constituency contained two old hospitals, one of which—the old workhouse—was a disgrace. We now have two new hospitals, thanks to a Labour Government. The hon. Member for Mole Valley mentioned hip and knee replacements, and I can tell him that the industrial legacy of a mining community meant that my area had a long waiting list; it was not uncommon for people to wait for more than two years. I recall people coming to my surgery arguing about how they could get up the list any faster. Waiting lists have more or less been abolished over the intervening 10-year period, which is testament to the changes the previous Labour Government made and the investment we put in. Investment in the health service should be about ensuring equal access to care, not about giving a tax perk to a very small section of the population—the less than 5% who actually have private health insurance—as this proposal seeks to do.

[Mr Redwood]

I would be more persuaded by this argument if the Labour party had, when in office, prevented the rich from buying the health care they wanted when they wanted it. The truth is that neither the Labour party in office, nor the coalition Government, have had any intention of preventing the rich from using their power and wealth to get the health care they want. The new clause is a measure to enable people who are not that rich to be able to do so.

[Mr Jones]

The facts do not bear that out, and I shall return to that point in a moment. If people wish to spend their money on health care, that is entirely up to them—I am not opposed to that. What I am saying is that I and others should not be subsidising that choice. We should be putting the money, as the Labour Government did, into ensuring that the general population have access to good-quality NHS care and do not have to worry about the cost.

[Mr Peter Bone (Wellingborough) (Con)]

The hon. Gentleman is making a powerful socialist speech, which is nice to hear in this Chamber. Is he not wrong about the new clause, however, because we would not be subsiding from the taxpayer? Anyone who takes out new private medical insurance because of the subsidy would be saving money for the NHS and so more money could be spent on the people who wish to use the NHS? [Interruption.]

[Mr Jones]

Not necessarily, as my right hon. Friend the Member for Holborn and St Pancras (Frank Dobson) says from a sedentary position. As I have seen in my constituency, people who have access to the private sector cherry-pick. Routine operations might be covered by private health insurance but with the more difficult, specialist treatments, the last recourse is often the NHS. A few years ago, a constituent of mine came to my surgery and complained that she could not get her knee replaced on the NHS. I found that remarkable, because by that stage the waiting lists were reduced in my constituency, until I found out from the NHS trust that there were medical reasons why she could not have that operation at that time—basically, she had weight and heart problems. She subsequently had the operation in the private sector, against all the advice, and lo and behold, when there were complications they were picked up not by the private sector but by the NHS. A full NHS care package and local social services were needed to support that woman through an operation that she was determined to have against medical advice.

17:30

The proportion of people with medical insurance is skewed towards the top earners who, the evidence shows, would benefit from today’s proposed change. The old scheme went to people who already had private medical insurance and was basically a tax cut for those individuals; by the time it was abolished in 1997, it had cost the taxpayer some £140 million a year. It did little to increase the take-up among individuals who accessed private health care.

A study carried out in 2001 by the Institute for Fiscal Studies and the King’s Fund showed that the argument that such provision would reduce pressure on the NHS was not realised. Likewise, when the relief was withdrawn, providers of private health insurance argued that up to 100,000 people would suddenly give it up and there would be a huge toll on the NHS, but that did not happen. The study estimated that 0.7% of those involved—some 4,000 people—gave up their private medical insurance because they did not have access to tax relief. That goes against the argument that rewarding people who already benefit through such tax relief is a way of saving money for the NHS.

On the question of saving money for the NHS, 4,000 people is not a huge number and the evidence points out that the saving from the withdrawal of tax relief more than outweighed the cost of the small increase in the number of people who had to rely on the NHS. I accept the Conservative party is arguing for choice, and if people want access to private health insurance, they are entitled to it, but the rest of the population should not subsidise it, which is what is being argued for. Some of the figures put out by various organisations suggested that if the relief were taken away, there would somehow be a deluge of pressure on the NHS. For example, the Western Provident Association estimated that the cost to the NHS could be as much as £300 million a year, whereas Bupa estimated that the number of NHS hospital treatments would increase by 48,000. That did not happen.

Likewise, if we are trying to encourage people to take out private health insurance, we should remember that although that is how it was sold by the last Conservative Government, it did not happen then either. The number of people who took out additional insurance rose by only a couple of hundred thousand, because most of the people who have access to that type of health insurance, either because they choose to take it out or through their employment contract, are, I stress, in the top 40% of earners. It is interesting to note that less than 5% of the low-earning population has some kind of access to such insurance, mainly through the old friendly societies and others. It is not a choice for most of the population; it is a choice for a small number of people. Having tried this measure in the 1980s, the Conservatives should not go back to it and should not think it would be of assistance to the NHS.

Given that we are told by the Conservative party that money is tight, is this a sensible way of spending scarce resources? The measure would cost about £440 million a year and I would sooner that those scarce resources went into the NHS, which benefits everyone in the general population. I do not think that the idea will fly even on the Government Front Benches. As I said in my opening, it is nice to see, in relation to this and the other amendments in this group proposed by Conservative Back Benchers, that the true face of conservatism is not dead in this place.

[Mr Christopher Chope (Christchurch) (Con)]

I am delighted to be regarded as the true face of the Conservative party, but I am also very pleased that there are lots of other true faces of the Conservative party present to listen to this debate. Not everyone recalls the great excitement that there was in the Conservative party and on the Conservative Benches back in 1989 when the then Secretary of State for Health, who is now the Justice Secretary, said that he was going to introduce tax relief for health insurance premiums. That policy, which was announced in a health White Paper and then put into practice in the 1990 Budget by Nigel Lawson, was the action of a self-confident Conservative Government. That same self-confidence carried on through the years when John Major was Prime Minister, and right up to 2001, when a proposal to restore the relief, which had been taken away by the mean Labour Government, was in our manifesto. Since then, we seem to have rather lost our way.

[Mr Kevan Jones]

I would never accuse the hon. Gentleman of losing his way, but can he remember why the Labour Government did that? It was not just because the relief was unfair but because they went on to use part of the money to reduce the VAT on heating fuel.

[Mr Chope]

That was the excuse put forward at the time, but I doubt whether it was the real justification. I suspect that the real justification was a feeling on the part of a lot of socialists—people on the Labour side of the House—who resented the idea that the health service should in any way be funded by the private sector. The problem we have in this country is that although our health service is funded by taxpayer money to the extent of most health services across the G7 or G8 countries, we lag behind those other countries in that we do not have enough private sector contributions to the health service. That is why the new clause tabled by my hon. Friend the Member for Mole Valley (Sir Paul Beresford) is brilliant, because it sends out a very strong signal to people that we want to encourage them to participate in and contribute to the cost of their health care.

It is good for people to contribute to the cost of their health care, and that of their family, if they can afford so to do. Some people who can afford to do that pay for their health care outright: in a sense, they pay as they go. Others who can afford to do that pay through insurance policies. Yet others who can afford to do that do not make a contribution at all, because they believe that it is in the national interest that the whole cost of their health care should be borne by other taxpayers, many of whom are less well-off than they are. Those are the three categories, and we should try to move more people from the category of those who could afford to pay for, or contribute towards, their health care but do not, into the category of those who do contribute.

[Mr Jones]

I totally disagree with the hon. Gentleman, but I understand where he is coming from. However, the scheme introduced in the 1980s did not do what he wants. It basically just gave a tax cut to about 500,000 people who already had private plans, so it did not work the last time it was tried.

[Mr Chope]

Obviously, the Treasury will always say that there is what is described as a dead-weight cost associated with such initiatives, in that people who would be paying for health insurance anyway would get the tax relief—but that is looking at only part of the issue. What I am trying to do—as is my hon. Friend the Member for Mole Valley in his new clause—is to encourage more people to come into that category, so that we grow that cohort of people. We certainly do not want to allow that cohort to be reduced, as it inevitably is when people who were on schemes provided by their employers retire and lose that provision. Taking on that burden, or responsibility, for themselves is a significant expense; my hon. Friend’s new clause would not eliminate that cost, but it would reduce it by a useful amount.

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

Will my hon. Friend tell us how, in the current financial situation, we could pay for any dead-weight costs? Where would the money come from?

[Mr Chope]

It is a matter of seeing what the countervailing benefits would be, because obviously, if as a result of my hon. Friend’s new clause a lot more people who are not contributing anything towards the cost of their health care started to do so, thereby reducing the burden on the NHS, the dead-weight cost that my hon. Friend the Member for Skipton and Ripon (Julian Smith) mentions would be exceeded by the overall benefits, and a reduction in the overall burden of taxation. More people who are getting health care in this country would be paying for it, or contributing to its cost, rather than relying on the state and the taxpayer to do so.

[Mr Leigh]

The dead-weight cost argument is always used against ideas such as school vouchers or tax relief for health insurance, but does my hon. Friend agree that the whole point of such proposals is to help the people in the middle? Quite rightly, Parliament is concerned about the people at the bottom of the heap, and the rich can always buy their way out, but this part of the Conservative party should help the people who struggle all their lives, and pay tax all their lives.

[Mr Chope]

Exactly. My hon. Friend is absolutely right. There is a lot of resentment about the fact that people who arrive in this country can latch on to the health service, at no cost to themselves, when they have not made any contribution at all. The new clause would give people who have been making a contribution, either through their employers or by paying insurance premiums themselves, a bit of help in the form of tax relief when they retire. We are talking about modest sums, but that would send a useful message and be an incentive.

[Mr Kevan Jones]

If we were designing a system to increase the number of people with private health insurance, would not this proposal be a very inefficient way of doing it? I must draw the hon. Gentleman’s attention to the Institute for Fiscal Studies and King’s Fund report, which showed that when the scheme was abolished, 0.7% of people—4,000 people—gave up their policy. It strikes me that for most people, the scheme was a not a great incentive to buy health insurance.

[Mr Chope]

The hon. Gentleman quotes figures from the Institute for Fiscal Studies that go back, I think, to 2001—10 years ago. What concerns me is that there has been no update of those figures. If my hon. Friend the Financial Secretary to the Treasury, whom I am delighted to see on the Front Bench, comes forward with up-to-date statistics that show that the Government have been considering the issue seriously, obviously I will listen to his arguments, as I always do.

I am concerned that the issue has become one that the coalition Government do not want to discuss, and they are not prepared to commission research into it. They are not prepared to consider the argument put forward by my hon. Friends and myself that our proposal would generate more private sources of income for the health service. The Government are going for the simplistic version and concentrating on the idea that there would be an up-front dead-weight cost. There might be, but that would be outweighed by the other benefits.

17:45

[Barry Gardiner (Brent North) (Lab)]

Can the hon. Gentleman explain why the individual making the payment should not make it out of resources provided by another person for the purpose of enabling it to be made? If he can explain that, does he not believe that it would require a desperately intrusive large state to undertake investigations to ensure that the provisions in the new clause were adhered to?

[Mr Chope]

The new clauses being considered together are a word-for-word recital of the original legislation. The hon. Gentleman may have some good points, but I hope that those will not be taken by the Minister, because they would be points against the measures that followed the 1990 Budget.

[Barry Gardiner]

I am grateful to the hon. Gentleman for giving way again. I am simply trying to establish the extent of Government intrusion that would be required in order to enforce the clauses that he supports. The Government would have to intervene and find out whether the funds being made available for the premium had been supplied by a third party—perhaps children who wanted to help their ageing parents. How would the restriction be enforced?

[Mr Chope]

In the same way as it was enforced before, as my hon. Friend the Member for Mole Valley says. As the insurance companies will be the beneficiaries, in a sense, because more business will be created for them, the provisions of the new clauses require those insurance companies, in effect, to participate in a regulatory regime supervised by the Treasury. That is the reasonable safeguard that we had before, and it would be a reasonable safeguard in the future. I am delighted if the hon. Gentleman’s only objection to the new clause is that whingeing technical objection, because that must mean that he is in favour of the substance of it.

[Charlie Elphicke (Dover) (Con)]

Perhaps my hon. Friend can help me. I am puzzled that Labour Members oppose the new clause as creeping privatisation, because when they were in office they privatised large sections of the NHS, with the independent sector treatment centre programme. I do not see how those two views sit together.

[Mr Chope]

As so often, my hon. Friend makes a telling point, which has got Opposition Members back on their haunches as a result of that good intervention.

Let us look at the total contribution made to health spending in this country by the private sector. The hon. Member for North Durham (Mr Jones) quoted from the Institute for Fiscal Studies report that came out in 2001. It said:

“Despite the increase in use of the private sector, private spending on health care makes up only 16.3 per cent of total health spending in the UK, which is lower than in any other G7 country.”

It goes on to describe how low health spending was as a percentage of gross domestic product. I concede, and am pleased, that since then health spending as a percentage of GDP has increased, but the percentage of private contributions to health care has not increased commensurately, as it should have done.

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

That has been used as an argument against privatising the national health service, because the reason why the United States spends such a high proportion of its GDP on health care is that there is a completely free market there. The hon. Gentleman is actually making an argument for the national health service.

[Mr Chope]

I certainly support the national health service, but I do not think that the hon. Gentleman understands my point. My point is that even in very socialistic countries, such as Sweden, the other Scandinavian countries and others in Europe—quite apart from the United States—the proportion of total health spending that comes from the private sector is much higher than it is in this country. I think that it would be much better if a higher proportion of our total health spending came from the private sector and from individuals and companies.

[Mr Bone]

My hon. Friend is, as ever, making a powerful speech. Will he explain why some people think that not having private money gives us a better health service? Our European colleagues have better outcomes when they have more private money.

[Mr Chope]

My hon. Friend makes a good point. I think, and some of the research suggests, that when people contribute directly to the cost of their health care they take a greater interest in outcomes and hold the health service to account to a greater extent than when they can be told, “It’s all free, so what do you expect?” We talk about the health service being free at the point of delivery, which of course it is, but I want a health service that is available at the point of need, and the two things are very different. That is the gap that exists at the moment. A little more private sector resource, which would relieve some of the burden on the taxpayer or complement taxpayer resources, would be a good thing.

[Mr Kevan Jones]

Where is the evidence for that? The old scheme that the hon. Gentleman says was so great clearly did not do that, for example in relation to waiting lists. It would cost £140 million, and it would be far better if that money went into the health service to improve care for all, rather than to the small section of society that he is trying to benefit.

[Mr Chope]

Of course, the original scheme was brought in on the basis that it would apply to everyone over the age of 60, and initially would give full tax relief to higher-rate taxpayers, so the figures would be nothing like as high under the new clause, because its proposals would apply only to people over 65, and would give only 20% in tax relief.

[Mr Leigh]

Is my hon. Friend not being very moderate? Surely there is an argument for giving everyone tax relief, which is how we would move to a continental-type system with much better health outcomes, and blur the boundaries between the private and public sectors. That is what we, as Conservatives, should believe in.

[Mr Chope]

I absolutely agree, but I think that my hon. Friend the Member for Mole Valley, who tabled the new clauses, is a gradualist by nature; that goes back to his time as leader of Wandsworth council, when he was preparing for his time in Parliament and knew that things could not be done immediately but must be done gradually. He can speak for himself when he contributes to the debate, but perhaps that gradualism is part of his thinking.

I will finish soon, because many Members wish to contribute, but let us first put this suggestion in perspective by thinking about roughly how much it would cost. Let us suppose that an average health premium is about £2,000, which a pensioner or pensioner family would be faced with paying, and which previously their employer had paid as part of a contributory or non-contributory occupational scheme. Many pensioners would not pay that, but if we gave them the tax relief, which would amount to more than £400, I submit that many of them would carry on paying for their insurance, thereby contributing towards the cost of the health service, which would be a benefit.

The last time I spoke in a debate on a Finance Bill on Report it was about insurance premium tax. The insurance premiums paid for health insurance are already subject to tax, which the Treasury keeps increasing, so an alternative way forward might be to abolish the insurance premium tax paid on health insurance contributions. That is a separate argument and not the subject of this group of new clauses, but it serves as an example. The Financial Secretary to the Treasury would obviously say that we could not afford that—but does he realise that if we increased the number of people taking out health insurance, the Treasury would receive a lot more in insurance premium tax? I am sure that he will take that into account when he—in due course, having done the proper research—tells us the costs and benefits of the proposals in the new clauses.

We should not forget that the dynamic effect of these taxation changes could deliver great benefits and dividends. It is important to send a strong message to those who can afford to contribute towards their health care costs but who currently do not do so, that this would enable them to contribute at a lower cost than would otherwise be the case. I think that it is a well-rounded and sensible proposal, and I am delighted that it is getting so much support from colleagues on the Government side of the House.

[Frank Dobson (Holborn and St Pancras) (Lab)]

I am sure that people across the country would be astonished to discover that the first priority of Back-Bench Tories on health spending is to give a tax concession to people who pay, on average, £2,000 a year towards health insurance, because most people over 65 are in no position to pay such a sum towards health insurance. Most people across the country, including many pensioners, and perhaps even those pensioners who have private health insurance, think that the first priority for spending should be to avoid some of the cuts that the Government are already introducing and to direct spending to the national health service.

[Mr Redwood]

I just want to correct the record, because our first priority was to have a wider range of drugs to treat cancer, as we thought that the previous system was too meanly constructed, and we were proud of the Government when they made that the No. 1 priority for extra spending.

[Frank Dobson]

But that decision has been and gone, and I do not think there was any opposition to it across the House, but we are now talking about the Bill. The Government now propose that the first priority should be to spend the best part of £200 million to give a subsidy to people who are already sufficiently well off that they can pay £2,000 on average towards their private health care costs. I do not think that that is a sensible priority for anyone concerned about health care. I hope that no Tory Members, or Lib Dem Members if they support this proposal, will parade outside their local hospitals saying, “Please don’t get rid of 200 nurses, or some of the doctors, or our ambulance and emergency service, and please don’t take away our maternity unit.” That will be because some of their colleagues thought that the first priority was to spend £200 million on people who are considerably better off than the average.

Government Members have said that the rich can afford to buy private health care and that most rich pensioners already have it. Some extreme marketeer right-wingers both here and in the United States think that health insurance should be abolished because, if people have to pay for health care costs out of their income or savings, they will be a source of pressure to bring down those costs, but Government Back Benchers have not reached that extreme marketisation approach yet.

18:00

[Mr Bone]

The right hon. Gentleman is being very generous in giving way, and I should say something nice about his speech, but I cannot think of anything. This Government’s first priority on health, however, was to make sure that we increased health spending at more than the rate of inflation. It was something that his party would not guarantee.

[Frank Dobson]

Let us turn to a bit of history. When the previous scheme was introduced, neither the Department of Health nor the Treasury made any calculation whatever of what it would cost the taxpayer. It was a decision flying blind—[Interruption.] I notice the Financial Secretary looking to the Box, but if those in the Box give him an honest answer, he will have to confirm that the Treasury made no calculation of the cost of introducing the scheme originally and neither did the Department of Health. When I had the scheme abolished, I found it very difficult to discover how much it had cost. It took the Treasury quite a bit of time, too, because it had not logged the effect of the scheme—which it introduced.

The proposition is that, if people have private health insurance, they will not place any demands on the national health service. First, however, they would get the tax concession most of the time, but, during the years—one would hope that there were many of them—when they did not need any health care at all from anybody, they would not be relieving demand on the national health service because they would not have any demand to supply.

Secondly, as my hon. Friend the Member for North Durham (Mr Jones) has already pointed out, large numbers of people—certainly if they have a difficult or complex operation—do not resort to their private health insurance, because private providers are not up to providing them with the quality of care that is needed, so they resort to the national health service.

I remember a proposal to build a private hospital on the Odeon site on Tottenham Court road, and the brochure that the projectors of this brilliant scheme provided had a paragraph that can be summarised as stating, “It doesn’t matter if anything goes wrong in our private hospital, because you’ll be next door to the world-famous University College hospital, so you’ll be transferred there and then you’ll be okay.” Almost all intensive care is provided in the national health service; private sector providers do not generally provide it, so when things go wrong people are shifted.

[Mr Kevan Jones]

Does my right hon. Friend agree that, if we wanted to move to the market-led initiative that some Government Back Benchers have put forward, we would find that private hospitals had to train all the nurses and doctors whom they currently get through state-subsidy and training in the NHS?

[Frank Dobson]

The private sector creams off the straightforward, relatively simple and less risky operations for people who are otherwise healthy, leaving the national health service to provide similar operations for people who are unhealthy, which can be much more complex. For instance, if someone needs their hip joint replaced, and they are okay apart from their bad hip, that is fairly straightforward, but, if they have a dickey heart or something wrong with a kidney, it is altogether more complex, and you can bet your boots that that operation will take place in an NHS hospital. Similarly, an NHS hospital will provide intensive care, accident and emergency care and emergency beds, and it will carry out the training that by and large the private sector does not.

All those burdens stay with the NHS, none of it transfers to the private sector, and we are being asked to provide a tax incentive for people to do something that they do already. There was no evidence in the 1990s of any increase in the use of private health insurance as a result of the Government’s tax benefit.

[Charlie Elphicke]

The right hon. Gentleman is being extraordinarily generous in taking interventions, and he has a long-held principled position on the national health service. On the private sector creaming off, as he would say, the easy cases, does he agree that, first, he would not have acceded to the independent sector treatment centres programme and, secondly, that it was wrong for the private sector in that case to charge for operations which were not carried out?

[Frank Dobson]

When I was Health Secretary, I agreed to the establishment of national health service units that undertook diagnostic and straightforward treatment on straightforward conditions. I thought that it was a sensible idea, but unfortunately my successors decided to privatise it, and it has to be said that then, John, now Lord, Hutton was not good at getting bargains for the taxpayer. He agreed a scheme whereby on average the private sector was paid 11% more per operation than the national health service, and the private providers were also paid when they did not do all the operations that they were contracted to do. Some got 11% more for operations that were not actually carried out, so I am no fan of such arrangements, but, having opposed them right from the start, I do not recall any cries of “Hosanna!” from the Tory party when I attacked the proposition. My memory may be false, but the Tories seemed to be wild enthusiasts for that ridiculous scheme.

Noticeably, however, unlike putting money into the private sector or, in the case before us, a bit more money into the hands of pensioners who have quite a bit to start off with, investing in the national health service had a dramatic effect. When we took office, national health service hospitals performed 5.7 million operations a year; in the most recent year for which figures are available, they performed 9.6 million. If we want to look after the interests of people who get sick, we will find that the way to do so is to ensure that everyone has access to a massive increase in the number and quality of operations, and there has been a massive increase in both.

[Barry Gardiner]

When considering the situation in 1990, does my right hon. Friend recall that part of the rationale for those people having private health care was that the queues in the health service were so long that it was effectively a way of getting the same care and the same consultant but doing so in the private sector much faster? Does he share my fear that the reason why the proposal is being made now is that Tory Back Benchers know that waiting lists are already going up and will go up still further, so they want to give their friends exactly the same opportunity?

[Frank Dobson]

Yes, my hon. Friend is quite right. Government Members are obviously anticipating the expected decline in national health service output, and that decline is the reason why the national health service is going to stop collecting figures on waiting lists and waiting times. One is always rather suspicious of any organisation that collects figures and then stops. One wonders why, and the idea that those figures might be embarrassing is a good explanation.

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

My right hon. Friend is coming on to precisely the point that I want to make. This week, my local hospital, Tameside general hospital, announced 200 job losses among front-line staff, and its waiting times have shot through the roof. Is not this the real picture of what is happening in the national health service? If money is available, should we not be prioritising care in hospitals such as Tameside, not giving a tax hand-out to people for medical insurance?

[Frank Dobson]

I agree with my hon. Friend. I am sure that he will draw this proposition to the attention of the electors of Tameside, who are facing valuable staff being got rid of and reductions in the number of operations being carried out. I hope that he will also point out, as I did at the beginning of my short contribution, that apparently the first priority of a lot of Back-Bench Tories, who seem to represent the true core of Tory opinion, is to bung £200 million into the hands of the best-off pensioners, some of whom will not agree with it either.

[Charlie Elphicke]

I respectfully put it to the right hon. Gentleman that our priority is not to bung £200 million at people, as he describes it, but to see real increases in NHS spending as against the cuts that were in the last Budget of the Government whom he long supported.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I let the hon. Gentleman’s previous question go, but he is drifting way off the mark. This debate is about medical insurance.

[Frank Dobson]

Let me return to the point. The proposition before us is to divert £200 million of taxpayers’ money to a group of pensioners—not to the national health service, or even to the private health care sector, but to those particular pensioners. I cannot believe that many people in this country, at this moment, believe that that is the first priority of anyone sensible—it is certainly not my priority—but that is what we are being asked to say by those who want us to vote for this new clause.

I can remember the claims that were made when the old scheme was introduced. Despite that, nobody was able to adduce any evidence that it added to the number of pensioners who took out health insurance or stayed as pensioners who had health insurance. When it was abolished, the predictions from the national association of scaremongers, led by Bupa and others, created the impression that the whole system would collapse, that hardly anybody would keep using private health insurance, and that legions of the formerly insured would be pouring into every hospital, clinic and doctor’s surgery. That did not happen. The main function of the scheme was to put a few bob in the pockets and handbags of the better-off pensioners, and that is what it did. It had virtually no impact whatever on health care either in the national health service or in the private sector, and I suspect that the situation would be similar today.

If we have £200 million to spare—apparently we do—and we want to put it into health care, I would be very happy to see some of it go into my local hospitals so that they were not laying off nurses and doctors and other staff in the next couple of years while having to put up with the ridiculous marketising shambles that the Health Secretary has wished on the country. In case it has not been clear, I am opposed to this proposition and, given the opportunity, will vote against it.

[Mr Bone]

It is a great pleasure to follow the right hon. Member for Holborn and St Pancras (Frank Dobson), who has been very consistent in his views over the years and, I think, represents the real views of the Opposition.

I congratulate my hon. Friend the Member for Mole Valley (Sir Paul Beresford) on proposing—

[Mr Kevan Jones]

Will the hon. Gentleman give way on that point?

18:15

[Mr Bone]

I will not give way on congratulating my hon. Friend because I am not going to change my view about that. He has proposed a very small and sensible measure that I support because it would benefit people’s health. That is its basis; it is not being done for any other reason.

Over many years, I had the opportunity to observe at very close hand someone who was very seriously ill and was being treated in the national health service and in private hospitals, and they got wonderful treatment in both cases. I pay tribute to the staff in all our health institutions. I do not single out any one group as being better than the other; they all did a very good job.

I believe passionately in insurance. People should insure against things that might go wrong in future; they hope that they will not, but they take out insurance and pay a small fee for that benefit. In the case of the person I mentioned, the cost to the private medical company ran into hundreds of thousands of pounds. My argument is simple: had they not taken out private medical insurance, that money would have had to be paid by the national health service. One of the sad things I saw during that period of years was elderly, retired people at the private hospital putting down £10 notes to get a service that they would have got at a fraction of the price had they taken out insurance. By offering tax relief, we will get more people to do the right thing. It is right that we encourage people to provide for their own medical care. It is simple: if someone is getting 20% off in tax relief, the other 80% is a saving to the national health service.

Let me deal with the dead weight argument. I suspect that the Government will say, as Opposition Members have said, that because people are doing the right thing they should be penalised. If they are doing the right thing in saving money for the NHS, they should benefit from it. The new clause would encourage more people to take out private medical insurance—in this case, only those who are retired. Come February next year, when I introduce my private Member’s Bill on extending the proposal to cover all patients, we can go even further, but this would be a small step in the right direction.

[Frank Dobson]

The hon. Gentleman is trying to justify this on the grounds that people should be rewarded if they place a lesser demand on the national health service. Is he suggesting tax cuts for people who stay slim, do not drink too much or do not smoke, because that would have a much bigger impact on demand on the national health service?

[Mr Bone]

Some of those things were tried in the past by the previous Administration—incentives for people to stop smoking, for instance. That is not what I am talking about, and I think you might well say, Mr Deputy Speaker, that I was out of order if I started to drift on to those subjects. One of the great things about today’s debate, of course, is that we have all night to scrutinise the Bill. One of the benefits of having no programming is that nobody can stop our discussions, and so far there has not been any filibustering.

[Ian Swales (Redcar) (LD)]

Clearly we have a financial problem in this country. Has my hon. Friend made any assessment of the number of people who do not currently sign up for private medical insurance but would be likely to do so in order to establish the costs of the new clause?

[Mr Bone]

The proposal applies to retired people, so I think that it will affect people who have private medical insurance through their companies or who can afford to have it while they are employed, but who drop it when they retire, at the very time when they are most expensive to the national health service. The more people we can encourage to take it up, the better.

[Mr Kevan Jones]

I am very interested in this point. Will the hon. Gentleman say what evidence there is? When this tax relief was withdrawn, 4,000 people did not continue with their health insurance, so there is no evidence at all that people drop out. Likewise, there is no great evidence that by introducing this measure, the previous Conservative Government increased the numbers. What it did was give a tax break to people who already had private health insurance.

[Mr Bone]

I am grateful to the hon. Gentleman, because he said first that 4,000 dropped out and then that nobody dropped out. He had already proved that 4,000 people dropped out.

I believe that the proposal will improve the uptake of private medical insurance enormously, which will mean that there will be less of a burden on the national health service and that more money will be put into private hospitals, allowing them to develop. This country needs more health care of a higher quality. That does not need to be centrally controlled, but can be done by a mixture of NHS and private providers.

To get the idea that the priority of this Government has not been the NHS, Opposition Members must have been asleep. A thorough new Bill has come forward, which has been scrutinised by Parliament. There have been slight shrivels on the way, and it has now gone into Committee. This proposal would be a very minor adjustment to the NHS programmes of this Government. It deserves the support of the House and it will be interesting to see what happens when we divide.

[Thomas Docherty]

I should say at the outset that I have no problem at all with private health care or education. If somebody wishes to spend their money as they see fit, it is entirely a matter for them. However, we must challenge head-on the argument that has been articulately, though falsely put forward by some Government Members that people are doing their patriotic duty by not using the national health service because they are a burden on it, and that they should be rewarded for having private health care. That is simply not the case. First, private health care is a form of queue jumping. I understand the arguments behind it, but we should recognise that we are talking about people who jump to the front of the queue.

[Sir Paul Beresford]

indicated dissent.

[Thomas Docherty]

The hon. Gentleman shakes his head, but that is exactly what people with private health care do—they jump right to the front. There might be a six-month waiting time for a minor operation—I suspect that waiting times will get longer—but people who choose to have private health care go to the front of the queue and are seen within a fortnight. I have seen various television adverts for very reputable private health care companies that advocate the services that they provide. I do not think that that should be forgotten.

[Mr Kevan Jones]

Does my hon. Friend also recognise that when we had long waiting lists, the incentive that a lot of these companies used in their advertising was that people could get to the front of the queue? Is there not an argument that now that we have short waiting lists—for the time being—there is less need for private health care?

[Thomas Docherty]

My hon. Friend is entirely right. It is interesting that there are now far fewer adverts for private health care. He is right that part of the reason for that is that we have a superb national health service. Having served in the House for longer than I, he should take a great deal of credit for the fact that we have a first-class health service. The second reason why I suspect private health companies are not advertising is that thanks to the policies of the Government parties, people cannot afford to have private health care. Of course, many people are losing their jobs. I will return to that point shortly.

The other huge issue about burden is that the private health system is a burden on the national health service, because it takes doctors, nurses and other medical professionals away from it.

[Mr Chope]

indicated dissent.

[Thomas Docherty]

Now the hon. Gentleman is shaking his head. There are many highly paid consultants who split their time between their private practice, their golf course and the national health service. The time that they spend in private practice is clearly time that is not available to the national health service.

[Andrew Gwynne]

Is this not a question of priorities? If there is a pot of money to be given away, would it not be much better to spend it on health care for the many, rather than on a tax give-away for the few?

[Thomas Docherty]

I absolutely agree with my hon. Friend. It is fascinating that in this debate, we have seen for the first time who the real deficit deniers are in this House. I appreciate that the parliamentary resources unit, which so ably serves the Conservative Benches, is very good at putting out lines to Conservative colleagues about my hon. Friends being deficit deniers. We have seen this afternoon that the real deficit deniers are sitting on the back row of the Conservative Benches. At a time when there is a real-terms cut in NHS spending—I must correct the hon. Member for Wellingborough (Mr Bone)—because the promised increase in funding under this Conservative-led Government is lower than inflation, whether using the consumer prices index or the retail prices index, these Conservative Members propose that we should take money, which Government Front Benchers often tell us we do not have as a nation, and use it to assist with private health care. We have seen yet again today, as my hon. Friend points out, that they are the real deficit deniers. I look forward to seeing whether they have the courage to push the new clause to a Division, and I look forward to going through the No Lobby later this evening.

[Mark Reckless (Rochester and Strood) (Con)]

On that issue, there is clearly a very large deficit, which we inherited from the hon. Gentleman’s Government. On funding for this proposal, we have seen a 74% increase in our net contribution to the EU, which many Government Members would not like to see paid. The Financial Secretary to the Treasury has made very substantial savings by keeping us out of the Greek bail-out—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I do not think that we will be tempted down that route. We will stick to insurance.

[Thomas Docherty]

The hon. Member for Rochester and Strood (Mark Reckless) is always tempting. I suspect that you would rule me out of order, Mr Deputy Speaker, if I pointed out that it was this Prime Minister who went to the European Council and failed to live up to his promises. Therefore, let me move back to the substantive debate, which is being so ably chaired.

This proposal is a Trojan horse. Government Members tried hard to cover up their anti-health service rhetoric, but every now and again it seeped out in their speeches. The national health service is an institution that Labour Members are proud of. It is the greatest achievement in 100 years of the Labour movement. It has transformed our country’s health. As you know, Mr Deputy Speaker, I am doing an Open university degree in history. [Interruption.] I am asked where I find the time. I have a great wingman in my parliamentary duties. I am currently studying a module on the history of medicine from 1500 to 1930. It is fascinating to see that the pre-war health system that was available to the vast majority of people did not compare one iota to the achievement of the 1945 Labour Government. It was fascinating to hear the disdain of Government Members for the national health service. They are attempting to allow privatisation through the back door and to undermine the national health service. I look forward to hearing what the Minister has to say and whether he agrees with his own colleagues on the issue.

18:30

There is a sense of déjà vu about this debate. I took part in last summer’s Finance Bill debates, Mr Deputy Speaker, as you will recall. We had an interesting debate about premium taxes, which the hon. Member for Christchurch (Mr Chope) was right to mention. We had two discussions, one about motor insurance and one about private health care. He made a compelling argument about motor insurance, which is a legal requirement about which people have no choice. I am therefore surprised, as he said he was trying to do something for hard-pressed people, that he has not chosen that issue. I suspect that that is because this is a Trojan horse attempt to undermine the national health service.

The hon. Gentleman spoke about the fact that many people have private health care through their employers. Let us remind ourselves why companies have historically offered it.

[Mr Kevan Jones]

Does my hon. Friend recognise that it is the top 40% of earners who have access to private insurance? In the bottom quartile, less than 5% have it.

[Thomas Docherty]

My hon. Friend is absolutely correct, and the new clause is, yet again, all about the few, not the many. It would do nothing for the squeezed middle, the people who, thanks to the economic policies of Treasury Ministers, are finding life much harder at the moment. We should perhaps reflect on the fact that for all the passion about tax breaks on insurance, hon. Members of both Government parties did not hesitate to go through the Lobby and vote to raise VAT, which has made life much harder for many of my hon. Friend’s constituents and mine.

There are two reasons why companies have historically offered private health care. One is as an incentive to get people to come and work for them in a competitive market. As I said, thanks to policies of the Government parties, that is not particularly a problem in the current climate of job losses and rising unemployment.

The second reason is a hard-nosed business case for key employees. There is obviously a good reason why companies decide that to minimise the amount of time for which certain key employees are absent from the workplace due to illness or injury, they will provide a fast-track or—wait for it—queue-jumping approach to health care. I understand the argument for that, and it is a matter of choice, but companies have not offered private health care beyond retirement because they have no further use for that employee. That is why we tend not to see companies giving a lifetime guarantee, as they do in the United States. It is therefore a slightly false argument to say that when a company provides private health care up to the age of 65, the state needs to step in after that. It is a hard-nosed business reason.

[Mr Jones]

Is not one of the hard facts of life in the United States system, as many individuals there are seeing now, that as soon as people become unemployed, their health insurance stops? In some cases the public sector then has to pick it up. Although there may be a benefit when somebody has work, there clearly is not if they do not have work.

[Thomas Docherty]

My hon. Friend is entirely correct that that is the case for the vast majority of people. Of course, care is often continued for highly paid executives, the group of people whom Conservative Members seek to help—as I have said, the Conservatives are the party of the very few, not the many. However, he is entirely right that the vast majority of US citizens lose their private health cover in that situation. That is why Opposition Members have worked so hard to resist the attempts of the Secretary of State and his Liberal cohorts to introduce privatisation by the back door.

I am conscious that the hon. Member for Mole Valley (Sir Paul Beresford) will wish to make his closing arguments prior to dividing the House. We look forward to seeing the strength of feeling that exists, and I urge Liberal Democrat Members to stand up for the health service and stand up to their Conservative allies.

[Mr Redwood]

I should like to make it absolutely clear that this matter is not my No. 1 priority, and I do not think it is the No. 1 priority of all Conservative Members. We were elected on a manifesto that said that we were going to increase spending on the NHS in the traditional way by several billion pounds a year, and that pledge is going to be honoured.

[Thomas Docherty]

No it’s not; you’ve broken it.

[Mr Redwood]

The hon. Gentleman should read the Red Book. It clearly shows substantial cash increases in spending on health every year over the lifetime of this Parliament.

[Thomas Docherty]

The reality is that the increase in spending is lower than the increase in inflation, so it is a real-terms cut.

[Mr Redwood]

We have kept the promise to have substantial increases in cash spending. It is now very important that we get the maximum for it. We are in danger of wandering too far from the new clause, but I point out that as we are about to enter a period of wage freezes, a substantial increase in cash funding will obviously buy more health care, because the main cost is wages. I hope that the hon. Gentleman will understand that. The Government’s clear priority was to expand cancer treatments and other drugs, and to ensure that we have more high-quality care. I welcome that very much.

The second thing to understand about the new clause is that it is not a help-the-rich new clause. Opposition Members should understand that the rich are not going to be attracted by an offset on 20% tax, because they are either non-doms paying very little tax or they are paying 50% tax. They are people who self-insure, so they are not going to take out insurance policies such as we are discussing. We are not dealing with the rich, because the rich have always been able to buy the health care that they want under any type of Government. That would not change as a result of the new clause.

We are talking about a specific group of people who are coming up to retirement. Some of them will have had the benefit of company scheme insurance, and some will not have had the benefit of insurance at all. At 65, they often have an important decision to take, because several things happen. First, they lose their company health insurance, if they were receiving it. Secondly, their insurance premiums go up a lot, because they are suddenly thought to be higher risk. Thirdly, they enter the age group when they will need a lot more health care than they did in their healthy, earning years when they were executives or whatever. We are talking about whether that group of people should be able to carry on their insurance, and whether such an incentive would make any difference.

[Kerry McCarthy (Bristol East) (Lab)]

Will the right hon. Gentleman give the House some indication of what proportion of the population he is talking about, and what sort of income scale they are on, including retirement income?

[Mr Redwood]

I will give as much precision as the Leader of the Opposition and say that they are the squeezed middle. They are exactly the people in whom the Opposition are meant to be interested but whom they clearly now wish to attack in the debate.

[Mr Iain Wright (Hartlepool) (Lab)]

rose—

[Mr Kevan Jones]

rose—

[Mr Redwood]

I give way first to the hon. Member for Hartlepool (Mr Wright).

[Mr Wright]

Will the right hon. Gentleman tell us how much the measures in the new clause would cost?

[Mr Redwood]

I will take the other intervention before I respond.

[Mr Jones]

I can help the right hon. Gentleman and say that the proportion of people who would be helped is 5% of the population.

[Mr Redwood]

That may have been the case in the past, but what we are interested in is the new clause.

The answer to the hon. Member for Hartlepool is that no, I cannot tell him that. It is not my new clause and I have not researched the matter. I was about to say that I would be more likely to vote for it if a case could be made on the money involved. It seems to me that it would be a good-value purchase if the savings on health care that it generated for the NHS were considerable. We need to balance the two things—we need to know what the revenue loss would be, based on a sensible estimate of take-up, and what the savings to the NHS would be.

The Labour party has to accept that it is not a one-sided matter. The whole point of the scheme is that there would be cost savings to the NHS. That money going into the NHS could then be spent on other people and other treatment. The NHS may still have to do the really difficult things for the people involved, but there could still be an overall benefit both to them and to the NHS if the extra money coming through the private sector led to extra care.

The fundamental mistake that we have heard from the Opposition tonight in their approach to these issues—although it was not the mistake of many Labour Ministers—is the idea that the resources to be provided are finite, to be used either in the private sector or in the public sector. The whole idea, surely, is that we need more resources, more trained people, more treatments, more supplies and more medical activity, because people are living longer, they need more health treatments and the population is growing for a variety of reasons.

As some of my hon. Friends have said, the one big gap between Britain and our European partners, which are normally the example held out by the Labour party, is the amount of private sector money that goes into health in Britain. It is a considerably smaller proportion than in countries such as Germany or France or the Scandinavian countries. If Labour Members are interested in the squeezed middle, they would be well advised to consider any scheme that might help to increase or release private sector money in health in a way that creates more resources, more medically trained people, and more medical treatment.

[Oliver Heald]

Does my right hon. Friend agree that a more substantial private sector would help the NHS, because at times of great busyness in the NHS, it is to the private sector that the NHS looks to do the necessary operations? That happens right across the country, and it is one reason why it has been possible to bear down on waiting times.

[Mr Redwood]

That is exactly what successive Ministers and Secretaries of State for Health in the Labour Government concluded, with the honourable exception of the right hon. Member for Holborn and St Pancras (Frank Dobson). After him came the modernising Secretaries of State and Ministers who felt that they had to turn to the private sector to achieve better standards—in terms of offering people treatment in a timely way—and to expand the total capacity of the system.

[Frank Dobson]

My successors, to whom the right hon. Gentleman refers, sometimes make rather wild claims about the number of cataract operations that are carried out by the private sector. When Labour came to power, the NHS did 167,000 cataract operations a year, and in the last year for which figures are available it did 346,000. The private sector made the massive contribution of 16,000 in its best year.

[Mr Redwood]

The right hon. Gentleman may well be right. It is quite obvious that the NHS is the dominant health provider in our country—it has been for the many years since its foundation, and it will continue to be so under any schemes proposed by any governing party or parties in this House of Commons.

I wanted to concentrate on the cost and benefit of the proposals. I am an agnostic on this issue, which may come as a surprise to the House, because I am far from being a deficit denier, and I believe that we must weigh carefully any proposal for tax relief against other such proposals. In this case, I would be interested to know more about what the savings would be. There could be significant savings. If Ministers do not adopt the proposed scheme, they need to introduce others to promote more private health care of the right kind, because we will need a lot more of that to meet our targets and requirements, alongside the very large, and rightly favoured and supported, NHS.

Perhaps my hon. Friends the Members for Mole Valley (Sir Paul Beresford), for Christchurch (Mr Chope) and for North East Hertfordshire (Oliver Heald), who have spoken so strongly for the new clauses, wish to move closer to the Liberal Democrat coalition partners. Perhaps they had ringing in their minds the words of the right hon. Member for Yeovil (Mr Laws), who set out a comprehensive universal insurance scheme for health in the Orange Book. We will have to disappoint him today, because the proposal is modest, and it will not cover nearly as many people as he would like. Were he here, we could debate that with him, and perhaps he would see that caution and moderation is the hallmark of Conservative approaches to such things. This proposal might be the way to get started on the journey that he wished to make.

[Mr Iain Wright]

In terms of spending on health, does the right hon. Gentleman believe that we should move away from a policy of funding through general taxation and towards comprehensive medical insurance, which is the policy advocated by the right hon. Member for Yeovil (Mr Laws)?

[Mr Redwood]

No, I was just wondering whether my hon. Friends had that in mind, knowing how much they treasure the coalition with the Liberal Democrats, and knowing that such bold statements were made in the Orange Book by no less than a former Chief Secretary to the Treasury, who presumably knew the price of everything and the value of some things, and who would want to ensure value for money.

I hope that my hon. Friends on the Front Bench consider the wider issue that was rightly raised by my hon. Friend the Member for Mole Valley. How do we get extra resources and money spent on health in a friendly and sensible way, on top of the very great and important NHS, which my hon. Friends the Members for Mole Valley, for Christchurch and for North East Hertfordshire rightly back? If not by their route, what route? May we please have some numbers? The proposal could be a good-value buy, but that depends very much on how much cost would be taken out of the NHS.

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

I have one or two things to say about this debate, and I was stirred into standing up by the previous speech, because either woolly-headed logic was being used by the right hon. Member for Wokingham (Mr Redwood), or he was making a deliberate statement to try to cover—

18:45

[Oliver Heald]

On a point of order, Mr Deputy Speaker. Is it in order for somebody to come into the Chamber towards the very end of a debate and then to start criticising how it has been conducted?

[Mr Deputy Speaker (Mr Nigel Evans)]

That is not a matter for me. I have just come into the Chair myself, as I am sure you observed, Mr Heald, so I am the last one to criticise anyone for just coming in and talking.

[Michael Connarty]

You know, Mr Deputy Speaker, there is amazing technology in this place. Members can sit in their offices and, if they wish, not watch the tennis but follow the debate in detail, and come down to the Chamber when they think it might be useful to add something. I recommend it to Members: turn off the tennis, turn on the Chamber.

The point I was making is that the logic used by the right hon. Member for Wokingham was possibly deliberately to convince the public that the proposal is an effort to add extra resources to the health services by encouraging people to put money into private health insurance. The logic, of course, is that such private health insurance is available to some people when they are in employment, but is denied them when they retire. If that is the kind of employer that people have, it is a shame that they are deluded into thinking that insurance is a substitute for taxation-based health services.

The right hon. Gentleman stated that resources are not finite, and that somehow this money would bring new resources rushing into the health service. Everyone who has studied the health service over the time I have been in elected politics, which is since 1977, knows what happens. The consultant and the surgeon choose whether to work in the private sector or in the public sector. Sometimes they choose to work in a mixture of those. I commend those who decide to work entirely in the public sector, because they give the best value to our constituents, as my right hon. Friend the Member for Holborn and St Pancras (Frank Dobson) said when, in an intervention, he cited the number of operations for cataracts.

However, the reality is that only a limited number of people get to the top of the elitist profession that is the medical profession, particularly to consultant level, because we do not train enough people to do the work that is required in the health service.

[Mr Redwood]

Does the hon. Gentleman not understand that in countries that have a bigger private sector on top of a large public sector, there are more doctors and nurses in relation to the population, because there is more money?

[Michael Connarty]

The right hon. Gentleman leads me to my next point. He recommended that we look at the EU system. I am glad that in reply to an intervention from one of my hon. Friends he said that he objects to the idea of a comprehensive, insurance-based health service in this country. I, too, have looked at that on the continent and in EU countries, and I have seen that it does not work.

In fact, other EU countries do have a larger number of doctors—there are more doctors per head of population in most of them than in this country—but that is because of the elitist structure of the medical profession in this country. That structure keeps the numbers down and pays huge bonuses to people once they get to the higher gradings. Many of those people are the very same ones who moonlight in the private sector for additional personal financial gain.

[Mr Kevan Jones]

Insurance-based health systems such as that in the United States may have large numbers of doctors, but those doctors are not accessible to the large proportion of the population who do not have private health care.

[Michael Connarty]

The figures in the US are—

[Frank Dobson]

Forty million.

[Michael Connarty]

I hear my right hon. Friend say that 40 million people in the United States of America exist without adequate health care insurance or provision. A friend of mine tried to set up a dental care service in New England based on Medicare, and found that the money was not available. Many people in New England are denied any form of dental care when they end up in private nursing homes in their old age. Something is seriously wrong with that. I commend President Obama’s attempts to at least moderate that.

Let me return to the debate. People should not be deluded into thinking that the proposal will encourage more resources into the health service. It will encourage more companies to demand the services of the limited number of available surgeons to carry out operations for their private patients, instead of allowing the surgeons to do the job they should be doing. I would commend a scheme of private health care payments that provided the NHS with new equipment, doctors and other staff on top of those already trained in this country to work in the NHS.

Those who say that this proposal could do that should look at what happened with a hospital built for the private sector on the west coast of Scotland. The idea was to build a huge hospital with private money and to have people come from around the world to use it, but eventually it had to be sold to the Scottish Government when Jack McConnell was First Minister. We bought the hospital at a knock-down price because, in reality, the private sector could not generate new and fresh talent and equipment. That is not going to happen. It will just suck out resources needed by my constituents, who believe that the NHS should be paid for through taxes.

[Andrew Gwynne]

Does my hon. Friend agree that this is not about restricting choice, but about prioritising finite resources and ensuring that any available money goes into front-line NHS services, rather than into a tax giveaway to a small number of people who are already accessing private health care?

[Michael Connarty]

I could not have put it better myself—I commend my hon. Friend for helping me with his analysis.

The Labour Government were right to encourage people to provide resources that the NHS could access using taxpayers’ money where it would be more efficient. That was an excellent scheme that enabled people in my constituency to go to hospitals where beds were available over Christmas for operations that were not being done and could not be fitted into the schedules of hospitals that were short of resources. That was a good initiative, but this proposal is not; it is the opposite. It would be a damaging initiative if it encouraged people to take out private health insurance and so divert resources from the NHS, where they are needed.

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

I have found it odd recently that some private health insurers will pay those whom they insure to use the NHS. If that is the habit of private health insurance, where does the hon. Gentleman think the saving to the taxpayer is in allowing this tax relief?

[Michael Connarty]

I did not want to cite that example, although it is a good example of what happens when people use private health care and take resources away from the NHS. I find it appalling that through private health care people can actually buy organs donated to the NHS by paying for the hotel care and all the rest of it. They are not allowed to buy the organs any longer; instead they buy the ancillary health care and then use resources that people might have donated thinking they would go to NHS patients, but which end up being used for private care. But that is an aside from this debate.

The new clause would encourage more private money to suck out resources and money needed in the NHS. The right hon. Member for Wokingham kept talking about cash increases. We should not pretend that this is not the same Member who reminded us all of the real effect of cash increases when inflation is running higher than the increase. He was—how can I put this?—dodging the issue unnecessarily and treating us as though we were stupid. Cash increases will not keep the resources at the level they are at, and the new clause will in fact take out resources that the NHS does not have to give.

[Mr Stewart Jackson (Peterborough) (Con)]

I can scarcely believe that the hon. Gentleman is making that case, given that the previous Labour Government paid consultants and general practitioners respectively 27% and 44% more for doing less work, hid billions of pounds off balance sheets with dodgy private finance initiative schemes, which have reduced taxpayers to penury, and foisted independent sector training on primary care trusts, meaning that they could not plan for patient numbers or the money needed to run those centres.

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. Interventions must be brief; otherwise we might find ourselves sitting until the early hours of the morning.

[Michael Connarty]

If the hon. Gentleman proposed a motion suggesting that all those things should not have happened, I would vote for it. I am a socialist. I did not like the Labour Government overpaying people and changing their hours in such a way that my constituents got less of a service. It seems that even some Conservatives realise that paying people huge amounts of money and asking them to work fewer hours in this elitist organisation—I am very critical of the consultancy-led health service in our country—is something we should be looking at seriously. Our constituents need value for money, which many of the schemes the hon. Gentleman mentioned did not provide. However, it is interesting that this Government have done nothing to change the tax laws, despite 23% of PFIs now being owned by foreign companies that are still getting the tax breaks in this country. Part of the idea of PFIs was that they would bring in tax money, yet 23% of the companies are abroad and put nothing into this country’s economy.

[Kerry McCarthy]

I can confirm that the Opposition oppose new clause 1. The Prime Minister spent the years in the run-up to the general election and the year since trying to convince us that he valued the NHS, that it was “safe in his hands”. Sadly, however, given the current shambles over the health Bill, which has yet again returned to Committee, it is safe to say that he and his Health Secretary have spectacularly failed. On current evidence, it seems that the Prime Minister did not even attempt to persuade his Back Benchers—it seems that they now want to reinstate a policy introduced by Baroness Thatcher’s Government.

As we have heard, new clauses 1 to 4 would introduce a tax relief on medical insurance for over-65s. The hon. Members who tabled the new clauses stood on a manifesto that proclaimed we “believe in the NHS”. It turns out that they believe so much in the state that they think even private sector provision should receive state funding.

[Mr Kevan Jones]

Does my hon. Friend not think it strange that this proposal has not appeared in a Conservative party manifesto since 2001? The fact that it was dropped in 2005 and 2010 shows clearly that it is not a vote winner.

[Kerry McCarthy]

I thank my hon. Friend for that intervention. I believe that I will come to the point that he raises in a moment.

New clause 1 would reinstate a benefit that was withdrawn by the Labour Government in 1997 because, quite simply, it had failed. As my hon. Friend the Member for North Durham (Mr Jones) said, it was not picked up by the Conservative party during the recent general election. As noted by my right hon. Friend the Member for Holborn and St Pancras (Frank Dobson), who was in government at the time—I congratulate him on his excellent speech—the measure had little impact. One of the problems with the previous Conservative Government's tax relief was that they did not do their homework on what impact it would have. I would be interested to hear what research the hon. Members who tabled the new clause have done. I note that the hon. Member for Mole Valley (Sir Paul Beresford) pleaded numerical dyslexia when asked about the statistics. I think he should have got someone to do his maths homework for him before proposing a spending commitment. The first thing hon. Members should have done was to see whether it would have the desired effect in spending that money.

The Justice Secretary, the then Chancellor, claimed when originally introducing the relief that it would provide an incentive to older people to buy private insurance and reduce the pressure on the NHS. That has been echoed by many Government Members today. However, the tax relief did not reduce the burden on the NHS or help those patients who relied on it. It simply subsidised health insurance for those who could already afford it and had chosen to buy it. When originally announced in 1989, it was estimated that the relief would cost £40 million. A telling warning for Government Members who want to reintroduce the expenditure at a time of such fiscal restraint is that by 1997 the cost had multiplied to £140 million, because there was no limit on the state’s generosity to private providers. It would be wholly irresponsible to reinstate a policy whose costs could spiral to such an extent.

As NHS patients knew to their cost in the 1980s and early 1990s, the then Government were far more comfortable limiting expenditure on the NHS and letting waiting lists rise for the majority of pensioners and others who could never contemplate private insurance, which, as my hon. Friend the Member for Brent North (Barry Gardiner) said, was primarily a way of financing queue jumping for those who could afford it. For just a 10% increase in the number of people covered by insurance qualifying for relief, there was a 100% increase in costs in just the first three years. Over the lifetime of that Government’s policy, the number of people covered rose from 500,000 to 600,000; so, for a 20% increase in the number of people covered, the costs shot up by 350%.

19:00

There may be a weak correlation between the relief and private insurance, but there is no evidence of causation. The failure of successive Conservative Administrations to support the NHS is just as likely—if not more so—to have driven affluent older people towards the private sector. Either way, I would be interested to know whether Government Members, and in particular the Minister, think that the tax relief represents good value for money. The previous Labour Government did not, which is why the relief was withdrawn and used to fund a reduction in the rate of VAT on domestic energy supplies, which the Conservatives had increased. A preference for lining the pockets of private health providers? An increase in VAT? It is all too disconcertingly familiar.

The Labour Government knew that the way to reduce the pressure on the NHS was not to subsidise private medical insurance for a select few, but to invest in improved facilities, in more doctors and nurses, in better health outcomes, and in reduced waiting times for the benefit of everyone who needs treatment. Moreover, we are talking about tax relief on medical insurance, not treatment, so it does not necessarily follow that there was an increase in private cover corresponding to a commensurate fall in demand for NHS services. Of course, everyone in this country already has public health insurance, and it is not denied that people with private insurance will have paid their fair share of national insurance. It is their right to opt out of state provision, but I am intrigued to know whether those on the Government Front Bench share the view of their Back Benchers that those people should be rewarded for opting out, and should be allowed to opt out of the state insurance system. Income tax relief de facto does that, so do the Conservatives want to allow the rich to opt out of income tax more generally? Do they think it right that the general taxpayer pays for a choice freely made by the better-off?

According to research by the King’s Fund, the best estimates are that the withdrawal of the relief led to a 0.7% fall in the number of people covered by private insurance. As we are talking about health care insurance, not health care use, it is difficult to say exactly what the impact on demand for the NHS was, but few would dispute the King’s Fund’s conclusion that

“the cost of treating these individuals”

on the NHS

“is likely to have been substantially lower than the £135 million annual cost of the subsidy.”

The right hon. Member for Wokingham (Mr Redwood) and others speculated that the change would save the Government money by subsidising people taking out private medical insurance, thereby reducing the take-up of NHS services. However, when the policy was last in place, that was not the case, as the King’s Fund said. I have heard nothing today to convince me that reintroducing the policy would have a different effect.

[Andrew Gwynne]

I am pleased that my hon. Friend has confirmed that those on the Labour Front Bench will oppose this measure. She is setting out the right arguments for why we should do so. Did more people not take up NHS care and treatment under the 13 years of Labour Government because of the improvements in NHS care and treatment that were achieved over the lifetime of the Labour Government?

[Kerry McCarthy]

My hon. Friend makes a good point as always. That is the crucial thing. Under the Conservative Government, the increased take-up in medical insurance from 500,000 to 600,000 did not necessarily have anything to do with the tax relief that was introduced; it happened because the NHS was in absolute crisis. Waiting lists were going through the roof under the last Conservative Government. People were terribly scared and did not feel confident that the NHS would look after them in their ill health. There were significant improvements under the Labour Government, which meant that fewer people felt the need to take out private health care.

Let me turn to the fairness argument. It remains to be seen how much the Health Secretary’s experiment through the measures in the Health and Social Care Bill—driven once again by a preoccupation with private sector involvement in health care—will eventually take from health care budgets. We know that £850 million will be spent on redundancies alone, and the estimates are that £2 billion of PCTs’ budgets are earmarked for what can only be described as—in those infamous words of the coalition agreement—a “top-down reorganisation”. Despite the Prime Minister’s promise of real-terms increases, NHS expenditure is falling in real terms. The King’s Fund has calculated that the NHS will have £910 million less to spend over the spending review period. Patients and staff know all too well that front-line services are being affected, but tax relief for private patients will not help them.

[Alun Cairns (Vale of Glamorgan) (Con)]

Do I take it from the hon. Lady’s comments on health spending that she is condemning her colleagues in Wales, who are cutting health spending by £1 billion over the next three years?

[Kerry McCarthy]

I am sorry, I did not quite catch the end of that because a colleague was talking to me. I do not know whether the hon. Gentleman wants to make that intervention again.

[Alun Cairns]

I will happily repeat the point. Do I take it from the hon. Lady’s earlier comments about growth in health spending that she condemns her colleagues in Wales, which is the only place where Labour is in power? They are cutting health spending by £1 billion over the next three years.

[Kerry McCarthy]

The Government are here to answer for the activities for which they are responsible in the English health service—it is one of those things that goes with devolution. We have heard from Government Members in this debate that the Government are increasing spending on the NHS. They have trumpeted that over and over again—it was meant to be a platform on which the Conservatives sought election—but the truth is that there is not a real-terms increase in spending on the NHS. When inflation is taken into account, there is actually a cut in NHS spending, and it is time that the Government owned up to that.

I am under pressure to finish my speech and allow those on the Government Front Bench to come in. [Interruption.] As hon. Members can see from the fact that not one but two Opposition Whips are sitting behind me, shouting at me to hurry up, I am indeed under pressure.

How can Conservative MPs tell the hundreds of thousands of people who have signed up to the “Save our NHS” campaign that a spending commitment priority for this Government should be subsidies for private medical insurance? The coalition has tried to deny that it is creating a market in the NHS, but now Conservative MPs do not even want it to be a fair one, by creating incentives for the private sector. If the Treasury thinks it wise to spend such considerable sums, I hope that it is clear by now that they could be much more wisely and fairly spent on the NHS for the benefit of everyone, not the few who need it least. Why not invest in the NHS as a universal service of which we should all be proud, rather than sending the clear message to patients and enormously dedicated NHS staff that private health care is better? Is the coalition planning to run down the NHS to such an extent that people will need to resort to private insurance?

As my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) knew when the relief was withdrawn in 1997, not only could those funds be of great value to the NHS, but ending the relief could fund a reduction in the VAT charged on domestic energy supplies to 5%—a rate that the Conservative Government had increased to 8%, and which they would have increased still further to 17.5%, had they not been defeated by Opposition MPs. The Labour Government at the time made clear their priorities. Rather than giving a tax break to older people who could already afford health insurance, they chose a tax cut that benefited everyone, but made the most significant difference to older people on low incomes who were struggling to heat their homes.

It is worth reminding the House that the Conservatives wanted to reverse that policy and reinstate the relief in 2001. Now, 10 years later, they still have the wrong priorities —priorities that will quite simply be incomprehensible to the average person feeling the effects of this Government’s reckless spending cuts. It is estimated that 4.5 million families in the UK are living in fuel poverty, while people are facing 10% increases in their electricity bills, which are likely to increase still further as a result of the coalition’s poorly thought out plans for a carbon floor price, which we will debate perhaps in the early hours of tomorrow morning or next week. Moreover, this Government have decided to cut the winter fuel payment for pensioners.

Faced with individuals and families who will struggle to heat their homes this winter, are the Government taking positive, responsible action to help them? No; instead, they have already hiked up the VAT bills of a couple with children by £450, and those of a pensioner couple by £275, and their Back Benchers think that it is more important to reverse a decision taken to help with fuel costs and instead give tax relief to the minority who can already afford the luxury of private health insurance.

The Labour Government lifted 1.1 million pensioners out of poverty, but there is a continuing need to support those on the lowest incomes. I fear that these proposals betray how some Conservative Members neglect the needs of the poorest pensioners. With the new clauses, they want to add insult to injury by giving tax breaks to the richest to buy private medical insurance, while poorer pensioners have no option but to rely on the NHS—a service that the coalition seems determined to decimate. New clause 1 explains that the relief would apply to people over 65 but, as we all know, the coalition is planning rapidly to increase the state pension age, which will affect the associated support for older people. Does the hon. Member for Mole Valley therefore envisage the age limit increasing with the state pension age, or does he disagree with the Government’s timetable?

In 2006, 10.6% of the population were covered by private medical insurance, and only 3% by personal private medical insurance. The latest figures that I have seen indicate that just 7% of people over 65 have private medical insurance, so the clear motivation behind new clause 1 is the choice to prioritise a very small percentage of the population at a time when the country and the NHS cannot afford it. Inflation is running at more than double the target rate thanks to the Chancellor’s decision to increase VAT, growth is flat-lining, the jobseeker’s allowance claimant count is increasing and more than 80 claimants are applying for each vacancy in some areas. That all means that the Government will have borrow £46 billion more than they planned last autumn, so how on earth can this measure be a priority?

I urge the Government to reject these new clauses, to consider how the money could be much better spent and to secure the future of the NHS as a high-quality service that everyone can access and trust. Instead of an unfair income tax cut for the few, we need a temporary emergency VAT cut that will benefit everyone, particularly those on low and middle incomes, and that will give a much-needed boost to the economy to reduce the deficit over the long term in a fair and balanced way. I conclude by asking the hon. Members who tabled the new clause what their priority is. Is it a tax cut for the minority who can afford private health insurance, which would undermine and undervalue the NHS, or a tax cut that would help everyone at a time when the economy needs it most?

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

New clauses 1 to 4 seek to provide for tax relief on medical insurance premiums for individuals above the age of 65. I understand that the argument for introducing such relief is that it would encourage individuals above that age to take up private medical insurance and therefore reduce pressure on NHS resources, and that this would result in a net saving for the Exchequer in the medium to long term.

The Government introduce new tax reliefs only when there is a compelling case that to do so would represent a good use of public money. Turning first to cost, we estimate that this relief would have a direct and immediate cost to the Exchequer of at least £135 million pounds a year—a significant amount, especially given the fiscal climate in which we are now operating. That would reflect the cost of restricting relief to the basic rate of tax.

[Mr Kevan Jones]

I am interested to find out where the Minister got his figure from, because the figure in 1997 was £135 million. Has it not changed since then?

[Mr Hoban]

That is the Treasury’s latest estimate, and it is a number that we are going to stand by.

In his opening speech, my hon. Friend the Member for Mole Valley (Sir Paul Beresford) said that he wanted to restrict the tax relief to the basic rate, but subsection (3) of new clause 1 would not have that effect. It suggests that the relief could be obtained at the highest marginal rate that a person paid. He has used the 1990 legislation, whereas in the 1994 legislation the relief was restricted to the basic rate.

[Mr Leigh]

Why does my hon. Friend think that the social insurance systems on the continent, where there is much more blurring between the public and private sectors, produce much better health outcomes? Also, why does he think that the Major Government followed this policy, which we all supported at the time? Why is this proposal different from the policy of the Major Government, which we all—or some of us—supported?

[Mr Hoban]

I am pleased that my hon. Friend added that qualification. I entered the House only in 2001, so I was not in a position to support the Major Government or to disagree with them. We need to look at this measure on its own merits.

I would say to my hon. Friend the Member for Mole Valley that the way in which his new clause has been drafted means that tax relief could be gained at someone’s highest marginal rate, which could mean relief of up to 50%.

[Sir Paul Beresford]

Of course, if that were the result, I would be prepared to make some little adjustments to the new clause as the Bill progressed through the House.

[Mr Hoban]

My hon. Friend is an experienced Member of the House, and he will know that this is the final stage of the Bill, so it would not be possible to amend his proposal in that way. I note, however, that he has introduced a ten-minute rule Bill on a related subject, so we shall see what progress that makes through the House.

19:15

[Frank Dobson]

Will the Minister give way?

[Mr Hoban]

I want to make some progress. I appreciate that my hon. Friend the Member for Wellingborough (Mr Bone) has said that the debate may go on until any hour, but I do not want to be the cause of delaying the House’s tackling subsequent new clauses.

The vast majority of the cost of providing the proposed tax relief would go to those who already have private medical insurance, and there is therefore no obvious need for a new incentive. The case for introducing tax relief rests on the proposition that it would encourage significant new take-up of private medical insurance and ultimately be self-financing. However, at this stage we do not have any strong evidence to show how much additional take-up of private medical insurance a tax relief would generate, or how much pressure on NHS resources would be relieved as a result.

Indeed, when a similar relief existed between 1990 and 1997, it had little apparent effect. It is estimated that take-up of medical insurance increased only from 500,000 to 550,000 individuals over that period. The hon. Member for Bristol East (Kerry McCarthy) said that that increase was a demonstration of people’s lack of confidence in the NHS under the previous Conservative Government, but she ought to be aware that the take-up of private medical insurance under the Labour Government of whom she was a member went up from 550,000 to 1.7 million, so I do not think that her argument is particularly strong.

[Frank Dobson]

I congratulate the Minister on at least producing an estimate of the cost of the proposed measure. When the original scheme was first introduced, neither the Treasury nor the Department of Health made any estimate whatever; they were flying blind.

[Mr Hoban]

I thank the right hon. Gentleman; there are times when I am happy to accept congratulations from the other side of the House. We want to ensure, especially given the constraints that we are working under in these times of fiscal austerity, that measures can be well justified.

An Institute for Fiscal Studies report published in 2001 questioned how far the take-up of private medical insurance would ever respond to tax relief. It also suggested that the dead-weight cost would make it unlikely that tax relief could be self-financing.

[Mr Chope]

My hon. Friend was not in the House in 1989, but is he saying that my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), who was Secretary of State for Health at the time, was wrong to say that introducing this self-same measure would

“reduce the pressure on the NHS from the very age group most likely to require elective surgery, freeing resources for those who need it most”?—[Official Report, 31 January 1989; Vol. 146, c. 169.]

[Mr Hoban]

Loth as I am to suggest that my right hon. and learned Friend could ever be wrong on any measure, I want to make a point about the chances of a reduction of pressure on the NHS exceeding the cost of the tax relief. There is no evidence that there would be a net positive outcome for the Exchequer. When a similar relief existed in the 1990s, it had little apparent effect, and the IFS report from 2001 concluded that it was unlikely that such a subsidy for private medical insurance would ever be self-financing.

I appreciate the passion with which my hon. Friend the Member for Mole Valley has put forward his argument for the new clause, but I do not think that there is sufficient evidence at this point to justify the relief. There is no evidence that it would represent good value for money for the taxpayer, particularly at a time when our efforts should be focused on reducing the deficit and tackling the problems left by the previous Government.

[Oliver Heald]

Assuming that the new clause does not result in making a change in the law tonight, would my hon. Friend be prepared to look into the effects of longevity and the effect of having a more substantial private sector available to undertake operations and procedures on behalf of the national health service, as this is partly about capacity and what the future holds, not just about the numbers today?

[Mr Hoban]

My hon. Friend makes an important point about the impact of longevity on the public finances; the Office for Budget Responsibility is working on that at the moment, and we await its report. At the moment, however, given the fiscal situation and the need to tackle the deficit we inherited from the Labour party, I do not believe that the costs entailed by the new clause would represent good value for money, so I ask my hon. Friend the Member for Mole Valley to withdraw the motion.

[Sir Paul Beresford]

It is traditional to say that we have had a good debate, but we really have had a good one today; it has been stunning in a way. Most importantly, I do not think there is any Member who does not support the national health service. We are very much behind the national health service, and it is true of me even more than most Members of all parties, because I have worked in it, as well as working in the private sector and in a combination of the two. I am emphatically behind it, and I back the hospitals in my constituency.

The approach has, of course, been different. If the right hon. Member for Holborn and St Pancras (Frank Dobson) had not joined the debate, I would have felt that I had failed because we would otherwise not have heard a good red-blooded, left-wing socialist viewpoint. The difference, of course, is that Conservative Members support the national health service, but we also support the possibility of looking for alternatives or different ways of helping the NHS. That was my aim tonight.

I question the figures that the Minister provided, as we need to recognise that over a seven-year period from 1990, with the over-60s—not just the over-65s—having a full swathe of tax deducted, not just the basic rate, the relief was costing about £80 million. If the proposal in the new clause went through, there would be a progressive growth in the number of people claiming as time went on. I do not think it would be logarithmic, but it would certainly make a difference to hospitals in my constituency and others, particularly those down south. There would be a relief of the strain on those hospitals and an opportunity to redistribute the money.

I was putting my toe in the water this evening, trying to get some thinking going on the proposal, and that has happened. I will discuss the issues further with the Minister before the Budget and next year’s Bill, but in the meantime, I wish to withdraw the clause.

Clause, by leave, withdrawn.

[Mr Deputy Speaker (Mr Nigel Evans)]

We now come to new clause 5. Fiona Bruce. Not moved?

New Clause 5

Transfer of personal allowances between spouses

‘After section 37 of the Income Tax Act 2007, insert—

“37A Transfer of personal allowances between spouses

(1) This section applies to an individual who is entitled to a personal allowance under sections 35 to 37 for a tax year if—

(a) the individual is a person whose spouse who is living with the individual for the whole or any part of the tax year, and

(b) the spouse meets the requirements of section 56 (residence, etc).

(2) If—

(a) the allowance exceeds the individual’s remaining relievable income;

(b) the individual makes an election, and

(c) the individual’s spouse makes a claim,

the individual’s spouse is entitled to an allowance for the tax year equal to the amount of the excess.

(3) The individual’s remaining relievable income is found by—

(a) taking the amount of the individual’s net income, and

(b) subtracting any personal allowance to which the individual is entitled for the tax year.”’.—(Mr Leigh.)

Brought up, and read the First time.

[Mr Leigh]

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

In the last Parliament the Prime Minister and other senior Conservatives repeatedly expressed their commitment to recognise marriage in the tax system. There were some very strong statements, particularly by the Prime Minister. For instance, in Glasgow, in July 2008, he said:

“And when it comes perhaps to the most important area of all, families, we will take action not just to support marriage and family stability”,

because he wanted to say

“to parents, your responsibility and your commitment matters, so we will give a tax break for marriage and end the couple penalty.”

That was the leader of our party speaking during the last Parliament. This was the key policy response to the challenge of social breakdown, or the “broken Britain” phenomenon, and it became an important manifesto pledge at the 2010 election—a manifesto pledge on which every Conservative MP was elected. It was a sacred bond, as it were, with the electorate to support marriage, which was considered to be an absolutely key part of dealing with broken Britain. We put that in our manifesto.

I know that our party did not win an outright majority, but the commitment, most importantly, got into the coalition agreement with a provision for our Lib-Dem friends to abstain. I am not asking them to do anything, but I am asking our Front-Bench team to fulfil the pledge that they solemnly made in the manifesto and put in the coalition agreement. We are still waiting for it, which is why new clause 5 is so important and why I believe that, whatever else has been going on in the background this afternoon—I need not go into that—it was my duty to move it. If it had not been moved, many people involved in the Christian community or in the Christian Institute or in churches would have wondered why this new clause—clearly on the agenda this afternoon, and a vital part of what we are trying to achieve for Britain—had suddenly been withdrawn. I was not prepared to let that happen. I have therefore moved it to allow a debate, to which the Government should be made to respond.

Since the election the Prime Minister has reiterated his commitment to recognise marriage in the tax system on a number of occasions, including at his second Prime Minister’s Question Time—but no action has yet been taken. Given that the manifesto pledge is backed by the coalition agreement and pertains to the period between 2010 and 2015, the fact that the Government have not yet acted to recognise marriage in the tax system is, I hope, no cause for alarm. This debate is important: the Minister will have to respond to it later, when he can assure us that although it has not been possible to do this yet, it is definitely going to happen in this Parliament because it was in our manifesto and in the coalition agreement. At the very least, I want the Minister to say that.

Since the commitment to recognise marriage in the tax system was made last year, there have been some significant changes, which in my personal view greatly increase the need for swift action. In this context, the tabling of new clause 5 on Report to recognise marriage in the tax system is an important step. It provides an opportunity to put on the record the standard arguments for recognising marriage in the tax system and, more importantly, to set out the changes over the last 12 months that have greatly increased the urgency of taking action in this area. As I have said, the Government are obliged to respond and engage with the implications of the changes as they relate to the importance of recognising marriage in the tax system.

Let us go into a bit more detail. Apart from married couples with at least one spouse born before 1935—a number that will clearly reduce over the years—and couples in which at least one partner is blind, everyone in the United Kingdom is taxed on an individual basis. Unused tax allowances cannot be transferred from a non-earning spouse to an earning spouse.

Under the system of transferable allowances, which we have constantly promoted as a party for several years and as is envisaged in our coalition agreement, a non-earning spouse would be able to transfer the whole or part of the basic income tax personal allowance to their earning spouse. Depending on how it was introduced, the whole allowance or part of it could be transferable, and it could be limited to couples with children under a specified age, or limited to tax at the basic rate. The Government can decide what they can afford and they can bring it in gradually; there need not be dead-weight costs or the other problems that were aired in the previous debate. Moreover, I am not at all sure that it is appropriate to talk about dead-weight costs in this context at all. For 2011-12 the personal allowance is £7,475; if the whole allowance were transferable it would be worth up to £1,495, so we are not talking about huge sums of money.

Let us look at what other countries are doing, because it is important to nail the untruth that this idea comes just from the right wing of the British Tory party, or from the Christian community, when it is very common throughout the world. In fact, Britain is unusual among developed countries in failing to recognise marriage in the tax system. This is something that we did as a country, with cross-party agreement, as it was considered absolutely the right thing to do, right up to 1999-2000. Only 24% of citizens of OECD states live in countries that do not recognise marriage in the tax system in one way or another, and most of those live in just three countries—Mexico, Turkey and the UK. We are very much in the minority in not recognising marriage through our tax system. Why should we not recognise marriage when most countries and tax administrations in the world think that marriage is a force for stability? It is not unusual to want to recognise that. Other developed countries such as France, Germany, Italy and America all recognise marriage. In that context it was hardly surprising to learn that, according to the latest figures—published in May 2010—the resulting tax burden on single-earner married families in the United Kingdom was one third greater than the OECD average.

19:30

My point is that the present system is unfair—unfair on single-earner families. Nothing in the new clause requires families to have a single earner; we are simply saying that if a family chooses to have one, particularly if there are young children and particularly if the mother wants to stay at home, that choice should be recognised. As I have said, such arrangements are common throughout the world, and I believe that the new clause is very moderate.

[Helen Goodman (Bishop Auckland) (Lab)]

I agree with the hon. Gentleman about the importance of marriage, but I am not convinced that it is appropriate to encourage and recognise it through the tax system. The hon. Gentleman mentioned unfairness, and I think the question of fairness is the nub of the issue, for if the money were spent on benefits or tax credits for children rather than on a married tax allowance, far more children could be lifted out of poverty.

[Mr Leigh]

As so often in Finance Bill debates, the devil is in the detail. The hon. Lady has made a perfectly reasonable point. However, I hope to establish in my speech that the present system is unfair and, specifically, militates against single-earner families. That applies especially to those who are struggling out of poverty, but it is not necessarily the very poorest about whom we should be concerned. We should also be concerned about families on fairly modest earnings who are desperately trying to look after their children, and who decide that someone, usually the mother, should stay at home and care for them. But, as I have said, the devil is in the detail, and I will try to deal with the hon. Lady’s point later. It is important, and we need to tease the answer out of Ministers. We want to know why action has not been taken.

[Mr Kevan Jones]

Will the hon. Gentleman give way?

[Mr Leigh]

I want to make progress, but I will give way.

[Mr Jones]

I agree with the hon. Gentleman that the devil is in the detail, but surely the new clause would unfairly disadvantage those who lost partners through no fault of their own as a result of broken relationships or death.

[Mr Leigh]

That argument has been used against transferable tax allowances. It is true that it is impossible to create a transferable tax allowance that helps everyone, but I do not consider the fact that in certain circumstances, through no fault of their own, people will not be allowed to enjoy the benefits of such allowances to be a good argument against trying to help others—and that is all we are trying to do.

Let us examine the extent of support for marriage in Britain. It is no surprise that marriage rates are at an all-time low and family breakdown is a massive problem, affecting many different areas and, it is estimated, costing us directly between £24 billion and £41 billion per annum. The “Breakdown Britain” report motivated the then Leader of the Opposition, now the Prime Minister, to come up with this policy—our policy—and launched the debate. It was promoted by my right hon. Friend the Secretary of State for Work and Pensions; although he is not present today, I pay tribute to him for his fantastic work.

[Chris Williamson (Derby North) (Lab)]

Will the hon. Gentleman give way?

[Mr Leigh]

I will in a moment, but I want to make a little more progress. Others will want to contribute to this important debate.

There is no doubt that the lack of support for marriage gives rise to some family breakdown, not primarily through the breakdown of existing marriages but by making marriage a less attractive and more costly option for some people than it would otherwise be. I do not pretend that that applies to everyone, but undoubtedly our present system, which is very unfair on single earners receiving relatively low wages, is a disincentive for some. As the “Breakdown Britain” report demonstrates, a child born to unmarried parents has a nearly one in two chance, before reaching the age of five, of seeing its parents split up, whereas for children whose parents were married, the figure is just one in 12. That is unmistakably a huge difference. It is, I believe, a commonly held view that marriage is a good thing.

A more recent piece of research, “Family breakdown in the UK”, set out the problem of the lack of support for marriage in the following terms:

“the problem is not divorce. While marriage accounts for 54% of births, the failure of marriages—i.e. divorce—accounts for only 20% of break-ups and 14% of the costs of family breakdown, amongst all families with children under five. Unmarried families account for 80% of the break-ups and 86% of the costs.”

The report also states:

“These new statistics demonstrate dramatically that family breakdown is a huge and growing problem and that the main driver of family breakdown is the collapse of unmarried families. A failure to acknowledge these key points will lead to the inevitable failure of any government policy aimed at strengthening families.”

That is why many Government Members believe that this policy is so important.

[Chris Williamson]

Given the hon. Gentleman’s proposition that the tax system discriminates against single-income households and could cause couples to break up, what does he think of the Government’s decision to force through a change in the child benefit rules for single-income higher earners with, say, three children, whose families will lose up to £3,000 per annum? If he believes that family breakdowns result from financial circumstances, he must surely believe that that will lead to even more of them.

[Mr Leigh]

I agree with the hon. Gentleman. I have made clear my belief that our policy of fiddling around with child benefit is entirely wrong. Child benefit works because there is no fraud and no error, and because it is a flat tax. I strongly oppose the Government’s policy, because it will attack families who are on the margin just as they get into work and emerge from poverty. I predict that we will see a U-turn on that policy, and if it is the 23rd U-turn, it will be one of the best of them.

Why does the lack of stability in marriage matter? We all recognise that most single parents do a fantastic job in very difficult circumstances—I noted earlier interventions on my speech to that effect—and they must enjoy our full support. Nothing that I am saying constitutes an attack on them. However, policy must be based on evidence, and the evidence is very clear. It shows that, on average, children who are brought up in single-parent families do less well than children brought up in two-parent families according to every significant measure: educational attainment, health, the likelihood of getting into trouble with the law, and alcohol and drug abuse. I do not think it wrong for the Government to try to recognise what works when it comes to bringing up children.

Some may be tempted to respond to what I am saying by suggesting that the principal cause of the different outcomes is not marriage but wealth, and that it just so happens that wealthier people are more likely to get married. However, the facts do not support that. No one is trying to argue that marriage is the only important consideration, or that wealth is not relevant—of course it is—but data show substantial differences in family stability between married and unmarried couples in the early years of parenthood, even after the discounting of socio-economic factors such as age, income, education and race.

Most notably, the difference in family breakdown risk between married and cohabiting couples is sufficient that even—this is an important point—the poorest 20% of married couples are more stable than all but the richest 20% of cohabiting couples. It is foolish to make ourselves the odd one out in comparison with other developed countries such as France, Germany and America. Why do we not recognise marriage in our tax system, and why has the Minister not fulfilled the pledge that we made in our manifesto?

As we all know, recognition of marriage in the tax system specifically through a transferable allowance brings heightened child development benefits. In a culture that encourages parents to go back to work as quickly as possible, even though research demonstrates that this is a key time for developing attachment which has huge implications for the later development of a child, the provision of a transferable allowance makes it easier for one parent to stay at home to be with their children. I am not saying that everyone will want to do it, I am just giving an opportunity. I am not requiring anybody to do anything.

[Helen Goodman]

Will the hon. Gentleman give way?

[Mr Leigh]

I have given way to the hon. Lady once. I will make a bit of progress and if she is really desperate, of course I will let her in because I am very fond of her, as she knows, and we have served together in a Select Committee.

Polling demonstrates that staying at home is a choice that parents want to exercise. That is all that we are talking about here; we are talking about choice—no requirement. For instance, a 2008 YouGov poll for the Centre for Social Justice, run by the Secretary of State for Work and Pensions, found that 88% of parents thought that more should be done to help parents who wish to stay at home and bring up their children in the early years and 97% agreed that the Government should do more in that area. What other policy has 97% support?

A 2009 YouGov poll for the Centre for Policy Studies found that only 12% of mothers wanted to work full time, 31% did not want to work at all. Only 1% of mothers with children under five thought that the mother in a family where the father worked and there were two children under five should work full time, 49% thought that she should not work at all and fathers, when asked the same question, offered an almost identical response. So the facts are there in the opinion poll data. Only 2% thought that mum should work when her husband worked and the children were under five, and 48% thought that she should not work at all.

Many people are forced into work. Many mothers want desperately to be at home looking after their children when their children are very young, but they simply cannot afford to do so. No one suggests that a transferable allowance will solve the problem of family breakdown or make it incredibly easier for families to cope, but it will be a step in the right direction and a small gesture that we in Parliament could make to mothers who desperately want to stay at home and look after their young children.

Many women, rightly, want to work; they have good jobs. Why should we be forcing young women with very young children into low-paid jobs when they want to be at home looking after their children? Why should we create a tax system that militates against women making that choice?

[Helen Goodman]

I am grateful to the hon. Gentleman for indulging me. He makes a powerful point. Many mothers of small children want to work part time. I worked part time as I am sure did many other hon. Members. I want to bring the hon. Gentleman back to the facts. When the tax system changed from one that included a transferable allowance to one that did not, was there evidence of any impact on family breakdown?

[Mr Leigh]

I confess that I cannot go back to 1999 and I do not know what data were then available to the Chancellor, but the hon. Lady cannot deny that our tax system is unfair because it militates against the choice to stay at home. Surely I can take the hon. Lady just this far, if no further—that it should be a free choice for women with young children whether they work or not, and the tax system should be neutral. That is all that we are asking for. The hon. Lady can make a speech later if she disagrees with me. I do not doubt her sincerity. I am just saying that the system is simply unfair.

Britain’s failure to recognise marriage in the tax system meant, as of May 2010, that it was out of line with other developed countries, with the effect that, far from supporting the best child development environment and being family friendly, it was placing a significantly greater proportion of its total tax burden on this family type than was the case in comparable countries. In that context, it is not surprising that family breakdown, the key driver of the broken Britain phenomenon is particularly pronounced and the case for recognising marriage in the tax system is clear and compelling. So all the arguments for recognising marriage in the tax system stand in one key area. The tax burden on one-earner married couples with children in the UK has now risen such that it is over 40% greater than the OECD average.

19:45

Should we be proud of that as a Conservative Government when we went to the country on the basis of supporting marriage? Why are we doing that? Why are we not taking action when it was a key part of our manifesto pledge to deal with broken Britain? What is even more important is that, if all the tax and benefit changes proposed for 2012 are introduced, the burden is projected to increase to over 50% more than the OECD average. So it is getting worse, not better, for every month that the Minister delays carrying out the pledge in our manifesto.

I want to go into a tiny bit more detail before I finish because the hon. Member for Bishop Auckland (Helen Goodman) made a point and I have to reply to it. If 2012-13 rates had applied in 2009-10, the tax burden on a one-earner married couple with two children would have been 20% rather than 18%—in other words, 80% rather than 73% of that on a single person. OECD figures show that in 2009 a UK one-earner couple with two children on an average wage paid 39% more than the OECD average. They would have paid over 50% more if 2012-13 rates had applied. The figures are there. They are Treasury-approved figures and there is no doubt about it. One can disagree with the policy, and no doubt the Minister will say that there are a 101 reasons why we cannot introduce a transferable allowance yet, but the figures are there. We are out of touch with other civilised countries, and we should be, above all, a civilised country that helps young mothers look after their children.

Under Labour, the tax burden on one-earner married couples with two children on the average wage oscillated between 33% and 44% greater than the OECD average. That means that the phenomenon is getting worse under a Conservative Government. I do not think that, for all those people who supported us at the election, that is tolerable.

When the burden reached the 44% level in 2007-08, the then Conservative Opposition spoke out against the extraordinary unfairness and committed ourselves to addressing it when in office through the introduction of the transferable personal allowance. It was 44% under Labour; it is now going to increase to 50%, and we are still not taking action. It is worth quoting the then shadow Chief Secretary to the Treasury, now the Secretary of State for Transport. He said that the report “Taxation of Families 2008-9”, which demonstrated that the tax burden on one-earner married couples on average wage with two children in the UK was 44% greater than the OECD average

“highlights the continuing bias in the tax system against two parent families where only one adult works. No other European country penalises families in this way. If we want to end child poverty we must end this discrimination.”—

what a ringing statement from a member of the current Cabinet—

“That is why Conservatives have pledged to reintroduce a recognition of marriage into the tax system”.

For the figure to deteriorate even further under a Conservative Administration such that the burden was over 50% greater than the average—breaking new ground never reached even by new Labour—would be a wrong thing for the Government to do, and that is why we should take action. I hope that the Minister will accept the new clause or at least give a commitment that he will address the issue in the next few months.

It would make the manifesto commitment to make Britain the most “family-friendly country in Europe” utterly ridiculous. Why is Parliament held in contempt? Why do people not follow these debates? It is because they vote for parties who make solemn pledges and five minutes later, when it becomes inconvenient, break them. This was a solemn commitment.

So when this new clause was promoted this afternoon there were all sorts of shufflings offstage to try to prevent its debate. I am not going to stand here and allow a solemn pledge not to be debated on the Floor of the House of Commons. It is about restoring faith in British politics. We made this pledge and many in this party will hold the Government to account on it.

Of course, some will respond by blaming the previous Administration’s economic mismanagement and the debt crisis—we do have a debt crisis—saying that the Government intend to make these changes but first have to deal with the debt crisis left by the previous Administration. I am sure that we will be told that this afternoon, but I do not accept it. Even if challenging times require a country to cut spending and increase tax, that does not mean that the way it shares out its bigger tax burden has to increase the already disproportionately negative effect on one same family type. We are all in this together, are we not? We are all in it together when dealing with this debt crisis, so why should we tax disproportionately heavily a particular type of one-earner family?

The need to increase the total tax take should be used as an opportunity for redistribution in the tax system—this may appeal to Labour Members—so that it is shared out more fairly between families and single people, even as it increases overall. I might even take Labour Members that far, for do they not agree with fairness among all family types? Interestingly, the tax burden in the UK on one-earner married families with children is on average 73% of that on single people on the same wage with no dependants. I have nothing against single people with no dependants, but what we are doing at the moment is manifestly unfair. Our system is disproportionate compared with the arrangements in other countries—our figure is 73% whereas the OECD average is 52%, so other countries are at least trying to address this state of affairs. Moreover, the tax burden on single people in the UK has fallen steadily since 2007, such that it is now lower than the OECD average. That is great—I have nothing against that—but we should not unfairly discriminate against other people. How can we allow the tax burden on one-earner married couples who have two children and are on an average wage to rise from 73% of that on a single person on the same wage to more than 80%? That is why I said to the Minister that this situation is getting worse and worse with every month and year that we delay taking action on a solemn manifesto pledge.

The ongoing arguments for recognising marriage in the tax system have been greatly enhanced by the fact that, other things being equal, the tax burden placed in this country on one-earner married couples on an average wage with two children will rise to more than 50% of the OECD average. We need a swift recognition of marriage in the tax system—the case is overwhelming. It will also probably take Her Majesty’s Revenue and Customs two or three years to make the necessary changes. Depressingly, even if the Minister were suddenly to announce today that he was going to do this, it might take two or three years for it to happen, so it is even more important to act. This is even more important than raising the personal allowance to £10,000. That Lib Dem policy concentrates on individuals, rather than families and, thus, favours two-income couples, rather than single-earner couples. The Government’s policy is actually making the situation even worse. With that, I rest my case and just plead with the Minister to try to recognise a solemn manifesto pledge.

[Mr Kevan Jones]

New clause 5 would allow married couples to transfer their personal income tax allowances between each other, along the lines of what was said by the Prime Minister and the Secretary of State for Work and Pensions during the election campaign about recognising marriage in the tax system. The new clause is not exactly what the Conservatives were proposing at the general election, and I shall deal with the differences in a while. The important point, which has not been clearly articulated by the hon. Member for Gainsborough (Mr Leigh), is that this policy arose from a 2005 report by a Conservative think-tank, the Centre for Social Justice, on the breakdown of the family. Its main argument was that marriage is the important point in keeping families together, tackling poverty and dealing with all the other arguments that he has covered. It also supported the introduction of an incentive in the tax system to encourage people to marry, and I shall return to that in a moment. I am not sure that most people who get married are thinking about the tax system before they decide to do so.

[Andrew Gwynne]

My hon. Friend makes a reasonable point and one that we were discussing on the Back Benches earlier. I am married and all three of my children attended my and Allison’s wedding in 2003. We did not need a tax allowance in order to get married—that is the important factor here that is being missed.

[Mr Jones]

I am sure that the hon. Member for Gainsborough will be shocked at the fact that my hon. Friend’s children actually attended his wedding. I did not realise that my hon. Friend was such a progressive individual, but he makes a perfectly good point.

[Mr Leigh]

The hon. Gentleman knows perfectly well that I am not suggesting for a moment that people get married in order to get tax allowances—I have never said that. All I am saying is that the current system is unfair, because it militates against a family on modest earnings where one person wants to stay at home to look after children. Of course nobody gets married in order to get a little tax allowance, but why should we have an unfair tax system?

[Mr Jones]

I actually do not understand why all this is unfair, because the new clause would give an advantage to people who are married but do not have children. I do not know how the new clause does what the hon. Gentleman is proposing in terms of keeping family units together and alleviating child poverty.

The important point relates to what was in the Conservative manifesto. What came out of that Conservative think-tank was the idea that marriage was an important point in keeping the family unit together and ensuring that children and wider society were not disadvantaged by a breakdown in the family unit. The manifesto made a commitment to “recognise marriage” in the tax system. It proposed that couples and civil partners who were basic rate taxpayers should be entitled to transfer just part of their allowance—this was worth, in effect, up to £150 a year. That is very different from what is contained in the new clause, because it makes no mention of civil partnerships. Given the names of the people who are supporting this proposals, I suspect that this has come from the wing that has not quite gone all the way in being the new cuddly Conservative party in terms of even envisaging the idea that civil partnerships, with or without children, could constitute a family unit.

As the hon. Gentleman mentioned briefly, the policy came unstuck in the coalition agreement because this proposal is clearly not supported by the Liberal Democrats. I believe that during a general election television interview, the Deputy Prime Minister called it “Edwardian”.

[Helen Goodman]

Edwardian!

[Mr Jones]

Well, yes. I can think of several people in the Chamber who are—

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

Mediaeval.

[Mr Jones]

They are mediaeval in some cases, as my hon. Friend mentions.

[Andrew Gwynne]

The Deputy Prime Minister did not just say that this proposal was Edwardian. I believe that he went on to say that it was also patronising drivel.

[Mr Jones]

That is a bit rich coming from the Liberal Democrats, because most of the things that they come out with are patronising drivel. However, they were clearly not happy about this policy, so in the scramble to get the red boxes and cars they had to reach some type of compromise. Thus, the coalition agreement simply states that there will be a provision whereby the Liberal Democrats can abstain at some point in the future when this policy is introduced.

[Helen Goodman]

Are they going to abstain tonight?

[Mr Jones]

Possibly. The 22 June Budget made no announcement on where this policy stood and on what was happening to it. I can understand the annoyance felt by the hon. Member for Gainsborough and others, who clearly think that this is a vital piece of legislation that was promised to the electorate. It was obviously a key point: I am sure that a lot of people went to the ballot box thinking that if they would get an extra £150, they would vote Conservative. That pales into insignificance when set against what has been taken away from them since this Government came into power.

20:00

[Mr Stewart Jackson]

I expect better of the hon. Gentleman than the trivialisation of this important issue. He is better than that. I know he is probably working up to the filibuster that is usual from him when we do not have a guillotine on our business, but does he concede that low-income families in North Durham who are eligible for working tax credit and in which one parent wishes to stay at home to look after the children will miss out on the child care element of that credit? That is the reality, and he should address those issues rather than trivialising the subject through knockabout.

[Mr Jones]

I am not trivialising the subject, but I will say to the hon. Gentleman that the real difference in North Durham was made by provisions opposed by him and his party, such as tax credits, which raised hundreds of families out of poverty, and the Sure Start initiatives, which were important in poor communities such as Stanley in my constituency and gave real life chances to youngsters from poor backgrounds. I will not take any lectures from a Conservative on alleviating child poverty. I hasten to add that since this coalition Government came to power, many families, including many individuals whom I met the other day at a school in my constituency, will lose the education maintenance allowance. That was not a luxury but a vital part of supporting those children in education and giving them the access to higher education that generations before them had never had.

[Mark Tami]

Would my hon. Friend like to add the minimum wage to that list? That was also opposed by the Conservative party and helped to lift many children out of poverty.

[Mr Jones]

I totally agree with my hon. Friend. I remember the debates on the minimum wage as a trade union official, as he will too, and we were told that it would wreck the economy, but in the north-east alone 110,000 people got a pay rise thanks to that change. It is interesting that we are now hearing proposals from Conservative Back-Benchers to change the system and that people who are disabled and others should perhaps be offered a lower rate of minimum wage.

[Dan Rogerson (North Cornwall) (LD)]

While the hon. Gentleman is patting himself on the back about the great successes of the previous Government, can he tell us which he thinks would have the best effect for working families with low incomes: scrapping the 10p rate or raising the income tax threshold, as this Government are doing?

[Mr Jones]

The hon. Gentleman must be honest with my electorate in North Durham about the fact that although the Government have increased personal allowances they have taken away money in others ways, such as the increase in VAT and the £140 million of cuts that Durham county council will have to impose over the next three years. Those cuts will have a direct effect on many of those poor families. The Liberal Democrats can claim that they have had great success, but if that is their only claim they should be honest with people and tell them what they have lost, as well, through such vicious policies. The hon. Gentleman should remember that this Conservative Government would be doing nothing without the support of him and his Liberal Democrat colleagues.

[Helen Goodman]

Another problem with raising the tax thresholds—a provision constantly promoted by the Liberal Democrats—is that, as I am sure my hon. Friend has not forgotten, the biggest beneficiaries are those who are highest up the income scale. The biggest value of the change is not to the people at the margins—those who are just caught or just not caught by the tax boundaries—but to the people higher up the income scale.

[Mr Jones]

My hon. Friend makes a good point, but she knows as well as I do that many people in County Durham are facing unemployment as a direct result of the spending cuts. Many of those people will be taken out of paying income tax altogether because they will not have a job. For Members to try to trumpet that policy, not realising the damage they are doing to regions such as the north-east of England, is disingenuous.

I understand the argument made by the hon. Member for Gainsborough, which is that marriage is key in ensuring that we have the units that will lead to less crime, less social breakdown and so on, but—I am sorry—I do not accept that. The root cause of many of those issues is poverty. If we consider the examples given by the hon. Gentleman, as well as those given by the Secretary of State for Work and Pensions when he toured his Glasgow housing estate, we can see that £150 will not make a great difference to lifting anyone living on such a council estate out of poverty or giving life chances to the young children who live there. We should address poverty, and, in my opinion, provisions to do with the tax system and marriage are not the way to do that.

[Mr Stewart Jackson]

The hon. Gentleman is being very generous in giving way. Would he care to comment on the UNICEF study, produced in 2007, which showed a league table ranking the well-being of children in 21 developed countries, including their material, educational and subjective well-being, their health and safety, their behaviour and the strength of their family and peer relationships? Under the hon. Gentleman’s Government, Britain came bottom of the league.

[Mr Jones]

I think that report has been discredited, but I can look at the north-east of England and my constituency and consider the changes in employment that happened under the previous Labour Government as well as the life chances we gave to individuals, the new hospitals we provided and the investment we made in things such as Sure Start centres. Although I accept that such changes will not have benefits straight away, they will have real benefits over the lifetimes of those individuals. The Government that the hon. Gentleman supports is taking away such provision and says that the state is not important in one respect while, in this case, they want the state to engineer people’s private lives socially. I find that a completely contradictory stance, but, again, the hon. Gentleman is a Conservative and is therefore allowed to be contradictory.

[Andrew Gwynne]

My hon. Friend is being generous in giving way and he is making the point that the state can be family friendly through its policies without having to give away a tax break to people based on their marital status. The previous Labour Government made great changes by giving life chances to young families, in particular, without having to manufacture the tax system in such a way.

[Mr Jones]

My hon. Friend makes a good point. A little later, I shall discuss what our Government did to recognise the fact that if we are to address the issues raised by the hon. Member for Gainsborough about child poverty, the tax system and marriage are not necessarily the way to do it. The way to do it is to ensure that the money goes to the families and children who are affected. That is why the child tax credits and other such provisions were vital in raising people out of poverty. Earlier, my hon. Friend the Member for Alyn and Deeside (Mark Tami) mentioned the minimum wage, which lifted a lot of very poor individuals out of poverty who were getting a pittance. I remember seeing as a trade union official an advertisement in the jobcentre in Newcastle that read, “Night guard, bring your own dog, £1.35 an hour.” That is a thing of the past. I hope that it will remain so, but I do not know, as we hear from Conservative Back Benchers that they might want to change the minimum wage in some way.

[Helen Goodman]

It was interesting that the hon. Member for Peterborough (Mr Jackson) mentioned the UNICEF report, because Denmark came at the top and Britain came very low down. I want to remind hon. Members that Denmark has the highest rate of lone parenthood and the Danish can combine that with good child well-being because they have a strong welfare state. Does not my hon. Friend think that that is far more important in addressing child poverty and well-being?

[Mr Jones]

It is. To be fair to the hon. Member for Gainsborough, he did say that being a lone parent does not make someone a bad or unfit parent. My hon. Friend the Member for Denton and Reddish (Andrew Gwynne) had three children before he got married, but that does not make him a bad parent. [Interruption.] He says, “I don’t know,” but I do not think it makes him a bad parent: it is something that he and his partner chose to do. As he said earlier, the offer of a tax break of £150 a year would not make any difference to whether people decide to have children before or after they marry. Indeed, I have many friends who have children and who have never married and have no intention of doing so.

[Barry Gardiner]

Has my hon. Friend considered the situation of people like my mother whose husband, my father, died when I was a child? Under the proposed system, she would have found that the support was taken away at the very time when financially she needed it most. That would be the effect of the measure, which pays no real attention to the needs of the family or the needs of the child.

[Mr Jones]

My hon. Friend makes a very good point. The proposal is not subtle at all and his personal example is a good one. Why should someone who loses a spouse in an accident or through natural causes be penalised because, through no fault of their own, they have lost their spouse? That is the problem with trying to use tax in relation to marriage. As I have said, the measure is very different from what was put forward in the Conservative manifesto because it does not include civil partnerships. It clearly is not what Conservative Back Benchers have read in their own manifesto.

[Mr Chope]

The answer to the hon. Gentleman’s point was put succinctly in a Daily Telegraph editorial of 11 July 2007, which asked

“why should favouring married couples be an unacceptable interference when favouring single ones, as this Government does, is not?”

[Mr Jones]

The hon. Gentleman knows that there are always winners and losers in any tax system. I am very surprised at him because I know that he has very libertarian views on a whole host of subjects, which we have heard on many occasions in the Chamber. Is he really suggesting that we should use the tax system socially to engineer society by saying that people should marry rather than cohabiting or, as has been mentioned, becoming single through separation or bereavement? I am surprised at him because I thought he was very much against the state doing anything, but the measure has the state wanting to determine or influence exactly what an ideal society should be. I am sorry, but the statistics just do not bear out what the hon. Gentleman proposes. If such tax measures worked as a way of bolstering marriage and keeping families together, we would have expected marriages to rise with the married man’s tax allowance through the 1960s and 1970s, but they did exactly the opposite—we had record levels of divorce and separation. Hon. Members should look at the facts. Tax measures have not succeeded in doing that in the past, and I doubt whether they will in future. They certainly will not encourage anyone to get married for a small financial benefit.

It is important to dispel one myth, which has been put forward again by the Conservative party—the fact that a wicked Labour Government somehow did away with the married couple’s tax allowance and that Labour is responsible for the degeneration of society that the Secretary of State for Work and Pensions describes in his report. It is important to recognise what the previous Conservative Government did on this. It was Chancellor Norman Lamont in the 1993 Budget who proposed that the married couple’s tax allowance should be restricted to 20% from April 1994. That was the first time that happened for the basic MCA, which for a couple under 65 was then £1,720, so it was worth something like £608 for those who were on marginal rates of 40%, but only £344 for those on marginal rates of 20%. We then had the argument that it was unfair to have different amounts for people on higher tax rates than for those on lower tax rates. The then Chancellor said:

“There is no good reason why an allowance intended to recognise the responsibilities of marriage should give least to those on low incomes and most to those right at the top of the income scale.”—[Official Report, 16 March 1993; Vol. 221, c. 182.]

In the November 1993 Budget, the current Justice Secretary confirmed that change and went on to announce that the MCA would be further restricted to 15% from April 1995, so there was a slow change in the system. The provision restricting the MCA was made in section 77 of the Finance Act 1994. When this was debated in Committee, there was general support for the idea that the MCA should be the same across the board.

20:14

[Helen Goodman]

My hon. Friend’s description of what happened in the 1990s reminds me of an issue that I do not think the hon. Member for Gainsborough (Mr Leigh) addressed. One of the big debates on this subject was about the fact that transferable allowances reduce any scope for financial privacy within a marriage. A number of people felt very uncomfortable about that. Does my hon. Friend have any comments on that?

[Mr Jones]

My hon. Friend makes a key point and I understand why she makes it. This goes right back to when income tax was introduced in the 1790s, when a spouse’s income was the property of the husband. That was the basis on which income tax was brought in and it continued for centuries. There was no recognition that even within marriages people might have separate tax affairs or sources of income that needed to be recognised.

It is interesting to look back at the debate that took place about the MCA. Baroness Maddock, who was then a Member of this House, argued that the MCA was

“a relic of the days when a husband was taxed on his wife’s income as well as on his own. It contravenes the principle that marriage should be tax neutral.”—[Official Report, Standing Committee A, 22 February 1994; c. 344.]

[Mr Chope]

The hon. Gentleman quotes my predecessor, the then hon. Member for Christchurch, but in order to emphasise how out of touch her opinions are, may I tell the hon. Gentleman that there is no longer a single Liberal Democrat councillor in the whole of my constituency?

[Mr Jones]

I am very pleased to hear that but I am not sure that that is very good news for the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith) to whom I understand the Baroness is now married. However, I take the hon. Gentleman’s point.

Interestingly, the then Chief Secretary to the Treasury, Michael Portillo, concurred with Mrs Maddock’s view. The then Chancellor, who is now the Justice Secretary, recognised that and announced in his Budget speech that there would be a two-stage restriction of the MCA, stating:

“Now that husbands and wives are taxed independently—one of the best taxation reforms in recent years—the married couple's allowance is a bit of an anomaly.”—[Official Report, 30 November 1993; Vol. 233, c. 935.]

The important thing that this demonstrates is that change was taking place under a Conservative Government, and that it was not the wicked previous Labour Government who came up with this idea. However, the change did set off the forces who were arguing that the changes were wrecking marriages. In 1995, a major paper called “Farewell to the Family” appeared. It made much of the fact that the measure would change families and discourage people from marrying.

[Stephen Pound (Ealing North) (Lab)]

Does my hon. Friend agree that it is a pretty poor show if a couple united in love and affection for each other decide to get married simply for the sake of some miserable, mean, pusillanimous fiscal mechanism? Would it not be a more healthy world if we could get the accountant out of the couple’s marriage bed, and concentrate on the important thing: two people who love each other, not two people who are trying to save a few bob from the Treasury?

[Mr Jones]

As usual, my hon. Friend makes a very good point. He raises the idea of the accountant in the bed. I do not know of many couples who, when they are ready to get married, sit down with their accountant to work out the financial benefit to them. I am sure that for many, something other than money comes into the decision to marry or start a family—a point that I demonstrated earlier.

[Mr Stewart Jackson]

As I said earlier, the hon. Gentleman aspires to be the County Durham filibustering champion; no doubt he will be on his feet for many more minutes. Is he seriously denying the findings of the British household panel survey, which found that the average length of cohabitation is just over three years, and led it to conclude in its paper that, compared to marriage, cohabitation was a significantly more fragile and temporary form of family? Just one in 11 married couples split up before their child’s fifth birthday, compared to one in three unmarried couples. Those are the facts; is he disagreeing with them?

[Mr Jones]

As for filibustering, this is nothing; I think that my record is two and a half hours. If the hon. Gentleman would like to keep intervening, I am sure that I can try to beat that. I do not deny what he says, and it is all right to cite the facts, but should one necessarily go on to say that those facts are a bad thing for society? Is he genuinely saying that the relationships of people who cohabit are any poorer than those of people who are married? Likewise, is he suggesting that if people decide, after marriage or cohabiting, to split up, that makes them bad individuals in some way—or, if they have children, bad parents? I know many cohabiting and divorced couples and single parents who are perfectly good parents and role models and work very hard to ensure that their families contribute to society financially and to local community life. The statistics that he cites are fine, but what is not fine is the next bit—the suggestion that the situation will somehow lead to the breakdown of society, or the idea that the family as a unit is the only answer to people’s lives these days. It is not.

That goes back to a Victorian notion. Before the Victorian period, it was not uncommon for people not to get married for many years. Marriage was a Victorian fashion, but in Georgian times many people did not get married at all, and raised perfectly good families. I am not sure that society came to a grinding halt because people were not married, or because there was not a tax system that encouraged people to marry.

[Mr Jackson]

Perhaps I might invite the hon. Gentleman to make a causal link, because he is not challenging the substantive point that I made with the figures that I gave. He will know that the Centre for Social Justice report of May 2011 found that children who do not grow up in a two-parent family are 75% more likely to fail at school, 70% more likely to be a drug addict, 50% more likely to have an alcohol problem, and 35% more likely to experience unemployment. That is not about traducing single-parent families, or besmirching their commitment to their children, but there is a causal link to family breakdown, which the hon. Gentleman denies.

[Mr Jones]

That is complete nonsense. When the Secretary of State for Work and Pensions was in opposition, we saw him walking around the Easterhouse estate, saying how dreadful things were. That is not down to whether people are married; it is down to poverty. That is the key driver of the pressures that people face. It is all very fine talking about drug use, but I have worked with an organisation for parents of drug addicts in Durham, and most of those parents are middle class. They have stable homes, but they have drug-addict sons and daughters. They are not bad parents, and it is not down to whether they are married. The hon. Member for Peterborough (Mr Jackson) and the Centre for Social Justice report make the mistake of saying that the family units that he describes are the reason for poverty. They are not. Addressing poverty, which we were doing through measures such as tax credits, is the way forward, rather than social engineering, and £150 a year will not go very far in encouraging people to stay married—or, for that matter, alleviate child poverty at all.

[Stephen Pound]

Does my hon. Friend agree that there is not a person in this marvellous, glorious, gorgeous building who fails to accept that couples together often nurture and raise children in a happier and better way, although they are not the only ones? However, we are not arguing about the sanctity of marriage; we are arguing about a backhander from the state—a few bob. The hon. Member for Peterborough (Mr Jackson), who was a bank manager and may well have interposed himself in a few intimate relationships in his time, is speaking very much from the perspective of the Conservative who sees everything in terms of money and fiscal benefit. Is there not a better way?

[Mr Jones]

There is, but the new clause that we are debating—I do not know whether the hon. Member for Peterborough would agree with this—refers only to married couples; it does not refer to civil partnerships, for example. I know that the new Conservative party is supposed to be modern and reflective, but what about people in a civil partnership who have children, whether from previous marriages or afterwards? Are we saying that that is a worse family unit than marriage? This debate is not about the tax system for those who are married and those who are not; it is about what is in the best interests of the child. Single parents—they may be separated, or their partner or spouse may have died, as my hon. Friend the Member for Brent North (Barry Gardiner) said—work very hard. This is about the child. The problem with the proposal is that it would reward people with no children.

[Barry Gardiner]

Does my hon. Friend accept that he has perhaps calumniated Georgian England—inadvertently, I am sure? Does he accept the wisdom of Jane Austen, who of course said:

“It is a truth universally acknowledged, that a single man in possession of a good fortune”

of £5,000 a year

“must be in want of a wife”?

My hon. Friend’s suggestion that marriage was not as common in Georgian England as in Victorian England is somewhat belied by Austen and other authors of the age.

[Mr Jones]

Let us consider Georgian and Victorian England. It might have been fashionable for someone with £5,000 a year in Georgian England to be married, but in many post-industrial cities of northern—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. I fear that we are straying a little far from the point. Any chance of getting back to the 21st century?

[Mr Jones]

I think this is an important point, Mr Deputy Speaker. The main thrust of the argument that has been made is that marriage, and taxation in marriage, has been consistent throughout history, but it has not. Like a lot of things in this country, it has been looked at through a Victorian prism that seems to bend the reality of what took place way back then. However, I will move on to my next point.

[Helen Goodman]

I should like to back up what my hon. Friend says. In the major study of marriage in England from 1550 to 1750, Lawrence Stone demonstrated that in a commercial society with a commercial attitude—

[Mr Deputy Speaker]

Order. We seem to be going even further back. Keep to the 21st century, please.

20:29

[Mr Jones]

It is important to note that income tax was introduced in the 1790s. We need not go back to the 15th century, but my hon. Friend the Member for Bishop Auckland (Helen Goodman) makes a good point, which was made earlier—the tax system treated women and their income as the property of their husbands. The supporters of the new clause argue that it would strengthen society, but there is no evidence for that. The new clause will help many people who have no children. It would apply to married couples and even retired people.

[Mr Stewart Jackson]

To what does the hon. Gentleman attribute the fact that many more people in County Durham, Northumberland and the north-east of England generally are keen on getting married than in, say, the south of England and London? Are his constituents wrong in supporting the institution of marriage?

[Mr Jones]

No, not at all. Many things in the north-east are obviously better than anywhere else in the country, but the statistics show that the number of people getting married is going down. The Secretary of State for Work and Pensions seems to think that a tax break of £150 a year will encourage people to get married, but that is not the case at all. He misses the main point.

The MCA was abolished in the Budget speech by the then Chancellor in 1999, and withdrawn in April 2000. Only married couples who reached the age of 65 by that date would be able to continue to claim the MCA. The additional personal allowance was also withdrawn at that time. The allowance equalised the MCA so it was given to lone parents, whether single, divorced or widowed, caring for one or more children under the age of 16.

Importantly, the then Labour Government introduced the child tax credit, which was vital to ensure that support went to the children. The Centre for Social Justice report suggested that marriage was important for keeping families together, but that is not the case. The important thing is how we support children. By introducing the tax credit system, we lifted thousands of children out of poverty by helping the families, whether they were married or not.

The credit took the form of an allowance which was then set at £5,200, on which relief was given at 10%. Families eligible to claim the child tax credit were able to cut their annual income tax not by £150, as is proposed, but by £520 a year. In April 2002 the credit was increased in line with inflation, making it worth £10 a week more. That was the fairest way of supporting families. I do not question the Secretary of State’s intention to help families, but the child tax credit was a far better way of doing it than through the married tax allowance.



The debate tonight has glossed over the cost of the proposal. We are told by the Government that we face hard times and that we must make every penny count. One reason given to explain why the proposal was not brought forward was the coalition Government; another was cost. The IFS estimated the cost of various options for introducing a transferable allowance based on different criteria. On the assumption that the allowance applied only at the basic rate of tax, which was due to be 20% in April 2008, the figures are eye-watering.

If the allowance applied to all married couples, the IFS estimates the cost at £3.2 billion. I am not sure where the Government would get such a sum from. If the allowance applied to all married couples but only half the personal allowance was transferred, that would cost £1.6 billion, so we are not talking about small amounts of money. If the object is to get that money to children, is this the best way? There is no realistic hope of the present Government doing this. I understand the annoyance of the hon. Member for Gainsborough, who thinks that he stood on a manifesto which will now not be implemented.

[Stephen Pound]

No one in this place would begrudge that sum if there was the slightest empirical evidence that it would be of any long-term benefit to society. There is no such evidence. Does my hon. Friend agree that that money could be far better spent on a raft of supportive mechanisms for families, particularly families with young children? That would ensure the longevity of the family unit.

[Mr Jones]

I agree. The money should be directed into Sure Start centres and the child tax credit, for example, but the Government are penalising single parents in some of their benefit proposals.

Another option that the IFS considered was targeting the allowance at married couples with dependant children or those receiving carer's allowance. The estimated cost of that was £1.5 billion. The final and cheapest option was that it would be given only to married couples with children under the age of six, which would cost £900 million. The various options illustrate the complexity of the policy and the questions that arise from it—whether it should apply to everyone or only to the groups that I outlined.

As the hon. Member for Gainsborough pointed out, whatever system is chosen, there are winners and losers. If we believe, as the hon. Member for Peterborough clearly does, that keeping people married is so important that everyone should get the allowance, the price tag is totally unaffordable, but doing anything less would undermine the main argument put forward.

It is worth recognising what that would translate into in cash terms. If it applied to the full personal allowance, the amount provided as an incentive to remain married would be quite meagre, at about £20 a week, which I am not sure is a great incentive. The rationale is that it needs to be fair and large enough to make a difference, but I do not think that a couple whose marriage is breaking down would stay together for an additional £20 a week. Whatever figure we come up with, I doubt whether it would actually make a real difference in determining not only whether a couple gets married in the first place, but whether they will separate after a period of marriage. When it comes to enabling families to stay together as a unit, clearly the important point is poverty. That pledge was made before the general election by the previous Prime Minister. I think that everyone, even those influenced by the darker forces on the traditional wing of the Conservative party, agrees that the modern family takes many forms.

[Stephen Pound]

My hon. Friend is young and has not been around for a enormously long time. When Mrs P and I were married in June 1976, virtually everyone got married just after the beginning of the financial year, which was a nonsensical system, with churches doubling the cost of altar servers. I assure him that one of the disadvantages of the married couple’s allowance was the great logjam of spring weddings. Despite that, Mrs P and I are still together.

[Mr Jones]

I have not had the pleasure of meeting Mrs P, but she certainly deserves a medal for the longevity of her marriage to my hon. Friend.

[Mr Leigh]

I am not sure that that intervention was entirely helpful, because the hon. Member for Ealing North (Stephen Pound) has just proved that tax policy at that time did influence behaviour.

[Mr Jones]

It might have done, but clearly if it raised the cost of a wedding, any financial benefit that people got from their £150 would soon be used up as a result of the extra costs involved. It did nothing to ensure that people stayed together longer.

[Stephen Pound]

I appreciate that we are treading on you patience, Mr Deputy Speaker, but I should note that it was probably a fear of Father Padraig that kept Mrs P and I together for the first three decades, rather than any small financial advantage.

[Mr Jones]

I understand why my hon. Friend and Mrs P have stayed together. Although the allowance might be an incentive to get married, the important point is that it does nothing to ensure that people will stay together for longer than the tax year. As has been mentioned, what is proposed would be very unfair. What happens if someone loses a spouse though no fault of their own, for example as a result of a tragic accident? Why should someone who finds themselves suddenly bereaved through no fault of their own after an accidental death, possibly with young children, be penalised by the tax system? It would be very difficult to introduce flexibility into this system to take account of that, and if we compare that with the tax credit system we will see that the important point is to support families and their children.

I will turn to some of the statistics on marriage that the Conservative party is putting forward. The hon. Members for Gainsborough and for Mole Valley (Sir Paul Beresford) are not known as great state interventionists, but by arguing that the tax system should be used to encourage people to marry, they are suggesting that the state should determine a certain model of behaviour. I find that very strange coming from Conservatives who deplore the nanny state and argue that the state should not interfere in people’s lives. There is an inconsistency there that needs to be answered.

[Mr Stewart Jackson]

The charming Maggie Pound deserves a long-service medal at the very least for putting up with the hon. Member for Ealing North (Stephen Pound).

On the merits and logic of the argument that the hon. Member for North Durham (Mr Jones) is making, is he suggesting that there is no place for fiscal incentives in directing personal and public policy? If so, does he think that we should not fine motorists for breaking the speed limit, for instance, because that is the logical corollary of his last remark?

20:45

[Mr Jones]

I am not saying that at all. I am saying that the hon. Gentleman, his party and, certainly, the more blue-blooded elements of it very strongly argue that the state should not intervene in people’s lives, including, in some cases, motorists’ lives, but what we have in new clause 5 is the right of the Tory party arguing for direct state intervention in something very personal: somebody’s personal relationship.

Earlier, it was said that a tax system would encourage people to get married, but there is no evidence of that at all. In the late 1960s and ’70s, when the old married man’s tax allowance was in place, there was a record rise in divorces, but that was less to do with the tax system and more to do with the change in society and the law that clearly made it easier to get divorced or to choose not to marry at all. Again, the idea that £20 a week will encourage somebody not to divorce is quite ludicrous. All the studies find that we would need to offer a considerable amount of money to prevent people from divorcing.

My hon. Friend the Member for Bishop Auckland (Helen Goodman) raised the issue of international comparisons, somebody else mentioned Denmark and other countries and the hon. Member for Gainsborough mentioned the fact that we are one of the few countries not to recognise marriage in the tax system, but there is no evidence to suggest that taxation as an encouragement to get married does anything to hold the family unit together.

[Clive Efford (Eltham) (Lab)]

I have listened to my hon. Friend’s speech with a great deal of interest. On fiscal incentives for people to stay together, does he agree that the cost of running two separate households is a major financial consideration for people living apart? It far outweighs any fiscal benefit that the taxation system could deliver.

[Mr Jones]

I agree. The changes being made to housing benefit will not do anything to help families stay together. My hon. Friend is a London Member, so he will know that families will be forced to move out of central London because of the Government’s changes to housing benefit rules. That is one of the inconsistencies of this Government. On the one hand they say that a tax break of £150, or £20 a week, will help to keep the social unit together, and on the other they—the same Minister, I hasten to add—pursue policies on housing benefit and other benefit changes that will not help at all to keep families together but will lead to the root cause of most of these issues: the poverty that affects such individuals.

I turn to some of the problems with the Bill as framed, and to what we have before us. New clause 5 is not the measure in the Conservative party’s most recent election manifesto. This proposed change includes married couples but excludes civil partners, who would not be covered by the new clause. When there was an outcry and complaints about what had been proposed at the election, the Prime Minister included civil partners at the last minute.

People would have to opt in to this system and elect to transfer their part of an allowance. That would be very unfair to many people who do not understand tax codes. I have just got my annual tax return and I keep putting it to one side, as most people do, until the deadline arrives. Introducing a system whereby people have to elect to transfer a certain allowance may well help the more articulate middle-class people who can do that when they fill in the form, but I am not sure that some of the people on poor council housing estates in Glasgow whom the Secretary of State for Work and Pensions is trying to address will have the wherewithal or knowledge to do it even if they knew that the option was available.

The Government have told us that they wish to simplify the tax system, but the new clause would make it a lot more complicated. In trying to bolster marriage, it would help certain groups of people but not others. Whenever we do anything with the taxation system, we should try to make it as user-friendly as possible. If someone opted to move their allowance around, that would be quite complicated because people’s incomes change throughout the year, so they might have a certain allowance available in one year but not another. The system would incur not only the £3 billion-plus cost of having it open to everyone but the cost of trying to work out how the tax office would administer it. In that respect, the new clause is not well thought out.

The Government have got themselves into a bit of a logjam on this. The Prime Minister is clearly committed to this policy. His Back Benchers are now worried that it cannot be implemented because of the coalition agreement. Huge amounts of public money would be used, but would it have any effect on child poverty? No, it would not, and neither would it affect most families. Moreover, it would help people without any children, including pensioners.

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

Leaving aside couples where there are no children in the household, does my hon. Friend agree that married couples typically tend to come from the better-off social classes and that, while I am sure that this is not what the hon. Member for Congleton (Fiona Bruce) intends, a tax break for marriage would therefore benefit the better-off?

[Mr Jones]

My hon. Friend has great experience in this area, and she makes a clear point. People on lower incomes and possibly of lower educational standing than others will not look at the tax system and say, “I’m going to stay married because somehow I will be financially better off.” That is why it is important to simplify the tax system.

If we are looking to help children, this proposal would not do that. Indeed, some aspects would be detrimental to families, especially put alongside the Conservatives’ existing proposals on changes to the tax and benefits system. We need an honest debate on the family, child poverty and how we can build communities. By investing in Sure Start and child tax credit, the last Labour Government raised a whole group of individuals out of poverty. That was the way to do it. If money is tight, it needs to be targeted very carefully.

The approach that has been put forward, which recognises marriage, is not targeted and will not have the effect that the Secretary of State for Work and Pensions wants. That is unfortunate, because I think that he is well intentioned and has just come to the wrong conclusions. It will be interesting to see whether the Government accept the new clause. I do not think that they will, because it is not what the Prime Minister and the Secretary of State for Work and Pensions outlined in the manifesto or in the lead-up to the general election. It will be interesting to see how much pressure the Liberal Democrats can bring to bear to ensure that this proposal never sees the light of day. The coalition agreement says that they can sit on their hands if it is brought forward.

In conclusion, the individuals who are trying to address this issue, including the hon. Member for Gainsborough who is well intentioned and thoughtful in trying to do the best for families, have got it wrong in thinking that the answer is marriage. The root cause of social breakdown is not that people are not married, but poverty. We need to ensure that not only the tax system, but the benefits system and everything else, supports families, whether the parents are married, single, in a civil partnership or whatever. As has been said, and as the modern part of the Conservative party recognises, the modern family comes in all shapes and sizes. One size does not fit all and one solution does not fit all. Giving a pathetic sum of money to support marriage will not relieve child poverty; nor will it ensure that people stay together longer if the taxman will raid their savings or income if they do not. I do not think that this is the answer, and if it goes to a vote I will oppose it.

[Fiona Bruce (Congleton) (Con)]

Only a few days ago, on father’s day, the Prime Minister stated:

“I want us to recognise marriage in the tax system so as a country we show we value commitment”.

I believe that the Government’s commitment to introduce such a provision is genuine. It was in the Conservative manifesto, it is in the coalition agreement, and I trust that the Government will introduce it in this Parliament, just as they are addressing the couple penalty. I warmly congratulate the Government, and in particular my right hon. Friend the Secretary of State for Work and Pensions, on the work being done to address this subject.

[Kate Green]

I know that the hon. Lady and her colleagues feel strongly about the couple penalty. Does she not accept that the design of the benefits cap that her Government are proposing will bring in a couple penalty—something that I thought they were trying to remove?

[Fiona Bruce]

The Government are seeking to support families and stable communities. In supporting marriage, that is what we are seeking to do.

[Mr Iain Wright]

Will the hon. Lady define what she thinks a family is?

[Fiona Bruce]

Committed relationships.

Under the previous Conservative Government, Britain recognised marriage in the tax system. The Labour Government did away with that in their first term. Britain’s fiscal arrangements effectively made it more challenging for people to marry than was the case in most other developed countries. Today we still live with that legacy. Apart from those in the UK, only 18% of citizens of OECD states live in countries that do not recognise marriage in the tax system. Most of them live in Turkey and Mexico. Our failure to recognise marriage puts us out of line with fellow developed countries, and that arrangement continues to be a cause for concern, for a number of reasons relating to both fairness and social well-being.

21:00

[Barry Gardiner]

I notice from the amendment paper that new clause 5 is in the hon. Lady’s name. Could she explain to the House why she did not move it?

[Fiona Bruce]

My hon. Friend the Member for Gainsborough (Mr Leigh) kindly moved it in my stead.

Is it fair—

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

On a point of order, Mr Deputy Speaker. I do not wish in any way to dispute the hon. Lady’s version of events, but I am quite sure that I distinctly heard her—maybe the official record will show this—say “not moved” when she was asked about new clause 5. Am I wrong in my recollection of that?

[Mr Deputy Speaker (Mr Nigel Evans)]

That is not a matter for the Chair, but I am sure that the hon. Gentleman will be able to read Hansard and work it out for himself tomorrow. As a matter of record, as he knows, it is open to any Member to move a new clause, despite the fact that the Member who tabled it has decided not to move it.

[Fiona Bruce]

Is it fair that when incomes are equivalised, one-earner married couples with children—

[Mr Kevan Jones]

On a point of order, Mr Deputy Speaker. I am sorry, but like my hon. Friend the Member for Nottingham East (Chris Leslie), I heard the hon. Member for Congleton (Fiona Bruce) say “not moved”. I think that I saw one of the Tory Whips at her beforehand, so I do not know whether they tried to persuade her not to have this debate, but I think we need to clarify this point before we move on.

[Mr Deputy Speaker]

The position has been made absolutely clear. Now can we please continue with the speech that is being made?

[Fiona Bruce]

Is it fair that when incomes are equivalised, one-earner married couples with children, on the average male wage, find themselves thrust into the poorer half of the population in income?

[Chris Leslie]

I apologise for interrupting the hon. Lady’s flow, but this is really quite important. Did she or did she not say “not moved” at the beginning of the debate on new clause 5?

[Fiona Bruce]

I have already indicated that my hon. Friend the Member for Gainsborough kindly moved the new clause in my stead. I am very pleased that he did so.

[Mr Kevan Jones]

Why, because you’re not up to it?

[Mr Deputy Speaker]

Order.

[Fiona Bruce]

If I may, I will move on.

On the subject of young people’s aspirations, it is striking that surveys demonstrate that approximately 90% of young people aspire to marry, yet that is not reflected in the marriage figures. I am not suggesting for a minute that fiscal considerations are the only factor, but the Government should at least ensure that it is not more financially detrimental to marry in this country than in other developed OECD countries, if we are to be true to our determination to become the most family-friendly country in Europe.

As a Government, we should send out a clear and credible signal to young people that we value marriage and encourage their aspirations in that respect, particularly as marriage acts as a stabiliser not just for the individuals within it but for the wider community. The prevalence, for example, of the isolation and exclusion of the elderly is influenced by the wider breakdown of family and community networks, as the Centre for Social Justice stated in its “Fractured Families” report.

On social well-being, the current problems in our local communities resulting from our failure to recognise marriage are pressing. As we have already heard, in December 2006 the CSJ’s report “Breakdown Britain” clearly resonated with the public. One of the key drivers of social challenges is family breakdown.

[Kate Green]

Will the hon. Lady give way?

[Roberta Blackman-Woods (City of Durham) (Lab)]

Will the hon. Lady give way?

[Fiona Bruce]

No, I am going to continue now, because I have given way so many times that, as has been pointed out, it has interrupted the flow of my speech.

Family breakdown is an incredibly important challenge for the Government. The cost in human terms, especially in terms of children failing to fulfil their potential, is far too high. Although most single parents do a fantastic job in very difficult circumstances, and deserve support as they do so, the evidence is that on average, the children of married parents do better on significant measures such as educational attainment, health, likelihood of getting into trouble with the law, and alcohol and drug abuse.

The crucial thing to understand about British family breakdown is that the key is not only divorce, but the break-up of cohabiting relationships, which are far less stable than marriage. The CSJ report states:

“While marriage accounts for 54 per cent of births, the failure of marriages—ie divorce—accounts for only 20 per cent of break-ups and 14 per cent of the costs of family breakdown, among all families with children under five. Unmarried families account for 80 per cent of the break-ups and 86 per cent of the costs.”

[Mel Stride (Central Devon) (Con)]

My hon. Friend makes an extremely powerful case. Does she agree that Conservative Members are not denigrating forms of family other than those that involve marriage, but saying that we believe that marriage makes for a powerful start in life for children, and leads to better social outcomes on average?

[Fiona Bruce]

I agree with my hon. Friend in that respect—nor are Conservatives seeking to take away the support that we give to other family groups such as single parents. We are saying that there should be a tangible affirmation of the very important relationship of marriage.

A child born to cohabiting parents has nearly a one in two chance of living in a single-parent family by the time they reach the age of five, but a child born to married parents has only a one in 12 chance of finding themselves in that situation at that age.

[Kate Green]

rose—

[Roberta Blackman-Woods]

Will the hon. Lady give way?

[Fiona Bruce]

No, because I took interventions from Opposition Members earlier.

The direct costs of family breakdown are variously calculated at between £24 billion and £41.6 billion per annum—a huge amount of money that cannot be ignored, especially in times such as these. When faced with such enormous figures, a provision such as the transferable tax allowance to support marriage, and in turn to support stable families, who in turn form an important element of promoting the stable communities that we all want and that are so very much needed today, is surely worth considering.

I am aware of the argument that the principal cause for those different life outcomes is not marriage but family income, but that analysis is too simplistic. No one is trying to argue that family income is not relevant—it is—but in my view, insufficient recognition has been given in recent years to the importance of family stability in promoting the health and well-being of children.

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

In my hon. Friend’s careful preparation for her speech, did she analyse whether other countries have given similar recognition to marriage?

[Fiona Bruce]

I did indeed, and I shall refer to that before I close my speech.

The CSJ report “Fractured Families” demonstrates significant differences in family stability between married and unmarried couples in the early years of parenthood, after discounting other factors such as age, income, education and race. Even the least well-off 20% of married couples are more stable than all but the richest 20% of cohabiting couples.

It is appreciated that we do not need to preach or moralise, but if we are to be truly family-friendly we must ensure that choosing to marry is no more difficult in this country than it is in any other developed country.

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

Will the hon. Lady give way?

[Fiona Bruce]

I will give way—[Hon. Members: “No!”]

Moreover, if we rise to that challenge through the provision of a transferable allowance, as suggested by the new clause, we would do so in a way that makes it easier for one parent to stay at home for the children, which parents value and from which children benefit. That is also a matter of women’s rights, for it is often women who will exercise greater choice and flexibility. Women want that choice.

A 2008 YouGov poll found that 88% of parents think that more should be done to help parents who wish to stay at home and bring up their children in the early years, and 97% of them agree that the Government should do more in this area. Furthermore—this is of huge importance—the relative costs of introducing a transferable allowance are small when compared with the huge costs of family breakdown. I quoted those figures earlier.

[Roberta Blackman-Woods]

Will the hon. Lady give way?

[Fiona Bruce]

The transferable allowance would help to reduce those costs, and would therefore be an investment very well made. The £550 million cost of the partially transferable allowance proposed by the Conservatives prior to the general election represents just 1.3% of the direct costs of family breakdown, as calculated by the Relationships Foundation—[Interruption.] And just 2.16% of the direct costs of family breakdown, as calculated by the same organisation—

[Michael Connarty]

Will the hon. Lady give way, in this so-called debate?

[Fiona Bruce]

No. [Hon. Members: “Go on!”] I will not. [Interruption.]

[Mr Deputy Speaker (Mr Nigel Evans)]

The hon. Lady should carry on.

[Michael Connarty]

rose—

[Fiona Bruce]

I am going to conclude.

[Michael Connarty]

rose—

[Mr Deputy Speaker]

Order. I ask the hon. Gentleman to resume his seat. Fiona Bruce has made it absolutely clear that she has no intention of giving way at this stage. I am sure that she will make it clear if she changes her mind.

[Fiona Bruce]

I fully accept that the Government’s priority has been to clean up the terrible financial mess left by the previous Administration, which has necessarily involved difficult decisions, and I want to put on record today my support for the Government, who have not been afraid to grasp the nettle and make the difficult decisions that the previous Administration were incapable of making. Britain is on a much sounder footing today than was ever the case under the previous Administration, and I pay tribute to the Government’s hard work in this respect. However, even in the current economic environment, I believe that new clause 5 would, as I have outlined, be an investment well worth making both fiscally and socially. The Government have said that they will recognise marriage in the tax system at the appropriate time. I suggest that that time is now, particularly given that it would still take Her Majesty’s Revenue and Customs some considerable time to implement a transferable tax allowance, because of the IT and other implications.

Does the Minister agree that the increased tax burden on one-earner married couples on an average wage—it will soon be more than 50% greater than the OECD average burden on such families—commends the early introduction of the transferable allowance if we are to be, as we aspire to be, the most family-friendly country in Europe? What assessment has he made of the time it will take to make the necessary IT and other changes to give effect to the Government’s commitment to introduce the transferable allowance? If he has not made such an assessment, will he do so? I ask the Government to bring forward this legislation not when they are ready, but sufficiently in advance of that, so that all IT and planning changes can be made first, and when the money is available, transferable allowances can become operational quickly, not one or more years later.

The transferable personal allowance was a key election commitment from many of us in the House and an important reason why people voted for the Conservative party. They are now looking for action. I very much look forward to what the Minister has to say, and I will conclude with a quotation from a speech given by the Chief Rabbi in another place earlier this year:

“If the Jewish experience has anything to say to Britain today it is: recognise marriage, not just cohabitation, as in the best interests of the child. Do so in the tax system. Do so in the educational system. Do so in relationship support. Otherwise, our children will pay the price—financial, educational, medical and psychological—for generations to come. Without stable marriages we will not have strong families, and without strong families we will not have a big society.”—[Official Report, House of Lords, 10 February 2011; Vol. 725, c. 366-7.]

[Jim Shannon (Strangford) (DUP)]

Thank you for giving me the opportunity to speak this evening, Mr Deputy Speaker. For the first time in what I suppose is a long time, I will be at odds with some of my colleagues sitting on the Opposition Benches. They are surrounding me at the moment, and I suspect that I will say something that they might not be entirely happy with. None the less, that will not stop me making my point of view heard.

21:15

I believe that marriage is good for society. That is my belief, and I am unapologetic about it. Like my hon. Friends the Members for North Antrim (Ian Paisley) and for South Antrim (Dr McCrea), I believe that a Christian marriage is good for society. Does that mean that other relationships are not right? No, it does not; but it does mean that marriage has an important part to play in society. Some of the research and the evidence that other Members have mentioned is clear on that too. The evidence indicates that marriage is associated with far better child development and adult well-being—ask those in a married relationship and the children they raise—although that does not mean that other children, from other relationships are not as good.

[Kate Green]

Does the hon. Gentleman not accept that the reason why children from married relationships so often do better is that their parents come from higher socio-economic backgrounds, not the fact of marriage itself?

[Jim Shannon]

The evidence from the constituency that I represent would indicate that that is not necessarily the case. Those who are perhaps worse off financially are in stable relationships as well. The reason I am speaking on this issue tonight is that I am reflecting not only my personal views, but—I believe—those of a large majority of the people whom I represent. I am here as the MP for Strangford to put that on the record and ensure that that opinion is well heard this evening. Many people might not like what I have to say, but hon. Members will have to accept that it is my opinion.

[Barry Gardiner]

I, too, believe that marriage is good for society, but surely what we have to consider this evening is whether the proposals before us would do anything to incentivise marriage and increase the number of people going into wedlock, and I do not believe for a moment that they will.

[Jim Shannon]

I do not believe that that is the intention of those who have put these proposals forward. I believe that they are about the unfairness in the taxation system that impacts directly on those in marital relationships. That is the reason. This is not about creating a financial incentive—other Members have suggested that it is about encouraging people to get married for an extra £150—and I do not believe for a second that it is.

[Ian Paisley (North Antrim) (DUP)]

Does my hon. Friend agree that these proposals are not about incentivising or encouraging people to get married, but about saying to people who are married, “You will not be penalised financially”? Marriage is good for society, good for relationships and good for children, and it should be encouraged. We should not as a House try to pour scorn on the many married couples out there, whether they are unemployed married couples or wealthy married couples.

[Jim Shannon]

I thank my hon. Friend for his intervention and for the passion in his voice.

Mindful of those points, it is a minimal responsibility of policy makers to remove all obstacles to marriage resulting from fiscal policy. Indeed, there is a good case for considering what steps could be taken to support marriage. I believe that the proposal before us is one suggestion that we should be considering. In the light of that, I am delighted by what the Prime Minister has said. Some people in this Chamber would say, “If the Prime Minister supports it, we don’t,” but if the Prime Minister says something good, let us support it, whether he is the Prime Minister or not—and if one of my colleagues says that something is good, then that is good as well.

[Mr Burrowes]

The hon. Gentleman is making the case on behalf of his constituents and presenting his own personal view, but does he also recognise that a strong case has been made in those countries that recognise marriage in a way that this country does not?

[Jim Shannon]

I thank the hon. Gentleman for his intervention. Clearly that is the issue, because there are many countries right across the world that have tax breaks. Indeed, the Prime Minister has said:

“Britain is almost the only country in Europe that doesn’t recognise marriage in the tax system.”

That was his comment back in 2007, but he reiterated the point in 2008 and 2010. There is clearly an issue to be addressed if we are to make comparisons with tax systems in other countries across Europe.

[Barry Gardiner]

I am grateful to the hon. Gentleman for giving way again; he is being extremely generous. I am delighted that he believes that this should not be about incentivising—[Interruption.]

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. Please could the hon. Gentleman direct his comments through the Chair? That will also mean that I can hear what he is saying.

[Barry Gardiner]

My apologies, Mr Deputy Speaker.

I am delighted that the hon. Gentleman has said that this measure is not about incentivising marriage, or about penalising people. Can he therefore explain why, under the proposals, a woman with children who has recently been widowed would suffer a financial loss at precisely the time when the family needed the money the most? That seems to me to be a fundamental flaw in the proposals.

[Jim Shannon]

The hon. Gentleman made that comment earlier to other speakers, and they responded to it. I accept that there are anomalies in all systems. In the short time that I have been in the House, I have spoken on many issues, and each one was something that my constituents told me that they wanted me to deal with. I am on record as having opposed changes to the education maintenance allowance, the employment and support allowance and incapacity benefit. I am also on record as opposing changes to the disability living allowance, among other changes in the benefit system. I have done that in this Chamber; if I see something wrong, I will take a stand on it. If I see an anomaly, I will do my best to address it. I cannot necessarily tell the House every detail of the matter, because I might not be aware of them, but if there is a wrong, it must be righted.

[Ian Paisley]

Does my hon. Friend also accept that it is all very well to say that there are anomalies, but that sometimes straw men are put up in these arguments? The fact is that if a pensioner, for example, loses a loved one, their tax credits and allowances go up, not down. We should not allow these straw men to be introduced into the debate.

[Jim Shannon]

I thank my hon. Friend for that contribution.

[Yasmin Qureshi]

No one is saying that there is anything wrong with marriage. Of course, one should encourage it. My parents were married, and I am married. No one is objecting to people getting married or saying that we should be telling people to get married. However, a fundamental problem with the new clause is that it effectively discriminates against one set of people. Why should a man and a woman who live together and have children be less well off or be discriminated against, compared with a married couple? Why would we wish to create discrimination between those groups of people?

[Jim Shannon]

People’s interpretations of these issues are different; we see things in different ways and have different opinions. I do not necessarily agree with what the hon. Lady has said, but there are issues to be addressed.

[Roberta Blackman-Woods]

Does the hon. Gentleman accept that there is inconsistency among Conservative Members, in that they want to support marriage while taking away huge amounts of financial support from ordinary families?

[Jim Shannon]

I do not believe that there is an inconsistency in relation to this matter, although, with respect, I would disagree with certain other proposals relating to the benefit system.

[Michael Connarty]

I am grateful to my hon. Friend—I regard him as such—for giving way. I share his warmth about marriage, having spent the past 41 years married, although I am not sure that my wife would be quite so enthusiastic. He has, however, strayed beyond his own guidelines. He said that the provision was not about people marrying for a payment, yet he is now arguing that that is what he supports. Surely this should be about the responsibilities that people take on as a couple, especially when they have children, because that is the most burdensome time when they need the most help from the tax system. This is not about whether they decide to have one kind of a relationship or another. Whether they are married or unmarried, if they decide to be together and have children, they will be burdened with other costs.

[Jim Shannon]

I can tell the House that when I married, I married for love. I am one of those old-fashioned boys; that is just the way I am.

[Mr Leigh]

In the light of the intervention from the hon. Member for Linlithgow and East Falkirk (Michael Connarty), it is important to point out that we are not trying to penalise single-parent families or families in which there are two earners. All we are trying to do is remove the severe penalty on families in which there is only one earner, because our system is totally out of step with most of the rest of the world in that regard.

[Jim Shannon]

I thank the hon. Member for his contribution and for providing a bit of focus to this debate.

Given that the agreement pertains to a full Parliament, one ordinarily would not be concerned at the failure to action a commitment in just over a year. What we need is for legislative change to be approved by the coalition Government, to move forward and perhaps see this legislation coming through in two years. The latest publication of the international tax comparison, CARE’s “The Taxation of Families 2009-10” puts things in a very different light. It demonstrates that we are now headed to a place where the tax burden on a married family with children with one earner on an average wage is growing so much that it will soon be more than 50% greater than the OECD average. That breaks new ground, taking us into territory that not even new Labour dreamt of occupying.

Some will no doubt respond by saying that this is a result of the tax burden having to increase on everyone in the context of the debt crisis. I understand that, but it is not exactly the case. Let me quote a director of an influential think-tank, who said:

“Given that it will take some time between changing the law and implementing the actual recognition of marriage in the tax system, it is important that the Government makes this a priority, takes swift action. The change, or at least a recognition of it, should be made”.

I very much hope that that report can be taken seriously, that the Government can look further at the issue and perhaps bring it forward in future legislation.

[Kate Green]

I just want to ask the hon. Gentleman which report he is referring to and which think-tank?

[Jim Shannon]

The think-tank is ResPublica.

As the hon. Member for Gainsborough (Mr Leigh) said earlier, the tax burden on single people with no dependants on the same wage has been falling and far from being 50% above the OECD average, it is now actually below it. That is reflected in the fact that the tax burden on a one-earner married couple on an average wage with two children is projected to rise from 73% to 80% of that of a single person on the same wage by 2012-13, while the equivalent average burden among OECD nations is 52%.

In this context, it is strange that the Government have started investing what will probably end up being almost £12 billion on increasing individual allowances to £10,000. There is a cost factor there and an agreement within the coalition on how that is going to happen. That will cost us all. It is a measure that will have a disproportionately positive effect on single people, yet the Government will not have brought forward a much cheaper transferable allowance policy.

I do not believe that the current situation is sustainable. It is now urgent that the Government introduce legislation to give effect to the transferable allowance. I hope that the Minister will be able to provide robust assurances on this point and a commitment to ensure that as the tax burden increases in the context of the current financial difficulties, it is allocated in a way that is fair, sensitive to family responsibilities and recognises the real strengths that marriage brings to society. I also trust that the Minister will address the important points raised by other hon. Members, including the need urgently to address the IT implications of recognising marriage in the tax system. There are changes to be made, there are costs and a system will need to be set up.

I urge Members to support new clause 5. I believe it is worthy of support. I understand that there are differences of opinion. This is probably the first time that I have disagreed with many colleagues on the Opposition Benches, but I believe in my heart that this is an issue of some importance.

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

Does hon. Friend accept that no one here needs to apologise for believing that this nation was richly blessed whenever it honoured marriage in legislation?

[Jim Shannon]

I thank my hon. Friend for putting the issue into perspective. We have no apologies to make; we believe in the sanctity of marriage; we believe it is important. Long may this House subscribe to that belief; we need to provide help and assistance to support marriage. We urge Members to support new clause 5.

[Dan Rogerson]

This has been a fascinating debate. It has been broad in its coverage of issues relating to marriage and social policy—although I must say that at times it has been as long as it has been broad—and it has strayed back into recent centuries in examining the institution of marriage. One common factor has emerged from it: Members in all parts of the House recognise the hugely beneficial effect of marriage on wider society in keeping families together and improving the quality of life, although some evidence presented by Members has raised questions about the quality of life during marriage.

21:30

There is a legitimate debate to be had about how we, as a society, can support and encourage marriage. Where there has been a history of family breakdown, it provides a role model that can encourage people to invest time in building and strengthening relationships. I strongly believe that our education system could do more in that regard,. Sometimes such subjects are seen as a bit touchy-feely, and some of the supporters of the new clause might resist attempts to include them in the curriculum, but I think it important for us to do so.

Opposition Members have said that if the hon. Members for Congleton (Fiona Bruce) and for Gainsborough (Mr Leigh) are arguing that the new clause provides an incentive, it is a pretty weak one. That point was made three or four times by the hon. Member for North Durham (Mr Jones) during his considerable and weighty contribution. If the new clause is not about an incentive, I do not see how it can belong in a debate about the importance of valuing, encouraging and supporting marriage. There are other ways in which we could do that, and I hope that we will, both as a coalition Government and as a society.

As others have said, however, we also need to send all those who are building and fostering strong relationships, and raising children successfully, the message that they too are valued and valuable. The hon. Member for Gainsborough was at pains to emphasise that, but although I much enjoyed hearing what he had to say—he is a regular visitor to North Cornwall, and I always welcome him back so that he can spend his post-tax income there, just as I welcome the Prime Minister and many other Members—I was not convinced by it. As I said earlier, if the new clause provides a financial incentive it is clearly not a very big one, and if it does not, I do not really see what part it can play in a debate about the importance of supporting, encouraging and fostering marriage.

[Andrew Selous (South West Bedfordshire) (Con)]

Does the hon. Gentleman not recognise that the transferability for which the new clause provides would enable parents, particularly women, to choose how they spend their time—to choose whether to work or to stay at home to look after children—and does he not think that providing that choice is a good idea?

[Dan Rogerson]

The hon. Gentleman has raised a useful point. However, given the existing pressures on families I do not think that the new clause is sufficient to allow that to happen, although it may be a step in the right direction. The argument presented by, mainly, Members in a particular corner of the Chamber is that on one hand that this is about incentives and on the other hand that it would make a financial difference, and I think there is a weakness at the heart of that argument.

Members have produced evidence relating to what happened at the time of the change in the tax system. My own marriage took place in 1999 and was not related to tax considerations; I am pleased to say that other factors were operating. I suspect that, given the way in which tax has risen and fallen in every Budget, if such decisions were based on tax policy we would see a huge flux in the nature of relationships and marriage.

[Mr Leigh]

The hon. Gentleman is making a perfectly honourable speech and his party’s position is entirely consistent, but, as possibly the only Liberal Democrat speaking in the debate, will he confirm that, given the coalition agreement, he would be perfectly relaxed if our Government produced such a transferable allowance? Surely the Liberal Democrats could simply abstain.

[Dan Rogerson]

The hon. Gentleman knows that I am generally a relaxed person. We in Cornwall are famed for being laid back and not wanting the hectic pace of life that some other constituencies thrive on. I am focusing on the debate about the Government’s policy in the Bill and whether the Government will choose to accept the new clause that the hon. Gentleman proposed in such an able and distinguished manner. I hope that the Government will not at this juncture look to act on the proposal in the new clause.

I am happy to update the House that during the course of the debate news reached me that Julia Goldsworthy, the former Member for Falmouth and Camborne, has announced her engagement, which I am delighted to hear. Whether she and Chris have been watching the debate and decided that this was it is unclear. I think it is unlikely, but I am delighted that the institution of marriage is taking a step forward in terms of our political life in Cornwall.

Hon. Members’ speeches have made it clear that the new clause is an attempt to send a signal to a group of people in society, but I am not convinced that we should use the tax system to send a signal. There are other ways in which we could support marriage.

[Mr Stewart Jackson]

I concur that 1999 was a vintage year for nuptials, having been married myself that year. Surely there is a discrepancy in the hon. Gentleman’s argument. By increments, he is seeking to direct fiscal policy in terms of taking poorer people out of tax—it is his party’s policy, shared by many in my party, and it is in the coalition agreement. Surely he must recognise that there are perfectly good fiscal reasons for us to prevail on the Government to pursue the married tax allowance.

[Dan Rogerson]

There is certainly an important debate to be had, but it is not based on income or the tackling of poverty. It is a different argument, although of course an entirely legitimate one. It is just one that has failed to convince me at this juncture.

In our long debate this evening we have explored the issues in some depth. Despite the excellent speech made by the hon. Member for Gainsborough, he has failed to convince me that the Government should act on his new clause.

[Kate Green]

This is an important debate and one that I am pleased to have the opportunity to speak in. The first thing to say is that it is important that we take great care with what the evidence tells us. That is in two respects.

[Mr Stewart Jackson]

The hon. Lady was not here earlier.

[Kate Green]

The hon. Gentleman is interrupting before I have even begun to expand on the evidence, but I shall be delighted to hear what evidence he has.

[Mr Jackson]

I merely had the temerity to point out that the hon. Lady did not grace us with her presence until about 20 minutes ago, so she was not in a position to hear the extremely articulate and well-made arguments made by my hon. Friend.

[Kate Green]

I am very sorry to have missed the contribution of the hon. Member for Gainsborough (Mr Leigh), but I should point out my own credentials—something that I do not often do. I bring to the House, if not exactly an interest, probably a bias. For four years I was proud to be the director of the National Council for One Parent Families. I worked with hon. Members, including Conservative Members, on what happens when relationships break down and children are involved. I know that I speak for hon. Members across the House when I say that our fundamental concern in this debate must be the well-being of children. I know that we come at that from different positions, but it is the debate that I think it is important we have this evening. The debate is not—however much hon. Members may, with the best of motives, care about it—about the social role of marriage and the societal messages that we send. I am interested in the well-being of children. It is incredibly important that we examine what we know about what marriage means for the well-being of children, what drives the factors that improve the well-being of children and the role of the financial position of families, and particularly of mothers, in the well-being of children.

I have had the pleasure of talking to hon. Members about this over many years, including Conservative Members. It is important for us as a House that we put it on record that this is what we really care about.

[Andrew Selous]

Will the hon. Lady give way?

[Kate Green]

I will with great pleasure give way to the hon. Gentleman, with whom I have had many important conversations on this point.

[Andrew Selous]

I acknowledge the hon. Lady’s considerable expertise, as I have been the beneficiary of some of it in the past. Does she agree that we should not set up a position of false opposition on this matter, and that many single parents are probably passionate supporters of marriage and might well like to get married again? We need to be a bit careful how we relate to this issue.

[Kate Green]

The hon. Gentleman is absolutely right, because the majority of people, including young people, want to be married. Most people who become lone parents never set out to do so; they did not enter into relationships expecting or wanting those relationships to break down. However, people often find themselves, at least for a time, bringing up children on their own. My point is that the well-being of children when that relationship breaks down must be a priority for this House. He probably feels as strongly as I do about that, and I hope that hon. Members will focus their attention on it when considering the new clause.

I want to say two things about the evidence that has been mentioned and debated by hon. Members this evening, the first of which relates to the cause and effect evidence. I perhaps raised this clumsily in earlier interventions, when I sought to point out that, to some degree at least, married couples are a bit of a self-selecting category. There is a preponderance of marriage among those who already had more financial and social resources before they married. Our policy should adjust to that where children who come from different social backgrounds may be disadvantaged, rather than seek to reinforce some of the societal disadvantages which mean that there is a prevalence of marriage among higher socio-economic groups.

[Dr McCrea]

As a minister, I have been marrying couples for the past 42 years and I do not know where the hon. Lady is getting her statistics from, as they certainly do not reflect the reality in the Province. She gives the idea that people who enter into marriage are at the upper end of the financial stability scale, but the vast majority of people who have been married have been at the lower end of the scale or in between. The reality is certainly not what she is describing to the House tonight.

[Kate Green]

I cannot question the hon. Gentleman’s evidence about Northern Ireland, but I can say that the position across the United Kingdom as a whole is that a higher rate of marriage correlates with people in higher socio-economic groups. We were helpfully reminded by the hon. Member for North Cornwall (Dan Rogerson) of an important question, which relates to the second point about the evidence: even if we could do something to spread the advantages of marriage across wider society, would a tax break do this? I have seen and heard no evidence, either this evening or during the many years that I have studied this subject, to show that a tax break persuades people to get married or to stay married. In that sense, particularly in these constrained fiscal circumstances, it seems extraordinary to spend public money on a mechanism that has no evidence to prove that it works effectively. There are real issues to address in respect of what the evidence shows us. Saying that does not devalue, in any way, the importance of marriage; I merely say that when we spend money, we need to know what outcome we expect it to achieve.

[Mr Burrowes]

I, too, recognise the hon. Lady’s expertise. It is difficult in these debates to unite on what we are for. She opened her contribution by discussing children’s well-being, and surely she would agree that there is evidence to suggest a correlation between children’s well-being and marriage. This issue should not just be the preserve of the few and the privileged; it should be an issue of social justice and extending it to the poorest, who can benefit from incentives and support in relation to marriage. That is what we are about, so surely we should unite in this House on that issue.

21:44

[Kate Green]

With the greatest of respect to the hon. Gentleman—I understand what he says—we do not know and we have no evidence to tell us that it is the fact of marriage that gives those children that advantage. That is where the evidence falls down, with the greatest of respect to the strongly held views of Conservative Members and of DUP Members, too. The evidence does not tell us that the fact and existence of a marital relationship, if we strip out all other social and economic factors, makes the difference for children. Commitment might be one important factor but there is another important factor: conflict. We know that conflict, in married relationships or outside them, is extremely damaging for children, so it is dangerous for us pick out one aspect of relationships or familial structures and to say that it makes or breaks children’s well-being. The evidence simply does not stack up to tell us that.

I said at the beginning of my speech that my concern was about the well-being of children in the context of the proposal to spend public money on supporting a particular kind of familial structure. I am concerned that we are diverting resources to families who are economically better off rather than to those who face the greatest risk of poverty.

The families who face the greatest risk of poverty today—hon. Members on both sides of the House agree on this point—are lone parent families. There are two possible policy responses to that, one of which is to try to stop those lone parent families becoming lone parent families. Saying that we should have fewer single parent families could be a policy response if we could see the mechanisms to achieve it and if we thought that it would genuinely work for children’s well-being. In the absence of evidence that this tax break or other mechanisms can compel families to stay together, we must also consider the second policy response mechanism, which is how to improve the economic prospects of children growing up in single parent families, particularly in light of the fact that one in four children in this country will spend some time in such a family. I suggest that if we are considering where the pressure of public resources need to be focused, protecting the best interests of those children, irrespective of the marital situation of their parents, ought to be our priority.

[Mr Stewart Jackson]

The hon. Lady is very generous in giving way, but surely she is avoiding one central fact. We alone in Europe have a tax system that is biased against families with caring responsibilities in which one member chooses to stay at home to look after the children. That is the central fact that she is avoiding.

[Kate Green]

The hon. Gentleman raises a number of important points. First, I have been struck this evening by the interventions by Government Members about the opportunity for couples to make a choice—particularly that which many of them would like to see, which is for one parent in the couple, often the mother, to take some time out of the workplace to stay at home and care for children. They seem willing to spend money on offering that choice to mothers in couple relationships and to spend more on offering it to mothers in married couple relationships, but not to offer it to single mothers. The economic pressure on single mothers to go out to work to support their children is being ratcheted up by this Government. If it is right for children to have a parent at home for a time, not necessarily just when the children are very young, it must be right irrespective of the marital status of the parents. Government Members must think about the child-focused approach to deploying resources. If we think it right that parents should have the choice to be at home with their children, all parents must have that choice, not just those in married relationships.

In response to the interesting and important point made by the hon. Member for Peterborough (Mr Jackson) about what goes on in other European countries, let me say that one of the distinguishing factors is that the experience of poverty among lone parent families in this country and the much lower experience of such poverty in other European countries shows that one can design a fiscal system so that lone parenthood need not be a determinant of poverty. It need not lead families and children into poverty. This is about the redistributive choices that we make in our fiscal system. When we have such pressure on the public finances, making a choice to spend money on favouring a group of families, many of whom are already economically advantaged, rather than focusing spending on those who are most economically disadvantaged is a strange priority, particularly given that we have no evidence of the efficacy of spending money on keeping people married as a route to keeping them out of economic disadvantage.

[Mr Kevan Jones]

My hon. Friend talks about international comparisons, but does she agree that there is also no evidence in European countries or anywhere else that having a tax system that encourages marriage leads to more stable marriages or more coherent family units?

[Kate Green]

It is very clear that putting the weight of expectation for supporting marriage on the fiscal system is a very unrealistic and unlikely way of providing adequate support for strong couple relationships. Of course everybody wants strong couple relationships to be sustained and of course it is right to use every instrument of public policy that we can—cost-effectively and in terms of outcome—to do so, but the evidence about what sustains strong couple relationships is not that we should give tax breaks to the already better-off, and particularly not to the already better-off who do not have children, if we are concerned about child well-being. The evidence about what sustains strong couple relationships is about a much broader landscape of social and emotional support. It is about early relationship and social education in schools and ensuring we have strong services to support families in the community, including the universally welcome Sure Start services and the very good-quality child care and play facilities that can be available to support parents in raising their children.

To isolate money and spend it in the fiscal system rather than direct our attention to what genuinely supports strong family relationships and children in whatever family structure they are growing up is in my view a misapplication of public funds, particularly at a time when those public funds are constrained. As hon. Members have pointed out, it is particularly strange to spend money on couples who have no children if we are concerned about child well-being, rather than to spend money in a way that specifically focuses on the well-being of kids. I am very concerned that the new clause would take money from those with higher levels of need and give it to many couples in lesser need. I accept that, as hon. Members on the Democratic Unionist Benches have said, some married couples are in low-income groups and in straitened circumstances, but in general we would be diverting resources to better-off families from lower-income families, and particularly from lower-income families with children.

Finally, let me address the issue of the couple penalty, about which we have heard a great deal and about which I am deeply sceptical. Let us start by remembering that there are economies of scale of living with another adult in one’s household. It does not cost twice as much for two adults to live in a household as it costs one. The couple penalty that has been much talked about by Conservative Members fails to identify that the material circumstances of children in lone-parent families are measurably worse than those of children in couple families. Whatever the intellectual and fiscal modelling might suggest about a financial couple penalty, the reality—the outcome—is that there is no such couple penalty. Indeed, the penalty works in quite the opposite way. To seek to extend the material advantage that couples enjoy at the expense of single parents seems to me a strange choice for a Government who are particularly concerned about social mobility and improving the prospects of the most disadvantaged children.

I hope that hon. Members will consider the new clause very carefully and the fact that it simply fails to achieve the laudable goals of Members on the Government Benches to improve the prospects of some of our most disadvantaged children. I hope that they will look instead at how best we can direct resources to support parents who are bringing up children on their own, usually through no choice or fault of their own. I hope that they will relieve what is often a burden from the parents who are often proud to take on that burden and who deserve to be rewarded for taking it on, as they are the parents who stay and make the commitment. Surely they are the parents to whom we should be giving extra financial support if there is extra financial support to be made available. I really do plead with Members on the Conservative Benches, and with DUP Members who I think are giving them some support this evening, to think again about the likely effect of such a new clause and about the children who would lose out. I am sure that their intentions are honourable, but I am afraid that the results will be anything but.

[Mr Stewart Jackson]

It is a pleasure to follow the hon. Lady, who always makes an intelligent, cogent and reasonable case, but she is completely wrong. I had not intended to trouble the scorers this evening, but it is important that we have a proper debate on new clause 5, that it is not rushed through, and that this is not treated as a procedural issue that the House can dismiss lightly. It goes to the kernel of what my hon. Friends and I believe in. We did not come into politics at any level—in my case, more than 20 years ago—to make people poorer, to embed disadvantage, or to have a tax system that favours some over others.

My party has a strong tradition of small “l” liberal and progressive social reform, from Disraeli onwards. One of the more depressing aspects of the debate is the straw men—or straw people, I should say—who have been set up, and the caricatures of the Conservative party that have been paraded before us.

[Fiona O'Donnell (East Lothian) (Lab)]

Will the hon. Gentleman give way?

[Mr Jackson]

Not at the moment; I may do so later. If a reasonable person from any other European country stumbled into the Chamber tonight, they would wonder why we were debating the issue. It is an existential issue of what we believe as public servants—as politicians—about the institution of marriage. That is not to traduce or do down the massive contribution that those who are, for a variety of reasons, single parents make to their family. They love their children and care about their family, and they are a part of the community. However, it is incumbent on us to say what we think is right. I commend the courage and dedication of my hon. Friend the Member for Gainsborough (Mr Leigh), who is willing to be unfashionable sometimes and speak out on what he believes is right.

This is a totemic issue, because my party put it in its election manifesto. It recapitulated that point in the coalition agreement and has argued for this specific policy, so it is not one that we can lightly cast aside as irrelevant now that we are in a coalition in which there must be give and take. Many of us have always believed that it is vital to take poorer working people out of tax. We heard about a cornucopia of so-called Tory errors, going back to the minimum wage. Let me remind Opposition Members that the gap between the richest and poorest 10% widened under the Labour Government. A former very senior Government member professed that he was

“intensely relaxed about people getting filthy rich”;

that is a fact. No one has a monopoly on care and compassion for people.

It cannot be wrong to look at examples in other European countries, see that their fiscal policy decisions work, and decide to look at a similar policy. I like, respect and trust the Exchequer Secretary to the Treasury; he is a decent man of his word. He will have heard the strength of views and the passion on the Conservative Benches. He will also have heard the filibustering by the hon. Member for North Durham (Mr Jones), which reached a nadir when he effectively said in his final remarks that people were essentially too thick to fill in their tax forms. I know that filibustering is an art form, and he has perfected it, but that is gilding the lily and taking things to a ludicrous length. This is not a subject for knockabout politics; it is about real changes to support people.

[Mr Burrowes]

My hon. Friend makes a good and important case. Many people quite properly raise concerns about the gap between the rich and the poor growing over the years, but why do the same people not also raise concerns about the position of one-earner married couples on an average wage with two children? Their tax burden has increased over the years, too. Why are people not rising up and expressing concern about that discrimination, which will lead to real child poverty if we do not deal with it?

22:00

[Mr Jackson]

My hon. Friend has a long tradition of concentrating on this issue in his professional work in family law before he came to the House, and he knows what he is talking about. He is right and astute in his observation. The proposal is about ameliorating unfairness, as well as having a progressive tax policy to reward what we think is right. The hon. Member for Stretford and Urmston (Kate Green), in her usual decorous way, skipped the key issue, which is that European countries are making such tax changes or have established them, and we have not. It is incumbent on her to make the case why they are all wrong and we are right.

[Andrew Selous]

Does my hon. Friend agree that in this case the United Kingdom is the odd country out? As he so powerfully said, we need to join the mainstream of Europe on this matter.

[Mr Jackson]

My hon. Friend makes an intelligent point, with which I wholeheartedly agree.

Reference was made earlier to the Centre for Social Justice report of May 2011. The hon. Member for North Durham, who is ambling along the Back Benches towards his place, did not refute the causal link and the difference between marriage and cohabitation and some of their negative socio-economic impacts.

[Mr Kevan Jones]

I do not know whether the hon. Gentleman was listening; I said nothing of the sort. I said that a possible reason for marriage break-up was poverty, but the link that he is making by suggesting that marriage break-down somehow leads to poverty is not the point that I was making at all.

[Mr Jackson]

The hon. Gentleman is trying the patience of the House. We will have a look at Hansard tomorrow to see what he said. He did not refute the details and facts that I put before the House in my interventions on him and others.

[Mr Jones]

I know the hon. Gentleman is not a good listener. He is drawing the conclusion that poverty, and things such as drug abuse among children of single parents and others, is a result of the fact that their parents are not married. What I said, and what is clear from the work of the Secretary of State for Work and Pensions, is that the root cause is poverty, not whether people are married or not married.

[Mr Jackson]

My capacity to listen is in inverse proportion to the length of the hon. Gentleman’s peroration. Given that he spoke for an hour, at the end, like many others, I lost the will to live. I expect better of the hon. Gentleman because he has given some very informative speeches over the years. Sadly, that was not the case tonight. I am sure he is distressed at my observations.

The hon. Gentleman failed to take on board any of the comments that were made or the facts that were presented. A study by the Bristol Community Family Trust in December 2010 demonstrated that cohabiting couples accounted for 80% of family break-ups, whereas divorce accounted for only 20% of break-ups. He did not specifically seek to break the causal link that I was making. One in 11 married couples break up before their child is five, compared with one in three unmarried couples. None of us wants to see the dire social consequences of family breakdown. There is a consensus across this country about it, from the Prime Minister down.

[Kate Green]

Accepting at face value what the hon. Gentleman says—that cohabiting couples are more likely to separate than married couples—what evidence can he give us that a financial inducement would work to keep those cohabiting couples together?

[Mr Jackson]

I expected better of the hon. Lady, who is learned, intelligent and usually erudite, than rejigging the caricature, “Put a ring on your finger and get an extra 20 quid a week.” That has never been our argument. We seek to influence private behaviour with public policy, and I used the example of speeding fines and points on a licence as policies that are likely to influence future behaviour. As I said to the hon. Member for North Cornwall (Dan Rogerson), who is no longer in his place, the Liberal Democrats made a manifesto commitment, which we have accepted, to take more poorer working people out of tax. That commitment was made on the same basis. The point I keep coming back to, and which I repeat for the hon. Member for Stretford and Urmston, is that the international comparators support my case and not hers.

[Helen Goodman]

Will the hon. Gentleman give way?

[Mr Jackson]

I will not give way for the time being.

We all wish to deal with the problem of family breakdown, and I genuinely believe that this would be an important pointer and signal that we are in line with other countries and cognisant of international comparators. The hon. Member for North Durham painted a picture of a wonderful land of milk and honey, a Valhalla, after 13 years of the Labour Government, but it is worth repeating that in 2007, under a Labour Administration, a UNICEF report on child well-being placed Britain bottom in a league table of 21 countries. Members should listen not only to me on that point but to Mr Justice Coleridge from the family division of the High Court, who in 2009 summarised the position thus:

“The breakdown of families in this country is on a scale, depth and breadth which few of us could have imagined even a decade ago… almost all of society’s ills can be traced directly to the collapse of family life… it is a never ending carnival of human misery.”

The Whips are imploring me to conclude my comments—I know it is not my aftershave—so I will do so, as I am always receptive to the admonitions of my hon. Friend the Member for Rochford and Southend East (James Duddridge). We have had an excellent debate and I believe that my hon. Friend the Exchequer Secretary has listened. This is an important point of principle for Members on this side of the House and for many others, including hon. Gentlemen and Ladies from Northern Ireland on the other side of the Chamber. It is a totemic issue, and this Conservative-led coalition Government must, and I believe will, deliver on this promise.

[Michael Connarty]

In the contributions that I have heard via the live feed and in the Chamber, sadly there seem to have been moral overtones that echo speeches in a Victorian Parliament. If moral judgments are behind those arguments and people think that they this is a moral vote, I am quite sad about that. It might be a political strategy, however. Many political strategies were put forward by the Conservative leadership at the election, but hopefully they will not be reflected in the legislation put though this House. I hope that the contribution from the hon. Member for North Cornwall (Dan Rogerson) is more reflective of the coalition, which means that the Government will not do what the new clause proposes.

It is very important that people listening to this debate realise what the proposals are. After the advances that this country has made, in the recognition of civil partnerships, for example, this proposal is about spouses and spouses alone, not civil partners. It is attacking the progress that has been made, which is now being copied across Europe. It does not relate to people of the same gender in firm and committed relationships, which shows that it is not a forward movement at all. It is an attempt to throw out and make a moral judgment on the things that have been done by the joint agreement of this House to advance society’s value of firm and committed partnerships. That is what is important.

[Andrew Gwynne]

Will my hon. Friend give way?

[Michael Connarty]

Not yet.

It is not just a matter of putting a marriage partnership or a firm partnership ahead of any other. My hon. Friend the Member for Stretford and Urmston (Kate Green) spoke strongly and has worked hard on single parenthood, but I happen to believe, in most cases but not all, that a partnership provides a much stronger place for children to grow up in than that provided by any single person—male or female—who has to go it alone. Therefore, our society has a lot of value when we can encourage partnerships.

We still have the oddest situation in Europe—and among many other countries outside Europe—because we do not recognise de facto partnerships. De facto partnerships are not civil marriages but agreements by people without either a civil or Church marriage to remain in a relationship and to commit to themselves and to any offspring.

My son lives in Australia, and he shared a de facto partnership for a number of years, recognising that if he or his partner had died their pension would have transferred to the other. In this country I have friends who, like me and my spouse, have been together for 41 years. They have had to get married because they might be coming to the end of their lives—not for a long time, I hope—and their pensions would have died with them.

That was a moral judgment which the previous Labour Government made, and it was shameful, because we should have had civil partnerships for all who wished to have them, and we should have recognised de facto partnerships as much as same-gender partnerships. That is how we should have looked at things, but we should not give cash incentives, as the new clause seeks. Indeed, that was the contradiction in the contribution from the hon. Member for Strangford (Jim Shannon), because he said that he was not about incentivising partnerships through finances and then spoke on behalf of the new clause—which would incentivise partnerships.

[Mr Burrowes]

Will the hon. Gentleman give way?

[Michael Connarty]

I have a call from my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) first.

That is what is wrong with the new clause. It is about spouses, it is backward looking and moralistic and it will not help children at all. It is sad that one in five marriages breaks down and that civil partnerships break down, so we must encourage people through the way we finance them and help them to keep their relationships together, because finances as much as personal fall-outs break down relationships.

[Andrew Gwynne]

I agree wholeheartedly that families come in different shapes and sizes, and we need to respect and reflect that in public policy. Is not that why the previous Labour Government were absolutely right to target limited resources on tackling child poverty, irrespective of the child’s family background?

[Michael Connarty]

My hon. Friend has made that point before, and he puts it better than I could.

My mother, who now has sadly passed away, was soured by the Labour Government very early on when we took away the additional money for single parents. From then on, every time I went to her house on a Sunday, she would start by saying, “Welcome,” and then she would say, “You and your Tony Blair,” and for the rest of my visit berate me for what we had not got right. She was a great touchstone, however, because she saw that the defence of children and the future of children were important, not the rest.

The new clause is a backwards step, but I am hopeful that the Minister will not support it and that such legislation will never get through. It states that only marriage—not any other relationship—is good enough or as good as we would wish.

[Mr Burrowes]

The hon. Gentleman is experienced in European affairs, given his chairmanship of the European Scrutiny Committee and his general interest in European matters, so I have a question. Why do France, Germany and Italy all recognise marriage in the taxation system? Indeed, let us widen that question. Why do only 24% of OECD citizens live in countries that do not recognise marriage in the taxation system? Has he ever asked why our European neighbours recognise marriage but we do not?

[Michael Connarty]

People must ask those Governments, but many recognise de facto partnerships as well, and their recognition is based on not just the marriage to which the new clause refers with “spouses”. That is the point. This is about one small group that we in this country used to see as a backward thing. We have moved beyond that now, and it is time we put it behind us. Perhaps others will catch up with us soon enough when they realise that it is partnerships that matter, not specifically spouses in a formal marriage.

22:15

[Mr Chope]

In making a brief contribution to this very important debate, I congratulate my hon. Friend the Member for Gainsborough (Mr Leigh) on getting it going. It came as a bit of surprise when my hon. Friend the Member for Congleton (Fiona Bruce) did not speak to the new clause, but I am delighted that she subsequently joined the debate to speak in support of it.

I come at this subject on the basis that the Prime Minister supports exactly what I support: recognising marriage in the tax system. He promised that the Government would recognise marriage in the tax system after the general election, and this debate rightly puts the focus on how that commitment will be implemented. I hope that when the Minister responds, he will say exactly when that is going to happen. Over a year ago, on 2 June 2010, the Prime Minister said:

“I believe that we should bring forward proposals to recognise marriage in the tax system. Those in our happy coalition will have the right to abstain on them, I am happy to say, but I support marriage. We support so many other things in the tax system, including Christmas parties and parking bicycles at work, so why do we not recognise marriage?”—[Official Report, 2 June 2010; Vol. 510, c. 428.]

Those were excellent words from my right hon. Friend. Then, some three or four months later—

[Mr Kevan Jones]

rose—

[Mr Chope]

No, I am not going to allow anybody to interfere with the words of the Prime Minister.

On 5 October 2010, the Prime Minister said:

“I have always supported the idea of supporting marriage through the tax system, specifically supporting the idea of a transferable tax allowance. The idea of a transferable tax allowance is in the coalition agreement.”

That is where my hon. Friend’s new clause comes in, because it calls for just that. One is entitled to ask why, having had two Budgets since the general election, we still do not have proposals to implement that very important pledge.

Labour Members are misrepresenting this proposal as an attempt to build new privileges for those who are in a marital relationship, but, as has been brought out time and again during the debate, the question is what we are going to do to prevent those who are married from suffering disadvantage under the tax system. That is what we are trying to put right with the new clause.

[Helen Goodman]

Labour Members would be far more sympathetic to the case that the hon. Gentleman and his colleagues are making in saying that they do not have negative attitudes towards single-parent families if they had not voted for the Welfare Reform Bill, which requires lone parents to pay to get the services of the Child Support Agency.

[Mr Chope]

Speaking for myself, I do not have negative attitudes towards single-parent families, but I do feel that single-parent families should not be advantaged in the tax system as compared with married families. That is the problem that we have at the moment, and that is what we are trying to put right in the new clause.

I am lucky in that my constituency is in an area described thus in a headline in last week’s local paper: “East Dorset is a place for love and marriage”. The article says:

“Married couples in East Dorset stick together. Latest…figures show that 65 per cent of marriages in the area last, well above the national average”,

with the seventh highest rate of marriage survival in the country. Even so, fewer than two out of three marriages survive, but that is a lot better than in many other parts of the country.

I am not suggesting that the tax system is causing marital breakdown, but I am saying that we should follow the very strong lead of our Prime Minister and put pressure on the coalition Government to implement their commitment to recognise marriage in the tax system.

[John Glen (Salisbury) (Con)]

Is not the real issue the calibration of the compromise? Most new Government Back Benchers recognise that in a coalition there has to be compromise. At the same time as we see moves forward on the individual allowance for our Liberal Democrat colleagues, we need to see some progress along the lines that my hon. Friend is setting out. The key issue is that there appears to be an imbalance in the compromise.

[Mr Chope]

My hon. Friend makes a very good point. We are seeking a route towards a destination. The Prime Minister set out the clear destination, but so far we do not seem to have made any progress towards achieving it. What was set out in detail on the Conservative website at the time of the election was a very modest proposal, which talked about a small proportion of the tax allowance being transferable, with quite a tight maximum income threshold in order for people to be eligible. Even that modest proposal has not yet been put forward by the Government in the Finance Bill so that we can support it and implement it.

[Mr Kevan Jones]

The hon. Gentleman has talked about the Prime Minister’s support for this proposal. Does he recognise that the Prime Minister included civil partnerships in what he said? If we agreed to this proposal tonight, civil partnerships would be excluded, which is clearly at odds with what the Prime Minister wants.

[Mr Chope]

If there is a defect in the wording of the new clause and it fails to recognise everything that the Prime Minister said—he certainly referred specifically to civil partnerships—the hon. Gentleman may have a point about that, but he does not have a point about much else, in my submission.

[Mr Leigh]

I am happy to make the concession to the hon. Member for Linlithgow and East Falkirk (Michael Connarty), who spoke at some length on this point, that if the new clause is defective, I am happy to withdraw it and for the Government to bring back a new clause that includes civil partnerships. I make it absolutely clear that we have nothing against civil partnerships.

[Mr Chope]

My final point is that there is a read-across between the new clause and the conundrum that the Government face in the debate about the withdrawal of child benefit from families that comprise at least one higher rate taxpayer. That issue is causing a lot of angst among our constituents, particularly for parents in single income households in which one parent stays at home to look after the children. As I have said in correspondence with the Minister, in some cases one parent stays at home to look after a disabled child. If there is one parent who is the breadwinner and he is a higher rate taxpayer on an income of about £45,000 or £50,000, he will be above the threshold and will be deprived of his child benefit.

[Michael Connarty]

Will the hon. Gentleman give way?

[Mr Chope]

I will give way in a minute.

In comparison, a household with two people earning between £35,000 and £40,000 each, which has a much higher income, will keep its child benefit. That is not fair. In response to correspondence, the Minister has said that there has to be a bit of rough justice and that to introduce a system of transferability of allowances and entitlements would be very complicated. However, that is exactly what was proposed by the Prime Minister with the transferability of tax allowances, and that is what is proposed in the new clause. That is of significance, because there is a read-across from this other thorny policy issue that faces the Government.

I hope that we will have a positive response from the Minister, and that he will spell out in detail when and how the Prime Minister’s pledges to the country will be implemented.

[Chris Leslie]

What on earth is going on with the Tories this evening? It is a perplexing situation, because Conservative Members usually accuse Labour Members of filibustering in an open-ended Finance Bill debate, but not at all this evening. Instead we seem to have a private family dispute breaking out.

[Chris Ruane (Vale of Clwyd) (Lab)]

Divorce in the air.

[Chris Leslie]

There could be, who knows? We had the unedifying spectacle, at the beginning of the debate, of the hon. Member for Congleton (Fiona Bruce), in whose name the new clause was tabled, not moving it, and the hon. Member for Gainsborough (Mr Leigh) swiftly getting to his feet and deciding to move it. Three hours later, here we are. I am not quite sure whether the hon. Member for Congleton had reached some sort of deal with the Whips—it did not look like a particularly friendly deal at the time, but maybe she had a concession from Ministers and they are going to announce, finally, some movement on their election pledges. It is all very strange behaviour.

As my hon. Friends have said, it is very peculiar, at a time when millions of families, pensioners and others are being hit hard by deep spending cuts and tax rises, that the first priority of so many Conservative Members is to advocate an unfair tax cut with no apparent benefit to society. It would be a multi-billion-pound marriage tax break that would penalise those who are separated, widowed or divorced, many of whom are already being hit hard by cuts to tax credits and child care.

[Mr Stewart Jackson]

Will the hon. Gentleman give way?

[Chris Leslie]

Well, why not? More from the hon. Gentleman.

[Mr Jackson]

On the subject of unfairness, would the hon. Gentleman like to apologise for the fact that in the financial year 2007-08, under his party’s Government, the tax burden on one-earner married couples with two children, on the average wage, rose to 44% greater than the OECD average? That is a matter of fairness. Does he think any responsible party should ignore it?

[Chris Leslie]

I am not quite sure what the hon. Gentleman’s point is. Maybe in the cool light of day that intervention will have more light shed on it. In his contribution earlier, he asserted that there was a causal link between marriage and the socio-economic well-being of society, child well-being and so forth. He may well have a set of statistics in which he sees a correlation, but I am sure he understands the difference between causal and correlative effect. It may well be that car ownership has a similar correlation with child well-being, but that does not mean that setting up the tax system to the advantage of a particular institution will necessarily have the outcome that he seeks.

My hon. Friends the Members for Stretford and Urmston (Kate Green), for North Durham (Mr Jones) and others have overwhelmingly proved that we need a tax and benefits system focused on need and on poverty alleviation, particularly poverty among children. That must be the driving force behind a sane and rational tax system. We do not want a system with the peculiarities and idiosyncrasies that Conservative Members advocate.

[Mr Kevan Jones]

Does my hon. Friend agree that one causal link might be with poverty? The hon. Member for Christchurch (Mr Chope) says that couples in Dorset stay together longer, but might that not have a lot to do with the affluent nature of that part of the world compared with, say, inner-city Glasgow?

[Chris Leslie]

Absolutely. Of course that is the case. It is so obvious that it is surprising that Conservative Members cannot see it. What is worse is that the new clause that they have moved—or rather, that one of them has moved—would cost more than £4 billion. It would cost £4.1 billion to create a personal allowance transferable between all couples, married and unmarried. That would be the price tag of new clause 5. That is the equivalent of a penny on income tax, a penny on employee national insurance rates, a 1% increase in VAT or putting VAT on fuel and power, as we know the Government sometimes like to do. If Conservative Members advocate spending that amount of money, surely it would be better to target it on the basis of need and where it would have the best and most direct benefit to society.

There is a long history of the transferability of personal allowances, and I will not go through it.

[Helen Goodman]

Oh, go on!

[Chris Leslie]

I know that many of my hon. Friends would like to me to elucidate some of that history, but we have already been through various centuries in this evening’s debate. Suffice it to say that it was a Conservative Government who eventually phased out the married couple’s allowance, and indeed the current Lord Chancellor who said:

“Now that husbands and wives are taxed independently—one of the best taxation reforms in recent years—the married couple’s allowance is a bit of an anomaly.”—[Official Report, 30 November 1993; Vol. 233, c. 935.]

My hon. Friend the Member for Stretford and Urmston was absolutely right when she highlighted Labour’s policy shift towards helping the children and families in greatest need, particularly through the tax credit system. That was one of the greatest changes made by the previous Labour Government, and one that we should be proudest of.

22:30

The Conservatives have made a number of manifesto commitments on the transferability of personal allowances: they made such a pledge as far back as their 2001 election manifesto, and the Work and Pensions Secretary reiterated it in Centre for Social Justice reports. It comes up again and again, even as recently as the most recent general election, when a similar, albeit smaller, measure was proposed.

The Liberal Democrats, however, have always been firmly against such a measure; at least, that appeared to be the case. Indeed, as my hon. Friend the Member for North Durham said, no less a person than the Deputy Prime Minister said that the proposal was

“a throwback to the Edwardian era”,

adding:

“Miriam and I got married for love, not for three quid a week. It’s patronising drivel.”

This is one of those rare occasions when I agree with the Deputy Prime Minister.

The hon. Member for Christchurch (Mr Chope) highlighted child benefit and taxation for higher earners. The two issues are inextricably linked, because when challenged about his decision at the Conservative party conference, the Prime Minister said, “Oh well. Don’t worry. We’re going to be making moves on a transferable married couples allowance.” Of course we never saw such a proposal then, and we still do not know how the child benefit taxation arrangement will be implemented. That would be a major change to the independent taxation system.

[Mr Chope]

Will the hon. Gentleman give way?

[Chris Leslie]

This is the final intervention that I will take.

[Mr Chope]

I am sure that if the hon. Gentleman waits, he will hear a major announcement on that issue from the Minister very shortly.

[Chris Leslie]

The hon. Gentleman could have speeded that up by not intervening.

I shall finish by saying that, clearly, there are major problems with the transferable allowance. It is costly and not targeted, and it is unfair to those without a marriage certificate, whether they are divorced, widowed, single or in a couple. There are a host of anomalies and unintended consequences, as several of my hon. Friends have said. For instance, if a husband is killed in a tragic road accident, his widow and children will be left without support, and so on. The proposal undermines the principle of independent taxation, but most of all, we should focus our tax and benefits system on need and on the alleviation of poverty. I sincerely hope that the House will reject new clause 5.

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

As we have heard, new clause 5 would introduce transferable personal allowances for married couples, allowing one spouse in all married couples to transfer unused personal allowance to the other. I am very grateful to my hon. Friend the Member for Congleton (Fiona Bruce) for tabling the new clause. It highlights an important point: that marriage is a positive institution, and one that the Government are committed to support.

We are keen to send a clear message that family and marriage matters, and that strong and healthy families help to create a strong and healthy society. In little more than a year, this Government have proved our determination to tackle the wider issues that can affect family stability.

[Fiona O'Donnell]

What message would the measure send to the woman who came my surgery on Friday, fleeing an abusive relationship to keep herself and her children safe?

[Mr Gauke]

It is of course important that we, as a society, do everything that we can for a woman in the circumstances that the hon. Lady describes. However, the Government also believe that the institution of marriage provides something to society that should be recognised. That is the thinking behind our policy. Of course we must help those in abusive relationships and do all we can to support them, but that does not preclude taking steps to support the institution of marriage. The Government recognise that.

[Thomas Docherty]

Like the Minister, I am a fan of the institution of marriage, but what does it say about the institution that the Government feel that they need to support it like this?

[Mr Gauke]

If the hon. Gentleman is prepared to be patient, I will set out the Government’s position.

If we are to address poverty, it is important that we address not just poverty but the causes of poverty—to coin a phrase—and ensure that work pays, and that is what our welfare reform programme is designed to do. It is also important that we take steps to ensure that the family and marriage are recognised, and that we do what we can to support stable relationships.

[Ian Austin (Dudley North) (Lab)]

Under the Minister’s proposals, if a man abandoned his wife and children and got remarried, would he continue to receive the tax allowance? If a woman were widowed, would she lose it?

[Mr Gauke]

Let me set out—[Hon. Members: “Ah!”] Let me set out the point. As has been said many times during this debate, marriage is recognised in the vast majority of countries. The previous Government introduced the transferable nil-rate band for inheritance, which was specifically designed to assist married couples and civil partnerships. If the Labour party is against any kind of recognition of marriage within the tax system—

[Ian Austin]

rose—

[Mr Gauke]

Let me finish this point. If the Labour party is against any kind of recognition of marriage within the tax system, why did it introduce the transferable nil-rate band for inheritance tax?

[Ian Austin]

rose—

[Mr Gauke]

Perhaps the hon. Gentleman will explain. [Interruption.]

[Ian Austin]

Would a woman whose husband was killed in Afghanistan lose this benefit?

[Mr Gauke]

As I sat down to give way to the hon. Member for Dudley North (Ian Austin), the shadow Chancellor said, “You don’t have to be married to benefit from the transferable nil-rate band.” He is absolutely right. As I said, it applies to married couples and those in a civil partnership. That is exactly what I said earlier. As the hon. Member for Dudley North pointed out, it is important that we support widows in the circumstances he mentioned. Does that mean, though, that we should never do anything for married couples? It does not necessarily follow.

I want to put this in the wider context of what we are doing to help strong and stable families. For example, the Department for Education has announced plans to spend £30 million on relationship support to deliver better support for couples in relationship distress. However, as hon. Members will be aware, the Government have made it clear that we intend to introduce proposals to recognise marriage and civil partnerships in the tax system. As the Prime Minister said recently, this will show that as a country we value commitment. I certainly agree, therefore, with the intentions behind the new clause.

Although the Government support the principle behind the new clause, now is not the appropriate time to bring forward such a measure. It would entail significant and immediate costs to the Exchequer, its scope is wider than the Conservative party manifesto pledge and the cost, we estimate, would be more than £4 billion. It would also necessitate substantial implementation costs.

[Clive Efford]

Will the Minister give way?

[Mr Gauke]

I will give way again, but I am keen to make progress.

[Clive Efford]

Will the Minister comment on what message this sends to teachers planning to strike on Thursday? On the day when the Secretary of State for Education was dragged to the House to explain what he was doing to avoid the strike, the priority of Back-Bench Conservative MPs is to propose a motion that would cost more than £4 billion a year, yet teachers are being told that the Government will not negotiate over increases in their pension fund contributions. What message does that send to those teachers?

[Mr Gauke]

We have heard a lot in this debate about single parents. One group that will be affected if teachers go on strike and schools close on Thursday will be single working parents, who will face substantial disruption in dealing with child care. I hope that Members in all parts of the House will strongly urge teachers to go to work on Thursday.

[Mr Leigh]

I am quite prepared to accept that we are only Back Benchers and that the new clause may be defective, but I would be prepared not to force it to a vote if my hon. Friend now gives a firm and solemn pledge that during this Parliament the Government will honour our manifesto pledge to recognise marriage in the tax system. If my hon. Friend gives me that pledge, I will not force the new clause to a vote; if he does not give that pledge now, I will force it to a vote.

[Mr Gauke]

As always, my hon. Friend is very forceful in the points that he makes. Let me make a little progress; whether he considers it to be sufficient progress we shall wait and see.

[Ian Lucas (Wrexham) (Lab)]

rose—

[Mr Gauke]

I am going to make some progress.

Clearly, £4 billion is a significant amount of money. Any decision to introduce a mechanism to recognise marriage in the tax system will need to be taken in the context of the wider public finances, so whatever proposals the Government make will balance the benefit to society with the cost to the Exchequer. We will consider a range of options.

There are also some issues with the drafting of new clause 5. Some seemingly minor elements, such as the lack of a commencement date, make the new clause administratively difficult for two reasons. First, lead-in times for an effectively implemented mechanism will be lengthy because HMRC will need to design and put in place new processes—a point that a number of hon. Members have recognised. We will factor that into our thinking. The Government and HMRC understand the need for a workable way of delivering this, and we are actively engaged in that process. Secondly, the lack of a commencement date means that those who qualify could, technically, claim for at least the last four years, which could substantially increase the cost.

As we have heard, the new clause also makes no mention of civil partnerships, which we believe must be included. There is much that HMRC will need to prepare before the Government are able to meet their commitment, but hon. Members can rest assured that the Government are considering all those points. Let me say to my hon. Friend the Member for Gainsborough (Mr Leigh) that the Government remain committed to exactly what we said in the coalition agreement. I support the principle behind the new clause.

Labour introduced a mechanism in the tax system to recognise the advantages of cycling to work, and although I have nothing against cycling to work, it seems to me that marriage is more important to society, so the idea that the proposal before us would somehow represent a strange or unusual element in the tax system is, I am afraid, wrong. However, it is not practical to implement it at this time, and such changes need to be made within the boundaries of improved fiscal stability. Therefore, although I will reluctantly ask my hon. Friend to withdraw new clause 5, I can assure my hon. Friends that this is not an issue that we have forgotten about; rather, it is a commitment that we will keep.

[Mr Leigh]

I am afraid that the Minister has not answered the specific question that I asked him. It is not good enough to say that we will honour a commitment, but then give no date for when that commitment will be honoured. I am very sorry, but there is not a cigarette paper between what my hon. Friends and I are proposing in new clause 5 and what the Prime Minister said, which I shall repeat:

“I believe that we should bring forward proposals to recognise marriage in the tax system. Those in our happy coalition”—

notice that he mentioned the coalition, because this is about now, in this Parliament; he was not talking about some time in the future—

“will have the right to abstain on them, I am happy to say, but I support marriage. We support so many other things in the tax system, including Christmas parties and parking bicycles at work, so why do we not recognise marriage?”—[Official Report, 2 June 2010; Vol. 510, c. 428.]

22:45

I repeat: why is politics held in such contempt? It is because politicians go to the people at general elections and promise things—

[Ian Austin]

rose—

[Mr Leigh]

I am not going to give way, because the House wants to come to a decision on this.

The House is held in such contempt because we make pledges and then we do not carry them out. We made a solemn pledge before the election, and we repeated it after the election—

[Ian Austin]

Nonsense!

[Mr Leigh]

I will not be shouted down by the hon. Gentleman. He was not here for most of the debate anyway.

We made that pledge, and we should now respect it. I was hoping to be able to say that the new clause was defective, and that we would be quite happy to withdraw it and to redraft it to enable civil partnerships to be recognised. We would be quite happy if the Minister then said that it could be introduced during the course of this Parliament. However, he has not said that. I am afraid that he has not answered the points that we have put to him. We had an hour’s speech by the hon. Member for North Durham (Mr Jones), most of which did not address what we are trying to say. I want to end by saying that none of us is trying to penalise two-earner families or single parents. We are simply trying to remove the severe penalty that this country imposes on one-earner families. The United Kingdom is completely out of step with most of the world in that regard. Nothing in our proposal is radical; it is sensible and it is right, and I think that we should now have a Division on it.

Question put, That the clause be read a Second time.

The House proceeded to a Division.

[Mr Speaker]

Order. Open the doors for a further minute, owing to the extreme congestion in one Division Lobby.

22:46

Division 307

Ayes: 23

---

Conservative: 13
Democratic Unionist Party: 7
Labour: 3

Noes: 473

---

Conservative: 227
Labour: 189
Liberal Democrat: 49
Social Democratic & Labour Party: 2
Plaid Cymru: 2
Scottish National Party: 2
Green Party: 1

[Mr Bone]

On a point of order, Mr. Speaker. A very unusual thing just occurred during the Division. I was one of the tellers. The doors were locked at the appropriate time, then unbelievably, they were unlocked again. Given the closeness of the result, do you think that the vote should be taken again?

[Mr Speaker]

I see no reason for it to be taken again, but I am strikingly impressed by the fact that, although it is three minutes past 11 o’clock, the sense of humour for which the hon. Member for Wellingborough (Mr Bone) is renowned throughout the House has not deserted him. However, it is only fair to say that the Chair has discretion to allow the vote to continue for slightly longer in particular circumstances. A very large number of Members were seeking to get through one Lobby so I extended the time. I think we will leave it there, and I am grateful to the hon. Gentleman for the manner in which he has raised his point of order.

New Clause 6

Rate of value added tax

‘(1) In section 2(1) of the Value Added Tax Act 1994 (rate of VAT), for “20 per cent” substitute “17.5 per cent”.

(2) In section 21(4) of that Act (restriction on value of imported goods), for “25 per cent” substitute “28.58 per cent”.

(3) The amendment made by subsections (1) and (2) has effect in relation to any supply made on or after 30 August 2011 and any acquisition or importation taking place on or after that date.’.—(Jonathan Edwards.)

Brought up, and read the First time.

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

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

[Mr Speaker]

With this it will be convenient to discuss the following:

New clause 9—Value Added Tax (Change of Rate) Order 2011—

‘(1) The Chancellor of the Exchequer shall make an order under the powers conferred by sections 2(2) and 21(7) of the Value Added Tax Act 1994 that in section 2(1) of the Value Added Tax Act 1994 (rate of VAT), the rate of tax charged by virtue of that section shall be decreased by 12.5 per cent.

(2) In section 21(4) (value of imported goods) of the Value Added Tax Act 1994 for “25” substitute “28.58”.

(3) This Order shall be known as The Value Added Tax (Change of Rate) Order 2011 and shall come into force on 30 August 2011.’.

New clause 10—VAT—

‘The Treasury shall, within three months of the passing of this Act, report to Parliament its assessment of the impact of the rate of VAT on UK economic growth.’.

[Jonathan Edwards]

Diolch yn fawr, Mr Speaker. I had an hour-long speech prepared for this debate, but as it is going well past my bedtime, I will try to keep my remarks as short as possible.

I move this new clause with a sense of déjà vu, as only last July I closed a Finance Bill debate on an amendment tabled by my hon. Friend the Member for Dundee East (Stewart Hosie) that aimed to overturn the decision in the emergency Budget to raise VAT to 20% from January this year. Many of the arguments I made then remain relevant, but I will resist the temptation to air the same speech twice. Interestingly, that debate [Interruption]—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Too many conversations are going on in the Chamber, and I am sure that everybody wants to hear the hon. Gentleman.

[Jonathan Edwards]

Thank you very much, Mr Deputy Speaker.

Interestingly, when the House divided on that amendments the Labour party abstained. Since then, it seems that the official Opposition’s main critique of the UK Government’s economic policy has been based on the Treasury’s VAT policy. I hope that when we divide later the Labour Front-Bench team will set aside its usual partisan approach to votes in this place and will walk through the Lobby with us. As I see the shadow Minister, the right hon. Member for Delyn (Mr Hanson), grinning, I hope that that will be the case.

In the 2010 general election, Plaid Cymru campaigned against a VAT increase—unlike the Liberal Democrats, who had their tax bombshell poster, we meant it. That is why we tabled an amendment to prevent the increase last year and why we have done the same again this year. Last year, I said that there was both a social and economic reason why the increase in VAT was a bad idea, and I hope to concentrate on those reasons during my speech. We are against the ideological cuts and the rush to achieve a zero deficit within one parliamentary term with the net result of hundreds of thousands of lost jobs and unimaginable pain across our communities. We have consistently expressed our concern at the possibility of what the former Monetary Policy Committee member, David Blanchflower, called a “death spiral”, whereby cuts in expenditure become cuts in receipts.

A country’s economy is not like a family budget. Although it is good public relations, making misleading references of this sort is a very dangerous game for the UK Government to continue to play. In the case of the state there is a direct link between expenditure and income. Indeed, an overt reduction in expenditure can lead to a reduction in income and an increase in the deficit. Some would argue that we are in that situation already, even before the real cuts start to bite.

The state cannot cut its expenditure and assume that its income will remain constant. We are talking about intrinsic fine balances, which is why it always makes more sense for a state to change its expenditure levels modestly, rather than go cold turkey, as is favoured by the current Government. Four main elements drive economic growth: public sector expenditure; exports; private investment; and the key element as far as today’s debate on VAT is concerned, which is household spending.

VAT is, in essence, a tax on consumption. Economic growth in the Labour years was largely driven by consumer spending, resulting in a situation whereby personal debt levels in the UK have rocketed to an unsustainable 100% of gross value added, at £1.4 trillion.

[Matthew Hancock (West Suffolk) (Con)]

I am listening to the hon. Gentleman’s argument. Given that cutting VAT appears to be the only economic policy of the Labour party, is he not surprised that the party tabled its amendment so late that it was not selected and that the leader of the Labour party did not sign up to its amendment?

[Jonathan Edwards]

The hon. Gentleman makes an interesting point and I hope that the shadow Minister will be able to address it much better than I could.

Debt charities such as Citizens Advice report that the amount of debt problems dealt with by the service continues to increase, as the human cost of the recession feeds into the system. There is a long-term economic case for addressing this unsustainable situation by reducing the personal debt caused by consumption in the economy. My preference, however, would be to change the banking code and make it more difficult for lenders to seduce consumers into debts that they cannot service, rather than directly to reduce the purchasing powers of individuals via the use of VAT. I note that new clause 11 has been selected for debate and it covers associated matters.

The major issue faced by the economy is a lack of demand. Personal household debt, built up during the last decade, will be a severe economic headwind facing the UK economy for the foreseeable future. The increase in VAT exacerbates the situation, as we can see today from the revised growth figures for the first three months of 2011, which show that consumer spending is falling at its fastest rate since the second quarter of 2009, a decline of 0.6%. Real household disposable income is 2.7% lower than it was last year, the biggest annual fall since 1977.

Growth in consumer spending will be key if the UK Government are to meet the economic growth forecasts they have set in order to achieve their fiscal consolidation targets. The January VAT increase will stymie the consumer-led growth on which the Government depend.

In the past, my party has argued against VAT being used as an economic stimulus, which was the aim of the previous Labour Government when they cut VAT by 2.5% in 2008-09. In our view, there were more effective ways of stimulating the economy, not least investing in capital infrastructure and putting proper money in people’s pockets and in their pay packets rather than just hoping that they would spend the small change from VAT. With the increase in standard VAT from 17.5% to 20% and the stagnating economic recovery from the recession, the circumstances have changed. This is no longer about merely keeping the tills ringing, but about keeping families in their homes.

[Christopher Pincher (Tamworth) (Con)]

I have listened carefully and with interest to the hon. Gentleman’s new clause. Can he tell the House when he informed the shadow Cabinet that he was going to table this clause and whether he has had any advice on it from the shadow Chancellor?

[Jonathan Edwards]

The hon. Gentleman will be aware that I am in a different party from those on the shadow Front Bench and we do not normally negotiate on the clauses we table. I can only assume that my staff are more effective.

Richard Banks, the chief executive of UK Asset Resolution, said that the UK economy faced a tsunami of repossessions once interest rates rise. Increases will come sooner rather than later, partly as a result of the VAT increase. The increase in inflation has come about for a variety of international reasons, including the slow devaluation of the pound and increases in basic food and oil prices, but we have a 2.1% increase in prices across the board and I am sure that many businesses have racked up their prices by greater amounts. The increase in VAT is adding to the inflationary pressures on the economy and it therefore seems strange that the Treasury is using a fiscal measure that is playing its part in increasing inflation and will inevitably at some stage lead to a tightening of monetary policy, creating a further major headwind for the economy. It is the economic equivalent of shooting oneself in the foot.

[John Hemming]

I congratulate the hon. Gentleman on being more efficient than the official Opposition. However, he is proposing to reduce VAT in this financial year, which would mean an increase in the deficit and therefore an increase in the borrowing. Where would we borrow the money from and how much interest would we pay?

[Jonathan Edwards]

As the hon. Gentleman rightly says, I am proposing a temporary cut and I am endeavouring to convey that the priority of the Treasury should be securing sustained economic growth. In my view, the increase in VAT is hindering that. That is my key point.

Older people and pensioners who thought that they had enough to live comfortably for the rest of their lives now find themselves with very little interest but high inflationary costs in their everyday life. The Government’s attempts to save money by changing indexation from the retail prices index to the consumer prices index means that any benefits people receive are lower than the real world cost, rather than keeping up with it.

Families who are stretched by the costs of their daily living are dealing with wage freezes but finding that the cost of living is rising dramatically. Young families find it hard to save to buy a house, and others live in worry about the base rate increasing and being unable to cover their mortgage. The VAT change last year is reported to have taken £450 from each family with children across the UK.

23:14

The UK economy is not growing and people’s standards of living are being compromised. Confidence amongst individuals and families is falling—that is key when we are looking at future economic growth prospects. Economic growth forecasts are being downgraded by all around except the Government and the unanimous response to today’s revised figures is that we are in for a period of subdued growth at best. As I say, the situation now is different from that of nearly three years ago when the VAT cut was first used as a part of fiscal policy. Back then, we were preventing the situation from getting worse and the recession from deepening; now we are looking at how we can generate growth. Part of the Institute for Fiscal Studies’ reason for backing policies such as a temporary VAT cut is that there is a time frame—people can see an end and know that they must spend to take advantage of it, as advocated by my new clause 9.

[Alun Cairns]

I give the hon. Gentleman and his party credit for having had consistent policy on this matter, but has he had any indication about where the official Opposition stand on his amendment? There has been some indecision within the official Opposition, with policies being announced without the shadow Cabinet knowing about them.

[Jonathan Edwards]

We will have to wait and see. I just hope that my words are powerful enough to entice them to come through the Lobby with us, but I am afraid we will have to wait until a little later in the evening.

I was talking about one positive reason for a temporary VAT cut, but that would not be my main, or only, consideration. The purpose behind the cut would be to help the millions of ordinary people who would benefit from not having to pay those extra pennies and pounds every day to the Government, which they could then use to spend or save elsewhere as they saw fit. They could spend them on other goods and stimulate the economy in that way or they could keep them to pay off their debts. At the moment, many costs have been factored into the margins of businesses and many businesses have not yet raised their prices to meet this new inflation from both VAT and other spending increases. If we can keep prices down through the use of a temporary VAT cut and keep high street prices down with it, we will help families. On the other hand, if we can secure the margins for shops and companies, we will help business. I hope that Government Members will agree with that point. Either scenario would be a win-win situation for families and business. Negating a key element of inflationary pressure would also enable monetary policy to be kept loose for longer, which I would imagine is a key objective for the Treasury and the Monetary Policy Committee.

In closing last year’s debate on the effect that the VAT increase would have on the budgets of public sector organisations, the devolved Governments and charities, I asked the Government what analysis they had made of the impact that increasing VAT would have on the operating costs of those bodies, as one study had estimated that increasing VAT would cost charities alone an extra £150 million per annum. I would be grateful if the Minister addressed that specific point in winding up. We will be pushing for a division on new clause 9, as it would introduce a temporary reduction and is more likely to generate support across the House. New clause 6 would be our preferred solution in the long term, but I will not push it to a vote tonight.

[Ian Swales]

I rise to speak against new clause 6 and I note that we have had no costings from its proposer, the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards). I would be interested to find out what he thinks the policy would cost. I can report that there was no dancing in the streets of Redcar when the VAT was reduced from 17.5% to 15%, and neither have we had riots in the streets about the rises from 15% to 17.5% and then to 20%.

[Ian Lucas]

There may not have been dancing in the streets, but after that reduction in VAT there was economic growth—something that has not happened as a result of the hon. Gentleman’s new-found friends’ policy, which he is now following, but which he refuted and rejected in order to get elected.

[Ian Swales]

I thank the hon. Gentleman for that intervention. I believe that the policy that his Government followed cost £12 billion; it would be difficult to spend £12 billion and not give some stimulus to the economy. I shall come to my view on that in a moment.

There was hysteria about the VAT rate among Labour Members, but if people in the street were not shouting about it, it is worth asking why. Our predecessors in this place knew that putting VAT on everything would be a very regressive measure, so they did not do that. They recognised that the basic costs of living should be VAT-free. In fact, when it was first introduced in 1979, some reporters described it as a luxury tax. Let us just think about all the things that are VAT-free: rent, mortgages, council tax, water costs, fares on buses, trains and planes, prescriptions, dental and optical care, newspapers, magazines, books, betting, bingo, the lottery, postage, TV licences, children’s clothes and shoes and, above all, food. Although gas and electricity were originally VAT-free, they now have a fixed VAT rate of 5%.

[Ian Lucas]

Because of the Labour Government.

[Ian Swales]

Yes, absolutely. This Government have made no changes on any of those items, nor will the new clause lower the cost of those items. Of course, that list covers the vast bulk of the weekly bills of lower-income families and pensioners. In fact, I am sure that many pensioners do not pay any standard VAT in many a typical week.

[Toby Perkins (Chesterfield) (Lab)]

It is hard to know where to start, given the number of areas on which the hon. Gentleman is wrong, but let me just point out one. The increase in VAT affects the cost of absolutely everything. As it is on fuel, it adds to the cost of getting food to our properties. VAT impacts on the cost of every single thing. It is an indiscriminate tax that hits the pensioner, the unemployed, and the single mother just the same is it does the millionaire in his castle.

[Ian Swales]

I thank the hon. Gentleman for his intervention. I just read out a long list of items that are VAT-free; that was the point of what I was saying.

[Clive Efford]

Those items were VAT-free when the hon. Gentleman made his pledge at the general election. When he stood for election, he said that the poorest people in society were affected most by increases in VAT, and that it was therefore a regressive tax. He was right then, and that point is still right now. Why, then, is it correct and appropriate for the poorest people in our communities to pay for the deficit that was run up by the richest bankers in the country?

[Ian Swales]

The hon. Gentleman has strayed off the topic of the new clause, but on my party’s policy on VAT, obviously we are between a rock and a hard place, due to the economic state of the country. We had some very difficult choices to make, and a progressive expenditure tax is the right answer.

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

My hon. Friend points out that difficult choices had to be made; indeed, they would undoubtedly have had to be made if a Labour Government had been returned. Does he recall that it was the policy of the last Labour Chancellor of the Exchequer to raise VAT to 19%?

[Ian Swales]

I thank my right hon. and learned Friend for reminding me of that fact. One of the things that have been absent from Labour Members is alternative policies to those being pursued by the Government.

The week after VAT was reduced by 2.5%, Cristiano Ronaldo, the premiership footballer, saved £4,000 on the cost of his new Ferrari. He will also have made massive savings on many of his other purchases during that period. I doubt whether any constituent of mine saved £4,000 as a result of VAT being reduced.

VAT as applied in this country is a progressive tax on spending. The more people spend, the more they pay, so the inconvenient truth is that cuts in VAT benefit people in proportion to how wealthy they are.

[Nic Dakin (Scunthorpe) (Lab)]

Does the hon. Gentleman think that when Save the Children says that

“the discount rate and exemptions doesn’t take into account the incomes of people buying goods and services—so they are not enough to make VAT fairer”,

Save the Children has got it wrong?

[Ian Swales]

I understand that charities have an issue with VAT, and I understand that Save the Children is right in its analysis. I am talking about the effect on personal spending.

The concept of a progressive spending tax is well understood across Europe. New clause 6 would take VAT in the UK back to a level where, among EU countries, only Cyprus and Luxembourg would have a lower rate. We have not heard from the Opposition parties how they plan to finance the cut in VAT.

[Nia Griffith (Llanelli) (Lab)]

Can the hon. Gentleman think of any other way in which people who can afford a Ferrari could contribute to the tax system?

[Ian Swales]

Well, £4,000 extra VAT is obviously one way that they are contributing as a result of this Government’s policies.

The hon. Member for Nottingham East (Chris Leslie) said in the previous debate that the important focus of the tax and benefit system is on need and alleviation of poverty. I believe that VAT increases, which impact on the wealthy more than on the poor, are a good way of doing that.

[Kelvin Hopkins (Luton North) (Lab)]

The hon. Gentleman keeps referring to VAT as a progressive tax. It is a flat tax, proportionate all the way up the income scale. Progressive taxes have increasing rates at higher incomes.

[Ian Swales]

Technically, VAT is a progressive spending tax because the average rate paid increases the more one spends. That is the definition of a progressive tax.

[Kate Green]

Does the hon. Gentleman accept that in relation to the proportion of a household income rather than its expenditure, VAT is a regressive tax? That is why we on the Opposition Benches are opposed to it.

[Ian Swales]

No, I do not accept that, because of the long list of items that are VAT-free. If everything had VAT applied, I would agree with the hon. Lady.

We have had no view about how the Opposition would fund the proposed cut in VAT. If they wished to borrow, which presumably is the answer, there are many options which are fairer to pensioners and the less well-off and more likely to encourage economic growth. Reducing VAT would be a flawed policy, just as it was last time, and I urge the House to reject new clause 6.

[Mr David Hanson (Delyn) (Lab)]

I shall speak to new clause 10, but before I do so, may I remind the hon. Member for Redcar (Ian Swales) that he fought an election on the Tory tax bombshell? I remember pictures of the Deputy Prime Minister, the right hon. Member for Sheffield, Hallam (Mr Clegg), standing in front of a poster that referred to a Tory tax bombshell—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I am sure the right hon. Gentleman would want to speak through the Chair.

[Mr Hanson]

I remember the hon. Member for Redcar standing with the Deputy Prime Minister in front of a poster that said “Tory tax bombshell”. I find it amazing to hear the hon. Gentleman speak this evening as an apologist for the Conservative Government’s imposition of VAT on people in Britain.

New clause 10 calls for a review of the assessment of the impact of VAT on UK economic growth over the next three months. As Members know, last Tuesday we voted on a Labour motion, which was opposed by the Liberal Democrats, to cut VAT on a temporary basis to 17.5% while economic growth is restored. The Conservative party voted against that motion, which would have ensured that we had the VAT cut proposed today.

[Mr Gauke]

The right hon. Gentleman will be aware that tax law is made in Finance Bills. Given that we are debating such a Bill, will he explain why the official Opposition have not brought forward their own proposals, in a form that could be selected, to cut VAT on a temporary basis, or have they abandoned that policy?

23:30

[Mr Hanson]

The policy is clear. If the Exchequer Secretary looks at new clause 10, he will see that we want an assessment of the impact of VAT that looks at how we should deal with the question of VAT across the whole UK. Let me start by saying that we have a deficit reduction plan, as he knows, and a plan to save resources to tackle the deficit, and we have a plan to ensure that we meet the needs of this country. He will know that we have consistently supported opposition to the Government’s VAT rise since they brought it forward.

[Alun Cairns]

I note that the right hon. Gentleman is speaking to new clause 10, which is very different from the proposal made to the House only a week ago. Is this yet another shift in official Opposition policy?

[Mr Hanson]

The hon. Gentleman cannot get away from the fact that he has imposed a VAT rise on businesses, families and hard-working people in Vale of Glamorgan and elsewhere in the UK, and he could have avoided that tax in different ways. On the same evening that the Conservative party has proposed tax relief on support for private medical insurance—[Interruption.] Well, I may be mistaken, but I believe that the hon. Members for Christchurch (Mr Chope) and for North East Hertfordshire (Oliver Heald) are Conservative Members of Parliament. The hon. Member for Vale of Glamorgan (Alun Cairns) has imposed a VAT rise on his constituents that is unfair, damaging business and will damage the UK economy.

[Christopher Pincher]

We all feel very sorry for the right hon. Gentleman, sitting there having to speak to new clause 10. Last week he proposed cutting VAT, but this week he simply wants to assess it. What will his policy be next week?

[Mr Hanson]

The policy is exactly the same week in, week out. We have opposed the VAT increase and the hon. Gentleman has voted for it. Last week we supported a temporary cut to help the economy and he opposed it. We are calling for a review of the impact of VAT on businesses and families, and tonight he will oppose it. This is an important debate and we have an opportunity tonight to assess the impact of VAT and look at the issues that affect constituents.

[Harriett Baldwin (West Worcestershire) (Con)]

New clause 16, which is on the amendment paper in the right hon. Gentleman’s name, has not been selected for debate. Will he explain why it was late and unable to be selected?

[Mr Hanson]

The hon. Lady will know that we have tabled several amendments to the Finance Bill. Mr Speaker chose not to select new clause 16, but he did select new clause 10, which calls for a review of the impact of VAT on things that are important to my hon. Friends’ constituents and hers: family incomes, businesses and jobs. If she looks at what the leader of her party said during the general election—[Interruption.] Perhaps the hon. Member for Chelsea and Fulham (Greg Hands) should listen to this, because during the general election the then Leader of the Opposition said during the Cameron Direct campaign in Exeter:

“You could try, as you say, to put it on VAT, sales tax, but again if you look at the effect of sales tax, it’s very regressive, it hits the poorest the hardest.”

I agree with the Prime Minister. Does the hon. Member for Chelsea and Fulham agree with his right hon. Friend?

[John Hemming]

On the point about hitting the poorest hardest, does the right hon. Gentleman not accept that the poorest people, those on means-tested benefits, receive an up-rating for the cost of living, which is in fact in excess of the extra VAT, and so benefit by 1% in excess of the extra cost of VAT?

[Mr Hanson]

I am afraid that every Labour Member believes that VAT is a regressive tax that hits the poorest hardest. When the Conservative party—

[Mr Gauke]

rose—

[Mr Hanson]

Wait. When the Conservative party—[Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Mr Hemming, you have had one intervention. If the shadow Minister is not giving way, you should respect that.

[Mr Hanson]

When the Conservative party, supported by Liberals who at the general election opposed VAT increases, imposes VAT increases, it does so on businesses and on jobs and hardest on the poorest people in our society. I will now give way to the Minister so that he can explain that.

[Mr Gauke]

The right hon. Gentleman says that every Labour Member opposes the increase in VAT. Will he explain, first, why so few of them voted against it last year and, secondly, why the previous Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), according to Peter Mandelson’s memoirs, was in favour of raising VAT to 19%?

[Mr Hanson]

I have great respect for my right hon. Friend the Member for Edinburgh South West (Mr Darling), and he is a very good friend of mine, but the issue tonight is that no Labour Government increased VAT above 17.5%. Indeed, the same Chancellor of the Exchequer, my right hon. Friend, in similar circumstances to those that we face now, when there is pressure on jobs, on businesses and on incomes, temporarily reduced VAT to help hard-working families to cope.

[Andrew Gwynne]

My right hon. Friend is absolutely right to draw the House’s attention to new clause 10. All it asks for is an impact assessment of the rate of VAT on UK economic growth. Is it not the case that, since the VAT rate was increased, consumer confidence has flatlined and retail sales have fallen?

[Mr Hanson]

It is very interesting that my hon. Friend makes that point about the VAT increase, because following that reckless gamble, inflation, which was 3.1% in September, was 4.5% in April and May, hitting savings, pensions, incomes, jobs and people’s livelihoods. He will know that confidence is important and that consumer confidence is now at minus 31%. Overall confidence was three points lower in April than in March, and lower than at any time since spring 2009.

[Stephen Williams (Bristol West) (LD)]

Confidence is a measure of sentiment and opinion, but spending power is a fact, so will the right hon. Gentleman explain how in January, February, March and April consumer expenditure went up?

[Mr Hanson]

The hon. Gentleman will know that the Office for Budget Responsibility and every independent forecaster have already shown that growth in the economy has flatlined over the past 12 months, following the impact of the Labour Government’s measures at the end of their time in office at the beginning of 2010. Since then, growth has flatlined and unemployment is projected to increase by 200,000 over the next year.

[Stephen Williams]

I thank the right hon. Gentleman for giving me a second chance to pose my question to him. The Library’s statistics show that, in the four months since VAT was increased, consumer expenditure in shops increased month after month, so how can he say that consumer confidence has declined? That is not about economic growth, which is how he answered my first question; it is about consumer confidence and spending. Will he deal with that point, please?

[Mr Hanson]

I suppose that is why the Federation of Master Builders only today—[Interruption.] Just for the record, on my uttering “Federation of Master Builders”, Conservative Members fell about with laughter, but the FMB’s members build houses and employ people in the construction industry. Only today—in a brief dated today—it stated:

“The situation for small construction firms has been made more perilous by the VAT increase at the start of the year,”

and that we risk

“11,400 construction job losses and 34,000 total potential job losses”

because of the VAT increase. The hon. Member for Bristol West (Stephen Williams) and his colleagues may recall that the OBR expects some 200,000 additional people to become unemployed this year. The lack of consumer confidence, the impact of VAT and the lack of consumer spending will be critical to those potential job losses in the community.

[Kelvin Hopkins]

The Tories have a track record on this. My right hon. Friend may recall that in 1979 they raised VAT from 8% to 15%, massively deflating the economy. Unemployment rose by 2 million and a fifth of manufacturing industry disappeared, and it was all down to that policy.

[Mr Hanson]

I remember that very well. The Conservatives said at that general election that they would not double VAT. They did not double it, but they increased it by 7%. Perhaps the Liberal Democrats have learned some lessons about breaking election promises.

[Alun Cairns]

I seem to remember that Labour opposed all those increases in VAT, but not once did it reverse them. Is that true?

[Mr Hanson]

No, I think we did. I have been here quite a few years now, and I recall that in 1993 the Conservative Government increased VAT on fuel and had to reduce it because of measures supported by the Labour party in opposition. The hon. Gentleman may not remember that.

[Ben Gummer (Ipswich) (Con)]

Will the right hon. Gentleman give way?

[Mr Hanson]

In a moment. Let me try to return to some of the key points of the debate.

[Ian Lucas]

Government Members seem to view the British construction industry with some levity. In a debate this morning on the crisis in the construction industry, no Liberal Democrats turned up and one Tory Back Bencher turned up 20 minutes late. The increase in VAT has had a massive impact on the construction industry, as one will hear from any representative group and anyone involved in the sector. Government Members are in complete denial about the madness of the policy that they are pursuing and the firms that they are driving into bankruptcy.

[Mr Hanson]

I am grateful to my hon. Friend for those comments. He will know that the Conservative party’s VAT increase alone will cost the average family with children £450 this year—far more than they will gain through any increases in tax thresholds.

[John Hemming]

rose—

[Mr Hanson]

If the hon. Gentleman will allow me, I should like to try to make some progress. I have been very generous in giving way so far.

Although unemployment has fallen by a couple of hundred thousand in the past few months, and that is very welcome, the OBR has said that the lack of consumer confidence, the impact of VAT increases and the long-term lack of economic growth will hit employment hard. Average UK unemployment at the moment is about 7.7%, but for those of us who represent seats in Wales, the east midlands, Scotland, the north-west, London, Yorkshire and Humberside, the west midlands and the north-east, it is well above that level. That is partly because of the impact of the VAT increase on retail sales and manufacturing in our communities. When the Government introduced the increase in January this year, the chairman of the Federation of Small Businesses, John Walker, said:

“A recent FSB survey shows that 70% of businesses are worried about the VAT increase, with almost half of respondents going to have to increase prices as a result and 45% believing it will decrease their turnover”.

The situation with regard to jobs is very important.

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

In my constituency, 85 claimants of jobseeker’s allowance are chasing every vacancy. Would not a reduction in VAT assist those people?

[Mr Hanson]

My hon. Friend’s region of Yorkshire and Humberside has a 9.2% unemployment rate overall, compared with 5.7% in the south-east of England. For someone who is unemployed, the figure is 100% wherever they are. Nevertheless, there are regions of the United Kingdom where many people are chasing jobs, there is a lack of consumer confidence, traditional manufacturing and the retail industry are being hit by a lack of demand, and growth is not occurring, and the VAT increase has been damaging to all those things.

[Ian Swales]

I have listened carefully to the right hon. Gentleman’s speech and that of the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards). Neither has contained details of the cost of such a reduction in VAT. Once we know that figure, we will be able to give many ways in which our economy could be stimulated with such an amount of money. We are still not sure where it is coming from. Reducing the price of Italian sports cars and round-the-world cruises is only one option.

23:45

[Mr Hanson]

The hon. Gentleman shows his complete ignorance of the impact that value added tax has on ordinary working people and their families. The rise in VAT is costing ordinary working people in Redcar and every other constituency an additional £450 each this year. Low-paid people will bear the brunt of that. I look forward to going back to Redcar with hon. Friends from the north-east and explaining what the hon. Gentleman is doing about those concerns.

[Malcolm Bruce (Gordon) (LD)]

The Labour party is keen on cutting taxes and on opposing cuts in expenditure. Consequently, it would widen the deficit, which is already at record levels. The consequence of that would be an increase in interest rates. Does the right hon. Gentleman not think that the retail trade and consumers would be more concerned about an increase in interest rates than a rise in VAT?

[Mr Hanson]

At the beginning of my speech, I said that we had a deficit reduction plan at the last election. When I was a Minister at the Home Office in the previous Government, we forwarded plans for £1.5 billion-worth of expenditure cuts. The Conservative-led Government are cutting £2.5 billion in that Department, which is why we are losing police officers and police community support officers, and why I fear that crime will go up. There was a plan. There were certainly issues that we had to tackle, and we will tackle them. The way in which the Government propose to tackle the deficit goes too far, too fast and too deep. It is being done in an unfair way that hits the poorest people hardest, and it will damage the long-term business interests of the United Kingdom.

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

Does my right hon. Friend agree not only that the coalition Government’s policies will deflate the economy, but that they are missing their own deficit reduction targets? They are so far from meeting them that they will have to borrow £46 billion more than it forecast, although they have not yet corrected the figure.

[Mr Hanson]

My hon. Friend is absolutely correct. The Conservative-Liberal Government are missing their borrowing targets and will have to increase borrowing by £46 billion because unemployment will rise over the next year and because we have lower growth. There is lower growth, in part, because of a lack of confidence, which has happened, in part, because of the rise in value added tax. It is an unfair tax that hits the poorest people hardest.

[John Hemming]

rose—

[Mr Hanson]

Before I let the hon. Gentleman intervene, I ask him whether he will contradict the right hon. Member for Bermondsey and Old Southwark (Simon Hughes), who said:

“I hope we don’t have a VAT increase because it is the most regressive form of tax, it penalises the poor at the same rate as the rich.”

Perhaps the hon. Gentleman will agree with his right hon. Friend.

[John Hemming]

I agree with my hon. Friend the Member for Redcar (Ian Swales), who is an accountant, that on the basis of expenditure deciles VAT is a mildly progressive tax. I ask the right hon. Gentleman, whose name appears above unselected new clause, 16, which would put VAT up to 20% once things improve, why the Labour party, having opposed VAT at 20%, now believes that it should be at 20% in the long term.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. We are not going to get bogged down in the VAT figures. We need to talk about the new clauses in the group. We are drifting into parts where we should not be.

[Mr Hanson]

I remind the hon. Member for Birmingham, Yardley (John Hemming) that new clause 10 calls for a review of the impact of value added tax on businesses and families over the next three months. Labour Members voted last week for a temporary reduction in VAT. Labour policy is to have a temporary reduction to tackle the real issues that we all face in our constituencies in relation to jobs, living standards and the future of our businesses.

[Toby Perkins]

I am listening to the debate with tremendous interest. There is a determined gaggle of Liberal Democrats here, arguing in the strongest possible terms that the manifesto that they have just fought an election on was totally wrong. Has my right hon. Friend ever known such a passionate rejection of a policy by Members who told us only a year earlier that we should be voting for it?

[Mr Hanson]

The most passionate rejection that I have seen in recent years was in Chesterfield, of my hon. Friend’s predecessor. He stood just next to where I am now before the election, when I was Police Minister, calling for more police and more expenditure. Yet now, the Liberal Democrats are saying that we should have had less expenditure.

I accept that I am going slightly wide of the issue of VAT, Mr Deputy Speaker, so I will return to it. VAT hits not just families or businesses but public services. The national health service in England will be hit by an extra £250 million a year because of the rise in VAT. A CT body scanner that cost £700,000 before the rise in VAT will now cost £17,500 more. A fully equipped ambulance that would have cost £225,000 will cost an extra £5,500. There is about £3 million a year of expenditure by each NHS trust on locum doctors, which will increase by £75,000. A Government who want to cut public spending are levying additional costs on the health service in England.

In my own region, in Wales, the actual cost of the increase in VAT to NHS budgets since 1 January is estimated at £13.2 million. For colleagues in Scotland, I add that Scottish health boards have been saddled with an extra £71 million of costs because of the VAT increase. At a time of decreasing public spending and squeezed budgets, we need to review the matter over the next few months and consider whether the VAT increase is causing even more difficulty.

[Bill Esterson (Sefton Central) (Lab)]

My right hon. Friend is explaining in incredible detail the danger that the VAT increase is causing. I wish to bring to his attention the effect that it is having on pensioners in my constituency, one of whom wrote to me to express his outrage. I cannot repeat what he said, because he swore in his e-mail, but he said that

“if these costs were not so damaging it could be laughable.”

Does my right hon. Friend agree?

[Mr Hanson]

I do agree with my hon. Friend’s concerns.

Time is pressing, so I will move on. I know that we have a lot of time, but I want to ensure that my right hon. and hon. Friends have an opportunity to speak.

[Ian Lucas]

There is another sector that is being hit extremely hard by the VAT increase—the third sector, the charitable sector. Government Members regularly profess to support hospices, but hospices in my constituency are having to raise more money to pay the extra costs that that lot have imposed upon them.

[Mr Hanson]

My hon. Friend is absolutely right. It is not just charities and the voluntary sector that are affected, but Welsh and other universities. In Wales alone, there will be £3.5 million extra VAT for universities to pay this year. Housing associations are affected, and the chief executives of the National Housing Federation and of the Homes and Communities Agency have said that the rise will cost an additional half a million a year in VAT.

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

Does the right hon. Gentleman agree that the problem for charities, which the hon. Member for Wrexham (Ian Lucas) mentioned, would exist whether VAT was 17.5% or 20%? The Labour party did not attend to the problem when it was in government.

[Mr Hanson]

Not just Labour MPs are concerned about this increase. The hon. Member for Colchester (Bob Russell), a Lib Dem MP, said in a debate last year that he wants to help charities that have been hit by this move.

We all accept that VAT is a difficult issue for charities, but it has been made more difficult by an extra 2.5% increase at a time of squeezed budgets, and when the Government are asking more of the charitable sector by cutting public sector spending generally. That issue of great concern was highlighted by my hon. Friend the Member for Wrexham (Ian Lucas).

[Nic Dakin]

Further education and sixth-form colleges will also be hit by that additional cost, but in this very Bill, the Government are taking measures to protect academies from the same sort of penalty. Does my right hon. Friend think that that is a little rich?

[Mr Hanson]

I do. My hon. Friend spent many a happy hour in Committee discussing those very issues.

If the Government are not interested in master builders and the voluntary sector, and if they are not interested in the impact on public sector operations such as hospitals, schools and universities, perhaps they will listen to the British Retail Consortium, which states:

“Increasing the VAT rate to 20 per cent would cost 163,000 jobs over four years and reduce consumer spending by £3.6 billion over the same period.”

Only today, there were job losses at Jane Norman. There have been job losses at Habitat, Focus DIY, HMV, Mothercare, Comet and HomeForm.

[Chris Ruane]

And Thorntons.

[Mr Hanson]

There have also been job losses at Borders. There have been job losses across the board in the retail sector as a result of the impact of the VAT increase.

[Stephen Williams]

I thought I heard the right hon. Gentleman say Borders, but Borders went bust under the previous Labour Government. Would he like to retract that?

[Chris Ruane]

I said Thorntons.

[Mr Hanson]

I misheard my hon. Friend the Member for Vale of Clwyd (Chris Ruane). I thought he said Borders, but he said Thorntons, which has today lost 10,000 jobs. It may be of some interest to the hon. Member for Bristol West (Stephen Williams) that those jobs have been hit, as has the confidence in the retail sector, by VAT increases.

My hon. Friend the Member for Wrexham mentioned charities. Earlier this year, Sue Ryder, the charity, stated:

“Today's rise in VAT to 20% will cut the amount of social care that charities can deliver”.

That has an impact.

What is the impact on fuel of the VAT rise? People with a typical family car will pay £1.35 more to fill up their tank, as will people moving goods around the country. The VAT increase has hit the retail sector and we see job losses across the board, but there is also concern from the tourism sector. Just recently, on 6 June, the British Hospitality Association stated that the high level of UK VAT is a deterrent to tourism growth. Once again, those are the impacts on growth, jobs and public services.

[Mark Durkan (Foyle) (SDLP)]

My right hon. Friend refers to the impact of the higher rate of VAT on the tourism sector. Of course, in Ireland, from next week for 18 months, VAT in the tourism sector will be reduced to 9%. It has already been reduced to 7% in Germany and 5.5% in France. Is that an argument for taking a more sector-targeted approach to VAT reductions? Will the assessment proposed in new clause 10 allow for consideration to be given to a more articulate way of applying VAT, rather than having general, standard reductions across the board on all products, regardless of whether they are imports or the products of home businesses?

[Mr Hanson]

If my hon. Friend looks at new clause 10, he will see that it calls for a general review of VAT and the impact on the economy. Out of that review could come, for example, a temporary reduction to 17.5%, as was called for by my right hon. Friend the Member for Morley and Outwood (Ed Balls), or there could be changes for certain sectors. The review could look at a range of issues to assess the impact of the increase on growth, jobs and living standards.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

Given the arguments that the right hon. Gentleman is making, how does he intend to vote on the new clause moved by the hon. Member for Caernarfon?

12:00

[Mr Hanson]

The hon. Member for Caernarfon has not moved a new clause—the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) moved it. However, we will not be supporting it because it does not give an end date for the potential VAT reduction. It would be a permanent reduction. We want a review of the impact of VAT on business, jobs and living standards.

[Mr Gauke]

I am trying to understand the Labour party’s position. If it believed in the policy announced by the shadow Chancellor a week or so ago, it would want first to reduce VAT, and then to make a decision on when to increase it. I do not understand, therefore, why it is not supporting the new clause, which takes that first step—it does what the Labour party want to do.

[Mr Hanson]

I will try again, slowly. The new clause calls for a permanent cut in VAT to 17.5%. It does not do what my right hon. Friend the Member for Morley and Outwood wishes to do—what we voted on last Tuesday—which is to implement a temporary cut in VAT until we secure strong growth.

[Christopher Pincher]

Will the right hon. Gentleman give way?

[Mr Hanson]

In a moment. The new clause does not do what we said we would do, which is implement a temporary reduction. We have tried, through new clause 10, to ensure that we have a review of all the issues I have mentioned—of tourism, business, jobs and families—so that we can come to conclusions about sectoral reductions and a temporary reduction to help employment.

[Jonathan Edwards]

May I clarify my position? I have a note from the House of Commons Library to me:

“NC9 finds an alternative way of doing the same thing as NC6 (i.e. decreasing the rate of VAT), only on an exclusively temporary basis. It does this by means of the Economic Regulator, which is a mechanism that allows for changing the rate of excise duties like VAT on a temporary basis without having to use primary legislation.”

Surely, it cannot be clearer than that.

[Mr Hanson]

Unfortunately, we are making legislation, not just research notes, and unfortunately what the hon. Gentleman’s new clause states is not what he believes he said just now.

[Christopher Pincher]

The right hon. Gentleman says that new clause 10 will make the VAT cut permanent. Is he saying, therefore, that there will never be another Budget before this House? Not only does he seem to have no policy, he does not understand parliamentary procedure.

[Mr Hanson]

With due respect to the hon. Gentleman, you and I, Mr Deputy Speaker, have been here 19 years and three months. I have been here long enough to understand a few matters of parliamentary procedure. The hon. Gentleman needs to go back to Tamworth and explain to his constituents why, by increasing VAT, he is adding £450 to people’s annual VAT bill; why he is hitting retail sales and retail shops in his constituency; why he is impacting on businesses in his constituency; and why the VAT increase in his constituency will put up the cost of the health service, education, housing and jobs. He needs to reflect on those issues as part of this debate.

In conclusion, we have today an opportunity to vote for new clause 10, which would give us a chance to consider the impact of VAT, to come to conclusions on the points I have made today and to ensure that we can properly assess the best way to implement our VAT reduction so that it helps create jobs, build growth and not stifle our economy. This Conservative-Liberal Democrat Government have not only broken their promises on VAT to the electorate, but put at risk growth, jobs and family living standards. Most abominably of all, however, with this rise they have hit the poorest hardest. We have consistently opposed the rise to 20%, and we want it reviewed. We ask hon. Members to vote for new clause 10 tonight, and I look forward to my right hon. and hon. Friends joining me in the Lobby at the end of the debate.

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

I want to outline my support for new clause 10, and for reviewing the impact of VAT within three months of passing the Bill. The increase in VAT is having a real impact on the spending power of people in my constituency, many of whom are really feeling the pinch of inflation, pay freezes, and rising energy and food bills, and for thousands of people across the north-east, this all comes at a time when many of them are facing redundancy.

The previous Labour Government’s decision to reduce VAT temporarily to 15% was judged by the independent Institute for Fiscal Studies to be an effective stimulus, putting additional money into people’s pockets, and helping to support an increase in consumer confidence, a return to economic growth and a fall in unemployment, all of which are needed now. Of course we must reduce the deficit, but I do not accept that the right way to do so is on such a scale and at such an intensity that ideological deficit reduction is delivered at the expense of economic growth and job creation. Indeed, there is widespread and well founded concern that this will only make it harder to get the deficit down in the long term. Finding ways to kick-start economic growth must therefore be a priority. It is therefore vital that the impact of VAT be kept under review.

Finding a means of kick-starting growth is vital, particularly for regions such as the north-east, where I fear we risk a lost generation of young people if new economic and employment opportunities are not created, and created quickly. A key concern in my region remains the level of youth unemployment, with around 19% of 16 to 24-year-olds in the north-east not in education, employment or training, compared with the national rate of around 15%. Of particular concern is the fact that over the last 12 months the north-east has seen a 10% increase in the number of 18 to 24-year-olds claiming jobseeker’s allowance. Only Northern Ireland, Scotland and London have also experienced such rises over the same period, and then only to a maximum of 4%. With measures such as the previous Government’s future jobs fund axed by the coalition and nothing lined up to take its place specifically to support the long-term unemployed into work, we need to consider as many steps as possible to kick-start economic growth and increase employment opportunities for young people. Keeping VAT under review is vital to ensuring that.

The coalition’s decision to increase VAT to 20% in January has hit many businesses hard, particularly as that VAT hike helped to push fuel prices up to record levels. Let me take just one example from my constituency. The owner of a small electrical services company in Gosforth has made clear to me the impact of high fuel prices on his firm, which he says have hit the small business sector hardest. From its base in Newcastle upon Tyne North, his company carries out most aspects of domestic electrical work and small commercial work, travelling across the Tyneside, Northumberland and Durham areas.

[Gordon Birtwistle (Burnley) (LD)]

Will the hon. Lady give way?

[Catherine McKinnell]

I will give way in one moment.

The owner of the company has an expanding network of clients from the private and voluntary sectors, and he would therefore like to be able to take on his first employees within the next 12 months. However, he has said that the cost of fuel and running a second van will be a significant influence on whether he decides to take on new staff, which he would like to do, thereby doing his bit to help the economy recover. That is just one example of a local company in my constituency really feeling the impact of high fuel prices, which are hugely affected by the rise in VAT, but there are others. They include the small driving school in Lemington that saw fuel costs rise by £20 a week over the last year, the self-employed businessman from Fawdon whose work requires him to travel around 10,000 miles a year, and the young man from Gosforth who set up a Facebook page on the issue and has 475,000 supporters. All those companies are affected by the rise in VAT. The Government must make a commitment to keep it under review, to ensure that all steps are taken to help businesses survive and thrive through these difficult times, and to support those that wish to expand and create new employment opportunities to be able to do so.

[Gordon Birtwistle]

rose—

[Chris Ruane]

You’re doing their dirty work! Look! There’s three times as many of them—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. We cannot have any shouting. We want to listen to Catherine McKinnell.

[Catherine McKinnell]

Thank you, Mr Deputy Speaker. I will give way to one of my friends from the north-east, who I am sure has something relevant to say.

[Ian Swales]

As a fellow north-east Member, I congratulate the hon. Lady on her speech. I believe that the previous VAT cut cost £12 billion. She makes a persuasive case for the need to stimulate the economy. Does she think that borrowing £12 billion and then cutting VAT is the best option from all the choices available?

[Catherine McKinnell]

The fact is that the current rate of 20% is hurting, and it is not working. Growth has stalled. We need to return to growth, particularly in the north-east, and I would have thought that the hon. Gentleman would support such a move.

A sector that has faced particular difficulties over recent months and years is the construction industry. It is thought that one in five of the firms going into administration are from that sector, and research recently undertaken by the Financial Times has found that construction orders have fallen by 40% in the past 12 months. That is an alarming figure. It is really worrying, when we consider that construction makes up around 10% of the UK economy, and that some 80% of the materials used by the industry are procured from within the UK, creating an economic stimulus and jobs in other sectors.

The construction industry is one clear example of how public spending can support private sector growth and jobs. Indeed, it is estimated that every £1 spent on construction leads to an increase in gross domestic product of nearly £3 and stimulates growth elsewhere in the economy worth nearly £2. The maths is simple. It is widely accepted that coalition decisions to cancel projects such as Labour’s Building Schools for the Future programme, to cut the housing and regeneration budget by 70%, to end the HomeBuy Direct scheme, and to scrap regional spatial strategies, are having, and will continue to have, a seriously detrimental effect on the construction sector.

The coalition’s VAT rise is also having a considerable adverse impact on many small and medium-sized construction firms, particularly when combined with the draconian cuts that the Government are imposing on public spending. Indeed, at the time of the VAT rise the Federation of Master Builders—an organisation to be taken very seriously—expressed its concern that 11,400 jobs would be lost in the construction sector alone over the next decade as a direct result of the coalition’s decision to hike VAT to 20%. The impact of VAT must be kept under review.

Household income in the north-east is the lowest in England, and a temporary reduction in VAT would have a positive impact on the spending power of people living in my city and region, helping to support local businesses, local economic growth and local jobs. Such a reduction could not come at a more apposite time, given that my region is facing the policies of what Kevin Rowan, the regional secretary of the Northern TUC, has recently described as a “profoundly anti-Northern Government”.

That is a description I would agree with, in the light of the impact of some of the coalition’s policies highlighted by Mr Rowan. They include the abolition of One North East and the planned sale of its assets to finance national Government administration—something that is not happening in London. Furthermore, job creation is simply not keeping up with job losses, with up to 19 jobseekers applying for every vacancy in some areas of the region. The north has the highest unemployment rates in the UK, and it is seeing cuts in disability benefits that will have a disproportionate impact on former industrial heartlands, as well as cuts in tax credits, the abolition of area-based grants and local government cuts significantly higher than those in many councils in the south-east. It is for those reasons that I support the proposal for the Government to undertake an assessment of the impact on UK growth of the rise in the rate of VAT.

[John Hemming]

Well, here we are: the Opposition have said that they really hate the idea of having VAT at 20%, and that that is a dreadful proposal. What are they proposing instead? They are proposing a review.

[Thomas Docherty]

Can the hon. Gentleman remind me whether he agreed with his party leader when he said, during the election campaign, that a VAT rise would hit families the hardest?

[John Hemming]

My right hon. Friend the Member for Twickenham (Vince Cable) was quite clear when he said that the party did not rule out an increase in VAT, when he was asked that specific question—[Hon. Members: “Oh!”] The then Chancellor supported an increase in VAT to 19%, and the present Opposition now support a long-term VAT rate of 20%. The reason why they will not support new clause 9 is that the change it proposes is not temporary but permanent. Labour Members cannot criticise us for accepting a long-term VAT rate of 20% if they want the same long-term rate themselves. There is an argument about whether the stimulus that would, admittedly, result from a temporary cut in VAT would be in the long-term interests of the country, but it is a complex one. However, it is clear that we need to keep the deficit under control.

We have heard criticism from the Opposition today that the Office for Budget Responsibility has indicated that we might be borrowing more money than was originally forecast. The Opposition criticise us for the fact that the OBR forecasts higher borrowing. The Opposition’s solution, however, is even higher borrowing. They identify a problem and then put forward a policy proposal to make that problem worse. It is an absurd situation.

12:15

The real problem that economies face, as we see with the situation in Greece, is that as the deficit goes up, the people lending the country money to keep it going become increasingly concerned and the interest rate goes up, so it is not just the amount of interest on the amount of deficit in each year that goes up, as the rate of interest goes up, too. That is why people end up in the state that Greece has ended up in.

[Ian Lucas]

The hon. Gentleman ought to have listened to the debate earlier, particularly to the very good speech by my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell), who explained that for every pound that is spent in the construction sector, £3 is injected into the economy. That would lead to three times as much being put into the economy for every pound spent in the construction sector. That means we should encourage that sector, not decimate it as the Conservatives are doing as we speak.

[John Hemming]

We should remember that VAT does not apply. I declare an interest, as a VAT-registered person. People who understand how VAT works will know that people who charge VAT can reclaim it on their inputs. We have to look at the details. On the hon. Gentleman’s further point, yes, there is an economic multiplier that has an effect. As demand is increased, there is a multiplier effect. At the same time, we have to look at the long-term effect on the deficit, the debt and the interest paid. As interest rates go up, wider damage is done to the whole of society.

It is true that in an ideal world we would not have higher rates of VAT. In an ideal world everything would be nice, and there would no problems and no difficult decisions to take. We have to get a balance. It is very pleasing to see that the official Opposition now accept that VAT should be 20% in the long term.

[Clive Efford]

There used to be a time when the hon. Gentleman was fond of quoting the Institute for Fiscal Studies, which called the VAT cut “an effective stimulus”. As for the construction industry, does he not recognise the figures showing a 19% increase in the number of business failures in the construction industry in the first three months of this year—since the increase was imposed?

[John Hemming]

There is no VAT on new build. The hon. Gentleman’s party believes that the VAT rate should be 20% in the long term; I thank him for agreeing with us about that.

The Government, essentially, have to bring the deficit under control to keep interest rates under control—and that is what we are doing.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Nigel Evans)]

Is the hon. Member giving way, or has he finished?

[John Hemming]

I thought I had finished.

[Mr Deputy Speaker]

That is good enough for me.

[Nia Griffith]

I am delighted to be given this opportunity to speak, perhaps a little sooner than anticipated. I shall speak to new clause 10 and I specifically remind Members that it is about having an assessment of the impact of the VAT rate on UK economic growth. That is the area on which I shall focus; it is what we need to talk about if we want to get this country back on its feet.

We are not asking for a knee-jerk reaction. We recognise that there is a complex relationship between the various different fiscal measures that can be taken—between VAT and all the other types of fiscal measures. We also recognise the importance of a changing environment, as events elsewhere might affect our ability to export, for example, and economic events in different countries will impact on our economy in all sorts of ways.

Let us look at what has happened recently. We have massive inflation and businesses are having real difficulty. They are being badly squeezed. They are experiencing rising costs, rising costs and more rising costs, and they are having to make difficult judgments about how many of those costs they can pass on to consumers before they begin losing sales. Their difficulties have been compounded by the fact that they have had to contend with a higher VAT rate since January. They are making calculations daily. The costs of their raw materials are changing constantly. They must keep asking themselves, “What must we do in order to keep afloat?”, but the problem is, of course, that many of them are going under.

[Gordon Birtwistle]

Will the hon. Lady give way?

[Nia Griffith]

I will if the hon. Gentleman is going to ask a sensible question.

[Gordon Birtwistle]

Does the hon. Lady agree that businesses—[Interruption.] I was asking the hon. Lady, not the animal in front of her. Does the hon. Lady agree that businesses can reclaim the VAT that they are charged?

[Nia Griffith]

I fully understand that businesses reclaim the VAT, but the consumer purchases the end product for a composite price that reflects everything that has been done to produce the thing in the first place, as well as the transport costs—that was explained by my hon. Friend the Member for Chesterfield (Toby Perkins)—and, of course, the VAT. The customer pays the VAT in the end, but the business has already been affected by the rise in costs that it is incurring, which do not include VAT. The price of raw materials, particularly fuel, has risen, and every business is being squeezed to the limit. Every penny counts, and businesses are asking themselves, “At what point can I put the price up? At what point does the purchaser not buy?”

Many of my hon. Friends have mentioned the impact on hard-pressed families, and they have indeed been hit very hard. The hon. Member for Redcar (Ian Swales) recited a long list of goods that do not attract VAT. Was he suggesting that every middle-income and lower-income family should exist solely on food and children’s clothing? Has he not thought of the numerous household items—

[Stephen Williams]

Will the hon. Lady give way?

[Nia Griffith]

I will, on that point.

[Stephen Williams]

The hon. Lady’s Front-Bench colleague, the right hon. Member for Delyn (Mr Hanson), said that there would be a £450 increase per “hard-pressed family”, if I may use her phrase. That means that families would have to spend £18,000 a year on VATable items—not VAT-exempt or zero-rateable items. Can the hon. Lady give us an example of the sort of items on which those hard-pressed families would spend £18,000 a year?

[Nia Griffith]

When we arrived at the £450 figure, we were taking account of the total impact of all the tax changes introduced in the emergency Budget last June. However, if Members look around their bathrooms and kitchens, they will see numerous items that do not last for ever and need to be repaired. For example, adults will need to replace some items of clothing.

[Catherine McKinnell]

Does my hon. Friend share my confusion about the fact that during the election the Liberal Democrats campaigned against the Tory VAT bombshell, yet tonight they seem to be the only Members present who are defending the Tories’ increase in VAT?

[Nia Griffith]

I find that extraordinary, and I also find it extraordinary that the Tories seem to have so little comprehension of the impact of the increase. As I have said, many household items need to be replaced.

[Andrew Gwynne]

Is not the real purpose of new clause 10 to enable us to assess whether the impact of the VAT increase is indeed returning growth to the economy, and does not the evidence so far suggest that the economy is going into reverse as a result of the Government’s measures?

[Nia Griffith]

Absolutely. I shall say more about that shortly.

[Mr Hanson]

My hon. Friend, like myself, is a Welsh Member of Parliament. May I draw her attention to a press release last year entitled “Welsh Lib Dem MPs want VAT rise impact to be assessed”. The hon. Member for Brecon and Radnorshire (Roger Williams) said:

“we are worried about the proposed increase in VAT. … We need to carry out this work so that we can lessen the impact of any increase in VAT.”

The hon. Gentleman said that they were

“particularly concerned about the impact on the voluntary sector”

and on hard-pressed rural areas.

[Nia Griffith]

That is an extraordinary statement, especially as I can remember the most surreal experience of being in a studio in Cardiff and the hon. Member for Brecon and Radnorshire (Roger Williams) popping up on a screen from some distant place to defend the increase in VAT. So what is the position of the Liberal Democrats? I really do not know. One minute they say one thing about an assessment, the next minute they pop up on a screen defending to the hilt every statement in the Budget last June. I do not know what the position of Welsh Liberal Democrat Members is.

[Albert Owen (Ynys Môn) (Lab)]

My hon. Friend is making a strong point about small businesses being unable to absorb the VAT increase. She asked about the position of the Liberal Democrats. They are on the wrong side of the argument and they are here tonight to defend the Tory rise in VAT. It is an absolute disgrace, and Welsh businesses and businesses throughout the UK will punish them at the next election.

[Nia Griffith]

My hon. Friend is right.

Let us move on from the small items such as mobile phone bills and the VAT on them—it might be someone’s only phone if they do not have a landline. Let us move to the other end of the scale and what are called the big ticket purchases such as replacing a car or refurbishing a kitchen. They are things that people do not have to do now, but they may choose to do; perhaps they intend to do them in the next few years. The Labour Government introduced the car scrappage scheme, which spurred on people who were thinking of replacing their car in the next couple of years to bring that purchase forward. It meant that money that was available, which some people had put by in savings, was fed into the economy and made a difference.

[Mrs Madeleine Moon (Bridgend) (Lab)]

Does my hon. Friend remember that the car scrappage scheme was particularly effective in Wales, where the Ford factory found that the majority of cars bought under the scheme were Fords. So jobs were kept in Wales? The Welsh Liberal Democrats want to take those jobs away from Welsh workers.

[Nia Griffith]

The whole point of an active Government who take an interest in re-igniting the economy was absolutely that—to create jobs and ensure wealth creation so that we would be in a better position to pay back quickly—

[Ian Swales]

Can the hon. Lady confirm that she is now proposing a cut in VAT and car scrappage schemes and other measures to stimulate the economy? Or is she offering a choice?

[Nia Griffith]

I am asking about the Government’s growth strategies. I am trying to explain by giving some examples of how Governments can stimulate the economy and make a difference. They can choose to kick-start the economy or to allow it to go spiralling down and unemployment to increase. These are active choices that a Government can make. We are asking in our new clause for a proper assessment of the effect of the increase in VAT on what is happening now in the economy.

[Andrew Gwynne]

My hon. Friend has been generous in giving way. She talks about the Government’s growth strategy. It appears to me that they have neither a coherent strategy nor, apparently, growth.

[Nia Griffith]

That is precisely the problem. In spring 2010 we were beginning to come out of the recession, the economy was growing, inflation was low, and unemployment was coming down. Under Labour’s plan, the economy was set to grow strongly. In fact, as more people were getting back into work, borrowing ended up £21 billion lower last year than had been forecast.

[Bill Esterson]

I am sure that my hon. Friend is aware that the Treasury is set to borrow £46 billion more than it planned last autumn as a result of slower growth. I am sure that she agrees that without growth the deficit will continue to rise. Surely that is why we are right in the new clause to call for an investigation of the impact of the measures on growth. Clearly, the Liberal Democrats do not understand the impact of the rise in VAT.

12:30

[Nia Griffith]

That is precisely the point. There is a huge contrast between an economy that was growing and doing better than the forecasts had predicted, and a situation where there has been no growth since last October. As my hon. Friend pointed out, the Office for Budget Responsibility now predicts that the Government will have to borrow £46 billion more over the coming years than was forecast last autumn after the spending review. Worse, they are failing to get Britain back to work, which is probably pushing up the benefits bill this Parliament by more than £12 billion. That not only makes the deficit worse, but makes the lives of the people involved infinitely more miserable.

[Clive Efford]

My hon. Friend cannot have failed to notice that only one Back-Bench Conservative Member is present—

[Chris Ruane]

No, he is a Parliamentary Private Secretary.

[Clive Efford]

Yes, he is a PPS. By contrast, nearly a dozen Liberal Democrat Members have been present. That is nearly as many Liberal MPs as positions their party has taken on VAT. I have here positions set out by not only the hon. Member for Brecon and Radnorshire (Roger Williams), but the hon. Member for North Cornwall (Dan Rogerson), who called for a review, and a Liberal Democrat activist, who called for a cut in VAT on tourism in that part of the world. Just how many positions do the Liberal Democrats have on VAT?

[Nia Griffith]

The whole point is that our new clause calls for a proper assessment to be made to see what the actual effect of the current VAT rate is on the economy, given the lack of growth and the lack of a plan for growth. The important thing is to carry out that impact assessment and work out the best growth strategy, because nothing is coming from this Government in order to put things right.

What has been happening in the news recently? Everybody must be aware of the crisis we are facing on our high streets and in store after store. This is happening to TJ Hughes and its 57 stores, to Jane Norman’s 90 stores and 100-plus concessions, to Habitat, and to HomeForm, which covers Möben Kitchens and Dolphin Bathrooms. Some 5,300 jobs are in the balance, and now we hear about what is happening to Thorntons and Comet. Judith McKenna, chair of the CBI’s distributive trades panel, has commented:

“After a year of growth, high street sales volumes fizzled out in June….Shoppers are budgeting hard and cutting back on their discretionary spending, such as on clothes and big ticket household goods.”

She is the CBI’s chief financial officer.

[Alison McGovern (Wirral South) (Lab)]

I thank my hon. Friend for mentioning TJ Hughes in her speech, because all this will have a great impact on its home in Merseyside. Does she agree that it demonstrates a problem with the Government’s approach to VAT, which is that the inflationary expectations they have built into the economy are damaging not only the people who will lose their jobs at TJ Hughes, but high streets throughout Merseyside and up and down our country?

[Nia Griffith]

I wish to correct what I said, because Judith McKenna is chair of the CBI distributive trades panel and ASDA’s chief financial officer.

The point is that the message is being given clearly from all our retail people. The CBI’s retail sales index fell to its weakest level in a year. Why was that? It was because anxious shoppers are cutting back on purchases of clothing, groceries and big-ticket items, as everybody is being squeezed.

[Mr Robinson]

Does my hon. Friend agree that the gist of what she is a saying in a general and good contribution is that the Government have managed to combine a deflationary economic policy with inflation at double the rate they forecast? Such a policy does not stand up. Is not the core of this their overall deflationary policy, of which an increase in VAT was the central part?

[Nia Griffith]

Absolutely. That is now having a devastating impact on the economy, on businesses and on individual families. In our new clause, we are asking for a proper impact assessment of the effect of the VAT rate on growth in the UK. Let us see whether the Government can come up with something more constructive and find a way to drive the economy forward.

[Jonathan Edwards]

I thank my parliamentary neighbour for giving way. Is she saying that the evidence is already there that the VAT rise is hurting the economy, as I believe it is, or that we need a review to see whether it is doing so?

[Nia Griffith]

I am saying that any fiscal measure is interdependent on other fiscal measures and the Government need to decide how their growth strategy will work and how the VAT rate will fit into that, in addition to any other fiscal measures they wish to take. I am not promoting any one particular measure, but there needs to be some form of stimulus because at the moment we are spiralling downwards and seeing increases in the debt and the deficit, in the benefits bill and in the number of people who are out of work. We would like to see increases in the number of jobs and in the number of businesses that are picking up and we would like to see the deficit come down so that we can get Britain back to work and get people back into jobs. The problem at the moment is that the policies with which we are being presented seem to do precisely the opposite, as was ably explained by my hon. Friend the Member for Coventry North West (Mr Robinson) a moment ago.

We need a proper assessment and we need proper decisions to be made on the basis of it to help our economy to grow.

[Roberta Blackman-Woods]

I want to support new clause 10. It is very important that the assessment of VAT considers the effects of the rise on both individuals and businesses. We need to consider both categories to understand fully the impact that the rise could have on economic growth. I know from sitting through the last debate that the Conservative and Liberal Democrat parties have no understanding and no idea of the pressures that are being placed on family budgets. This debate seems to be showing that they do not have any understanding of the stresses and strains being put on businesses in constituencies such as mine. In fact, as my hon. Friends have said, the Government seem to have very little understanding of what is happening to businesses across the north of this country.

I know from my constituency postbag and I hear from my local citizens advice bureau that more and more people are looking for advice not only because they are concerned that they might lose their jobs, which is affecting a large number of people in my constituency and the neighbouring areas, but because those who are in work are experiencing increasing rises in food, energy and petrol prices while facing a cut in wages in order to keep themselves in employment. If we add those factors together, we can see that consumers are concerned about the future, which is affecting what they purchase on the high street. That has a huge impact on all our constituencies and we have heard tonight of many examples of businesses in the retail sector that are falling daily.

[Mr Kevan Jones]

Does my hon. Friend agree that a vivid example of that can be seen when one walks through the centre of the fine city of Durham? An increasing number of shops are closed with no trade taking place at all.

[Roberta Blackman-Woods]

I am grateful to my hon. Friend for making that point and I shall come to the city of Durham in just a moment or two.

The situation that I am describing, with reducing consumer confidence and increasing stresses on business, would definitely be helped by a reduction in VAT, even if it were temporary.

[Hywel Williams (Arfon) (PC)]

May I congratulate the hon. Lady on making such a fine and powerful case in favour of the new clauses tabled by my hon. Friend the Member for Carmarthen East and Dinefwr (Jonathan Edwards)? Given the case that she is making, why do we need yet another review?

[Roberta Blackman-Woods]

That is an interesting point, but as my right hon. Friend the Member for Delyn (Mr Hanson) said earlier from the Front Bench, we would like to see a time scale and an end point.

As I was saying, we need a full assessment about whether a reduction in VAT would really help to turn around areas such as the one I represent. I also want to know exactly what the impact is on growth, and I will come to that in a moment or two. I want to take up the point that my hon. Friend the Member for North Durham (Mr Jones) made point about retail, but my argument is that almost every single sector in Durham is being affected by the rise in VAT that was brought in by the parties in government. We are a constituency that has a large public sector not because it is crowding out the private sector, which is the mantra we always hear from the Government parties, but because it is an administrative centre and so has a large number of public sector jobs. However, the public sector is being hit by public expenditure cuts as well as by the rise in VAT.

[Bill Esterson]

The situation that my hon. Friend describes is also typical of my constituency, where we have a very high level of people working in the public sector who are threatened with job losses from the parties in government. We also have a large number of small businesses that depend on those public sector workers for their custom. Those businesss are finding, as other Members have mentioned, that the VAT rise makes it very difficult for them to keep prices at the same level, and that has made it very difficult for them to trade effectively.

[Roberta Blackman-Woods]

My hon. Friend makes an excellent point, which clearly demonstrates a major problem in the economic strategy of the parties in government, which show no understanding of the links between spending in the public sector and private sector businesses. That is a very great shame and is to the detriment of business in many areas.

My hon. Friend the Member for North Durham has talked about the great impact on retail businesses in my constituency, and I am concerned about the ability of some businesses in the city centre to keep going. I have been talking to the head of one of the construction businesses in my constituency, which has been a very vibrant business in the past, and he told me that it is not only flatlining but might be about to go bust. That is extraordinary because it is a major company, but jobs in the construction sector are drying up. Other hon. Members have made this important point, which shows the lack of growth strategy from the parties in government. I would like there to be some consideration about whether a reduction in VAT could help to push down inflation and could lead to a boost in job creation, particularly in areas such as mine.

[Mrs Moon]

Does my hon. Friend accept that part of the problem is that some of the smaller construction companies do not feel able to take on a young apprentice and help them to train, thereby giving them that initial start in business that might help them to see a future? Instead, those people cannot find work and feel that there is no hope, and that desperation is placing a huge depression over many of our communities.

[Roberta Blackman-Woods]

My hon. Friend makes an excellent point. As a result of the insecurity that a number of businesses face, they are more reluctant than they were to give young people—and older workers—apprenticeships.

12:45

[Roger Williams]

The hon. Lady makes an important point about the construction industry, but does she agree that some of the problems in that industry were due to the previous Government’s abolition of the industrial buildings tax allowance, and indeed the agricultural buildings tax allowance, which led to a contraction in the construction industry?

[Roberta Blackman-Woods]

The previous Government’s investment in the economy led in my constituency to a huge growth in construction jobs for those working on not only fine public-sector projects such as our new hospital and our new school, but new housing. That has just disappeared. The really serious point that I am making is that there is no growth strategy from the Government parties to ensure growth in construction jobs in my constituency—in fact, quite the opposite. We know from national figures that there is an effect on the construction sector right across the country.

[Ian Paisley]

Does the hon. Lady agree that there are a number of cash-flow issues that affect the entire business sector, and particularly the construction industry? There is a lack of cash flow from banks to business; from business to business, which means that debts are not paid; and of course from business to consumer, and from consumer back to business. Does she agree that the measures that are being proposed are among a cocktail of measures that need to be introduced if we are to start to address the nation’s economic crisis?

[Roberta Blackman-Woods]

The hon. Gentleman makes an interesting point. He describes very well the downward spiral that businesses can get into unless there is a clear strategy in place to counter the deflationary measures in the economy, and we are simply not seeing that from the Government parties.

[Mr Robinson]

Does my hon. Friend agree, having listened to the minor carps of Liberal Members, that the essential difference between our policy and theirs seems to be on the issue of aggregate demand in the economy? All that the Government have done is reduce it by cancelling overnight Building Schools for the Future. That has halved the demand for construction in my constituency, and denied two crucial schools new buildings that they desperately need.

[Roberta Blackman-Woods]

My hon. Friend makes an excellent point, and reduced demand, not just from sectors but from individuals, appears to be very damaging for communities such as mine.

I want to talk about tourism in my constituency. Tourism was mentioned earlier; we know that VAT rises have really had an impact on the tourism industry, and cities such as mine are suffering because of that. People do not have as much disposable income as they did, so they are not spending as much on leisure, and that has an impact on tourism.

[Mr Kevan Jones]

It took the Minister with responsibility for tourism a year to visit the north-east; he finally turned up in the north-east last week. Is my hon. Friend as concerned as I am not just about the effect of VAT on tourism in Durham, but about the fact that the Minister had no answers whatever when it came to the issue of replacing One North East’s marketing campaign to promote tourism? He basically said to local businesses that they had to get on with it themselves.

[Roberta Blackman-Woods]

I am not sure that I am surprised that that was the answer from the Minister with responsibility for tourism. I shall come on to the regional development agency in a moment or two.

[Stewart Hosie (Dundee East) (SNP)]

For the past 10 minutes, the hon. Lady has been making a very good speech. She has said that virtually every sector in her constituency is under pressure. She was worried that businesses might not even be able to keep going. She spoke about a construction company that is under huge pressure. She described the inflationary impact of the VAT rise. She spoke about the downward spiral for businesses, and the impact of the VAT rise on tourism. Would she please explain, then, why she will not vote tonight for a temporary decrease? Has Labour changed its position? Does the shadow Chancellor not know what he is doing? Is he having a fight with his party’s leader, or is this just the normal Labour shambles?

[Roberta Blackman-Woods]

I can only suppose that the hon. Gentleman was not listening to the answer that I gave earlier to his colleague, who made the same point.

[Hywel Williams]

Will the hon. Lady give way?

[Roberta Blackman-Woods]

I had better make progress as others want to speak. I have been quite generous in giving way.

In conclusion, I shall deal with the issue of growth and why it is so necessary for us to monitor the impact of the rise in VAT on the economy, on families and on the whole country. I make a plea for the Government to look particularly at how that is impacting on growth in the north. It was reckless of the Government to get rid of a regional development agency in the north-east that had a very good plan in place for promoting growth and identifying sectors of the economy that would benefit from public sector investment that would lever in private sector investment. We have no growth strategy in place from the Government, and that is having a huge impact. I would like that to be examined alongside the impact of the VAT increase.

[Toby Perkins]

This is not the first time that I have been involved in passionate debate at 12.50 am, but under normal circumstances it has taken place in a rather less rarefied environment than we are currently enjoying. I shall speak to new clause 10 and the need to assess the impact of VAT on a range of things. We should remember that the Bill follows the Budget for growth, as it was described at the time. One has to ask whether that has been investigated by the Advertising Standards Authority, because since the Budget for growth we have seen growth continuing to flatline.

We saw three months of negative growth at the back end of 2010, which was blamed on the wrong kind of snow. In early 2011, we were expecting a huge boom, with all the people who had been unable to get out to the shops in December rushing out in January and getting the economy moving, but of course it did not happen. The Chancellor’s Budget for growth was a damp squib.

At every level the Chancellor has demonstrated that he just does not get it. He does not get the challenges facing working people or the challenges facing business. He does not understand the cause of the banking crisis and the collapse of the banking model. He does not understand the need for growth and how the Government can stimulate it. Most importantly, he does not understand that the public and the private sector need to co-exist and depend on each other in a constructive economy.

There is no taxation that does not have knock-on effects. The knock-on effects of VAT are phenomenal. The Institute of Economic Affairs described the VAT increase as “bad economics”. If people do not choose to listen to the Institute of Economic Affairs, perhaps they want to listen instead to the economic genius who was advising Norman Lamont when we were led into black Monday. In January this year, the Prime Minister said about VAT:

“If you look at the effect as compared with people’s income then, yes, it is regressive.”

That was at least consistent—it was exactly what he had said in opposition. But what about the Deputy Prime Minister? We all remember him. Back in the old days, when he was still pretending to be a progressive, we remember him with his giant Tory tax bombshell. We have been told tonight that those signs did not mean that he was against a VAT rise, or that the Liberal Democrats would not introduce such a tax bombshell; he was simply warning us that it was coming and that we should beware. A lot of Liberal Democrat leaflets were delivered in Chesterfield, and I thought at the time that they were describing the impact of the VAT increase as a bad thing, but today those of us who have never visited Planet Clegg have been put straight. The impact of VAT on the cost of living is significant, and increasing the cost of living has a dramatic impact on people’s capacity to spend money and support the economic growth that we need.

[Jon Ashworth (Leicester South) (Lab)]

One of the effects of the VAT increase is its contribution to inflation, which is currently running at twice the rate of earnings growth. The Bank of England has suggested that inflation will hit 5% later this year because of increases in utility prices, which are a result of the VAT increase. Many of my constituents are feeling particularly hit by that. Is that also the case in Chesterfield?

[Toby Perkins]

Absolutely. My hon. Friend makes an important point. The impact is being felt on the cost of everything, even items on which VAT is not charged, because businesses and members of the public are having to spend more on others items. There is the impact on fuel and heating costs and the downward pressure on wages, as we see the failure to achieve economic growth and the public sector being told that it will have no wage increases for two years and that pension contributions will increase. All those impacts are contributing to people spending more on VAT and having less money.

[Andrew Gwynne]

New clause 10 proposes an assessment of the impact of VAT on the economy, and of course we can now make a direct comparison with a fairly recent period when the previous Labour Government introduced a temporary cut in VAT and got the economy growing again. Is it not the case that we need to make that assessment so that we can see where this Government are getting it so badly wrong?

[Toby Perkins]

Absolutely. The new clause could not be more reasonable. It is impossible to imagine even having a vote on it, because I cannot see how anyone could argue against the need for an assessment when there is so little growth in our economy.

[Ian Paisley]

Does the hon. Gentleman agree that we need a much more strategic approach to this? We have the ludicrous situation that our taxation policies affect even our international relations. For example, we have lent £7 billion to our nearest and dearest—by which I mean expensive—neighbour, the Irish Republic, which allows it to reduce its internal taxation and reduce to a matter of pennies its aviation tax, yet our taxation continues to increase, which ruins business opportunities in our country. We need a more strategic approach so that if we lend money overseas we can ensure that it does not undermine taxation policy in this country.

[Toby Perkins]

That is an interesting point. We had the ludicrous situation of the Chancellor claiming that our country was on the verge of bankruptcy, but at the same time giving money to a country that was genuinely in a very difficult position. His credibility is really damaged when, for political gain, he says things that he knows are not true, and that every serious economist knows are not true. No one seriously believes that he would have lent money to the Irish if he thought that this country was on the verge of bankruptcy. What we saw in Ireland was what would have happened if we had followed the dangerous policies that the Conservative party proposed in 2008, which were to start cutting when the recession was at its worst. It is precisely for that reason that there is now so little economic confidence.

00:59

[Susan Elan Jones (Clwyd South) (Lab)]

Having tried on three occasions to intervene on speeches by Conservative Members, and on each occasion been told no, I am grateful to my hon. Friend for accepting this intervention.

On VAT, Conservative Members bleat that it is not possible to secure any rebate on VAT because the Europeans will not let us, but does my hon. Friend recall that the French managed to do so for their own restaurateurs? What is it about Conservative Members’ being so gutless and spineless that they will not argue our case in Europe in order to do something that would actually improve life for people in this country—especially as they brought in the VAT increase in the first place?

[Toby Perkins]

If I had had any idea that my hon. Friend so desperately wanted to intervene I would have given way earlier, but I am pleased to have been able to make her dream come true. The strong point that she makes, and on which Members should reflect, is precisely why my right hon. Friend the Member for Delyn (Mr Hanson) suggests that we assess the impact of the VAT increase.

I am not trying to get into a class war thing, but one reason why the Chancellor has got things so wrong and why so many of his policies seem so out of kilter is that he has no concept of what people can actually buy with a half-decent salary. That is one reason why, at the drop of a hat, he introduced the changes to child benefit. As someone who was loaded the day he was born, he has no idea of the difference between a salary of £50,000 a year, £20,000 a year or £12,000 a year; he just knows that they are a lot less than he has, and that people on £50,000 seem to earn more than the average so they are probably okay.

[Mr Kevan Jones]

Has my hon. Friend noticed that the same applies to the majority of the Cabinet? I understand that among both its Conservative and Liberal Democrat members there are some 20 millionaires, so they say that we are all in it together, but they are clearly not.

[Toby Perkins]

My hon. Friend makes a valuable point. No one is suggesting that because someone is wealthy they do not have a right to go into politics, just as we would never keep someone out of politics because they were poor—[Interruption.] Well, we would never do so! The central point, however, is that when the policies that the Government pursue seem so directly to hit the most deprived people, to attack pensioners and, particularly, to attack women as they have on so many different occasions, people will understandably look at the background of the people making those decisions. When people hear them in opposition say that they recognise that VAT is a regressive tax, but see them go into government and try to claim something different, they will understandably question their credibility.

VAT hits the poor, the workless and pensioners. Are those really the people the Chancellor wants in his sights?

[Chris Ruane]

Yes.

[Toby Perkins]

Absolutely. The VAT cut, like so many other Government policies, is hitting women hardest.

I do not know, Mr Speaker, whether you ever have the opportunity to visit the Conservativehome website, but if anyone does so today they will see an article entitled “The Conservatives are losing female supporters. Why?” We have had many debates that could have given them the answer, but basically every single economic policy that they have introduced has had an adverse effect on women. Women are more likely to be public sector workers; women have been badly hit by the pension changes; women are more likely to be impacted by the VAT increase; and women often manage the family budget and have noticed acutely the increase in and squeeze on the amount that they have to spend. The Conservatives are trying to analyse why women are deserting them, and we can lead them to the answer without the need for them to do much research at all.

The challenges that business face are significant. Before coming to this place, I was running my own business. Confidence is low. When customers are worried about whether they will be able to afford to pay their mortgage, they will not be spending money on anything that they do not need. The banks are not lending, public sector organisations are not buying from the private sector because they have less money, and IT suppliers are finding that they are not getting the business they relied on from the public sector. At the same time, public sector employees are not contributing to the private sector by buying all the things they would be buying if they had confidence in the security of their jobs. The cuts to the public sector are having a dramatic effect on the private sector.

We have had a Budget for growth that has led to no growth. We now need an assessment of the impact of the VAT increase so that we can understand fully the reasons we are not getting growth in the economy. We need to make decisions based on getting people back to work, getting money in people’s pockets, and seeing the economy grow back in the way that every single one of us wants it to.

[Kate Green]

It is a pleasure to follow my hon. Friend the Member for Chesterfield (Toby Perkins) and to echo many of his remarks.

I appreciate that it is late, and I will keep my remarks brief, but it would be remiss of me not to speak up on behalf of my constituents to express the genuine concerns about the impact on businesses and families of the Government’s fiscal policies, including, in particular, their policy on VAT.

The impact on families, especially the poorest families, of the Government’s fiscal measures is a cause of considerable concern. The other day, the Institute for Fiscal Studies told us that inflation is having a 60% greater impact on poorer families than on better-off households. The poorest fifth of families now face an inflation rate of 4.3%, compared with the richest fifth, for whom it is only 2.7%, and the higher rate is hitting pensioners especially harshly. I suspect that we all know this from standing on the doorsteps in our constituencies and listening to families talk about the pressures they are facing in managing the rising cost of living and the difficulties they are experiencing in making ends meet. Families across the piece are beginning to feel the squeeze that is resulting from the Government’s policies, and there is no doubt that the VAT increase is a significant element in that.

I am sorry that the hon. Member for Redcar (Ian Swales) is not in the Chamber, because there are one or two important points about VAT that we need to ensure that Conservative Members understand. First, VAT is a regressive tax because it hits the lowest income deciles disproportionately harshly. That is because it is a flat-rate tax that it is taken away from the poorest families at the same rate as from the better-off. All the sleight of hand that looks at expenditure deciles misses the point that families with lower disposable incomes are seeing more of their income eaten up on non-discretionary spend, where costs are rising.

My hon. Friend the Member for Llanelli (Nia Griffith) rightly pointed out that we are talking about spend not on luxuries but on household basics. We recognise that food and children’s clothes are exempt from VAT, but let us remember all the other household basics that families will still have to go out and buy: soap powder, washing-up liquid, shampoo, shoe repairs. These are not items of frivolous luxury but everyday expenditures that families have to meet. In addition, as families rightly seek to enter or stay in the labour market, there are the costs for adults of buying clothes and equipment for work. VAT is a regressive tax that harshly hits ordinary families on tight budgets, and that is an important first consideration for Conservative Members to bear in mind.

Secondly, as many of my hon. Friends have said, we need to think about the impact that the VAT rise is having on the economy as a whole. That is the thrust of new clause 10. Here again, there is a basic lesson in economics that my hon. Friends have been trying to get across. Some Government Members have said that businesses can reclaim VAT. That neglects the fact that VAT, wherever it is applied in the product chain, ends up being charged somewhere. It ends up being charged when the consumer goes out and buys the goods. It does not somehow disappear in the course of VAT recovery, but is charged ultimately to the customer, who is now faced with spending more on essential items and having less to spend on additional items. That is having a damaging effect on business, manufacturing, retail and jobs. That is the point that I and my hon. Friends have been trying to get across.

It is a pity that the hon. Member for Redcar has only just arrived as I finish this helpful, if rather basic lesson in elementary economics. You will not want me to repeat it all at this time of night, Mr Speaker, so perhaps the hon. Gentleman can read the Official Report tomorrow to gain the benefit of what I and my hon. Friends have been trying to get across.

As I said, I want to make a few remarks about the impact that this policy is having in my constituency. I have talked about the impact that it is having on families in my constituency. Hon. Members have alluded to the impact that it has had on HomeForm, which is a substantial business based in Old Trafford in my constituency. It has been forced into financial difficulties, and I am very concerned about that. I am also concerned about an exceptionally important and large retail centre in my constituency, the Trafford centre, with which hon. Members may be familiar. I am concerned about jobs at the Trafford centre, particularly because of the nature of those jobs. They are exactly the kind of jobs that low-income families and those who can manage only a few hours of work are reliant on: part-time jobs, shift jobs and low-skilled jobs. Those are the jobs that are being put at risk and those are the jobs that do something—not very much, but something—to keep families on modest incomes afloat.

I am concerned that there is an impact on families, an impact on industry, an impact on retail and an impact on jobs. As my colleagues have said, that translates into a fall in consumer confidence and a fall in retail growth. We are concerned therefore about the damaging effect on the economy overall.

As the House is aware, we are asking simply for an assessment of the economic impact of the Government’s VAT rise. I think that that is a reasonable thing to ask for, particularly given the Chancellor’s apparent greater open-mindedness towards the economic impact of the 50% income tax rate introduced by the last Labour Government for those with incomes of more than £150,000. It was interesting to hear him say explicitly in his Budget statement in March this year that he regards that as “a temporary measure” and that he is concerned about what its broader impact may be. We are asking simply that VAT—a tax that affects all families, all households, all businesses and our economy as a whole—be subject to the same degree of scrutiny and review. I am at a loss to understand why a responsible Government would not want to take on board new clause 10 and support us in the Lobby this evening.

[Mr Gauke]

We have had an interesting debate. I must admit that I am surprised that on the subject of VAT cuts I am responding principally to the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) and that it is he who tabled the new clause calling for a VAT cut. After all, it was only on 16 June that, with much fanfare, the shadow Chancellor announced the Opposition’s flagship policy of a cut in VAT—the first paragraph to appear on the blank sheet that is Labour policy. Yet with an opportunity to legislate for that very policy today, the official Opposition failed to get around to tabling their new clause until the day before the debate—too late for selection.

01:15

We could speculate as to why that is the case. Perhaps the Labour party has reconsidered its policy. After all, by the time of Treasury questions on 21 June the shadow Ministers were refusing to raise the policy in the Chamber, and on 22 June various shadow Ministers were quoted in the Financial Times as complaining about not being consulted, and were admonished for doing their politics on the record. Of course, the previous Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), failed to support the policy on eight occasions. In an Opposition day debate, Labour Back Benchers failed to mention it at all. Perhaps the policy has been quietly dropped, replaced by the more modest new clause 10, which we heard from the right hon. Member for Delyn (Mr Hanson) suggests an assessment of the impact of the VAT rate on UK economic performance.

Of course, there was new clause 16, which was not selected. Was the delay in tabling it because of indecisiveness? Do the Opposition want to put forward that policy or not? Perhaps there was a delay in the process as it was cleared through the shadow Cabinet—we know how the shadow Chancellor likes to do that. Perhaps it was waiting for consent from the right hon. Member for Dulwich and West Norwood (Tessa Jowell). Or perhaps it was incompetence. It is, after all, difficult in opposition. There are no officials to help, and there are deadlines to meet. Somehow, however, the formidable Westminster machine that is Plaid Cymru managed to get its new clause in on time. When the shadow Chancellor was appointed, we heard much about how he was a ruthless street-fighter, how he was endlessly harrying the Government, how he would set the agenda and how he would imaginatively exploit parliamentary opportunities to the full. Six months on, he cannot even get his key new clause tabled in time. This is the man who wants to run the economy.

On the subject of VAT policy, what have we heard from the official Opposition? First we learned that the right hon. Member for Edinburgh South West was in favour of raising VAT to 19%, then the official Opposition abstained on the increase to 20%. Then they had a policy of cutting VAT on road fuel, which turned out to be illegal, so whereas we got on with cutting taxes on road fuel, the Opposition would have engaged in endless negotiations on a derogation. Then, last week, we heard the policy of cutting VAT on a temporary basis, even if the Opposition are not entirely sure about it. This week we learn that they are not going to vote in favour of that policy. What the hon. Member for Carmarthen East and Dinefwr said is correct—his new clause would be a temporary policy, yet the official Opposition are not going to support it. In other words, in 12 months we have had three shadow Chancellors and five different policies on VAT.

I can be clear about our position. I know that hon. Members have heard this before, but I will say it again. This Government inherited an exceptional fiscal challenge—the largest deficit in post-war history, and the state borrowing £1 in every £4 that it spent. We have undertaken a programme of fiscal consolidation, and the VAT increase is a necessary part of that plan. Current economic conditions and events in Europe reinforce the view that fiscal consolidation is the right course of action for the UK, and the evidence shows that the plan is working. The economy is growing and will grow further. We have the advantage of interest rates on a par with Germany’s, even though we are borrowing more than Greece and Portugal.

[Mr Robinson]

How can the Exchequer Secretary say that the economy is working and growing? It flatlined for six months, and according to his own Office for Budget Responsibility, the prognosis is that we will borrow £46 billion more over the period of the deficit reduction plan, and that unemployment will rise by 200,000 over the same period. How can he pretend that the plan is working?

[Mr Gauke]

The fact is, the economy grew in the first quarter of this year, after the VAT increase, unemployment fell this year at the fastest rate since 2000, and borrowing is falling. The plan is working. I am afraid that Opposition attempts to talk the economy down are not working. In difficult international conditions, the economy is growing.

Raising the rate of VAT was a difficult decision to take, but it was the right decision, and the responsible thing to do. The Opposition proposal is reckless: an unfunded VAT cut to the tune of £12 billion a year, and £51 billion over the Parliament. How do the Opposition propose to fill that gap? Would they revert to their tax on jobs? Do they think that that would stimulate growth?

Deficit reduction, in which the VAT increase plays an important role, is a prerequisite for sustained economic growth. At the June Budget and in the spending review, the Chancellor set out a credible plan to reduce the deficit. According the OBR, the plan is consistent with medium-term growth, achieving the mandate in 2014-15, a year earlier than required. The International Monetary Fund continues to back the Government’s consolidation plans, and to advise against changing course. It considered whether it is time to adjust macro-economic policy, and its conclusion is that the answer is no.

Events in Europe and around the world in the past few weeks have shown how important it is for countries with large deficits, such as the UK, to have a credible plan to deal with their debts. The Government have a credible plan. The British economy is recovering, output is growing and new private sector jobs are being created. We have set out why we have made those changes and explained what is required. We are putting our economy on a path of sustainable growth. I urge hon. Members not to press the new clauses to Divisions, and to support the Government’s plans for this country.

[Jonathan Edwards]

We have had a very interesting debate, although I find myself somewhat confused by the voting intentions of hon. Members. We will see in a few moments.

I shall not press new clause 6 to a Division, because it proposes a permanent reduction in VAT. New clause 9, however, proposes a temporary reduction, no matter what Labour Front Benchers say, and I will press that to a Division. Those who do not join us in the Lobby for the Division on new clause 9 will not be able to say with any credibility that they oppose the January VAT increase.

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 9

Value Added Tax (Change of Rate) Order 2011

‘(1) The Chancellor of the Exchequer shall make an order under the powers conferred by sections 2(2) and 21(7) of the Value Added Tax Act 1994 that in section 2(1) of the Value Added Tax Act 1994 (rate of VAT), the rate of tax charged by virtue of that section shall be decreased by 12.5 per cent.

(2) In section 21(4) (value of imported goods) of the Value Added Tax Act 1994 for “25” substitute “28.58”.

(3) This Order shall be known as The Value Added Tax (Change of Rate) Order 2011 and shall come into force on 30 August 2011.’.—(Jonathan Edwards.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

01:22

Division 308

Ayes: 10

---

Labour: 4
Democratic Unionist Party: 3
Plaid Cymru: 2
Green Party: 1

Noes: 293

---

Conservative: 250
Liberal Democrat: 41

New Clause 10

VAT

‘The Treasury shall, within three months of the passing of this Act, report to Parliament its assessment of the impact of the rate of VAT on UK economic growth.’—(Mr Hanson.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

13:34

Division 309

Ayes: 159

---

Labour: 150
Social Democratic & Labour Party: 3
Democratic Unionist Party: 3
Plaid Cymru: 2
Scottish National Party: 2
Green Party: 1

Noes: 295

---

Conservative: 249
Liberal Democrat: 44

Ordered, That further consideration be now adjourned. —(Mr Francois.)

Bill to be further considered tomorrow.

Business without Debate

Tuesday 28th June 2011 Commons Chamber

Delegated Legislation

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Climate Change

That the draft Carbon Budget Order 2011, which was laid before this House on 24 May, be approved.—(Angela Watkinson.)

Question agreed to.

Motion made, and Question put forthwith (Standing Order No. 118(6)),

That the draft Climate Change Act 2008 (Credit Limit) Order 2011, which was laid before this House on 7 June, be approved.—(Angela Watkinson.)

Question agreed to.

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Financial Services and Markets

That the draft Undertakings for Collective Investment in Transferable Securities Regulations 2011, which were laid before this House on 10 June, be approved.—(Angela Watkinson.)

Question agreed to.

Leave to Remain (Sam Fontana Wright)

Tuesday 28th June 2011 Commons Chamber

01:47

[Andrew Stephenson (Pendle) (Con)]

Thank you for allowing me to present my petition, Mr Speaker.

Sam, a constituent of mine, has had his application for a long-term visa refused by the UK Border Agency, which plans to send him back to America within days.

The Petition of residents of Pendle, Lancashire, and others,

Declares that the Petitioners believe that Sam Fontana Wright should be allowed leave to remain in Britain.

The Petitioners therefore request that the House of Commons urges the Government to encourage the UK Border Agency to halt his deportation and reconsider his case.

And the Petitioners remain, etc.

[P000932]

Employment (Livingston)

Tuesday 28th June 2011 Commons Chamber

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

01:49

[Graeme Morrice (Livingston) (Lab)]

I believe that both you and I have drawn the short straw tonight, Mr Speaker, but I am delighted to be able to initiate the debate, and I am very pleased that it concerns employment in my constituency.

One of the key issues that motivated me—along with many other Labour Members—to become more actively engaged in politics was the corrosive effect of mass unemployment, which reached 22% in my local authority area of West Lothian in the mid-1980s. Action to create job opportunities, especially for young people, in the communities I grew up in and went on to serve as a councillor, a council leader and now an MP, has always been central to my political outlook and activity.

But before I move on to specifics on the future jobs fund and employment in my constituency, it is important to set this debate within the current national context. Youth unemployment in the UK is alarmingly high, with unemployment among 18 to 24-year-olds higher than at any time since 1992. West Lothian also has a higher proportion, at 7.4%, of youth unemployment than the Scottish average of 6.5%.

The House explored the effects of those record levels of youth unemployment in a debate last week, so I will not dwell for long on the details now. However, I was amazed to read in the Library briefing for that debate about the results of a recent poll conducted for The Independent on Sunday. It found that eight out 10 people think it is harder for young people to get a job now than it was 20 years ago under the previous Conservative Government. It also reported that two thirds of the public think that the coalition’s economic policy threatens to

“leave a generation of young people jobless”

and that there is not enough being done to help youngsters into work. That is a damning public verdict on the coalition’s failure to get a grip on this vital issue. It is now clear that jobs are one of the biggest costs of the Government’s cutting too far and too fast.

As we came out of recession, Labour’s No. 1 priority was creating jobs, and by spring 2010 we were turning the corner and unemployment was coming down. Putting young people on the dole is not only a waste of money but a waste of their potential. We believe that getting people back into work is the best way to reduce the deficit. Yet the Government’s poorly targeted spending cuts have led them to axe programmes such as the future jobs fund, resulting in higher unemployment and more people claiming benefits. This, in turn, is making it harder to get the deficit down.

I will now turn to my main points in this evening’s debate—the future jobs fund and employment in Livingston constituency. During my time as the leader of West Lothian council I made economic regeneration and job creation top priorities. As part of that work, I oversaw the establishment of Access2employment, a council service to extend essential employability support to people who need help to get back into work. The Access2employment team delivers employability support to all residents of West Lothian, but with a priority focus on specific groups who have been identified as disadvantaged. They have very strict and challenging targets, which to date have been consistently achieved or exceeded.

On average, the team will work with 1,500 residents of West Lothian each year and will move at least 50% of them into work or training. There are three dedicated locations where the service can be accessed, including two in my constituency at Craigshill and Broxburn. The team also has lead responsibility for PACE—partnership action for continuous employment—in West Lothian, a partnership of key organisations which provide an immediate response for organisations when redundancies occur.

Support is tailored around the individual so that they are equipped with the employability skills that meet the needs of employers, recognising that one size does not fit all. The service has really come into its own during the difficult economic period, experiencing significant increases in the number of clients it works with over the last few years. In October 2009, the Department for Work and Pensions awarded West Lothian council a future jobs fund contract to create more than 200 jobs for young people by March 2011.

Access2employment has led the delivery of that contract and 211 people aged 18 to 24 have now been found employment opportunities, achieving the FJF target. The fund has supported those young people to gain the confidence and skills boost that they needed to find jobs.

One of those who found employment through the future jobs fund in Livingston was Aileen Ross, who was employed by the West Lothian chamber of commerce. She said of her own experience:

“I feel as though the Future Jobs Fund position gave me the chance I needed, to not just get myself back into work but change my career path in a positive direction. On the whole my experience over the last few months with the future jobs fund has been a positive one and I am very grateful for the opportunity I was given.”

Amber Lees was the 211th, and last, employee under the contract. She is now employed by The Pitstop community facility in Addiewell, a former mining community in my constituency, as a community assistant. She said:

“I really enjoy working at The Pitstop and know that I would not have been able to find a job like this without the future jobs fund.”

Margaret Pow, the manager of The Pitstop, which has been highly supportive of the delivery of the FJF contract, commented:

“The Pitstop would not be able to operate in the way it does without the hard work and dedication of the future jobs funded staff we have here.”

There are dozens of similar success stories, with young people in my constituency and across West Lothian who had struggled to find work after leaving school having now, through the FJF and the expert assistance of Access2employment, found work.

Most crucially, the overall success rate in West Lothian has been remarkable, with about 65% of the young people who completed the programme moving into jobs or training—some 15% more than the national average. The added value provided by Access2employment, and its long-established expertise and contacts, has clearly been vital in achieving such significant success. The council’s FJF will end completely in September, but where does the scrapping of the FJF leave Aileen, Amber and thousands more like them?

It is clear that the Government moved to axe the FJF at an indecently hasty pace, before all the evidence on its outcomes was available. The Select Committee on Work and Pensions report on youth unemployment and the FJF, published in December last year, concluded:

“While we accept the Government’s need to make savings to address the public spending deficit, it is our view that insufficient information was available to allow the Department to make a decision to terminate the FJF if this decision was based on its relative cost-effectiveness.”

In fact, there is an increasing amount of evidence to suggest that the FJF has generally been successful and has produced positive results for those who have participated in it. Indeed, a new qualitative study backing the success of the FJF was published last month, albeit with little fanfare, by the Department for Work and Pensions itself.

“Customer Experience of the Future Jobs Fund”, a DWP in-house research report, found that the quality of jobs on the FJF was often high, that Jobcentre Plus generally managed it well, and that the programme had been a huge help in securing jobs for the young people who have been through it. The report states:

“A widespread view amongst respondents who had not found work was that their six month post would help to secure another job in the future. Some of the respondents who had been unemployed for many months plus prior to starting FJF described how their frustration and despair had changed into a real sense of hope for their prospects.”

It goes on to conclude:

“Overall, the evidence from this study suggests that FJF has been successful in up-skilling and preparing customers for work, particularly in terms of increased confidence and belief in capabilities.”

It also states:

“for many participants their reported experiences had been to such a high standard, that they could not think of any improvements to the scheme.”

That hardly sounds like a description of an ineffective scheme, as the Government tried to claim the FJF was a year ago when they announced that they were shutting the programme down.

Support for the FJF has also come from the Scottish Council for Voluntary Organisations, which led the Third Sector Consortium in Scotland, one of the largest third sector providers of the FJF in the UK. Its “Future Jobs: Future Communities” report showed that the FJF helped to support vulnerable people, increase recycling, involve more children in sport and support financial inclusion projects. The report highlighted many specific examples of successful placements in the voluntary sector, including three at Cyrenians Farm, a social enterprise, based in Kirknewton in my constituency.

Martin Sime, chief executive of the SCVO, said the FJF was an example of successful public service delivery. In evidence to the Select Committee inquiry last year, the SCVO also stated:

“We are disappointed that the Coalition Government has chosen to end the FJF early, particularly as this decision was taken so swiftly and without being informed by thorough analysis or evaluation of the outcomes achieved by the programme, which we believe to be favourable when compared to mainstream employment initiatives designed for this client group.”

What of the Government’s alternative, the Work programme? It has been dogged by criticism from all quarters, including from the head of a leading welfare-to-work charity, who also happens to be a Conservative peer. Baroness Stedman-Scott of the Tomorrow’s People charity last week publicly expressed strong concerns about how the Work programme is being implemented, and not least about how voluntary sector providers have been treated. She was voicing the widespread concerns of work charities, many of which have lost out to commercial providers in the bidding process for Work programme contracts.

Earlier this month, Tomorrow’s People and the Centre for Public Service Partnerships published a report that suggested that the Work programme will fail if commercial providers do not help jobless people with the worst social disadvantage. Neil Lee, senior economist at the Work Foundation, has supported this concern. He said:

“As the Work Programme is based on payment-by-results, contractors carry the initial risk. There is therefore the danger that private contractors will focus on investing in places where they are more likely to get people into work to secure a return on investment.”

Perhaps the most disturbing concern has been raised by the Employment Related Services Association, which represents most of the organisations awarded prime contracts to run the Work programme. It has claimed that the welfare-to-work industry could shrink by up to a third in the years ahead, with up to 10,000 jobs at risk. That is because the Government’s own predictions suggest that fewer people will be referred to the Work programme than were referred to similar schemes under the Labour Government.

The ERSA’s chief executive, Kirsty McHugh, said that although she and her members support the Work programme and want it to succeed, there is “huge concern” about its implementation. She said:

“The big unknown is quite how many customers are going to be going through the Work Programme. If, as we think it will, that number turns out to be quite low, our estimate is that the workforce employed to deal with those customers will shrink by 25 to 33%.”

That is breaking new ground even for a Tory Government: a jobs programme that is putting those responsible for running it out of work before it has even begun. On a serious note, that highlights the Government’s lack of ambition in tackling youth unemployment.

Labour believes that a repeat of last year’s bankers’ bonus tax, which brought in £3.5 billion, could, on a cautious estimate, raise £2 billion, which should be used to help create 100,000 jobs, build 25,000 affordable homes, rescue construction apprenticeships and boost investment in businesses. The coalition Government’s decision not to repeat last year’s bonus tax means that even with the increase in the levy announced earlier this year, the banks are still getting a tax cut this year as youth unemployment increases.

In Scotland, Labour adopted an incremental and evidence-based approach to the issue before last month’s Scottish Parliament elections. We consulted with relevant organisations on a £40 million Scottish future jobs fund, which would have built on the strengths of the UK Future Jobs Fund and sought to learn from examples of best practice such as those displayed in my local authority area, West Lothian. That approach, which involves working with experts and local communities, contrasts starkly with that of the coalition Government. At a national level, instead of consulting those who know best how to get young people into work—the people on the ground, such as the dedicated staff at Access2employment—the Government have shut down a programme that is now proving its value and that could easily have been adapted and further improved. Thousands of young people in Livingston, the rest of West Lothian and up and down the country will wonder why the Government have pulled the rug out from under them in this way just when they are in the greatest need of extra support.

In conclusion, I would like the Minister, who I know has drawn the short straw this evening in having to respond to the debate at this late hour, to tell us why the Government acted in such a precipitous way in axing the future jobs fund before all the evidence was available to make an informed decision. Furthermore, what will the Government do now to ensure that the best aspects of the future jobs fund, as so effectively evidenced in my constituency, in the rest of West Lothian and across the length and breadth of the country, are not lost as the Work programme is rolled out, so that young people in Livingston constituency can continue to benefit from expert support in helping them to find work? I thank you, Mr Speaker, and the two Members who have remained in the House.

02:05

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

The hon. Member for Livingston (Graeme Morrice) has, as he rightly said, drawn the short straw this evening, and I am sure that he would have chosen a slightly earlier hour to debate what are certainly important issues. However, I think that, quite appositely, we have finished this evening with a bit of a fairy story, because much of what the hon. Gentleman said was, although well-meaning I am sure, complete nonsense. Let me explain why. Having listened to his remarks for the past few minutes, one would not believe that youth unemployment today is actually 25,000 lower than it was at the general election, that the number of young people on jobseeker’s allowance in his constituency has fallen since the general election or that the trends in the labour market have seen an increase in employment in Scotland. One would not believe that across the country as a whole there are 500,000 more people in employment than there were a year ago and that, very gratifyingly at what are difficult times for the public sector, the private sector is creating jobs at a rate that is significantly faster than the loss of jobs in the public sector. I simply do not recognise the bleak picture that he portrays.

I fully accept that with the challenging youth unemployment in the hon. Gentleman’s constituency and across the country we still have a lot of work to do. That remains a big problem and a big challenge for us. Of course, the figures are somewhat distorted by the bizarre situation that the overall headline youth unemployment figure includes almost 300,000 young people who are in full-time education and who happen to be looking for a part-time job alongside their studies. I do not classify those people as unemployed and I do not think that most reasonable people would. However, the reality is that we still have more than 600,000 young people across the country—many in his constituency, some in mine and some in the constituencies of all hon. Members—who are struggling to get into work in what remains a challenging labour market. I accept that there is a job to be done. The progress that has been made is a welcome step in the right direction, but it is only a small step on a long journey to tackling a real problem.

I disagree with the hon. Gentleman’s comments about the future jobs fund. I know that Labour Members believe strongly that that policy was a significant strategy for dealing with youth unemployment, but I disagree. I do not deny that a number of young people benefited from what were six-month placements—it is important to get the jargon right. “Future jobs fund” was not an honest and accurate title for the programme. They are not jobs, but six-month placements almost entirely in the public, voluntary and community sectors. Because of rules relating to European state aid, it was not possible in almost all cases to provide jobs in the private sector. At a time when it is the private sector that is creating job opportunities, that was a big flaw in the future jobs fund.

The other big flaw was cost: it was massively expensive. It cost four times as much to achieve a job outcome as did the Labour party’s own new deal for young people. It was a hugely expensive programme that did not deliver results significantly out of line with previous programmes at a cost that was comparable to previous programmes. At a time when the Government were dealing with a massive deficit—a huge challenge—we had to take some hard decisions, and those hard decisions were about value for money. Early on, we took a straightforward decision that I stand by to this day and which I believe was absolutely the right one: to focus our attention on apprenticeships. I accept that in Scotland, in the hon. Gentleman’s constituency, responsibility for apprenticeships has been devolved to the Scottish Administration. I admired his bravery in referring to the Labour party’s plans prior to the Scottish parliamentary elections, because I am not sure that they were entirely welcomed by the electorate north of the border.

[Graeme Morrice]

It is probably true to say that the Scottish Labour party was not quite successful in last month’s Scottish parliamentary elections, but that was not because of our policies on jobs, employment, or apprenticeships; most people recognised that those were our top priority. There were other reasons why we did not quite win. I do not think that it was because of our position on getting young people back into employment.

[Chris Grayling]

Of course the hon. Gentleman knows more about Scottish political affairs than I do. Looking at the issues from south of the border, I simply observe that it is quite clear that the Labour manifesto for those elections did not capture the attention of those north of the border in the way that he and his colleagues might have wished it to. However, it is certainly the policy of the Administration in Edinburgh to pursue an apprenticeship route. It is very much the view of the Government that apprenticeships offer a much better option for young people. They offer a pathway to much longer-term skill building, and to a real job that can last a number of years. We all hope that in most cases it will carry on beyond the apprenticeship period and become long-term employment—in an organisation in the private sector, in most cases, where there is a real chance of growth and opportunity. Sadly, right now, for reasons that we all know and understand, the same growth and opportunity is not shared in the public sector.

That was a very conscious decision, and I was pleased when, earlier this week, my colleague the Minister for Further Education, Skills and Lifelong Learning, in the Department for Business, Innovation and Skills, published figures on the Government’s progress on apprenticeships and set out a quite remarkable increase in the take-up of apprenticeships over the past 12 months. When we add to that the additional apprenticeship places that were announced by the Chancellor of the Exchequer in the Budget, we find that the package of apprenticeships that we are offering, together with the package of apprenticeships that will be set up in Scotland and Wales, will offer young people across the United Kingdom a better option than the future jobs fund.

[Graeme Morrice]

I am grateful to the Minister for allowing me to intervene a second time. Certainly, I would welcome any increase in the number of apprenticeships for young people. Of course, the Government are building on the strengths of the modern apprenticeship scheme introduced by the Labour Government in this place and the Labour Administration in the Scottish Parliament. What does the Minister say in response to my comments about the criticisms made of the Government’s Work programme by a series of people, including Baroness Stedman-Scott, who was particularly critical of the scheme?

[Chris Grayling]

I shall go on to talk about the Work programme in a moment, but first let me touch briefly on one other important part of our strategy: the work experience scheme that is being organised through Jobcentre Plus. We believe that one of the key barriers to employment for young people is that age-old problem—they cannot get a job unless they have experience, but they cannot get the experience unless they have a job. We discovered very soon after taking office that under the previous Government, any young person who did a period of work experience would lose their benefits. We have changed that; young people can now do up to eight weeks’ work experience while continuing to claim jobseeker’s allowance. That allows them to get into a company, demonstrate their potential, and get to know the employer and vice versa. We believe that in many cases that will be a bridge into an apprenticeship or full-time employment.

There are already many thousands of young people going into work experience placements under a scheme that we launched about three months ago. We have commitments from employers to tens of thousands of placements over the next 12 months. We believe that that scheme can be a simple, quick vehicle that opens up opportunities for apprenticeships and other employment for young people, and allows them effectively to demonstrate to an employer what they can do, and break down that initial barrier. An employer may say, “Actually, I like this young person; they are doing something for my organisation, and they can make a difference.” That is the second part of our strategy.

As the hon. Member for Livingston rightly said, for those who have been unemployed for a longer period, or who come from a more challenged background, we have the Work programme. I am afraid that I simply do not recognise the pessimistic view that he portrays of the programme.

It is undoubtedly the case that there are some issues for voluntary sector organisations in the negotiations with prime contractors, sorting out the best possible deals for themselves. I have been very clear, and I am very clear again tonight on the record, that as far as I am concerned we have recruited a good team led by prime contractors and backed up by teams of organisations—specialist, community, voluntary sector, smaller private sector and public sector, such as local colleges—to deliver the Work programme across the country. We expect those teams to remain intact.

I have no doubt that there will be some to-ings and fro-ings in the negotiations between prime contractors and subcontractors over the next few weeks, but it will not be acceptable for prime contractors to treat their subcontractors as what has been called “bid candy” and to drop them. Any prime contractor that does that can expect to lose its contract. So I do not recognise that there is a deep-rooted problem. Yes, of course there are some to-ings and fro-ings in negotiations; that always happens in a big contractual changeover.

The hon. Gentleman talked about a lack of referrals to the Work programme. I can tell him that already many tens of thousands of people are on the Work programme and are starting to receive support from the providers. One of the bits of feedback that we are getting from providers is how pleased they are that we have delivered the volumes that we promised at the time we promised, in stark contrast to the flexible new deal programme under the previous Government, which was a disaster when it started. The people who were promised to providers did not materialise. Providers found that they did not have the people they had expected. That is not happening under the Work programme. The feedback that we are getting is that providers are pleased with the volumes of people who are waiting for support.

This is the most ambitious back-to-work support programme that this country has ever seen. In terms of numbers, it is bigger than any previous programme. I do not accept any figures that say otherwise. It is available to every single person who is claiming employment and support allowance, and it is available to every single person on jobseeker’s allowance who crosses the threshold of 12 months for an adult jobseeker, nine months for a young person, and three months for somebody who comes from a challenged background. Every single one of the people in those categories has access to the Work programme on a scale that has not been seen before in a previous programme.

This radical new approach—payment by results—says to provider organisations large and small, from big multinational companies down to small community projects, all working as a team, “You deliver the support that will work best for the people you are helping, get them back into the workplace, help them stay in work for a period of time that can be as long as two years and three months, and we will pay you on the basis of your success.” I am confident that that will unleash best practice around the industry. These organisations can succeed only if they are excellent at what they do.

The voluntary sector organisations that have real skills have a first-rate opportunity because if they are the best at helping these people into work, they will succeed in the Work programme because their skills will be very much in demand. We have in total 500 voluntary sector organisations across the country which have all signed up to the Work programme. As part of the tendering process, they have signed pieces of paper to say that they are happy with what is on the table. They will now deliver support and expertise to the prime contractors to help the long-term unemployed get back into the workplace in the hon. Gentleman’s constituency, in my constituency and in the constituency of every hon. Member throughout the country.

As of this Thursday, every single part of the country will have been covered by the Work programme on time, as planned. The contracting process has taken place in a very short time by public standards and in many parts of the country is already starting to help people into work. The package of support includes the work experience scheme, our real focus on expanding the number of apprenticeships, the intensive personalised support through the Work programme, and a greater devolution of flexibility and responsibility to the front line in Jobcentre Plus to tailor support in areas where those individual staff are working to the realities of those areas. To be able to look at a constituency like the hon. Gentleman’s and say, “For the shorter-term jobseekers who have not yet accessed the Work programme, what are the extra things we need to do in our area to help our own client base—

02:19

House adjourned without Question put (Standing Order No. 9(7)).