Westminster Hall

Tuesday 13th September 2011 Westminster Hall

Tuesday 13 September 2011

[Mr Mike Hancock in the Chair]

Tourism in Yorkshire

Tuesday 13th September 2011 Westminster Hall

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

09:30

[Nigel Adams (Selby and Ainsty) (Con)]

I thank the Minister for attending this debate, which is important for the Yorkshire region. I also thank my Yorkshire colleagues for getting up early this morning for a debate on an industry that means so much to our great county.

The tourism industry is a rare wealth generator for this country and one of our most important industries. The variety and history of our landmarks, monuments, countryside and culture are powerful magnets for visitors from all over the world. Important events such as next year’s Olympics will continue to contribute greatly to putting Britain firmly at centre stage, globally.

A little more than a year ago, the Prime Minister gave a speech on the importance of tourism in the UK and launched the first ever tourism policy in this country. That landmark policy set out targets for attracting 4 million extra visitors to Britain over the next four years and is backed by £100 million-worth of marketing campaigns. Along with that increase in visitor numbers, the policy aims to increase the proportion of UK residents who holiday in the UK to match that of those who choose to holiday abroad each year.

This country has some of the most spectacular and wide-ranging scenery and holiday destinations, most particularly—I am sure those present will all agree—in Yorkshire, God’s own county. It is important that we encourage the British people to make the most of what they have on their doorstep.

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

I thank my hon. Friend and Yorkshire colleague. He will be pleased to know that I was happy once again to take my family to Yorkshire on our summer holiday. I apologise to him and to you, Mr Hancock, because I have to leave for an equally important event for Yorkshire; it is the launch of the Leeds city region bid for the green investment bank—something that colleagues will also support.

My hon. Friend is right about the offering that Yorkshire has, with two national parks, some of the finest coast in the country and a host of attractions. I pay tribute to the wonderful and important work that Welcome to Yorkshire does in promotion. I ask the tourism Minister not only to be a champion for tourism in this country, which I am sure he will be, but to ensure that he speaks to his colleagues in the Treasury—

[Mr Mike Hancock (in the Chair)]

Order. You are pushing your luck; this is an intervention, not a speech. You have apologised for having to leave, so ask your question and then we will move on.

[Greg Mulholland]

Thank you, Mr Hancock. I am asking my question now. Can the Minister, in his discussions with the Treasury, ensure that sustainable development cannot include the deliberate closure of pubs and other community assets, which are enormously important to the whole of Yorkshire? People are cashing in those assets for the one fast buck of development, but that is not sustainable development.

[Mr Mike Hancock (in the Chair)]

That is not a precedent for anyone else. Mr Mulholland, I think you owe the House apologies for that; it was an intervention, not a Member’s speech or a speech in lieu because you had to leave. May we bear that in mind for future reference?

[Nigel Adams]

I appreciated that intervention, despite its length. I echo what my hon. Friend the Member for Leeds North West (Greg Mulholland) said about pubs—I am a fellow member of the all-party save the pub group. The point that he made is incredibly important.

Not only is this country well worth a visit, but the tourism industry is vital to our economy, and the 200,000 businesses directly involved are key contributors to Britain’s economic recovery. They provide £52 billion of our gross domestic product and 4.4% of our jobs, and they have contributed to making tourism one of the fastest growing sectors, providing employment in our most rural communities and enjoyment to millions. The industry accounts for almost £90 billion in direct spending each year and, equally importantly, it rises above north-south or regional divides and creates wealth and employment in all parts of the country. It remains a fantastic, cost-effective way to rebalance the fortunes of the country away from past reliance on financial services, construction and the south-east.

I turn to tourism in Yorkshire. As I am sure we are all aware, Yorkshire is England’s largest county, with a population of 5.5 million—equal to that of Scotland and twice that of Wales. Tourism is the county’s third largest industry and continues to support a quarter of a million jobs and more than 25,000 businesses, many of which are in rural and coastal areas that depend solely on visitors for their livelihoods. I am pleased to see Members representing coastal areas in the Chamber today.

All my Yorkshire colleagues present today are well acquainted with the county’s official destination management organisation, which is called Welcome to Yorkshire. I am delighted to see the senior management team of Welcome to Yorkshire, who are—by sheer coincidence—in the Chamber today. The organisation is widely heralded as a national success story that has transformed the UK tourism landscape. I confess to being, in a previous life, a director of its predecessor, the Yorkshire Tourist Board. What now exists is a completely different beast; Welcome to Yorkshire is doing a fantastic job.

[Neil Carmichael (Stroud) (Con)]

Yesterday, I launched the Stroud special train, which is designed to pick people up from Paddington and take them to Stroud and, obviously, Gloucestershire. The train will run every day, with cheap tickets and advice on what people can and should do once they reach their destination. It seems to have caught the imagination of people in Stroud and the rest of Gloucestershire. Does my hon. Friend think that that kind of thing should be done for Yorkshire? Can he not imagine trains going from King’s Cross to Yorkshire, with the same sort of promotion, tickets and, effectively, navigation of people to the right place?

[Nigel Adams]

That is an excellent example. Yorkshire is fortunate to have a good railway service to and from London, but I am sure that the railways Minister might be interested in a similar proposal that involves taking advantage of the high-speed rail network in a few years’ time—such a train could be up in Yorkshire within several minutes, I imagine. The Stroud train is a great initiative and, although we are well served in Yorkshire, it is certainly something we could take on board.

Since Welcome to Yorkshire was launched in 2009, the value of Yorkshire’s tourism has increased from £5.9 billion to £7 billion, adding more than £1 billion to the economy. Its role is to change perceptions of Yorkshire, by projecting a new, dynamic and vibrant county sitting alongside its tradition, history and natural beauty. The Welcome to Yorkshire gates at King’s Cross station fill me with great pride every Monday morning when I arrive in London, reminding everyone that they would surely rather be spending their time in Yorkshire than London.

It goes without saying that Yorkshire is awash with tourism assets, which are the envy of the nation. I do not mean to upset any of my Yorkshire colleagues, but I am sure that they will allow me to mention a handful and that they will put me right if I miss a few. We are lucky enough to host, in the constituency of my hon. Friend the Member for Scarborough and Whitby (Mr Goodwill), the world’s oldest and greatest cricket festival, at Scarborough. We have two world heritage sites, Studley Royal and Fountains abbey, and Sir Titus Salt’s vision at Saltaire.

We have some fantastic churches, abbeys, minsters and cathedrals—none finer than Selby abbey in my own constituency. The weekend before last, I visited a fantastic small church in the village of Birkin in my constituency, a Norman church which has lasted for all those centuries and is an absolute gem, and a great potential tourist destination. Hopefully, it will not be blighted by the proposed wind farm adjacent to it.

Other great examples of what we have in Yorkshire are UNESCO’s first and only world city of film, Bradford, and six national museums. Yorkshire is arguably the food larder of Europe, and we have 190 independent breweries, which many of us are doing our best to ensure that we visit in the course of this Parliament. We have the seventh most visited attraction in the UK in Flamingo Land. We have more blue plaque awards for quality beaches than any other county, and the world’s No. 1 heritage railway—North Yorkshire Moors railway—which was featured in ITV’s “Heartbeat” and in Harry Potter movies. I could go on.

Our destination management organisation has revolutionised the approach of the UK’s tourism industry as a whole by raising standards and redefining the role of traditional tourist agencies. Its return on investment is impressive, with £40 delivered to the local economy for every £1 invested in the organisation, £18 of which goes back to the Treasury in tax receipts. There is not much not to like about that; it is a great return on investment.

The tourism policy’s aim is to attract greater numbers of visitors over the next four years, and Welcome to Yorkshire has become an innovative international ambassador, tirelessly promoting Britain and, of course, Yorkshire, as leading tourism destinations. It has even been suggested that, within the tourism policy, Yorkshire has become an attack brand, capable of rivalling London as a super-destination for international visitors—although we do not want to stir up too much rivalry.

According to independent research from Visit England, we are succeeding in the role of encouraging more people to visit Yorkshire, to stay longer, and to spend more. In the first quarter of 2011, visits to Yorkshire were up 14% on the same period last year, compared with just a 5% increase throughout the UK as a whole. During the same period, length of stay increased by 15% in Yorkshire, compared with a 2% decrease nationally. Yorkshire also experienced a 25% growth in visitor spend, compared with just 5% for the UK, with overseas spending at 70%, compared with a 7% expenditure increase in the UK overall. In the two years since Welcome to Yorkshire was launched, 4,000 new jobs have been created in the tourism industry in Yorkshire. I have listed many figures, but they are impressive and worth mentioning.

The organisation has won numerous awards, including the world’s leading marketing campaign and Europe’s leading marketing campaign, and has been shortlisted for status as the world’s leading tourist board 2011; I believe that it is England’s only representative, and it is up against the likes of Malaysia, the Maldives and New York. We wish it well with that award. However, the progress and success of Yorkshire’s tourist industry is now at risk.

When Welcome to Yorkshire was launched, it had funding of £10 million a year for three years, but that funding stream ends on 1 April 2012. When it ceases, in just over seven months, its resources will be vastly reduced, leaving it to be funded through a cocktail of revenue streams, including strong private sector support from several thousand businesses that partner the organisation, local authorities and the newly created local enterprise partnerships.

Those new methods of funding are concurrent with the tourism policy’s stated aims for tourism bodies to be less reliant on public funds, and more locally responsive. I support that. It seems all very well, self-sufficient and in order, until one discovers that Visit Scotland received £66 million in funding in 2009-10, the majority of which came from Westminster. As I pointed out, the populations of Yorkshire and Scotland are the same, with similar sized tourism industries, employing 240,000 people in Scotland and 254,000 in Yorkshire, yet Scotland received six times more funding than Yorkshire in that financial year.

When centralised funding ceases on 1 April 2012, Visit Scotland will continue to receive funding from Westminster, but England’s largest county will receive nothing. If we are successfully to rebalance the UK economy, as we all know we must, it is clear that some central funding, not necessarily at the same level as in Scotland, is needed in England for super-destinations such as Yorkshire, which the Government have already identified. I urge the Minister to consider that in great detail.

[Mr Gerry Sutcliffe (Bradford South) (Lab)]

I congratulate my hon. Friend on securing this debate. He is rightly making the point that tourism is important to local economies, particularly in cities such as Bradford, as is the investment that comes to Bradford from tourism, whether in Haworth or the variety of other assets that we have, and which I will talk about later. Should not the Government recognise that if that funding ceases, and Welcome to Yorkshire does not succeed, local economies such as Bradford will be affected?

[Nigel Adams]

My hon. Friend makes a good point. The days of going cap in hand to the Government, and of organisations such as Welcome to Yorkshire being funded totally from the public purse, are gone, and rightly so, but we must be mindful of the impact of complete cessation of funding. That is the point that I want to raise with the Minister, and I have another suggestion for a way of squaring the circle. The Government’s tourism policy has identified Yorkshire as one of a few elite areas capable of being an internationally attractive super-destination, with pulling power alongside the likes of the Cotswolds, Cornwall, the Peak district and the Lake district. The risk is that, without continuing funding, Yorkshire may no longer be able to keep up.

One idea being bounced around and discussed is that the Government should match-fund the private sector membership of England’s attack brands over a minimum subscription level of £1 million; Welcome to Yorkshire is capable of extracting money from the private sector—from industry in Yorkshire. That would be extremely cost-effective in helping to fulfil the Government’s goal of rebalancing the economy geographically, investing in the success of areas that they have identified as being examples of excellence in UK tourism and helping to increase a major local and national industry, safeguarding jobs and generating additional wealth.

I welcome the Secretary of State’s recent announcement that £3 million will be made available for tourism in connection with the Olympic games, and I am keen to hear from the Minister how much money Yorkshire is likely to receive from that £3 million. Continued support of our leading tourism agencies will also help the Government to achieve their three stated aims of attracting more visitors to Britain, increasing the number of Britons who holiday at home, and improving the sector’s competitiveness and efficiency.

I realise that I am biased towards Yorkshire, as are many of my colleagues. I am Yorkshire born and bred, and I urge the Minister to look at the facts and figures that I have mentioned, all of which prove that Yorkshire is a worthy investment—not only for our visitors’ time, but for the national economy.

09:40

[Mr Gerry Sutcliffe (Bradford South) (Lab)]

I am grateful to my Friend the hon. Member for Selby and Ainsty (Nigel Adams) for raising this important debate. I am delighted that members of Welcome to Yorkshire are in the Chamber and that parliamentary colleagues from all parties are united in saying how wonderful Yorkshire is. I say that as a Lancastrian. By an accident of birth, I was born in Salford, but I have lived and worked in Yorkshire all my life, and was educated there, so I hope that that will not be held against me. I fully understand the importance of the tourism industry to Yorkshire, and during my intervention on my hon. Friend I referred to the importance of tourism to economies such as Bradford.

Welcome to Yorkshire and its predecessors have brought people together. In the past, tourism involved competing city against city, area against area. The good news is that Welcome to Yorkshire has brought the whole of Yorkshire together, and collectively its assets and other fantastic attractions, such as culture, sport and recreation, have been packaged together. It fills me with pride whenever I watch adverts about Yorkshire, wherever I am in the UK or indeed the world. Welcome to Yorkshire has united the county to ensure that we maximise what we can from the tourism industry.

The hon. Member for Selby and Ainsty discussed Yorkshire’s various assets, and I could go on at length about the wonders of Bradford. He mentioned Sir Titus Salt’s village, Saltaire. It has a festival this week, and people will be coming from all over the UK to enjoy its benefits and delights, not least the Saltaire brewery. Talking about breweries was a noble attempt by the hon. Gentleman to encourage us to go to as many as possible during the lifetime of this Parliament. I will try to help him, not least by visiting the Timothy Taylor brewery in Keighley, which is world famous for its bitter and other delights. It is a brewery, and it employs people.

Yorkshire has breweries but also culture, and it is amazing what Yorkshire has produced in terms of film, culture and arts. Last week saw the launch of the film “Jane Eyre”, and I understand that a remake of “Wuthering Heights” is due to be released shortly. That shows the impact of Yorkshire. Behind those films are the great delights and wonders of the Bronte family at Haworth, but jobs are connected to those great assets.

We have mentioned breweries and culture. As a former Sports Minister, I wish to talk about sport in Yorkshire. It is fantastic that we have got the Olympics, and it is great to see the Minister, and the shadow Minister my hon. Friend the Member for Ashfield (Gloria De Piero), in the Chamber today. We will have the delights of the Olympics next year; there are training camps in Yorkshire, which is fantastic and will boost the economy. Young people will draw benefits from having international athletes in our community.

Sport is important in many other regards. Yorkshire has nine great race courses, which is more than any other county. The race course at York is the jewel in the crown with the one at Doncaster not far behind, but people also enjoy the smaller courses such as those at Wetherby and Ripon. Those assets are important, and Welcome to Yorkshire has increased its spend in Yorkshire and brought people together.

The hon. Gentleman is right to say that the days of handouts are gone, but the Government must recognise how important it is that organisations such as Welcome to Yorkshire continue to operate. We must encourage more people from the private sector and more individuals to become members of Welcome to Yorkshire and to join the crusade of extolling the virtues of Yorkshire. The Government have a role to play not only at national level, but at local level, and we must keep the momentum going. Those who support Welcome to Yorkshire do a fantastic job, and we must ensure that people are behind them.

I hope that the Government will listen to the hon. Gentleman’s comments about the possibility of matching funding and about whether there are other ways we can be creative. As I have said, in cities such as Bradford the tourism industry is perhaps akin to the engineering and textile industries in the past—tourism is a key player in the city’s regeneration. Bradford has a diverse population, and we have the opportunity to enjoy wonderful international cuisine. We are proud of the curry run in Bradford, and people can come for the weekend and enjoy the flavours of Asia.

Bradford has been called “The World in a City” because of the make-up and diversity of its population. That developed over centuries and is based on the wool capital of the north that Bradford once was. I know that the Minister, and the shadow Minister, will recognise the importance of the tourism industry, not only in terms of the beautiful and wonderful things that we see in Yorkshire, but because of the impact that has on our economy. I would be worried if organisations such as Welcome to Yorkshire were not supported by the Government and others, and this morning’s debate provides a wonderful opportunity for us to state our thanks to Welcome for Yorkshire for the work it does in the region. I hope that the Minister and the shadow Minister will do what they can to ensure that the momentum that has started will continue.

09:54

[Andrew Jones (Harrogate and Knaresborough) (Con)]

May I start by congratulating my hon. Friend the Member for Selby and Ainsty (Nigel Adams) on securing this debate? Tourism is an important issue in Yorkshire, and it has been important for me during my career. I spent many years working in the tourism sector, first running the marketing team at Going Places, and more recently on the board of Harrogate International Centre. Tourism is a critical part of our local economy, and it is a sector that drives our economic growth. It is the third biggest sector in the county as a whole, and it is the biggest sector of the economy for my part of the county, North Yorkshire. Overall, the industry employs 250,000 people and accounts for just less than 10% of our economy. There is an enormous scale to our tourism industry.

Tourism is a marvellous success story. Visitor numbers are up by 12% this year, which vastly outperforms other parts of the country even when building on high levels of visitors in the first place. I read that we have about 215 million visits to Yorkshire every year, which is more than to Disney worldwide, so the scale is significant. I want to say why the tourism sector in Yorkshire is doing so well, mention a little about the business tourism sector, which is often ignored, and comment on where we might perform a little better.

There are a number of reasons for the encouragingly strong performance by Yorkshire, but the main reason is the quality and variety of the tourism offer. The product is excellent, but it is not a single product and the key is in its variety and choice. Yorkshire delivers a world-class offer in many different sectors of the tourism industry. From family holidays to short breaks, no destination can better match the heady mixture of landscape and heritage offered by Yorkshire. Underpinning much of that is the stunning natural landscape. Yorkshire men often refer to our county as “God’s county”. I have occasionally had a bit of a joke or banter about that with tourism Ministers in the past, but we continue to refer to Yorkshire as God’s county because it is.

Last week, Mintel’s annual British lifestyles survey rated Yorkshire as the happiest place to live in the UK. Yorkshire men and women are more satisfied with their lives than people in any other part of the country, and one reason for that is the abundance of open spaces. The range of accommodation and hospitality available in our county has breadth and quality. Visitors can be catered for in different styles and to different budgets, and the product is very good. It is not possible to drive an industry if the product is poor.

The tourism sector has had a strong product for some years, so what is driving growth and causing visitor numbers to accelerate? I think that it is the combined effort by the industry and the way in which the county has set about selling itself. We saw a change some years ago with the move from marketing campaigns based on destinations, where towns and cities marketed themselves, to more co-ordinated campaigns based on the types of holiday and break available. That is a more customer-driven approach that shows fantastic insight and has been a practical way forward. It has meant the promotion of heritage, art, sport, spa breaks or whatever type of holiday people are looking for. I say sport with a heavy heart, because yesterday Yorkshire county cricket club was relegated. [Hon. Members: “ Shame”.] It is a shame, but I cannot really say any more about that.

That change in the tourism industry has proved extremely successful and combined with the great efforts made to improve the offer available and create new products. Tourism entrepreneurs are bringing new developments to market. Around the Harrogate and Knaresborough area alone, we are seeing new rooms and a spa at Rudding Park hotel, a new golf resort is planned at Flaxby, Harrogate’s Turkish baths have recently been refurbished, and we have the Royal Horticultural Society’s Harlow Carr garden and its successful partnership with Bettys tea rooms. Across the county there is ongoing investment in some of our major stately homes, such as Harewood house and Castle Howard, a location that my hon. Friend the Member for Selby and Ainsty will know well as he used to live about a mile away from it.

There are efforts to keep what Yorkshire offers live, fresh and new. People will have read recently about aspirations to bring the opening stages of the 2016 Tour de France to Yorkshire, and to host the British leg of the World Rally Championships. Aspirations are high. Underpinning all that, however, must be a culture of service. A holiday destination is not only about product but about the service offered by individuals. That is firmly understood. In Yorkshire, there is always friendly service and a welcoming approach.

There has been a recognition that the area must compete and win as a whole. Community groups and local authorities have been playing a major role. The excellent work of the In Bloom teams, which I support locally, makes our communities not only better places in which to live, but better places for visitors. The Harrogate In Bloom team and their partnership with the borough council’s very good parks department play a critical role in making Harrogate Britain’s premier floral town.

The improvements in Waterside in Knaresborough, driven by the Renaissance Knaresborough group, have improved the walk and the views of the river, the castle and the crag. That iconic Yorkshire view has been much improved.

My point is that we are seeing growth coming from a quality product, good service, an entrepreneurial spirit and effective partnership working, but also from the entrepreneurial vigour with which that is sold. At this stage, I join the praise for Welcome to Yorkshire. The whole team, under the dynamic leadership of Gary Verity, has displayed professionalism and zeal and has really made a difference. It is good to see some of the team in the Public Gallery today.

There is one part of our tourism industry that does not receive as much attention but that can be an important driver of business growth—business tourism. There are huge overlaps between leisure and business tourism. From my experience in Harrogate, I know that visitors who come for conferences often return to the county later for leisure breaks, too. However, that is a different market and, at the moment, it is a troublesome market that has obviously been affected by current economic conditions. As I have said, I was on the board of the Harrogate International Centre. That conference centre brings to the area 300,000 visitors and £150 million of spend and supports more than 5,000 jobs, so business tourism is clearly a major player in my constituency. It has been a success story, irrespective of the current trading difficulties. The drivers of success in that field are, again, investment and partnership working.

I will share a couple of examples to make my point. Investment in new facilities is fundamental. People have to keep their offer up-to-date, relevant and attractive, because many new entrants are challenging for business in the marketplace. In Harrogate at the moment, there is a £13 million scheme to build new exhibition halls. I look forward to that scheme coming online next year, as it will be a significant addition to the offer. I have been very involved in making that deal happen, which will be a huge tonic for our conference industry.

[Mr Greg Knight (East Yorkshire) (Con)]

Does my hon. Friend agree that sometimes local authorities could do more in encouraging business tourism, because one of the problems that most businesses face when organising a conference is lack of parking spaces? If we are to encourage more businesses and more business conferences to come to Yorkshire, we need to ensure that there is adequate car parking near any exhibition centre that may be operating.

[Andrew Jones]

I agree with my right hon. Friend. Ensuring that the offer is welcoming to visitors is critical. All local authorities should have that in mind all the time. Parking facilities are necessarily an important part of that, but so are other means of transport, too. Local authorities should be working together to secure better parking provision, and they should lobby Ministers and the Highways Agency for improvements in the road and rail networks. I strongly agree with my right hon. Friend’s point.

I was recently at the opening of a trade show, the home and gift show, in the Harrogate International Centre. The organisers told me that they would use the new facility, but I have also spoken to many delegates, who have commented on the importance of transport connections to the decision about where to locate a conference.

The biggest single show in Yorkshire is a mixture of business and leisure. The Great Yorkshire show, organised by the Yorkshire Agricultural Society, is a magnificent event. It has bucked the trend in agricultural shows by going from strength to strength. Indeed, this year it was just four visitors off its record attendance, so if the Minister had been able to visit God’s county for the show and brought his family, we would have had a record! He should take that as a standing invitation. If he can come up to future events, I will be delighted to provide him with tickets—I would happily buy those. I hope that we can enjoy attending such an event in due course.

There is a strong partnership that helps to promote business tourism in my area. Called Destination Harrogate, it is an association of the leading hotels, which work with the conference centre, the local council and the media to bring business to Harrogate. I support its work, which has been excellent, but there is one example of partnership working that I want to draw to everyone’s attention—the Harrogate hospitality and tourism awards. Those awards are all about celebrating success and outstanding service. It is right to recognise and reward what makes a difference to customers. The awards are used by a variety of local players to showcase their offer to visitors and to build relationships.

I am conscious that I am describing the factors involved in making a successful sector even more successful, but it is not without its problems. Other hon. Members have spoken about funding. I want to highlight a feature that the industry is talking about a lot at the moment—a potential subsidy being paid by local councils to conference organisers to bring their conference to a venue. The team at the Harrogate conference centre think that that is a major factor in the market and have questioned whether it is appropriate for local councils to use council tax or Government grants in that way. I am not sure whether that is classed as state aid, so its legality might be questionable. The issue needs to be explored.

One factor that is a key challenge for the future of our industry is the transport infrastructure. There are 220 trains a day from London to Yorkshire, but we certainly have room for improvement. As a region, we have not enjoyed the same long-term investment in transport as other regions, but I can say to the people of Yorkshire that they have a new set of MPs, who are working together to address that issue. I have been working with the chamber of trade and commerce in Harrogate to secure better rail connections. We have secured our first direct London-to-Harrogate service in 20 years and are now working on a scheme of improvements to the Leeds, Harrogate and York line. I applaud the work done by the chamber of trade and commerce.

A major problem is our lack of air links. Direct links to Heathrow or Gatwick do not exist. We need connecting flights, but we do not have them. That is a factor in our performance in the international business exhibition market. Indeed, I think that transport is a reason why the UK underperforms in the huge international business exhibition market.

Overall, however, the tourism industry in Yorkshire is doing well. The reasons for that growth are quality products, new investment, excellent service, working together and good marketing. Those are sound ways in which to grow any industry for the future. The industry understands what drives it and is determined to make it even better. Indeed, there are lessons from Yorkshire that the rest of the country could learn. I hope that as a country we do learn them, because tourism could be at the heart of the economic recovery that we all need.

10:08

[Julian Sturdy (York Outer) (Con)]

It is a pleasure to speak under your chairmanship again, Mr Hancock. It is also a great pleasure to speak in this debate. I congratulate my hon. Friend the Member for Selby and Ainsty (Nigel Adams) on securing a debate that is so important to our region. I echo the sentiments already expressed by fellow Yorkshire Members on both sides of the Chamber.

Tourism is a key economic driver across the Yorkshire region as a whole and to the city of York directly, creating 23,000 jobs in the city, generating £433 million for the local economy and promoting the many visible and, indeed, hidden treasures of God’s own county to more than 7 million visitors a year.

As my hon. Friend the Member for Selby and Ainsty has said, the Prime Minister made a key speech in August 2010 about the importance of tourism to the UK economy. Tourism is worth at least £47 billion a year to the UK economy, with more than 1.7 million people employed in the sector at present. Throughout his speech, the Prime Minister admirably stressed the importance of a renewed focus on tourism and the need for Britain to break into the top five in the World Economic Forum’s travel and tourism competitiveness ratings.

If Britain is to achieve that goal, a vibrant, growing and resilient tourism sector across Yorkshire will be crucial. However, too many people still automatically think of London when they think of British tourism. The capital is indeed a remarkable and historic place, and it is undoubtedly one of the greatest cities in the world—up there even with the great city of York. However, there is more to Britain than London, and if we are to boost the tourism sector, we need to boost our support for local tourism in regions across the country. With that, I pay tribute to Welcome to Yorkshire’s success in our region, from innovative advertising to key partnership working.

My hon. Friend the Member for Selby and Ainsty has mentioned King’s Cross station. Similarly, on the few times I fly into Manchester airport, I see the sign saying “Gateway to Yorkshire”, which always lifts the heart of any Yorkshire man. I am sorry that the hon. Member for Bradford South (Mr Sutcliffe) has had to leave, but he is a keen Manchester United supporter, and he will have seen that sign many times.

As one of the two MPs for the city of York, I shall focus particularly on tourism in York. As many Yorkshire colleagues present will testify, York is a beautiful and historic city. It is situated on the banks of the River Ouse and surrounded by quaint villages and spectacular landscapes. From its Roman ruins and Viking remains to the industrial legacy of the National Railway museum and the jewel in the crown that is York minster, York is truly one of Europe’s most inspirational and eye-catching destinations.

More than 1 million people a year walk on the city’s historic walls. For a Yorkshire man or woman, it is almost a ritual to be walked over the walls by their father or grandfather as a young child. Originally designed to defend the city from attack, the walls now stand as a proud symbol of York’s history and international standing.

The challenge for York, as for so many areas, is to compete in an increasingly tough tourism market during extremely difficult economic times. That is why regional partnership working, which my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones) has mentioned, is so important. York has already benefited from such partnership working, which brought about the refurbishment of the Yorkshire museum, which now receives record numbers of visitors.

Yorkshire racing and the Ebor festival are other examples. The hon. Member for Bradford South touched on Yorkshire racing, and Welcome to Yorkshire got involved in promoting racing across the region two years ago. This year, the numbers at the Ebor festival were up 16% on the back of record attendance figures last year. Some 360,000 people visited the race course last year—the highest number since racing started on the Knavesmire in York in 1761. Members should think of the impact those growth figures have on the economy of not only York but the wider region. Similarly, the production of “The Railway Children” in London lifted visitor numbers at the National Railway museum by 6%.

I welcome the Government’s tourism strategy, which they published in March, and I agree with their three aims of launching a £100 million marketing campaign, increasing the proportion of UK residents holidaying in the UK and increasing the sector’s productivity—no one can argue against those—but we must make sure that the money is channelled through the right areas to deliver the biggest impact.

I acknowledge the important role played by local authorities in promoting local tourism, and I congratulate the Minister on a policy that will incentivise local authorities to do more on that front. I hope reforming business rates revenue will ensure that local authorities reap the full rewards of their tourism strategies, rather than simply picking up the costs. Such incentives should drive City of York council to do even more to promote the city’s tourism industry. I would, however, be interested to learn the Minister’s thoughts on the role played by local enterprise partnerships in local tourism. How much responsibility for tourism are those new bodies expected to pick up in the coming years?

In his speech last August, the Prime Minister stated that

“tourism is one of the missing pieces in the UK’s economic strategy.”

I agree wholeheartedly with those sentiments, and I would be grateful if the Minister were to provide an update on the Government’s work internationally to promote tourism in Britain and specifically in Yorkshire. Likewise, the creation of business-friendly conditions is key to supporting the tourism sector in cities such as York. Such conditions encourage entrepreneurship and support small local businesses, which are crucial to York’s vibrant atmosphere. I would therefore be grateful for the Minister’s thoughts on whether the Government are doing enough on that front.

I want briefly to mention the funding of Visit York. Visit York is having to apply for alternative funding, and one of its bids is being made to the regional growth fund via VisitEngland. Given that it faces budget cuts, I would be grateful if the Minister could advise it on how best to apply for funds elsewhere and if he could give us his thoughts on how partnership working across the region might drive economies of scale.

I appeal to the Government to retain their strong focus on tourism. The sector needs encouragement and reassurance. Cities such as York have much to offer, as long as enough support is provided during economically challenging times. As a result of the dynamic and innovative work of Welcome to Yorkshire and Visit York and the partnerships they have formed, the tourism industry in our region is in great heart. Those bodies have proved themselves great wealth creators in our region, and that must always be remembered in any funding formula. For that success to continue, however, we need a level playing field. In that respect, I support my hon. Friend the Member for Selby and Ainsty in his drive for matched funding for the tourism industry.

As I have mentioned, the city of York and our region have a magnificent story to tell visitors, but we, as representatives of our region, also play a role, in proudly talking about our beautiful, historic county and in promoting its many delights and attractions.

10:17

[Gloria De Piero (Ashfield) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Hancock. It is also a pleasure to respond on behalf of the Opposition. I congratulate the hon. Member for Selby and Ainsty (Nigel Adams) on securing this important debate. He spoke passionately about the issue and posed some good questions, which I hope the Minister will address.

I echo many of the things that have been said about Yorkshire, because, as hon. Members may be able to tell from my accent, I am originally a Yorkshire girl. Everybody in the room has a responsibility to ensure that Yorkshire and its tourism industry stay on the agenda. As the hon. Member for York Outer (Julian Sturdy) said, the debate is an important part of that.

I am from Bradford, and it is good to see my hon. Friend the Member for Bradford South (Mr Sutcliffe) here. He is my mum and dad’s MP, and I know how proud he is of his constituency and how hard he works to promote Bradford. He has also done a fine job of promoting Yorkshire today.

Tourism is incredibly important for the survival and continuing regeneration of many regions such as Yorkshire; it creates huge numbers of jobs for people directly employed in the industry and for many thousands more working in similar industries. Its importance to our national economy is highlighted by the fact that it is our fifth largest industry. According to figures from Yorkshire Forward, tourism contributes billions of pounds to the regional economy.

Tourism should feature strongly in our strategy for economic recovery. I know that Britain cannot afford to give the industry a specific VAT cut at this time, but does the Minister accept that this is perhaps not the right time for the Chancellor to hike up VAT?

It is not hard to see why Yorkshire is popular with tourists and so valuable to the economy. It has everything, from the hidden gem of Selby abbey, in the constituency of the hon. Member for Selby and Ainsty, to Scarborough, which was one of the first seaside resorts in Britain, to great moors and coastlines. It also has cities such as York and Leeds and shopping complexes such as Meadowhall. The hon. Member for Selby and Ainsty is rightly proud of the region.

I have learned some new facts about Yorkshire from the hon. Member for Harrogate and Knaresborough (Andrew Jones). We all know about the landscape and heritage, but I did not know that it was the happiest place to live in. I have enjoyed tea and cake at Bettys, and it is a fantastic part of Harrogate.

[Mr Knight]

Can I add to that impressive list the enjoyment of fresh crab and lobster at Bridlington, Britain’s largest shellfish port?

[Gloria De Piero]

I remember the odd school trip to Bridlington. I did not have any crab then, but perhaps I will now, as a grown-up.

As people have said, tourism is about more than economics. It has the magical ability to conjure up dreams and create special memories. I grew up in Bradford, and I remember vividly the opening of the National Media museum, where my dad used to take me when I was a little girl. That museum did so much to capture my imagination. It was there that I learned about how television was made, and its history. That broadened my horizons, and who knows whether it was responsible for my choosing a career in TV before I came to this place? There was a mat to sit on, which would transform, by means of the television screen in front, into a flying carpet to transport visitors to far-flung places. I went back to the museum a couple of years ago and the flying carpet mat had gone, but the special effects meant that people could transport themselves to outside 10 Downing street, to be a reporter. That offered a little less magic to me, as that was my job at the time.

Another pleasure when I was growing up was Haworth, down the road. I am sure that it was the main reason I fell in love, as a teenager, with Emily Bronte’s book “Wuthering Heights”, and went walking the moors wondering when my Heathcliff would come. Those moors brought the novel to life for me, and I am sure that they do for many tourists. That reminds us that tourism is not only about people from different counties or countries, but can be for people from nearby in the same county: it can expand people’s horizons. It can expand the taste buds too. Much to the horror of my Italian parents, spag bol was not my food of choice, because, as everyone knows, Bradford has a reputation for fantastic curries, and I became a devoted convert. I wish Bradford and Sheffield well, as they have both been nominated for the Curry Capital of Britain award. It would not surprise me if Yorkshire were to add another award to its growing list.

With brilliant attractions on our doorstep, it is important to make sure that everyone knows about them, and that people do not miss out. That is why hon. Members are right to point out the importance of promotion. I am originally from Bradford, and am the shadow Minister for Culture and Tourism, but I did not know until recently that my birthplace beat cities such as Los Angeles, Cannes and Venice to achieve UNESCO city of film status. If I did not know that, what are the chances that someone from Japan, or even someone from Jarrow, will know?

Spending on promoting Britain and its wonderful regions should not be seen as an unnecessary cost; it brings valuable cashinto Britain too. I am sure that the Minister is all too aware of figures that show that money spent on promoting tourism can be extremely cost-effective. For instance, Welcome to Yorkshire was launched in April 2009 with regional development agency funding from Yorkshire Forward of £10 million a year for three years. According to Welcome to Yorkshire, for every £1 invested, it has delivered £40 back into the local economy. However, the Minister will know that it is in the dark about its financial future, with the impending closure of the regional development agencies. When regional funding ceases in April 2012, it will be interesting to see what effect the Government’s new enterprise partnerships will have on the tourism industry. If regions such as Yorkshire are not protected and developed, and if budgets to attract tourists to them are slashed, people may simply go elsewhere.

The Labour Government worked hard to ensure that the British isles were once again becoming an attractive place in which to live and work and enjoy simple pleasures such as the Yorkshire moors, Whitby bay, Bradford and Selby—places where vast numbers of people show their support with their feet and their wallets. Yorkshire is a wonderful place and I hope that it has a wonderful future.

I have a few questions for the Minister. What does he believe will be the impact of the VAT hike on the Yorkshire tourist industry? What does the Government tourism strategy have to offer the Yorkshire tourist industry? Does the Minister appreciate that spending on promoting Britain and Yorkshire should not be viewed just as a cost, since it brings in cash? Will he give an assurance that Welcome to Yorkshire will receive some financial support from the Government, after April 2012? Finally, to echo what the hon. Member for Selby and Ainsty said, will the Minister tell us about the funding anomaly in relation to Scotland?

10:25

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

It is a pleasure to know that you are here this morning, Mr Hancock, to provide a firm hand and make sure that we stay in order. I congratulate my hon. Friend the Member for Selby and Ainsty (Nigel Adams) on getting the debate under way. It is tremendously helpful to be able to mark the contribution that Yorkshire makes to tourism, because Yorkshire is one of our most important attack brands—I think that is the phrase that my hon. Friend used—and a potential alternative to established tourism honey pots such as London. Providing us with a chance to consider how to pursue that potential is a tremendously worthwhile and intelligent use of time.

Everyone in the debate, across the party divide, seems to agree on the importance of tourism overall to Britain’s economy. I shall not repeat the various figures that have been cited and points that have been made, but it is helpful and instructive to note that one of the Prime Minister’s main intentions in making his speech on tourism within the first 100 days of the coalition Government was to raise the profile of tourism as a sector of the visitor economy overall. The reason why he did that, apart from the fact that I was cheeky enough to ask him to, was his feeling that it was important to nail down the point that although tourism and the visitor economy as a whole have been an important part of the economy for many years, they have perhaps been slightly undervalued and under-appreciated. There was a need to raise their profile. That is also why the Prime Minister appointed, for the first time in many years, a dedicated tourism Minister—in the shape of myself—in an attempt to give the sector a fair crack of the whip.

All that attention, focus and constructive and helpful input, from all sorts of people around the industry and Members of Parliament on both sides of the divide, led to the tourism strategy that was published in March, which several hon. Members have mentioned. I hope that the strategy will create—again, for the first time in many years—a focus and sense of overall direction for our visitor economy and that it will give people something to get behind, a template to work to. However, it will be a slightly different kind of template from those that people have been used to in the past. The intention is to say, “Tourism involves a very large number of small and medium-sized businesses, and therefore it is wrong to try to treat the industry as a single organisation.” In fact, it would be counter-productive and destructive of value to do so.

There will not be a grand, centrally planned Stalinist master plan handed down from my office about how we shall pass investment between different parts of Britain and different sectors of the visitor economy. Instead, we must have a much more bottom-up, organic approach, through which local destinations can say, “This is what we need in our area.” What is right for Harrogate will be different from what is right for York or Scarborough. That is entirely correct, and the people best placed to understand the different responsibilities and priorities in each area are inevitably the businesses that operate in those local markets, which are trying to make their living in those local destinations.

[Mr Sutcliffe]

I understand the thrust of what the Minister says about small and medium-sized businesses, but it is important that there should be an overarching organisation. As I said in my speech, before the tourist board and Welcome to Yorkshire, areas competed against each other. There is a need for co-ordination. That is why we are concerned about the long-term future of Welcome to Yorkshire.

[John Penrose]

I completely agree; I am not talking about an either-or option. We need the bottom-up, organic, business-led approach, because that is what will give our management and marketing efforts to grow the local visitor economy in each destination more commercial edge and nous. The hon. Gentleman is right to say that the approach must not be at the expense of other areas or trying to do down neighbouring destinations, particularly those that could themselves be a vital attack brand or an overall destination. If he will hold his horses for a moment, I will come to the point about Yorkshire’s overall position as a potential rival to London, alongside the Peak district, Cornwall, the Lake district and others.

There is an important difference in the way that we are trying to approach things, in that local destination management organisations will increasingly become more business-led and commercially savvy but still be supported by local councils, local enterprise partnerships and all sorts of other public sector bodies, particularly where tourism is an important part of the local economy, such as in large parts of Yorkshire.

Tourism’s place in the pecking order will obviously vary from place to place, but there is no doubt, as we heard this morning, that the visitor economy is an extremely important part of the local economy right across Yorkshire, and local councils and other public bodies will naturally want to support tourism in whatever way they can. Again, however, we hope that they will be supporting and backing up a business-led organisation—one that has that extra commercial nous. In creating those organisations, I hope that we will have started to change the culture of the business and the way in which we approach the matter.

Before speaking about how we might create rival attack brands or alternatives to London, I should make clear that all the contributions made today show that Yorkshire has a great sense of place and of a shared culture and history. That is a huge advantage when creating an alternative to London and rival destinations. There is a huge sense of pride in a shared Yorkshireness.

My hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones) said that in the past he and I have been prone to a little banter on the relative merits of Yorkshire and my county of Somerset. I shall not intrude on private grief by alluding too often to the Yorkshire cricket team, but I was pleased to hear the selfless offer made by the hon. Member for Bradford South (Mr Sutcliffe) to arrange a tour of the Yorkshire breweries. I am sure that many Members here today would be willing to assist him.

Having spoken about breweries, I mention in passing the contribution of my hon. Friend the Member for Leeds North West (Greg Mulholland), who was concerned about pub closures. I remind the House that the Government recently announced what I hope will be a valuable initiative, one that will help many more of those pubs that have been struggling to stay open. It is a strong consultation on deregulation and reducing the red tape on entertainment licensing. That will clearly be very important for a great many pubs that currently find it difficult, time-consuming and awkward to lay on music. I believe that that will make a huge difference to the future success of many pubs, both rural ones and those in city centres.

I speak next about establishing Yorkshire as an overall destination, as well as a place that contains many local tourism gems. As everyone else has done so, and because they deserve it, I add my congratulations to the people of Welcome to Yorkshire. It is a good example—I am boring the rest of the country with it—of a high-functioning, well run and effective local destination management organisation, and Yorkshire can be proud of it. The organisation will be at the front and centre in the drive to establish Yorkshire as an alternative destination, and an attack brand to attract people to other parts of the country rather than simply to London. It is important that we make the effort.

London is a hugely valuable tourism asset to Britain. It is the single most visited area of the country. However, we need to use London as a way not only of attracting people to Britain but of making it their first stop before they move out and visit all the other things that we have to offer. As Minister with responsibility for tourism, I do not much mind if that means Cornwall, the Lake district or Yorkshire, but we must have credible alternatives. That is why I was pleased to hear my hon. Friend the Member for Harrogate and Knaresborough talk about the importance of investing in the product and ensuring that the attractions and accommodation are kept up to standard. He is right to say that it is impossible to drive success in this industry without a product that is worth promoting.

Once we have created a high quality and good value product—I mean good value at all price points, from the cheapest to the poshest and most expensive—we must ensure that people understand that going for a weekend to York is fine but that they can spend longer there, perhaps spending an entire week visiting the whole of Yorkshire. That is the kind of challenge that we must get across; we must ensure that people understand the richness, breadth and diversity of the various things that can be done in places such as Yorkshire. It should not matter if people go to Yorkshire for a particular purpose; there are always other things to tack on the end. If one goes with the family, the children will not be bored. There will always be something new and different to do.

It is important that organisations such as Welcome to Yorkshire put across the message of a rich and diverse tourism offer. Destination management organisations are not the same as destination marketing organisations, and the difference is crucial. We need management organisations to act as the voice of the visitor when talking to local public bodies, be they local councils, LEPs or whatever. It is important that locally elected councillors and other politicians have somebody to remind them what visitors want because, by definition, visitors come from elsewhere and do not have a local vote.

We need somebody to stand up and speak up for the local tourism industry on behalf of its customers; when councils are considering how, for example, to renew or regenerate a piece of public space—perhaps an old market square—we must ensure that the needs of the tourists are considered at the same time as those of local people. Those needs can often be entirely congruent and aligned, but occasionally the needs of the visitor will be slightly different from or additional to what local people want, so it is vital that we have organisations strong and vibrant enough to speak when the moment strikes.

My hon. Friend the Member for Selby and Ainsty raised some important questions about funding. I wish to develop my argument in response to those questions, possibly wrapping up the various queries raised by others during the debate. My hon. Friend was entirely right to say that there are different levels of funding around the country, but we are in a transition period at the moment. The old regime of regional development agency funding is coming to an end, and new sources of funding are being found by destination management organisations around the country.

My hon. Friend was right to point out that DMOs take a different approach in Scotland. It is worth pointing out that domestic tourism in Scotland is a devolved matter; it is the responsibility of the Scottish Executive. Having taken the overall funding devolved under the Barnett formula, they may make decisions about the relative priorities for spending in Scotland that are different from those made in England. If they want a different trade-off between the health service spending and tourism, they are entitled to make it. None the less, and however those local priorities are assigned, we in England have to ensure that we make the best of our overall funding allowance.

My hon. Friend mentioned the efforts that we are making to promote Britain abroad and to attract more foreign visitors. That is going pretty well. I suspect that few Members will have seen our advertisements or marketing, because by definition they are being applied in foreign markets. They are being targeted at the top 20 or so most important markets for visitors to the UK. They include some of what I would call the near abroad, in western Europe, which may have been a little ignored in the past; it also includes some traditionally strong markets for the UK, such as the USA and Canada. It also includes some of the high-potential, fast-growing but historically small contributors to our visitor base, such as China, Russia and Brazil. Those are working well, and we are seeing strong levels of interest.

As will be understood, we also have a series of amazing and wonderful events to add to our existing attractions, not only in 2012 but in future years. Next year we have Her Majesty the Queen’s diamond jubilee. We also have the Olympic and Paralympic games and the cultural Olympiad, and in 2012 and 2014 we will have the two flavours of rugby world cup. We have the Commonwealth games, the Ryder cup and so on and so forth. There is a whole stream of wonderful opportunities that we can use to raise the profile around the world of Britain as a destination.

The point that I want make to hon. Members here and to the industry more broadly is that those events are not the main course. They are not the moment when we will see huge increases in the numbers of visitors, although we expect and hope to see influxes of visitors around the events themselves. The really big-value opportunity here lies in the fact that events such as the Olympics will probably attract the single biggest TV audience that this planet has ever seen, which gives us an unparalleled, historic opportunity to demonstrate all the wonderful things that Yorkshire and other parts of Britain can offer to the rest of the world. We want the people who cannot come to the Olympics or the Paralympics next year to watch the events on TV and think, “You know what, I may not have been able to get there for the games themselves, but I fancy going to see all those things that are available in Britain in 2013, 2014 or 2015.” That is the big opportunity that the international marketing campaign is aiming to use.

There are also some domestic funding opportunities and targets that we want to explore. Various Members, including my hon. Friend the Member for York Outer (Julian Sturdy), mentioned the reform of business rates. Those rates are tremendously important as a source of public sector funding. By reforming them and giving councils an opportunity to share in the proceeds of local economic growth by retaining some of the increased business rates that are generated, we change the mindset of councils about investing in local tourism. From being something that was not a statutory duty—it still is not a statutory duty—and was, in many cases, viewed as a cost and something for which local councils got very little return, it will hopefully be seen by local councils as an opportunity to invest in a successful local business. We expect them to say, “If we put some money into local tourism, either into marketing a local destination or into investing in infrastructure, we have an opportunity to drive economic growth very effectively.”

The figures that have been quoted in this morning’s debate show that tourism is an extremely rapid and financially efficient way of driving economic growth. It is also a way of driving economic growth that is not centred on the south-east or on one or two of our traditional sectoral strengths such as financial services.

Tourism, therefore, ticks a great many boxes. It is instructive to see what has already been done by successful organisations such as Welcome to Yorkshire. The local rates of economic growth in the sector far, far outstrip those of the economy as a whole. From the Treasury’s point of view, that has to be good because it shows that the tourism sector and the visitor economy as a whole has a huge potential and is already delivering on that potential to be a leader in the country’s economic recovery. The reform of business rates is crucial and will provide important incentives for local councils and other public bodies to invest in local tourism organisations.

It is also true that local tourism businesses are increasingly willing to get involved. If they contribute to local destination collective marketing campaigns, they will see positive returns to their businesses as well. It is important to draw a distinction here. In the past, in some parts of the country—there have been notable and honourable exceptions to this—local councils and local councillors have gone round and effectively twisted the arms of local tourism firms to contribute to a local tourism marketing campaign, which has never been a terribly effective system. It was driven more by the mayor’s desire to wander into the local tourism and information centre and see his picture and a foreword from him on the front of a leaflet rather than to put heads on beds or bums on seats and drive top line revenue for local tourism businesses.

If we move away from that and have business-led organisations, we will achieve our aims because those organisations will have an extra commercial edge. If we start running campaigns that genuinely make a difference to local tourism businesses, and make more of a difference to those that have contributed to a collective pot than the ones that have decided to free-ride, we will have something that is not an exercise in corporate philanthropy or council arm-twisting but makes good commercial sense because it justifies its own place in any local tourism companies’ local marketing plans. Equally, it will make more sense to participate than not to participate. Firms that participate in the scheme will do better that those that do not. Those are simple, clear incentives that will transform the way in which local tourism bodies work. They will also transform the incentives for local companies and local councils to get involved. What that means—this is already happening in many parts of the country—is that we will get locally organised, locally run and locally focused shared marketing campaigns that are funded by contributions from local businesses, and backed up by local tourism and marketing organisations, often with the support of local councils.

It would be remiss of me to pass over the issue of ongoing central Government support. There is the regional growth fund, into which a number of what I hope will be highly successful tourism-related bids have gone for consideration. Those bids vary in size from the small to the extremely large. We hope and expect that many of them will be compelling when they are being considered.

Yesterday’s announcement on the torch relay was also mentioned. We are using £3 million of central Government money to leverage local tourism money from different parts of the country. There will be a strong discount-led offer for anyone who wants to book a trip to a destination where the torch relay is happening. The trip does not have to take place at the same time as the torch relay, but it has to be booked while the relay is happening. We will use that unique event to highlight the wonderful things that visitors can do in York or in Harrogate or wherever the relay may be happening. It is a golden opportunity to leverage a lovely piece of Olympics-related public relations in a way that will stimulate local tourism demand. Therefore, there will be a series of central Government initiatives designed to drive Olympic-related tourism activity.

I hope that I have responded to all the points that have been raised and that it is clear that there is a great deal of commitment to tourism both in Yorkshire and elsewhere in the country, a high degree of pride in the kind of tourism opportunities that counties such as Yorkshire provide, and a huge excitement in the potential that places such as Yorkshire have to put across the breadth and depth of what they have to offer to potential visitors, thus enabling them to become rivals to London and alternative centres for extended stays rather just short breaks.

I am sure that hon. Members will agree that the opportunities for Yorkshire tourism are bright. The future looks very good indeed. We must understand that landing those opportunities will require huge amounts of hard work, but with the cross-party commitment and local pride that has been on offer today, I am sure that we will manage to do so.

10:49

Sitting suspended.

Road Fuel Duties

Tuesday 13th September 2011 Westminster Hall

11:00

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

I welcome you to your rightful place in the Chair, Mr Hancock, and I also welcome the Economic Secretary to the Treasury and my hon. Friend on the Front Bench, the Member for Bristol East (Kerry McCarthy), to this extremely important debate. It is also good to see that all parties in the House are, I think, represented here, and I look forward to what they have to say. I particularly want to hear what the Economic Secretary has to say about the high levels of road fuel duties in this country. I also want to put on record my thanks to the Speaker for allowing the debate to take place at this time.

This year, 2011, has been eventful in every sense of the word. It has perhaps been the most financially eventful year in the history of politics. It has been a rollercoaster. We have seen global financial turmoil, and the stock market has fluctuated at a rate that I have never seen before. We are seeing the beginnings of high unemployment levels, along with a rise in inflation, increasing transport costs, and tax changes that I have never witnessed in my time in the House—I have been here some 20 years. The past eight months have delivered a record-breaking run of price rises, those of petrol and diesel being among the most alarming.

Across the UK—there are, of course, highs and lows across the country—the average price of petrol reached a high in May of 137.43p per litre, and an examination of the relevant website just last night showed that the average price just now is not far from that. There is a differential of some 24p per litre between the highest and the lowest price across the country. I remember that when the Labour party was in government there was a near revolution when the truckers blockaded the refineries as a consequence of high fuel prices. Interestingly, we have not seen anything like that since, and I wonder why.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

I am not certain from the tone of the hon. Gentleman’s voice whether he wants a blockade of refineries by truckers across the United Kingdom.

[Mr Donohoe]

The hon. Gentleman should know, as should all Members, that I would be the last person in this place to call for a revolution and civil disobedience.

There is absolutely no doubt, however, that the high fuel prices are at the point of driving people out of jobs, which is the most serious aspect of the matter. I shall give an example, which makes me angry, of the desperate situation of a nurse in my constituency. She has had to put up with a wage freeze for the next two years, her pension contributions have gone up, she has to pay double for parking at the hospital in Glasgow where she works, and she has to find £100 extra a month to get to and from work because of the high fuel prices. That proposition cannot feasibly be sustained for too long, but she cannot use public transport because of where she stays and where the hospital is. That problem must be looked at.

Regarding what the Government take per litre, I always remember a case from some years ago of a retailer who was determined to show the breakdown of the price of petrol and diesel. He was told that that was not the form, and the petrol company said that it would no longer supply him, for some obscure reason. When one considers that of the average 135p price of a litre of fuel, 81p is taken, one starts to understand the cost to the individual buying the petrol or the diesel. A good 60% goes on dealing with Government intervention in the form of fuel duty, and there is also VAT. Indeed, 20% VAT increases the price of petrol by 2.5%, putting something like 2.5p on it. In addition, outside of Government intervention in the price, there are the oil companies, and it is time to argue for a windfall tax on their profits. I know that there has already been a tax, which a lot of colleagues are very concerned about in relation to the oil companies’ continued investment, but I believe that the Government should look at the correlation between profit and price.

I have already argued that a significant portion of the price of petrol and diesel in this country is made up of the Government take, and I argue that it is higher than in most other European countries as a consequence of the high level of tax. Is there any opportunity to make the price cheaper? I am sure that the Economic Secretary will argue that in the present climate there is no leeway—no room for manoeuvre—but I suggest that there might be, and I shall come on to that later.

The reason for this debate is obvious: the price of fuel is crippling a great number of the people whom I represent and, I am sure, a great many of those represented by other Members here this morning. The Institute for Fiscal Studies has announced that the living standards of UK families will decline by more than 10% over the next three years, and it predicts that in real terms the typical household income will fall by 3.5% in the year to April, which will be the steepest drop since 1981. We understand that there is little room for offsetting falling living standards by cutting taxes, but the matter must be looked at. The level of tax and duties on petrol and diesel is cutting off the prospects of many struggling families and small businesses, and since I secured this debate I have had dozens of e-mails from small businesses with examples of just what it is doing to them.

The situation is also destroying job prospects, in particular among young people. I have already had a summit in my constituency, attended by the Secretaries of State for Work and Pensions and for Scotland. Youth unemployment is reaching levels that I never thought possible—it is as high as 70% in many areas. That cannot be sustainable and it is not helped at all by the cost of living today, particularly in more rural areas—I see that the hon. Members for Argyll and Bute (Mr Reid) and for Na h-Eileanan an Iar (Mr MacNeil) are present.

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

I am delighted that the hon. Member for Central Ayrshire (Mr Donohoe) has brought this important topic for debate. Is he aware that the current Chief Secretary to the Treasury called in 2007 for a rural fuel discount scheme, and so may have a favourable view? Like the hon. Gentleman, I am concerned, because the south-west has a very rural community. Three quarters of the land is agricultural holdings, so a rural discount would be of great benefit.

[Mr Donohoe]

We will have to wait for the Economic Secretary’s response on that point. As an Opposition Member, I am not in a position to give any assurances.

We must consider the problems with the Government’s approach. Although they have frozen fuel tax duty for the next couple of years, we must take into account the fact that the freeze will be more than offset by the rise in inflation. As petrol is always an easy revenue raiser, it is widely expected that the Government will make up their losses, leaving the consumer no better off in the long term.

I will highlight three areas of concern. The first is environmental, the second is economic and the third involves the social impact of the road fuel duty. The removal of the duty differential will affect the green economy. The UK Sustainable Biodiesel Alliance has raised concerns about the Government’s decision to remove the 20p duty differential for biodiesel produced from used cooking oil by April 2012. I ask the Economic Secretary to consider that loss more closely. It does not stack up against the Government’s views on the green economy. Many see the impact of the removal of the duty differential for biodiesel as a disastrous blow for the growth of the green economy. Just outside my constituency is the company Stagecoach, which runs buses on biodiesel. It is highly successful, and particularly popular with youngsters, but it will come to an end if the differential is not maintained. Will the Minister clarify why on earth the Government, whom we have heard are the greenest Government ever, continue to consider it?

On the economic side, we risk the demise of the independent fuel sector. Retail Motor Industry Petrol told me that MRH, the UK’s largest independent forecourt operator, has highlighted the unfair pricing practices used against it by both hypermarket chains and oil companies. That is a concern. In addition, the four big supermarket chains are struggling with their own retail this year due to the downturn, which in turn is placing greater pressure on and compounding the problems of independent retailers.

Such relentless competition has been going on for some years. It is responsible for the closure of around 400 independent forecourts, and it continues. It will lead to a sparse population of fuel retailers, obliging motorists to drive great distances to top up their tanks, which is not sustainable. More than 6,000 garages have closed since 1998, which is a problem, as anybody knows who travels off motorways. Particularly in more rural areas, as I have seen at first hand, running out of fuel because there are no petrol or diesel stations is always a danger.

[Jim Shannon (Strangford) (DUP)]

The hon. Gentleman has outlined the issues relating to road fuel duty and mentioned garages running short. Does he share my concern—I suspect that he does—that it is not only about garages running short but about elderly people in our community? This winter, they will be asking themselves, “Should we use oil, electric, coal or gas?”, but they will be stuck with oil and the cost that that entails. Does he not feel that the Government should consider what help they can give elderly people to ensure that this winter will not be a hard one?

[Mr Donohoe]

The blasé slogan “Either eat or heat” is becoming a reality faced by many of my constituents, particularly the elderly. The hon. Gentleman is right. It is a major concern, and it should concern the Government.

To return to the economic point, the industry should look into the fact that some oil providers supply their own forecourts with fuel at one price while selling the same fuel to a second retailer down the road at a higher cost. Something must be done about that. Anyone who travels two miles along the road from Prestwick to Ayr in my constituency can see it at first hand. Prices at forecourts using the same supplier vary 6p from one end to the other, which should not be allowed. Two-tier pricing is becoming a joke.

[Mr MacNeil]

I hear what the hon. Gentleman says about two-tier pricing, but I am sure that he will sympathise with areas of one-tier pricing, such as my constituency, where all prices are high and the closest cheaper fuel is a ferry ride away. Does he not feel that there has been too much inaction by successive Governments on tackling the problem?

[Mr Donohoe]

I agree entirely. It is interesting to note that Shetland has some of the highest petrol prices in Scotland, although half the United Kingdom’s total oil supply flows through two pipelines there. Another instance is Grangemouth, where the refinery for Scotland is based. The price of fuel there is also among the highest in Scotland. That does not stack up.

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

I was interested by the intervention of the hon. Member for Newton Abbot (Anne Marie Morris), because not far from Newton Abbot is the Devonshire coast. I was down there about 12 months ago or more, and it was amazing to see the number of tankers lined up that were not being unloaded. Does my hon. Friend not think that there might be a case for an investigation into oil companies and hoarding to force up prices? Price is as much an element of the problem as taxes.

[Mr Donohoe]

I thank my hon. Friend for that intervention. I am sure that the Economic Secretary will address that issue when she sums up, along with the points made by other hon. Members.

My third point concerns the social and economic consequences of the situation. Everybody can see that many kinds of damage have been done to consumers and businesses, particularly small businesses. As I have mentioned, the erosion in the number of forecourts is obvious, particularly in rural areas, and it will lead to fuel deserts in many parts of the UK. A vital immunity for low-income families, pensioners and the disabled has been lost. Journeys to fill fuel tanks are longer, increasing carbon emissions needlessly. Consumer choice has been reduced. There are fewer facilities for HGV and van users, as supermarkets do not cater for them. The impact on the UK’s ability to cope with emergencies has also been massive. Perhaps most importantly, jobs and job opportunities are being lost.

[Jim Shannon]

As the hon. Gentleman will be aware, an e-petition is circulating that has some 62,000 signatures at the moment. If it gets 100,000 signatures, we can debate the matter in the House of Commons. Does he not feel that he should encourage people to sign it so that the matter can be debated at length in the House, as it needs to be?

[Mr Donohoe]

That was one of my conclusions, so it is useful that the hon. Gentleman has made that point. This morning, the Fair Fuel UK campaign e-mailed me, as I am sure it mailed everybody. Like everybody in this room, barring perhaps the Economic Secretary, I signed the e-petition. As a consequence, only 17,000 signatures are now required to reach 100,000. I urge everybody—not just those here but anybody listening to this debate who is concerned about high fuel prices—to sign the petition so that a full debate can be held. This is, after all, only an Adjournment debate. Important as it might be, we need a full debate in the House with the Government leading. I look forward to it.

In conclusion, we must consider the issues that I have highlighted. The Government know that the Labour party opposes 20% VAT, which has helped to push up petrol prices to their current levels. I did not realise until I was preparing for this debate that VAT is put on top of the tax, so the duty is taxed with VAT. If the tax is 50p, 20% VAT is put on top of that fuel duty. The Government should look at that. If, as is being argued, a reduction in VAT is not an option because of the bureaucracy across the water in Brussels, we could consider a reduction in fuel duty to lower the cost of taxation, which, as I have said, is initially some 80p per litre. The Economic Secretary and the Treasury should look at that.

[Guto Bebb (Aberconwy) (Con)]

On VAT, I have been in discussions with a representative from a coach company in my constituency, which has put on hold plans to employ more staff because of the extent of fuel duty. One of the issues that he raised was VAT. He actually argued in favour of a higher rate of VAT for diesel and petrol, because, as a business, he can reclaim the VAT but not the fuel duty. I wonder whether the Treasury has an opinion on that.

[Mr Donohoe]

That is a matter for the Economic Secretary, not me, to address, but I am grateful to the hon. Gentleman for his intervention. A tax increase is being proposed for next January and August, but I would like an assurance from the Economic Secretary that it will not be implemented. The best way to help hard-pressed consumers would be for the Government not to adjust the tax on families, who are already feeling the squeeze as a consequence of the Government’s policy on pay freezes and pension hikes.

We also have to look at the big six energy providers, which recently announced large price rises and bigger profits. The Government must have scope to look at that in order to redress, via a windfall tax, the whole problem of taxation. There is also the issue of the Government’s policy—if it is a policy—to move people from the road to public transport. The Government have just increased the cost of rail travel by 10%, which seems to go against everything that is being argued. Is that policy supported and likely to continue to be supported by the Treasury?

A number of representatives from rural areas are present. More emphasis needs to be put on trying to allay the problems associated with living in the countryside, which are an enormous burden on businesses and the consumer in those areas. I have already mentioned the removal of the duty differential for biodiesel, but the position of that industry needs to be addressed by the Government. It is a growing industry and one that is useful in addressing both public and private transport in my constituency. I have already mentioned the prices set by supermarkets and oil providers, which have to be addressed.

I have two final points. The Government must reduce the tax on petrol. That would increase employment prospects, particularly those of the nurse whom I mentioned earlier, as well as those of people who rely on public transport to get to work. Finally, I am old enough to remember when fuel prices were fixed universally throughout the whole country. A lot of the commodities that were deemed at that time to be essential, such as bread and milk, were all the same price. Given the disparity between the highest and lowest price in this country, will the Government examine the issue so that the disparity is overcome and the price of petrol is not a commodity with which the supermarkets and some of the country’s suppliers play?

[Mr Mike Hancock (in the Chair)]

Thank you, Mr Donohoe. A lot of Members want to speak, but we do not have a great deal of time. Will those Members who speak be careful about the number of interventions they take? Perhaps that way everyone will get in.

11:25

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

It is a pleasure to serve under your chairmanship, Mr Hancock. I congratulate the hon. Member for Central Ayrshire (Mr Donohoe) on securing this debate and on bringing this important issue before the House.

I represent a sparsely populated constituency, so I am well aware of the impact of high fuel prices on people and businesses. I represent many of the islands of the Inner Hebrides. The price of fuel on the larger islands, such as Mull and Islay, is typically 15p a litre higher than at a city centre supermarket, and on the smaller islands, such as Coll and Colonsay, the price is usually about 30p a litre higher. That is not due to any profiteering by local filling stations; Office of Fair Trading investigations have shown that there is no local profiteering. The main reason is the low turnover. The high fixed costs of running a filling station mean a high price.

[Mr MacNeil]

On that point, Donald MacNeil of the Burnside filling station in Daliburgh, South Uist, has told me that, if he paid somebody to sell fuel all day, they would not raise their own wage from the amount they sold, which is a reflection of why the price of rural fuel is so high. There is no profiteering. Apart from the high prices, we also know that there are distribution issues.

[Mr Reid]

I am grateful to the hon. Gentleman for his intervention. He is correct that there is no profiteering at the local filling station, although the distribution network, as he has indicated, might be another issue.

The high price obviously has a great impact on people’s living standards and on anyone trying to run a business on an island or in a remote rural area. I was therefore delighted when the Government announced their intention to pursue a pilot scheme under which there will be a 5p a litre fuel duty discount on many of the country’s islands, including all the islands of the Inner Hebrides and the Clyde. The Treasury is currently consulting filling station operators on the terms of the pilot scheme. Its original consultation proposals were met with significant concern by filling station operators, because they would have caused a cash-flow problem. I was pleased when the Government responded quickly to those concerns and revised their proposals in a way that removes the cash-flow problem.

The revised consultation proposals envisage two possible schemes—a distributor-based scheme and a retailer-based scheme. Of the two, it looks like the distributor-based scheme would be easier to operate, because the distributor has the resources to carry out the administration, which the small retailer would often find more difficult. I appreciate, however, the Government’s concern that a distributor-based scheme may fall foul of EU state aid rules and might not be approved by the European Commission. I hope that a distributor-based scheme can be devised that is acceptable to the Commission. If not, we would have to proceed with a retailer-based scheme.

The cash-flow problem in the original proposals has been overcome, but filling station operators are still concerned that it is not clear how they can prove to the Treasury that they are passing on the discount to the consumer. An essential principle of the scheme is that the 5p discount is passed on to the consumer. What retailers have asked me is whether the Government can provide clarity on how they should demonstrate that they are passing on the discount. That clarity would be welcomed because, as I say, the retailers are still not clear what they would have to do to comply with the scheme—and, of course, they are all keen to participate. If the islands’ pilot scheme is successful, as I am sure it will be, I would like it to be extended to remote areas of the mainland.

[Anne Marie Morris]

I absolutely endorse what my hon. Friend says, but some of the rebates that have been given in France, Portugal and so on are not limited just to the islands. The Government’s current view is that it is only in an island situation that such relief can be made available, but that does not seem valid.

[Mr Reid]

I wholeheartedly agree with my hon. Friend. As she said, other EU countries are operating a similar scheme, so I am sure that it can be successful here.

[Mr MacNeil]

Will the hon. Gentleman give way?

[Mr Reid]

The Chairman asked for limited interventions and I have already given way to the hon. Gentleman.

I have accepted the Government’s view that we must have an islands pilot first, but after that I would certainly press for it to be extended to remote areas of the mainland.

[Jim Shannon]

The hon. Gentleman refers to the mainland; obviously, I am very keen for the same opportunities to exist for the people of Northern Ireland. Will he address that issue and does he agree that Northern Ireland also needs to have a similar pilot scheme, because the prices there are equal to those in the western islands of Scotland?

[Mr Reid]

I agree with the hon. Gentleman. From the perspective of a Scottish island, the mainland is the mainland of Great Britain, but I accept that there is another part of the United Kingdom. I am not sure whether calling it the mainland is the correct way to refer to it or not.

[Jim Shannon]

As Margaret Thatcher said, we are more British than Finchley.

[Mr Reid]

We are straying into another debate here. I think we will stick to fuel duty, which is probably a lot less contentious.

Operating a rural filling station is clearly not a profitable business these days, and we heard from the hon. Member for Central Ayrshire about how many have closed. In my constituency, I can point to 10 that have closed since I became an MP in 2001, and that is fairly typical of the country as a whole. On the Kintyre peninsula, only three of the five filling stations that the area had at the beginning of the year are still open. Two have closed this year, which is causing real concerns on the peninsula. As the hon. Gentleman who opened the debate pointed out, people are therefore driving longer distances to fill up their tanks and the choices available to rural motorists have been reduced. Action to help rural motorists is certainly badly needed.

There was a time when it could be argued that high fuel taxation was needed to discourage people from polluting the environment, but market forces have already achieved that. Nobody drives for the fun of it these days unless they literally have money to burn and, of course, anyone in such a position would not be deterred by high fuel duty anyway. High fuel duty has played its part in discouraging people from using their cars when public transport alternatives were available but, of course, in a rural area those alternatives are not often available. The price of fuel is already very high and the Government should not be considering putting duty up any further.

I was delighted when the Government abandoned Labour’s fuel duty escalator in the Budget, introduced the fuel duty stabiliser instead and brought down the fuel duty because the price was so high. The Government have scheduled a fuel duty increase for January as it was hoped at the time of the Budget that prices would have decreased by then, although they show no sign of doing so. If prices are still at this level in January, I hope that the Government will not press ahead with the increase.

My final point, which was also touched on by the hon. Member for Central Ayrshire, is about what exactly is causing the high price of fuel. The hon. Member for Coventry South (Mr Cunningham) referred to oil companies storing fuel rather than putting it on to the market. I want to ask the Government whether any collective action can be taken internationally—for example, through the G20—to bring the price of fuel down. The price of fuel adds to the price of everything in a rural area, so anything that the Government can do to bring the price down would be greatly appreciated by my constituents and all hon. Members who represent a rural constituency.

11:35

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

This is the first time I have taken part in a debate that you have chaired, Mr Hancock, and so far you have been handling the discussion very well.

I want only to make one or two points of emphasis because I am conscious that all hon. Members present represent constituencies that are under the cosh in certain ways regarding fuel prices. I congratulate my hon. Friend the Member for Central Ayrshire (Mr Donohoe) on securing the debate. I know that there is high feeling in the country about fuel prices because I get regular letters about the subject. I also note one of the points that he made earlier: so far, we have not seen the lorry drivers demonstrating. I do not know and would not like to say whether that will happen, but I would not like it to. I would prefer to think that the Government will take action, as they promised in the run-up to the general election when they were condemning us for the fuel price escalator.

It is worth noting and reminding the hon. Member for Argyll and Bute (Mr Reid) that the fuel price escalator was introduced by a Conservative Government—in fact, it was the previous Conservative Government. I was also interested to note that the hon. Gentleman mentioned that the Government had taken action to try to stabilise fuel prices. I think it was 1p or something that they knocked off so, frankly, they did not take very much action.

[Mr Reid]

As well as knocking 1p off, the Government did not go ahead with the increase that the previous Chancellor’s fuel price escalator would have caused.

[Mr Cunningham]

I welcome the hon. Gentleman’s response because he is only apologising for the Government of whom he is part. When he was in opposition, he said the opposite; but never mind, we shall carry on.

Although we cannot broaden the debate, I would like to mention that one of the major implications of the fuel price increase is its impact on the wider economy. We could talk about pensioners who are on fixed incomes, one-parent families or people who rely on transport—whether it is the motor car or the bus. I need to check this out, but I think that, a couple of weeks ago, National Express announced that it may have to reconsider off-peak fares for pensioners because of the subsidy situation. That is something that the Minister may want to investigate.

[Anas Sarwar (Glasgow Central) (Lab)]

I join my hon. Friend in congratulating our hon. Friend the Member for Central Ayrshire (Mr Donohoe) on securing the debate. My hon. Friend the Member for Coventry South (Mr Cunningham) mentioned the impact on pensioners. In the city of Glasgow, 100,000 pensioners face cuts to their winter fuel allowance this year as well as increases in the cost of fuel and of living. Sadly, too many pensioners right across the country will have to choose between putting food on the table, heating their homes and getting out and about around the country. Would he like there to be some real Government action to support pensioners?

[Mr Cunningham]

The previous Government certainly went a long way to try to address some of those problems. Some Labour Members did not necessarily think that they went far enough, but that is another argument. We now have the present Government. If they want to talk about the big society, they must get a grip of the issue and try to do something more positive. It is no good relying on a pilot scheme somewhere and a double-tier price index for fuel. We must tackle the problem in a proper way. Someone mentioned the European scheme, which may well be something that the Government can consider.

I return to the issues that affect the economy. Haulage prices must be affecting businesses, particularly small businesses—for example, in relation to builders. We rely on builders to generate much of the economy. There are one or two examples of that. In addition, small businesses cannot always get credit and have cash-flow problems, which impacts on small and other businesses and therefore on the economy.

It is also worth noting that this Government, like the previous Conservative Government, changed the retail prices index; we now have a new invention called the consumer prices index. Such an approach shows that the Government are concealing the real impact of their policies, particularly in relation to inflation. I hope that the Minister will address that because the retail prices index is a way in which the public can get a good measure of what is happening in the economy in respect of inflation. If we consider current inflation levels, the public are not sure whether they are getting a true measure. The household budget is mucked around with, to use an expression, but the real cost cannot be measured. I hope the Government will look at that.

In relation to the islands, I know a lot more about Cornwall. Some years ago, I sat on the Trade and Industry Committee. We discovered to our surprise that one of the poorest areas in the country was Cornwall. Like the highlands and islands, Cornwall relies on the tourist trade, as everybody knows; a lot of its jobs depend on the tourist trade and a lot of them depend on public transport. That has an impact on public transport and bus fares. That is bound to affect the poorest areas in Britain, whether we are talking about the islands, the south or the south-west.

I remember one scheme where the post office used postal vans as a method of public transport in order to pick people up. There have been cuts in public transport in the south-west; the frequency of buses, that public mode of travel, has been reduced drastically. I wonder what has happened to what we used to call the transport subsidy.

I have covered some of the main points that I thought needed emphasis. My hon. Friend the Member for Central Ayrshire has covered the major areas, so it was worth pointing one or two other things out. The seriousness of the situation has now developed, whether we talk about inflation measurements or the impact on ordinary people who have been encouraged to take part in what is called the big society.

11:41

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

I congratulate the hon. Member for Central Ayrshire (Mr Donohoe) on securing this important debate, a debate that is in my ears every week of the year. I think the hon. Member for Coventry South (Mr Cunningham) used the words, “under the cosh”—and we are certainly under the cosh.

Road fuel in my constituency is at ridiculous rates, and has remained at ridiculous rates in the lifetime of this Government and the previous one. Road fuel is between £1.50 and £1.57 a litre. My constituency has the highest fuel poverty in the UK. In Stornoway, at the north end, fuel is £1.50 a litre. At a small fuel station in South Uist, where I stopped on Friday in a rush to the ferry—I was almost late, as usual—I paid £1.57 a litre for diesel for my car.

In the Faroe Islands, which are halfway between the Hebrides and Iceland, the price of fuel is usually 50p a litre less. That was confirmed to me this morning: it is £1.06 a litre in Torshavn in the Faroe Islands. The price is not a function of geography; it is a function of Treasury taxation. [Interruption.] The hon. Member for Strangford (Jim Shannon) asked me whether I wanted to move. Given how we are taxed from London, as Scotland does not yet control fuel tax, we may have to move to all sorts of strange, weird and wonderful places to avoid the Sheriff of Nottingham tax behaviour from the London Treasury, regardless of which sheriff is in charge. Be it the red sheriff or the blue sheriff, the prices are much the same from London.

Iceland has prices that follow the Faroese model. It is interesting to note, and probably no coincidence that, despite its problems three years ago, Iceland has bounced back better. Its unemployment is lower than that of the United Kingdom and its GDP per capita is higher—Iceland is moving on and putting the past behind it far better than the UK. In my constituency, higher fuel costs are bleeding the economy dry.

Unlike in Iceland, which is able to move on, we are still being bled dry and left in a very weakened state. Higher fuel costs are pulling money from councils, health boards, the police, the fire service, small businesses, pensioners and families. The hon. Member for Coventry South made that point very well. He also mentioned rural postal vans. My father used to drive one of those postal vans. They were certainly a crucible of politics when passengers came on from whichever part of the island of Barra, where I lived when I was younger, and where I still live.

When I spoke in the House of Commons on 7 February —I went back over Hansard this morning—I said that Alec MacIntosh at Benbecula airport was haranguing me about the price of fuel and telling me to sort them out in London. He said the same thing yesterday morning as I boarded the plane from Benbecula to Glasgow. Fuel in Benbecula is about 10p a litre higher than it was when I spoke in the House of Commons on 7 February 2011; it is 19p a litre up on the price it was in Stornoway last year. Orkney, Shetland and the islands of Argyll are suffering the same, and Northern Ireland is probably suffering the same.

That is all the more galling when we think of the oil around the islands of Scotland. Shetland, of course, is pumping oil at the moment, as is Orkney. West of the Hebrides, we apparently have 25% of the UK reserve of fossil fuels—$1 million for every man, woman and child in the Hebrides—but we are paying 50p a litre more than the Faroese, who have no proven or found reserves at all.

When the Government came to power, they talked about a rural fuel derogation, and that was welcome. We are having problems, of course, because the Scottish Government do not control this issue and we are left with the red sheriff or the blue sheriff in London. The previous sheriff played Pontius Pilate to the issues of rural fuel. They were not interested in the rural fuel derogation; spurious and ridiculous reasons came about why they could not do anything. They sat on their hands. There was no fair fuel stabiliser, absolutely no rural fuel derogation, daft excuses and—still dafter—they had no apologies. There is still no apology from the previous Labour Government for their inaction.

This Government came in and their words were like a fresh breeze. Being the fair and earnest fellow that I am, I welcomed their words and their stated intentions. They blamed Europe for the slow progress of the rural fuel derogation and, being the fair and earnest fellow that I am, I was minded to believe them and accept them at their word. Then, of course, the green light came from Europe. The Government are now in danger of eclipsing the previous Government in their cynicism.

Treasury rules are now so cumbersome that they might actually cause small rural fuel stations to go out of business. The Government are looking for every device to slow this down when we know that in rural France, 10 km from a main population centre, people enjoy rural fuel derogations. What is the difficulty? Please get it into place. I warned the Liberals in February—in the House of Commons, as recorded in Hansard—that if the rural fuel derogation was not in place before May, they would suffer at the polls for the Scottish elections. They did suffer in rural areas and they are now known as the “not so famous five” in the Scottish Parliament.

There is a good argument, as I think the hon. Member for Central Ayrshire or the hon. Member for Coventry South said, for fixing fuel across the country, just as the prices of newspapers are fixed. If we are to have any fairness, we will have people across the UK paying the same amount of tax; my constituents, and probably those in Argyll, Orkney and Shetland, are paying the highest tax per litre of any part of the United Kingdom.

[Mr Jim Cunningham]

Does the hon. Gentleman agree that one of the best ways to try to sort the problem out—it is becoming like a ping pong game between the political parties—is to have a proper public inquiry into the price of fuel and fuel hoarding?

[Mr MacNeil]

I have some sympathy for what the hon. Gentleman says, and I will come on to distribution in a second, but we have played the patient game long enough. I think it was Martin Luther King who said that it was not the time for the “tranquilising drug of gradualism”. This is a time for action. At £1.50 and £1.57 a litre, people are hurting and hurting badly.

I am aware that I have taken six or seven minutes, Mr Hancock, and that others want to speak. I would finally like to mention fuel distribution. I have asked the Secretary of State for Scotland, the right hon. Member for Berwickshire, Roxburgh and Selkirk (Michael Moore), about distribution from refineries to retailers, and he has assured me that he is looking into the issue.

[Jim Shannon]

On distribution, I would like to underline how the issue affects Northern Ireland. The same oil that comes into Belfast goes out all over the whole of the province and the prices vary incredibly. Does the hon. Gentleman feel that there is a need to address how oil companies distribute fuel across the whole of Northern Ireland and the United Kingdom?

[Mr MacNeil]

Yes, I could not agree more. I had a feeling that that was going to be a helpful intervention and indeed it was. As I was saying, I spoke to the Secretary of State for Scotland in the House and he has assured me that he will look into the matter of fuel distribution. I am not sure what progress there has been on that.

There is a difficulty between refineries and small rural fuel stations, and the habits of the distribution companies. They hold retailers very tightly and do not allow them the freedom to shop around and buy their fuel from different suppliers. A tanker in a certain area of the west highlands can move to a port further down and the fuel can be more expensive. It can go into another port and it can be cheaper. Batches of fuel, within a discharge at a small island port, can have different prices, depending on the amount that is bought. There is, in my view, predatory parasitical behaviour. I use those words with some thought. There is parasitical behaviour from fuel distribution companies when it comes to small rural and island areas.

I am not sure what the Scotland Office is managing to do, but I ask whether the Treasury might look into parasitical behaviour by fuel distribution companies, which are basically leeching off small, vulnerable island communities. That has to stop. At £1.50 to £1.57 a litre, there is utter anger at the price people are having to pay, and that in an area where the cost of living is generally higher—often thanks to the Co-op—where the wages are lower and, as I said, where we have the highest fuel poverty in the United Kingdom. I am making a plea to the Treasury.

The issue comes around every six months, but it is serious and affects people badly. If the powers were held in Scotland, we would not be coming every six months to talk to the Treasury or the Scotland Office in London, to make a plea about how tough things were in areas of Scotland.

I am aware that other Members want to get in, and some throats are being cleared around me, so I will leave it at that—I have said my piece. I am more than annoyed, and I hope that I am not back here in six months repeating part of my speeches of February 2011 and September 2011. We need the rural fuel derogation to come soon.

11:50

[Graeme Morrice (Livingston) (Lab)]

I thank my hon. Friend the Member for Central Ayrshire (Mr Donohoe) for securing the debate on what is clearly an important issue for all our constituents and the future of our economy. All right hon. and hon. Members will have had constituents approaching us and expressing their concerns about the current high cost of fuel. Individual constituents and local businesses have certainly raised it with me.

Fuel costs in West Lothian, where my constituency of Livingston is, are currently almost exactly in line with the national average: about £1.35 or a little more for a litre of unleaded, and £1.38 a litre for diesel—[Interruption.] The hon. Member for Na h-Eileanan an Iar (Mr MacNeil) confirms that from a sedentary position.

High fuel costs form an important element of the general increase in household outgoings currently experienced by so many families, in many cases coupled with frozen or reduced household incomes. A constituent recently contacted me to describe her own circumstances: she has not had a pay increase for two years, yet she is having to pay an extra £10 to fill up her car with petrol, meaning that she must now prioritise her journeys to remain within her budget.

Interestingly, recent AA research found that one in four of its members is now in the position of having to restrict the amount spent when refuelling and to prioritise car use. Alarmingly, that figure rises to 40% among those on lower incomes. Edmund King, the AA’s president, commented:

“Members tell us that driving to work represents the priority use of their car and that other trips have to suffer to make financial ends meet.”

With the Institute for Fiscal Studies warning recently that household budgets are set to be squeezed for a decade, it is vital that we get a grip on the issue of fuel costs now, so that consumers do not continue to suffer misery year after year.

Other constituents have expressed their frustration at being told that they should use public transport when they live in areas where public transport links are simply inadequate, or the costs are as high as for using their own vehicle. We touched on that earlier in the debate, and I do not want to go into the detail. The impact of high fuel costs is also seriously hurting businesses, however, and I want to focus the remainder of my remarks on that aspect of today’s debate.

We have seen some welcome, if limited, respite for consumers in the past few weeks, with pump prices in supermarket forecourts falling in response to a reduction in wholesale costs. Even if that is of some small assistance to individual consumers, it does little to help businesses and, in particular, haulage and transport companies. Speaking about that recent round of price cuts, the Road Haulage Association chief executive, Geoff Dunning, said:

“These price cuts can only ever be short term. What is desperately needed and would help everyone would be a reduction in the actual rate of fuel duty.”

He went on:

“However, January’s planned duty rise, combined with the proposed August increase will drive up fuel duty by a massive 10.4%. This will suck more money out of the economy and further undermine efforts to regenerate growth.”

Only last week, the Freight Transport Association revealed research showing that, on average, vehicle operating costs for rigid, articulated and drawbar vehicles had risen by 5.6% in the year to 1 July 2011 and that they have remained close to record, all-time highs since April this year. The largest contribution to the rise is the 12% increase for diesel over the same period. The FTA said that, while hauliers could ride out the recession by reducing margins and delaying vehicle replacements, they continue to feel the pinch and that it is likely that some hauliers might not be able to sustain their businesses in such circumstances.

That is of particular concern in my Livingston constituency because of its central position in Scotland, which makes it a popular location for businesses that need to transport goods throughout Scotland and often to other parts of the United Kingdom. Before the previous Budget, Dave McDougall, the chief executive of the West Lothian chamber of commerce, highlighted that point and the importance of getting the cost of fuel down for businesses in West Lothian. He said:

“Fuel prices are crippling all types of business. West Lothian is a location of choice for many companies because of its access to all of central Scotland. But this means that the effects are even worse for our Chamber members.”

He urged the Chancellor to take action to reduce the costs but, of course, we know that the 1p cut in fuel duty announced in the Budget was wiped out within weeks by soaring world oil prices.

Also speaking before the Budget, in March, the Federation of Small Business’s Scottish policy convener, Andy Willox, said:

“Scotland is suffering disproportionately due to the spiralling cost at the pumps.”

[Mr MacNeil]

The hon. Gentleman has just said that Scotland is suffering disproportionately. Would he prefer those powers to be held by the most democratic forum representing Scotland, the Scottish Parliament, or to be controlled by the Tory and Liberal Government here in London?

[Graeme Morrice]

I do not want to get bogged down in a debate on the constitution or the whole question of more powers for the Scottish Parliament. I certainly support the Scotland Bill, which we have been discussing, and fiscal autonomy for Scotland—but not independence, of course.

[Jim Dobbin in the Chair]

The impact has also been felt by retailers, with Asda stating last month that its customers were cutting back on trips to its stores because of high fuel prices. It estimated that families have, on average, £9 less disposable income each week compared with this time last year, largely due to increased petrol costs. So there is absolute agreement about businesses needing more help with high and rising fuel costs.

The all-important question is what can be done with road fuel duties to reduce the pressure on businesses and individuals and to bring about a halt to spiralling price rises. Fuel duty accounts for more than 60% of the pump price of petrol and just less than 60% for diesel, with VAT on top of that—the highest percentage of duty in the European Union. While the anger and frustration of individuals at suffering such high duties are understandable, once again the major concerns that business has are also clear. How can we expect businesses to compete on a level playing field with European competitors when they face such high taxes and duties?

When the Government increased VAT to 20% in January, they contributed to a further hike in fuel costs. It was the wrong tax at the wrong time, hitting families and businesses hard, just when they were least able to absorb such an increase. I support the calls to look at reversing the VAT increase for road fuel. We know it is feasible to obtain approval at the EU level for such a cut, but the Government refuse to entertain the idea because it is politically inconvenient for them to do so.

In a debate on motoring fuel costs here in Westminster Hall back in June, the hon. Member for Harlow (Robert Halfon) called for a commitment to no more petrol tax rises in this Parliament. He urged the Government to consider abolishing even inflationary rises on fuel duty during the Parliament. Such calls have largely come about as a result of the work of Fair Fuel UK, which is a broadly representative body and is making a strong case for reducing fuel costs for both motorists and businesses.

How do such calls square with the Government’s position? In opposition, the Conservatives made much of plans to “slash fuel duty”, as the headlines screamed at the time, with their fair fuel stabiliser. The concept of fuel duty falling when fuel prices go up and rising when prices fall, seems, on the surface at least, like a winningly simple and effective idea. Many of my constituents certainly believed so and contacted me about supporting it. However, the Office for Budget Responsibility, the Institute for Fiscal Studies and others have raised problems with that approach. It remains to be seen whether the fair fuel stabiliser will deliver what businesses and individual motorists want.

[Mr Robin Walker (Worcester) (Con)]

When the Office for Budget Responsibility looked at the fair fuel stabiliser, it said that one of its fiscal problems was that the benefits to the Government of higher fuel prices were wiped out over time by the harm to the economy. Is that not evidence for intervention, and for the Government to set a lower fuel duty to stimulate the economy?

[Graeme Morrice]

The hon. Gentleman makes an interesting point. I am all for Government intervention in many walks of life, but I would have thought that reducing VAT would be a good start. My hon. Friend the Member for Central Ayrshire made the interesting point that putting VAT on top of the total cost of fuel is a tax on a tax, and the Treasury should look at that.

In summing up, I again thank my hon. Friend for this debate. It will not solve the problem, but I hope that it will at least provide further food for thought about what we can do to find a solution to this most thorny of problems in the longer term, and eventually to bring about a settlement that provides relief for hard-pressed families and businesses. I look forward to the Economic Secretary’s response.

11:59

[Kerry McCarthy (Bristol East) (Lab)]

I congratulate my hon. Friend the Member for Central Ayrshire (Mr Donohoe) on securing this debate. I am aware that the number of signatures on the e-petition that is doing the rounds calling for a debate on fuel duty is rapidly approaching 100,000. Since joining the shadow Treasury team, I have spent much of my time debating fuel duty with the Economic Secretary. It is indicative of just how strongly Members of Parliament feel about the matter, and of how much their constituents are affected by high fuel prices, that we have returned to the issue. It also suggests that the Government’s limited action so far—the 1p cut in fuel duty—has not done enough to satisfy people’s concern and its impact on their lives. For example, my hon. Friend the Member for Central Ayrshire referred to the impact on a nurse in his constituency.

The small increases in the cost of living and the small cuts add up. The cost of parking at a hospital may have doubled, and travel to work may cost an extra £100 a month. Such increases make the difference between people being able to get by on a modest income and being unable to make ends meet. Sometimes they must make the tough decision to give up work, because they simply cannot afford it. I want to allow plenty of time for the Economic Secretary to reply, so I will not elaborate further, but people are being hit across the board. Fuel duty rises and the cost of petrol are obviously a significant element in that.

Before the Budget in March, we called on the Chancellor to review the duty increase, and we welcomed his decision following the example of previous Labour Governments, who had cancelled or postponed rises in duty when circumstances suggested that would be a good idea because fuel prices were putting too harsh a burden on people. We welcomed the 1p cut in duty, but the savings lasted only a short time, and prices at the pump remained high. According to figures published by the Department of Energy and Climate Change this morning, the price of one litre of petrol has increased over the past seven days by 0.38p to 135p and diesel by 0.44p to 139.4p. That makes prices 20p and 22p respectively more expensive than in the equivalent week last year. I am sure that some hon. Members in rural constituencies will say that those average prices do not reflect the real prices in areas that are ill-served by petrol stations.

Clearly, the 1p cut has not been sufficient for motorists feeling the squeeze. That is partly because the Government added another 3p to the price of a litre of petrol by hiking up VAT in January 2011. Motorists are also facing the prospect of a 3p increase in January 2012, and a further increase in August 2012. That comes at a time when the Institute for Fiscal Studies is warning that the coalition’s tax rises and spending cuts will squeeze household budgets for the next 10 years, with families over the past year having suffered the largest fall in living standards for 30 years. Median net household income is down 3.5%, the consumer prices index stands at 4.4%, and the retail prices index stands at 5%, which is more than double the rate at which earnings are growing. The Office for National Statistics has highlighted that fuel costs are one of the most significant contributors to the CPI and are adding indirectly to the cost of our weekly food shopping, because distribution costs rise with fuel prices.

I need not remind hon. Members that fuel prices affect not only affect households, but are having a serious impact on businesses, which are already struggling in a flatlining economy. Only this month, the Freight Transport Association reported that the high cost of fuel remains the biggest cause for concern among haulage operators. A survey by the Federation of Small Businesses found that its members were most concerned about the fuel tax rise in January. It warned that small and medium-sized enterprises would be severely affected.

I shall move on to what the Government have said they will do about the problem. Before the election, great play was made of the fair fuel stabiliser. David Cameron said that he would introduce a mechanism to ensure that when oil prices went up, prices at the pump would go down and vice versa. That was widely seen to be unworkable, and has been proven by the fact that since coming to power the Government have not acted on it. The stabiliser in the form suggested by the Prime Minister and the Chancellor has not materialised. Even the Office for Budget Responsibility said that it would make fuel prices less stable rather than more stable.

The Treasury then moved to funding the 1p fuel duty cut with the windfall tax on the oil companies, which the Scottish First Minister described as cack-handed. It was introduced almost at the last minute, and the oil companies that it affected were not consulted. The reduced duty is funded by a rise in the supplementary charge on oil companies from 20% to 32%. The Government were then hit by evidence that that would lead to fewer new fields being developed, and greater reliance on foreign imports, which are, of course, more expensive. Under pressure, the Treasury announced in the summer that it would allow companies to offset some start-up costs against tax, but that only served to show the Government’s muddle on the fuel duty regime. They float various ideas, but when those ideas are subject to any scrutiny they do not stand up to cross-examination, and the Government have to make policy on the hoof.

That is partly why we tried to amend the Finance Bill to require the Chancellor to assess the impact of tax on ring-fenced profits. As I argued at the time, that seemed to be in line with the Government’s professed commitment to more consultation and greater transparency in tax policy, instead of coming up with measures without consulting industry and then having to make U-turns..

Another measure that the Chief Secretary announced and which seems to be running out of steam is the pilot scheme for the rural fuel duty rebate, which he announced last October. He was keen on that when he was in opposition, but it seems to be more complicated than the Treasury expected. The rebate would allow a discount of up to 5p a litre on petrol in the inner and outer Hebrides—

[Mr MacNeil]

There is talk in London of the scheme being complicated, but it need not be. It is happening in many places throughout Europe. The only complication seems to be the length of time it is taking to put it in place.

[Kerry McCarthy]

At the moment, it is suggested that the scheme will apply to the inner and outer Hebrides, the northern isles and the Isles of Scilly. The Minister will have to explain, but perhaps the delay is due to the fact that there is considerable pressure from other areas where fuel prices are very high. The hon. Member for Newton Abbot (Anne Marie Morris) is no longer in her place, but she made the case for her constituency in the south-west having a similar scheme.

People in the Scottish Highlands, where large distances need to be travelled and the scarcity of retail petrol stations adds to the cost of petrol, think that they, too, should be included in the scheme. Do the Government think that the scheme should be restricted only to the islands, or should it be extended? If the islands are a particular case, perhaps the Minister will clarify what that is. It is not clear whether the island populations would feel any benefit or how the discount could be delivered, and there have been warnings that such a scheme would risk putting petrol stations out of business.

Under the original idea, upfront costs would fall on retailers who might have to wait two months to be reimbursed by the Treasury. For many small retailers that is simply not viable, and if petrol stations in remote areas are forced to close, motorists will have to travel even further to fill up their tanks. I would appreciate a response from the Minister about how that could be avoided if the pilot schemes for rural islands are introduced.

[Mr Reid]

The hon. Lady has referred to the original consultation proposals, which the Government quickly changed because of feedback from retailers and the cash-flow problem that would have occurred. That feature is no longer in the revised proposals, so the issue has been solved.

[Kerry McCarthy]

I thank the hon. Gentleman for that clarification. It seems that the briefings from people lobbying on the issue are slightly out of date.

In conclusion, the Government’s efforts to reduce the burden of high fuel bills on households and businesses seem to have run out of steam, rather like a car running out of petrol. Ministers continually try to ignore the fact that their VAT rise has had the greatest impact on petrol and diesel prices by adding almost 3p to the price of a litre of petrol and £450 to the average family’s annual bills. As we know, VAT has a disproportionate impact on those who can least afford it, and evidence shows that that is harming the economy. The Treasury is happy to ask the EU for a derogation on fuel duty for the remote Scottish islands but, as we have heard today, people’s budgets all over Scotland and around the UK are being put under pressure by the cost of petrol and diesel, and the Government refuse to listen.

[Mr Jim Cunningham]

Does my hon. Friend recall that after the 1997 election, the first thing the Labour Government did was cut VAT on fuel? That helped fuel poverty.

[Kerry McCarthy]

I recall that, and there are various other examples. Hon. Members are keen for the Minister to respond so I will not elaborate on that point, but the fact is that the Government have not even tried to get a derogation from the EU on fuel prices. Opposition Members argue that the rise in VAT earlier this year is having a seriously damaging impact on the economy and, at least in the short term until the economy recovers and economic growth returns, that it should be reversed.

I have posed a number of questions to the Minister, and I look forward to hearing not only a recognition that fuel prices are impacting on families and warm words about how the Government appreciate that people are being hit by the cost of fuel, particularly in rural or remote areas, but something clear about what the Government intend to do. The 1p cut in duty is incredibly insignificant in the grand scheme of things, and the Government must act because people and businesses are suffering. It is time for action.

12:13

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

It is a pleasure to see you in the Chair, Mr Dobbin, into which you seamlessly moved during the course of the debate. First, let me congratulate the hon. Member for Central Ayrshire (Mr Donohoe) on securing the debate. As the shadow Minister, the hon. Member for Bristol East (Kerry McCarthy) said, the House has had a number of opportunities to debate the pressures that the high cost of petrol puts on individuals, families and businesses. The Government continue to view the issue as incredibly important, and the hon. Member for Central Ayrshire was right to raise it. In the time that remains, I will do my best to respond to the points that he raised, and those raised by my hon. Friends. I also hope to provide an update on some of the questions raised about the rural fuel duty discount.

Even though average pump prices fell slightly over the summer, there is little doubt that the cost of fuel remains a difficult issue and concerns many families and businesses across the country. The Government have recognised that for some time, and as hon. Members will know, in the Budget we announced a second rise in the personal tax allowance that aimed to take more people out of income tax altogether. In total, that benefited about 23 million or 24 million people who pay the lower rate of tax on their household income. The Government have worked hard to recognise and tackle the cost of living.

There were extensive debates in the House and the Finance Bill Committee about the cost of fuel and the Government’s plans to support motorists. I welcome the opportunity to revisit those issues, but before I address some of the points raised today I want to explain why the Government acted as they did in the Budget, and set out why the approach proposed by the Labour party is not only illegal but unworkable. Perhaps if I explain to the Chamber why I believe that to be the case, we can put the issue and the alternative proposals to bed once and for all, and perhaps I can save Labour Members from continuing with the hole they are digging in pressing for them, although that is obviously up to them.

The coalition Government recognise that motoring is an essential part of everyday life for many households and businesses. The cost of fuel affects us all and the Government recognise that the rising price of petrol has become an increasingly significant part of day-to-day spending. We know that high oil prices are causing real difficulties in trying to ensure that motoring remains affordable, and it is important that when shocks such as the steep rise in the price of oil occur, a responsible Government are able to listen, consider and respond.

The hon. Member for Bristol East mentioned the fuel duty escalator. That was introduced in the 2009 Budget by the previous Government and involved seven increases in fuel duty. The previous Government had planned for an above-inflation increase at the start of April—that was the position we inherited, and we had to make a decision about whether to go ahead with the pre-planned rises left by the previous Government. Had we gone ahead with those rises, pump prices would, on average, have been 6p per litre higher than they are currently. I take on board many of the points raised by the hon. Member for Central Ayrshire about the impact of high petrol prices, but he must recognise that had we done nothing, that extra 6p would only have created more pain for motorists and businesses. On top of that—let us be clear—the plans that we inherited would have introduced further above-inflation increases in duty in 2012, 2013 and 2014. On taking office, we had to come up with a plan to support motorists, because the previous Government did not have one—it was the exact opposite.

From the start, the coalition Government have been actively looking at how we can ease the burden on motorists, although that is incredibly challenging given the constrained and difficult fiscal situation that we inherited. One of the first things we did, as the hon. Member for Coventry South (Mr Cunningham) mentioned, was ask the Office for Budget Responsibility to look at how high oil prices flow through to impact on the economy and try to understand that. As the hon. Gentleman pointed out, we were concerned to understand the impact on businesses and jobs. That was part of our work in looking at how we could construct a fair fuel stabiliser, which I will come to in a moment.

As part of the Budget, we finally announced our plan to ease the burden on motorists with a £1.9 billion package. The Government listened to hard-pressed motorists and businesses and acted. What did we do? We acted by cutting fuel duty. The hon. Member for Central Ayrshire clearly wants us to go further in cutting fuel duty, but he should at least be able to welcome the fact that we have already cut fuel duty by 1p a litre from 6 pm on Budget day. We acted by cancelling the previous Government’s plan for a fuel duty escalator for the rest of the Parliament. We acted by introducing a fair fuel stabiliser that will better share the burden of high oil prices between motorists and oil companies, so fuel duty will increase by inflation only when oil prices are high.

[Mr Donohoe]

Does the Minister accept that there is a correlation between the duty and the increase in VAT? Indeed, the cost of the VAT increase to the motorist was 2.8p a litre. If the Government are to do anything to redress the imbalance, it is that amount, not the 1p that she talks of, that should be taken from the price, because the consequence of increasing VAT to 20% has been an increase in the price to the motorist of 2.8p.

[Justine Greening]

I take the hon. Gentleman’s point. The issue was raised of VAT being applied to the total price of fuel, including fuel duty. For clarification, that is in line with EU rules. That is the reason why that approach is taken. However, I will say two things to the hon. Gentleman. First, we have introduced a £1.9 billion package to support motorists. Secondly, I have heard a number of Opposition Members bemoan the increase in VAT, but they have had several chances in the Division Lobby to vote against that VAT rise and they have not taken them. I would be happy for any hon. Member who voted against the VAT rise to intervene on me now, but having checked Hansard—[Interruption.] Let me be clear that I am not referring to the Scottish National party contribution to this debate, because of course it called the vote. I think that both I and the hon. Member for Na h-Eileanan an Iar (Mr MacNeil), who represents the SNP, would recognise that the Labour party abstained in that vote and did nothing, despite its words. It never followed them up with action. Those Members owe it to their communities to be a little more frank about the fact that they waved through the VAT increase themselves.

[Graeme Morrice]

Who put VAT up to 20% in the first place?

[Justine Greening]

I did not hear the whole of that intervention. I am sure that if the hon. Gentleman repeats it, I can respond.

[Graeme Morrice]

Who put VAT up to 20% in the first place?

[Justine Greening]

Well, of course, that is one of the key measures that we had to put in place—[Interruption.] The hon. Gentleman laughs, but he is—

[Graeme Morrice]

You did it.

[Justine Greening]

I would rather be in my position, voting for things that I believe in, being clear to my constituents and accountable and being part of a Government who are tackling a huge fiscal deficit. I think it is the worst fiscal deficit handed to any incoming Government. It is one of the deepest seen in a developed country.

[Graeme Morrice]

Caused by the banks.

[Justine Greening]

It was not caused by the banks, actually. Let me explain to the hon. Gentleman what a structural deficit is. Even in the good times, the previous Government were spending more money than they were taking in taxation. That did not have to do with the banks. The banks simply dramatically exacerbated that problem. That was what we were talking about when we said that the previous Government did not fix the roof when the sun was shining. My point is that there is no point in Opposition Members complaining about the VAT rise when they have not taken the opportunity to vote against it. I think that most people in Britain would think that that was slightly disingenuous.

[Graeme Morrice]

rose—

[Justine Greening]

I will give way again if the hon. Gentleman wants to keep digging his hole.

[Graeme Morrice]

But we are not in government. When the sun was shining, we built schools and hospitals and improved public services. We spent the money on the people’s priorities. The current Government are now cutting that.

[Justine Greening]

There are many people with schools in their constituencies—I can certainly think of one in mine—that saw none of that investment. Frankly, it is easy to spend, spend, spend. That is the Labour party’s legacy to Britain—a debt that is so high that it is costing taxpayers £120 million of interest every day. It is always the same. Let us not forget that the other legacy was unemployment that was 400,000 higher.

[Anas Sarwar]

rose—

[Kerry McCarthy]

rose—

[Justine Greening]

I will give way to the hon. Gentleman, but then I would like to make some progress and talk about fuel, because that is clearly the point of the debate. However, I am happy to have a debate on the economy, because many people in Britain recognise exactly whose fault it is that the economy is in the state that it is in today—it is the fault of the Labour party.

[Anas Sarwar]

I give the Minister some credit for being able to rewrite history in the way that she has. Can she tell me why the Conservative party supported Labour’s spending plans before the financial crisis?

[Justine Greening]

You always know that you are making progress in an argument, Mr Dobbin, when people have to turn back to things that happened decades—[Interruption.] Opposition Members can make this into a political issue. I would like to make it into an issue that involves people outside this place. Frankly, if those in the Labour party had spent less time arguing among themselves, as we now know they were doing, and a little more time moving away from political stunts to manage the economy responsibly, perhaps the public finances in this country would not have been in the mess that they were in when they were handed over to us at the last election. [Interruption.] An Opposition Member says, “You are in government.” Yes, there’s a good reason for that—because the British people had just about had enough of the Labour party being in control of the purse strings. I think we all hope that it will be an awfully long time before it is given control of the purse strings again. [Interruption.] I now want to make some progress on fuel duty and I particularly want to —[Interruption.]

[Jim Dobbin (in the Chair)]

Order. Could I ask hon. Members to behave themselves?

[Justine Greening]

Thank you, Mr Dobbin. I want to make some progress on fuel duty, because that is the key concern in our minds today. The issue of hauliers was raised. The package that we introduced has meant that hauliers have been able to benefit on average by about £1,700 a year.

[Mr MacNeil]

I know that time is getting on—we meandered down a funny road there. I want to pull the Minister back to two important points. First, when are we likely to see the rural fuel derogation in place? That is very important. Secondly, does the Minister have any sympathy with my point of view that I am tired of the red and the blue sheriff and I would like to see some of this controlled in Scotland?

[Justine Greening]

We will update the House very shortly on what is happening with the rural fuel duty discount. We have made progress with the European Union. That will be good news for the hon. Gentleman. It will mean that we can get on with our pilot. I am sure that he very much welcomes that. In terms of other issues raised by the hon. Member for Argyll and Bute (Mr Reid), he will be aware that of course his islands will be part of that pilot. As he pointed out, we have within the Treasury met stakeholders—petrol retail associations and of course regional owners and operators—to talk about how we can ensure that any rural fuel duty discount scheme works effectively. I think that we are making good progress with that. Clearly, whenever we bring in such a scheme, we must ensure that we understand that it will do what we want it to do and that it will work in the way that we want it to work. We want it to be of help. We were therefore keen to sit down and work through some of the issues that came up, for example, in relation to cash flow. It is also important to ensure that the scheme is not administratively over-burdensome. We are making good progress with those discussions. We have made good progress with the EU. Perhaps we will be able to give further details of that in coming days.

Finally, I want to point out once and for all why it is simply not possible to go down the route of creating a separate VAT rate for petrol. I am surprised that I still hear the Labour party talking about that. We rejected that proposal for a number of reasons. One was that it would take six years—possibly more—to come into effect. The other was that it is illegal, because fuel is standard-rated in terms of VAT, as part of EU rules. If we want to reduce the rate of VAT on fuel, we need a revision of the VAT directive. In fact, we would have to have unanimous agreement from all member states, and the European Commission would have to approve. As I said, it could take six years or more. I say that because that is what the French found when they sought a reduced VAT rate. Just in case that is not enough of a problem, the EU has also agreed a moratorium on revising the VAT directive. That was agreed under the previous Chancellor of the Exchequer. That route is not the route to help motorists, whereas the route that we took of a £1.9 billion package to support motorists was.

Radar Industry

Tuesday 13th September 2011 Westminster Hall

12:30

[Mr Andrew Turner (Isle of Wight) (Con)]

Before I begin, I thank you for calling me to speak, Mr Dobbin. I also thank my hon. Friend the Minister for coming to discuss the future of radar. I have asked for the debate because my attention has been brought to a situation in my constituency involving BAE Systems and the procurement of radar systems by the Ministry of Defence.

Since 1940, Britain has been at the forefront of international research and development when it comes to radar. That heritage, along with our experience, knowledge and unsurpassed expertise, is routinely admired by militaries and Governments across the world. BAE Systems has been in the vanguard of the highly specialised radar industry for more than half a century. As the most significant UK company in the field, it is almost singlehandedly responsible for having put us in our current enviable position. At the same time, it has worked tirelessly with the Government, and particularly the MOD, to ensure that the nation is secure from airborne and seaborne threats. Additionally, it has provided skilled employment to a multitude of people and an unsurpassed graduate scheme, and it has generated huge sums for the taxpayer. It is also one of the largest private employers on the Isle of Wight.

Globally, the market for radar technology is £5 billion a year, with 20% coming from the US, and the majority of the balance coming from other markets. As a result of our highly regarded skill in the sector, UK radar products are now installed in approximately 100 countries, and the majority of those products are believed still to be in active service. BAE is the primary UK supplier of radar technology to global customers, but international competition is strong from the likes of Lockheed Martin, SELEX, Thales and Raytheon. If developed correctly, the UK has obvious political and economic advantages, which will allow BAE to remain a market leader.

On the island, BAE employs 290 people. In its radar business, it employs 510 people across the UK, and it has additional sites in Chelmsford, Portsmouth and Dunfermline. In 2009, an Oxford Economics report on BAE assessed its financial contribution to the UK as being more than £78,000 per full-time employee, which is 85% higher than the national average and 34% higher than in manufacturing in general. In the same year, it was estimated that BAE spent £4.1 billion paying for equipment, components, raw materials, rent, energy and other services from UK suppliers. That meant that for every 10 BAE jobs in the UK, another 12 were created in the supply chain. One example is a company called Pascall Electronics, which is also on the Isle of Wight, and that is just one of many local Isle of Wight suppliers in BAE’s supply chain.

Those figures cannot be ignored. The economy and defence of the UK, and the population of the Isle of Wight, simply cannot afford to lose the radar industry. Recently, however, events have conspired to threaten the current situation, and this incredibly specialised and niche manufacturing industry is in danger of being lost. The first reason for that is that a number of large long-running programmes have finally been finished. They have been delivered to the MOD after years of extensive planning, research, development, trials and testing. The most notable are Sampson, which is in the Type 45 destroyers, and the forthcoming Artisan RT997, which will be in the Type 23 frigates. Sampson has been universally recognised as a world leader, and Artisan has benefited greatly from the reuse of parts of the same technology. Consequently, it, too, has been designed to be extremely competitive in the global market. That has particular significance because both systems are designed and constructed on the Isle of Wight.

As those contracts with the MOD come to an end, BAE’s work load in the UK has decreased. There is simply not enough work to sustain such high employment and the range of specialist skills required for further development. BAE therefore recognises that it must focus on its international markets to avoid redundancies. Additionally, the MOD has chosen to take delivery of an off-the-shelf system from the US company Lockheed Martin rather than a BAE system to cope with the modern problem of offshore wind farms. That was done instead of working with BAE to mature a wind farm solution that could have been made available through its existing radars.

Having made that observation, let me quickly stress that the company appreciates the MOD’s logic in making that particular decision at that particular time, but the side effect has been to create genuine concern. If the MOD is planning further purchases of off-the-shelf products from the US or any other foreign supplier, and BAE so much as appears to fall out of favour with the MOD, its opportunities for export business will be adversely hit. The reason for that is that when potential clients abroad look at BAE products, they judge their worth by the standards of the UK. Has the MOD bought these products? Does it endorse them? Should the MOD cease to work in partnership with BAE, it will indirectly, and probably irreparably, damage the company’s credibility in foreign markets.

Should global sales in BAE start to diminish, it is likely to do what companies do when sales decrease—make employees redundant. Should it then go as far as deciding to cease work on radar, the MOD will simply lose the only technical experts in the field of radar in the UK. The inevitable outcome will be a huge increase in the costs of through-life care for the MOD’s current radar fleet, because it will have to pay a foreign company to keep it running.

The possibility that a company might lose international credibility and have to lay off staff is not a reason in itself for the MOD to purchase equipment from any defence company, let alone BAE. Indeed, BAE is not asking for handouts, subsidies or guarantees of sales at some point in the future—far from it. It recognises that having just come to the end of some very long-term programmes, the MOD has no need to buy further equipment. It accepts that there will be a competition for the replacement of the rest of the air defence system in 2017, and it is confident that its entry in Project Vigilance will be of the highest standard. However, it feels a firm appreciation of the relevant issues by the MOD is vital for the protection of the UK radar industry’s future. The most cost-effective method of developing the next generation of radar defence for the UK is by defining a cohesive and credible long-term partnership with the MOD. That was demonstrated successfully with the last projects, and those before them, including the multi-function electronically scanned adaptive radar and advanced radar technology integrated system testbed programmes. I also fervently hope to protect the employment of my constituents, and those constituents of my colleagues who are also affected by the issue.

I want to make a final point. Radar has defended our country definitively at least once, in 1940. It is likely that it has done so on many other occasions that are not in the public domain and it is more than likely that it will do so again. I pose this question: is it not essential that the radar technology our military are asked to use should be of British origin, in research, design and manufacture? It makes perfect sense to me that the company that we use to develop such sensitive technology should be British-based, like most of its employees. What would happen if there were to be an incursion into our airspace by a foreign power and the UK Government did not have the control and flexibility that we enjoy today, because the designs were not British? Many might scoff at that suggestion, and say that surely it makes no difference which of our allies makes our radar. It probably does not at the moment, when our airspace is not being challenged on a daily basis, but none of us knows what will happen in the future. Why should we take the chance when there is a world-class company specialising in the area in question, native to our country? Why would we even think about taking the risk? That would not only be imprudent, but would smack of recklessness.

No one is asking the Government to help one company over another, to provide subsidy or even to point fingers and lay blame about previous decisions that have affected a company’s reputation. By continuing to ignore those companies in the UK that add genuine value to the economy, are recognised world-class providers of technological solutions, carry the British brand globally, employ large numbers of people and, in the case of BAE Systems, are integral to the very defence of the United Kingdom, we will end up cutting off our nose to spite our face.

12:43

[The Parliamentary Under-Secretary of State for Defence (Peter Luff)]

I begin in the customary way, but entirely sincerely, by congratulating my hon. Friend the Member for Isle of Wight (Mr Turner) on securing the debate. I am always impressed by the diligent way he represents his constituents’ interests, and I hope to encourage him by showing that there is a significant amount of work for British radar companies both here and overseas.

I hope that my hon. Friend will forgive me for saying that he gave a rather half-empty view of the radar world and the future of the British industry. I hope to persuade him that the glass is comfortably more than half full. The future of the British radar industry is an important topic and I am pleased to be able to share with the House all the good work in which the Government are involved, in support of that industry. My hon. Friend will understand that success has many fathers and failure is an orphan, and in that spirit I offer the thought that, as a Worcestershire Member, I look towards Malvern’s proud role in the development of British radar systems; I take a close interest in the development of radar.

The defence and security of our nation and people are the primary responsibility of Government, and defence is, as will be appreciated, my primary interest. There is a vital requirement for the detection of airborne assets entering and travelling through UK airspace, as my hon. Friend emphasised in his excellent speech. Radar is the primary tool used for such detection, whether for the tracking of co-operating civil aircraft or the detection and engagement of potentially hostile aircraft. UK companies such as BAE Systems, SELEX and Thales supply many of the radars that we rely on for that critical role. I want to emphasise that: I regard SELEX and Thales as British companies, and later this afternoon I will receive a delegation from colleagues in the House, making the case for SELEX, and will be visiting its excellent offices in Edinburgh on Monday to see its radar work. However, my hon. Friend is right to recognise the proud record of BAE Systems as well.

Our armed forces operate across the world—not just in Afghanistan and Libya, but also in our permanent bases overseas such as the Falkland islands. Accordingly, radar technologies sourced from British companies are deployed by our armed forces around the world, so we recognise the importance of radars across a range of military systems. They are a critical element of our air defence capability, supporting operations on land and sea and in the air. Recent operations over Libya have clearly demonstrated the effectiveness of commanding the air domain. Radars are required for combat systems working alongside our complex weapons from ships, submarines and aircraft as well as troops on the ground, so our ability to sustain and develop those systems, including our ability to respond rapidly to emerging and evolving threats, is essential to our operational effectiveness. On that point, there is nothing between my hon. Friend and me.

I am glad to reassure my hon. Friend that the UK’s industrial capability is critical to meeting the vital defence requirement that I have outlined. Indeed, we are working with BAE Systems and other UK industrial players, together with our scientists in the Defence Science and Technology Laboratory, better to understand the issues and to share our thinking regarding the evolving requirements—and they can evolve quite fast. That is very much in the spirit set out in last year’s Green Paper on technology, equipment and support. We enjoy a close and productive working relationship with our radar suppliers and look forward to maintaining that in the years ahead, so I was slightly disappointed by the way my hon. Friend characterised our relationship. I hope that BAE Systems feels that it has a constructive relationship with us.

On my hon. Friend’s points on air defence radars and wind farms, I must stress that the provision of up to three proven wind farm-tolerant radars by the wind farm developers, removing the objections of the Ministry of Defence to those wind farms and releasing significant renewable energy potential, is seen across Government as very encouraging. My ministerial colleagues have worked hard to achieve that. Indeed, the Secretary of State for Energy and Climate Change has acknowledged that work, which has been achieved by co-operating across Government, and with industry, to reach an outcome that is beneficial to our national security, energy security and decarbonisation goals. Furthermore, it is not the case that the UK’s air defence radar network will be made up of a foreign fleet in the future. I am assured that UK industry is developing a wind farm-tolerant air defence radar, and I welcome that.

There are many radars in service with our armed forces. Some examples are long-range air defence sensors, medium-range air defence systems, Type 45 air defence sensors—my hon. Friend referred to the Type 45—and air traffic control sensors, many provided by UK companies, including BAE Systems. In the long- range sector, UK BAE Systems produces the Type 101 and 102 radars used in support of the defence of the UK. In air traffic control there is UK involvement in the Watchman radar—again with BAE.

However, it is in ensuring the future capability and reach of the Royal Navy that UK companies stand out. I am happy to endorse what my hon. Friend said about the Sampson multi-function radar fitted to our newest class of destroyers, the Type 45, which, incidentally, is supported by MBDA UK and BAE Mission Systems. I want to make the point that support is extremely important. My hon. Friend should not concentrate only on manufacture, although I understand its importance for his constituency. The supporting of radars is also hugely important, and it brings many important jobs. It is an important skill for the UK.

Also in the Type 45 class of ship there is the Thales long-range radar, which is supported by BAE Mission Systems, and the Royal Navy’s next generation of radar capability, the UK company BAE Mission Systems radar—the RT997. The contribution to the Royal Navy’s current capabilities by UK companies is evidenced by the BAE mission systems radar 909, fitted to Type 42 destroyers and mainly supported by the same British companies. There is also the RT996, which is fitted to many ships throughout the fleet, including Type 23 frigates and destroyers, amphibious support ships and Illustrious, for which in-service support is provided through an award-winning long-term contract with a UK company. There is no shortage of business here, especially for UK companies.

[Penny Mordaunt (Portsmouth North) (Con)]

I thank the Minister for giving way. Does he agree that, when deciding whether to buy in the UK or from overseas and where to invest in research and development, we should be thinking about the export market, how many can be built over a particular cycle, and whether the technology is genuinely innovative? The examples that he gives fit into all three categories.

[Peter Luff]

I agree with my hon. Friend. I hope to talk later about exports and our export ability, an important part of the future of the UK’s radar industry. One of the major changes that we seek to achieve through our acquisition strategy—not only in radar but across the board—is to ensure that the exportability of a product developed for UK purposes is considered early in the life-cycle and acquisition process. When investing in capability for the British armed forces, we should develop a capability that has a ready export market. My hon. Friend is right to emphasise that point, and I shall return to it.

I turn next to a future capability referred to by my hon. Friend the Member for Isle of Wight. Project Vigilance will provide an upgrade to existing air defence radar systems, with the opportunity for industry to compete for those elements of the air defence radar system that need replacement. The project is still in its early days, and its exact scope and requirements are still being decided.

Project Vigilance is currently planned to sustain the long-range surveillance and air defence capabilities provided by the T101 and T92 radars, which allow United Kingdom air surveillance and control system force command and chief of joint operations to detect, track, identify, monitor and, if necessary, take action against objects flying within, approaching or adjacent to UK and Falkland Islands airspace. Work to develop the strategy is under way.

Given the financial climate, taking an incremental approach to Project Vigilance will ensure that existing sensors are utilised to full effect, the whole air defence network is coherent and each reaps maximum benefit from other interlinked projects. That applies not only to MOD projects, but to other Departments’ initiatives and requirements, including the need, whenever possible, to enable the use of renewable energy; I say “whenever” to emphasise the great importance that we attach to that.

Surveillance data are not limited to military air defence radars; information comes from a multitude of sources that includes military and civilian air traffic management radars, and links to NATO air defence sites and tactical data links from air, surface and land platforms. Again, industry has been and will be invited to compete in these and other projects.

Moreover, the utilisation of a plethora of data sources not only provides resilience, but allows defence to optimise the air defence radar footprint to ensure that an appropriate level of redundancy is met. We must have the capacity to ensure that we can carry on doing what we need to do in adverse circumstances. It is on this foundation that the air command and control strategy is being developed, but we recognise the need to ensure that value for money is obtained from the Project Vigilance procurement strategy, as my hon. Friend would wish.

There is also good news on another radar project. Project Marshall is a large and wide-ranging project for the provision of terminal air traffic management, essentially the provision of air traffic services to military and civil aircraft operating in and out of Government aerodromes. Air traffic control services are currently provided to 70 MOD-owned airfields and air weapons ranges through the use of a wide range of equipment located on more than 100 locations in the UK and overseas.

Project Marshall has four key objectives. The first is to ensure a safe and enduring terminal air traffic management capability; the second is to address issues of equipment obsolescence through a programme of capital investment; the third is to address regulation changes and make provision for emergent regulatory issues; the final one is to rationalise arrangements to benefit from associated efficiencies and savings. This transformation project will ensure that military air traffic control services continue to be operated in a safe manner, while complying with relevant legislation. The new services are planned to commence in 2014, and several UK companies are involved in the ongoing competition.

There is more good news, this time on the naval side. I have already highlighted some of the support that the Royal Navy receives for radars from UK companies. Five types of primary and secondary navigation radar are fitted to Royal Navy surface warships and submarines. I recognise the excellent support that a range of radar contractors have provided over recent years in maintaining the primary and secondary navigation systems used by the Royal Navy.

As for the future, the navigation and situational awareness radar is planned to replace 1007, which is fitted to most Royal Naval vessels; it is being designed to provide primary navigation and sustained situational awareness on surface warships. The project is in its assessment phase and, against current plans, the radar system is due to enter service in 2016.

I turn next to the air sector. I bear in mind what my hon. Friend the Member for Portsmouth North (Penny Mordaunt) said about exportability. Our highly capable Typhoon aircraft have long been served by the mechanically scanned, or m-scan, Captor radar, which is produced by the four partner nations on the Typhoon project. However, as the defence environment evolves, no matter how good those mechanically scanned radars are, they are having to be replaced by electronically scanned, or e-scan, radars, which provide increased detection and agility against a wider range of targets and a less easily countered capability.

In partnership with our Typhoon partners and industry, we are developing an e-scan solution that will further enhance Typhoon’s capabilities well into the 21st century. Industry has played, and continues to play a full, active role in achieving the optimum solution on e-scan. Not only will e-scan result in a capability leap for the UK Typhoon fleet, but it will further the chances of success for Typhoon in the highly competitive fast-jet export market, where e-scan is a key discriminator for many export customers. For example, the Indian Government order depends on the development of the e-scan radar, and we attach great importance to winning it, as it will represent a lot of business for UK industry—not only in radar, but across the aerospace sector.

We must not forget exports. There are significant opportunities to supply civil radar, for airports and air traffic control services throughout the UK. There will be an increasing demand for solutions that can mitigate against interference from wind farms. There are also increasing opportunities overseas, driven by airport expansion and upgrades in markets such as Brazil, Russia, India, China and the middle east. UK strengths in civil radar and air traffic control solutions, which my hon. Friend the Member for Isle of Wight rightly emphasised, mean that we are well placed to make the most of these prospects—but in a responsible manner, consistent with the UK’s export controls. UKTI can help UK companies sell overseas through a range of support, including trade missions, overseas exhibitions and inward buying missions. I encourage UK industry to make the most of these opportunities. Although I suspect that BAE systems needs no such encouragement, I encourage it none the less.

The defence and security equipment international exhibition takes place in Docklands this week, and it will showcase UK industry on the world stage. My ministerial colleagues and I will use that event to meet a large number of overseas Government delegations; high on the agenda, if not at the top, will be defence exports and the scope for the UK to engage in greater industrial partnerships across the globe. There are a number of attractive export prospects for UK radar systems, from a range of British companies, including those companies that I mentioned at the outset. It is a diverse sector. For example, UKTI DSO is already actively supporting BAE Systems with a campaign in Qatar.

In summary, I assure my hon. Friend and the House that we remain committed to supporting the future of the radar industry. To me, the future of the industry looks exceptionally bright. My hon. Friend has every reason to be confident about it, and about the future of his constituents.

Gaza (Aid)

Tuesday 13th September 2011 Westminster Hall

12:58

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

I gave you a note, Mr Dobbin, to say that we may be joined by others who have recently been on a trip to Gaza. Should they make it here—they are currently in other Committees—they would like to speak in this debate, rather than just intervene. If the Minister agrees, I should like to end my contribution early so that they can tell us about the recent events that they have seen with their own eyes.

[The Parliamentary Under-Secretary of State for International Development (Mr Stephen O'Brien)]

I am grateful that I have been given that notice. It is fine for those Members to speak, provided that we keep roughly to the same split of time.

[Michael Connarty]

Mr Dobbin, it is my intention to give the Minister adequate time to speak.

Having been to Gaza on five occasions, I feel that I should say a word about the people there. I was lucky enough to be a monitor at the first democratic elections in Gaza city. At all times, the people were unbelievably welcoming, friendly and tremendously supportive and I was much buoyed up by my meetings with them. On my last visit, we went to Beach camp. I was very ill—an allergy that I suffer from kicked in while I was there—and I found the people to be unbelievably hospitable and caring. They looked after me very well. I have nothing but the highest regard for them; they were kindness incarnate. It is those people whom I want to talk about in this debate.

First, though, I must talk about the context in which such recent visits have taken place. Deep concerns have been expressed, and continue to be expressed, about the impositions placed on the people of Gaza and the humanitarian effects of them. In the second democratic election, the people of Gaza chose to elect a Hamas majority Government. Since then, there have been tremendous controversies. I join others in condemning not only the inability of that Government to stop the firing of rockets into the Israeli territories and households, but the unbelievable excessive force used in retaliation by the Israeli Government, which has killed more than 1,000 people and destroyed many of the basic facilities required for humanitarian reasons.

There has been strong condemnation from the Turkish Government over the killing of nine Turkish citizens on the aid flotillas. They have now said that they will defend the flotillas taking humanitarian aid to Gaza if they are carrying Turkish citizens. The problem has been caused by Israel’s appalling blockade of Gaza. Access to the Gaza strip remains severely restricted. Only the Kerem Shalom crossing is functioning, although it has recently been subject to Palestinian industrial action, which is in protest at the recent closure of the Kami crossing. The Gisha Legal Centre for the Freedom of Movement notes that Kerem Shalom can accommodate 250 trucks per day in both directions, compared with 1,000 trucks in both directions at Kami, so that is clearly severely restricting the amount of aid going into Gaza.

In September 2009, the IMF directly attributed the continuing restrictions on access to Gaza as a prime reason for the continued high unemployment rate, low growth and high inflation. Gaza could reach growth rates of 7 to 8% if the economic blockade were lifted. As for the children of Gaza, one in three is anaemic and one in 10 is malnourished. The Food and Agriculture Organisation of the UN classes 61% of Gazans as “food insecure” and the United Nations Relief and Works Agency reports that 80% of Gazans rely on some form of aid.

A report published in January 2011 on the website of the Norwegian newspaper Aftenposten, which has access to documents obtained by Wikileaks, makes it quite clear that the Israeli Government are determined to starve the economy of Gaza to bring it to the point of collapse. If people cannot sustain their own economy, the need for aid grows and grows, and that is a strategy that the Israeli Government are clearly using. That is wholly unacceptable.

The report said that a shortage of Israeli shekels in Gaza has continued to be an issue. Last July, Tony Blair, speaking in his role as representative in the middle east, said that he welcomed

“Israel’s decision to allow the entry of 50 million shekels into Gaza as well as the exchange of 31.5 million shekels of spoiled banknotes”.

The pressure is on Israel. This is about not just starving people of basic materials that the international community would give them or that people would be able to trade, but trying to break the economy in retaliation for people exercising their democratic right, which we are always espousing, to choose a different Government.

Let me put on the record the names of all those Members who went on the visit in July 2011. They are my hon. Friends the Members for Manchester Central (Tony Lloyd), for Ayr, Carrick and Cumnock (Sandra Osborne), for Kilmarnock and Loudoun (Cathy Jamieson), and for Edinburgh South (Ian Murray), and Lord Warner. Before I quote from their reports, I also want to put it on the record that the right hon. Member for Rutland and Melton (Mr Duncan) was the first Minister to visit Gaza in the last decade. I hope that the Under-Secretary of State will follow that example and go to Gaza to meet the people.

[Guto Bebb (Aberconwy) (Con)]

The difference between Israel’s attitudes to the Gaza strip and the west bank might be because it faces more of a threat from the Gaza strip. As for the recent visit to the west bank, my understanding is that the economic growth in that part of the Palestinian authority is about 12% per annum. Clearly, the message is that if the Palestinians can restrain the violence being shown by Hamas in Gaza, economic growth in Gaza might be much greater.

[Michael Connarty]

Even when I have visited some of the worst regimes, I have always been impressed by the tremendous entrepreneurial ability of the people of the Palestinian nation and their tremendous thirst for knowledge and high skills. We see them all around the world. We have quite a number in Scotland who contribute to our economy.

If we look at what has happened on the west bank, and such things have been well recorded, we see that the people have to manage in very straitened circumstances, especially given the Israeli Government’s attitude to land, roads and water. Even in the west bank, the people live under a penal regime. In Gaza, there is an attempt to starve out and harm the ordinary people in retaliation for what is the unacceptable use of rockets.

Everyone recognises that Israel has used disproportionate force. We cannot just blame Hamas. The circumstances are set by the occupying nation, which is Israel. That may change shortly, because there will be an attempt in the UN to recognise the nation of Palestine as a state. Hopefully, that will change the attitude of the people in the UN—perhaps not in the Security Council. It will help Hamas and Fatah to try to create one non-violent approach to unity and to statehood.

Let me turn now to the situation that our colleagues found when they visited Gaza in July. The blockade clearly aims to cause great harm to the people’s ability to generate income and run their own economy. The effects of denying them the supplies that they require to function were quite stark. My hon. Friend the Member for Kilmarnock and Loudoun said that it took them three hours to get into the occupied territories. Some of the Palestinians who were waiting at the crossing to get through had been waiting for days.

The imposition was deliberately put in by the Government. On a positive note, my hon. Friend said that when she spoke to women’s groups, voluntary organisations, small businesses and trade unions, she found a tremendous sense of activity within the community to overcome the burden placed on them. The people are not lying down with their hand out waiting for someone to come to their aid; they are a very determined people who are attempting to live under these terrible conditions and to do their best.

None the less, the reality is that the people cannot generate much of their own wealth—50% of factories were destroyed in the Israeli war in 2008-09. The numbers of employed fell from 135,000 to 15,000; that is a massive drop that impacts on their ability to generate income. As a result, inferior, illegally imported goods are coming through, which create safety problems. They are not of the right quality. Raw materials for manufacturing are difficult to source, so the Palestinian people’s ability to save their own economic life is minimal.

Another problem that has always existed in Palestinian communities is the difficulty of sourcing adequate water. The hon. Member for Aberconwy (Guto Bebb) compared Gaza with the west bank. There is a water problem in the west bank, but the water problem in Gaza is probably more extreme. Even when I was last in Gaza, before the latest problem caused by the reaction to the election of Hamas, most of the main water sources had been diverted to Israeli settlements outside Gaza.

That has always been a problem, because the Israeli wells are sunk much deeper than the Israelis allow the Palestinians to sink their wells, so the Israeli wells soak up water from the aquifers. The Coastal Municipalities Water Utility organisation in Gaza has said that, because of the reduction in the flow of the water, the amount of nitrates and the level of chlorine contamination are now rising very fast in the water sources that the Palestinian people have to use. Even when I was last in Gaza, which is some time ago now, doctors told me that children were beginning to show signs of diseases that had not been prevalent among the Palestinian people for quite some time, and children are the ones who are harmed by using contaminated water.

Another thing that caused me great distress when I was last in Gaza was the fact that people were not being allowed to dump their rubbish by taking it away to somewhere safe; often they had to dump it within the limits of their cities and communities. That meant that, when it rained, material from the rubbish leached down into the aquifers and was then absorbed back into the bodies of the people using water from the aquifers.

Because of the inability to generate enough electricity, the people in Gaza now have problems keeping even the basic facilities running in their hospitals. One of the hospitals in Gaza city is mostly comprised of wards that were built with donations from the families of returning or deceased soldiers from the first world war. Many soldiers recuperated in Gaza city after the terrible Gallipoli campaign and many of the wards in that hospital have plaques on the walls to show that they were built by the British.

To keep those wards running is very important. However, the recent British delegation visited Al Shifa hospital in Gaza city and the members of the delegation were told that kidney dialysis machines have to be disconnected from patients every time the power goes out, meaning that the blood has to be cleaned and the dialysis process has to be restarted every time the power goes out. Dialysis has to be done twice, which is a great imposition on kidney patients.

There is also a major problem in trying to source legitimate building materials, because of the argument put forward by the Israeli Government that certain things, including basic building materials, have dual use and therefore should be denied to the people of Palestine. That argument does not make any sense. For example, radiotherapy drugs for cancer patients are banned, because Israel says—for some reason—that they are a dual use product. I am not quite sure how to extract the small amount of radioactivity from radiotherapy drugs and how it could be used for anything other than medical purposes.

I know, Mr Dobbin, that you come from a medical research background and so you will know that a small amount of radioactive material, with a very low level of radioactivity, is generated by every hospital in the country. I do not see anyone saying that we need to rush around and put that material in a high security facility, so the Israeli attitude is nonsense and an imposition on patients.

Doctors who spoke to the British delegation that visited Gaza recently estimated that in the past year 500 Palestinians have died simply because of a lack of medication; Gazans are simply not being allowed to import medication in adequate quantities. Children and cancer patients are most at risk, as they are denied the treatment they need. For example, we met a young boy with a sickle cell anaemia problem. In this country, we would regard any child who had that problem as being a priority, but that child in Gaza was denied drugs to deal with that terrible disease. Providing those drugs is what humanitarian aid is about.

We must ask the Minister, “When will the warm words and the talking stop? When is all this nonsense about it being all right when we have a negotiated settlement going to stop?” There is a widespread feeling that the Israeli Government do not want to have a negotiated settlement that would give the Palestinians an equal and adequate life, and it is quite clear that we are condoning and colluding in the situation in Gaza. We did not like the result of a democratic election and we have not done enough to try to move from that viewpoint, to a situation where that election result is not seen as a threat but as something that should be absorbed into the discussions about what happens in Palestine.

In all the years since I last visited Gaza, and in the time since the British delegation visited Gaza recently, there seems to have been very little movement, except perhaps for a backward movement in the conditions of the people there. That is a great tragedy and, to be quite frank, in the past it has been a cause of great shame for my party when we were in government; we should have dealt with that situation if we were in any way humanitarian and democratic socialists.

Now the challenge lies with this Government, without regard to party. I hope that they make the choice to change their position so that they support UN recognition of the state of Palestine. But if they cannot do that, I hope that they will do something to argue very strongly for, and win through the UN, a situation whereby it is accepted that it is wrong for Israel to do what it is doing in preventing humanitarian aid and other basic aid from being taken to the people of Gaza by whichever route people choose to take it.

13:15

[Jeremy Corbyn (Islington North) (Lab)]

Thank you very much, Mr Dobbin, for calling me to speak. I will be very brief and I am grateful to my hon. Friend the Member for Linlithgow and East Falkirk (Michael Connarty) for giving me a few moments to say something.

I have visited Gaza on quite a number of occasions and every time I have come away even more depressed than I was at the end of the previous visit. There was a sort of high point post-Oslo in the late 1990s, when there was an airport ready to function, there were water supply systems, drainage systems were in operation, forests were being planted, trees were growing, agriculture was developing, and there was a high level of employment and a real sense of optimism and hope.

I then went to Gaza in 2005 as an election observer. I have vivid memories of Israeli border guards at the Rafah crossing deciding to shoot into the town of Rafah on polling day. Why did they do that, other than to intimidate those people who were trying to cast their votes legitimately and democratically in that election? I was not particularly surprised at the result of that election. Along with many others, I confirmed that it was peacefully carried out and democratically conducted and that there was no intimidation of voters. So we must recognise what has gone on in Gaza; the situation there is very serious.

On a subsequent visit, I discovered the number of people suffering from mental illnesses and from wholly preventable conditions, because of polluted water supplies and everything else, which indicates that we are dealing not with a natural tragedy but a human tragedy, of human proportions, created by the blockade, the bombardment, Operation Cast Lead and the constriction of supplies. Under the Mubarak regime in Egypt, the Rafah crossing was opened and closed at various times. Now it is open most of the time and it is the only way that sufficient supplies can get into Gaza, because the Israeli blockade continues.

In the short time left to me, I want to make a plea to the Minister. I plead with him to understand that the people of Gaza—1.5 million people—are in prison. I plead with him to try to understand what it is like to be a young person growing up in Gaza, knowing that it is only possible to watch the world through television and computers and that it is only possible to listen to the world through radio, because the chances of travel are limited, job opportunities are limited and aspirations are limited. Education in Gaza is often very good; there are very many graduates and people with other educational qualifications in Gaza. That is what breeds the anger and all the problems that I have just outlined.

The pressure must be put on to lift the blockade of Gaza, to recognise the legitimate rights of the people of Palestine, and, above all, to get aid to Gaza as quickly as possible, to deal with what is a developing human tragedy of undernourishment and medical problems, including mental health problems, caused by the blockade. Anything that the Government can do in that respect would be very much appreciated and I appreciate the short time that I have had today to contribute to this debate. I also congratulate my hon. Friend on his contribution.

13:18

[The Parliamentary Under-Secretary of State for International Development (Mr Stephen O'Brien)]

Thank you very much indeed, Mr Dobbin, for calling me to speak. I congratulate the hon. Member for Linlithgow and East Falkirk (Michael Connarty) on securing this very important debate and I thank him for doing so.

Let me begin by stating very clearly that the humanitarian situation in Gaza is unacceptable and unsustainable. In Gaza, 66% of the people are dependent on food aid; 90% of mains water is unfit to drink, the consequences of which were particularly noted by the hon. Member for Islington North (Jeremy Corbyn), who has just contributed to the debate; and, despite the fact that schools are running on double or triple shifts, 40,000 children have no school place. Gaza’s economy is depressed and aid-dependent. There has been strong growth recently, but from a very low base. GDP per capita remains 40% below 1994 levels. At 37%, the unemployment level is among the highest in the world, and 38% of Gazans live in poverty. It is deeply troubling that Gaza, which should have a thriving economy, is currently one of the highest per capita recipients of aid funding in the world.

We believe that the actions of both Israel and Hamas have contributed to the current situation in Gaza. Between 18 and 21 August this year, we witnessed, once again, an alarming escalation of violence: a terrorist attack in southern Israel, more than 100 rockets and mortars launched from the Gaza strip at Israeli civilians, and retaliatory strikes by the Israeli air force against targets in Gaza. Nine Israelis were killed during the rocket attacks, and many more were injured.

We strongly condemn the appalling violence. In Gaza, at least 15 people have been reported killed, including three children, and 44 injured. We have urged the Israeli Government to ensure that everything is done to avoid further civilian causalities. The announcement of the current ceasefire is welcome, and it is vital that both sides now show restraint and seek to reduce the tensions. Like the hon. Members for Linlithgow and East Falkirk and for Islington North, I have been to the region, although not to Gaza itself—that was the Under-Secretary of State for Foreign and Commonwealth Affairs, my hon. Friend the Member for North East Bedfordshire (Alistair Burt)—but in the southern Israel area the problems are real and continuing.

Israel retains obligations under international law as an occupying power. It controls the majority of Gaza’s borders, and sea and air space and, as such, has primary responsibility for facilitating humanitarian access to Gaza. We welcomed the changes to the Gaza access regime announced in June 2010, and the subsequent package of measures agreed by Quartet representative Blair and Prime Minister Netanyahu on 4 February this year. However, recent UN reports show that the measures have not brought any fundamental change to Gaza, with food insecurity remaining high and economic opportunities scarce.

Much more needs to be done to ease restrictions on exports, construction material imports and the movement of people. Israel’s commitments on exports that were agreed with the Quartet representative in February 2011 have not yet been met. Increases in imports since June mainly relate to consumer goods, with the number of trucks entering still being only one third of what it was pre-blockade. We understand Israel’s security concerns, but the current access regime imposed by Israel has the perverse effect of fostering radicalisation and empowering Hamas, while punishing the ordinary people of Gaza.

Economic restrictions have not brought political change or degraded the military capability of Hamas. On the contrary, legitimate business is being strangled while Hamas allies are strengthened. Isolation and growing frustration at the lack of economic opportunities make extremism more attractive, a point ably highlighted by my hon. Friend the Member for Aberconwy (Guto Bebb) in his intervention. An improved economy and a resurgence of Gaza’s business sector are not only essential for the people of Gaza, but firmly in Israel’s security interests.

The vast majority of goods entering Gaza come not through the official crossings but through the vast network of tunnels between Egypt and Gaza. Hamas controls the tunnels and imposes taxes on goods passing through them, the money raised forming a large part of their revenue base. As a result of the blockade, UN and non-governmental organisation projects confront constant difficulties in gaining access and in importing construction materials, which means that projects designed to help the most vulnerable people are blocked, delayed or made more expensive. Meanwhile, 30 times more cement and 10 times more steel comes in through the Hamas-controlled tunnels than through the crossings.

[Jeremy Corbyn]

I hope that the Minister has the opportunity to visit Gaza at some point. I welcome what he says, but does he not acknowledge that the tunnels are a product of the blockade? Without the blockade there would be no point in the tunnels, and there certainly would be no economic advantage in having them. The blockade must be lifted; that is the crucial issue.

[Mr O'Brien]

I certainly recognise that it is difficult to envisage how the tunnels might have come into being but for there being a difficulty in getting goods to move, so I fully understand the hon. Gentleman’s point.

The United Nations Relief and Works Agency reports that at the current approval rate for reconstruction projects, it will take 78 years to rebuild Gaza. Only 28% of its work programme for Gaza has been approved by Israel, and only half of the materials needed for approved projects have entered into Gaza. UNRWA wants to build 100 schools, but at the moment has permission for only 42. The UNRWA schools are vital, because they teach the lessons of the holocaust and of the universal declaration of human rights. If a child cannot get a place at an UNRWA school, he or she might end up unable to go to school at all, or might attend a school with a curriculum approved by Hamas or another extremist group.

What is the UK doing? We continue to press the Israeli Government bilaterally to ease the movement and access restrictions. We have consistently lobbied the Israeli Government at ministerial and official level, in close co-ordination with the office of the Quartet representative and European Union partners. The Department for International Development supports the UN Access Coordination Unit to work with the United Nations, Israel, the Palestinian Authority and aid agencies to facilitate the transfer of vital humanitarian assistance, including medical equipment and supplies, in and out of Gaza. DFID has also contributed to a greater international understanding of the situation in Gaza and the impact of the blockade. Earlier this year, DFID-funded reports by the World Food Programme and the UN Office for the Co-ordination of Humanitarian Affairs provided detailed and impartial analysis of the situation in Gaza, and that has provided a solid, analytical basis for our work with partners in identifying ways to improve the situation.

We are also providing support through our programmes. Immediately after Operation Cast Lead, we concentrated on humanitarian aid, working with the UN, the International Committee of the Red Cross and NGOs to provide drinking water, food, shelter, medical assistance and support for those traumatised by the conflict. Our current work on Gaza addresses the key access constraints, promotes economic growth and provides support to the poorest and most vulnerable parts of society.

The UK supports the Palestinian Authority and UNRWA to provide basic services, such as education and health, to the people of Gaza. About 50% of our support to the Palestinian Authority and 30% of our support to UNRWA benefits the Gazans. We provide 2,400 vulnerable families with work and an income through our support for UNRWA’s back-to-work programme, and we help to develop the private sector by supporting 304 small companies in Gaza and generating jobs for more than 1,800 unemployed Gazans. We also provide food vouchers to 5,750 poor households through our support to the World Food Programme, enabling them to purchase the basic food items, such as bread and milk, that they need to survive. We help 24 UN agencies and 132 international NGOs to get aid and goods into Gaza through our support to the UN Access Coordination Unit and the Palestinian Authority’s crossing co-ordination committee.

We understand Israel’s security concerns, but for a peace settlement to work any future Palestinian state must be economically viable.

[Michael Connarty]

Will the Government take up with some priority the matter of much-needed medical drugs, particularly for the treatment of cancer? It is ridiculous to deny people cancer-treatment drugs because of the dual-use nonsense.

[Mr O'Brien]

I am happy to undertake that we will look into that, to see what the situation is and what can be done, not least because of the commitments that I have just listed, particularly our help in ensuring that there are supplies for assisting with medical needs—not just in emergencies, but for ongoing health requirements.

In the last couple of minutes of the debate, I shall touch on the broader process. We in the UK hope that the reconciliation agreement between Fatah and Hamas announced in May this year will lead to the formation of a Government who reject violence and pursue a negotiated peace. We will judge any future Palestinian Government by their actions and their readiness to work for peace.

It is clear that negotiations towards a two-state solution are the only way to meet the national aspirations of both Israelis and Palestinians and to achieve a sovereign, viable and contiguous Palestinian state living alongside Israel in peace and security. We therefore call on both parties to resume talks on the basis of clear parameters, including borders based on 1967 lines with agreed land swaps, security for Israel that respects Palestinian sovereignty, a just and fair resolution of the refugee problem, and Jerusalem as the future capital of both states.

We want the new generation of Palestinians to grow up in hope, not despair, and to believe in a peaceful settlement with Israel, rather than being impoverished and susceptible to terrorist recruitment. We want the next generation of Israelis to live free from the fear of rocket fire, and able to enjoy peaceful relations with their Arab neighbours. We cannot deliver that for either side, but as friends to both the Israelis and the Palestinians, we will work with our international partners to help deliver progress in the peace process. We remain a strong supporter of those who are building the institutions of a future Palestinian state.

UK Environment Capital (City of Peterborough)

Tuesday 13th September 2011 Westminster Hall

13:30

[Mr Stewart Jackson (Peterborough) (Con)]

It is a pleasure to serve under your chairmanship for the first time, Mr Dobbin. I am also delighted to welcome the Minister of State, Department for Business, Innovation and Skills, my right hon. Friend the Member for Tunbridge Wells (Greg Clark), who is doing an excellent job in his ministerial capacity. I am somewhat surprised, as I was expecting the enterprise Minister, the hon. Member for Hertford and Stortford (Mr Prisk), but my right hon. Friend is a more than adequate substitute. This is my opportunity to showcase the city of Peterborough’s positive and innovative growth agenda, particularly our aspiration to be the home of the UK environment capital, and to put on record our belief that we have a good case for being the future home of the new green investment bank.

From time to time, I have disagreed with Peterborough city council about the quantity of housing development in the city. I have also expressed concerns, as have many Members over the years, about the correlation between residential development and infrastructure. However, I believe that we are resolving those issues. Peterborough city council, the urban regeneration company Opportunity Peterborough, neighbouring Members of Parliament and I share ambitious plans for the future of Peterborough, which I will elucidate.

Peterborough’s population of 170,000 is set to grow to well over 200,000 by 2021, and there are plans to deliver more than 25,000 homes and 24,000 jobs by 2026. A McKinsey report published this year predicted that by 2025, Peterborough would have the highest growth in GDP of any English city. Private sector job growth is vital to the city’s economic prosperity and growth. Peterborough’s location—just 46 minutes from London by train, with direct links to the north of England, Birmingham, Cambridge and Stansted airport—makes it a nationally and internationally well-connected city that attracts and retains businesses.

The city’s economic growth is based on strong sectoral foundations. I will mention its environmental and financial businesses in a moment. Peterborough’s manufacturing companies have outperformed many competitors and include global giants such as Caterpillar Perkins, Dresser-Rand and Applied Energy. In printing and media, Peterborough boasts Bauer Media, Europe’s largest privately owned publisher, and Ideal World, digital broadcaster to more than 22 million homes in the UK. In food and drink, the full spectrum from processing and packaging to innovation and cutting-edge technology is covered by companies such as Coca-Cola, New Covent Garden Food Co., Masterfoods, British Sugar and AB Agri.

Although nowhere has been wholly unaffected by the recession, Peterborough has performed relatively well, creating over 3,000 private sector jobs in the past year. Investment has continued to head to the city. New high-profile operators such as TK Maxx, Nando’s, Patisserie Valerie, Van Hage, Andronicas, Pandora and Superdry have all set up in Peterborough recently, and imminent arrivals such as Kelway IT services and Stobart Group are due to deliver more than 700 jobs.

Given its accessibility, Peterborough’s economic growth is available to a wide geographic area. The city has taken a lead role in the development of the Greater Cambridge and Greater Peterborough local enterprise partnership and is assisting in the delivery of the enterprise zone at Alconbury in Huntingdon, ensuring that the zone’s benefits are more widely exploited. I must put on record my disappointment that the local enterprise partnership did not push for the Peterborough railway corridor, which would have had greater resonance as a catalyst for change, built on our regeneration, and had a bigger social and economic impact. However, that was the LEP’s decision. While I am making minor complaints to my ministerial colleagues, I must say that Peterborough’s exclusion from the national insurance contributions holiday will have had a slight impact on people minded to set up businesses in Peterborough, at the border between the east midlands and the east of England, rather than in the east midlands, Lincolnshire or Northamptonshire. However, those are my only gripes.

As we know, the east of England contributes significantly to the national economy, to the tune of £30 billion a year. As a powerhouse for growth in the area, Peterborough could have a positive impact on the UK economy, and its environmental credentials could make it an exemplar city for sustainable growth.

Peterborough was designated as an environment city in 1993 and became the home of the environment capital in 2010. The city’s environment capital is a collection of assets including, among many other things, a unique cluster of environmental businesses, innovative approaches to understanding environmental performance, development of the UK’s largest zero-carbon homes project, one of the highest amounts of green space per capita in the UK and a drive for sustainability at the core of all its activities. More than 380 organisations and businesses constitute the environment cluster, including Government and voluntary organisations such as Natural England, the Environment Agency, the Wildlife Trust and Froglife and international consultancies such as Halcrow, Royal Haskoning and the Rolton Group. It also includes major businesses such as Dresser-Rand, which is developing energy from wave technologies, Caterpillar Perkins, formerly Perkins Engines, which is reducing engine CO₂ emissions, and Anglian Water, which is delivering leading-edge innovation in water management.

Peterborough Environment City Trust is delivering nationally unique environmental programmes, attracting funds for major retrofit projects, developing community skills through its Greeniversity programme and the Green Apple resource kit and awards for local schools and involving more than 400 local businesses in environmental management improvements through its Investors in the Environment scheme. With 295 code 6 homes on the south bank of the River Nene, Peterborough will be the country’s biggest carbon challenge city. The city is also developing innovative utility provision to support housing and economic growth through a council-led energy services company installing photovoltaic and other energy solutions for council property.

As one of three Department for Transport sustainable transport demonstration towns—an initiative branded as Travelchoice—the city has achieved a significant shift towards more sustainable travel modes, including a 35% increase in the number of bus passengers between 2004 and 2009, a 14% increase in walking and a 12% increase in cycle journeys. The recent award of a £5 million Department for Transport grant to Travelchoice reflects the transformations already achieved and will enable the city to develop them further.

The 2008 Government-commended integrated growth study produced by Arup on behalf of the city council demonstrated how the city could meet its ambitious growth targets while achieving environmental, economic and social sustainability. Data sets from the study underpin the pioneering Peterborough model, a web-based visualisation of city-wide environmental performance developed through a public-private collaboration. The model has received interest from as far afield as New York, Cape Cod and Bordeaux, as well as closer to home from Her Majesty’s Treasury, to support the green infrastructure plan.

Skills development is key to the city’s future. The city council has recently partnered with Cranfield university to establish the Centre for Renewable Energy and Bio-Fuels and is supporting the commercial research and development of algae biofuel energy. That brings me to the bid for the green investment bank. The pioneering work of the coalition Government in establishing the green investment bank requires relevant expertise in the host city and a similarly innovative attitude. As the home of the environment capital, Peterborough has unrivalled expertise in environmental sustainability, with its 380 businesses and organisations, its innovation networks, which reach across the globe, and its innovative mapping of environmental performance through the Peterborough model.

Peterborough also has more than 27,000 people working in the financial sector, proportionally more than the east of England and the United Kingdom. Major companies with main offices in Peterborough include the insurance operators the BGL Group—famous for the meerkat adverts—Royal Sun Alliance and Diligenta, which is part of the giant Tata Consultancy Services conglomerate. Other financial operators include BNP Paribas, Handelsbanken, the Lloyds Group, Aldermore, Travelex and Clydesdale Bank. Many of these companies have announced significant growth and expansion, even during the recession.

Innovation is key to the financial as well as environmental performance of the city. Local companies such as PinPlus, for financial security, iGo4, for insurance, and indeed the city council, through its mortgage partnership with Lloyds TSB, are all leaders in creative approaches to finance. In these difficult times for first-time buyers, I commend in particular the collaboration between the city council and Lloyds TSB in providing much-needed finance for first-time buyers. I certainly commend it to other local authorities.

In Peterborough, the green investment bank would have access to unparalleled levels of financial and environmental expertise and innovation, as is already demonstrated by the Treasury’s interest in using the Peterborough model to support the green infrastructure plan.

In conclusion, Peterborough is ambitious and growing, with a work force to match. The city is actively exploring pioneering public-private partnerships to remove the burden from the taxpayer without slowing progress in the city. Innovation in all areas of environmental, financial, economic and social capital is matched by understanding infrastructure needs and opportunities.

I will finish with a quote from Diligenta, which is a subsidiary of the huge Tata group, is a leading player in UK life and pensions business process outsourcing, and has a headquarters in the city. It says:

“Peterborough…has great infrastructure that supports a vibrant economy and a financial sector presence. We strongly recommend it as an excellent location for any business looking to invest.”

Peterborough is moving forward and grabbing the opportunities of the Government’s growth agenda. I look forward to hearing the Minister’s response.

13:43

[The Minister of State, Department for Communities and Local Government (Greg Clark)]

It is a pleasure to serve under your chairmanship for the first time, Mr Dobbin, and to be able to respond to the debate initiated by my hon. Friend the Member for Peterborough (Mr Jackson). He has referred to the Peterborough model, and I think that he is the Peterborough model of a Member of Parliament who is absolutely passionate about his constituency and who represents it with the vigour for which that city is itself famous.

As my hon. Friend has said, Peterborough is a growing city. Even during the recession, it has performed well with 3,000 new jobs announced last year. It has great strength in sectors such as the environment, manufacturing, finance and investment. It is a city with innovation at its heart, with its Eco-Innovation Centre and Water Innovation Network. Cranfield university is not far away and Peterborough is working with it to establish a commercial research and development base in algae biofuel technology.

As my hon. Friend has indicated, Peterborough’s leading role in the Greater Cambridge and Greater Peterborough local enterprise partnership, which was announced in October, is a major positive force for the economy. There are great hopes for that local enterprise partnership, being, as it is, such a concentration of some of our most promising businesses and industries.

My hon. Friend has mentioned the new enterprise zone in Alconbury. It is outside his constituency, and I acknowledge his point about the Peterborough railway corridor. I say to him that that was the choice of the local enterprise partnership, and I know that his constituents will benefit from the general uplift that it will give to the whole area. Moreover, many of the powers in a local enterprise zone are in the gift of local authorities to bestow on other areas to create, as it were, enterprise areas. On simplified planning, for example, a new discretion will be available in the Localism Bill to give business rate discounts to particular types of businesses for start-ups. The proposed reforms to the local government finance system will allow authorities to retain the benefit of the uplift in business rates. I hope that, when he returns to Peterborough, my hon. Friend will encourage both the local enterprise partnership and the city council to think about how some of the benefits of the local enterprise zone in Alconbury might be conferred on the area in Peterborough that he has mentioned.

The unique model of the Peterborough skills vision of brokering direct links between local business and schools and colleges is another area that other cities are looking to replicate. Peterborough has so much more to offer besides, such as a spectacular cathedral and excellent rail links, which my hon. Friend has mentioned, as well as being the home of the Posh and of one of my great heroes, Peter Boizot.

The green economy is important to the whole country and I am aware that that applies nowhere more than in Peterborough—350 eco-businesses are located there and it has 29 conservation areas and an amazing commitment from its people to improve the city’s environment, as they have done over time. Peterborough’s long-standing association with the environment is clear. It was designated an environment city 15 years ago—one of only four at the time—and it recently celebrated its 20th green festival. In addition, I was pleased to hear about Peterborough’s recent environmental business successes with a Queen’s award for enterprise and the international interest generated by the Peterborough model, which my hon. Friend has mentioned and which brings the city’s environmental performance data to life through an online visualisation.

Peterborough is right to be so committed to the green economy. The green economy in the UK was worth more than £116 billion in 2009-10. By 2015, the sector is expected to employ more than 1 million people. We are taking action now to put the whole economy on a low-carbon, resource-efficient path. UK expertise and innovative low-carbon businesses can lead the way in refocusing our economy to capture the global opportunities that were worth £3.2 trillion in the past year alone and are forecast to grow by about 4% a year over the next five years.

A greener, low-carbon economy is one of the key areas that we have focused on in our plan for growth. The Government recently published plans that map out the Government’s action to enable the transition to a green economy, including areas such as climate change, resource efficiency, waste prevention and carbon capture and storage. These plans will form the basis for continuing dialogue between Government, business, universities and communities.

We understand that business needs to invest substantial resources, but it needs to be confident that this is at the heart of the Government’s agenda. I hope that it can see that it clearly is. We are putting in place the policies that will establish the long-term framework in which investment decisions can be made with confidence. Providing that consistency creates an attractive environment for investment, which, by its very nature, will pay dividends over a long period.

We are committed to substantial reductions in carbon emissions. We have launched the world’s first incentive scheme for renewable heat, which should increase investment in green heat technologies, and we are launching the green deal, under which householders, businesses and landlords will be able to improve the energy efficiency of their homes and buildings at no up-front cost. We are also introducing a carbon price floor, proposals on electricity market reform and a range of initiatives to encourage the roll-out of green vehicles.

High-quality economic infrastructure is important for any competitive, growing economy. The transition to a green economy will require unprecedented investment in green infrastructure in key areas. Hundreds of billions of pounds, mostly from the private sector, will be required in the energy sector alone. In the long term, the benefits to be gained from that action will be much greater than the costs of taking it. To ensure that a lack of sufficient finance is not a barrier to the scale and pace of the transition, we need to go beyond existing policies.

To that end, we have announced our intentions for the green investment bank, which is the first of its kind in the world and one of the Government’s top priorities. The green investment bank will be dedicated to providing financial solutions to accelerate and increase private sector investment. A new institution rather than a series of Government interventions is required, and the green investment bank will build the necessary deep expertise in financial markets and green investments. It will be an institution that complements our existing green policies and addresses the areas of under-investment that persist in spite of the other measures I have mentioned.

Our green objectives are ambitious, and to achieve them we need tailored and targeted financial intervention to overcome under-investment in those key areas. The green investment bank will work towards a double bottom line of achieving a significant green impact and making financial returns. There has been a great deal of interest in the green investment bank and I know that my hon. Friend is keen to understand where we are with setting it up and to ensure that Peterborough is well represented in those considerations.

We are at the early stages of establishing the green investment bank, and there is much to be done. Our proposals need to be approved by the European Commission before we can establish the bank as a fully independent financial institution. However, we know that there is a need for early action, so my Department will start to make direct state-aid-compliant investments in green infrastructure projects from April 2012. The advisory group, which was recently appointed and which met for the first time last week, will provide us with advice on the establishment of the green investment bank, including what its strategic priorities should be. Those priorities will then be decided by the Secretary of State and will be regularly reviewed by Ministers and the institution’s corporate board.

We will also need to decide on the bank’s location. Although it will not be a large institution, we know that people already see it as a valuable organisation and an asset to wherever it will be located. We are currently defining a process to decide the location that will build on the criteria we published in our May update on the green investment bank. We will, of course, make an announcement in due course about the process and ensure that all those who have already expressed an interest are kept informed.

We believe that a green economy is a growing economy and welcome Peterborough’s commitment to green growth. Through our green policies, our work with businesses and the green investment bank, we believe that we are firmly on our way to achieving that vision of a green economy. We will continue our work to establish the green investment bank, including the design of a process to decide the location, and we hope to make an announcement on progress as soon as it is sensible to do so.

I pay tribute to my hon. Friend for the consistent interest that he has taken in the green powerhouse that is the city of Peterborough’s potential in this area. No one in his city should doubt the fact that they could not wish for an advocate who has a stronger or more respected voice in this House. It has been a privilege to respond to his debate and to serve under your chairmanship, Mr Dobbin.

Question put and agreed to.

13:52

Sitting adjourned.