House of Commons

Tuesday 24th January 2012 Commons Chamber

Tuesday 24 January 2012

The House met at half-past Two o’clock

Prayers

Tuesday 24th January 2012 Commons Chamber

[Mr Speaker in the Chair]

Business Before Questions

London Local Authorities and Transport for London (No. 2) Bill [Lords] (By Order)

Transport for London (Supplemental Toll Provisions) Bill [Lords] (By Order)

Second Readings opposed and deferred until Tuesday 31 January (Standing Order No. 20).

Oral Answers to Questions

Tuesday 24th January 2012 Commons Chamber

The Chancellor of the Exchequer was asked—

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

1. What fiscal steps he plans to take to promote economic growth.

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

The Chancellor is at ECOFIN today.

As the experience of many European countries has demonstrated, loss of control of the public finances is catastrophic for growth. That was why, in the autumn statement, we set out plans to maintain the credibility of our fiscal stance while innovatively using the money that we do have to support home buyers, small firms and infrastructure and to tackle youth unemployment.

[Mr Buckland]

I was pleased to see in the autumn statement the proposed introduction of the new seed enterprise investment scheme, which will encourage investment in small and high-risk early-growth businesses. What other measures does my right hon. Friend propose to take to encourage equity investment and support for growing businesses?

[Danny Alexander]

As my hon. Friend knows, at the Budget last year we announced reforms to the enterprise investment scheme and the venture capital trusts scheme, which are subject to state aid approval. The Government are committed to finding innovative ways to invest in new firms, such as the seed enterprise investment scheme, and we will consider further ideas in the future.

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

The economy has flatlined for more than 12 months since the Chancellor’s spending review, unemployment has hit a 17-year high and the national debt has now topped £1 trillion. What has gone wrong?

[Danny Alexander]

I would have thought that the day on which it has been announced that the national debt has broken the £1 trillion mark would provide a good opportunity for the Labour party to apologise for its catastrophic economic mismanagement that led the country into the mess that the coalition Government are cleaning up.

[Mr Andrew Tyrie (Chichester) (Con)]

The Redknapp case and the public interest in it illustrate the need to reform taxation to ensure that top earners pay what is due. The Chief Secretary will not want to comment on an individual case, but what steps are the Government taking, consistent with the Treasury Committee’s report on the principles of tax reform, to ensure that all taxpayers, including top earners, pay the correct amount of tax?

[Danny Alexander]

Of course, as the hon. Gentleman says, I cannot and will not comment on ongoing individual cases, but he is right to say that the wealthiest need to pay their fair share. That was why we announced in the spending review an extra £900 million of funding for tackling tax avoidance and evasion, which has helped to set up a new specialist unit, which became operational last year, targeting offshore evasion. High-profile tax evasion cases could become more commonplace in future, and our message to tax dodgers is: “No matter how well known you are, how clever you think your accounts are or how far away you hide your money, we are coming to get you.”

[Rachel Reeves (Leeds West) (Lab)]

The Chief Secretary says that the Government’s fiscal plans are working and that only the eurozone has thrown them off course. Tomorrow, we will know by how much the UK economy grew in 2011, so let me ask him a simple question. In its last forecast, did the Office for Budget Responsibility revise up or down its estimate for growth in the eurozone in 2011?

[Danny Alexander]

The Office for Budget Responsibility made significant changes to its forecasts for the UK and for other countries. It made a significant change to its forecast for how much damage was done to the UK economy during the time when the hon. Lady’s party was in government, suggesting that our economy is now about 13% smaller than it otherwise would have been.

Yesterday was the eighth anniversary of the shadow Chancellor’s now infamous Ken Dixon lecture, when he rightly said that long-term interest rates were

“the simplest measure of monetary and fiscal policy credibility”.

Then, 10-year gilt rates were 4.76%. Yesterday, they were 2.16%. Case closed.

[Rachel Reeves]

Given that the Government went to the trouble of setting up the Office for Budget Responsibility, one would expect that the Chief Secretary would read its forecasts. The reality is that it revised up its forecast for growth in the eurozone in 2011 and revised down its forecast for growth in the United Kingdom. The Government like to blame everybody except themselves for the economic troubles. First they blamed the snow, then they blamed the royal wedding, now they are blaming the eurozone. When will they take responsibility for their own actions, which choked off the economic recovery a year ago by cutting too far and too fast? As a result, they are borrowing an extra £158 billion. That is the cost of this Government’s economic failure.

[Danny Alexander]

Once again, the hon. Lady is wrong in her economic policy pronouncements. The Office for Budget Responsibility has the UK growing more slowly this year, but faster than countries in the eurozone in the next few years. That is a testament to the Government’s economic policies. If she wants to know who is at least partly responsible for the mess that the country is in, she should just look immediately to her left. It has come to something when Katie Price’s tweets make more sense about the economy than Labour Front Benchers.

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

The economy in our islands will be greatly helped by the reduction in fuel duty that the Government are introducing. Will my right hon. Friend update the House on progress towards introducing that fuel duty discount?

[Danny Alexander]

I am grateful for the opportunity to do that. The fuel duty discount will come into force for customers, including on the islands in my hon. Friend’s constituency, from 1 March. That will reduce the cost of fuel by 5p a litre in the most remote island communities, reflecting the fact that they have the highest cost. The scheme has been open to retailers to register for it since 1 January, and I am pleased to report that almost every retailer has already signed up.

[Roberta Blackman-Woods (City of Durham) (Lab)]

2. What assessment he has made of the effects on families with children of taxation changes coming into force in 2012-13.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

The Government have taken unprecedented steps to increase the transparency of decision making, publishing detailed analysis of the impacts of individual measures in tax impact notes and presenting the overall impact of tax benefit reforms at fiscal events. The analysis shows that all but the top decile gain from direct tax changes, and that the Government continue to help protect the most vulnerable.

[Roberta Blackman-Woods]

Research by House of Commons Library and other independent sources shows that, of the £8.1 billion of tax rises and benefit cuts, women are paying £5.8 billion. That is a massive 72%. A further £2.4 billion of cuts will affect families with children. Why are the Government targeting the cuts on women and families? Does not that give the lie to the notion of our all being in this together?

[Mr Gauke]

We do not accept that. I must point out, for example, that of the 1.1 million people taken out of income tax because of policies that the Government have pursued, the majority are women.

[George Freeman (Mid Norfolk) (Con)]

Will the Minister also confirm that, as well as the 1.1 million people taken out of tax, we are reducing the tax bill of 20 million of the poorest families?

[Mr Gauke]

Absolutely. It is important to point out that it is not just those who are taken out of income tax altogether who benefit, but the approximately 25 million people overall who receive an increase in personal allowance. That should be supported by hon. Members of all parties.

[Yvonne Fovargue (Makerfield) (Lab)]

The Treasury has admitted that cutting tax credits will lead to an increase in child poverty. Rather than trying to change the definition of child poverty, was not the Prime Minister right in 2006 when he said:

“We need to think of poverty in relative terms”?

[Mr Gauke]

It is also important not just to think of poverty in terms of moving someone from one side of an arbitrary line based on a percentage of median income to another, but to look more widely. That includes improving poor children’s opportunities. The Government, through the pupil premium and other measures, are concentrating on opening up those opportunities.

[Charlie Elphicke (Dover) (Con)]

Will the Minister tell the House how families can have a greater option of part-time working under the taxation changes, and whether they will have more encouragement to work with the introduction of the benefits cap?

[Mr Gauke]

With the work that my right hon. Friend the Secretary of State for Work and Pensions has undertaken, the Government are determined to ensure that work will always pay and that we do not have people trapped on benefits.

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

Yesterday, we heard the Prime Minister say that jobs in retail are a vital part of the economy. Why are the Government making changes to working tax credits that will hit part-time workers in the retail sector hard? Is that a fair deal for parents who are trying to do the right thing? Can the Minister tell us how many couples who work between 16 and 24 hours a week will lose out, and by how much?

[Mr Gauke]

We are taking measures to ensure that work will always pay. On the Labour party’s complaints, I point out that its flagship policy at the last election to increase national insurance contributions for employers would have hit the retail and other sectors very hard.

[Mr Mike Weir (Angus) (SNP)]

3. What recent discussions he has had with Her Majesty’s Revenue and Customs on the operation of the COP26 process.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

Ministers have regular meetings to oversee and challenge HMRC business, including the administration of tax credits and the recovery of overpayments.

[Mr Weir]

I am grateful for the Minister’s answer, but does he understand the intense frustration and anger of many of my constituents who repeatedly tell HMRC about errors in tax credits that HMRC does not correct, which subsequently give rise to overpayments? How often can HMRC be allowed to make mistakes and hide behind COP26 to evade any responsibility?

[Mr Gauke]

I understand the hon. Gentleman’s concern—he has raised this matter on behalf of his constituents a number of times. The Treasury and HMRC are always seeking to improve the system. It is in a better place than it was four or five years ago, but none the less, there are still issues. I constantly tell HMRC that we need to find ways to address problems when information is provided but not taken up and used.

[John Howell (Henley) (Con)]

4. What progress he has made on implementation of the national infrastructure plan 2011.

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

Work on the implementation of the national infrastructure plan is now under way across Government, led by the Treasury. This month, for example, the Government have approved High Speed 2 to Birmingham and are working to resolve radar interference issues that are holding up wind farm developments. We will update the House on progress at the Budget on 21 March.

[John Howell]

Does my right hon. Friend agree that the national infrastructure plan is welcome and timely because it is about real investment in our infrastructure and because it shows that the Government are thinking for the long term, both of which will encourage co-investment in those projects?

[Danny Alexander]

My hon. Friend is absolutely right. The national infrastructure plan sets out a medium-term plan for £250 billion of much needed investment in this country’s infrastructure. Alongside that, we brought forward plans at the autumn statement for £6 billion of further investment in capital projects in this Parliament and announced a scheme working with pension funds to get £20 billion-worth of pension fund investment into infrastructure. Those are all the right things to ensure that in the long term, we rebalance our economy and make our infrastructure stronger.

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

With unemployment at 2.7 million and rising rapidly, what contribution will the national infrastructure plan make to reducing unemployment this year and next year?

[Danny Alexander]

As I said in my answer to my hon. Friend the Member for Henley (John Howell), alongside the national infrastructure plan, we announced in the autumn statement significant new investment in infrastructure projects this year, next year and the year after that, all of which will both contribute to growth in the immediate term and help to build the better infrastructure we need to ensure that our growth is stronger in the medium term.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

5. What assessment he has made of the Office for Budget Responsibility’s most recent forecast of levels of unemployment in 2012.

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

In line with the weaker outlook for gross domestic product growth, the OBR has revised up the projected level of unemployment over the near term, peaking at the end of this year before falling. In the autumn statement, the Government committed to important new steps to support private sector job creation and reduce unemployment, such as nearly £1 billion for the youth contract; an initial £1 billion for the regional growth fund; and a £21 billion package of credit easing to support firms and encourage job creation.

[Seema Malhotra]

I thank the Minister for his answer. The youth claimant count last year in my constituency of Feltham and Heston rose 25.2%. The long-term claimant count for over-50s rose 48%. Both statistics are more than twice the UK average. What measures have the Government taken to tackle unemployment in Feltham and Heston, and when does he expect the number of unemployed to fall?

[Mr Hoban]

The hon. Lady makes an important point, but let me be clear: as she will know, youth unemployment in her constituency peaked in December 2009—it is actually lower today than it was then. No one should be complacent about youth unemployment, but she should recognise, as the right hon. Member for South Shields (David Miliband) did, that youth unemployment is not a problem that this Government created, and that it is a long-term challenge and grew even when the economy was booming. We are taking steps—such as the youth contract and boosting the number of apprenticeship places—that will benefit every constituency in the country, including hers.

[Mr John Redwood (Wokingham) (Con)]

When will we see more of the details of the credit easing scheme and what is the Minister’s forecast of the monthly draw-down for the rest of this year?

[Mr Hoban]

We are working with banks on the details behind the national loan guarantee scheme. We have set aside £20 billion to enable the rates that are charged to small businesses to fall by up to 1%. The utilisation of the scheme will very much be driven by the demand from businesses for debt finance.

[Owen Smith (Pontypridd) (Lab)]

Yesterday the Chief Secretary appeared not to know too much about what the Work programme was going to do to deal with unemployment. This morning, the National Audit Office tells us that the programme will fail to get a third of the people the Government are targeting back into work. Can Ministers now tell us how much extra this latest failure to tackle unemployment will cost the Exchequer?

[Mr Hoban]

The NAO’s report this morning was based on guesswork. The scheme has not been fully implemented and there are no published figures as yet on the out-turn for the scheme. Let me just say that private sector providers expect that this scheme will be more effective than the schemes put in place by previous Governments.

[Matthew Hancock (West Suffolk) (Con)]

Given the increasing private sector employment levels, have the Government made any assessment of the impact on those levels if we lost all credibility of economic policy by having the sort of incoherence proposed by the Opposition?

[Mr Hoban]

The levels of interest that businesses in this country pay are determined by the credibility of our fiscal policy. If interest rates rose as a consequence of diverting from the fiscal plan the Government have set out, we would see higher interest rates and that would have a huge impact on families and businesses across the country.

[Sheila Gilmore (Edinburgh East) (Lab)]

6. What estimate he has made of the likely effect on the level of child poverty of the fiscal measures in his autumn statement.

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

8. What estimate he has made of the likely effect on the level of child poverty of the fiscal measures in his autumn statement.

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

When measured against previously announced policies, there will be an estimated increase of 100,00 in children living in households with less than 60% of median income in 2012-13.

[Sheila Gilmore]

We are constantly told by the Government that the way out of poverty is work and that work must pay. Is the Minister prepared to reconsider the decision not to uprate working tax credits this year in terms of inflation while at the same time uprating out-of-work benefits by inflation?

[Miss Smith]

The reason for that decision was to prioritise the resources we have available on those perhaps least able to deal with the difficulties of the cost of living.

[Kate Green]

The Chancellor announced in the autumn statement an increase in the number of child care places for disadvantaged two-year-olds, but at the same time we are hearing of cuts to local authority funding for child care, and places are closing. How will the Government guarantee that these new places for disadvantaged children will be additional places and not simply a matter of money being moved out of one pot to pay for another?

[Miss Smith]

We expect that that policy will be additional in the sense that it is extending it to disadvantaged two-year-olds. We expect 130,000 disadvantaged two-year-olds to be assisted by the 15 hours of free child care, and we certainly expect local authorities to take sensible decisions with the limited resources that they also have.

[Harriett Baldwin (West Worcestershire) (Con)]

With 2 million children living in workless households, does the Minister agree that the essential steps include not only the additional child care places, but the universal credit and the fact that every hour of work will count towards increased reward for the household? That is an essential part of those fiscal measures.

[Miss Smith]

I certainly do agree with my hon. Friend, and on a couple of counts. First, poverty is not about income: it is about work. I am sure that she will agree that it is a crying shame that under the previous Government the number of children in workless households reached one in every six. I also agree with the chief executive of The Big Issue, who says in The Times today that

“You don’t help the poor by making them dependent on handouts”.

[Duncan Hames (Chippenham) (LD)]

Grandparents often play an important role in supporting their children’s children. So why is it that the Government’s welcome commitment to a more generous state pension bizarrely has the effect of increasing the number of children statistically said to be living in poverty? What is the sense in that?

[Miss Smith]

My hon. Friend is absolutely right. If I can, I would be happy to provide him with the workings that create that situation. That measure can have perverse effects, but we believe in measures that genuinely take children out of poverty, such as early intervention policies, rather than moving them over an imaginary line.

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

7. What steps he is taking to encourage banks to charge competitive rates for loans to small and medium-sized businesses.

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

At the autumn statement the Government announced the launch of the national loan guarantee scheme. The scheme will provide up to £20 billion of Government guarantees for bank funding, which will lead to a reduction in loan interest rates to smaller businesses of up to 1%.

[Neil Parish]

I thank the Minister very much for that statement, but businesses in my constituency of Tiverton and Honiton are being held back by the banking sector, which is charging interest rates of up to 20% to financially sound businesses. When and how are we going to get much more competition into the banking sector?

[Mr Hoban]

My hon. Friend makes an important point. We need to see a more competitive banking system. At the moment we are seeing, for example, the acquisition by Santander of businesses from RBS, which will create a challenger. We have also seen the outline decision by the Co-op to buy branches from Lloyds bank. Those measures, together with the sale of Northern Rock to Virgin Money, point towards a more competitive landscape for banking and will lead to better outcomes for consumers and businesses.

[Stewart Hosie (Dundee East) (SNP)]

It is not only the cost and availability of bank lending that is the problem; it is what the nationalised banks are doing with that debt. They are selling it to private equity firms for discounts of 40% to 50%, which reflects a net loss to the taxpayer-shareholder and fundamentally changes the relationship between the business and the bank. Let me ask the Minister, first, whether he is aware of that; and, more importantly, whether he has any information that would tell him that equity funds have had access to bank records on individual companies that would allow them to cherry-pick the assets they are buying.

[Mr Hoban]

As the hon. Gentleman will know, the responsibility for commercial decisions is a matter for the management of RBS and Lloyds. He has flagged up a concern, and if he brings forward details of those matters, I will raise them with the chief executives concerned.

[John Thurso (Caithness, Sutherland and Easter Ross) (LD)]

Following on from that question. Given that banks can lend only if they have capital and that 80% of financial transactions take place within the financial services industry, so that only 20% result in an end user, can the Minister say what steps the Government are taking to look at the marginal utility of the financial services industry, or what Lord Turner described as its “social usefulness”?

[Mr Hoban]

My hon. Friend makes an important point. It is vital that banks and other participants in the financial services sector play their full role in supporting growth across the economy and meeting the aspirations of families across the country. It is vital when banks are faced with difficult decisions about how to use their capital that they should focus their efforts on securing lending and boosting economic growth.

[Chris Bryant (Rhondda) (Lab)]

The thing that my constituents who work for Peacocks do not understand is why there seems to be plenty of money in the banks, including RBS, to pay exorbitant bonuses to senior executives, when there is not enough money to keep the company afloat. What will the Government do to try to ensure that those jobs, in a company that is still making money, are protected?

[Mr Hoban]

I do not want to comment on particular decisions. I am well aware of the concerns that people in the hon. Gentleman’s constituency have about the prospect of Peacocks closing. It is vital that banks are in a position to lend to viable businesses. That is why we entered into Project Merlin, which has led to an increase in bank lending compared with last year. That is the right thing to do, and I would encourage the management of Peacocks to engage with the banks and other investors to get the right outcome for them and for their business.

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

9. What steps he plans to take to ensure that the burden of taxation is fairly distributed.

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

We are significantly shifting the burden of taxation away from people on lower incomes and on to those with broader shoulders. The bank levy, the increase in capital gains tax, changes to pensions tax relief and the maintenance of the 50p rate all help to enable us to meet our commitment to increase the income tax personal allowance to £10,000, cutting taxes for millions of hard-pressed, hard-working families.

[Annette Brooke]

I thank my right hon. Friend for that answer. However, the Institute for Fiscal Studies said of the autumn statement:

“New tax and benefit measures are, on average, a takeaway from lower-income families with children, and giveaway to middle and top of income distribution”.

What further approaches will he take in the forthcoming Budget to ensure that we are all in it together, be it a demonstrable crackdown on tax avoidance, perhaps a mansion tax, and certainly more progressive tax measures?

[Danny Alexander]

Of course, the burden of the deficit reduction is fair overall, and we know that the burden falls most highly on the richest 20% of the population. However, with spending cuts needing to continue for longer—another two years—we need to redouble our efforts, both to tackle tax avoidance and to deliver the income tax cuts that we have promised, by lifting the personal allowance as rapidly as the nation can afford. Those are, of course, issues that we shall be considering in the run-up to the Budget.

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

Why does the Minister not look at employing more tax inspectors, given that billions of pounds are going unpaid because there are not enough tax inspectors to do the job?

[Danny Alexander]

Not only have we looked at that; we are doing it. In the spending review, we announced an extra £900 million for HMRC, which is creating an extra 2,000 specialist posts to tackle tax avoidance and tax evasion. It took the hon. Gentleman’s party 12 years just to set up a specialist unit at HMRC to deal with high net worth individuals. We have extended that to ensure that there is a specialist unit to deal with the tax affairs of all those who pay, or should pay, the 50p rate.

[Andrea Leadsom (South Northamptonshire) (Con)]

10. What steps he is taking to tackle excessive executive pay.

[Henry Smith (Crawley) (Con)]

14. What steps he is taking to tackle excessive executive pay.

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

17. What steps he is taking to tackle excessive executive pay.

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

The Secretary of State for Business, Innovation and Skills, my right hon. Friend the Member for Twickenham (Vince Cable), yesterday announced a package of proposals designed to address the market failure in setting executive pay. The proposals represent a major step forward in empowering shareholders, reforming remuneration committees and improving transparency in order to give shareholders the tools that they need in order to control unacceptable rewards for failure.

[Andrea Leadsom]

What consideration has my right hon. Friend given to a system of three-year rolling executive pay, in which the worsening of performance in one year would lead to a claw-back of remuneration from previous years? Does he think that putting pressure on companies to adopt such a system would be sufficient, or would it be necessary to legislate?

[Danny Alexander]

My hon. Friend makes a good point. That is already part of the Financial Services Authority’s code of practice for banking remuneration. It is particularly important to end the distorting effect of those kinds of incentives in the financial sector, but the additional powers that we are giving to shareholders, which my right hon. Friend the Business Secretary announced yesterday, will allow companies in other sectors to adopt that kind of practice, should they wish to do so.

[Henry Smith]

I welcome yesterday’s announcement by the Government on mitigating excessive executive pay. With regard to the UK honours system, may I seek an assurance from my right hon. Friend that the Government will be more circumspect in regard to the honours that are suggested, unlike the—

[Mr Speaker]

Order. I think that the hon. Gentleman might have been groping his way towards order, but he had not quite arrived. We will have to leave it there for today. We are specifically talking about excessive executive pay.

[Nadhim Zahawi]

In the forthcoming Financial Services Bill, should we not introduce criminal sanctions for gross negligence at the helm of a systemically important bank, to ensure that no rewards for failure would be forthcoming for those who are masters of nothing?

[Danny Alexander]

That was mentioned explicitly in the Financial Services Authority’s report on the failures of the Royal Bank of Scotland. Lord Turner suggested three options for changing the law, and the Joint Committee that has scrutinised the draft Financial Services Bill has recommended that the Government give consideration to the report’s recommendations. We agree with that, and we will be publishing a joint consultation document with the FSA later this spring, which will consider a range of possible measures.

[Mr George Mudie (Leeds East) (Lab)]

John Hourican of RBS is expected to get in excess of £4.3 million in his remuneration package in share options alone. When RBS was asked about this, it said that he had met his performance targets, but refused to say what those targets were. On the ground of transparency, will the Chief Secretary agree to put in the Library a copy of the performance targets of the chief executive of RBS and of Mr Hourican?

[Danny Alexander]

I will certainly look into the matter that the hon. Gentleman has raised, but it was his party that set up the contracts for many of the executives at RBS, and his party that allowed the bonuses to be paid out. It was also his party that awarded Fred Goodwin a knighthood that he should never have been given, so I do not think that we are going to take any lessons on this from him. We have certainly been looking hard at the remuneration proposals for this year, and I can assure him that bonuses will be far, far lower than they were last year.

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

May I remind the Minister that, when in opposition, the present Chancellor and the present Prime Minister promised a really tough regime to reduce the gap between the high earners and the rest of the people in this country. Yesterday’s announcement showed that they have backed away from that promise, but the people in my constituency want a fair society in the so-called big society.

[Danny Alexander]

I am certainly not going to attempt to take responsibility for things the Chancellor and the Prime Minister said in opposition, but I can take responsibility for what the coalition Government are doing. The announcements made yesterday by the Business Secretary on tackling executive pay went far further than anything the hon. Gentleman’s party did during 13 years in government. That alone should give him pause for thought.

[Mark Durkan (Foyle) (SDLP)]

Giving more powers to shareholders sounds welcome, but we know that their existing powers on executive pay have not been readily used. Should institutional investors not be made more accountable to the millions of ordinary savers whose money is at stake, and does the Chief Secretary believe that the Chancellor would be ready to exercise his reserve powers to make them disclose to their savers how they vote?

[Danny Alexander]

One of the striking things about how the climate of opinion on this subject is changing in recent times has been the change in attitude of institutional investors. The comments of Otto Thoresen, the head of the Association of British Insurers, for example, to the banks in this remuneration round suggests that such investors are interested in and seized of the importance of ensuring that proper levels of remuneration are paid, not unfair rewards for failure.

[Stephen Williams (Bristol West) (LD)]

The Business Secretary’s announcements will give more power to non-exec directors and shareholders to control pay in the private sector. The Government effectively discharge those roles in the public sector, so what measures is my right hon. Friend undertaking to control high pay in the public sector?

[Danny Alexander]

Ministerial salaries were cut by 5% and then frozen for the whole of this Parliament. As Chief Secretary, I now personally sign off any new pay above £142,000, the equivalent of the Prime Minister’s pay. That is a vital deterrent to the cycle of ever higher pay at the top of the public sector—so much so that in central Government alone the number of people paid more than £150,000 has dropped by 55 since May last year. When applications come in, I can and do reject them if I think they are too high. In fact, since May 2010 83 like-for-like cases have sought my approval. Pay was lowered in 45 of those cases and frozen in a further 23, saving more than £1 million a year for the taxpayer, including a £100,000 cut in the pay for the new chief executive of Royal Mail.

[Mr Virendra Sharma (Ealing, Southall) (Lab)]

11. What assessment he has made of the Office for Budget Responsibility’s most recent estimate of the size of the deficit in 2015.

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

The OBR forecast in November that borrowing in 2015-16 would be £53 billion, which is 2.9% of gross domestic product. That compares with £156 billion last year and £127 billion this financial year.

[Mr Sharma]

I thank the Economic Secretary for answering the question. Can she tell us why the Government are now forecast to borrow £37 billion more than the more balanced plan Labour set out before the election, despite the pain of £40 billion more spending cuts and tax rises?

[Miss Smith]

This Government are engaged in a credible deficit reduction plan. I would like to hear the hon. Gentleman and his colleagues tell us what their plan is and whether it veers towards credibility or the policies of the delusional left.

[Michael Fallon (Sevenoaks) (Con)]

What lesson should we draw from Standard & Poor’s warning that the UK’s rating could come under downward pressure if, against its expectation, the commitment to fiscal consolidation wavers? Should not that warning be addressed to those who want us to cut more slowly and to borrow even more as a result?

[Miss Smith]

My hon. Friend is absolutely correct. Our policies have kept the UK ahead of the curve. He and others in our House need only look to the French downgrade last week to see the value of the credibility we have restored to the UK economy.

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

Is not the Minister aware that the figures show the total failure of the Government’s economic policy—not only on the deficit, but on all the contributory factors? Employment is down, way below their target, and so are growth and private sector employment. On every key index, their policies have failed. They own this policy, they are failing—when will they change it?

[Miss Smith]

We have a plan A, to which we are sticking because it is working—unlike the policies proposed by the Opposition, which have yet to emerge in any credible detail whatsoever.

[Mr Peter Bone (Wellingborough) (Con)]

12. What recent estimate he has made of the level of the UK’s current account balance with the EU.

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

In 2010, the UK had a current account deficit of £49 billion. That deficit results from a deficits of £48 billion with the EU and of £1 billion with non-EU countries.

[Mr Bone]

That was a most incredible figure of a deficit of nearly £50 billion to the EU. Does the Minister agree that the Deputy Prime Minister is quite wrong to go around to the television studios claiming that the EU creates 3 million jobs for British workers when it is quite clear from those figures that the EU costs millions of British jobs?

[Mr Hoban]

My hon. Friend should bear in mind that the deficit on traded goods between the UK and the EU is £43.9 billion but that the deficit outside the EU is even larger at £54.7 billion. We should be encouraging businesses across the UK to invest more and to export more to places in the EU, as well as to Brazil, Russia, India and China. I encourage him to talk to businesses in his constituency and encourage them to export more to close that gap.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Does the Minister accept that, unlike some other EU members, we have flexible exchange rates, flexible interest rates, market access and very limited exposure to the euro bail-out? Is it not time that we invested in a growth strategy to take advantage of those opportunities and build Britain so that it is strong again, getting rid of the deficit to growth and not cutting?

[Mr Hoban]

The key thing is to have a credible fiscal and economic policy. The Conservative party and this Government have that credible economic policy, whereas the Labour party has no idea where it wants to take the economy. The measures we are taking to tackle the deficit which keep interests rates low are providing the biggest benefit we can give to businesses to help them grow in future.

[Mr David Hanson (Delyn) (Lab)]

13. What assessment he has made of the likely level of economic growth in 2012.

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

The Office for Budget Responsibility forecast 0.7% economic growth in 2012 and that the economy would grow every year after that within the forecast.

[Mr Hanson]

With unemployment at a 17-year high, with growth having flatlined over the past 12 months, and with targets for future growth having been missed in every month so far to date, may I gently suggest to the Minister that she should look positively at some of the alternative suggestions that have been made, such as for a cut in VAT on construction, which is supported by the Federation of Small Businesses, to help growth in the next 12 months?

[Miss Smith]

Like recoveries from all deep recessions, this one has been choppy, and we are facing subdued growth, as the Office for Budget Responsibility has laid out. There are many reasons for that, one of which is that the Labour party simply turned on the taps when it came to spending and left them running. What the right hon. Gentleman has to recognise is that in policies that deal with business we do not pick ones that have an extra £20 billion price tag that cannot be sourced. Perhaps it is his leader who needs to take a lesson in understanding business, as his adviser has said that he

“doesn’t understand business…there was always something missing.”

[Christopher Pincher (Tamworth) (Con)]

Will my hon. Friend congratulate Jaguar Land Rover, BMW, B&Q and John Lewis, among others, on driving down long-term unemployment in Tamworth by a whacking 22%? Does not that demonstrate that it is through the private sector’s developing sustainable jobs that we will build sustainable economic growth?

[Miss Smith]

I certainly will join my hon. Friend in congratulating those firms. It is exactly through the private sector that we will find a more balanced recovery. I would also like to place on record my interest in the record numbers of apprenticeships in which such firms are participating, such as 440,000 more this year—up by half on the year before.

[Naomi Long (Belfast East) (Alliance)]

15. On what basis HM Revenue and Customs calculates surcharges levied for handling payments made by credit cards.

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

Her Majesty’s Revenue and Customs is able to levy a reasonable charge for the use of credit cards for payments. There are many other ways in which people can pay their tax bill without paying a surcharge. HMRC also flagged up quite early in the process how much it would cost to pay by credit card. HMRC adopts best practice, and that is why we have decided to extend these practices across business. We are launching a consultation paper later this year on banning unreasonable credit card surcharges.

[Naomi Long]

I thank the Minister for his answer. We know that the amount charged by different credit card companies varies depending on the transaction amount and the size of the institution receiving the money. Will he undertake to keep this issue under review to ensure that individuals pay only the charge that is levied by the company, and that there is no benefit to HMRC from its making additional charges?

[Mr Hoban]

The hon. Lady makes an important point. It is absolutely vital that HMRC looks carefully at the costs it incurs in processing credit card transactions and that it charges taxpayers only what are reasonable costs. We want that same approach to be adopted in the private sector as well, as that would bring huge benefit to consumers.

[Mr Stewart Jackson (Peterborough) (Con)]

16. What steps he is taking to maintain the UK’s triple A credit rating.

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

The Government’s macro-economic strategy is designed to protect the economy through this period of instability, and to lay the foundations for a stronger, more balanced economy in the future. The autumn statement set out a comprehensive plan to return the public finances to a sustainable position and meet the Government’s fiscal targets. In recent months, the major credit rating agencies have reaffirmed the UK’s sovereign credit triple A rating, with a stable outlook.

[Mr Jackson]

Does the Minister agree that the systemic risk to our triple A credit rating is unlikely to be ameliorated by a form of state-sponsored laundering of UK taxpayers’ money through the International Monetary Fund to the failed eurozone, which hitherto has not received the confidence of the bond markets?

[Mr Hoban]

My hon. Friend raises an issue about resources for the IMF. It is absolutely vital that the IMF has the resources it needs to play its part in ensuring that there is a stable global economy, which is in our economic interest. My right hon. Friend the Chancellor has said that if there is a request from the IMF for more resources, he will look at it carefully. If he agrees to the request, and the amount requested exceeds the limit in place at the moment, we shall seek parliamentary approval, but it is absolutely vital, and in our interest, to ensure that there is a stable global economy, because that is of benefit to the UK economy. I hope that the Opposition have changed the approach they adopted last year of opposing increases in the IMF subscription.

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

With borrowing set to grow by £158 billion more than the Government planned, how many more miscalculations can the Minister afford before the precious credit rating goes the same way as all the other economic indicators?

[Mr Hoban]

Let me just tell the hon. Gentleman what Moody’s said in December last year:

“The currently stable outlook on the government’s Aaa rating depends in part on the assumption that the government will stay on track with its fiscal consolidation programme.”

We will stay on track. The Opposition, with their policies on debt and borrowing, would throw this country off course, leading to higher interest rates that would hit families and businesses. We will stick to our course.

[Nicky Morgan (Loughborough) (Con)]

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

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

The core purpose of the Treasury is to ensure the stability of the economy, promote growth and employment, reform banking, and manage the public finances so that Britain lives within her means. I am pleased to tell the House that the Chancellor has decided to reappoint David Miles as external member of the Monetary Policy Committee of the Bank of England. This morning, the Chancellor wrote to the Chair of the Treasury Committee to make the Committee aware of the reappointment, and it will decide whether to hold reconfirmation hearings. Mr Miles’s knowledge of the UK economy and his background in the financial sector will be invaluable to the Monetary Policy Committee through this challenging period.

[Nicky Morgan]

The Government’s plans to index-link public sector pensions to the consumer prices index rather than the retail prices index have been the subject of much debate in the House. Has the Treasury received any representations or support for that approach from private sector organisations that are planning to make changes to their pensions?

[Danny Alexander]

It is a very good question. We made that change, which has had an effect on public service pensions, for good reasons. The change has been made in many private sector organisations—most recently, I read, in the Labour party’s pension scheme. The Opposition’s attacks on the move being ideologically driven are belied by the decisions they have had to make because of the deficit their party is running.

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

With the Chancellor away in Brussels in his new role as an observer at European Finance Ministers meetings, it is nice to welcome the Chief Secretary to his new starring role at Treasury questions. I am sure he will know, although he has not told the House, that in the last 15 minutes the International Monetary Fund has announced that it is once again downgrading its growth forecast for the UK economy, saying that action is now needed to support economic activity in Britain. With unemployment rising too, continued pay restraint is now inevitable, but it must be done fairly, so let me ask the Chief Secretary this. In 2010, he promised a £250 rise for every one of the 1.7 million public sector workers paid less than £21,000 a year. Can he tell the House how many of those low-paid public sector workers actually got the £250 rise?

[Danny Alexander]

It is good to see the shadow Chancellor after the Christmas recess. Many of us who missed the chance to go to a panto over Christmas have enjoyed the Opposition’s pantomime economic policy changes. It is not clear whether today the right hon. Gentleman supports cuts or opposes them, but this is one show that will run and run. On the point about public sector pay, for all work forces under central Government control, the £250 was paid in full.

[Ed Balls]

Bluster. The right hon. Gentleman is worse than the Chancellor of the Exchequer, and there was no mention of the IMF growth downgrade. The answer is that less than half of those low-paid public sector workers got the rise. Almost a million did not get the £250 increase that they were promised by the Treasury. Last week, we urged the Chancellor to ask the pay review bodies to make the 1% cap fair this time, with restraint at the top, so that we can have pay rises at the bottom. Have the Chief Secretary or the Chancellor written to the pay review bodies? Will they guarantee a fair way forward on pay restraint, or will we just get more broken promises from this Chief Secretary to the Treasury?

[Danny Alexander]

Of course, the people to whom the right hon. Gentleman refers are local authority employees. Many local authorities did pay the £250, including some Liberal Democrat-controlled local authorities. I am not aware of any Labour local authorities paying the £250, so perhaps he should look within his party before deciding which side of the House was most effective at ensuring that the benefit was paid directly to the lowest-paid. Of course, we have had to take the difficult decision to continue pay restraint, with a 1% cap for the following two years. The pay review bodies will be very involved in making recommendations for those two years, starting, of course, in the parts of the civil service that come out of the pay freeze earliest. The IMF has repeatedly made the point that the Government are right to stick to their fiscal consolidation strategy, and we will.

[Michael Ellis (Northampton North) (Con)]

T2. Does my right hon. Friend by any chance agree with the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson), who said:“promising no cuts, no jobs losses and continued levels of public expenditure...is the policy of the delusional left who will never gain the public’s trust”?

[Danny Alexander]

That is a very wise quote. Of course, the policy of the Labour party is in increased confusion since the shadow Chancellor made his speech. It is a little-known fact that when he made it, he also signalled his opposition to more than £20 billion of this Government’s deficit reduction measures, and since he made that announcement, his party in the House of Lords has opposed a further £2 billion of welfare reforms, which rather suggests that the conversion to fiscal credibility is skin-deep at best.

[Rushanara Ali (Bethnal Green and Bow) (Lab)]

T6. My constituency now has one of the highest youth unemployment rates in the country, and the highest level of child poverty at 51%; that is compared with 7% in the Prime Minister’s constituency. Will the Minister admit that his Government are not serious about child poverty, and have completely failed to tackle youth unemployment?

[Danny Alexander]

No, I will certainly not say that, not least because youth unemployment rose by 40% when the Labour party was in government. I hope that the hon. Lady will welcome the youth contract that we announced, which is a great deal more ambitious than the package put forward by her Front Benchers; the Work programme, which is delivering real results for people up and down the country; and the investment in child care that will help women to go out to work, as well as men. Those are all things that help people to find work in these very difficult times.

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

T3. I warmly welcome the work being done by the Office of Tax Simplification, but does the Exchequer Secretary agree that we can do more to boost tax transparency, for example by providing all taxpayers with an annual statement on how their hard-earned tax pounds are spent?

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

My hon. Friend raises an interesting point. In November, the Government and Her Majesty’s Revenue and Customs published a consultation paper on exactly those lines, and I very much look forward to the ten-minute rule Bill that my hon. Friend the Member for Ipswich (Ben Gummer) will introduce tomorrow, which makes that proposal. We should all agree that we should do everything that we can to make tax and spending as transparent to the public as possible.

[Kerry McCarthy (Bristol East) (Lab)]

T8. The Public Accounts Committee has“serious concerns that large companies are treated more favourably than other taxpayers”by HMRC.That once again gives the lie to the Government’s claims that we are all in this together. What action will the Chancellor or the Minister take to ensure greater transparency and accountability in HMRC, and to assure ordinary taxpayers who are struggling to pay their bills this month that companies will also pay their full share?

[Mr Gauke]

The Government will respond in detail to the PAC report shortly, but it is only fair to point out that, in recent years, HMRC’s yield from large companies has increased substantially. Indeed, we have provided, as part of the spending review settlement for HMRC, additional resources to get more out of large businesses, so that we ensure that they pay their fair share.

[John Glen (Salisbury) (Con)]

T4. How much revenue does the Treasury expect HMRC to receive as a result of recent measures to reduce tax avoidance, and how much does the Minister estimate could be accrued from tax exiles who make £100 million in this country, clear off to Switzerland for five years, and then come back and advise the Leader of the Opposition?

[Mr Gauke]

As a consequence of the measures that we announced last year to tackle avoidance, we believe that something like £1 billion will be raised, £750 million of that relating to disguised remuneration, a policy that was opposed by Labour. I cannot talk about individual advisers to the leader of the Labour party and their tax affairs, but if such a person is advising the Labour leader, as far as we are concerned he is doing a great job and should carry on.

[Jonathan Ashworth (Leicester South) (Lab)]

Can the Chief Secretary confirm, so that we are clear, that the Chancellor is set to borrow more and debt is set to be larger than it would have been, had the Government followed the path of my right hon. Friend the Member for Edinburgh South West (Mr Darling)?

[Danny Alexander]

I certainly cannot confirm that debt is higher than it would have been if we had followed the path advocated by the Opposition. That path was leading to lack of economic credibility. When this coalition Government came into office, our credit rating was on negative watch from one credit rating agency, and it is only because we have taken tough action to deal with the deficit that we have got our spending under control, we are reducing our deficit and we have established this country’s credibility on the international markets, which was in considerable doubt under Labour.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

T5. Can the Minister update the House on lessons learned from the Fiscal Forum on how to maximise investment in jobs in UK oil and gas production?

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

I certainly can, and I welcome my hon. Friend’s interest in this policy area, based on his constituency experience. The Government have been clear that they want to see the oil and gas industry thrive, given its importance for jobs and growth around the country. Ministerial colleagues, officials and I continue to engage the industry in ongoing constructive dialogue to understand the challenges facing it.

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

The Minister confirmed today that 100,000 more children will be put into poverty as a result of the changes to tax credit. Can the Minister explain to the House, the country and my constituency why it is fair that three times as much will be taken from tax credits as will be raised in additional taxes on the banks?

[Miss Smith]

What the hon. Gentleman needs to acknowledge is that we have a sustainable way of including the banks in our public spending and public taxation plans; under his party’s plan, that revenue would have been spent five times over, if not more, and that is if it were done over multiple years, as ours is.

[Mel Stride (Central Devon) (Con)]

T7. Youth unemployment under the previous Government grew by more than 40%. That is 277,000 more young people out of work from the time they first came to office. Does my right hon. Friend agree that the best way to tackle youth unemployment is not to invest in wasteful schemes such as the future jobs fund, but to invest in skills for young people, which means apprenticeships, which this Government are delivering?

[Danny Alexander]

My hon. Friend is right to point out that youth unemployment has been rising since 2004, which suggests that it is a deep-rooted structural issue in our economy, not just the subject of political knockabout at the Dispatch Box. That is why we are, as a Government, investing far more in apprenticeships. That is a very good way to give young people the skills that they need to survive and thrive in today’s labour market. That is why, in relation to youth unemployment, we will not be deflected from the path that we are on.

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

The Government’s national insurance holiday for new companies to employ new workers has been acknowledged by the Prime Minister to be a flop. So far just £6 million has been spent on supporting jobs and £12 million in administering them, out of a budget of £1 billion. Will the Minister consider taking the advice of the Federation of Small Businesses and extending that support to all small businesses prepared to take on new staff?

[Mr Gauke]

The take-up has indeed been disappointing, but there have been 12,000 successful applications and we estimate that about 40,000 jobs have been supported in total. There are 17 participating businesses in the hon. Gentleman’s constituency. If I may correct him on one thing, the administration costs are not £12 million, but £325,000. As for extending the scheme further, we have to bear in mind the cost. We are concerned about that, even if the Opposition are not.

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

T9. I thank the Chief Secretary to the Treasury for his help in securing the extension of the north-east enterprise zone into Northumberland, which could bring jobs to my constituents in south-east Northumberland. Will enhanced capital allowances be available within the extended area?

[Danny Alexander]

My right hon. Friend has worked assiduously on behalf of his constituents to ensure that the enterprise zone includes the port of Blyth and the land at East Sleekburn, which will enable private sector firms to come into the area blighted by the problems at Alcan. Capital allowances will of course be available within the enterprise zone, and that will certainly include this territory.

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

The huge reserves of coal, oil and gas held by companies listed in the City of London have been called a sub-prime asset, because the global drive to reduce emissions is likely to cause fossil fuel reserves to lose value. Has the Minister any plans to ask the Financial Policy Committee to examine the impact of over-exposure to high-carbon assets by London listed companies, and what other plans has he to remove the carbon bubble from our financial system?

[Danny Alexander]

The hon. Lady asks a good question. The Government’s priority in this regard is precisely to support the expansion of renewable energy, which is a vital part of our future energy strategy. That is why it is a key priority in the national infrastructure plan and why we are investing £3 billion through the green investment bank to stimulate investment. The high price of oil and fuel at the forecourt suggests that that asset is not declining as quickly as she suggests.

[Jessica Lee (Erewash) (Con)]

Does my hon. Friend agree that local enterprise partnerships, such as Erewash Partnership in my constituency, play a vital role in advising SMEs on the difficulties with the availability of credit and can provide an overview for banks and the Government on the current concerns?

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

My hon. Friend makes an important point. It is absolutely vital that businesses and banks engage together to understand the challenges businesses face. We have taken a number of measures through the seed enterprise investment scheme, relaxing the rules on venture capital trusts and enterprise investment schemes, to encourage more equity funding for business. We are working closely with the banks to ensure that we do all we can to reduce the cost of funding to SMEs.

[Jim McGovern (Dundee West) (Lab)]

Yesterday I found myself again agreeing with a Government Minister, at least in part, when the Under-Secretary of State for Work and Pensions, the hon. Member for Basingstoke (Maria Miller) said in answer to a question from my hon. Friend the Member for Midlothian (Mr Hamilton) that the most sustainable way to reduce child poverty is through parents going to work. GMB, my old trade union, today published a study showing figures suggesting that, on average, eight jobseekers are chasing every vacancy in Scotland, and unfortunately in Dundee the figure rises to 12 jobseekers for every vacancy. What are the Government doing to address this scandal, and are they working with the Scottish Executive on the matter?

[Danny Alexander]

I am sorry if agreeing with a Government Minister makes the hon. Gentleman uncomfortable, but he is of course right that work is the best route out of poverty. That is the driving force behind our welfare reforms, the Work programme, which is the most extensive initiative ever undertaken to help people off benefits and into work, and our youth contract. Of course the country is in very difficult economic circumstances, but the Government are doing everything we can to support people off benefits and into work for precisely the reason he gives.

[Mr Speaker]

Order. I am sorry to disappoint colleagues, but questions to the Treasury team, rather analogous to questions to the Foreign Secretary and his colleagues, tend to beat the box office records. We must now move on.

Petition

Tuesday 24th January 2012 Commons Chamber

Phil Wilson (Sedgefield) (Lab)

- Hansard - - Excerpts

This is a petition on behalf of 1,000 residents of Bishop Middleham and Fishburn. It states:

The Petition of residents of Bishop Middleham and Fishburn,

Declares that the Petitioners believe that in order to maintain a reliable rural transport network in County Durham additional funding needs to be provided for rural bus services.

The Petitioners therefore request that the House of Commons urges the Government to ensure that there is funding in place to maintain the provision of reliable rural bus services in County Durham.

And the Petitioners remain, etc.

[P000999]

EU Sanctions (Iran)

Tuesday 24th January 2012 Commons Chamber

15:33

[Robert Halfon (Harlow) (Con)]

(Urgent Question): To ask the Foreign Secretary if he will make a statement on EU sanctions relating to Iran and the threat from Iran to close the strait of Hormuz.

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

Yesterday I attended the EU Foreign Affairs Council in Brussels, where member states agreed a new and unprecedented set of sanctions against Iran. These include a phased oil embargo, a partial asset freeze of the central bank of Iran, measures against Iran’s petrochemical sector and a ban on Iranian transactions involving gold. This is a major increase in the peaceful, legitimate pressure on Iran to return to negotiations over its nuclear programme. It follows the financial measures that the United Kingdom imposed on 21 November and the widening of EU measures on 1 December. Sanction measures, often close to those of the EU, have been adopted by the United States, Canada, South Korea, Norway, Switzerland and Japan. These are in addition to the sanctions imposed by the United Nations Security Council. At our joint press conference this morning, the Australian Foreign Minister announced that his country will replicate these new EU sanctions, and we will urge other nations to do the same.

Iran is in defiance of six United Nations Security Council resolutions, which call on it to suspend its uranium enrichment programme and to enter negotiations. Its recent decision to enrich uranium to 20% at an underground site in Qom demonstrates the urgent need to intensify diplomatic pressure on Iran to return to negotiations. The programme has no plausible civilian use, and Iran tried to keep it secret.

The International Atomic Energy Agency has expressed serious concerns about the possible military dimensions of Iran’s nuclear programme, and Iran is now in breach of 11 resolutions of the IAEA board of governors.

Sanctions are a means to an end, not an end in themselves. Our objective remains a diplomatic solution that gives the world the confidence that Iran’s nuclear programme is for purely peaceful purposes. We are ready to talk at any point if Iran puts aside its preconditions and returns to negotiations.

Iranian Vice-President Rahimi was reported as saying in December:

“If sanctions are adopted against Iranian oil, not a drop of oil will pass through the Strait of Hormuz.”

It must be borne in mind, however, that 95% of Iran’s oil exports, representing more than 80% of its foreign earnings, transit the strait of Hormuz, so it is very much against Iran’s interests to close the strait to oil exports.

Britain maintains a constant presence in the region as part of our enduring contribution to Gulf security, and the Royal Navy has been conducting such patrols since 1980. At the weekend, HMS Argyll and a French vessel joined a United States carrier group transiting through the strait of Hormuz. This was a routine movement, but it underlined the unwavering international commitment to maintaining rights of passage under international law. Any attempt by Iran to block the strait would be both illegal and unsuccessful.

We call on Iran to answer the questions raised by the International Atomic Energy Agency, to adhere to the UN’s Security Council resolutions, to suspend its enrichment programme and to return to the negotiations that are the only way of reaching a peaceful and long-term settlement in its dispute with the international community.

[Robert Halfon]

I am grateful to you, Mr Speaker, for granting this urgent question, and to the Foreign Secretary.

Iran is at crisis point. It is the new Soviet Union, of the middle east. It supports terrorism, undermines democracy and is trying to stop the Arab spring in Syria, but now we are threatened by an Iranian nuclear bomb, which risks the security of the Gulf states, Israel and the whole region.

Two weeks ago, Iran admitted that it had begun enriching high-grade uranium, and the regime is now threatening to close the strait of Hormuz, which deals with more than 20% of internationally traded oil. The UK Government could not have done more to try to contain the problem, with unprecedented action to isolate Iran’s financial sector by the Chancellor, and the extra EU sanctions imposed this week by the Foreign Secretary, but the question must now be asked: are we facing the prospect of a nuclear dictatorship in the middle east?

In the past, nuclear deterrents worked because of mutually assured destruction, but for MAD to work one has to be sane, and the Iranians have said that they would be happy to use nuclear weapons. Will my right hon. Friend set out to the House what military action Britain and the allies are planning in the strait of Hormuz? Will he explain what will happen if the latest economic sanctions do not work? What more is being done to bring Russia and China to the UN table?

Most people would accept that Britain has shouldered its fair share of the burden in tackling dictators, but it seems clear that the free world must send a message to Iran that, if it continues with its nuclear plans, it will lead to military action. No one wants war, but tragically it is looking increasingly possible. As The Times says today:

“One of the greatest civilisations in history has been superseded for a generation by an extremist regime perpetrating repression at home and aggression beyond its borders.”

[Mr Hague]

I am grateful to my hon. Friend, who pointed out at the beginning of his contribution that there are many grounds for quarrels with the Iranian Government, although I stress that this is not a quarrel with the Iranian people. The human rights record and much of the international behaviour of the Iranian Government, such as the recent plot to assassinate the Saudi ambassador in Washington—in addition to the nuclear programme—give grave cause for concern to the international community. But it is because there is a very serious danger of the wider proliferation of nuclear weapons across the middle east if Iran were to develop nuclear weapons capability, that this issue must be confronted and that we and our European partners, and so many other allies, take the strong stance that we do. I stress that we do so very much in the interests of avoiding conflict; this set of actions is not designed to lead to conflict, but to lead us away from it by increasing the pressure for a peaceful settlement of these disputes.

I say to my hon. Friend that we have contingency plans for many contingencies—including, as my right hon. Friend the Defence Secretary said at our press conference this morning, for sending any further naval forces to that area. But we are not planning to take military action in the Gulf. We call on Iran to return to the negotiations that are, at all times, available to it.

[Mr John Spellar (Warley) (Lab)]

May we welcome the Foreign Secretary’s comments? I apologise for the absence of my right hon. Friend the shadow Secretary of State, who is in Brussels today. We also welcome the extensive international engagement in this policy—not only from our European partners but, as the Foreign Secretary said, from our long-standing friends and allies from Australia, whose Defence Minister, Stephen Smith, and Foreign Minister, Kevin Rudd, are in town today to show their support.

Will the Foreign Secretary outline the reaction from the main oil consuming countries in Asia, which have a higher dependence on Iranian oil, to the policy of a ban on crude oil imports from Iran and, equally importantly, on the export of refined products back to Iran? Given the effect that these necessary sanctions will have on already vulnerable economies in southern Europe, will he indicate what measures are being taken to protect those economies?

In the wider context, will the Foreign Secretary outline how much support this policy has managed to garner at international level—particularly from Russia, China, India and Japan? The ban by Russia and China on supplying military equipment, as well as training and maintenance, is most welcome, but what assurances are they giving that that will be continued and what influence are they exerting on Tehran to ensure a more responsible attitude from the regime?

In that context, on the diplomatic front we have seen reports that, at a meeting in Moscow on 18 January, Russian officials presented the Iranians with a proposed framework for negotiations with the P5 plus one, possibly based on Russian proposals made in August. Will the Foreign Secretary report to us any feedback that he has had from the Russians?

The right hon. Gentleman rightly stressed that we have no quarrel with the Iranian people. Before the Arab spring, there was the green movement in Iran, where we saw huge numbers on the streets of Tehran and other Iranian cities seeking reform. Although it was barbarically repressed, it showed the very considerable public alienation from the regime. What assessment has he made of the state of public opinion in Iran and of divisions in the political elite?

What weight do the Government give to the threat by Iran to attempt to close the strait of Hormuz? Do they intend to participate in any international naval taskforce to keep the strait open? Given the defence cuts, can the right hon. Gentleman guarantee that vessels could be made available? What agreement have the Government obtained from other P5 countries for such action, as well as from those in the Gulf?

Finally, although we support the steps being taken to bring pressure to bear on the Iranian regime, all of us recognise the fragility of growth in the European economy at the moment. Given the importance of oil imports to that growth, will the Foreign Secretary assure us that the economic impact of the steps taken have been discussed with the Chancellor and that contingency plans are in place?

[Mr Hague]

I am grateful to the right hon. Gentleman for his supportive remarks and welcome for the broader international engagement and endorsement of our policy. He is right to draw attention to the visit of the Australian Foreign and Defence Ministers, which, as in so many ways, has been very helpful in this regard.

I shall not necessarily take the right hon. Gentleman’s questions in the order in which he asked them. On the question about the political situation in Iran, of course that can sometimes be difficult to interpret from the outside. There are many reports of deep divisions within the Iranian Administration—sometimes, of such divisions between the supreme leader and the President, although not necessarily about this issue. As the right hon. Gentleman said, at the time of the last presidential elections in Iran, we saw signs of deep discontent among the ordinary people of Iran. Sadly, such is the repression and the appalling human rights record of the Iranian Government that the people of Iran do not have much opportunity to voice their discontent. The principal opposition leaders are under house arrest. Iran, alongside China, conducts one of the largest numbers of executions in the world, with 50 executions already so far this year. It is an appalling human rights record that does not help anybody in giving voice to their real opinions.

The right hon. Gentleman asked about Asian countries. Japan has indicated over the past few weeks that it would not increase its oil imports from Iran and has mirrored some of the sanctions that the European Union has taken before. China has expressed its concern about recent developments within Iran, including during Premier Wen’s visit to the Gulf in recent days. In Qatar, he particularly remarked on China’s growing concern when he said that it

“adamantly opposes Iran developing and possessing nuclear weapons.”

Indeed, last month China approximately halved its oil imports from Iran, although I must point out that that is not because China necessarily agrees with this approach. Moreover, given its dispute with Iran about credit terms, it is expected to continue its halving of oil imports through February. In general, the demand for Iranian oil from the main Asian economies is down over recent weeks and is not replacing revenue that Iran will lose from the European Union.

On vulnerable economies, it is largely because of Greek concerns and Greece’s importation of large quantities of oil that we are phasing in this embargo, which will come into full effect on 1 July. We and many other countries would have preferred an earlier date, but we were happy to settle for that to give Greece time to adjust. If there are any difficulties for Greece and its energy supplies after that, we will of course all try to assist.

Russia has been promoting what it calls a “step-by-step” approach to negotiation. It is true that it has been pushing Iran hard to return to talks. Like the rest of the E3 plus 3 countries, Russia wants a diplomatic breakthrough. In discussion with us—also one of the E3 plus 3—it has not been able to confirm that Iran is serious about negotiations, but I am sure that Russia and China will continue to press Iran, in a different way from us, to return to negotiations. In the meantime, we, like so many nations of Europe, the United States and, as I have pointed out, many other parts of the world will increase the pressure on Iran to do so.

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

I am sure that my right hon. Friend would have no difficulty in agreeing that the environment of the strait of Hormuz is potentially extremely dangerous. Having regard to the nature of our relations with Iran at the moment, what steps has he been taking to enlist the support of countries that have better relations with Iran than ourselves to ensure that it exercises restraint in the strait of Hormuz and does not, to put it rather dramatically, cause a conflagration?

[Mr Hague]

We certainly talk a great deal to countries that have excellent relations with us and better relations with Iran than we have. That is one of the ways we try to understand the Iranians’ position and to make clear to them our position and our resolve on these issues. We do that with countries such as Oman and, in particular, Turkey. I discussed the situation at length with the Turkish Foreign Minister last week. All those countries use their good offices on Iran to say that it should exercise restraint, and I know that they will continue to do so. Moreover, all common sense goes in the direction of exercising restraint because, as I have pointed out, 95% of Iran’s oil exports go through the strait of Hormuz, and it has to factor that into any calculation that it makes about what to do there.

[Mr Jack Straw (Blackburn) (Lab)]

I chair the all-party group on Iran with the hon. Member for Wyre and Preston North (Mr Wallace).

While I understand the decisions that have been made by the European Union, may I press the Foreign Secretary on what action he is taking to reinvigorate the E3 plus 3 formation, which was absolutely critical in getting the six Security Council resolutions to which he refers? My anxiety about these sanctions is that without China and Russia on board there will be the most substantial leakages.

Secondly, I want to press the Foreign Secretary on the issue of military action. We know that there are strong demands in parts of the Israeli Administration for unilateral action, and that is running into the United States’ presidential election. Does the Foreign Secretary accept that the United Kingdom has to set out a policy on this matter? Does he also agree that we should not in any way, including through Diego Garcia, participate in any kind of military action without the clearest legal basis from the Security Council?

[Mr Hague]

The E3 plus 3 is indeed the basis on which to take forward negotiations and it is still available to do so. Last year, there were negotiations between Baroness Ashton, the EU High Representative, on behalf of the E3 plus 3, and Iranian representatives. Those did not get anywhere because of the preconditions that Iran attaches to any discussion of these matters, which amount to the dropping of all sanctions at the beginning and the recognition of Iran’s right to enrichment at the beginning. That is not much of a basis on which to negotiate about those things. It has not been possible, despite the best efforts of all six countries and the European Union, to have a successful negotiation. The door remains entirely open to that, as Baroness Ashton stressed again and as I stressed yesterday. That remains the framework in which we would like to have these discussions. China and Russia are continuing, rightly, to press Iran on this. That process remains very much alive. It does not require reinvigoration, but it does require Iranian engagement.

The right hon. Gentleman asked about military action. I stress that we are not calling for, or advocating, military action. It is the job of our armed forces to prepare for many contingencies, but we are not calling for that. We have successfully called for and introduced what I hope will be effective sanctions because we do not want a military conflict. He knows that when we became engaged in a conflict under a UN resolution in Libya last year, we came to the House of Commons for the authority to do so. That is how we will approach any conflict anywhere in the world.

[Several hon. Members]

rose—

[Mr Speaker]

Order. Accommodating the level of interest in this matter will require brevity, which will be exemplified, I am sure, by the Chairman of the Foreign Affairs Committee.

[Richard Ottaway (Croydon South) (Con)]

I welcome the Foreign Secretary’s approach. The challenge is how to tighten our grip on the Iranian economy without damaging our own. Has he received assurances from other oil producers, such as Saudi Arabia, that they can up production to replace the oil that will not be coming to Europe?

[Mr Hague]

No. It is a matter for each country to decide whether to change its oil production. This and many other factors affect the oil market. The price of oil is very similar today to what it has been over the past few months. Yesterday, the main benchmark price was $110 per barrel. That is a couple of dollars different from the price in December, which covers the period in which the discussion about sanctions and the strait of Hormuz has been going on. Many other factors affect the oil market. Some countries are increasing their oil production anyway. Iraq is planning huge increases in oil production and some Libyan oil production is coming back on stream. There are many forces at work, both positive and negative, in the oil market. We should not, therefore, exaggerate the effect of this measure.

[Keith Vaz (Leicester East) (Lab)]

I fully support what the Foreign Secretary has said today. When he last addressed the House on this question, I asked about the effect of this diplomatic crisis on the 75,000 British Iranians who live in this country and on those who wish to visit them from Iran. He said that he would name a third country to which applications could be made. What is the name of that third country?

[Mr Hague]

That issue remains a concern. The right hon. Gentleman is right to suggest that an unwanted side effect of the Iranian invasion of our embassy compound, the closing of our embassy there and the consequent closing of the Iranian embassy here is that it is harder for Iranians to visit this country and to get a visa to visit this country. Of course, British nationals in Iran can seek assistance from other EU embassies in Iran. We do propose to name a third country. We have identified that country and it has, in turn, approached Iran for permission to act. However, Iran has not yet given that country permission to act on behalf of the United Kingdom. The delay is with Tehran, not with London.

[Tony Baldry (Banbury) (Con)]

Given the recent international behaviour of the Iranian Government, is not one of the sad truths that we cannot trust any of the undertakings that they give? We therefore need two things from them—not simply an unconditional return to negotiations but preparedness to give unfettered access to International Atomic Energy Agency inspectors to go wherever in Iran they want to. That would give them the competence to find out whether Iran was complying with whatever it told the international community it was doing.

[Mr Hague]

Yes, my hon. Friend is absolutely right. The verification of any agreement with Iran would be very important, and the presence of IAEA inspectors there is crucial. I referred earlier to the enrichment of uranium to 20% at the underground facility that Iran has built in Qom, which my hon. Friend will remember Iran kept secret for a long time. It was exposed by western nations including the United Kingdom, and if that had not happened, Iran would probably have kept it secret to this day. The level of trust is not very high.

[Jeremy Corbyn (Islington North) (Lab)]

Iran remains a member of the nuclear non-proliferation treaty, and the last review conference called for a nuclear-free middle east. There is, however, one nation in the middle east that does have nuclear weapons, and that is Israel. Does the Foreign Secretary not think that it would be useful if we took up the suggestion of the NPT review conference to convene a denuclearisation conference of all nations in the region, in order that there could be direct talks? Iran would then be in a position to give assurances that it had no intention or wish to develop nuclear weapons.

[Mr Hague]

Indeed, the commitment to have such a conference in 2012 was given at the NPT review conference in 2010, and plans are going ahead for that conference. Of course, it does not help anyone trying to persuade Israel not to have nuclear weapons if Iran continues a nuclear weapons programme that would have the effect, if it were brought to fruition, of many other nations in the middle east pursuing a nuclear weapons programme. That is absolutely the wrong way to go about trying to persuade Israel to adhere to the non-proliferation treaty.

[Mr Ben Wallace (Wyre and Preston North) (Con)]

I, too, declare that I am a co-chairman of the all-party group on Iran.

If an ordinary Iranian looks out from the inside, he will see that he is surrounded by Israel, Pakistan and India, all countries that developed a nuclear weapon illegally without any UN checks and still refuse to sign any UN undertaking. What message does the Foreign Secretary have for ordinary Iranians that the reason for what we are doing is that something different is going on in this case and that the rewards and the outcome are worth it?

[Mr Hague]

That is a very important question. The reason something different is happening is partly because of one of the factors to which I was just referring—we can be fairly confident that if Iran develops a nuclear weapons capability, other nations will seek to do so. That will not help the security of the people of Iran; it will simply mean that the world’s most unstable region starts to have a large number of the world’s most destructive weapons. That is not in the interests of the people of any of the countries there. Secondly, Iran’s record of concealment, which we have just discussed, and statements by the President of Iran that have included his saying at one stage that Iran would like to wipe Israel off the map, create a focus of attention on Iran’s nuclear plans to an even greater degree than on those of any other country.

[Mr Denis MacShane (Rotherham) (Lab)]

The Foreign Secretary referred to our oldest D-class frigate, which was in the flotilla that just went through the strait of Hormuz and displaces less than 5,000 tonnes, but without aircraft carrier power Britain can have no maritime power projection. I wish our Foreign Secretary well, and I do not want him to go into the conference chamber naked, so will he talk to Brazil, Argentina and Thailand, which have had the good sense to keep their aircraft carriers, and see whether we can borrow or sub-let one while the crisis unfolds?

[Mr Hague]

Our frigate sailed through the strait of Hormuz in the company of the USS Abraham Lincoln, one of the most powerful aircraft carriers on earth.

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

Given that Iran is a state in transition, with multiple centres of authority, I suggest to the Foreign Secretary that the west’s policy of sabre rattling and sanctions has not only been unsuccessful, but serves to reinforce the hardliners in the country at the expense of ordinary Iranians. Has the time not come for a fundamental reappraisal of our relationship with Iran, similar to what President Nixon did with China when he recognised that country’s new status in the 1960s?

[Mr Hague]

If there were a reasonable hope of any such policy succeeding, of course there would be a case for it. In the Foreign Office, I regularly review our overall policy and the alternatives to it. However, at every stage, I and my colleagues on the National Security Council reached the view that this is the right policy—as have the Governments, as my hon. Friend can gather from what I am saying, of the entire western world. We have come to that conclusion because Iran has resisted or rebuffed efforts to create a better relationship. We offered substantive and serious help with the development of civil nuclear power in Iran, provided there was no nuclear weapons programme. I often point out that one of my predecessors, the right hon. Member for Blackburn (Mr Straw), made heroic efforts to improve relations with Iran on several visits there, and attempted the rapprochement for which my hon. Friend calls. None of that has worked, despite the best efforts of all involved. The policy choices are whether to do what I have set out to increase the peaceful pressure on Iran, to leave a situation in which military conflict is more likely, or to do nothing. The latter two options are not very attractive.

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

What steps are being taken to prevent third countries from trading on behalf of Iran, thereby circumventing sanctions?

[Mr Hague]

As the hon. Lady can gather, many nations are joining in the measures and similar measures. Of course, we will talk to other nations around the world about their own policies. For instance, we have discussions with the Gulf states, which are also deeply concerned about Iran’s nuclear programme. It is also worth pointing out that the United States Congress has adopted sanctions with extra-territorial effect. They have a major effect on transactions from the financial institutions of other nations and trading in oil by other nations.

[Mark Pritchard (The Wrekin) (Con)]

Although we all want diplomacy to work, the nuclear clock is ticking, and if sanctions do not work will the Foreign Secretary put it on the record that all options remain open to stop Iran becoming a nuclear-weaponised state?

[Mr Hague]

Yes, I repeat what I and previous Governments have said: all options remain on the table. However, I also stress that the policy is important and that we are pursuing it because we do not want Iran to be armed with nuclear weapons and nuclear proliferation in the middle east, but we also do not want military conflict over that or any other issue in that region. We are pursuing that policy, but of course all options remain on the table for the future.

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

It seems likely that ordinary Iranian citizens will suffer from the sanctions, but far less clear that the regime itself will suffer. Indeed, some analysis suggests that sanctions will strengthen the regime. What assessment has been done of the impact of sanctions on ordinary Iranian people? What efforts have been made to ascertain their views?

[Mr Hague]

We are not in a position to conduct a referendum in Iran on the measures. I wish that there could be an open consultation with the people of Iran, or even that the Iranian Government would consult them on domestic issues. As I said earlier, free expression of opinion is not easily permitted in that country. Clearly, it is not possible to consult the Iranian people.

For a long time, the measures that we imposed were directed at the financing of the nuclear programme and the finances of the Iranian state. Of course, the measures that we are discussing are unprecedented and wide ranging, and can have a wider effect. However, I would argue that that is better than the alternatives of doing nothing or making a military conflict more likely. I think that they greatly concern the Iranian regime, and that is why we hear statements such as that from Vice-President Rahimi on 27 December, and why we have seen any flexibility about negotiations from Iran in the past 12 months only on each occasion when we are on the point of imposing additional sanctions. We have been through that several times and learned not to be deterred from imposing additional sanctions. The Iranian Government will now have to try to deal with the situation.

[Martin Horwood (Cheltenham) (LD)]

I welcome the European Council’s robust stance, and the confirmation by the Council and the Foreign Secretary of the peaceful objectives of the process—the resumption of talks about the nuclear programme—but what active steps are the British Government or the European Union taking to facilitate the start of the talks and the de-escalation of this dangerous crisis?

[Mr Hague]

We are taking very active steps to facilitate that. Baroness Ashton wrote, I believe, from memory, in October—three months ago—to the Iranian negotiator Mr Jalili setting out the terms of a new round of negotiations and inviting Iran to them. The EU has not received a formal reply. The opportunity has been clearly set out on behalf of the E3 plus 3 and it will remain.

[Mr Frank Roy (Motherwell and Wishaw) (Lab)]

Will the Foreign Secretary give an assurance that he will report to the House before there is any escalation of the conflict—armed or otherwise—with Iran, especially in the strait?

[Mr Hague]

Yes. I stress that the Government are not seeking an escalation of any conflict—we are seeking a resolution—but I will of course come back to the House as necessary.

[Mr Julian Brazier (Canterbury) (Con)]

Does my right hon. Friend agree that more aircraft carrier capacity is not a huge priority in an area with plenty of available land bases? Much more important is the potential threat of terrorists sowing mines along the shallow waters of the western Gulf using fishing vessels, for which Britain’s naval contribution of mine-clearing vessels is pre-eminently central.

[Mr Hague]

My hon. Friend is absolutely right. Indeed, our principal military contribution in the Gulf is the minehunters based in Bahrain. They are enormously respected in the region and are extremely expert in what they do. They are a very important part of our presence there.

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

There have been reports and allegations that covert military operations have already taken place in Iran, with bombings and assassinations. Will the Foreign Secretary confirm that the UK Government and the UK are not involved in the operations and that they do not support such intervention by foreign forces?

[Mr Hague]

We are not involved in, and we do not support, assassinations. Beyond that I do not comment on intelligence matters.

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

As Iran begins to feel the squeeze, it may not be capable of closing the strait of Hormuz, but it is very good at using proxies to destabilise its neighbours—the fragile democracy in Baghdad and the Kurdish region. What steps are we taking to support those institutions and those parties that are working to bolster rather than break up that democracy?

[Mr Hague]

We very much support democracy in Iraq. It is certainly right that Iran can often be a malign influence there. We also want stability in Lebanon and a resolution to the appalling situation in Syria. In all those situations, Iran has become a malign influence. Our direct leverage to alter events in Iraq is very limited now, but we will use our influence and our strong diplomatic presence to bolster democracy there.

[Derek Twigg (Halton) (Lab)]

Given the increased pressure from sanctions and the increased military presence in the strait of Hormuz and the region, has the Foreign Secretary held discussions with the Secretary of State for Defence to satisfy himself that the chiefs of staff and any commanders in charge of our assets in the region are clear on the rules of engagement? I am thinking in particular of the Cornwall incident. What would happen should the Iranians try something like that or worse again?

[Mr Hague]

I believe that all of our vessels in the region are very clear about the rules of engagement and where they should or should not go. Such matters are clearly set out and agreed within government between the Ministry of Defence and the Foreign Office, so I do not think that there is any lack of clarity for anyone involved.

[Patrick Mercer (Newark) (Con)]

I understand and fully support the economic sanctions that the EU is taking. Can the Foreign Secretary reveal whether anything else can be done directly and specifically to thwart Iran’s nuclear capability and the industry that surrounds it?

[Mr Hague]

I am reporting to the House on the European Union sanctions. As my hon. Friend will gather, I am not advocating military action, and if he is asking about other areas of activity, I cannot go into them in the House.

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

The Government have rightly gained credit for the support that they have shown opposition movements elsewhere during the Arab spring. Why do they set their face so implacably against opposition movements when it comes to Iran?

[Mr Hague]

I am not aware that that is our approach. Indeed, I deplored earlier the house arrest and imprisonment of opposition leaders in Iran, and the brutal and repressive treatment of opposition spokesmen and demonstrations. At the same time, the future of Iran is for the Iranian people—at least, we hope so. It is very important that opposition movements with which anyone in this country associates themselves are credible and likely to represent the Iranian people.

[Dan Byles (North Warwickshire) (Con)]

What assessment has the Foreign Office made of the time frame within which Iran could develop a credible nuclear capability if it is allowed to continue down that path unchecked?

[Mr Hague]

My hon. Friend will see many estimates and much speculation, and it is best to take all of them with a pinch of salt. Iran is currently enriching uranium to 20%, which is not sufficiently high grade for a nuclear weapon but creates a larger amount of uranium that, at a later stage, could be enriched quite rapidly to 90% and more, which is a faster process. There are many different estimates of how long that could take, depending on the quantity involved and the number of centrifuges available. He will see estimates of numbers of months rather than years for how long it would take go beyond the 20% level to the higher enriched level. What we do know is that this has become a sufficiently urgent problem that we have to address, with the international community showing unity and resolve, and that is what we are doing with these measures.

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

I am sure Members on both sides of the House understand the need for a longer lead-in time so that our European neighbours can seek alternative sources of energy, but if they were able to do so quicker than anticipated would the sanctions be brought forward?

[Mr Hague]

I do not anticipate the sanctions being brought forward. This is the result of a long and complex negotiation over the last few weeks. But I do anticipate that purchasers of Iranian oil in the European Union will decline steadily. It is not a continuous amount and then a cliff-edge effect. The effect of the phasing and the coming into force on 1 July is that remaining purchases will be declining long before then.

[Mr Philip Hollobone (Kettering) (Con)]

Is not the Iranian regime hellbent on developing a nuclear weapon? Nothing will stop it short of a breakdown in the developmental process or the overthrow of the regime either from inside Iran or by military action. If sanctions do not work, would not the response of the Iranian regime be to redouble its efforts to develop a nuclear weapon before effective sanctions bite?

[Mr Hague]

In many ways that is the case for wide-ranging sanctions policies that address the oil industry and the financial sector. If they are worth doing at all, given the gravity of the situation, sanctions are worth doing seriously. That was my argument at the Foreign Affairs Council yesterday. My hon. Friend is right that at the moment the Iranian leaders are clearly determined on the development of nuclear weapons capability. However, I do not think that one can speculate with certainty about what may happen over the coming year—about the effect of sanctions or any flexibility that may be shown in negotiations—so I am not prepared to say that there is no possibility of such a policy working and that one must therefore reach for other solutions. We want sanctions, coupled with negotiations, to work, and this is not the time to speculate about what might happen if they do not.

[Jim Shannon (Strangford) (DUP)]

The Minister will be aware of the close relations—or perceived close relations—between Iran and Syria. Will he ensure that the sanctions bite, or will he have to consider widening them, perhaps against other countries and even the sanction breakers?

[Mr Hague]

We have already imposed an oil embargo on Syria and a wide range of other measures. Indeed, we widened the sanctions on Syria yesterday to include a further 22 individuals and eight entities. I think that we will be able to make the sanctions regime effective and that it will be well adhered to by members of the European Union and the other countries that are committing themselves to it. We will therefore concentrate on making the sanctions regime work, rather than imposing additional sanctions on people who might not support it.

[Mr Matthew Offord (Hendon) (Con)]

Will the Foreign Secretary assert that Iran’s development of a nuclear weapon will be a red line issue for the United Kingdom?

[Mr Hague]

My hon. Friend can gather that it is indeed a red line issue; that is why we are addressing it in this way. The Prime Minister, along with other European leaders—Chancellor Merkel and President Sarkozy—has said that we will not permit the development of a nuclear capability by Iran. That is why we are adopting this policy.

[Rehman Chishti (Gillingham and Rainham) (Con)]

To counter the threat from Iran, what steps are we taking to strengthen our strategic relationship with key regional powers such as Saudi Arabia? By way of a declaration, let me say that I am vice-chairman of the all-party parliamentary group on Saudi Arabia.

[Mr Hague]

We have strong relations with the Gulf states, many of which we have intensified over the past year, particularly our relationship with the United Arab Emirates, although we enjoy excellent relations with all those states. My hon. Friend will know about our long and historic relationship with Oman, and about the many difficulties faced in Bahrain, including by the people of Bahrain over the past year. My right hon. Friend the Prime Minister visited Saudi Arabia earlier this month. Saudi Arabia is an important ally and an important force for stability and peace in the region, so I salute my hon. Friend’s work with the all-party group.

[Kris Hopkins (Keighley) (Con)]

What efforts have the UK Government and our allies made to communicate directly with the people of Iran? It is important that we demonstrate that our argument is not with them, but with the despotic leadership of that country.

[Mr Hague]

This is very important. Ten days ago I did an interview on BBC Persia to communicate directly with the people of Iran and make clear our arguments, and we have done that on many other occasions. The Under-Secretary of State, my hon. Friend the Member for North East Bedfordshire (Alistair Burt), has done the same on previous occasions, and we will keep up our efforts to communicate with the people of Iran. Needless to say, however, the Iranian authorities often attempt to block our attempts to do so.

Points of Order

Tuesday 24th January 2012 Commons Chamber

16:19

[Rachel Reeves (Leeds West) (Lab)]

On a point of order, Mr Speaker. The International Monetary Fund has today revised its growth forecast for 2012 downwards, from 1.6% to 0.6%, and asked the Government to reconsider the pace of their deficit reduction plans. Have you had any indication that the Chancellor plans to come to the House to give the Government’s response?

[Mr Speaker]

I have received no such indication, but I am sure that the hon. Lady will pursue these matters through the Order Paper and in other ways if she is dissatisfied with the position as it stands.

[John Mann (Bassetlaw) (Lab)]

On a point of order, Mr Speaker. In answering a series of questions printed in Hansard on 19 January on 18 separate and current EU proposals on financial services, the Treasury Minister responded:

“When EU legislation is being reviewed or prepared, responses by the UK authorities to a public consultation will be made available on the Commission website.”—[Official Report, 19 January 2012; Vol. 538, c. 948W.]

When a Member of the House asks questions of the British Government, is it sufficient for them to be answered by reference to potential statements being put up on the European Commission’s website? Is it not the responsibility of the Minister to give an answer to the Member of Parliament?

[Mr Speaker]

I am grateful to the hon. Gentleman for his point of order. There has been no breach of order in the method that the Minister chose for his reply to the hon. Gentleman. The hon. Gentleman’s point of order will have been heard by those on the Treasury Bench, however, and I hope that, when framing answers, Ministers will take account of the convenience of right hon. and hon. Members in being able to access information. I recall from my own experience as a Back Bencher that it was exceptionally irritating when a series of carefully crafted written questions was responded to in a desultory and, some might have thought, a discourteous manner. To do so to the hon. Gentleman is certainly a hazardous enterprise, because he is bound to raise the matter on the Floor of the House, as he has just eloquently demonstrated.

[Mr Gordon Marsden (Blackpool South) (Lab)]

On a point of order of which I have given you notice, Mr Speaker. I tabled two named-day questions for answer on 13 December by the Department for Communities and Local Government. They were factual questions about the payment of money for regional projects under the European regional development fund. Despite polite follow-up questions from my office, no reply was received until yesterday. I was surprised and concerned that the Minister responsible, the right hon. Member for Welwyn Hatfield (Grant Shapps), had inserted into his reply a tendentious, partial and lengthy attack on the previous Government, including inaccurate comments about me. The argument that we shout like mad and protest too much might come to mind, but is it not an abuse of the conventions and courtesies of the House to pervert a factual written reply to a Member in that way? Given that the reply has now appeared in Hansard in that form, what recourse is available to enable it to be amended so that it reflects only the factual information that I requested from the Minister, and represents a response suited to a Minister of the Crown rather than a boastful rant more suited to a timeshare salesman?

[Mr Speaker]

I thank the hon. Gentleman for giving me notice of his point of order. I do not feel comfortable about commenting now on his question about retrospective amendment, but I can respond to him on two points. First, the content of ministerial answers is not a matter for the Chair, and the hon. Gentleman might wish to write to the Procedure Committee if, as is obviously the case, he is dissatisfied. Secondly, I will say that, in my view, Ministers should avoid putting in their written answers to written parliamentary questions any polemical matter that would not be allowed in the questions themselves. The Table Office regulates the manner of the asking of the questions, and Ministers must exercise some responsibility and demonstrate some courtesy in the manner of their answers.

[Jeremy Corbyn (Islington North) (Lab)]

On a point of order, Mr Speaker. You very generously allowed the debate on the urgent question to carry on for 49 minutes, and there is obviously enormous interest in the situation in Iran. The Leader of the House is in the Chamber. Would you accept a request for a much fuller debate on the situation facing Iran in the very near future? Clearly, the whole situation is extremely dangerous.

[Mr Speaker]

I am grateful to the hon. Gentleman for his point of order. A senior Government Whip, chuntering rather helpfully from a sedentary position, says that there will be a defence debate on Thursday. I do not think that he was saying it for my benefit, but I am grateful to him nevertheless. That debate might provide a suitable vehicle for the hon. Member for Islington North (Jeremy Corbyn) to air his concerns. I do not want to be pedantic, but when he asks me whether I would accept such a request, he will know that the scheduling of business is a matter for the usual channels. Those on the Treasury Bench will have heard his point of order, and he will know that I allowed the debate on the urgent question to run for a substantial time because I felt that it related to a matter of the highest importance, on which a statement could have been—but did not have to be—volunteered by the Government, and in which there was very substantial interest. I hope that that will be taken into account, and that the Government will realise that Members want to be updated on the matter on a regular basis.

Housing (Amendment)

Tuesday 24th January 2012 Commons Chamber

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

16:25

[Mr Frank Field (Birkenhead) (Lab)]

I beg to move,

That leave be given to bring in a Bill to require the Secretary of State to make provision for the system for social housing allocation to give priority of choice of social housing to those with an exemplary tenancy record; to place a duty on housing associations to inform potential tenants about conduct of existing tenants in neighbouring properties; and for connected purposes.

I seek leave to amend the Housing Acts with one simple objective in mind: to put the good citizen in pole position in the allocation of the most decent and best housing association homes. Hardly a statement from any of our senior politicians today does not mention that they are standing shoulder to shoulder with the hard-working families of this country. It is a sign of the times in which we live that senior politicians feel that they have to affirm what most people would consider an axiomatic position for all politicians to occupy.

The Bill would define what we mean by hard-working. It would obviously include people who work hard—those who gain work and pay their taxes—but it would also have a more generous definition. As we all know from our constituencies, hard-working families have an extraordinarily important roll-over effect as regards community benefits. For example, the hard work that families put into raising their children means that they are not only a credit to the families concerned but diligent in their concern for their neighbours. We are all aware of the importance of the hard work people put into building up strong neighbourhoods, so the Bill’s definition of hard-working is generous and not mean.

The Bill would, I hope, encourage the Government to be more radical and in a form that is more just. They recently put out a consultative paper on who should get the best housing and under what conditions. The paper keeps in key position the six most favoured groups, who have been there for a long time. Let me remind the House of them: the two homeless categories; those families who are threatened with homelessness; those families who live in overcrowded or insanitary conditions; those of our constituents who wish to move to better accommodation on medical grounds; and those who can make a case for a move for other reasons.

Those categories would remain, but those who were simply—I emphasise that word—good citizens would join them. The other six categories would also be judged in the first instance on whether they were also good citizens, so a premier league would be formed of those of our constituents who were in a position to have first choice of all the social housing—the best social housing—when it became available.

The Bill has a second objective, which is to protect those good citizens from neighbours from hell—those chaotic families who cause such misery. The aim of the Bill is to put decent tenants on a par with the position of owner-occupiers, which was changed by the previous Government. Owner-occupiers who wished to sell and who had been plagued by antisocial behaviour had to declare that that had occurred. If they did not do so and the sale went through, they could be open to legal challenge.

The Bill would deal with the two somewhat underhand moves made by many housing associations, in my constituency, and, I would guess, elsewhere. The first is dumping neighbours from hell next to good tenants without any warning whatever. The second is moving unsuspecting good tenants next door to neighbours from hell without any warning. The Bill would give all tenants the right to be consulted in such circumstances, the right to object and the right to legal redress. It is about trying to legislate to bring about what most of our constituents would regard as fair—to bring housing legislation on side with their gut feeling of what is fair.

Let me end with one last comment. My life is very different from those of my parents and grandparents because of the changes that the Attlee Government brought in and I think that we as a group of politicians are worryingly relaxed about rebuilding support for our welfare state. Many of our constituents do not believe that all the rules governing entitlement are fair. This year will be the first in which income transfers in the welfare state will burst through the £200 billion mark. If now is not the time for us to think carefully about all our reforms, particularly our housing reforms, and about putting on the statute book measures that most of our constituents would regard as fair and just, I cannot think of any other.

Question put and agreed to.

Ordered,

That Mr Frank Field, John Mann, Siobhain McDonagh, Mr Roger Godsiff, Hazel Blears and Natascha Engel present the Bill.

Mr Frank Field accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 30 March, and to be printed (Bill 276).

Local Government Finance Bill

Tuesday 24th January 2012 Commons Chamber

(Clause 1, Schedule 1, Clause 2, Schedule 2, Clauses 3 to 5, Schedule 3, Clauses 6 and 7, new Clauses relating to non-domestic rates and new Schedules relating to non-domestic rates)

[2nd Allocated Day]

Further considered in Committee

[Mr Lindsay Hoyle in the Chair]

Schedule 1

Local retention of non-domestic rates

16:33

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

I beg to move amendment 3, page 16, line 29, at end insert—

‘(6A) Where the original calculations did not show that a relevant authority was to make a payment to the Secretary of State, but the revised calculations show that the authority is to make a payment to the Secretary of State—

(a) the authority must make that payment to the Secretary of State, and

(b) the authority must make a payment to the Secretary of State of an amount equal to the amount of the payment shown by the original calculations as falling to be made by the Secretary of State to the authority.’.

[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

With this it will be convenient to discuss Government amendments 4 to 16.

[Robert Neill]

It is a pleasure to be back here under your chairmanship, Mr Hoyle, dealing with the next part of the Bill. The amendments make changes to paragraphs 12 and 15 of the schedule and some consequential changes to schedule 3. To make sense of how they operate, it is sensible to look at the scheme of how part 5 works as a whole, which I shall do as briefly as I can.

In earlier debates on the Bill, the Government have made it clear that we have always accepted there would be a need for some redistribution of business rates from resource-rich to resource-poor authorities. We intend that the redistribution should be done by way of tariffs and top-ups, which have been mentioned in earlier debates. Those will be set at a level that ensures that no authority will be worse off on day one of the scheme than they would have been under formula grant. That is a principle that we have already established. So tariffs and top-ups will be set on day one so that no authority will be worse off. Thereafter, the intention is that tariffs and top-ups will be index-linked to the retail prices index so that the value of protection provided to top-up authorities is maintained in real terms. Under paragraph 10, the basis on which tariffs and top-ups will be calculated will be set out each year in the local government finance report, which the Secretary of State must lay before the House, and will thus be subject to the same scrutiny as the report.

Once the local government finance report is approved by the House—the normal procedure—paragraph 11 requires the Secretary of State to make the necessary calculation of the tariffs and top-ups to be paid, or received by each authority, on the basis approved in the report. After the calculations have been notified to the authorities, paragraph 12 requires them and the Secretary of State to make payments in line with them.

Part 5 of the schedule also provides, purely on a precautionary basis, that the Secretary of State may at any time up to 12 months after the year to which the local government finance report relates make a further set of calculations, but with the proviso that they are made on the same basis as set out in the report. That will make sure that in the unlikely event that we later discover a mistake in the original calculations we can put it right.

[Lyn Brown (West Ham) (Lab)]

I am listening to the hon. Gentleman with interest. Is it not true that as a result of the financial calculations that will be made under the Bill, the 10% most deprived areas will lose four times as much as the 10% best-off areas?

[Robert Neill]

I do not accept the hon. Lady’s proposition. The whole point is that we are not dealing with the individual circumstances of authorities; that will be done in the report. The provisions set out the methodology. That is the important thing. It is worth bearing in mind that under the existing formula grant arrangements, there is provision that in exceptional circumstances the Secretary of State can make an amending report. In effect, these provisions mirror the position for dealing with the situation now; we are operating with a baseline and top-ups and tariffs, with the protection that they are uprated in line with inflation.

Paragraph 13 makes further provision to allow us to put right a mistake in the basis for calculation set out in the original report, but it is important to stress that if we did so we would again need to seek the approval of the House of Commons. The principle exists in the current system, although it has not had to be used; it is a fail-safe arrangement.

[Mr Robert Syms (Poole) (Con)]

Is it the Government’s intention that the tariff will always equal the top-up—that no money will be top-sliced by the Department for Communities and Local Government—or will a reserve be kept?

[Robert Neill]

We will talk later about what is described as the central share, which is the proportion that may, as necessary, be retained by central Government. That is to ensure that at all times the settlement fits into the envelope of the control totals, but even so we have indicated that anything allocated under the central share will be returned to local government through other grants. Just as at present local authorities receive grants that are outside the formula grant scheme, so too can money be recycled to local government in the same way.

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

If the answer to the question put by the hon. Member for Poole (Mr Syms) is that, yes, the Government will retain that money, are they not, by that mechanism, substituting for central Government funding by making sure that local government pays for all grants that go to local authorities? That is not the case at the moment.

[Robert Neill]

On the first part of the hon. Gentleman’s proposition, the Government have never made any secret of the fact that there will be a central share; we have always indicated that it would be necessary for the system to operate within the control totals of the spending review. On the second part, the central share can be set and adjusted from time to time. We have made it clear that we intend to look, as we go forward, at the macro-economic situation, which will be reflected in the control totals, and the ability to seek to align more closely the responsibilities of local authorities with funding availability through the business rates. Put it this way: it would be a bit previous to come to a conclusion at this moment about what precisely would happen to any individual grant stream.

[Mr Jones]

Is the Minister saying that in future, grants that currently come from central Government taxation and revenue will be paid for by local government? That is basically shifting the burden to local businesses, rather than taking the money from the central taxpayers’ pot.

[Robert Neill]

The danger in the hon. Gentleman’s formulation is in assuming that that would shift all funding in that way, and that is not correct. What we have said is that we will have the option to make an adjustment to keep the grant within the control totals, and to ensure that money raised by business rates is returned to local government, in a way that is consistent with the scheme in the Local Government Finance Act 1988. That is not different, because as the hon. Gentleman, with his experience, will know, quite a number of funding streams are paid to local authorities, outside formula grant. I do not accept that it follows that all of them have to be added in. What we have said is that we will seek to align more closely the grants with the responsibilities.

[Mr George Howarth (Knowsley) (Lab)]

I am grateful to the Minister for giving way; he has been generous. He may cover this later, but the top-ups and tariffs updated by the retail prices index would mean that, without the protection of safety nets, Knowsley, which I have the honour to represent, would have a four-year cash growth of 21.9%; by comparison, for the City of London, it would be 139.6%. Will he explain how the measures that he is about to announce would ameliorate the problem?

[Robert Neill]

In a later passage of the schedule, we deal with the operation of the set-aside and the safety net, and that will deal with the issue of recouping what is decided to be disproportionate growth, and how that will work in principle. Of course, as this is a framework Bill, it does not set out the impact on any individual local authority; it sets out the methodology that will be applied, and I will happily deal with that at the appropriate time.

I can tell the right hon. Gentleman that, as we may have indicated earlier, over the spending review period that we have looked at, Knowsley’s non-domestic rate increase was 8.4%, which is significantly above the national average. Of course, I accept that local authorities start with different financial circumstances, and we are reflecting that in the baseline, so that no one is worse off, but we are right to point out that some local authorities that certainly have a number of demands on their resources are capable, as we have seen, of a growth in business rate income that is above the national average.

In a nutshell, the Government amendments deal with a set of revisions that we do not anticipate having to use, but which it is desirable to have, as a fail-safe device to correct any mistake or erroneous calculation. That is the background. One further point should be made: it follows that where we have occasion to use the provisions to recalculate tariffs and top-ups, or to make an amending report, obviously the sums due to local authorities would potentially differ from those of which they were originally notified. It is therefore right to point out that the provisions in paragraph 12(5) and 12(7) and in paragraph 15(3) and 15(5) ensure that the sums due and paid by an authority as a result of the original calculations can be compared with the result of the recalculation or the amending report, and that adjusting payments can be made to reflect the difference.

16:45

In the Bill as currently drafted, those paragraphs provide that where an authority’s tariff is bigger than the tariff originally calculated, it should pay the difference to the Secretary of State, and where it is smaller, the Secretary of State should refund the difference. Similarly, if the top-up is bigger than originally calculated, the Secretary of State should pay the difference. Where the top-up is smaller, the authority should pay back the difference.

That is all pretty obvious and straightforward, but the provisions do not specifically deal with the situation where, as a result of a recalculation or an amending report, an authority switches from being a tariff authority to a top-up authority or vice versa. It might never happen even if there were a recalculation, but it is conceivable that a local authority could be on the cusp, marginally in either the top-up or the tariff category, and a recalculation pushed it to the other side of the line. We are inserting the amendments as a precautionary measure to tidy up and make the position crystal clear.

That is what amendments 3, 4, 7 and 8 do, so that local authorities need not be in any doubt. They ensure that payments from the authority or from the Secretary of State as a result of that recalculation can be made, to make the system work fairly. To do that, they introduce the sub-paragraphs 6(A) and 8(A) into paragraph 12, and 4(A) and (6A) into paragraph 14. Amendments 5 and 6 make consequential amendments to schedule 1. When we get to them, amendments 9 to 17 make consequential amendments thereafter, so that everything is tidied up.

[Helen Jones (Warrington North) (Lab)]

It is a pleasure to be here under your chairmanship, Mr Hoyle.

The Minister explained clearly the purpose of the amendments, but the fact that the Government have had to table so many amendments at this stage of the Bill is ample proof of how they are rushing it through the House. The amendments do not deal with esoteric issues. They are not about something easily missed. They simply deal with the situation where a revised calculation is made and an authority may move, as the Minister rightly said, from tariff to top-up or the other way around.

It is typical of this Government’s sloppy thinking and of their desire to rush the Bill through without proper scrutiny that they forgot one simple fact, which the most junior clerk in a council finance department could have told them—that if they want people to pay up, whether that is a council tax payer, a council or a Secretary of State, they must make provision for payment. The fact that Ministers did not even notice that when the Bill was drafted shows how little time they have spent reading it, a fact that was convincingly demonstrated by their performance on Second Reading and on the first day of Committee in the whole House. They are not up to speed on the measures that they are introducing.

We have no objection to the amendments. They are tidying-up amendments, but let us imagine what Ministers would say if a local authority were so sloppy. After all, in determining the baseline for rate income, they would base their figures on what a local authority would receive if it had acted diligently—a term that they have signally failed to define in answer to questions in the Chamber and in Committee. Local councils would be called to account by Ministers for such an omission, and rightly so. It is a shame that Ministers do not apply the same high standards in their own Department. They are as careless in their drafting as they are with the effects of their legislation on local communities. These amendments, straightforward as they seem, epitomise the Government’s attitude to the whole Bill: sloppy, rushed and badly considered.

[Alex Cunningham (Stockton North) (Lab)]

I am interested to hear my hon. Friend advise the Minister that he should talk to local authorities and take an example from them. Will she encourage him to take a trip to Stockton-on-Tees borough council, my local authority, because not only was it named council of the year the year before last, but for the past six years it has been recognised as providing excellent services and financial management and delivering for the people? The Government might learn something there.

[Helen Jones]

I am sure that it would benefit many people to take a trip to Stockton-on-Tees, as my hon. Friend suggests. There are certainly many things that the Department for Communities and Local Government could learn from good local authorities, but it has failed to do so. We do not intend to divide the Committee on these amendments, but they show what a shambolic lot those on the Government Front Bench are and how little they have thought through the Bill.

[Mr Syms]

I fully support the Government amendments, because what they propose is sensible when we are moving towards a new system. We are talking about some very large figures, and it takes only a small change in one figure to throw the others out. It is important that local authority finance officers have a clear idea of where they are going with this new system. If there is a recalculation, which we do not expect, will it be perfectly obvious in the information supplied to local authorities? Local authorities will have to set a legal budget, and they will do so based on figures supplied by the Government. If those figures change a little, will the system be sufficiently transparent for local authority treasurers to understand where there has been some adjustment? Otherwise, if it is totally out of the blue and they cannot see the rationale, that will cause more problems than we are solving.

[Robert Neill]

I take my hon. Friend’s sensible point. That is why it will be done, if it is needed, by making a report to the House so that there is proper scrutiny. Local authorities would of course be notified and the basis of any change set out. We would also seek to give any local authority affected appropriate warning informally and through the formal channels here, and there would of course be scope for Members who represent constituencies affected to raise the matter in the House and with Ministers.

I am grateful that the hon. Member for Warrington North (Helen Jones) deigns to support the amendments but sorry that, in doing so, she has managed to raise churlishness to a new art form, even by her standards. I simply point out that I can scarcely remember a Government Bill in the previous Parliament that did not come with dozens of drafting amendments as it progressed. These things happen, as she knows full well. I am a little surprised and she does herself an injustice by making so needless a point.

Amendment 3 agreed to.

Amendments made: 4, page 16, line 40, at end insert—

‘(8A) Where the original calculations did not show that the Secretary of State was to make a payment to a relevant authority, but the revised calculations show that the Secretary of State is to make a payment to the authority—

(a) the Secretary of State must make that payment to the authority, and

(b) the Secretary of State must make a payment to the authority of an amount equal to the amount of the payment shown by the original calculations as falling to be made by the authority to the Secretary of State.’.

Amendment 5, page 17, line 10, after ‘(6)’ insert ‘or (6A)’.

Amendment 6, page 17, line 18, after ‘(8)’ insert ‘or (8A)’.

Amendment 7, page 19, line 8, at end insert—

‘(4A) Where the relevant previous calculations did not show that a relevant authority was to make a payment to the Secretary of State, but the revised calculations show that the authority is to make a payment to the Secretary of State—

(a) the authority must make that payment to the Secretary of State, and

(b) the authority must make a payment to the Secretary of State of an amount equal to the amount of the payment shown by the relevant previous calculations as falling to be made by the Secretary of State to the authority.’.

Amendment 8, page 19, line 19, at end insert—

‘(6A) Where the relevant previous calculations did not show that the Secretary of State was to make a payment to a relevant authority, but the revised calculations show that the Secretary of State is to make a payment to the authority—

(a) the Secretary of State must make that payment to the authority, and

(b) the Secretary of State must make a payment to the authority of an amount equal to the amount of the payment shown by the relevant previous calculations as falling to be made by the authority to the Secretary of State.’.—(Robert Neill.)

[Helen Jones]

I beg to move amendment 27, page 21, line 12, leave out ‘may’ and insert ‘must’.

[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

With this it will be convenient to discuss the following: amendment 40, page 21, line 17, at end insert—

‘(1A) The regulations must specify the definition of a “disproportionate gain” which is used to calculate whether a relevant authority is required to make a levy payment.’.

Amendment 28, page 22, line 19, at beginning insert—

‘(1) If a calculation under paragraph 21 shows that a levy payment is to be made to the Secretary of State by a relevant authority, the Secretary of State must—

(a) notify the authority of the amount of levy he deems to be payable;

(b) allow the authority twenty-eight days to make representations either about the basis of the calculation of the levy payment or its accuracy, and

(c) give due consideration to the authority’s representations before issuing a final determination.’.

Amendment 29, page 22, line 22, at beginning insert ‘Following a final determination’.

[Helen Jones]

Amendment 27 is a probing amendment designed to test the Government’s intentions with regard to the implementation of the scheme. The Bill states that the “Secretary of State may”—the phrase is repeated throughout the schedule—by regulations determine whether a local authority is required to make a levy payment and, if so, the amount of that payment. What we want to know from the Minister is why the Bill uses “may” in this case rather than “must”. It is clear from clause 1 that any regulations will be subject to the affirmative procedure, but it is not clear whether the Secretary of State intends to proceed by regulation in all cases. We are advised that the use of “may” rather than “must” or “shall” implies that he might proceed in some other way. I am not sure how, although it might be by ministerial diktat, by a written ministerial statement or by a finance report, but it is important to make the situation clear, because the Committee is dealing with an enabling Bill that gives huge power to the Secretary of State, without being clear about how it will be used.

We would therefore like to hear from the Minister exactly what the Government’s plans are, because the Bill is not consistent. In several other places, it uses “must” in relation to regulations, so what is the reason for the different wording in the case before us? The Minister must forgive me if I appear to be developing a suspicious nature; it comes from dealing with him for so long on this Bill. But we would welcome an assurance from him that the regulations on this point, and on the others that we have highlighted in this group of amendments, will be placed before the House and not simply introduced through a statement from the Department.

[Mr Kevan Jones]

Does my hon. Friend think that local government will feel confident that power is not being centralised if we are able to see the regulations now, as the Bill is going through Parliament, rather than being tagged on, as she suggests, once it has done so?

[Helen Jones]

My hon. Friend makes a valid point. I, like other Opposition Members, have mentioned the Government’s failure to produce any draft regulations, and the reason why is that they have proceeded so quickly with the Bill and did not want to take it into Committee upstairs. In turn, we all know the reason for that: they simply do not have enough business to go through on the Floor of the House, because their business is snarled up in the Lords.

Amendment 40 would add new sub-paragraph (1A) to paragraph 20 of the schedule and require the Secretary of State to specify in regulations exactly what he defines as “disproportionate growth” or—the term that is often used—“disproportionate benefit”. The amendment, like many that we have tabled, is an attempt to address what my hon. Friend has just highlighted: the alarming lack of clarity in the Bill and the consequent uncertainty for local authorities.

We know the mechanism that the Government intend to use to calculate the levy. After abandoning ideas for fixed-rate and banded levies, they intend to create a proportionate levy, which in effect is an individual rate for each local authority, but not only do we have no clarity about the percentage level, but it is still not entirely clear what will constitute a disproportionate benefit.

The Government, in their response to the consultation, say that the proportionate levy will create a system to allow a local authority to retain growth in a fixed proportion to its baseline level. The levy is intended to tackle the gearing effect, whereby authorities with a high tax base gain more from the same growth than those with a low tax base, but it does not do so. It mitigates the effect; it does not tackle it. The simple fact of basing a levy on growth above a baseline level, however, leaves many questions unanswered, and amendment 40 is an attempt to get some answers from the Government, because, unless there is some certainty about the definition, local authorities will find themselves in real difficulty when deciding on future projects.

Let us imagine, for example, a rural authority that loses a large employer, one that pays a high proportion of local business rates. The authority’s business rate income goes down, and might do so before the baseline is set. It then attracts another employer to the area. When that employer starts up, the authority gets a big increase in business rates for one year; the increase tapers off after that. Is that a disproportionate gain, given that the local authority is simply replacing income that it had previously lost?

What about a town that redevelops its centre? The council would see a fall in business rates but when the redevelopment was complete, it would see an increase. Would that be treated as a disproportionate gain, given that the council might use the increase to fund the development in the first place? How would the levy then apply to a TIF 1 project—as opposed to a TIF 2 project, which would be outside the scheme?

Furthermore, the Secretary of State has given himself a Henry VIII power to reset the scheme. [Interruption.] The hon. Member for Rossendale and Darwen (Jake Berry) should learn that PPSs should be seen and not heard. How would the council get any certainty for future planning?

17:00

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

My hon. Friend posed the question of how anyone could have certainty about what will and will not apply in a TIF area. Given the Second Reading debate and the performance of the Secretary of State, the one certain answer is that such certainty will not come from asking the Secretary of State. When I challenged him, he simply could not say whether resets would apply to TIF schemes. That is a matter of serious concern to all of us who want to make the schemes work.

[Helen Jones]

I remember that exchange between my right hon. Friend and the Secretary of State; he did not get a proper answer. Later, we will debate the clause about resets as they relate to TIF schemes.

The issue also applies to setting the levy. Let us say that there was significant house building in a local authority. That would lead to more employment and business rates, but would also mean that there was more demand on the council’s services. Unfortunately, in the Bill, the Government refuse to take account of service needs and service provision. Where would that leave the council? Would it have made a disproportionate gain and therefore be subject to a levy? A levy set as a percentage charge on growth simply does not deal with such issues, but the Government do not seem to wish to look at the matter. They want simplicity, but in a complex world—and that is not achievable. We have moved the amendment to get some clarity.

Amendments 28 and 29 simply seek to bring the procedure for requiring a levy payment from an authority more into line with that used for the local government finance report. As we have said, the Bill is remarkable for giving no indication of how the Secretary of State intends to exercise many of his powers. As has been said, we have seen no drafts of the regulations. The Secretary of State used fine words about the radical devolution of power in introducing these measures, but it is noticeable that that is totally inconsistent with what is happening under the Bill.

As I said, we have a concern about how the levy payments will be calculated, but the amendment seeks to ensure that local authorities, if required to pay a levy, have the opportunity to make representations about that. That happens with the local government finance report, because a copy must be sent to relevant authorities, and the Bill contains provision for what will happen if there is an amending report. However, the levy is calculated at the end of the year to which it relates and it is not clear whether levy payments will be included in the local government finance report.

[Mr Nick Raynsford (Greenwich and Woolwich) (Lab)]

My hon. Friend is making a telling point. Is it not extraordinary that not even the basic principles on which the levy calculations will be made have been spelt out in the legislation? One can well understand the need for some discretion for Ministers, when operating rules, to be able to adjust on a year-for-year basis; I have no difficulty with that. But Ministers should be open with the House, the public and local government about the principles on which they are acting. The complete silence in this legislation about anything to do with the principles that determine whether an authority gets a disproportionate gain seems extraordinary.

[Helen Jones]

My right hon. Friend, who is a very distinguished former local government Minister, is exactly right. In effect, we are being asked to write a blank cheque to the Secretary of State, who can then do what he wants with it.

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

The hon. Lady is making a fair point in relation to these probing amendments. Surely, however, a word such as “disproportionate” would require an exceptional change. For example, the building of a new town would involve a more substantial amount of building than the much smaller developments that she has mentioned. I have some sympathy with her view that it would be good to have a full set of regulations in advance of the Bill. It is extremely regrettable that more regulations are not in place. That would also apply to Bills going back many years to a time when I was in her shoes rather than the other way round. Equally, this is a relatively early stage of the Bill, and I am sure that regulations will be up and running well before Third Reading.

[Helen Jones]

I am grateful to the hon. Gentleman, who makes a fair point about regulations. I do not know whether they will be with us before Third Reading, but at that point we will have finished debating the Bill in Committee, so it will not be terribly helpful. He makes an interesting point about what he sees as a disproportionate gain. However, the problem is that that is not what Ministers see as a disproportionate gain. That is why we are trying to get some definition into the Bill. Local authorities cannot plan unless there is some certainty in the system, and as yet we do not know what it will be.

[John Healey]

My hon. Friend is developing a powerful case. As my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) said, the Committee should at least expect to see confirmation of the principles on which judgments about disproportionate benefit will be made and on which any levy will be based, but that is not in the Bill. The principles on which a levy would be based are not even set out in the response to the consultation that was published in December. That is not good enough, and we expect more from the Minister and his colleagues.

[Helen Jones]

Again, my right hon. Friend makes a telling point. The consultation document merely says that there will be a proportionate levy. The obvious question to put is this: “What is the proportion and how will it be decided for each authority?”

[Mr Kevan Jones]

Does my hon. Friend agree that the situation would vary from authority to authority? For example, Northumberland is losing Alcan, which is a large employer in the south-east of the county and therefore a large contributor to the local tax base. There is a big difference between Northumberland losing such an employer and, say, the closing down of a Westminster office block that will be replaced quite quickly.

[Helen Jones]

My hon. Friend reminds me of a good point that I was going to make earlier. I had Northumberland in mind because it is a place that I am very fond of and know well. If Northumberland has lost Alcan by the time the baseline is set, it will be set on the basis of lower business rates. If the authority replaces Alcan with another employer, will it be deemed to have made a disproportionate gain? The Minister must explain why an authority that is trying to do the right thing by bringing in new employment to replace what has been lost should be penalised for that.

An authority will need to be able to make representations when the amount of levy that it is going to be asked to pay is first published. As I said, we do not know whether the levy payments will be included in the local government finance report. That is because the Bill is so vague.

We think that it is only fair to specify that, if a local authority is required to make a levy payment, it should be notified and be allowed to make representations about the calculation before the final decision is made. It might be that an authority challenges the basis of the decision that it has made a disproportionate gain. That is unlikely, but it could happen. It might be simply that the calculation has not been done correctly. We have seen that many times. That is why we have amending local government finance reports. It has been known occasionally for Departments to get their calculations wrong. In such circumstances, councils should have a mechanism for making representations before the final decision. Local authorities are, after all, partners in this process. Neither the Secretary of State nor any other Minister would want to be a provincial governor figure handing down unchallengeable decisions.

[Mr Raynsford]

Oh, yes they would.

[Helen Jones]

My right hon. Friend says that they would. I do not think that that applies to the Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill), although I can easily imagine the Secretary of State in a toga, handing down diktats.

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

Is it not crucial not only to have a procedure whereby councils can appeal to the Secretary of State, but to put that within a proper time frame? Local authorities get their settlements towards the end of the calendar year in order that they can finalise their budgets by the end of the financial year and set a proper budget for the new financial year. It is therefore crucial to get not only the mechanism but the timing right.

[Helen Jones]

My hon. Friend makes a worthwhile point. The problem with the whole Bill is that it is difficult for local authorities to know the framework in which they will be asked to operate.

We are not proposing anything that would create a long delay, merely a simple system to allow councils time to check the calculations and respond before the Secretary of State issues a final determination. Most local councils support a levy system, even if they have different views about how the levy should be calculated. We do not anticipate that large numbers of councils would challenge decisions merely for the sake of challenging them. However, it is important for any system to give local authorities a mechanism to make representations if they think that the Department has simply got it wrong. I believe that Members from all parts of the House would want their local council to be able to do that if the need arose, to ensure that the communities that they represent are dealt with fairly.

The amendment would not prevent the Government from exercising the powers that they will be given if the Bill is passed. It does not even seek to change the way in which the levy is calculated—or it would not if we knew how the levy was going to be calculated. It is aimed purely and simply at ensuring that there is fairness in the system. I therefore commend it to the Committee.

[Mr Syms]

It would be helpful to have a little more detail as soon as possible on what the Government mean. I hope that, in winding up the debate, the Minister is able to set out a little more detail than we have at the moment.

Clearly, the intention of the proposal is to offset unforeseen falls in rate income in certain areas. By their nature, those falls are unforeseen. Is it the Minister’s intention that the levy on disproportionate gain will be equal to any unforeseen fall in income in certain authorities, or will the Government simply recoup a levy of disproportionate gain even if there has not been an unforeseen fall in council business rate income?

If things were dealt with on an annual basis, there might be a year in which there was not any unforeseen fall, so it might be sensible for a number of local authorities with quite large gains to take a share of the income, whereas in a subsequent year there might be the opposite situation. What I am trying to tease out of the Minister is whether the exercise will be annual or whether it will occur over a period of years. Could a fund be carried forward to cover unforeseen falls in council business rate income? From my reading of the Bill—it would help if there were more information—I believe that the fund is to be exceptional and will affect only a number of authorities. One might think of the developments in Stratford, nuclear power stations, estuarial airports, car plants and so on.

17:15

It would also be interesting to the Committee if the Minister set out whether, if the Government recouped disproportionate gain, it would be simply for one year or for a period of years. What does the Bill mean by a “share” of the fund? If a car plant were built within a local authority area, would the Government split the difference of the income with the local authority? We need a little more information so that we can have a much better idea of how the Government intend to proceed over the next few years.

Clearly, a base year will be set for business rates. On that basis, I believe that changes will be small to start off with. However, it would be useful if the Minister could give a little more information. What advance knowledge would the Government have of a change? Presumably if a major car plant, shopping centre or utility plant were closed, a local authority would very quickly write to the Minister. Will he also get information from the Valuation Office Agency about what is happening in a particular district, including new developments? We need a little more information so that the Committee can feel a bit more comfortable about what the Government intend.

[Mr Kevan Jones]

My hon. Friend the Member for Denton and Reddish (Andrew Gwynne) said that the one thing that local authorities need is certainty. Having been in local government myself, I know that a council needs certainty about what its income will be each year. The previous Government made great strides by providing three-year budgets, which allowed councils to plan their expenditure over a period of time.

As we heard on Second Reading and last week in Committee, although the Bill has been trumpeted as being about devolving decision making to a local level, it will actually do completely the opposite. It will give the Secretary of State the power to determine, in his toga or otherwise—the idea of him in a toga should probably come with a health warning—what level of budget councils will get.

We need a definition of disproportionate change. We have heard some interesting examples, and we need to know whether the building of a major power station or the loss of a manufacturing site such as Alcan would be considered disproportionate. Would a council forgo business rates for a year while a site was being redeveloped, only to gain them back when occupancy took place? Without such definitions, councils will be left in a very difficult position in planning their budgets.

Another issue to consider is the time of year when a closure happens. My right hon. Friend the Member for Knowsley (Mr Howarth) has just told me that his local authority area has one large employer that provides 7% or 8% of the local business rates. Let us suppose that it closed just after the business rates had been set. Would the local authority get any compensation in the following year? It is not clear, because we do not know what the regulations are going to be. That could leave his local authority minus 7% of the income that the Government think it is getting, which would be totally unfair. It would help if we knew what the regulations were, what the circumstances were and what the Government consider a disproportionate gain.

Matters differ from local authority to local authority. Northumberland has just been mentioned, and one large employer, such as Alcan, leaving has a huge impact on business rate income. No doubt in more affluent areas, the position is different. For example, I am sure that the loss of an office block in Westminster would not have the same impact on Westminster city council’s overall tax take. I would also argue that it is much easier in Westminster to replace that income through attracting new jobs than it is to replace the income that Northumberland county council will lose. If we do not know what the regulations and the circumstances are, it will be difficult for local authorities to plan. I do not understand why the Government are reluctant to come forward with a definition of disproportionate, or with the regulations.

We are supposed to be scrutinising the Bill on the Floor of the House. My hon. Friend the Member for Warrington North (Helen Jones) said that the reason for that is to give us something to do while the legislative programme is in a logjam in the other place. There is therefore no shortage of time to discuss the details. I do not know whether, in their haste to push the Bill through this Chamber, the Government do not think that they have time to draw up those regulations and explain the way in which the levy will work. That is very interesting. If we were doing our job properly, we should have a chance to examine the regulations.

If the Bill is passed in its current form, local government will look forward to its future budgets with some uncertainty. Local authorities cannot just turn their services on and off. Local authorities’ long-term planning is done on an annual basis, but they need to consider not only how to make savings, if their budgets have to be reduced, but their investments. It is claimed that the Bill will encourage local authorities to incentivise business to grow in their areas, but if they do not know how much money they have to do that, it will be difficult for them to forward plan.

[Andrew Gwynne]

My hon. Friend makes a good point about uncertainty. If a local authority’s income mid-year falls below what is in the budget plans, that causes all sorts of problems. That happened just the other year, with the in-year cuts. Local authorities had prepared a budget on an assumed amount for that year and ended up with substantially less funding.

[Mr Jones]

They did. If local authorities have to lay people off mid-year and sever contracts, that costs local government more. In County Durham, when we had those in-year cuts, it cost the council more money to sever contracts than it would have cost to allow them to fulfil them. No money was saved, but things were made very difficult for local councils, not only to plan their budgets but to manage services.

[Alex Cunningham]

My hon. Friend mentioned Alcan—a major organisation—and the tragedy in Northumberland. Does he recall when Samsung walked out of the Wynyard Park estate on Teesside, devastating the business rates in that area and throwing many people on the dole? Does he agree that a local authority’s fortunes could rest on the whim of multinational corporations, which can move in and out at will? There is all the more need for a proper safety net for local authorities that face that sort of dilemma.

[Mr Jones]

My hon. Friend makes a good point and Samsung is a good example. Its inward investment provided jobs and income to the local authority. Such situations are more relevant in rural areas or constituencies such as his and mine in the north-east of England. When one single, large employer leaves, there is a disproportionate effect. I do not want to talk again about Westminster city council, but a single employer leaving that area does not have as devastating an effect on the employment base and on the local tax take.

Another thing that the Bill does not take into account is the increased demand on local government services when there are large closures such as the one to which my hon. Friend referred. There is bound to be more take-up of, for example, council tax benefit, even though the Bill cuts it by 10%. The Minister was on the letters page of The Journal in Newcastle trumpeting the Bill and saying how great it is, but he did not mention that it would come with a 10% cut in council tax benefit. He will be pleased to know that I have written to the paper to correct him and to ensure that readers of The Journal have the full facts about the Bill rather than the propaganda he is trying to put out.

Another concern is the centralisation of powers. The Bill gives power to the Secretary of State to decide the levy. In addition, as we have no definition of “disproportionate effect”, that is down to the Secretary of State’s whim. When we look at what the Secretary of State has used his powers for in the past 18 months, we see that he supports and rewards people who vote for his party—I take my hat off to him, because he is quite political. If we do not have a definition of “disproportionate”, what is to say that he will not use the Bill to assist regions that he wishes to assist for political reasons?

The Bill means that the current or a future Secretary of State could punish councils that he or she does not favour, or that do not support one of his or her central diktats—the current Secretary of State talks about decentralisation but intervenes quickly to decide what local councils should do. If we do not have a definition of, or explanation for, “disproportionate” in the Bill, a lot of council chief executives and treasurers will be in fear each year of not keeping in with the Secretary of State, because he or she will determine whether they will get the budgets that their councils need.

[Mark Field]

I am sure the hon. Member for North Durham (Mr Jones) will be glad to hear that I am not speaking just to protect the ratepayers and businesses in Westminster.

This has been a worthwhile debate. I appreciate that the amendments were tabled for probing purposes, and I hope the Minister will elucidate precisely what the context of the word “disproportionate” is. I suspect I agree with my hon. Friend the Member for Poole (Mr Syms) that the context will change over a number of years, and that this is not a one-off opportunity for ministerial diktat to determine that money should be taken away from a local authority when there is a big change in one particular year for the reasons that were given.

I wanted to make a much more fundamental point. I appreciate that the Bill will go to another place. I suspect much of the real scrutiny will take place there and I hope that, by that time, we will have details on precisely what regulations will apply to each and every local authority. It shames the House that so much legislation is skated through it. That is partly because of guillotines, which have been around for the 11 years that I have been a Member of this place. We can also see that so much important scrutiny of the Welfare Reform Bill is happening in another place because there is not quite the same pressure on time there.

I hope the Minister satisfies us when he responds to what has been said because some valid points have been made. I am fairly confident that we are looking in disproportionate terms at exceptional circumstances, and I think that the context will become clear over a longer period, but it would be useful to have that confirmed by the Minister. I hope he will also confirm that we will have at least draft regulations brought forward as soon as possible, because otherwise there will be the eternal suspicion—only a suspicion and nothing more—that the Department will utilise huge discretionary powers, when if localism means anything, it means a devolution down of powers. That underlines what the Bill is trying to achieve—to incentivise local authorities. That can happen only if there are regulations that will be met with confidence across the political divide within local government.

17:30

[Mr George Howarth]

It is a great pleasure to follow the hon. Member for Cities of London and Westminster (Mark Field). I sat through his speech last week on the first day in Committee, in which he pleaded the case for Westminster. I found it difficult to sleep that night, given the strong concerns that he raised about the consequences of the Bill for his constituency. On reflection, I decided that it might not be that bad really.

I have some sympathy with the Minister, with the amendments and, indeed, with the Bill. Local government finance generally is so technical that it reminds me of the Schleswig-Holstein affair. People think that they understand it, but many years later they have forgotten it. Some 25 years ago, when I was a local authority finance chairman, I actually understood multiple regression analysis, but if anyone were to intervene and ask me to explain it now, I would struggle.

[John Healey]

rose—

[Mr Howarth]

My right hon. Friend would give me another sleepless night.

[Mark Field]

The right hon. Gentleman mentions Schleswig-Holstein, but he has not gone into detail about which local government Minister has gone mad as a result of all this.

[Mr Howarth]

I suspect that there are several candidates. I remember a few, but it would be churlish to name names.

I shall be brief, largely because my hon. Friend the Member for North Durham (Mr Jones) stole my thunder, but my concern is that in Knowsley we have two large private sector employers. QVC, the home shopping channel, employs about 1,500 people, and Jaguar Land Rover is also a major employer with more than 1,000 employees. There is no reason to believe that either company is in any danger. Both are very successful and are doing well, even in these straitened economic times, but what would happen if one were at some point to go bust—one of them represents 7% of the total business rates take? Unless there is clarity about what would happen in those circumstances, the effect on the finances of the borough of Knowsley could be appalling. We need clarity about what would happen in such circumstances. I hope, therefore, that when the Minister replies, or perhaps at a later stage, he can give some further and better particulars about how all this will work.

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

I would like to make just a few comments, because I have listened intently to the discussion and found I am quite confused about the time periods that different people are talking about. I would like to ask the Minister what time of year the levy will be announced—that is critical—and also which year will be used. I have found it difficult to see whether we are dealing with historical data or doing it as we go along.

One big change will be that council finance officers are likely to be preparing monthly reports on the revenue from business rates, which will be different from what happened previously. I can see how that will focus the council’s mind on what is happening to its business rates, as well encouraging it proactively to talk with its local businesses to check stability and so on. I can see a lot of positives in that, but I need to know what the stocks and flows will be—it is really confusing—what the time periods will be and when the announcements will be made.

[George Hollingbery (Meon Valley) (Con)]

I wonder whether the hon. Lady knows the answer to a question that is confusing me—I apologise to the Committee for my ignorance about this matter. Once the baseline for a budget is set at the beginning of the year, is that set in concrete, so that it is paid via business rates through the Government and essentially becomes a central Government payment, or does it represent locally collected business rates that are not then given to the Government? In short, is that baseline interruptible or is the next year interruptible, when a council’s business rates have gone down?

[Annette Brooke]

I think my hon. Friend is hitting on the same issue that I have in mind—the respective time periods. It is important that we have clarity on that and I thought I had, but that was before I listened to the speeches this afternoon. We know that we are starting off firmly—councils know how much they are getting in the first settlement—but we need to know what will happen when the new system really clicks in.

[Robert Neill]

This has been an interesting and useful debate. The right hon. Member for Knowsley (Mr Howarth) and I did a crash course in regression analysis at probably about the same time, when we were performing similar roles in local government, and I sympathise with him. He is quite right: the analogy with the Schleswig-Holstein question is frequently raised, sometimes with some justice, as I think pretty much everyone in the Chamber knows. I can happily inform him that I am not aware of any former local government Minister being driven mad as a consequence. It has sometimes been suggested that some former Ministers have been driven to tear their hair out, although I am perhaps not the best person in the Chamber to comment on that either.

This issue has certainly exercised a number of right hon. and hon. Members in a most constructive way. It has also caused a number of us to be engaged in quite a lot of detailed debate, because, by its nature, whatever system we use—the existing system, the previous system, when we had relative needs assessments, standard spending assessments and so on, or the future system—there will always be quite a lot of technical detail. A lot of the detail will inevitably be in regulations of one kind or another.

Let me try to reassure hon. Members on a number of points. The provisions in the Bill set out the scope for regulations to be made. I say to the hon. Member for Warrington North (Helen Jones) that the phrasing of her amendment 27 would create a duty to have regulations, rather than a permission. I hope she will not pursue that point at this stage, because I cannot conceive—it is certainly not my intention—of the Secretary of State proceeding other than by way of laying regulations. It would be inappropriate to fetter the Secretary of State’s discretion. I can assure her that our intention is that regulations will be laid in the ordinary course of the scheme’s operations.

Secondly, let me assure hon. Members that we intend to consult local government and other interested parties on the regulations in a timely fashion. The hon. Member for Warrington North knows from her experience in local government that, at present, the Secretary of State lays the finance report and there is a provisional settlement and scope for representations. I hope I can reassure hon. Members that it is certainly our intention that the system will include the ability to make representations. It is by no means unusual for regulations to be introduced during a Bill’s passage through Parliament. I think that that happened during every local government Bill with which I was involved in the previous Parliament. Of course there will be consultation on the drawing up of the regulations to set up the scheme, as well as an opportunity for representations to be made during the course of the Bill.

[Helen Jones]

I am grateful to the Minister for clarifying the Government’s intention to proceed via regulation, but it would be helpful if he explained exactly why he thinks it would be wrong to fetter the Secretary of State’s discretion, because that leads us to think that the Secretary of State might want to proceed in another way. Will he assure us that that is not the case?

[Robert Neill]

It is certainly not our intention that that would be the case in the ordinary course of events. I think that the hon. Lady is unduly suspicious, perhaps as a result of her spending a long time in the Government Whips Office during the previous Parliament; I can understand how that could happen. It is conceivable that certain urgent circumstances might arise in which we might wish to proceed differently, but it is not our intention to set out these measures in anything other than a transparent process. I want to assure hon. Members of our good faith in that regard.

I also want to make it clear that amendments 27 and 40 are unnecessary and would narrow the options available to the Secretary of State in drafting regulations about the calculation of levy payments. We believe that it is right and proper that the measures should be set out in regulation rather than in the Bill, and I restate my assurance that we will work with local government on the content of the Bill. Any regulations will be subject to the affirmative resolution procedure in the House, and therefore subject to maximum scrutiny. At this stage, however, I do not want to limit us before we consult local government on the design of the scheme. I think that that is reasonable.

[Mr Raynsford]

What the Minister has just said is really unacceptable. He says that he does not want to limit the options available to the Government before they reach a decision. He knows that this Committee is here to scrutinise the Government, but he is proposing a doctrine whereby the Government should be free to do whatever they want and not be subject to parliamentary scrutiny. Will he now please answer the question we have already put to him? What are the principles that will guide the levy system that he is giving himself powers under this clause to operate? On what principles will it operate?

[Robert Neill]

The right hon. Gentleman really should not work himself up into a state of needless indignation, particularly in the light of his history as one of the most centralising Ministers this House has ever seen. I am not going to take any more lessons from him on this, given his record, anxious though he is to remind us of it at every opportunity.

It is our intention that the system will operate in such a way that, if areas such as that of the right hon. Member for Knowsley or the area around the Alcan plant in Northumberland should suffer significant loss of business rate revenue through the closure of a firm, for example, there would be a safety net to protect local authorities. That would come from the proceeds of a levy on disproportionate growth. That is a perfectly simple and comprehensible principle, and I think that the right hon. Member for Greenwich and Woolwich (Mr Raynsford) knows that.

[Mr Kevan Jones]

In trying to answer the question from my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford), the Minister has raised more questions. He mentioned Alcan, for example, and if he is not prepared to say now what he thinks is disproportionate, how can the Committee scrutinise his proposals? I accept that it is very important that he consults local government but, surely, as the Bill goes through, Members should have a chance to question it and to have some input into the regulations, but the Minister is not prepared to give us that chance.

17:45

[Robert Neill]

I am sorry to say to the hon. Gentleman that he is incorrect. As I said a moment ago, we intend to ensure that the regulations are scrutinised under the affirmative resolution procedure, so there will be that precise scrutiny of the detail. There is more than one way of calculating what is disproportionate in such circumstances, so it is right that there is the opportunity to consult local government on how best to perform the calculations before coming back with proposals, which Members will certainly have every opportunity to scrutinise.

[Mark Field]

Given the context of the discussions that have taken place, I think it would help the Committee if we had at least some idea of what the Minister thinks “disproportionate” means. Members on both sides of the Committee have given a number of examples of what they might regard as disproportionate. Would the building of a new town that doubled the population of an area count as disproportionate? Would the opening of a nuclear power station count? Given that we are trying to scrutinise the Bill, it would be helpful to have some idea of what the Minister regards as disproportionate and about the time context. One benefit, as I see it, of this Bill is that it puts a 10-year cycle in place, so presumably things happening over the course of a single year would be taken in context and would not fall foul of the “disproportionate” definition—or perhaps they would. It is in the Minister’s hands.

[Robert Neill]

I understand my hon. Friend’s point. I will not go down the route of giving such a specific example, but I would say that it is worth bearing it in mind that we are considering disproportionate growth in business rate income, so one does not necessarily have to consider a particular development in itself, but the impact overall of the business rates income. I can assure him of that.

As regards my hon. Friend’s point and that made by my hon. Friend the Member for Poole (Mr Syms) on a related topic, paragraphs 27 and 28 of schedule 1, as I recall, make provision for the calculation of the levy account and set-aside account to be made annually, but there is also provision, after the first year, of course, for a balance to be carried over. That can be done over a period of time and there is therefore an element of an opportunity—and it would be appropriate—to build in a measure of insurance over that period so that moneys could be collected and held in reserve to deal with potential set-asides in different years. I hope my hon. Friends’ points are answered.

[Mr Syms]

I think we are starting to learn a little bit more about this now. If there is a balance and it builds up—that is, if there is income from those that are gaining rather more than those that are not—will there be a redistribution at some point when there is a reset to local government?

[Robert Neill]

I envisage that the whole situation would be reconsidered when a reset was reached. The balance would itself have to be the subject of a report by the Secretary of State and would therefore have to be subject to scrutiny. I can assure the hon. Gentleman that it is not intended that the Secretary of State should somehow hoard the balance or squirrel it away, other than for the purposes of making safety net payments. That is why there are separate accounts.

[Mr David Ward (Bradford East) (LD)]

I am less concerned about a surplus on the account, as amendments we will consider later cover what should happen to that. What will happen if there is a deficit on the account, which has accumulated over a series of years of general economic decline?

[Robert Neill]

Inevitably, one would have to consider revisiting the levy. As it is reported annually, the objective gives us the chance to review the balance of the accounts to ensure that there is a sensible equilibrium. Let us hope that we do not reach such a situation, but my hon. Friend’s point is fair. There is provision for that flexibility.

[Helen Jones]

rose—

[Robert Neill]

Perhaps I might make just a little more progress.

The whole point of our concern is the need to give an incentive at all times for local authorities. We therefore do not envisage ever reaching the circumstances in which the levy is of such a kind that over time it destroys the incentive. That is why there is the aspiration to have 10 years between the resets to allow the incentive to work through. We will consult local government and then place our basis before the House for scrutiny, and I assure hon. Members that this is not intended to choke off the incentive for any local authority to go for growth. Equally, I want to assure authorities that have concerns, such as Knowsley, that there will be a proper and viable safety net that can be kept in balance to give them the necessary protections.

On the point made by my hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke), the provisions in the schedule essentially mean that there will be a report annually. There will still be the annual financial report—that is why there will still be opportunities for representations to be made—and we will consult on the regulations well in advance of their coming into force in 2013-14. As far as possible, we intend to give at least the same degree of notice as local authorities currently have. As my hon. Friend will know, consultation usually starts around the summer and then there is the period when the provisional settlement is announced, generally in December and thereafter.

[Helen Jones]

rose—

[The Second Deputy Chairman of Ways and Means (Dawn Primarolo)]

Order. I am sorry Minister, but—

[Robert Neill]

I am delighted to see you, Ms Primarolo.

[The Second Deputy Chairman]

Good. I would like to hear you as well as see you.

[Robert Neill]

I am sorry. I was distracted momentarily by my hon. Friend the Member for Mid Dorset and North Poole. You can understand how I am torn in those circumstances. I hope you will forgive me.

[The Second Deputy Chairman]

Perhaps the hon. Gentleman could move closer to the microphone and then we could all hear his excellent explanation.

[Robert Neill]

I shall do so.

[Helen Jones]

The Minister is being generous in giving way. Will he answer the point I put to him earlier? If an authority loses a major employer before the determination of its rates baseline and it then somehow replaces that employer and its income goes up, will that be counted as a disproportionate gain?

[Robert Neill]

First, it will depend on whether it was in a top-up or tariff scenario. Secondly, precisely because we are looking at two things, the normal arrangement will be that the calculation and the report are made annually. However, in the detail of the regulations there is provision, which we may not need to use, to consider in-year payment if something were to create some catastrophic loss that could not be made up. I am sure the hon. Lady will concede that these are precisely the details that we ought to be talking to local authority professionals about—particularly how best to achieve what we want.

[Mr Kevan Jones]

May I pick up on what the hon. Member for Mid Dorset and North Poole (Annette Brooke) said? In terms of an employer leaving an area—let me take the example that my right hon. Friend the Member for Knowsley (Mr Howarth) used and suppose that an employer left after the determination—will there be a mechanism by which the Secretary of State could compensate the authority for that loss in-year? If not, it will be very difficult for local authorities to set a legal budget.

[Robert Neill]

As I recall, when we get to paragraph 26 we are looking at that ability, but let me double-check the exact paragraph. One has to look both at this part and at the part that deals with the safety net. In paragraph 26 of the schedule, there are regulations that can be made about payments on account. We envisage circumstances in which the Secretary of State may make an in-year calculation in response to a request, and regulations can be drawn up to deal with that eventuality, which is a fair one. I hope that puts the hon. Gentleman’s mind at rest.

[Mr George Howarth]

This might make me a bit unpopular on the Opposition Benches, but I think it is perfectly understandable that the Minister might want to deal with the detail of this, after consultation with local government, through regulations that will go before the House. That is not unreasonable, but it would help many of us if rather than giving the detail of the regulations he gave some indication, either now or later in the afternoon, of the principles he would like to adopt in the regulations and on which they would be based.

[Robert Neill]

I think I can help the right hon. Gentleman and I note the very constructive way in which he makes his point. There are two things that one has to distinguish, the first of which relates to the period of setting the baseline regarding tariffs and top-ups, which are adjusted by inflation. The idea of the levy and the set-aside is to deal either with a level of growth well beyond that rate or with a loss of business rates well beyond it. The principle of the system is to make sure that beyond the tariff and the top-up a sufficient amount of growth can always come through, for those who achieve growth, so there is an incentive effect. It would clearly be wrong to define “disproportionate” in such a way as to cream off any prospect of growth. That is why it is sensible to consult local government on quantums and the methodology for achieving that.

Equally, we can envisage circumstances, although we hope they will not occur, in which local authorities suffer significant losses in their rate base, which are greater than would occur with the normal volatility of business rate fluctuations and which they can do nothing about. That is what is suggested might happen when someone moves out. We have always indicated that we intend there should be safety-net protection for such authorities, which should be paid for from a levy on what we regard as disproportionate gain. If one gives words their ordinary English meaning one sees that we are talking about a system that will not scoop off all the incentive, and I think we can talk sensibly, from the experience of local authorities, about means of achieving that. I want to assure hon. Members that that is the scenario we are looking at.

[John Healey]

I want to believe that the Minister can make this work, but the more I listen to him, the more complex and uncertain this system seems to me. I wonder whether he has really grasped this issue and whether he has looked at his own authority. In 2006-07, his authority—Bromley—suffered a loss of business rate income of more than half. In at least two of the following five years, the volatility was more than 10% of the total business rate income. In that sort of situation, which has been exemplified within his own authority, the system of top-ups and tariffs will be complex and uncertain, and some authorities will find themselves top-up authorities in one year and tariff authorities in the next. That will make essential local government planning very difficult.

[Robert Neill]

With respect to the right hon. Gentleman—I have genuine regard for his attention to detail in these matters—we have made it very clear from the outset that the top-up and the tariff will come as a consequence of the setting of the baseline, which will not change until the reset. The protection that authorities will have is that the amount of the top-up and the tariff will move with RPI, so there will not be erosion because of that. All that is separate from the set-aside—the safety net, in effect—and the levy, which will deal with significant loss when someone closes down a business or something of that kind.

[John Healey]

I am grateful to the Minister, who is being generous in giving way. Whether it is the top-up and the tariff or the set-aside and levy that are designed to deal with this wild volatility, the central point remains: many local authorities, including his, see great variations year on year in their business rate income. That makes essential financial planning and management, particularly when finances are tough, much harder to do and calls into question the very design of the new system.

[Robert Neill]

With respect to the right hon. Gentleman, he makes the case for having a decent period between the resets, with the protection of the uprating of the tariffs and top-ups. I know that he follows these matters closely, but there is a distinction between the operation of that system and the levy and safety-net arrangements. On his criticism about complication, I have to say that although he did not create it, he presided in a distinguished and elegant fashion over the four-block system. If anyone thinks that is simple, then I say that Schleswig-Holstein is a minor province of outer Mongolia by comparison. This system is simpler and more transparent and it gives an incentive. That is why my authority welcomes the principle. However, because I accept that these are technical matters, as the right hon. Gentleman knows from his experience, it is sensible that we have the flexibility to consult on the options right across the board and, when we have consulted local authorities, they will be scrutinised by the House under the affirmative resolution procedure.

18:00

[Mr Kevan Jones]

Clearly councils will be compensated if they have significant losses, but the hon. Member for Bradford East (Mr Ward) made the good point—although it is a rare occurrence—that in one year there could be a big draw-down of the central fund. What level of central contingency will have to be kept back to address any significant changes year on year?

[Robert Neill]

That is a degree of hypothesis that it is not realistic to deal with at this stage. If the hon. Gentleman looks at the detail of the regulations, he will see that the very fact that we are creating the ability to carry over year to year makes provision to deal with the point he makes.

[John Healey]

rose—

[Robert Neill]

I have been very generous and I am about to finish, but I will give way once more.

[John Healey]

The Minister has indeed been generous, but these are Committee proceedings. May I pursue the point raised by my hon. Friend the Member for North Durham (Mr Jones) about what constitutes a significant drop? Would the Minister regard as significant the £52.2 million drop in his Bromley local authority’s business rate income in 2006-07? Would he regard last year’s drop of £5.5 million as significant? For the purposes of the provisions we are debating, would he regard both, either or neither as significant to his local authority?

[Robert Neill]

With respect to the right hon. Gentleman, to answer the question in those terms would prejudge the whole point of the consultation. I shall not do that. Hon Members have probed and have, I think, received clear answers, so I hope they will withdraw the amendment. If not, I ask the Committee to vote against it.

[Helen Jones]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Chris Williamson (Derby North) (Lab)]

I beg to move amendment 30, page 22, line 28, leave out ‘may’ and insert ‘must’.

[The Temporary Chair (John Robertson)]

With this it will be convenient to discuss the following:

Amendment 48, page 23, line 9, at end insert—

‘(5) The regulations must make provision for safety-net payments to be made to relevant authorities whose calculated funding is less than the relevant funding calculated in regard to the authority fulfilling its integrated risk management plan.’.

Amendment 31, page 24, line 28, leave out ‘may’ and insert ‘must’.

Amendment 32, page 24, line 37, leave out ‘may’ and insert ‘must’.

New clause 2—Major redevelopment schemes: non-domestic rate income—

‘(1) In any case where a relevant authority proposes a major redevelopment scheme resulting in a substantial loss of non-domestic rate income for a period exceeding one year, the authority may make an application to the Secretary of State for a safety-net payment to be made to the authority each year for the period of the scheme. The Secretary of State must determine whether to make such a payment having regard to—

(a) the proportion of non-domestic rate income which will be lost to the authority for the period of the scheme, and

(b) the future social and economic benefits of the scheme.

(2) The Secretary of State must notify the authority of his or her decision on whether or not to grant a safety-net payment and allow the authority 28 days to make representations about his or her decision before issuing a final determination.’.

[Chris Williamson]

It is a great pleasure to serve under your chairmanship, Mr Robertson.

Amendments 30, 31 and 32 were dealt with in some detail in the previous debate, so I shall not detain the Committee unduly by going over old ground. However, I shall speak in more detail about amendment 48, which would add a new protection in the Bill to ensure that fire authorities are enabled to fulfil their integrated risk management plans.

The plans enable fire and rescue services to develop a balanced approach to reducing risk within the communities they serve, and I hope that the Minister will look with some sympathy on the intentions behind the amendment. The plans combine prevention, protection and emergency response on a risk-assessed basis to improve the safety of local communities and to create a safer working environment for firefighters. They also include measures to help the community speedily recover from the aftermath of an emergency and to minimise the impact both to people and to the local economy. It is thus absolutely essential that funding for the fire service does not fall below the minimum amount required for it to carry out its vital duties. The amendment has the aim of ensuring that the obligation is on the face of the Bill. It would protect, through a safety net payment, authorities that might otherwise receive less funding than was required for them to fulfil their duties under the integrated risk management plans.

I understand that Ministers believe the financial risk will be mitigated by fire authorities receiving a percentage of the rates of the district authorities in their area, but what if they are wrong? They would be putting the safety of the general public at risk. If they are confident that their predictions are right, the safety net payment mechanism would never need to be evoked. Either way, I hope the Government will support the amendment.

In their response to the consultation on the changes, the Government said that if some fire authorities had their funding outside the business rate retention scheme, they would not be incentivised to make savings. We believe that is both unfair and untrue; fire authorities have all the incentive they need, which is to make their communities safer places by maximising their resources. The changes would also play fast and loose with the health and safety of the general public. The essential principle is that funding for fire services should be based on the risks and needs of the area, not solely on local economic circumstances.

Many local authorities engage in significant redevelopment schemes. I invite the Committee to look at how city centres have been revitalised in Derby, Leeds, Leicester, Manchester and many other cities, but some developments involve more than changing the shops or regenerating old buildings. They can involve a significant amount of demolition before a new project begins. New roads may be required, and some buildings may not be suitable for conversion, or they may not be worth saving.

That was the case when we regenerated the centre of my home city of Derby. Had that scheme gone ahead under the Government’s proposed new system, a significant amount of business rate income would have been lost to the local authority. Those situations can be addressed when the rates are pooled, but we fear that such projects might not go ahead under the new scheme because of the uncertainty it will create.

If shares of business rate income are to be decided year on year, an authority cannot plan effectively for a long-term project. They could use tax increment financing to fund the project itself, but that has two drawbacks. If they use a TIF 1-type scheme, there are problems if the scheme extends beyond 10 years because there may be a reset of the system by the Secretary of State. Such a time scale is possible for some major schemes, and we should like resets carried out before 10 years. A TIF 2 scheme has to be in an area designated by the Secretary of State and can only secure income to the authority when it is completed. The borrowing in such schemes is likely to be used to pay for the project; it is capital, not revenue.

New clause 2 is therefore intended to assist local authorities when they are undertaking such schemes. It would enable them to make an application in advance to the Secretary of State for a safety net payment to be made to them for the duration of the scheme. The Secretary of State would decide whether to make such a payment based on a consideration of the proportion of its income the authority would be losing and the future social and economic benefits of the scheme. That would allow a kind of cost-benefit analysis to be undertaken before a decision was made.

We have also sought to include social benefit in the calculation. The purpose of that is to ensure that issues such as the types of job to be created, rather than the number of jobs, could be looked at if there was an economic imbalance in the area. It would also enable other social benefits to be taken into account, such as improved transport access, community facilities, and access or provision for disabled people.

We have deliberately chosen not to limit any examination of social and economic benefits to the area covered by the local authority undertaking the scheme. That is because schemes may be on the border of another local authority, or may benefit those in a larger travel-to-work area. It is right that all the benefits to a wider area should be taken into account, especially when only one local council is bearing the loss of business rates.

If a scheme proposed by a local authority was deemed to have a social and economic benefit, the Secretary of State could agree that the authority would receive a safety net payment for the duration of the scheme. That would give the local authority certainty that its loss of business rates would be compensated for throughout the scheme, rather than it having to wait to see, each year, whether it had received a payment. That would encourage local authorities to go ahead with schemes that had real benefit, and would protect local services.

The new clause would also allow local authorities to make representations to the Secretary of State once he had notified them of his decision, and prior to a final determination being made.

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

Will the hon. Gentleman say exactly what he defines as a major redevelopment scheme?

[Chris Williamson]

I think I covered that point in my opening remarks, but the sort of thing that I am thinking of is redevelopment of a city centre. I cited my home city of Derby. There are many similar examples of schemes that required significant disruption; there is Birmingham, and many other cities—too many to enumerate. That is the type of thing I am referring to when I talk about major redevelopment.

[Mr Leech]

Would the term “major redevelopment” be based on the proportion of business rates that were to be lost? If a redevelopment resulted in a small reduction in business rates, that would perhaps not be classed as a major redevelopment, whereas a smaller redevelopment could result in a bigger loss of business rates.

[Chris Williamson]

That is a fair point, and where development was not significant, there would be little point in applying for a safety net payment. Local authorities would be in the best position to judge in what circumstances they would apply for such a payment. I think that we know what we mean when we talk about a significant, major development of a city centre. The sort of scenarios that we are envisaging, would involve not a small redevelopment of a tiny corner, but a significant development of a city centre.

As I said, the new clause would allow local authorities to make representations to the Secretary of State. That is only fair to local authorities. If they believe that the benefits of the scheme were not properly taken into account, or if calculations relating to it were incorrect, the new clause would allow them to say so. That would promote good governance and good decision making by allowing local authorities to mount a challenge. The final decision, of course, would be left with the Secretary of State.

The new clause tackles an issue that was not really considered during the drafting of the Bill, but is vital for a number of councils across the country, so we are minded to divide the Committee on new clause 2, and we look forward to hearing the Minister’s views on it.

[Ian Austin (Dudley North) (Lab)]

It is always a pleasure to serve under your chairmanship, Mr Robertson. I want to speak in support of amendment 48 and take this opportunity to ask the Minister to meet me and colleagues from the west midlands, and members and officials from the region’s fire authority, to discuss how our fire service is funded. I reiterate the remarks made by my hon. Friend the Member for Derby North (Chris Williamson), who asked the Minister to consider the case for safety net payments to be made where funding would otherwise be below that required by a force to follow the integrated risk management plan.

18:15

The Prime Minister promised that front-line services would be safeguarded, yet the services that my constituents receive are being affected as a direct result of the way in which fire services in the west midlands are being funded and of the cuts and savings being made. I am worried that, as my hon. Friend said, there is substantial risk of some authorities having less funding than is required to fulfil their duties. I want to talk a little about the situation in my constituency to illustrate those concerns.

When Sedgley fire station closed three years or so ago, the station in Dudley got an extra targeted response vehicle, in addition to its two engines. Under new proposals set out by the fire authority, one engine will go, and the TRV will be replaced by a brigade response vehicle—an adapted Range Rover—leaving the town of Dudley, despite its size, with one engine and the new response vehicle. When Sedgley closed down, the authority said that parts of Sedgley would be covered by fire engines from the Tipton station, but that is to lose an engine, too.

All fire and rescue services were expecting cuts as part of the comprehensive spending review settlement, and had been planning well in advance to protect the service provided to their communities, but the cuts have presented some with more of a challenge than others.

[Alex Cunningham]

Is my hon. Friend aware of the situation facing the fire service in Cleveland? Teesside is the biggest fire risk in Europe, yet it faces similar cuts. Cleveland has some innovative ideas for cutting costs, and it has done extremely well—I am proud of what it has achieved—but it has been asked to go too far. That is perhaps all the more reason why the amendment needs to be accepted. There should be proper safeguards in place in the highest-risk area in Europe.

[Ian Austin]

rose—

[The Temporary Chair (John Robertson)]

Order. May I ask the hon. Gentleman to come back on to the amendment? We are not here to talk about fire services.

[Ian Austin]

Absolutely, Mr Robertson, but the point that my hon. Friend makes is accurate. It is clear that fire services are not funded fairly; that is the point I want to make. Some forces, such as the one in the west midlands, face more challenges than others. It is important that an amendment like amendment 48 be considered, so that we can make up for the shortfall in funding that some forces receive. If you will allow me, Mr Robertson, I shall set out why I think we are in this situation.

It is clear that the way in which funding is provided to fire services is not fair. In October 2010, the Chancellor announced an average cut of 25% to fire service formula grant over the next four years. That settlement was expected to be tougher for those services, such as West Midlands and Cleveland, with a heavier reliance on formula grant, but we were told that it would be fair. When the exact figures were announced for each service, it was immediately obvious that the cuts were anything but fair. Some forces have been handed increases in their formula grant, and clearly would not need the benefit of amendment 48, but others, such as the West Midlands fire service, face severe cuts.

Looking at revenue spending power, it is clear that the West Midlands fire service was hit hardest of all, with cuts that were twice the national average. Even taking into account the effect of the proportion of council tax to grant, and the small special grant to encourage a council tax freeze, some brigades—such as Cheshire, which happens to cover the Chancellor’s constituency—will receive more money in formula grant in 2012-13 than they did in 2010-11. Cheshire is getting more than £400,000 extra in formula grant, Essex is getting an extra £700,000, and Hampshire an extra £800,000. As a result, Cheshire’s total increase in revenue spending power between is 1.84%, or £800,000 extra in cash. When it comes to the fire services, it is absolutely clear that we are not all in it together.

The formula ought to be reviewed to take local factors into consideration. The failure to do that makes the case for special safety nets even more compelling. The formula used to decide on the settlement does not take into account a number of key considerations. For example, many of the most deprived areas are among the worst hit, despite the well established link between deprivation and fire. Four of the five most deprived fire authority areas in the country are metropolitan brigades, and those currently have to find the heaviest savings. Their financial positions are the most difficult.

Part of the reason that we stand to suffer most in the west midlands is that we maintain the lowest council tax precept in the country, at just £47.83 for a band D property, compared to as much as £87 for people in County Durham. We are therefore much more heavily reliant on formula grant than others and receive a greater cut in our overall spending power.

[Andrew Gwynne]

My hon. Friend makes a pertinent point about the way that metropolitan fire authorities in particular are funded. He will know that, similar to the situation in the west midlands, Greater Manchester fire and rescue authority is making £4.6 million of savings this year. For the next two years, depending on which scenario one looks at, there could be between £8.6 million and £16.7 million of savings—very substantial reductions in spending power in an area of high risk. Does he agree that it is crucial that we make it clear to Ministers that we expect a fairer mechanism for funding metropolitan fire authorities?

[The Temporary Chair]

Order. I remind hon. Members that we are talking about safety net payments, not general payments.

[Ian Austin]

Of course, Mr Robertson, but to understand the case for the safety net payments, it is important to look at the way in which fire services are currently funded, because that demonstrates the need for those safety payments.

[The Temporary Chair]

I take the hon. Gentleman’s point, but I think we will go back to the safety net, if that is all right with him.

[Ian Austin]

Indeed, Mr Robertson. It’s a fair cop, I suppose. I shall draw my remarks to a close. It is clear to me that the West Midlands fire service is making all sorts of reforms, more savings in the way the force is managed and run, and cuts to services too, which many other forces around the country are not having to make. It is faced with the prospect of even more severe cuts over the next couple of years. It is not at all clear how it can make those cuts without a huge impact on the services that it provides to people in the west midlands.

Will the Minister meet me, colleagues from the region and representatives of the fire authority to discuss whether a fairer distribution of resources would safeguard services such as those in Dudley? As I said at the outset, will he consider the case for the safety net payments to be made where funding would otherwise not allow forces to meet the integrated risk management plan?

[Alex Cunningham]

I shall speak in support of amendments 30, 31, 32 and new clause 2, but before I start, I seek your guidance, Mr Robertson. I referred earlier to the Cleveland fire authority. Perhaps I ought to have declared the fact that my wife, Evaline, is a member of the Cleveland fire authority.

[The Temporary Chair]

It is up to the hon. Gentleman.

[Alex Cunningham]

Thank you. I so declare, so that people do not think it is my wife’s individual management that has led to the improvements. She shares my anxieties about the cuts that the fire brigade faces there.

I am by no means against reforming the way in which local authorities and central Government work together to collect and distribute tax, or the various mechanisms put in place to protect the system, but I recognise that the current system has its flaws. It is vital that the systematic inequalities in the country are addressed. The provisions suggested by the amendments do that. The Bill fails to recognise the simple fact that different councils must be provided with different levels of resource to meet different needs in order to prevent any form of postcode lottery, which would otherwise exist in the provision of services.

The amendments put a clear requirement—not “may”, but “must”—on the Secretary of State to take specific actions to ensure that all councils are provided with clear regulations within which they must work, and the Government as well, and allows councils the specific right to challenge. New clause 2 provides a comprehensive safety net for local councils which find, as others have described, that a major redevelopment scheme results in a substantial loss of non-domestic rate income for a period exceeding one year. Without specific powers—it is so important that they are specific—and requirements for the Secretary of State to intervene, I fear that countless councils, including those in north-east England, could be left high and dry and unable to continue to provide the range and depths of services required by our communities.

It is no good the Secretary of State having a series of discretionary powers in this area. He must be able to intervene to avoid wide-scale financial hardship which would leave local authorities no option but to slash services. Councils’ differing ability to generate business rates must be taken into account. Many local areas with vulnerable economies require support and Government investment in their infrastructure if they are to grow, particularly in the north-east, where the investment and growth that took place as a result of the positive intervention by the Labour Government are being reversed. The need for councils’ differing ability to be taken into account is recognised by the Tory-led Local Government Association, which strongly advocates the incorporation of safeguards to help authorities that raise relatively low amounts of business rates.

No one would disagree that there is substantially greater need in the north-east because of pressures on local services and smaller commercial and business areas. For example, in my Stockton North constituency there are several times more children on free school meals than in Wokingham, and our local authority faces around double the cost of providing residential and nursing care. Despite the diversification of the north-east economy under the Labour Government and considerable action on health and poverty, which saw the gap in life expectancy narrow, sadly the region still has about 33% of its population living in the most deprived areas of England.

Unemployment is also disproportionately impacting on the north-east, standing at 11.7%, compared to a national average of 8.4%. In my constituency, the local government finance settlement has already determined that Stockton council will receive £77 million in the current financial year. That is a 12% reduction on 2010-11 and higher than the average English reduction of 11.1%. Going forward, the 2012-13 settlement is to fall further by 8.8%, compared to 8.2% across England, so we need the safeguards proposed in the amendments.

Such a significant reduction in income means that councils such as my own in Stockton would no longer be able to provide the same level of public services in their area by charging a similar rate of council tax. They would inevitably have to make deeper cuts in their budgets, thereby putting greater pressure on the delivery of the most essential local services, exacerbating the inequalities that unfortunately plague this country and are worsening under the coalition Government. It should be emphasised that the previous Government made significant gains in bridging the equalities gap in Britain. The north-east especially benefited from a proactive Labour Government, determined to improve the prospects for the whole country.

Based on gross value added per head indices, the rate of growth in the north-east went from being the lowest of the regions during the 1990s to being the second highest during the past decade. Employment growth between the mid-1990s and the 2008 economic downturn increased by 11.2%, compared to 9.2% nationally. Despite the common view that the north-east had become over-reliant on the public sector at the expense of the private sector, between 2003 and 2008 private sector employment rose by 9.2%, whereas public sector employment grew by only 4.1% during the same period. Between 1999 and 2007 the number of north-east businesses rose by 18.7%, just a fraction below London’s business growth of 19.6% for the same period. What a testament to the work of our regional development agency and local authorities in the north-east.

Unfortunately, that hard work is being overturned by a reckless coalition Government, and we need the Bill to address that. One of the Government’s first actions was to abolish One North East, our regional development agency, and the regional Ministers, who had played an important role working with the private sector on large-scale investment programmes. The net effect has been a two-thirds cut to regional development funding and the establishment of a much smaller national fund to which every region must compete for investment.

18:30

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

I am sure that my hon. Friend would agree that One North East was regarded across the country as one of the most successful RDAs, which shows just how stupid the Government’s blanket removal of RDAs was.

[The Temporary Chair]

Order. The hon. Gentleman knows that we are not here to talk about RDAs.

[Alex Cunningham]

I will talk instead about PricewaterhouseCoopers, which evaluated the work of RDAs between 2002-03 and 2006-7 and demonstrated their role in improving economic output from investment. Its report showed that every £1 invested over the period achieved at least £4.50 in economic output. They were extremely successful, yet now we are seeing the reverse. That is all the more reason why we need specific powers for the Minister to intervene and make up for the bad times when investment falls and companies leave the region. The diminishing opportunities in the region mean that a safety net is required all the more to protect our services. To localise business rates in the way the Government propose and create a system that would threaten the already uncertain future of the north-east’s public services at a time of high unemployment, greater deprivation and child poverty, an ageing population and worsening health inequalities is simply madness.

We still need something similar to the organisations that you, Mr Robertson, said I should not refer to, in order to provide a comprehensive, holistic and proactive means of creating growth in deprived areas. Local enterprise partnerships, working with local councils, must be provided with the proper means of attracting investment and creating the jobs our people need. Without that, regions such as the north-east will simply not have the opportunities to grow their businesses and their commercial base, yet the Bill fails to address the likely need for intervention when real growth eludes certain parts of the country and the powerhouse of the south-east ramps up investment and income from non-domestic rates.

Instead, the Government are introducing a system that will increase inequality and, frankly, is insulting to local authorities because it relies on the assumption that they are currently apathetic about growth in their areas. Local councillors would cut off their right arms to create jobs and investment in their areas, and if the Government think that some kind of overnight entrepreneurial revolution will take place as a result of the Bill, they are simply being foolish.

Any discussion of local authority finances must also include the differing ability to generate council tax revenue. The proportion of properties in different council tax bands varies widely from one area to another, making a significant impact on a council’s ability to raise revenue. The Association of North East Councils has calculated that localising business rates will result in the top 10% most deprived areas losing four times as much in spending power as the least deprived 10%. The north-east will experience an average cut in per capita spending power between 2010-11 and 2012-13 of £120, whereas the south-east will receive a cut of £31.

In his first Budget, the Chancellor promised to create

“an economy where prosperity is shared among all sections of society and all parts of the country”.—[Official Report, 22 June 2010; Vol. 512, c. 167.]

However, for those trapped in some of the worst hit areas in 2012, former Chancellor Geoffrey Howe’s “managed decline” might sound like an entirely apt description of the Government’s approach to local government. They must think again and accept the amendments if they are to have any chance of realising the shared prosperity vision that they claim to have.

[The Temporary Chair]

Given the breadth of recent contributions, I do not think that we need to have a stand part debate on schedule 1. Any Members who wish to speak have a chance to do so now or when we debate the next group of amendments.

[Robert Neill]

It is good to see you back in the Chair, Mr Robertson. I will do my best to confine my remarks to the amendments we are considering. I am of course always happy to meet any hon. Member to discuss the funding arrangements for their local fire authority. I hope that it goes without saying that I also meet members of fire authorities and will continue to do so.

Let me deal first with amendment 48. I hope that the hon. Member for Derby North (Chris Williamson), upon reflection, will withdraw the amendment, on the grounds that it is impractical and ill conceived. It would not do the job that it is intended to do because it misunderstands the nature of integrated risk management plans. That plan, which every fire authority has, is a locally produced and consulted document, drawn up by professional fire officers and debated by members of the fire authority, relating to the allocation of local need to deliver the budget that they already have. It is not, and never has been, a tool for determining the distribution of resources between fire authorities nationally, and it has never been designed or used as a means of comparing need between local fire authorities. That is not the case now under formula grant, and it would be illogical for it to be so under the business rate retention system that will replace it.

There is a means of taking into account need and risk in the fire sector within the current system, and there will continue to be such a means under the new system’s baseline arrangements. The baseline funding calculation for the resources each local fire and rescue authority needs to deliver its services is already based on needs and risk, because the fire resource element within the formula includes the need to take account of deprivation, control of major accident and hazard sites—major risk sites, in other words—fire safety enforcement, community fire safety and so on. That was updated at the last settlement to reflect a consultation with local fire authorities. Because the baseline under the business rates retention system is based on the formula grant assessment we have for the current year, the needs and risks are already taken onboard. They are therefore covered in the baseline calculation and will be uprated, as I have indicated, by RPI in the same way as for anyone else.

[Chris Williamson]

Can the Minister assure the Committee that all fire authorities in the country will have sufficient resources under the Bill to fulfil their integrated risk management plans?

[Robert Neill]

No one has suggested to me that they do not have sufficient resources at the moment, and nothing in the current proposals would change the relationship between the IRMPs and the current plans. I am sorry to say that the hon. Gentleman misunderstands what is a pretty fundamental part of the operation of fire planning. IRMPs are not a national resource allocation tool. Currently, the needs formula within the resources and needs element of the formula grant calculation separately allocates moneys to each fire authority. The authorities then consult locally on the design of their IRMP, and it is on that basis that they decide on the deployment of appliances, personnel, stations and so on. That is the case now, and it will not be changed in the slightest under the new scheme.

[Chris Williamson]

Of course I acknowledge the Minister’s point on the distribution of funds, but we are entering a new era, and the fact is that under the new regime fire authorities could be well short of the funding required to fulfil their obligations. I do know whether he has heard the concerns of the metropolitan fire authorities, for example. The new regime he is advocating today could leave fire authorities in an invidious position in which they are unable to offer the general public the proper protection that they have been able to offer hitherto.

[Robert Neill]

With respect to the hon. Gentleman, that is highly unlikely. In fact, I cannot conceive of such a situation—for this reason, which he really ought to know if he has studied the topic. Fire authorities are in the business rates retention scheme because about one third of them are county council authorities. If they were outside the business rate retention scheme, we would have the perverse situation in which one third of all fire authorities—county council fire authorities, in effect—were nevertheless funded within business rates retention, while the remaining ones, including the metropolitan and other combined or stand-alone fire authorities, were funded by a wholly separate means. It is therefore logical to include them all within the same scheme.

[Andrew Gwynne]

Will the Minister give way?

[Robert Neill]

Let me develop the point, because it may deal with the hon. Gentleman’s question.

Given that authorities are, therefore, all within the scheme, they all benefit from the baseline calculation, which already takes as their starting point their current allocation, which in turn already takes account of need and risk in the fire system. Precepting authorities, including all the metropolitan authorities, will be top-up authorities, because almost all precepting authorities—as they currently are—will come under the new scheme. They will therefore benefit from the top-up being uprated by retail prices index inflation in order to protect them throughout the period. So I hope that that has dealt with the point.

[Andrew Gwynne]

Greater Manchester is one of the metropolitan fire authorities, and I understand that there will be a baseline throughout Greater Manchester for fire and rescue, but, on the retention of business rates, what happens in districts that have had substantial business rate growth as opposed to districts that have had low growth or no growth? Will there be a disparity in precepted funding, or will the precept remain the same throughout the old metropolitan county?

[Robert Neill]

Greater Manchester is protected, because the top-up does not change between the reset periods, save that it is uprated by RPI. So Greater Manchester, as a top-up authority, will be protected from instability. That will be the way with any top-up authority, so Greater Manchester’s situation will not be affected by what happens in its districts, because it is a top-up authority and it has the protection of the RPI uplift until the next reset. That is the answer to that point.

I hope that for those reasons the hon. Member for Derby North will reflect on the fact that his amendment is not the appropriate means of addressing the problem. IRMP does not compare like with like at all, and if we funded to IRMP we might reach the perverse situation in which the locally consulted delivery document drove the funding centrally. That has never been the case; it never was under the hon. Gentleman’s party in government; and it would be illogical. I hope that on reflection he will not press his amendment.

[Graham Jones (Hyndburn) (Lab)]

Will the Minister give way?

[Robert Neill]

The hon. Gentleman has not intervened in the debate before, so with respect I will press on to the next point. He has only just come into the Chamber, so I will give way to those hon. Members who have been present and listening to the debate throughout.

On new clause 2, I understand the issue that the hon. Member for Derby North raises, but I hope that he will not press it to a vote, either. I take on board the concerns that he and others have raised about the impact that might occur when there is a major redevelopment and, for a period, a consequential loss of business rates income. None of us would wish to create a perverse disincentive to such major redevelopment. It is fair to say that, if it were to cause a significant loss of income, it would qualify for the safety net, which would be capable of picking things up. I have already said that we will consult on the calculation of the safety net.

I am concerned about the new clause, because it would give 100% indemnity up-front for an early years’ loss of income, so the risk is that it could indemnify delay and inefficiency in such important redevelopment schemes. There is a strong incentive for a local authority itself—alongside the other good reasons that most local authorities have—to get on with things quickly, and for it to press its private sector partners in a redevelopment scheme to do so, if it knows that there is no up-front, 100%, no-questions-asked indemnity.

18:45

I accept that when we draw up the regulations we should not reach a situation in which genuinely desirable and major redevelopment schemes end up perversely penalising a local authority, so I take that point. As I said on our first day in Committee, however, we have set up an official-level working group—with officials from my Department, representatives of local authority associations, treasurers, the valuation industry and so on—that is due to start meeting this month, so it will meet during the passage of the Bill, and I have specifically asked the group to look at the issues that such major redevelopments raise. In the light of that, and given that we are prepared to reflect on the group’s work and report to us and, if need be, to return to a means of dealing with the issue that the hon. Member for Derby North and I have identified, I hope that in due course he will feel able not to press the new clause to a vote.

[Chris Williamson]

In view of the shortage of time, and with the leave of the Committee, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Helen Jones]

I beg to move amendment 33, page 25, line 34, at end insert

‘Any such distribution must be made on the basis of the level of need in any local authority receiving a payment as defined in Schedule 1.’.

[The Temporary Chair (Mr John Robertson)]

With this it will be convenient to discuss the following:

Amendment 34, page 25, line 38, after ‘distribution”)’, insert

‘including the level of need in any local authority as defined in Schedule 1’.

Amendment 35, page 26, line 19, leave out from ‘made’ to end of line 22 and insert

‘within the following financial year’.

[Helen Jones]

It is a pleasure to serve under your chairmanship, Mr Robertson.

With these amendments, we return to our discussion about ensuring that any local government finance scheme takes account of the varying level of need in our communities, a problem that the Government seem determined to ignore. Interestingly, the Bill does not lay down the basis on which the Secretary of State must distribute the whole or a part of the remaining balance on a levy account at the end of the year, if he decides to do so. That is the problem with the Bill: too much of it is left opaque; too much is unspecified. Even Ministers have difficulty explaining it properly.

I cannot remember whether it was the Secretary of State or the Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill), but on Second Reading a Minister was reduced to reading out the explanatory notes when asked to explain the Bill in plain English, but we do know that embedded in the Bill is a blind refusal to address need. It is there in the use of the current financial settlement as the baseline, which, as the Yorkshire and Humberside councils said, means that baselines may not reflect the actual funding that councils need to deliver services to their local communities from April 2013. It is there also in the Government’s refusal to put anything in the Bill about need being taken into account when determining central and local shares; and it is there in the Government voting against our amendments to ensure that need was debated alongside local government finance reports.

It is all very well for the Prime Minister to talk about caring capitalism, but as we debate this Bill we do not see much care for the needs of the elderly, for children, for the working poor or for any of those who rely on local government services. Tory Members ignore it; Liberal Democrat Members weep crocodile tears and then troop into the Lobby after their Tory masters, anyway.

We see the same mindset operating when we consider the distribution of the levy balance. It is open to the Secretary of State not to distribute it at all, and we accept that there may be times when the levy needs to build up from year to year in order to fund safety net payments. If he does decide to distribute it, and it is nice to see the Secretary of State in his place, we will be back to the “all-power-to-Pickles” scenario. There is nothing in the Bill to stop him doing as he likes. What will his decision be based on—on whether he once had a nice day out somewhere, or the fact that an open space was named “Pickles park” in his honour? I cannot see many local authorities represented by Opposition Members getting money on that basis.

In Warrington, we have an Attlee avenue and a Bevin avenue. When the noble Baroness Thatcher was in power, the council even named one of its buildings “Poll Tax house”, to remind people of how the payments that they made had been imposed on them. That is a salutary reminder of how the last time they were in government, the Tories got it so wrong on local government finance. I cannot see us having a Pickles avenue, a Neill nook or anything else that might get us money on that basis.

[Mr Kevan Jones]

My hon. Friend’s constituency is rather moderate; I have Marx, Engels and Lenin terraces in my constituency. It is clear what the Secretary of State will do—exactly what he did last year in the local government settlement. He will reward councils in the south-east of England that vote Conservative.

[Helen Jones]

That is interesting; I suppose that my hon. Friend could think about a change of name to get money for his local authority, although I doubt that that would serve him.

The fundamental problem with the Bill is that too much discretion is given to the Secretary of State and there is no consideration of need. Without the concept of needs-related payment in the Bill, the Government cannot pretend that they want to protect the most vulnerable. Clearly, they do not. The amendment is yet another that tries to address that huge omission.

Wherever we look, we see evidence of the real disparities between different areas. Many examples have been cited in this Committee, but it is always possible to find more. In Knowsley, for example, 58,000 people—more than a third—live in areas that are among the top 5% most deprived in the country. There has been a 47% increase in social services referrals, which the council has had to deal with following the baby P case. In Sunderland, 50,000 people live in areas that are in the top 10% of the most deprived in the country. In such areas, councils face enormous problems in attracting new jobs and meeting service needs—despite their constant efforts to do so, which have often been denigrated by Government Members during this debate.

[Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)]

Does the Bill shed any light on the Government’s decision to penalise Liverpool—the most deprived authority in the country—to the greatest extent among all local authorities? Does my hon. Friend see any way of changing that in the context of the amendment that she is discussing?

[Helen Jones]

My hon. Friend, herself the former leader of a major local authority, makes a fair point. It is what we have been debating throughout the Bill. Everywhere we look in it, we see no consideration of need; the poorest local authorities are being penalised most at every point.

We have said that the Bill does not recognise the barriers to growth that some areas face, such as the lack of appropriate transport infrastructure or of surplus capacity, as my hon. Friend will know from Halton, near her own area of Liverpool, for example. Everyone seems to accept that some growth happens simply because of where it is. Add to that the fact that councils also face a 10% cut in money to fund council tax benefit and we see that there will be real pressure on many local authorities. They will face having to cut benefits for some of the poorest people, having to cut services or having to raise council tax. We all know how difficult it is going to be to raise council tax. The result of the changes is that stronger local economies will find it easier to grow while others find themselves caught in a trap of rising demand and declining resources.

[Mr George Howarth]

My hon. Friend mentioned Knowsley. Does she accept that the problem is not just current, but stretches out into the future? My information is that from 2017-18, wealthier authorities will begin to see real-terms growth in resources, yet Knowsley will still face year-on-year reductions in resources of more than 5%. After 10 years, it will still have reductions of 3.8%. If what we are discussing is wrong now, it will become progressively more wrong as the years go by.

[Helen Jones]

My right hon. Friend has hit on the key to the Bill. It is not simply wrong in the beginning; it will increase inequalities—get more and more wrong—as it proceeds.

Inequalities will widen, even if the top-ups and tariffs are uprated by the retail prices index, and the levy will not fully compensate for that. Remember that even if we get a proper definition of what constitutes a disproportionate gain—bearing in mind the earlier debate, that seems unlikely at the moment—councils need to pay only a proportion of that in levy. The logic of that is that some areas will benefit from disproportionate growth. Others will fall further behind.

[Andrew Gwynne]

All my hon. Friend’s argument supposes that the starting point was fair. Of course, an awful lot of authorities will have had deep and damaging cuts locked into the baseline, which is the real starting point, and would not have the ability to raise additional council tax income even if they were permitted to do so by the Secretary of State. There is a real double-whammy for those areas. That is why we need a fair assessment of need, so that we can get our share of resources through that route.

[Helen Jones]

My hon. Friend is right, and many hon. Members have made that point in our debates on the Bill. It starts from an unfair baseline and totally ignores the different council tax bases that authorities have.

We believe that any distribution of the remaining balance on the levy account—if the Secretary of State decides to distribute; he does not have to—ought to be done on the basis of need. Without that and the amendments that we have tabled elsewhere, there is a real risk that services will be put at risk by factors entirely beyond a council’s control, as the Government transfer financial risks to it, but keep the power with the Secretary of State. That is why throughout the discussion we have been trying to ensure that the concept of distributing resources according to need is built into the Bill.

[Graham Jones]

Will my hon. Friend give way?

[Helen Jones]

Of course; we Joneses must stick together.

[Graham Jones]

My local authority is bracing itself not only for the cut; it will have to put further moneys aside for the risk element. The economy and incomes may not decline, but the authority has to set aside a further amount of money for risk and that exacerbates the problem.

[Helen Jones]

That is an important point that we have not considered so far. I believe that local authority finance officers, because of the risks and uncertainties inherent in the Bill, will advise their authorities to build up bigger reserves. Authorities have been criticised by the Government for holding too much money in reserve, but the Bill almost incentivises a prudent authority to do that.

[Mr Kevan Jones]

If an authority did that—it would be prudent financial management—it would be named and shamed, a tool that the Secretary of State uses on many occasions. It would be said that somehow the authority could redistribute that money and keep down council tax.

[Helen Jones]

That is an important point. Whatever happens, some local authorities cannot win.

[John Healey]

Clearly, prudent councils will set sums by against risk. The central problem with the system is its unpredictability and volatility. To make provision against risk, one has to be able to quantify it. That is highly uncertain. For instance, how would the treasurer of Brentwood council—the Secretary of State’s local council—have been able to anticipate a drop of more than a third in the business rates revenue last year? It was probably due to factors beyond their control, and they would have been unable to hedge against and provide for that sort of risk.

18:59

[Helen Jones]

My right hon. Friend is entirely correct. Local authority finance officers will no doubt respond to this by always working on the basis of the worst possible scenario and therefore by building up more reserves than they may need. Government Members claim that they support distribution on the basis of need, which is not a difficult concept. Why, then, are they so opposed to including it in the Bill?

[Graham Jones]

We have localisation not only of national non-domestic rates but of council tax and housing benefit, so local authority finance officers will have to put aside risk money for all three. It is a triple-whammy, and that is putting councils in a very difficult position.

[Helen Jones]

Indeed, that is absolutely right. As we have said many times during these debates, the Government are centralising power and devolving blame so that local authorities will have to take all the risks.

Why not include our proposal in the Bill? The only real answer is that Ministers do not want to be constrained in how they use the money. I entirely accept that it might be necessary to carry over the balance if the account is to be sufficient to fund safety net payments, but if the balance is to be distributed, what is wrong with being clear about the factors that should be taken into account? If the Government reject the amendment, it will be clear that they want simply to collect the money and allow the Secretary of State to distribute it in any way he likes. There will be no fairness in the system and no real account taken of the needs of the poorest people in the poorest communities.

Amendment 35 also deals with how any remaining balance in the levy account is distributed. As the Bill stands, the Secretary of State may decide to distribute the remaining balance to one or more local authorities. In amendments 33 and 34, we set out exactly what factors he should take into account. Strangely, however, even if he does decide to make a payment, he does not have to hand it over. The Bill gives him the authority to pay whenever he likes and to pay in instalments if he wishes; I do not suppose that they would come with interest. What on earth is that provision for? We would not expect anyone else to be treated in this way. If I bought some furniture from someone and said to them, “I’m going to pay you, but I’ll do it when I like, in as many instalments as I like”, I would find myself rapidly being sued for the money and would not have a defence. This is another “Trust me—you know it makes sense” clause, whereby the Secretary of State can say , “I’ll distribute the money any way I like.” He seems to believe that he can treat local authorities in that way by deciding to pay out the remaining balance on whatever basis—we do not know—and as and when he thinks fit.

[Andrew Gwynne]

That goes back to the nub of the problem from an earlier debate—the lack of certainty that is given to council treasurers in enabling them to plan ahead in their council budgets.

[Helen Jones]

My hon. Friend is entirely right. Time and again we find in the Bill a lack of clarity and lack of certainty for local authorities.

How on earth can this be the right way to deal with local services? Local authorities need to be able to plan and to have a degree of certainty in their finances, yet here we have a recipe for uncertainty. Our simple amendment would require the Secretary of State, if he decided to make a payment, to hand over the money within the following financial year. Such a provision would give ample time for him to do the calculations, or at least get someone else to do them, to determine the amount to be paid and to hand it over. Local authorities would then be certain about what they were receiving and when, and, importantly, they would be given more certainty about how the scheme would operate.

I will be interested to hear the Minister’s arguments against the amendments. Does he believe that if local authorities know they are going to get a payment and when, they will blow it all on riotous living—that they will decorate their town halls with bunting and order large shipments of chocolate cake—or does he believe, as we do, that they will use it to improve services? His arguments can mean only two things: that he expects local authorities to behave irresponsibly, which is like saying to children, “You can’t have your pocket money all at once because you might spend it all on sweets”, or—I think this is the real reason—that the Treasury wants to hang on to the money.

Local councillors deserve better than that. They are our partners in delivering services. They should be given as much certainty as possible and trusted to act responsibly. The amendments would achieve that, and I commend them to the Committee. It might be helpful, Mr Robertson, to let you know that we will seek to divide the Committee on amendment 33.

[Mr Kevan Jones]

It is a pleasure to serve under your chairmanship again, Mr Robertson.

My hon. Friend the Member for Warrington North (Helen Jones) used a good analogy when she said that this measure is intended to centralise power but decentralise blame. Local councils will be given options over, for example, a 10% cut in council tax benefit. They will face some difficult decisions about how that is to be distributed. When the Minister wrote to Newcastle’s The Journal last year, he did not even mention that in his supportive letter on the letters page. We need to be clear to local people that this is not about decentralisation but about putting power back into the hands of the Secretary of State and, ultimately, those of the Treasury.

We had an interesting discussion on the previous group of amendments about whether there would be any money left to distribute at the end of the year. The hon. Member for Bradford East (Mr Ward) asked the Minister what would then happen, but he did not answer. I suspect that this mechanism is being used so that the Government can use local government-raised finance to offset central Government expenditure. It might be given back to local authorities, but only as a substitute for other types of grant. It is all about centralisation.

In the settlement of the accounts in the first few months of the coalition Government, the Secretary of State was the first Minister to run to the Treasury saying, “I’ve got my plans and I’ll give up my savings to meet the Chancellor’s targets.” If he again finds himself with a large pot of money left at the centre, no doubt he will offer it up to get himself some credence in the Treasury and in the eyes of the Prime Minister as the Secretary of State who is doing best in financially managing his Department, even though the pain of that is being borne on the shoulders of local businesses and local people.

[Graham Jones]

My hon. Friend makes a good point about offsetting Government expenditure and local expenditure through raising the levy and taking local taxes. Could Jobcentre Plus be an example of where the Government might look to spend local money on what is now essentially a national service given the changes in the delivery of housing benefit?

[Mr Kevan Jones]

I think that this Secretary of State will be very creative. He will no doubt put out a press release saying that he is giving money to local councils and various initiatives, without telling them that it is their own money. The difference is that he will now have control over how the money is spent, rather than the local councils.

My hon. Friend the Member for Warrington North asked on what basis money will be redistributed. The Government’s track record shows that they do not recognise need as an element in the redistribution of capital. We need only look at last year’s local government settlement to see that.

As my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) said, the baseline will be set for the next 10 years, so councils will not only lose out in the first year but will continue to lose out over the next 10 years. County Durham’s revenue spending power for 2011-12 is £498.2 million, which is a reduction of £35.9 million or 6.73% of its budget. It will see a further reduction of £10.94 million in its spending over 2011-12 and 2012-13, which is a further loss of 4.5%. That will be used as the baseline. This will continue, as my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) said, for ever more.

Which councils did the Government reward in the settlement? They rewarded southern councils with far lower demands on local government services than councils such as Durham county council. I do not think that that was done by accident.

[Andrew Gwynne]

My hon. Friend is making an interesting point. I commend to him a study that produced a heat map showing the areas that face the largest cuts in local government funding. If that is superimposed on to a map showing the most deprived areas and the areas of greatest need according to socio-economic data, the two maps marry up quite well.

[Mr Jones]

My hon. Friend makes a good point. One of the very deprived local authorities that the Government were determined to help last year was Wokingham in Berkshire, which saw its budget increase by 0.2%, meaning that every person there has had an additional 30p spent on them.

We must take need into account. There are services that County Durham and northern cities need. For example, County Durham has a growing population of elderly people, who are high users of services. Added to that, we have the Government’s reduction of the public sector and deficit reduction strategy, which are affecting the economic viability of regions such as the north-east of England. More individuals will therefore use local councils’ services. More people will certainly become eligible for council tax benefit as unemployment rises. Need has to be an important element in redistributing this money.

We are leaving it up to the Secretary of State to decide how the money will be distributed. In the last debate, the Minister failed to define “significant”. He used the word on several occasions and was pressed by Members on both sides of the Committee to define what it meant, but he could not come up with an answer. We are again being asked in the Bill to trust the Secretary of State. It will not come as a great surprise to hon. Members that I do not trust the Secretary of State. He is a very political individual who is clear in his philosophy: he will help people who support the Conservative party at the expense of northern councils. He does not care whether those councils thrive or not.

Although need is not part of the assessment, let us look at some of the figures. In County Durham, 31% of people live in the 20% most deprived areas of the UK, and 22,805 children, or 21.8% of children, live in households that are defined as living in poverty. In Wokingham, it is just 7% of children. Between January 2011 and January 2012, unemployment in the north-east rose by 19%. It now stands at nearly 12% across the region. As I said earlier, as unemployment rises, the demand on local government services increases, just when the ability for councils such as Durham county council to raise finance is being constricted.

19:15

We are having to second-guess what the Secretary of State will do. It would be helpful to have the regulations and to know exactly how he will distribute the money. It will be interesting to hear in his response whether the Minister puts any flesh on the bones and says how the money will be distributed.

I can imagine that there will be fights between different councils. If the Secretary of State says that deprived Wokingham should get a bigger slice of the pie than Knowsley or my constituency, without explaining or justifying it, I can imagine there being legal challenges. I would not put it past this Secretary of State blatantly to reward the councils that support the Government, just as he has already.

It was said on Second Reading and in Committee last week that the impression is being given that all councils up and down the country start from the same point on the journey in terms of need. No, they do not. There are big differences between councils up and down this country in their ability to raise domestic rates of council tax. In the north-east, about 50% of properties are in band A. Even the freedom that councils will have to raise additional revenue if they need to will be restricted.

In the last week, the Secretary of State has condemned councils for ignoring his generous offer of allowing them to freeze council tax. Again, that is a highly political move. He is very clever in one respect. He says that councils can take the gold for the next two or three years, but there is no guarantee that they will get it in the year before the next general election. No doubt, he will then force councils to stick up council tax or make further reductions in services. Things have been delegated to local councils, but the poisoned pill of a cut comes with them.

Looking at the whole Bill, it is clear that the strategy of the Secretary of State is to blame local councils for the decisions, while he stands back and says that it is not his fault. These are highly political moves. If he is guaranteeing that need will be taken into consideration, it would be better to put it in the Bill than to just give us an assurance and say, “Trust us.”

Given the suggestion of my hon. Friend the Member for Warrington North, I might have to suggest to Durham county council that it renames Marx terrace, Engels terrace and Lenin terrace in Stanley in my constituency. Perhaps one could be called Pickles terrace.

[Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)]

Stunell avenue.

[Mr Kevan Jones]

Yes, that has quite a ring to it. The council might have to do that to keep in with the Secretary of State.

[Graham Jones]

Pickles dyke.

[Mr Jones]

Yes, or Pickles dyke.

[Mr George Howarth]

My hon. Friend is developing an interesting argument.

[The Temporary Chair (John Robertson)]

Order. But one that has absolutely nothing to do with the Bill.

[Mr Howarth]

I wonder whether my hon. Friend is aware of the fact that there was a residents group in Liverpool that had a battle with the city council over the right to name the local streets. They lived in an area called Weller streets. They won the battle, and in homage to the city engineer who had said that they could not rename the streets, they named one Weller way.

[Mr Jones]

I obviously do not want to draw your wrath, Mr Robertson, for going off the subject, but time and time again the Secretary of State talks about devolution and giving local government powers, and then he produces this centralising Bill and gives councils diktats week after week about what they should and should not be doing—whether they should have pot plants, or whether they should have weekly bin collections. The public will start to see through it. He cannot have it both ways. He cannot have a Bill that will centralise power and centralise the finance that local councils raise and at the same time tell councils what they can and cannot do, but that is his method. If the Government do not accept the amendment and accept need as the basis for payments, people will come to the conclusion that many of us have already come to—that they do not actually care about need.

[Robert Neill]

I will endeavour to confine myself to matters that are germane to the amendments, so I will be fairly brief despite the temptation to inquire what happened to Trotsky and Bakunin drives. I imagine they were probably airbrushed off the map in Durham at some point.

I am not sure whether hon. Members have quite followed how paragraph 28, relating to the distribution of any remaining balance in the levy account, will actually work. As I hope they will be aware, provision is made in the Bill for some or all of the remaining balance in the levy account to be returned to local authorities. It provides flexibility over the amount to be distributed and the basis of distribution, and we believe that it is wise and sensible to keep it that way. It will enable the distribution of the remaining balance to be carried out as is appropriate at a particular time. For example, it might be appropriate to distribute it to authorities on the basis of need, or if we assess that there is no such need, we might wish to return it to some of the levy authorities to make up for the taking of levy moneys that were not needed for disbursement. It would be wrong to preclude that possibility, which is provided for in the Bill.

[Mr George Howarth]

Actually, paragraph 28 states:

“The Secretary of State may determine that an amount equal to the whole or part of the remaining balance on the levy”

be distributed. I am sure it was inadvertent, but the Minister misled the Committee slightly a few moments ago.

[Robert Neill]

No, with respect, because first, there is flexibility to distribute all or part of the balance on that basis. Secondly, that flexibility is not unchecked, because the procedures in sub-paragraphs (2) and (3) require the Secretary of State to include both the amount to be distributed and the basis on which it is to happen in a local government finance report, which will be subject to the scrutiny of the House. Such a report is laid before the House and can be debated.

Finally, paragraph 18 tightly defines the debits that may be made from the levy account. The effect of that paragraph, taken together with the rest of the schedule, is that any money in the levy account can be used only to make safety net payments or to be returned to local authorities as part of the distribution of the remaining balance for the year. The idea that the Treasury can somehow snaffle it and keep it back from local government is simply not correct.

[Mr Kevan Jones]

But the Bill does not state the criterion by which the remaining balance will be distributed. The Secretary of State could therefore quite easily decide that he wished to distribute it in such a way as to save the Treasury money by substituting it for central Government spending. The Minister cannot get away from the fact that the Secretary of State will decide how the money is spent. It will be his decision alone.

[Robert Neill]

The distribution will be subject to scrutiny by the House in a local government finance report. It is correct that it will not be defined in primary legislation, just as the basis of the distribution of formula grant is not. That is decided by the Secretary of State, so in fact we are being utterly consistent with the system that was operated under the previous Government. We are being consistent, and the hon. Gentleman is being wholly inconsistent, not for the first time.

[Mr George Howarth]

I have already mentioned paragraph 28. Sub-paragraph (1) refers to paragraph 19(2), which states that the remaining balance must be

“debited (as an item of account) to the levy account kept for the year”

or

“credited (as an item of account) to the levy account kept for the next year.”

The flexibility still lies with the Secretary of State, who can decide whether it is utilised in the current year or the subsequent one.

[Robert Neill]

That just enables the sum to be carried over. The point is that it would remain in the same account. It could not be used for any other purpose. It could be carried forward for a year as part of a buffer, but as I have indicated, it could go out of the levy account only by way of a safety net payment or as a distribution of the remaining balance to local authorities. Either way, it would go back to local government. That is the key point that I am not sure has been grasped. I therefore hope that Members will not press amendment 33 to a Division.

Amendment 35 would require any payment in respect of the remaining balance to take place in the following year. There are some technical reasons why I do not believe it would work, including the need for any payment from central Government to local authorities to include the standard provisions about Treasury consent. I know that Opposition Members will remember that. It is a technical thing, but it has to be done.

I assure Members that in practice we would not want to hold back any distribution of the remaining balance once it had been agreed in the local government finance report. However, payment as described in the amendment might be difficult to achieve because of the timing of that report.

[Helen Jones]

If the Government do not intend to hold back payment, why have they included in the Bill provisions for the payment to be made at such times and in such instalments as the Secretary of State determines? Surely holding on to the money once they have determined to pay it out makes it a gain to the Treasury, however we look at it.

[Robert Neill]

It is equally useful to have those provisions to deal with in-year payments, and I have already indicated to the hon. Lady that we do not intend to hold back the money and make gains to the Treasury. One way or the other, the money will all ultimately go back to local government.

There are technical issues to consider about the timing of the report and Treasury consent, so I say to the hon. Lady that I am willing to consider whether anything more can be done to provide greater clarity on Report. I assure her that we do not intend to hang on to the money, but if there is a way in which we can make the provision work better technically, we can return to the matter on Report if she does not press the amendment now.

Question put, That the amendment be made.

19:29

Division 437

Ayes: 220

---

Labour: 216
Social Democratic & Labour Party: 3
Independent: 2
Alliance: 1

Noes: 290

---

Conservative: 240
Liberal Democrat: 44
Democratic Unionist Party: 5

Schedule 1, as amended, agreed to.

Clause 2 ordered to stand part of the Bill.

Schedule 2

Amendment of provisions about revenue support grant

19:45

[Helen Jones]

I beg to move amendment 65, page 36, line 42, at end insert—

‘(2A) In determining whether or not to pay a grant to any authority named above the Secretary of State must satisfy him or herself—

(a) that the resources available to any local authority (including payments made under Schedule 1 of this Act) are sufficient to meet the needs of the local authority, and

(b) that there has been no significant change in the circumstances of the local authority resulting in a substantial increase in demand for the authority’s services or for reductions in council tax.’.

The schedule removes the Secretary of State’s duty to pay a revenue support grant and replaces it with a power to do so. Like many measures in the Bill, how that power will be exercised remains opaque.

From the consultation, it seems that the Government propose to use discretionary grant more like a section 31 grant to meet new burdens on local authorities, but the point is that the power in the Bill does not say that. The power is given to the Secretary of State to decide whether or not to pay a grant and there is a real possibility of the gap between the resources available to a local authority and its need growing even further.

I have already quoted the concerns of Yorkshire and Humberside councils about how the baseline was set and the possible gap that will emerge by 2013-14 between the needs of a community and the resources available to it. Their view was expressed reasonably, but many local authorities’ justified fears of increasing gaps are much stronger.

The special interest group of municipal authorities, or SIGOMA, modelled outcomes based on business rates growing at about 4%, which is 1.5% above inflation; council tax growing at 2.5%; and inflation growing at 2.5% over the same period. On that basis, many councils will suffer a real decline in overall income in the first two years of the scheme, first because the increase in business rates will be taken by the Government, and secondly because all local authorities will suffer an absolute decline in 2014-15 as the funding available to local government is reduced overall in line with the Government’s spending review.

In fact, the autumn statement was clear that the Government are not on target to meet their deficit reduction programme until 2016-17, which is much later than first thought. Local authorities will find themselves penalised, because the Bill is clear that the system can operate only within the overall spending envelope set by that programme.

This change—from a system in which grant is paid to one in which there is a dependence on business rate generation—brings with it real concerns. Levy and safety net payments could mitigate some of the impact, but as we discussed earlier, we still do not know properly how the Government will operate them. We have seen no drafts, yet everything is left to the regulations.

As time goes on, the problems with the system will likely become apparent. The Government have failed to consider the different tax base of local authorities, especially because the council tax base does not feature in the Bill. The Government have nothing to say about their role in helping weaker local economies to grow and have shown repeatedly in the debate that they do not wish to take any account of need, yet it is precisely those weaker local economies that are most likely to face the greatest strains on their resources in the coming years.

We have mentioned several times the problem of child poverty. There is a real problem for councils with weaker local economies that need to deal with levels of child poverty in their areas that are well above average. Child poverty is 29% in Hartlepool, for example, and 27% in Liverpool. Those authorities have much greater problems meeting the needs of their populations than those with fewer problems, such as Surrey. But the charities working in this sector tell us that child poverty is likely to increase, rather than decrease, as a result of the measures that the Government are taking. Their cuts to housing benefit, their Welfare Reform Bill, and the cuts in council tax benefit that they are seeking to introduce in that Bill will all increase child poverty.

One example that may have slipped through the net is the increase in the hours needed to work to qualify for working tax credit. That measure alone will affect 200,000 families and is likely to put 400,000 more children into poverty. What will that mean for local councils? It will mean more demands on their statutory social services; more people moving out of private rented accommodation and requiring emergency accommodation, at huge expense to council tax payers; more people unable to pay their council tax; more demand for council services; and less ability to meet the demand.

[Graham Jones]

Will my hon. Friend add to that list that, with a reducing income to pay for those needs, those authorities will have less opportunity to invest in business infrastructure to attract businesses—the inverse of what will be happening in the net beneficiary authorities?

[Helen Jones]

My hon. Friend is right. Instead of a virtuous circle, authorities could end up in a vicious circle that spirals further and further downwards.

If we look at unemployment figures, we see the same problem facing particular local authorities. Unemployment is up 6.9% in Yorkshire, Humber and the north-west. In Denton and Reddish—my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) is not in his place at the moment—it is up 14.5%. In Derby South it is up 16.7% and in parts of Newcastle it is up by 14.6%. All of those are authorities that have already experienced huge cuts in their spending power under this Government and are likely to see further cuts in their resources as the scheme proceeds.

It is estimated that by 2016 the disparity between the richer and poorer areas will become apparent. After 10 years, which is when the Government propose to reset the scheme, the gap between the affluent areas and the poorer ones will be wider still. The Government have said that no council will lose out at the start of the scheme. What will happen in year three, year five and year 10? No one knows, but in the meantime the Government expect local councils to pick up the consequences of their failed policies, policies that are designed to hit the poorest people in the poorest communities. That is why we have tabled the amendment, which would provide that the Government, when deciding whether to pay a grant, must ensure that the resources available to a local authority are sufficient to meet its needs and that there has been no significant change in circumstances that has led to a significant increase in demand for services or reductions in the amount of council tax collected.

The second part of the amendment is designed to tackle the kind of problem that occurs, for example, when a major employer closes down—we discussed that earlier. What happens then is that unemployment leads to more demand for services from councils and a loss in revenue, because more people qualify for council tax benefit at the same time as the council has lost business rate income. How is a local council to cope with that under the system the Government propose? The council will lose rate revenue and council tax, and even if it is successful in attracting new businesses, they will not come in immediately. If, as is often the case, those new businesses are small and medium-sized, they will not generate the same level of business rate. Safety net payments will not kick in until the following year and we do not know whether they will be sufficient to replace the loss of income. We do not know, because the Government will not tell us the basis for their calculation.

The Secretary of State should use his power to pay a grant where there is a real gap between needs and resources. If not, we will see—we have made the point throughout discussion of the Bill—the gap between rich and poor increase. The motto of this Bill seems to be to them that hath shall be given, but that is not the way to run services, especially statutory services, in a civilised society.

[Graham Jones]

Does my hon. Friend agree that it is grotesquely unfair that constituents in those poorer areas are paying for goods and services, the profits from which furnish plush offices and pay high executive wages in the likes of Westminster and the City of London? The poor are effectively paying the rich, because there are no head offices in deprived local authorities. Westminster and City of London will be able to keep those resources and that is grotesquely unfair.

[Helen Jones]

My hon. Friend raises a point that I had not considered before, but he is right about that effect. Part of the problem in this country is that headquarters of major companies are often concentrated around London and the south-east, unlike many other economies, in which it is common for major companies to have their headquarters in the regions. There is huge unfairness built into the system that the Government propose.

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

How many headquarters are there on the Isle of Wight, which is in the south-east?

[Helen Jones]

I did not say that they were in every constituency: I said that they are concentrated in London and the south-east, which is a plain fact.

In any case, we do not believe that this is the way to proceed. If the Government do not take steps to tackle the gap—and those steps are not set out in the Bill—services in many councils will decline, while others are able to reduce, even abolish their council tax as time goes on. We will therefore seek to divide the Committee on the amendment later, and I commend it to my hon. Friends.

[Mr George Howarth]

I rise to support my hon. Friend the Member for Warrington North (Helen Jones) on amendment 65, which encapsulates an important principle. The 2012-13 settlement, which will be used as the baseline for the new finance system that is to be introduced, has a number of problems that will affect areas such as Knowsley disproportionately—we have already heard examples from other areas.

It is important for Knowsley in particular—and I hope the Minister will comment on this when he replies to the debate—that the system is based on the damped allocations, including the grant floor, as that will lock £6 million in for Knowsley, which is a very important sum of money. The baseline also needs to consider the scale of cuts faced by some local authorities in the recent multi-year settlement which, as my hon. Friend has said, targeted some of the most deprived areas in Britain, including Knowsley. It is worth reminding the Committee that Knowsley’s cut in revenue spending power per head of population in 2011-12 was £156.09 compared with the average in England as a whole of £49.18.

If the Secretary of State were here for this debate, he would be sitting there smiling and might even be tempted to say, “The point we’re trying to make with this Bill is that local authorities such as Knowsley should go out and promote their businesses, get more inward investment and shore up the business rate, the benefits of which would offset some of these problems.” However, the difficulty is, first, that that does not address the fact that we cannot switch around economic activity in a given area in a short space of time. We can do it over time, and Knowsley has been quite successful in retaining major industries. Earlier I quoted the example of Jaguar Land Rover, which has remained in Knowsley; indeed, it has grown, with new products and a major recruitment programme last year. New businesses can also be attracted, which is what we did with QVC, a massive business, employing about 1,500 people in Knowsley, and a major contributor to the business rates of the borough. However, doing that takes time, and such changes cannot be made in a short space of time.

20:00

Added to that, the current difficulties that this country faces—I do not propose to get into a debate about their cause, although I am happy to do so if anyone wants me to—means that areas such as mine face more distress than would otherwise be the case. In turn, that will affect the needs of the area, which is why it is important that a provision such as that contained in amendment 65 should be inserted into the Bill. I want to give the Committee some information about the impact that not making such an amendment will have on areas such as Knowsley. Knowsley would support the commitment to uprating the tariffs and top-up by inflation under the proposed scheme—we talked about that earlier, but it is important that that should be included in the scheme when the Bill is enacted. At the moment, we are not entirely clear how all that will work or how it will affect some areas as compared with others.

However, what we do know, on the basis of the information that is available, is that under the Government’s proposals, local authorities such as Knowsley will be left behind by the wealthier authorities. Those authorities can easily recover from current reductions in resources—which is what took place in the comprehensive spending review—because they already have larger tax bases but we cannot will such a recovery instantly into existence in areas such as Knowsley. Areas with large tax bases find it easier to recover what has already been taken. Also, as I said earlier—although it bears repeating—the process will carry on. It is not as if it will last only one, two or three years. In the case of Knowsley, we will still face year-on-year reductions in resources of more than 5%. Indeed, after 10 years of the proposed system, we would still be facing annual reductions of 3.8%. This is therefore a serious matter for areas such as Knowsley.

I do not know whether the Minister has seen the excellent briefing that SIGOMA—the special interest group of municipal authorities—provided for MPs last week, but if he has not, I would very much commend it to him. That briefing shows the top-up and tariff updated by RPI on the current, known operation of the Bill. I accept that there is still some room for elaboration and illumination, but the briefing tells its own story. The authorities with the lowest funding growth are Liverpool with 21.9%, Knowsley with 21.9%, Bury with 21.1%, Wirral with 21%, and South Tyneside with 22.7%. Those statistics alone are fairly meaningless, unless they can be compared with those for other areas—this comes back to the wealthiest/poorest area argument. Guess which authorities, and where they are, will have the highest funding growth: the City of London with growth at a staggering 139.6%, Westminster with 90.7% growth, Hillingdon with 40.6%, Camden with 37.5%, and Kensington and Chelsea with 34.5%.

Therefore, when my hon. Friend the Member for Warrington North makes the point, which she made very effectively, that the most deprived areas are the most disproportionately affected, that is not windy rhetoric on her part—she is never one for windy rhetoric, and I would never dare make such a suggestion. Rather, it is based on fact. The available information, which has been provided by a range of organisations, including SIGOMA, shows that she is entirely correct in that assumption. The reason it is necessary to set out that background is that the amendment would require that needs, as they change over time, should be taken into account.

I will not rehearse all the difficulties that we face in Knowsley, because we have struggled with the problem, both under the previous Government and through the local authority, for many years. However, most of those problems and most of the needs that we want addressed through the local government finance system arose in the 1980s, when the industrial areas of Kirkby and the parts of Huyton that were based on industry collapsed. They collapsed because the economy was in a deep recession. There was high unemployment, reaching as high as 50% or 60% in some parts of Knowsley—staggering figures that it was almost impossible to deal with. The industrial base shrunk dramatically as a result of closures. For example, the Birds Eye factory closed in the late 1980s with the loss of 1,300 jobs, and we also lost major brand-name companies such as Hygena. That happened not because of anything that the work force did wrong or because those companies were burdened by red tape or excessively high business rates, but because of the economy and the recession at the time—I mentioned just those two closures, but I could quote a long list.

The consequence was that the needs of boroughs such as Knowsley grew enormously over that period. Indeed, the out-workings of those problems still exist today, in the form of a low skills base, welfare dependency, the poor health that is associated with long-term unemployment and benefit dependency, and so on—the list could go on and on. Indeed, my hon. Friend the Member for Liverpool, Walton (Steve Rotheram) is now in his place, and there are parts of his constituency where the same problems exist. In fact, they exist on an even greater scale in some areas, as parts of his constituency were also former industrial areas. However, the argument that I am making, which is not unfair or unreasonable, is simply this. We cannot turn the clock back in areas such as Knowsley and expect business or those industries to be recreated at the same rate at which they retracted in the 1980s and early 1990s. It is a long-term project.

In the meantime, without that economic expansion, which is incremental, slow and difficult to manage, we still have those needs, which will be unmet unless the local government finance system works in such a way that there is redistribution from wealthier areas to those in the greatest need. We are confronted with the very reverse of that, however. The areas that will be the most disproportionately and adversely affected are those with the greatest needs, and those that will be the most rewarded and that can most easily cope with the changes are those with the fewest needs.

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

My right hon. Friend is making a powerful point about the needs of specific areas, and he is correct in saying that Liverpool, Walton now has, unfortunately, the fifth highest level of unemployment in the country. Liverpool as a whole therefore needs more support. How does he think the Government can justify the fact that, proportionally, places such as Liverpool have been hit the hardest and that Liverpool has had to take a cut of £141 million in the past two years?

[Mr Howarth]

I shall give my hon. Friend two possible answers to his question, and I shall leave him to decide which is correct. The first possibility is that the Secretary of State and the Ministers responsible for this Bill genuinely believe that areas such as mine and that of my hon. Friend have the capacity create to economic growth—a bit like turning on a tap—and to widen the tax base and increase the revenue that they get through the business rates. They might also think that we are not doing enough to attract new investment into our areas. My hon. Friend and I know that that is not the case, however.

The alternative answer was put forward in very explicit terms by my hon. Friend the Member for North Durham (Mr Jones) earlier. It is that these measures are a crude way of rewarding those areas that send Conservative and Liberal Democrat MPs to this House and penalising those that do not. To put it even more crudely than my hon. Friend the Member for North Durham did—although I am not entirely sure that that is possible—I think that the Government are rewarding their friends and penalising their enemies.

I am not standing here as the representative of the Knowsley constituency to cry crocodile tears or to wave around the levels of deprivation that exist there. Those are facts. This is not a question of sentiment or of special pleading. The reality is that, as a result of historical events, some of which took place at least 20 years ago, we have problems and, as a result, we have needs. Unless the Bill can satisfy me and the people of Knowsley that those needs will be taken into account when the grant formula is determined, the more bleak interpretation that my hon. Friend the Member for Liverpool, Walton drew out of me a moment ago will be the inescapable conclusion.

I hope that the Government will accept the amendment, either here or in the House of Lords, later in the proceedings. They must not fall back on the argument that we heard earlier, when they said, “Don’t worry, we’ll take all this into account in the regulations. It will all become clear then.” The risks involved are so great for my constituents and for the local authority in Knowsley that it is impossible for me to accept those assurances. I do not believe that they have been given dishonestly. I accept that they have been given in good faith, but I have been around long enough to know that promises made in the heat of the moment in Committee in response to concerns about specific provisions have a habit of getting lost in the ether later. We need clarity, but we need it now. Local authorities are expected to plan on a long-term basis to meet their needs and determine their expenditure on services. Without that clarity, we will find ourselves in a position, some years down the line, in which the worst possible interpretation that we can put on the Bill will be the nightmare reality.

20:15

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

The descriptions I have heard of myself today have varied enormously. The hon. Member for Birmingham, Erdington (Jack Dromey) described me this morning as a Leninist, and earlier in these debates the hon. Member for North Durham (Mr Jones) sought to name a street after me and suggested that I might be pickled. I want to respond to this debate using neither the extreme ideology of the left nor the extreme ideology of the right. I want simply to say that we have brought to the Committee a set of proposals to give local authorities control over their resources for the first time in 30 years, including not only their council tax but their business rates.

I can understand, and will respond to, the concerns that have been expressed about the precise details of the proposals. However, hon. Members will not be able to interpret correctly what we are doing if they make assumptions about an ideological direction, other than the ideology of localism, which involves getting decisions and money out of Westminster and Whitehall and returning them to town halls and local communities.

I cannot accept amendment 65, because it would place a requirement on the Secretary of State to undertake an unnecessary assessment of need, which could risk undermining our objectives to create long-term certainty for a strong growth incentive and to reduce local authorities’ dependence on central Government grants. Need is already incorporated as an important part of the system, and the different circumstances of authorities will be taken into account as the scheme is set up.

[Graham Jones]

Has the Minister made any assessment of the risk management carried out by local authorities, and of how much money they will have to put aside as a contingency to deal with any liabilities or deficits that they might incur as a result of the Bill? That could involve housing benefit, council tax and non-domestic rates. Has he assessed how much money councils will need to bank as a contingency measure?

[Andrew Stunell]

The hon. Gentleman’s point was raised in an earlier debate on the way in which local authorities will assess the risks that are inherent in any new proposals, and in these ones in particular. In my time, I have served on three different local authorities and with about eight different chief finance officers, and their approach to these matters was that although they might get a bonus if there was money in the bank at the end of the year, they would be likely to get the sack if there was none. The job of those who control local authorities—the democratically elected representatives—is to strike the correct balance between the risks calculated by a chief finance officer and the real risks in the real world. I hope that the hon. Gentleman will be a force for good in that regard, and that by the time I have finished speaking, he will see that some of his worst fears have been grotesquely exaggerated. I hope that he will understand that there are real opportunities for every local authority in England to benefit from the system that we are bringing in.

[Graham Jones]

My local authority, Hyndburn borough council, has put away almost £1 million as a contingency for the next three or four years, mostly in anticipation of the passage of this Bill. Will the Minister comment on that, because it refutes the suggestion he has just made?

[Andrew Stunell]

Actually, it confirms it absolutely. In another debate, the hon. Gentleman and I had an interesting discussion about whether he was receiving good advice from his council about housing policy and it transpired that he was getting very poor advice. If we were having another debate, I would ask him whether his local authority had now registered as a registered provider of housing, as it was failing to do so and was therefore losing out on opportunities for Government money. Given that fact, I would not necessarily accept that the decision it has taken to retain money in its accounts was based on the soundest available interpretation of its future financing.

Need is already incorporated as an important part of the system and the different circumstances of authorities are taken into account. I shall give some practical examples in a minute or two. Local authorities’ baseline funding levels will be set on the basis of the 2012-13 formula grant process. To pick up on the points made by the right hon. Member for Knowsley (Mr Howarth) about damping, floors, ceilings and so on, we consulted last year and asked consultees for their views on retaining damping. He will, perhaps, not be completely surprised to hear that the answers depended strongly on whether the writers were recipients of the benefit of damping. We have considered that carefully and we are minded to retain the current damping in the assessment of formula grants, so I hope that will provide some reassurance to him and to his local authority. I know, however, that there will be others in the House for whom it will be a major disappointment.

[Mr Andrew Turner]

rose—

[Annette Brooke]

rose—

[Andrew Stunell]

I shall take an intervention, but perhaps the direction these interventions are coming from will give the right hon. Member for Knowsley a little comfort.

[Mr Andrew Turner]

Will the Minister explain to me why floor authorities that get extra grant above that determined by the formula through damping will be protected whereas councils such as my own on the Isle of Wight will not? Secondly, will the costs of concessionary fares and rurality on the island be properly accounted for?

[Andrew Stunell]

I thank my hon. Friend for raising all those points. As I predicted, clearly a decision to retain damping benefits some local authorities and is to the disbenefit of others. The Government have announced their view and I am sure that my hon. Friend will find ways to express his disappointment at a later stage. On the other points, as my right hon. Friend the Secretary of State has made clear, the calculation of the formula grant figures will take account of new data, such as that from last year’s census, and will take a view on what might need to be done on concessionary fares and rurality. We have made that point, but nevertheless the foundation stone will be the formula grant figure for 2012-13, as amended by the measures in the points I have just made. The calculation of tariffs and top-ups will therefore be based strictly on that and will ensure that local authority funding at the outset of the scheme is in line with that assessment of relative needs and resources.

[Annette Brooke]

I thank the Minister for giving way, and this is a genuine question. Is it not true that the baseline funding will have taken on board the council tax base? Was that not reflected in previous formulae? An authority such as mine, for example, would naturally get less formula grant because of its council tax base.

[Andrew Stunell]

My hon. Friend is right and I will bring some of the facts and figures to the attention of the Committee in a moment or two. I hope that will reassure not just her but Opposition Members about the impact of the scheme.

Once the baseline is set—for shorthand, let us say that it is set at formula grant level—it remains fixed in place and in amount, in real terms, until there is a reset. We have already said that that figure will be uprated by RPI to effect that. In advance of any reset, protections will be built in for those authorities that are less able to respond to the growth incentive. For instance, there will be the safety net payments we have already discussed, which will apply to any local authority that sees its income drop by more than a set percentage below its baseline funding level.

[Helen Jones]

The Minister and his colleagues keep talking about the growth incentive, so will he now answer one simple question to which we cannot get an answer from any of his colleagues? What does he think local authorities will do differently under his scheme from what they do now? The point has been made again and again that most local authorities are constantly seeking to attract new jobs and new investment.

[Andrew Stunell]

Similar questions were asked about the Government’s decision to apply the new homes bonus to empty homes. We were asked what possible difference that could make, but it has reduced the number of empty homes by 21,000 this year and, as I go around the country, I find that local authorities are, for the first time, seized with the importance and necessity of tackling empty homes because that is an income stream for them. That will definitely be the case with local authorities in this situation. Indeed, the Opposition have given some illustrations that suggest that they rather fear that it might. There have been questions about whether the measure will prohibit the redevelopment of sites if authorities cannot keep the business rate income coming in. Opposition Members see that the perception about receiving a business rate income will be a significant consideration for local authorities of all kinds.

[Steve Rotheram]

It appears that the Minister is trying to advance the argument that that there are local authorities that are not interested in attracting inward investment. Can he name one?

[Andrew Stunell]

I am certainly not going to name an authority that is failing to get its inward investment, but I invite the hon. Gentleman to frame his remark and revisit it in four years’ time, when he will see the results of the change we are introducing.

One of the central criticisms of the Bill has been based on a misunderstanding of what happens at the moment and a deep pessimism about what it is possible to achieve in the future. Let us look at the area of the hon. Member for Liverpool, Walton (Steve Rotheram). In the four-year period from 2005-06 to 2009-10 the average annual increase in business rates in Liverpool was 8.2%. It absolutely is not the case that Liverpool loses out by getting business rates instead of formula grant. The hon. Gentleman might like to ask the treasurer at Liverpool what the annual average increase in formula grant was at that time, because that is what we are comparing—formula grant that is delivered to Liverpool and dictated by Whitehall against a business rate income that is in Liverpool’s hands. As I have said, the increase in those four years was 8.2% and I challenge the hon. Gentleman to say that the outgoing Labour Government were as generous as that. Let us not automatically assume that because an authority has difficult and challenging circumstances it is not possible for it to have increases in rates or that that is not happening.

20:30

[Helen Jones]

rose—

[Andrew Stunell]

I will give way to the hon. Lady in a moment, but I want to mention Knowsley first. The right hon. Member for Knowsley has done a very good job of illustrating the challenges faced by his council and his residents. He made the point that he has a number of large employers and he has understandable anxieties about the possibility of extreme volatility that that introduces. However, in the four-year period I have mentioned, Knowsley had an annual average growth of 8.7% in its business rates. Again, I invite him to talk to his chief finance officer and find out whether the formula grant increase for Knowsley under Labour was higher or lower than 8.7% per year. I hope that gives yet another illustration that it is not necessarily the most challenged or challenging authorities that face the losses he fears from the transfer of decision making and money from Whitehall to the town hall

[Mr George Howarth]

rose—

[Helen Jones]

rose—

[Andrew Stunell]

I shall give way to the right hon. Gentleman and then to the hon. Lady.

[Mr Howarth]

I need to make two points. First, when I spoke earlier I made the point that as far as I know there is no danger of the two companies I mentioned—Jaguar Land Rover and QVC—not surviving and prospering in future. I mentioned them merely as examples of the sort of investment Knowsley has been able to attract and I was not saying that the inherent volatility is likely to come about because either of them will close. Secondly, the Minister suggests that I should talk to the director of finance at Knowsley, but my speech was based largely on a discussion I have already had with the director of finance. Given the current circumstances, he does not think that the kind of investment we have been able to attract in the past can be guaranteed in future.

[Andrew Stunell]

On the right hon. Gentleman’s first point, I agree and I am sorry if any of my remarks conveyed a different impression. He is absolutely right that the issue is not about the future of particular companies in his constituency. On his second point, it is a good idea for me to tackle this issue of need head-on, as the amendment is about need.

[Helen Jones]

Will the Minister give way?

[Andrew Stunell]

I am so sorry, I will certainly give way.

[Helen Jones]

I am very grateful to the Minister for giving way, but I have to say that he is advancing an entirely specious argument. He is comparing growth at a time when the Labour Government were investing hugely in cities such as Liverpool and when the economy was growing with a time when that investment has been mostly withdrawn under this Government and the economy is flatlining. Anyone who seriously thinks we will get the same amount of growth in the next—

[Gavin Barwell (Croydon Central) (Con)]

It is relative.

[Helen Jones]

No, the Minister quoted the actual growth in business rates. Anyone who thinks we are going to get the same amount of growth in the next few years is living in cloud cuckoo land.

[Andrew Stunell]

I invite the hon. Lady to check her diary carefully and see exactly when it was that we had to buy all the banks because they had gone bust.

I want to contrast Knowsley with another local authority. Knowsley gets £1,225 per resident in formula grant. I am sure the right hon. Member for Knowsley would say that is not enough, and I understand his point of view, but I want to draw his attention to Wokingham, which is often prayed in aid as one of those rich southern places that benefits from an unfair system. Wokingham had a 3.3% growth in its business rates in the period I have mentioned against Knowsley’s 8.7%, and whereas Knowsley got £1,225 in formula grant per person, Wokingham got £686. That is being built into the system.

The hon. Member for Hyndburn (Graham Jones) said he thought the Government were behaving grotesquely unfairly. He may think that, but I have hon. Friends who think that that outcome is grotesquely unfair for a different reason. We have a system that recognises need, albeit imperfectly and even though we have built in damping. That suits the right hon. Member for Knowsley but does not suit my hon. Friend the Member for Isle of Wight (Mr Turner). That is entrenched in the system and it is important that if the Opposition make criticisms—understandably, because that is their job—they should be based on a sense of reality.

We are introducing a scheme that provides an incentive for growth and localises decisions over the money that local authorities can spend. That growth and localisation is very much better than local authorities standing as beggars at the door of Whitehall, year after year, saying, “We want more money.” Surely it is right that those who have the money can decide how to spend it and those who can promote growth have opportunities not only to do it but to benefit from it.

What about Westminster which the right hon. Member for Knowsley prayed also in aid? Let us be clear: he should rejoice when Westminster gets loads of business rate. Why? Because the authority keeps only the baseline figure. It will keep only its formula grant figure. All the rest will go to help Knowsley, among other places—[Interruption.] The hon. Member for Warrington North (Helen Jones) says it is not true. I am not sure whether she is accusing me of deceiving the Committee.

Westminster gets its formula grant and the rest goes back into the pot. When Westminster has growth, it will be able to keep some of it. If it has disproportionate growth, it will be taken away in the levy. Two things will affect Westminster: it will get only the equivalent of its formula grant in its baseline, and when growth comes, any disproportionate growth will be taken away to fund the right hon. Gentleman’s safety net.

[Mr George Howarth]

Let me make it clear. I am not arguing that Westminster, Wokingham or even the Isle of Wight should be penalised in any way. That is not my point. By making invidious comparisons, the Minister makes the case for the amendment. We are saying not that everybody should get the same, but that what they get should be based on rigorous analysis of the needs of individual areas.

[Andrew Stunell]

The right hon. Gentleman should be careful about making that argument; I might be tempted to take away his damping. That would be the unchallengeable fact in what he said.

[John Healey]

The Minister may have meant it lightly, but he has just said a serious thing. It suggests that Ministers in this Government make arbitrary and personal decisions about the funding going to local councils, that are not based on any fair, open or objective formula.

[Andrew Stunell]

That is of course wilfully misunderstanding the point I made. The damping mechanism means that Knowsley does not get what the Labour Government decided it should get if the formula of need was applied correctly. The damping formula is protecting Knowsley from full implementation of the needs formula that the Labour Government introduced, and the right hon. Member for Knowsley wants me to keep it. Let us be quite clear. I am sorry if my lightly enunciated remark was taken as meaning anything other than that the right hon. Gentleman advanced a contradictory argument to the one he was making a few minutes ago.

[Mr George Howarth]

I suggest that in the morning, when the Minister has a quiet moment—I am sure that he has them in his life—he reads the Hansard for this debate; he can then decide which of us is being contradictory. For the purposes of absolute clarity, and following the point that my right hon. Friend the Member for Wentworth and Dearne (John Healey) made, will the Minister make it absolutely clear that his was a light-hearted debating remark, and that he does not intend to penalise Knowsley in the way that he described?

[Andrew Stunell]

I am disappointed with that, I have to say. I said very clearly that the Government have reached a settled view about including damping in the formula grant system; I hope that that is very clearly on the record.

Let me turn to the part of the amendment that relates to what should happen to revenue support grant. We are talking about funding outside the local share of the rates retention scheme. We could only use the revenue support grant for other matters. For instance, in the financial year 2013-14, the most likely recipient will be Local Government Improvement and Development. Perhaps the scale of these things needs to be understood: £27.8 billion is being distributed through formula grant—the amount that will, in future, come through the business rates retention scheme. Local government receives funding from outside that, from departmental budgets. For instance, under the provisional settlement for the coming year, the learning disability and health reform grant will be £1.36 billion; that comes from the Department of Health. The local sustainable transport fund will be a much smaller figure—£100 million—and comes from the Department for Transport. The preventing homelessness grant will be £90 million, and comes from the Department for Communities and Local Government. In the great majority of cases, it would be completely inappropriate to do what is suggested in amendment 65 and run those through a needs assessment.

[Helen Jones]

I am sorry, but most of the grants that the hon. Gentleman mentioned could not be run through needs assessments, because they are paid by other Departments, not by DCLG. The amendment relates to DCLG.

[Andrew Stunell]

I think that the hon. Lady is asking a question about revenue support grant, and that is the answer that I am giving her.

The Government have strongly endorsed the previous Government’s policy that new burdens imposed on local authorities should be funded directly by central Government. We would therefore want a more tailored assessment of how those new burdens fall, rather than a needs assessment process.

The amendment misses the mark entirely. The speakers in this debate have started from a position of understandable oppositional attack on the proposals that we have introduced, and have entirely missed the point of what we are doing in returning power and opportunities to local authorities. Their fears for their individual authorities are misplaced. With that explanation and assurance, I hope that the hon. Lady will choose to withdraw the amendment.

20:45

[Helen Jones]

I want to respond to what the Minister said, because I am not entirely sure, having listened to him, whether he has understood what is in the Bill that his Department has brought before the Committee. First, he tells us that the Bill hands control of business rates back to local authorities, but it precisely does not do that; the Secretary of State decides the central and local shares for each authority. The Minister also told us that need was in the system. Well, it may be somewhere in the system in his mind, but it is certainly not in the Bill. It appears nowhere in the Bill, and the Government have rejected every amendment that tried to put it there.

Secondly, the Minister kept quoting the growth incentive for local authorities. Throughout these debates, no one on the Government Benches has been able to tell us what they expect local authorities to do differently under the new system from what they are doing now. He also talked about local authorities giving all their growth, if they are a high growth area, to other authorities, but that is not what the Bill does. That ignores the gearing effects. Local authorities with a high tax base will gain more from the same amount of growth than an authority with a low tax base.

It is true that there is a levy on local authorities. That does not take back all the growth from a local authority, nor does the top-up and tariff system. Let me tell the Minister again that the levy takes back part of the disproportionate growth. It does not take back all the disproportionate growth. The logic of that is that some authorities grow at a higher rate than others. The problem is that the Government will not accept that the effect for some local authorities might be a huge gap between needs and resources.

Once again, we are asked to give a blank cheque to the Secretary of State to distribute grants in whatever way he thinks fit. There are a number of objections to that. We will be told, no doubt, that the Secretary of State will do that fairly, and that he is a benign, generous and wise individual. His record so far on local government finance would not support that view. Even if we believed that, there are whispers that he might not be in that post very long. However, in the Bill we are giving power not to an individual, but to an office holder, with no checks and balances whatever in the system. I am amazed that Conservative MPs, who constantly lecture us about the growth and overweening power of the state, are prepared to cede such power, with no checks and balances in the system.

What we heard from the Minister in his winding-up speech is cloud cuckoo land. It is nothing to do with what is in the Bill. Perhaps it is an aspiration, like not raising tuition fees, but we want to see these things written into the Bill. For that reason, we will press the amendment to a Division.

Question put, That the amendment be made.

20:48

Division 438

Ayes: 214

---

Labour: 210
Independent: 2
Alliance: 1

Noes: 288

---

Conservative: 240
Liberal Democrat: 42
Democratic Unionist Party: 5

Schedule 2 agreed to.

Clauses 3 to 5 ordered to stand part of the Bill.

Schedule 3

local retention of non-domestic rates: further amendments

Amendments made: 9, in page 44, line 14, leave out ‘12(8)’ and insert ‘12(8) or (8A)’.

Amendment 10, in page 44, line 16, leave out ‘15(6)’ and insert ‘15(6) or (6A)’.

Amendment 11, in page 44, line 43, leave out ‘12(6)’ and insert ‘12(6) or (6A)’.

Amendment 12, in page 44, line 45, leave out ‘15(4)’ and insert ‘15(4) or (4A)’.

Amendment 13, in page 45, line 44, leave out ‘12(2) and (8)’ insert ‘12(2), (8) and (8A)’.

Amendment 14, in page 45, line 44, leave out ‘15(6)’ insert ‘15(6) and (6A)’.

Amendment 15, in page 46, line 3, leave out ‘12(1) and (6)’ insert ‘12(1), (6) and (6A)’.

Amendment 16, in page 46, line 3, leave out ‘15(4)’ insert ‘15(4) and (4A)’.—(Robert Neill.)

Schedule 3, as amended, agreed to.

Clauses 6 and 7 ordered to stand part of the Bill.

New Clause 2

Major redevelopment schemes: non-domestic rate income

‘(1) In any case where a relevant authority proposes a major redevelopment scheme resulting in a substantial loss of non-domestic rate income for a period exceeding one year, the authority may make an application to the Secretary of State for a safety-net payment to be made to the authority each year for the period of the scheme. The Secretary of State must determine whether to make such a payment having regard to—

(a) the proportion of non-domestic rate income which will be lost to the authority for the period of the scheme, and

(b) the future social and economic benefits of the scheme.

(2) The Secretary of State must notify the authority of his or her decision on whether or not to grant a safety-net payment and allow the authority 28 days to make representations about his or her decision before issuing a final determination.’.—(Helen Jones.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

The Committee proceeded to a Division.

[The Temporary Chair (Mr David Amess)]

I ask the Serjeant at Arms to investigate the delay in the Aye Lobby.

The Committee having divided: Ayes 219, Noes 284.Division No. 439][9.4 pmAYESAbbott, Ms DianeAbrahams, DebbieAinsworth, rh Mr BobAlexander, HeidiAli, RushanaraAllen, Mr GrahamAnderson, Mr DavidAshworth, JonathanAustin, IanBailey, Mr AdrianBain, Mr WilliamBalls, rh EdBarron, rh Mr KevinBayley, HughBeckett, rh MargaretBegg, Dame AnneBenn, rh HilaryBerger, LucianaBetts, Mr CliveBlackman-Woods, RobertaBlears, rh HazelBlenkinsop, TomBlomfield, PaulBlunkett, rh Mr DavidBrennan, KevinBrown, LynBrown, rh Mr NicholasBrown, Mr RussellBryant, ChrisBurden, RichardBurnham, rh AndyByrne, rh Mr LiamCampbell, Mr AlanCampbell, Mr GregoryCaton, MartinChapman, Mrs JennyClark, KatyClarke, rh Mr TomClwyd, rh AnnCoaker, VernonCoffey, AnnCooper, RosieCorbyn, JeremyCreagh, MaryCreasy, StellaCruddas, JonCryer, JohnCunningham, AlexCunningham, Mr JimCunningham, TonyCurran, MargaretDakin, NicDanczuk, SimonDarling, rh Mr AlistairDavid, Mr WayneDavidson, Mr IanDavies, GeraintDe Piero, GloriaDobson, rh FrankDocherty, ThomasDodds, rh Mr NigelDonohoe, Mr Brian H.Doran, Mr FrankDowd, JimDoyle, GemmaDromey, JackDugher, MichaelEagle, Ms AngelaEagle, MariaEfford, CliveElliott, JulieEllman, Mrs LouiseEsterson, BillEvans, Chris Field, rh Mr FrankFitzpatrick, JimFlello, RobertFlint, rh CarolineFrancis, Dr HywelGardiner, BarryGilmore, SheilaGlass, PatGlindon, Mrs MaryGoggins, rh PaulGoodman, HelenGreatrex, TomGreen, KateGreenwood, LilianGriffith, NiaGwynne, AndrewHain, rh Mr PeterHamilton, Mr DavidHamilton, FabianHanson, rh Mr DavidHarman, rh Ms HarrietHarris, Mr TomHavard, Mr DaiHealey, rh JohnHendrick, MarkHepburn, Mr StephenHermon, LadyHeyes, DavidHillier, MegHilling, JulieHodge, rh MargaretHodgson, Mrs SharonHoey, KateHopkins, KelvinHowarth, rh Mr GeorgeHunt, TristramIrranca-Davies, HuwJackson, GlendaJames, Mrs Siân C.Jamieson, CathyJarvis, DanJohnson, DianaJones, GrahamJones, HelenJones, Mr KevanJones, Susan ElanJoyce, EricKaufman, rh Sir GeraldKeeley, BarbaraKendall, LizLammy, rh Mr DavidLavery, IanLazarowicz, MarkLeslie, ChrisLewis, Mr IvanLloyd, TonyLong, NaomiLove, Mr AndrewLucas, IanMacShane, rh Mr DenisMactaggart, FionaMahmood, ShabanaMalhotra, SeemaMann, JohnMarsden, Mr GordonMcCabe, SteveMcCann, Mr MichaelMcCarthy, KerryMcCrea, Dr WilliamMcDonagh, SiobhainMcDonnell, JohnMcFadden, rh Mr PatMcGovern, JimMcGuire, rh Mrs AnneMcKechin, AnnMcKenzie, Mr IainMcKinnell, CatherineMeacher, rh Mr MichaelMearns, IanMichael, rh AlunMiliband, rh DavidMiller, AndrewMitchell, AustinMoon, Mrs MadeleineMorden, JessicaMorrice, Graeme (Livingston)Morris, Grahame M. (Easington)Mudie, Mr GeorgeMurphy, rh PaulMurray, IanNandy, LisaNash, PamelaO'Donnell, FionaOnwurah, ChiOwen, AlbertPearce, TeresaPerkins, TobyPound, StephenRaynsford, rh Mr NickReed, Mr JamieReeves, RachelReynolds, JonathanRiordan, Mrs LindaRobinson, Mr GeoffreyRotheram, SteveRoy, Mr FrankRoy, LindsayRuane, ChrisRuddock, rh Dame JoanSarwar, AnasSeabeck, AlisonShannon, JimSharma, Mr VirendraShuker, GavinSimpson, DavidSkinner, Mr DennisSlaughter, Mr AndySmith, rh Mr AndrewSmith, NickSmith, OwenSpellar, rh Mr JohnStraw, rh Mr JackStringer, GrahamStuart, Ms GiselaSutcliffe, Mr GerryTami, MarkThomas, Mr GarethThornberry, EmilyTimms, rh StephenTrickett, JonTurner, KarlTwigg, DerekTwigg, StephenUmunna, Mr ChukaVaz, ValerieWalley, JoanWatts, Mr DaveWhitehead, Dr AlanWilliamson, ChrisWinnick, Mr David Winterton, rh Ms Rosie Wood, MikeWoodcock, JohnWoodward, rh Mr ShaunWright, DavidWright, Mr IainTellers for the Ayes:Yvonne Fovargue andPhil WilsonNOESAdams, NigelAfriyie, AdamAldous, PeterAndrew, StuartBacon, Mr RichardBaker, NormanBaker, SteveBaldry, TonyBaldwin, HarriettBarclay, StephenBarker, GregoryBaron, Mr JohnBarwell, GavinBebb, GutoBeith, rh Sir AlanBenyon, RichardBeresford, Sir PaulBerry, JakeBingham, AndrewBirtwistle, GordonBlackman, BobBlackwood, NicolaBlunt, Mr CrispinBoles, NickBone, Mr PeterBottomley, Sir PeterBradley, KarenBrady, Mr GrahamBray, AngieBrazier, Mr JulianBrine, SteveBrokenshire, JamesBrooke, AnnetteBruce, FionaBruce, rh MalcolmBuckland, Mr RobertBurley, Mr AidanBurns, ConorBurns, rh Mr SimonBurrowes, Mr DavidBurstow, PaulBurt, LorelyByles, DanCampbell, rh Sir MenziesCarmichael, rh Mr AlistairCarmichael, NeilCarswell, Mr DouglasChishti, RehmanClark, rh GregClifton-Brown, GeoffreyCoffey, Dr ThérèseCollins, DamianColvile, OliverCox, Mr GeoffreyCrockart, MikeCrouch, TraceyDavey, Mr EdwardDavies, GlynDavies, Philipde Bois, NickDjanogly, Mr JonathanDorrell, rh Mr StephenDorries, NadineDoyle-Price, JackieDrax, RichardDuddridge, JamesDuncan, rh Mr AlanDuncan Smith, rh Mr IainDunne, Mr PhilipEllis, MichaelEllison, JaneEllwood, Mr TobiasElphicke, CharlieEustice, GeorgeEvans, GrahamEvans, JonathanEvennett, Mr DavidFabricant, MichaelFeatherstone, LynneField, MarkFoster, rh Mr DonFox, rh Dr LiamFrancois, rh Mr MarkFreer, MikeFullbrook, LorraineFuller, RichardGarnier, Mr EdwardGarnier, MarkGauke, Mr DavidGeorge, AndrewGibb, Mr NickGilbert, StephenGillan, rh Mrs CherylGlen, JohnGoldsmith, ZacGoodwill, Mr RobertGove, rh MichaelGraham, RichardGrant, Mrs HelenGray, Mr JamesGrayling, rh ChrisGreen, DamianGreening, rh JustineGrieve, rh Mr DominicGummer, BenGyimah, Mr SamHalfon, RobertHames, DuncanHammond, StephenHancock, MatthewHands, GregHarper, Mr MarkHarrington, RichardHarris, RebeccaHart, SimonHaselhurst, rh Sir AlanHayes, Mr JohnHeath, Mr DavidHeaton-Harris, ChrisHemming, JohnHenderson, GordonHendry, CharlesHerbert, rh NickHinds, DamianHoban, Mr MarkHollingbery, GeorgeHollobone, Mr PhilipHopkins, Kris Horwood, MartinHowell, John Hughes, rh SimonHuhne, rh ChrisHunt, rh Mr JeremyHunter, MarkJackson, Mr StewartJames, MargotJenkin, Mr BernardJohnson, GarethJohnson, JosephJones, AndrewJones, Mr DavidJones, Mr MarcusKelly, ChrisKirby, SimonKnight, rh Mr GregKwarteng, KwasiLeadsom, AndreaLee, JessicaLee, Dr PhillipLeech, Mr JohnLefroy, JeremyLewis, BrandonLewis, Dr JulianLilley, rh Mr PeterLloyd, StephenLord, JonathanLoughton, TimLuff, PeterLumley, KarenMain, Mrs AnneMaynard, PaulMcCartney, JasonMcCartney, KarlMcIntosh, Miss AnneMcLoughlin, rh Mr PatrickMcPartland, StephenMcVey, EstherMensch, LouiseMenzies, MarkMercer, PatrickMiller, MariaMills, NigelMilton, AnneMitchell, rh Mr AndrewMorgan, NickyMorris, Anne MarieMorris, DavidMorris, JamesMosley, StephenMowat, DavidMulholland, GregMundell, rh DavidMunt, TessaMurray, SheryllMurrison, Dr AndrewNeill, RobertNewmark, Mr BrooksNewton, SarahNokes, CarolineNorman, JesseNuttall, Mr DavidO'Brien, Mr StephenOfford, Mr MatthewOllerenshaw, EricOpperman, GuyOttaway, RichardParish, NeilPatel, PritiPaterson, rh Mr OwenPawsey, MarkPenrose, JohnPercy, AndrewPerry, ClairePhillips, StephenPickles, rh Mr EricPincher, ChristopherPritchard, MarkPugh, JohnRaab, Mr DominicRandall, rh Mr JohnReckless, MarkRees-Mogg, JacobReevell, SimonReid, Mr AlanRifkind, rh Sir MalcolmRobathan, rh Mr AndrewRobertson, Mr LaurenceRogerson, DanRosindell, AndrewRuffley, Mr DavidRussell, Sir BobRutley, DavidSanders, Mr AdrianSandys, LauraScott, Mr LeeSelous, AndrewShapps, rh GrantSharma, AlokShelbrooke, AlecSimpson, Mr KeithSkidmore, ChrisSmith, Miss ChloeSmith, JulianSmith, Sir RobertSoubry, AnnaSpencer, Mr MarkStanley, rh Sir JohnStevenson, JohnStewart, BobStewart, IainStewart, RoryStreeter, Mr GaryStride, MelStuart, Mr GrahamStunell, AndrewSturdy, JulianSwales, IanSwayne, rh Mr DesmondSyms, Mr RobertThurso, JohnTimpson, Mr EdwardTomlinson, JustinTredinnick, DavidTruss, ElizabethTurner, Mr AndrewUppal, PaulVaizey, Mr EdwardVara, Mr ShaileshVickers, MartinVilliers, rh Mrs TheresaWalker, Mr CharlesWalker, Mr RobinWallace, Mr BenWard, Mr DavidWeatherley, MikeWebb, SteveWharton, JamesWheeler, HeatherWhittaker, CraigWhittingdale, Mr JohnWiggin, BillWilletts, rh Mr David Williams, Mr MarkWilliams, Roger Williams, StephenWilliamson, GavinWillott, JennyWilson, Mr RobWollaston, Dr SarahWright, JeremyWright, SimonYeo, Mr TimYoung, rh Sir GeorgeZahawi, NadhimTellers for the Noes:Norman Lamb andStephen CrabbQuestion accordingly negatived.

[John Healey]

On a point of order, Mr Amess. The Under-Secretary of State for Communities and Local Government, the hon. Member for Hazel Grove (Andrew Stunell), wound up the previous debate for the Government, but I am not certain that Hansard will record exactly how he voted. Now he has rejoined the Front Bench having gone absent for a little while, perhaps he could tell us.

[The Temporary Chair (Mr David Amess)]

I am afraid I have to tell the right hon. Gentleman that that is not a point of order. The Committee will have heard what he said and will draw its own conclusions.

[Mr Tom Harris (Glasgow South) (Lab)]

Further to that point of order, Mr Amess. I wonder whether you could clarify a rule of which many of us were unaware. Is it in fact possible to run into the wrong Lobby and avoid your name appearing in Hansard by not actually voting? I have been in the House for 10 years, but I was not aware that that route was open to us.

[The Temporary Chair]

It is perfectly in order, whether it be unusual or not for the Minister to have done what he did.

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

On a point of order, Mr Amess.

[The Temporary Chair]

Is it on the same point?

[Mr Watts]

It is on a different point. Is it possible, Mr Amess, to extend the time of this debate by 15 minutes, bearing in mind that we have lost 15 minutes because a Minister was locked in the wrong Lobby?

[The Temporary Chair]

I must tell the hon. Gentleman that I have no powers to do so. Any more points of order would obviously reduce the time further.

New Clause 5

Re-set of the system

‘The Secretary of State shall establish a mechanism to allow local authorities to make representations on whether they believe a re-set of the system is required. The Secretary of State shall, prior to the publication of the Local Government Financial Report in any year, give consideration to any representations he has received and must lay before the House of Commons a report detailing—

(a) any representations he has received from local authorities on whether it would be appropriate to re-set the system, and

(b) his or her decision on such representations and the reasons for that decision.’.—(Helen Jones.)

Brought up, and read the First time.

[Helen Jones]

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

[The Temporary Chair]

With this it will be convenient to discuss new clause 7—Resets of the non-domestic rates retention system

‘(1) The Secretary of State shall be required to make arrangements for a “reset” of the non-domestic rates retention system every three years.

(2) Any such reset must include consideration of—

(a) relative spending needs of each authority,

(b) relative resources available through council tax income,

(c) relative resources available through non-domestic rates.

(3) The assessment of relative need shall be determined in full consultation with local government.’.

[Helen Jones]

It is nice to see the Minister in his place after the time he spent quivering with fear in the Lobby.

Having convinced a junior Minister of the value of new clause 2, I hope to convince the rest of them of the values of new clauses 5 and 7. The new clauses attempt to tackle the difficult problem of how often the system should be reset by requiring a reset every three years and by establishing a mechanism to allow local authorities to make representations on resets.

All hon. Members accept that there must be a balance between having stability in the system and coping with change, but a system that leaves it too long without a reset will simply increase the disparities between local councils and penalise those in greatest need. The long gap that the Government want will increase the dislocation between the resources available and the funding needed for local services, which we have discussed. There is therefore a possibility that service provision will become a postcode lottery depending on the demands made on a local council and on whether it has been successful in attracting new business.

[Andrew Gwynne]

Like me, my hon. Friend might have seen SIGOMA research that shows that all councils face a drop in their income when such changes are introduced. The research also shows that over the first five years of the 10-year period, a number of councils manage to make surpluses, but some do not. By the end of year 10, there is a huge disparity between the richest and the poorest authorities. Is not that the basic unfairness of the Bill?

[Helen Jones]

My hon. Friend highlights the problem throughout the Bill, but the longer the period between resets, the worse it gets. It is not clear what the Government plan, but in their response to the business rate consultation, Ministers say it is their aspiration to have a reset every 10 years.

[Mr Watts]

It is bad enough that the Minister is introducing a Bill that means that no hon. Member can work out the effect on their local communities and constituencies, but is it not even worse that he will also leave it for 10 years before he looks to reassess the situation?

21:30

[Helen Jones]

My hon. Friend, who is a clear expert in local government finance makes a valid point—[Interruption.] He certainly is, and he ran a very successful local authority.

Throughout proceedings on the Bill, we have tried to get some certainty. But there is no certainty about resets. It is not certain whether the Government’s aspiration will become a policy. The period is too long, and I suspect that in making it only an aspiration, the Government know that and are providing a get-out clause. They will not publish all the responses to their consultation, just a summary, but we know that the majority of respondents wanted a maximum of five years between resets, and many wanted a shorter period. This seems to have had no influence on the Government.

The problem with a 10-year reset is that all the modelling shows that the gap between the richer and poorer authorities will increase, and the Government have rejected all attempts to link resources with need. Indeed, the baseline for the redistribution of business rates is the current local government financial settlement, which has already created disadvantage, whatever the Under-Secretary might seek to tell us.

[Andrew Gwynne]

I am sorry to intervene again, but this issue is a hobby horse of mine. The general unfairness of the baseline locks in the in-year cuts that we saw in 2010-11, and the very poor settlements that Tameside in particular will receive in 2011-12, 2012-13 and 2013-14, so that those will be the baseline for the 10 years of this business rate redistribution.

[Helen Jones]

My hon. Friend makes a very good point and I have discussed with representatives of his local authority how badly they will be affected by this. No one will believe the Under-Secretary when he tells us that fairness is built into the system and that the Government will take account of need. A man who cannot even find the right Lobby is not likely to be believed to be an expert on local government finance.

Many of the councils who will suffer most have the weakest economies, the highest unemployment and significant barriers to business rate growth, so it is likely that they will be caught in a spiral of disadvantage, with local people paying the price. Labour Members have a real fear that the link between resources and needs, which has already been eroded by this Government, will be undermined further. Authorities with a high tax base will benefit more from the same amount of growth than those with a low tax base, even after taking levy payments into account.

No account is being taken, as we have seen, of the differing council tax bases of local authorities. That means that those authorities with many properties in band D and above will benefit much more from the same rise in council tax than those with a majority of properties in the lower bands. Some councils will end up struggling to protect the most vulnerable, while others might find that they have been successful enough to reduce, or even abolish, their council tax. The result will be that the system of delivering local services will no longer be seen as fair or reasonable, with huge implications for people’s support for the system of business rates and council tax. We saw in the extreme case of the poll tax what happens when public confidence in a system of local taxation collapses—when they no longer see it as fair. I suggest that that is also a risk with this system.

[Mr Watts]

Is that not exactly what the Government want? They want to show that local authorities have been left with two choices—either to cut vital services in their communities or to put up council tax—but they want to be able to blame them for that, rather than accepting the blame themselves.

[Helen Jones]

As my hon. Friend knows, we have discussed what the Government are trying to achieve many times in debates on this Bill. Opposition Members are all clear that this Bill is not about giving power to local authorities, but about ensuring that they get the blame for what goes wrong.

In fact, the Government have already recognised in their response to the consultation that there is a problem with changing needs in local authorities. For example, a rise in population would create the need for more children’s services, whereas as a growth in the number of elderly people may mean that more social care was needed. However, as we have seen in our debates thus far, the Government have failed to recognise that many other things can contribute to increased demand for local authority services, including unemployment and child poverty. The argument that that has to be balanced against the requirements of those who wish to undertake long-term projects, by allowing a 10-year reset, simply does not stand up, because most of them—we are talking about the TIF 1-type projects—will run for much longer than 10 years anyway. What the Government are suggesting would therefore fail to help councils with those projects, yet cause excessive problems for others. We believe that the way to avoid them is to have the system reset at regular intervals. The reset should also look not only at the business rate baseline and the basis for redistribution, but at the council tax base.

[Mike Freer (Finchley and Golders Green) (Con)]

If the Opposition are so keen on resets and the ability to affect the calculation based on need and other factors, I am intrigued to know whether the hon. Lady can tell the Committee how many resets or revaluations took place between 1997 and 2010.

[Helen Jones]

As the hon. Gentleman knows, the difference is that when we were looking at local government finance, much of the grant was allocated on the basis of need. The problem that we are considering with this Bill, whereby the gap between local authorities will grow wider and wider, is not what we were considering at that time.

[Mike Freer]

rose—

[Mr Kevan Jones]

rose—

[Helen Jones]

I am going to make a bit of progress, because we have to get through this.

The way to avoid those problems is to have a reset at regular intervals. Some have suggested three years, and some five. We have opted for three years in our new clause 7, because we believe that local authorities have become used to three-year financial settlements and that they have operated very well. That option is also in line with the responses to the consultation, where only 23% of respondents felt that 10-year resets were appropriate. So much for the Government taking note of the consultation.

In new clause 5, we have also suggested that local authorities should have a right to be consulted each year about whether a reset is required before the Secretary of State publishes the local government finance report. We have done that because we think that local government is the best judge of what is happening on the ground. It should be treated as a partner in the process and allowed a say. Councils would be able to make such representations if they felt that unforeseen problems had been discovered, if major changes had occurred or simply if the system was not working as the ever-optimistic ministerial team assures us it will. Such a mechanism would recognise the key role that councils play in representing communities. That right is fundamental, if we in this House believe that councils have a democratic mandate of their own—as I think we all do—and should be able to participate in the process. The Secretary of State would have to consider representations received, and publish his decision and the reasons for it.

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

rose—

[Helen Jones]

If the hon. Gentleman will forgive me, I want to wind up, because others want to get in before 10 pm.

We believe that such a proposal would introduce more clarity and accountability into the procedure. We have often been told—particularly by Government Members—that sunlight is the best disinfectant. We now have a chance, with our new clause, to let a bit of sunlight into the DCLG. We believe that both our new clauses would improve the system no end. It might help, Mr Amess, if I give the Committee notice that we will seek a vote on new clause 7. I commend new clause 5 to the Committee.

[Annette Brooke]

It is a pleasure to serve under your chairmanship, Mr Amess. I wish to make a few brief comments.

It is important that a local government body of councils should have a position on all the decision making, be it on the tariffs, the top-up or the levy or in relation to resetting. I do not know how formal that arrangement needs to be, but it is important to recognise that the information needs to come from a cross-section of local councils. Of course, we already have the Local Government Association, which is in a position to take such an overall viewpoint.

We have had some useful discussions about the length of the set-up period. It is fairly clear that no one here knows what the ideal period would be. I feel instinctively that 10 years is rather too long, but I recognise that we need a period of stability in order to make other measures work and to create incentives. I therefore hope that the Minister will assure us that a great deal of work will be done on this before we get to the regulations. I have a preference for a period of about five years, but I would also like an assurance that the Minister would have the power to reset, having listened to the LGA and other bodies, should something obviously have gone dramatically wrong. We have heard a great deal about uncertainty and, yes, there is bound to be uncertainty involved in a change of this magnitude, but the main thing for me is that we ensure that there is a safety net in place for ourselves, as decision makers.

[Mr Kevan Jones]

It is a pleasure to serve under your chairmanship, Mr Amess.

The hon. Member for Mid Dorset and North Poole (Annette Brooke) has just said that she hopes the Minister is listening. The ministerial team might well be listening but not actually taking notice. It has already been stated in the consultation with local government that the majority of councils came out against the 10-year reset time limit. I do not think that that bodes well for the future; I do not think that the leopard will suddenly change its spots, or that the Government will suddenly start to listen to local government.

I support the new clauses. The Bill will lock in for the next 10 years the inequality and unfairness that have become apparent this year. That unfairness will affect councils such as mine in Durham and other northern Labour-controlled councils. It is part of the Secretary of State’s plan to lock in that inequality of support that favours his friends in the south-east. I shall give the Committee some examples of how that inequality has already become apparent this year, and how it will become locked in under the new mechanism.

As my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) mentioned, the baseline figure in the 2010-11 spending round was the starting point. For example, County Durham’s budget for 2011-12 was reduced by £10.9 million. South Tyneside council’s budget was reduced by 5.6%—some £33.70 for each resident of that borough. Let us contrast that with Wokingham in Berkshire, whose budget was increased by 0.2%, meaning that each of its residents got an extra 30p.

21:44

I know the Government do not believe in regions, but if we look at the average cuts per capita set by the 2010-11 and 2012-13 spending rounds, we see that per capita spending is down in the north-west by £133, in the north-east by £120, in Yorkshire and Humberside by £107, in London by £97, in the west midlands by £89, in the east midlands by £60 and—this is where it becomes quite clear that the Government are looking after their friends—in the south-west by £44, in the eastern region by £38 and, lo and behold, in the south-east of England by £31. The fact that that is used as the baseline figure locks it in under the formula for the next 10 years. That will increase inequality—we heard in an earlier debate how the Government do not recognise that there is a need in that regard—and it ignores what local government is saying.

If the new system will be perfect from day one, what have the Government to fear from reviewing it after three or five years, as local government wants them to? As councils recognise, the inequalities will continue and there would be a loud clamour and pressure on the Government to change the benchmark in three, four or five years’ time. If it is locked in for 10 years, they can keep on ignoring that, saying that as the law says they must wait that long it is the earliest time they can review it.

[Mr George Howarth]

Does my hon. Friend accept that as well as the regional disparity he has described there are disparities within regions, which mean that things could be even worse for some local authorities?

[Mr Jones]

I do. In regions such as that represented by my right hon. Friend, there will be regional disparities between councils. We are told that this Bill is about giving local government the powers to grow business rates, for example, but it will lead to an increased cycle of deprivation in those constituencies and make it harder for councils to attract businesses and grow their council tax base.

[Andrew Gwynne]

Is the situation not worse than that, because the plans do not just lock in the funding from one period of time? Instead, on top of those real cuts in local government finance we will also have a huge increase in demand for statutory services in those areas of deprivation.

[Mr Jones]

Exactly. Hidden in the Bill is the localisation of council tax benefit, which the Minister does not like to talk about and which comes with a 10% cut. As unemployment is rising in the north-east under this Government, more people will qualify for that benefit. Where will the money come from if it is locked into this system? The only other option for local government would be to increase the domestic rates, but there is an inbuilt problem in doing so. For example, in the north-east, 50% of properties are in band A, so the amount that can be generated is limited. In Surrey, only 2% of houses are in band A, so it is easier for some of the wealthier areas to generate that cash if they wish to do so. An increase of 1% in council tax in Durham, for example, gives a lot less in the long-run than the same increase would in Surrey.

[Steve Rotheram]

Is my hon. Friend aware of the heat map that has been produced that illustrates precisely what he is underlining? Those areas of highest deprivation that have been hit the hardest just happen to be areas that have Labour Members of Parliament.

[Mr Jones]

They are. My hon. Friend mentioned that map earlier and it only has to be seen—it screams inequality and exposes what the Conservative element of this coalition is about. It does not care about areas such as Liverpool and so on but about rewarding areas in the south-east, where its voters are. That is blatantly political. I am surprised that the Liberal Democrats are going along with it, but I presume that they have written off most of their northern MPs and councils for the next election in exchange for the Deputy Prime Minister’s post. Certainly, that inequality will be there when one looks at some northern councils and I do not understand why the Liberal Democrats are going along with this given the blatant unfairness that it will lock into the system. The hon. Member for Mid Dorset and North Poole (Annette Brooke) said that she would like a review of this issue, but there is no sign that the Government want to look at or take on board anything that has been said in the House or by local Government regarding the Bill.

[Mr Watts]

The proof is in the pudding, is it not? Not one council that has a high level of deprivation supports this measure and the only ones that do are those with very low levels of deprivation.

[Mr Jones]

That is right. This issue is highly political. All credit to the Secretary of State—he knows exactly what he is doing. As my hon. Friend the Member for Warrington North (Helen Jones) has said from the Front Bench, the measure will end up pushing on to local councils some of the tough decisions on spending that will have to be taken. There are two ways of dealing with this—increasing local rates or cutting services—but that will be happening at a time when demand for local government services in deprived areas such as some of those my hon. Friend the Member for St Helens North (Mr Watts) represents is going up. One has only to look at some of the statistics we have heard on Second Reading and in our debates in Committee. Demand for adult services and other services in County Durham, south Tyneside and Liverpool, for example, will be a lot higher than in Surrey and the south-east.

I do not know what the Government have to fear from the reset being on a five-yearly or three-yearly basis. They think they can lock that unfairness into the system, and it is clear that when local people realise that not only are their services going to be cut but they face council tax increases as well, the Secretary of State will say, “Oh, well, it’s your profligate local council that’s doing this.” But in fact, the problem is the system of local government finance being introduced that will directly cause that. We need to keep repeating that point. It is quite clear that the Local Government Association and even some Conservative councils are working on the basis that what the Secretary of State says is not always true. For example, he can offer money for the freeze in council tax, but only for three years. If people take that, they have to realise that there is no guarantee about what they will get just before the next general election.

The measures build in unfairness and we need to make sure that the Minister explains why the period will be 10 years. That figure seems to have been plucked out of thin air—there is no justification for it and local governments do not support it—so what is the rationale behind it? The Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill) said earlier that there could be in-year adjustments for councils that fall on hard times in terms of their business rate income going down, and that is mentioned in the Bill, but we have not seen exactly how that will be distributed. There is no guarantee that a council faced with large redundancies and the closure of a big provider of local business rate will get any benefit at all, because it will be down to the Secretary of State’s determination. On present form, it seems quite clear what the Secretary of State will be doing—looking after Conservative councils.

[Andrew Gwynne]

We spoke earlier about the need for local government to have certainty and the fact that the Bill does not provide adequate certainty for local government, particularly for council treasurers, in planning their budgets. Is it not ironic that although the 10-year reset provides a degree of certainty, the certainty for councils such as Tameside and Durham is that we will have pretty poor settlements for the whole decade?

[Mr Jones]

Indeed. I know that the Secretary of State will say, “We are giving you these local responsibilities”, but how are authorities going to plug the gap? It will be either by cutting services even more or by increasing domestic rates.

Another point on which we need clarification is the “exceptional circumstances” mentioned in the Bill. I should like to know what “exceptional circumstances” are. In what circumstances would the Secretary of State look at a reset during the 10-year period?

Local government needs certainty, and not just in providing services. For example, three-year budgets allowed councils to take decisions that led to efficiencies. If councils are not sure how much money there will be each year, that uncertainty will prevent them from making strategic decisions, savings and investments. That flexibility will be lost. The argument is that this is a localism Bill giving local councils a say, but as we have explained clearly, it actually gives more powers to the Secretary of State and Ministers to decide the future of local government. I should like to know from the Minister why 10 years was chosen for the reset.

Earlier, there were some comments about revaluation. When the Secretary of State was in opposition he argued vigorously against the revaluation of domestic rates. It is time to look at domestic rates, because in all our constituencies we see disparities between different properties. The revaluation process was rushed, which led to a record number of appeals. The Bill will give rise to a situation where the inequality set in domestic rates in the 1990s will be set in the business rate assessment too.

[Robert Neill]

I can tell my hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke) that of course we shall consult fully before we finally set, through regulations, the figure for the reset. It is important to bear in mind that a key point of the legislation is to give a proper incentive for growth, and the longer the period between resets, the greater the incentive for growth for local authorities. The shorter the period between resets, the more the growth incentive is minimised.

I am sorry that the Opposition, having claimed to be in favour of localisation, seek to introduce amendments that would significantly undermine the growth incentive for local authorities. It is even more unfortunate that when they make their case, having accused us in rather patronising tones of not doing our homework, they clearly get their homework very wrong, as I shall shortly demonstrate.

New clause 5 would implement a system that triggered an annual reset. That would destroy any incentive in the process whatever, and negate the whole growth incentive. The Opposition say we should listen to the interests of local government. In the consultation responses that the hon. Member for Warrington North (Helen Jones) cited, 78% of respondents favoured fixed resets, so their amendment ignores that 78%. It is a pity they did not do their homework properly on that one.

[Mr Watts]

Will the hon. Gentleman give way?

[Robert Neill]

No, I do not intend to give way.

The Opposition proposal would simply recreate formula grant through the back door.

In relation to the period between resets, the hon. Member for Warrington North needs to start reading things a little more carefully. She claimed that a majority favoured three years and quoted a figure of 23%. That is incorrect in relation to three years. Let me tell her what the response said: the three-year period that the Opposition proposed as their preferred reset period was supported by exactly 10% of respondents. A 10-year reset period was supported by 23%, and a period between five and 10 years had the support of in excess of 70%. If the Opposition cannot get their basic maths right, we will not have much faith in any amendments that they table on local government finance. Their rather specious argument falls, at the very least on grounds of thorough inaccuracy.

Of course it is important to ensure that we get a proper balance of need and resource at the beginning of the system, and we will do that. At the reset periods—we will discuss with the local government sector the appropriate—

22:00

Debate interrupted (Programme Order, 10 January).

The Chair put forthwith the Question already proposed from the Chair (Standing Order No. 83D), That the clause be read a Second time.

Question put and negatived.

The Chair then put forthwith the Question necessary for disposal of the business to be concluded at that time (Standing Order No. 83D).

New Clause 7

Resets of the non-domestic rates retention system

‘(1) The Secretary of State shall be required to make arrangements for a “reset” of the non-domestic rates retention system every three years.

(2) Any such reset must include consideration of—

(a) relative spending needs of each authority,

(b) relative resources available through council tax income,

(c) relative resources available through non-domestic rates.

(3) The assessment of relative need shall be determined in full consultation with local government.’.—(Helen Jones.)

Brought up.

Question put, That the clause be added to the Bill.

22:00

Division 440

Ayes: 218

---

Labour: 214
Independent: 2
Alliance: 1

Noes: 297

---

Conservative: 245
Liberal Democrat: 45
Democratic Unionist Party: 5

The occupant of the Chair left the Chair (Programme Order, 10 January).

The Deputy Speaker resumed the Chair.

Progress reported; Committee to sit again tomorrow.

Business without Debate

Tuesday 24th January 2012 Commons Chamber

Delegated Legislation

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Local Government

That the draft City of Bradford (Mayoral Referendum) Order 2012, which was laid before this House on 5 December, be approved.—(Bill Wiggin.)

The Deputy Speaker’s opinion as to the decision of the Question being challenged, the Division was deferred until Wednesday 25 January (Standing Order No. 41A).

Bus Services in Sedgefield

Tuesday 24th January 2012 Commons Chamber

22:14

[Phil Wilson (Sedgefield) (Lab)]

This is a petition on behalf of 1,000 residents of Bishop Middleham and Fishburn. It states:

The Petition of residents of Bishop Middleham and Fishburn,

Declares that the Petitioners believe that in order to maintain a reliable rural transport network in County Durham additional funding needs to be provided for rural bus services.

The Petitioners therefore request that the House of Commons urges the Government to ensure that there is funding in place to maintain the provision of reliable rural bus services in County Durham.

And the Petitioners remain, etc.

[P000999]

Children's Subjective Well-Being

Tuesday 24th January 2012 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Stephen Crabb.)

22:15

[Chris Ruane (Vale of Clwyd) (Lab)]

Our children are under threat like never before. In the past, threats to children were mainly physical. Many died in infancy, when working or of diseases. The modern threat to our children and young people is more to their mental and psychological well-being.

There are many reasons why, and one is child poverty. After the war, whichever party was in government, child poverty hovered between 12% and 15%, but it went from 13% in 1979 to 29% in 1992. With the huge investment that Labour made over 14 years, we managed to get it down only to 20%—a big reduction, but not enough.

There are other factors. We face an obesity epidemic, with costs to the individual child’s health and self-image. The most recent figures, for 2010-11, show that obesity among children in reception class, at five years old, is at 9.4%, and that by the time they reach year 6, at 10 years old, it doubles to 19%.

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

Does my hon. Friend agree that we are storing up problems for the future, both in terms of cost and from a psychological point of view, as many such children unfortunately become very disturbed adults?

[Chris Ruane]

The cost will be huge in terms of the individual, society and the economy.

When we look at mental illness, we find that certain groups are affected more than others: 45% of looked-after children and 72% of those in residential care suffer with mental illness. Some 1.5% of children are hyperactive; 0.3% have eating disorders; 5.8% have conduct disorders; and 3.7% have emotional disorders. Those figures might sound low, but at any one time 10% of children between the ages of five and 15 are suffering with a mental health disease. That is 850,000—almost 1 million—children.

We have to look at the reasons why that has come about. As I suggested earlier, something happened in the 1980s. The Government often talk about the broken society and broken Britain, but I honestly believe that the problem started to ramp up in the “loadsamoney” era, when there was no such thing as society and atomisation and isolation were rampant.

We have also seen the decline of those institutions that did believe in a big society and in social cohesion, such as the Church and the trade unions. Stable minds equal a stable society, but even Labour used the terms “producer” and “consumer”. We did not use “citizen”, and that is what we need to get back to—to viewing individuals as citizens and as part of society.

The Government can take many kinds of action, and many programmes have been tried, tested and proven. The roots of empathy classroom programme in New Zealand is a big success; the Swedish Government banned advertisements to children under 12, and that, too, has been a big success; and the Welsh Assembly Government introduced the foundation phase, with children learning through play until the age of seven.

My local authority of Denbighshire has had quite a few initiatives, including one by Sara Hammond-Rowley, involving simply sending out information sheets to parents, teachers and social workers, and giving out books, readily understood by parents and teachers, that can help with emotional disorder. We have had volunteering days in the local school in Prestatyn. Thirty-eight local volunteering groups aimed at children were there. The children were let off, one year at a time, to join them in friendship groups. It is about increasing volunteering and getting children away from the TV and computer and into socially interactive and physical activity. That is all to the benefit of those individuals and society.

The curriculum needs to be rebalanced. The national curriculum was introduced by the Conservatives. I was a teacher for 15 years and we followed the curriculum religiously, but we need a review. Have we thrown the baby out with the bathwater? We need to go back to stuff such as gratitude, empathy, discernment, reflection, silence, mindfulness, resilience, centring—the softer, gentler, more emotional approach to the curriculum, heavily present in the Catholic school in which I taught and in many religious schools. That would be a means of countering the advertising, media, peer pressure, consumerism, materialism and individualism.

A number of key statistics are not being monitored by the Government. I have tabled parliamentary questions asking what monitoring there is of advertising’s impact on children; there was no assessment. I have tabled questions about the number of fictional acts of murder that a child will watch, but there is no assessment and no figures are kept.

A young child will see tens of thousands of fictional acts of murder and violence, which do not correlate to their own, natural world. What is most disturbing is that the Government do not collect statistics on self-harm, eating disorders, mental illness, hyperactivity, attention deficit hyperactivity disorder or transient children. The statistics are out there; they are often compiled by research departments or voluntary organisations.

I pay tribute to two reports in the past week, one of which—“Promoting Positive Wellbeing for Children”, came out last Thursday and is jam-packed full of practical steps that local and central Government can take to promote positive well-being for children. This afternoon, the Action for Children campaign on neglect was launched; the Minister was there and spoke well. Those reports are excellent documents, but what use do the Government make of them? When the guiding association found out about the speech that I was making today, it sent me a briefing about its research on volunteering.

The Prime Minister talks about the big society and volunteering and I back that 100%. But we need to make sure that his words are backed up with action. This is a quote from the Prime Minister in 2006:

“It’s time we admitted that there’s more to life than money, and it’s time we focused not just on GDP, but on GWB—general well-being. Well-being can’t be measured by money or traded in markets. It’s about the beauty of our surroundings, the quality of our culture and, above all, the strength of our relationships. Improving our society’s sense of well-being is, I believe, the central political challenge of our times.”

I share every single one of those sentiments.

[Jim Shannon (Strangford) (DUP)]

Earlier, the hon. Gentleman touched on child poverty. Does he feel that the Government’s proposed changes to the benefits system will directly impact on families in child poverty now and those who will fall into it? Does he feel that the Government should be giving priority to address child poverty across the whole United Kingdom?

[Chris Ruane]

I absolutely concur with every word of that, and I shall come to those points in more detail in a moment.

I want to spend a few minutes on the Children’s Society’s excellent report on children’s subjective well-being. It gives the definition of subjective well-being, which focuses on how people are feeling, whereas objective well-being focuses on conditions that affect those feelings, such as health or education. The report looked at 10 areas: relationships with family, relationships with friends, time use, health, the future, home, money and possessions, school, appearance, and the amount of choice in life. It has some interesting key findings. One in 11 children has low subjective well-being. Family relations and choice are the two most important factors. Family relations has the best score and is always a positive, but how a schoolchild or young person manages the choices that affect his own or her own life has one of the lowest scores. External factors, life events and relationships with others can have a dramatic and sudden effect on the subjective well-being of children. Household income is important, but it should be enough rather than a lot. If a child has too much, they can mark themselves out and become a figure of fun as the posh kid in the class.

The report highlights six priority areas, one of which is the opportunity to learn and develop not just cognitive but emotional intelligence. I was a little disturbed last week when one of the education Ministers said that he held emotional learning in complete disregard. That does not chime with the opinions of the Prime Minister, and the Minister needs to think carefully about it.

The home environment is as important as the school environment. If a child goes home to a house in multiple occupation and is living six storeys up where it is wet, windy and draughty and he or she cannot concentrate, that is not a good environment in which to create opportunities for learning and developing.

Children and young people should have their opinions respected. They should be listened to not only in school, through schools councils, but by their parents around the breakfast table or the dinner table. They need to have a positive image of themselves. Advertisers tell us that beautiful people are thin, attractive, intelligent and dynamic. That is not always the case, but it is the image that is thrust at us through the media.

We must ensure that all families have enough to live on as they face the sudden shock of redundancy, benefit caps, the freeze in child benefit and the abolition of education maintenance allowance. The full consequences of those measures as regards how they will impact on childhood well-being must be thought through before they are introduced.

Positive relationships with family and friends are a key priority area. Family bonds are 10 times more important than the structure of the family. A lot is made of the nuclear family, which is held up as a paragon. I am from a nuclear family and I have my own nuclear family, but we should not be promoting that model by saying “You are not quite right” to all the other families, because that additional pressure will not help a child’s well-being.

Children must be in a safe and suitable home environment. Privacy is important for a child’s well-being: they need to have their own bedroom. If a child is in a transient family that moves between one town and another, they are twice as likely to have poor well-being. I come from a seaside town, Rhyl, where one primary school has a 49% transiency rate. In other words, for every 100 children who are there in September, 49 are gone by July. That is not good for the 49 and it is not good for the 51 who remain. Those children will often move two or three times in a year, leading to massive pressures on themselves and their families.

Children need an opportunity to take part in positive activities, because otherwise they will turn to negative activities such as drink, drugs, teenage sex and teenage pregnancy. We need to create positive opportunities for volunteering and creative and expressive activities.

The report is a mixed blessing. I hope that the Minister has a copy. The final page has a grid on which the green areas represent initiatives that have been put in place—I congratulate the Government on that—and the purple areas represent ideas that have not been acted on. I hope that in the course of this Parliament they will all become green areas. Just to remind the Minister, I have put down 36 questions tonight—one for each box—so he will be able to answer them tomorrow.

The important thing that the report says is that all these things need to be monitored. I know that the Minister, his party and the Government do not believe in red tape, but if they are not monitored, we will not know whether they are successful.

[Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)]

Will my hon. Friend give way?

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. I am afraid that the hon. Lady cannot make an intervention from the Front Bench, but if she moves to the Bench behind, she can.

[Chris Ruane]

Come on down!

[Mrs Hodgson]

Thank you, Mr Deputy Speaker. I am interested in what my hon. Friend said about monitoring the outcomes. We are signed up to the UN convention on the rights of the child. Many of its articles, such as the article on the right for the child’s voice to be heard, could play a big part in meeting those outcomes. What does he think about the idea of having a Bill of Rights for children?

[Chris Ruane]

There is much to be said for that. The UN perspective is important, as is the European perspective. We need international comparators so that we can measure ourselves against international standards. We also need to monitor the programmes that we put forward nationally.

The Children’s Society report gives credit to some of the initiatives that the Government have put forward over the past year, such as telephone support for families, free parenting classes for those with under-fives and the junior individual savings account. Of course, to have an ISA people need enough spare cash to put in it and many families do not have that.

There are big changes, which the Minister knows about, that will impact on children and their well-being. I will simply echo a thought that is in both reports. One of the key things that the neglect report asks of the Government is for information to be collected. For dozens of parliamentary questions that I have put down, the answer has been that the information is not collected by the Government—I must say that it was not collected by the Labour Government either.

These are two excellent reports. Progress was made under the Labour Government and it is being made, although more slowly, under this Government. However, there are dark clouds ahead and we all need to monitor this area—both those in government and those outside government—through parliamentary questions and debates to ensure that we get the best deal for our children and young people.

22:29

[The Parliamentary Under-Secretary of State for Education (Tim Loughton)]

I congratulate the hon. Member for Vale of Clwyd (Chris Ruane) on raising this important subject. He and I probably do not constitute the beautiful people physically, but that does not stop us bringing important and weighty topics to this House.

The hon. Gentleman raised a number of interesting ideas, many of which the Government support and are working on. I am glad that he produced the Children’s Society’s bingo card. After 20 months, I am proud of a number of the things that we have instituted. It is now important to see them through. I am confident that we will make a lot more progress with many of the other considerations in the report.

The hon. Gentleman also mentioned the Action for Children report on neglect, which was launched this afternoon. That report references some of the things that the Government have latched on to. I was able to say in my speech this afternoon that we are already on the case in ensuring that more children are identified and supported before a case of neglect becomes a case of abuse and a child ends up in the care system.

I agree with many of the hon. Gentleman’s points, although I raised an eyebrow when he suggested that everything started to go wrong in the 1980s and that mental health only started to become an issue then. I am afraid that that is a rather limited perspective on history.

The Children’s Society report, which the hon. Gentleman described, has clearly sparked a lot of interest and debate. It shows that many factors determine how happy children feel, including the quality of the relationships they have with their family and friends, their family income relative to that of their peers, how much choice they feel they have, their health and appearance, and where they live. I was pleased to note that most of the conclusions of the report were positive. In looking at the specific issues that it raises, we should not forget that 90% of the young people who were interviewed are satisfied with their lives. Some 85% are happy with their family life, more than 80% are in good health and more than 80% have a good set of friends. Nearly three quarters believe that that they learn a lot at school. Overall, the story is positive. Concerns are clearly being raised, and one is not being complacent, but there are lots of positives.

Not surprisingly, though, discussion has focused on the more negative aspects of the report. It is worrying that large numbers of children will experience low well-being at some stage in their childhood. The hon. Gentleman specifically mentioned mental health, and it has always been a worry to me to see the number of school-age children who have some form of notifiable mental illness and how young some of them are when they develop it. That is why the “no health without mental health” policy that the Government have instituted to raise the profile and importance of mental health in the NHS is key. Within that, we are placing importance on child and adolescent mental health services, particularly for children in the care system. We recognise their increased susceptibility to mental health problems. Across Government, we are determined to make improvements to all aspects of children’s and young people’s lives. We are working across Departments to try to bring about more effective solutions.

One of the things that the report says matters most to children is doing well at school. Achieving well academically builds children’s confidence and self-esteem and provides them with a clear pathway to further learning and a skilled job. That will help to ensure that they experience positive well-being in their adulthood. The hon. Member for Alyn and Deeside (Mark Tami) said how problems in childhood clearly lead to troubled adulthood.

Feeling positive about the future is another important aspect of children’s well-being. We are therefore absolutely clear that having a strong focus on raising academic attainment is critical to improving children’s well-being. We believe that key to that aim is reform of the school system, giving school leaders the freedom and flexibility to respond to the challenges that they face. Our school reforms have been guided by three overarching goals: to close the attainment gap between those from poorer and wealthier backgrounds, to ensure that our education system can compete with the best in the world and to trust the professionalism of teachers and raise the quality of teaching.

One of the suggestions that the hon. Member for Vale of Clwyd made was that we review the curriculum. I can tell him that we are doing that. We are streamlining it to ensure that children get the very best grounding at school, which too many of them are still missing out on at the moment. To narrow gaps in achievement between the lowest-performing students and the average, we must have high aspirations for all children and a zero-tolerance approach to the view that schools facing difficult circumstances cannot succeed.

We recognise, however, that children from poorer backgrounds may need additional support, which is why we have introduced the pupil premium, releasing an extra £625 million of funding to support higher achievement among children from poorer backgrounds, rising to £2.5 billion in 2014-15.

We must also aim to halt the decline in our performance relative to other countries. It is not acceptable, for example, that at the age of 14 the reading ability of pupils in England is more than a year behind the standard of their peers in Shanghai, Korea and Finland, and at least six months behind those in Hong Kong, Singapore, Canada, New Zealand, Japan and Australia. Overall, in the past nine years England has fallen from seventh to 25th in international student assessment tables in reading, which is completely unacceptable.

We must also trust the teaching profession to get it right. Good schools have always recognised that children who feel happy and safe are more likely to achieve well at school, and such schools know what to do to ensure that they address underlying causes of low well-being among their pupils. They do not need the Government to issue endless guidance telling them what to do or how to do it. I am proud to say that in one year of this Government, we have cut more than 6,000 pages of guidance to schools. That means not that we think children’s well-being is not important but that we trust schools to do what is right for their students, for example by intervening early to address problems so that children do not fall behind in their studies.

We want to be clear that the core business of schools is to ensure that every child receives a high-quality education and achieves to the best of his or her ability. That is why, for example, we have refocused the school inspections framework on four key areas: pupils’ achievement, teaching quality, leadership and pupils’ behaviour and safety.

We recognise, too, that we must take action to remove the barriers that prevent some children from flourishing and give extra support to children who are disadvantaged. I should like to take this opportunity briefly to illustrate how we are making improvements on all the factors highlighted in the Children’s Society report.

First, on the family, the “Good Childhood” report states that a stable and supportive family environment is the most important factor that affects children’s well-being. We are investing £30 million over the spending review period to fund a range of support for families and relationships, delivered through the voluntary and community sector, including counselling for couples who are experiencing relationship difficulties, parenting classes for first-time parents, and a commitment to turn around the lives of the estimated 120,000 most troubled families in Britain, who have multiple social, health and economic problems. A good, stable, happy family background is a major component of a good and happy childhood.

The hon. Gentleman mentioned income. Although the “Good Childhood” report is clear that having more money than their peers does not make children happy, it is equally clear that being poor relative to their friends reduces levels of well-being, with children in the poorest 20% of households experiencing lower levels of well-being. Our child poverty strategy sets out how we will take a cross-Government approach to tackling the causes of poverty, such as worklessness, educational failure, debt, poor health and family breakdown, thereby raising the life chances of poorer children and breaking the cycle of entrenched intergenerational poverty, which is such a blight on our society. The Government remain committed to the goal of eradicating child poverty.

Friendship is another subject that the hon. Gentleman flagged up. Having good relationships with friends is a key component of well-being. Conversely, experiencing bullying has a devastating impact on how children feel—those who have experienced bullying by peers are six times as likely to experience low well-being. That is why we have recently issued new guidance to schools on preventing bullying and taking decisive action to tackle bullying when and in whatever form it occurs. My work as co-chairman of the UK Council for Child Internet Safety—UKCCIS—is an important part of tackling cyber-bullying.

On supporting the most vulnerable, we are taking steps to improve the lives of those who face the biggest challenges. Whether through the reforms that we plan to introduce to improve the lives of children with special educational needs, implementing the recommendations arising from the Munro review of child protection, publishing the first national action plan to tackle sexual exploitation of children, or the improvements we are making to the support for children in care, the Government care about the well-being of all children. Many of those matters were referenced in both reports that the hon. Gentleman mentioned.

I want to finish on “Positive for Youth”. The Children’s Society report found that older age groups—in other words, those in their teens—tend to have lower subjective well-being than younger children. The Government accept that view, and take the well-being of that age group very seriously. Last December, after extensive collaboration with young people and professionals, we published “Positive for Youth”, which is a new approach to cross-Government policy for young people. It is different in several ways. It brings together the policies of nine Departments, with nine Ministers contributing, into a single vision. It moves away from the centralised approaches of the past to set out a vision for how all sections of society can and need to work together to help all young people achieve. Most important, it is relentlessly positive about young people and their potential—it focuses on helping young people succeed, not just on how to prevent them from failing. I firmly believe that the vast majority of young people are hard working, responsible and creative members of their communities, who do not deserve the bad press they attract due to the behaviour of a tiny minority.

We will follow “Positive for Youth” with an audit of progress at the end of 2012. As part of that, we will publish a new set of data to demonstrate progress, moving away from reporting on the negative outcomes that have been prevented and focusing instead on young people’s positive achievements.

Along with those measures, we are also developing a new national measure of young people’s subjective well-being as part of the Measuring National Well-being programme that the Prime Minister commissioned. The Department for Education and the Office for National Statistics are working closely with a group of experts and partner organisations, including the Children’s Society, to ensure that children’s views are captured and acted upon. I absolutely agree with the hon. Gentleman about the importance of listening to the voices of children and young people. I have always practised that and will continue to do so. The results will tell us even more than we already know about children and young people’s well-being and enable us to know how the views of children and young people in the UK compare with those in other countries, and to ascertain what progress we are making over time. The Government will also use the emerging data to better formulate and evaluate policy.

Let me deal finally with volunteering. Young people volunteer disproportionately when compared with other sections of the community. All the attributes of volunteering that the hon. Gentleman mentioned are encompassed in the national citizen service programme, which the Prime Minister launched. It is all about giving young people opportunities to learn, to develop their personal social characteristics and to engage. I greatly hope that the hon. Gentleman will give his support to the national citizen service, which is part of our work to tackle all the issues that he rightly raised. We would very much like to extend it to Wales because it is a United Kingdom-wide scheme.

I thank the hon. Gentleman for raising such important points. I am sure that he and I share the objective of having much happier young children growing into much happier and productive adults.

Question put and agreed to.

22:45

House adjourned.

Westminster Hall

Tuesday 24th January 2012 Westminster Hall

Tuesday 24 January 2012

[Linda Riordan in the Chair]

Health Inequalities (North-East)

Tuesday 24th January 2012 Westminster Hall

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

09:30

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

As a Member of Parliament, my priority must be the health and well-being of my constituents, and many MPs feel the same. Regional health inequalities are of profound concern and strike at the heart of our sense of fairness and equality: people are suffering unnecessarily in this country just because of the region in which they are born, and that undermines not only the idea that we are all in this together, but our very sense of national unity. At a time when the Scottish Government are seeking independence, does it help the case of those who believe in the Union, as I do, that a Brit born in Glasgow is likely to die 14 years earlier than one born in Chelsea?

As we shall see, health inequality is a complex subject, but the key question for the Minister is, do the Government recognise regional health inequalities in their health funding? I look forward to the Minister’s reply.

I was born in Wallsend and grew up in Newcastle. In Newcastle, we are more likely to die early from cancer, heart disease and stroke. We tend to die younger, are more obese as children and are more likely to die from the cold as pensioners. We suffer more from the diseases of our industrial legacy, such as asbestosis. Last year in Newcastle, there were 89 early deaths from heart disease and stroke—19 more than the national average. Disability-free life expectancy for women in Newcastle is 3.3 years shorter than the English average. For men, it is 4.9 years shorter. Not only do we live shorter lives, but more of those shorter lives are spent with a disability.

Such inequalities are not unique to Newcastle. Thanks to the public health observatories set up by the previous Labour Government, we have a comprehensive view of the inequalities in health across the country. Every year, 37,000 people in the north die earlier than their counterparts in the south. That is enough people to fill a modern football stadium. A report published in the British Medical Journal last year said that the excess toll of ill health and disability in the north is

“decimating”

the region

“at the rate of one major city every decade”.

In Newcastle, one in 25 adults claim incapacity benefits for mental illness. That is four times the rate in the Secretary of State for Education’s constituency. Across the river in Gateshead, we have one of the highest levels of obesity in the country, and on the Wear, the 2010 chlamydia rate for 16 to 24-year-olds was almost three times the rate in Surrey.

Of course, there are inequalities within regions and within cities. The Institute for Ageing and Health at Newcastle university has produced an interesting map of the Tyne and Wear metro, which shows how life expectancy reduces by more than a decade as we ride from Ponteland north to Byker.

Although I see mainly north-east MPs here today, this is an issue for the whole country, for the Exchequer and for the Prime Minister, but given that the Prime Minister press-released yesterday’s visit to Leeds as a visit to the north-east, it is clear that his grasp of geography still leaves something to be desired.

Every year, health inequalities cost £31 billion to £33 billion in lost productivity, up to £32 billion in lost taxes and higher welfare payments and £5.5 billion in additional health care costs, so this is a problem for us all. It is important to emphasise that the poorer health in the north-east is not a function of the level of health care. The Newcastle Hospitals NHS Foundation Trust is in the top 10% of best-performing trusts in the UK. We have the Campus for Ageing and Vitality, the Centre for Life, the Great North Children’s Hospital, the Northern Institute for Cancer Research and the Northern Vascular Centre and Freeman Hospital’s Cardiothoracic Centre. They are world-class institutions.

Evidence going back six centuries tells us that the root causes of health inequalities are economic. The BMJ report that I mentioned earlier says:

“Social and economic factors are extremely reliable predictors of health”

If more resources are put into an area, its health improves, but if they are taken out, its health declines. The north-east has the lowest income per head in England, and in Newcastle, a quarter of the city’s neighbourhoods are in the 10% most deprived in the country. So the poorest are hit by a double whammy. Not only does poverty impact on their quality of life, but it reduces their life expectancy and makes them susceptible to a host of diseases.

It is also ironic that in the north-east we live with the health consequences of industries that were long ago allowed or even encouraged to die. Just last month, Cabinet papers showed how Margaret Thatcher’s Cabinet discussed the managed decline of the north. We are still dealing with that. Last year’s figures from the Health and Safety Executive show that rates of death from mesothelioma in the north-east are by far the highest in the country, and although we address the symptoms, we can do nothing for the causes. But in other areas we can and are tackling the causes.

The north-east has the highest number of mothers smoking during pregnancy—22%—so Fresh, a local charity, is working with local primary care trusts to make smoking history for children. Higher than average alcoholism in the north-east has resulted in excessive numbers of hospital stays for alcohol-related harm, so a campaign to reduce alcohol dependency is supported by local press, such as the Newcastle Journal and the Evening Chronicle. But I am worried that essential work to improve health in the north-east is threatened by measures that the Government are taking.

Under Labour, health funding doubled in real terms, waiting times reduced and death from heart disease and stroke went down by a massive 40%. The previous Government also worked hard to tackle poverty and its associated evils—poor housing, high fuel costs and low wages—but the inequalities remained. So although the health of people on low incomes improved significantly, the health of those on high incomes went up by the same amount or more. In some areas, health inequalities decreased. For example, the infant mortality health inequality for manual workers fell by almost a third to 12%. To understand why that is so, we must go back further than the previous Labour Government.

The Thatcher Government refused to acknowledge the relationship between poverty and ill health. The Department of Health was prohibited from using the phrase “health inequalities”. It had to talk about variations in health, and they were always couched in terms of its being people’s fault because they led such an unhealthy lifestyle.

Labour’s experience with infant mortality shows that targeted interventions can work. Infant mortality is really interesting, because it is a sensitive measure of immediate health, which is susceptible to direct interventions, such as the ones the Labour Government introduced, including improving the health of expectant mothers through the pregnancy health grant and of babies through Sure Start.

As the Labour-commissioned Marmot review demonstrated, to reduce health inequalities we cannot just focus on lifestyle factors; we need to address their social and economic root causes.

[Guy Opperman (Hexham) (Con)]

I have listened carefully to the hon. Lady’s arguments, and I congratulate her on this debate. It is good to see so many hon. Members from the north-east in the Chamber. She talks about inequalities, and referred to Surrey’s excellent mortality rates and alcohol abuse recovery rates compared with the north-east and Scotland—people in Glasgow have the lowest life expectancy rates in the country. Does she support the proposal for an alcohol Act that would statutorily restrict alcohol availability?

[Chi Onwurah]

I thank the hon. Gentleman for his intervention. As I said, the causes of health inequalities are complex. Alcohol dependency certainly varies significantly throughout the country. We need, and we are seeing, targeted campaigns to address that. I hope that the Government will introduce concrete measures to address alcohol dependency, such as legislation and a minimum price if that is appropriate.

Labour prioritised addressing health inequalities. We could not overcome the legacy of inequality in 13 years, but we made real progress, as the figures for infant mortality show. However, that is set to change. There are three main ways in which the Government are undermining work to reduce health inequalities.

First, the Government have changed the funding formula, and reduced the component designed to address health inequalities. I have been in Parliament for 19 months, and I have raised this matter directly with Ministers four times, not counting written questions. I am hoping it will be fourth time lucky for receiving a direct answer. Will the Minister confirm that in 2010 the Secretary of State decided, against the advice of the Advisory Committee on Resource Allocation, to reduce the health inequalities component of the primary care trust target funding allocation from 15% to 10%? Two weeks ago, during an exchange on the Floor of the House, the Secretary of State cited a 2.8% rise in funding when I asked him about changes to the funding formula. Will the Minister address the change to the formula, rather than the overall increases that the Government claim?

During a speech on the Floor of the House in December 2010, I asked the Secretary of State to confirm that more will be invested in health services for every man, woman and child in Newcastle for every year of the comprehensive spending review as the Government claim that they are increasing NHS spending. He declined to do so, so will the Minister step into the breach?

Clearly, if funding is changed to reduce the amount associated with health inequalities, the north-east will lose out. The Minister will say that the Government have ring-fenced public health spending and handed it over to local authorities. She may refer to the public health outcomes framework, which was published yesterday, just in time for today’s debate, and is very interesting reading. It includes 66 measures, which will be monitored, but they cannot distract from the assault on public health that the Government’s wide-ranging cuts represent for local authorities. For example, cuts to fuel poverty reduction programmes such as Warm Front will leave pensioners in Newcastle colder and more vulnerable to illness. Cuts to area-based grants such as the Supporting People programme mean there will be less investment in support services for those with mental health issues.

The second way in which the Government are undermining work to address health inequalities is the top-down, unnecessary and destructive health care reforms. It is estimated that they will cost £3 billion, and we now know that in the north-east the NHS has been asked to put aside £143 million for those organisational changes. The Government claim that efficiencies will make up for that, but the service is already being asked to meet the 1.5% efficiency cuts challenge at a time of wholesale reorganisation. As the Select Committee on Health said today, it is incredibly difficult, if not impossible, to make such efficiency savings when everything is changing.

In the north-east, our strategic health authority and primary care trusts are being abolished. Funding will be in the hands of GP consortia. Newcastle already has a pathfinder consortium in place. Newcastle Bridges GP commissioning consortia covers most of the city, and has shown that it is keen to work with other stakeholders across the city to promote public health, but it is having to make it up as it goes along in the face of huge uncertainty and change in the public sector and in the third sector, with unprecedented local authority cuts, watched over by an eager private sector that is keen to take advantage of the profit-making opportunities that the Prime Minister and the Health Secretary have promised.

A recent letter to the Health Service Journal, signed by more than 40 directors of public health and more than 100 public health academics, argued that the Bill will increase health inequalities, not reduce them. If the Government will not pay attention to what the Opposition say, perhaps they will pay attention to what the profession says. Michael Marmot told the Health Committee that there is little evidence that the health premium will reduce inequalities. Indeed, he said that it is most likely to increase them. Seven former presidents of the Faculty of Public Health have said that the Bill will “exacerbate inequalities”.

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Lady on bringing this matter to the Chamber. I am a Member not for the north-east, but for Northern Ireland, where health is a devolved matter, but she is expressing concerns felt by many people throughout the United Kingdom, even where such matters are devolved. There are two reasons for that. The problems for her constituents, to which she referred, are as real in my area as they are in other areas of the United Kingdom. The Government’s reduction in the block grant for Northern Ireland means that our health will also be affected. The changes in health care here will be the marker for future changes for us. Does she believe that the service that the NHS is offering is not the standard that we in the United Kingdom expect and are accustomed to, and is not of the standard that is needed to address core health issues?

[Chi Onwurah]

I thank the hon. Gentleman for his intervention. I believe strongly that the national health service is one of the best, most efficient and most effective health services in the world. The evidence shows that, as I will explain. It is absolutely right to say that the concerns I am expressing on behalf of my constituents and the north-east are felt throughout the country, and with good reason. The proposed measures will have an impact on the health of all constituencies in the country. The profession believes that the changes will have a negative impact on health inequalities. The Health Committee’s recent report on public health warned that the Bill poses a “significant risk” of widening health inequalities, yet the Government are pressing ahead.

The third way in which the Health Secretary will widen regional health inequalities is through the wholesale marketisation of the national health service. Before the Minister pretends otherwise, let me quote her colleague, the Minister of State, Department of Health, the right hon. Member for Chelmsford (Mr Burns), who admitted last year that the Bill will turn the NHS into a “genuine market”.

We should recognise that despite having serious health inequalities, we suffer relatively little from inequalities of access. I am no expert on health services, but I am told by those who are that the stent insertion that Prince Philip recently underwent at Papworth hospital did not differ materially from the treatment that any of my constituents would have received at the Freeman hospital if they had suffered a similar condition. That is fantastic, but it is not the case in the United States of America where there are terrible health access issues due to its private health care system. In the short term, the Government’s reforms are diverting funds away from patient care, which will have an impact on waiting times. Those who can afford it will tend to seek private health care, but those on low incomes will be unable to do that. In the longer term, the Bill is about the privatisation of the NHS. Strong independent evidence indicates that the NHS is one of the most efficient and equitable health systems in the world. Why would we want to make it into a market? The Bill misses an important opportunity to focus on the real issues and the wider determinants of health in this country.

I shall therefore finish by asking the Minister these questions. The Government have signed the recent World Health Organisation declaration to deal with the social determinants of health inequalities, so what concrete actions will Ministers take? The previous Government accepted the Marmot review’s recommendations in full. When will the current Government do the same? What are the coalition’s proposals for introducing a national minimum unit price for alcohol? Will the Government confirm a commitment to undertake a consultation on plain and standardised packaging for tobacco products, and on what date that will take place?

Does the Minister share my concern about the Royal College of Midwives and Netmums survey showing that women from lower incomes were denied antenatal classes and the choice of a home birth? Will that not entrench health inequalities from before birth? The Minister looks somewhat surprised at that question, but differences in health access do exist in our country.

As Blane said, no law of nature decrees that the children of poor families should die at twice the rate of children born into rich families. In the north-east, there are more poor families. Will the Government commit to reversing their changes to the funding formula component designed to deal with health inequalities?

The national health service’s first Minister of Health, Nye Bevan, famously said that when a bedpan falls to the floor in Tredegar, it should echo in the Palace of Westminster. The Minister of State, Department of Health, the right hon. Member for Chelmsford, quoted that with some amusement and disdain and proclaimed that those days were long gone, so what does this Minister think should echo in Westminster? Does she accept responsibility for reducing health inequalities? Can she assure me that health inequalities between the north-east and the rest of the country will reduce over the term of the present Government?

[Several hon. Members]

rose—

[Mrs Linda Riordan (in the Chair)]

Order. At least six Back Benchers wish to speak. I mean to call the first Front-Bench speaker at 10.40 am. That leaves about 45 minutes, so I ask hon. Members to bear that in mind.

09:53

[Ian Swales (Redcar) (LD)]

It is a pleasure to speak under your chairmanship, Mrs Riordan. I congratulate the hon. Member for Newcastle upon Tyne Central (Chi Onwurah) on securing the debate. I agree with her that the issue of health inequalities is of great importance to all MPs and particularly those of us who represent constituencies in the north-east. Having been born in Leeds, I was delighted to emigrate to the north-east in my early 20s.

First, I would like to refer to the July 2010 National Audit Office report, which was specifically about “Tackling inequalities in life expectancy in areas with the worst health and deprivation”, and to the subsequent hearing of the Public Accounts Committee and the report that it produced in November 2010. That report was in effect a catalogue of action by the previous Government and bears detailed reading. It said that the Department of Health had been

“exceptionally slow to tackle health inequalities…we find it unacceptable that it took it until 2006—nine years after it announced the importance of tackling health”—

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

Will the hon. Gentleman accept that tackling health inequalities effectively requires a broad range of actions, including tackling things such as educational under-achievement, the need for warm homes, and child poverty, which go across a broad range of Departments, not just the Department of Health?

[Ian Swales]

I absolutely agree with that and will go on to say more about it. The Department of Health has an important role in being the umbrella Department for monitoring action in this area, however. The report went on to say that the Department recognised its failings, admitting that it had been

“slow to put in place the key mechanisms to deliver the target it had used for other national priorities”

and

“slow to mobilise the NHS to take effective action.”

However, I agree with the hon. Gentleman that there is much more to this than simply the NHS.

There certainly has not been a shortage of reports on this subject. The Department of Health issued 15 major publications on the issue, starting in 1998 and rising to a crescendo in 2010. In fact, 2007 was the only year in which the previous Government did not issue a publication.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

I wonder whether the hon. Gentleman could catalogue the action that was taken after the publication in 1980 of the Black report, which first demonstrated a causal link between ill health and poverty. In addition, “The Health Divide” was published towards the end of the ’80s. As I recall, because I was working in this field, there was absolutely nothing.

[Ian Swales]

I bow to the hon. Lady’s knowledge in this area. She certainly has a great deal more than I do. I do not know the answer to her question.

In 2003, the Government identified 12 cross-Government headline indicators and 82 cross-Government commitments, but sadly overall it was effective action that was the problem. In 2005, the Government identified 70 spearhead local authority areas for special attention, and credit to them for that. One third of those areas were in the north-east. However, only in London did those spearhead areas see a narrowing of health inequalities.

I know that this issue is complex, but some things are basic. The NAO report showed that more deprived areas had fewer GPs. Some had significantly fewer. They were also paid less. I was shown barely believable figures showing that Redcar and Cleveland had only half the average GP resource of the most deprived 20%. Clearly, that is not a good position to be in.

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

How does the hon. Gentleman think that forcing through NHS reforms that are vehemently opposed by both the British Medical Association and the Royal College of General Practitioners will encourage GPs to go and work in deprived areas that have a shortage of GPs?

[Ian Swales]

I believe that the wider issue of NHS reforms is outside the scope of this debate, but certainly I see a growth in the number of GPs already.

[Chi Onwurah]

rose—

[Ian Swales]

I am not giving way again on that subject.

As the hon. Member for Easington (Grahame M. Morris) said and as we all know, many factors are involved in health inequalities: smoking, alcohol, obesity, housing, income and others. Sadly, the area that I represent has the worst rate or one of the worst rates of obesity in the country, and one third of my constituency is in the poorest 10% of most deprived wards, so I am well aware of how these things operate in the local area.

In the public health area, we should, as the hon. Member for Newcastle upon Tyne Central said, celebrate a great success and learn from it. The Fresh organisation has had a great impact in terms of smoking reduction. The rate in the north-east went from 29% in 2005 to 22% in 2009. I also find this hard to believe, but apparently males in the north-east have the lowest rate of smoking in the country. It was probably the highest at one time, but apparently it is now the lowest. That shows that effective public health action and education can have a big impact. Models such as that, in which innovative third sector organisations focus on change, can assist with this important job, which is a lot about behavioural change.

As well as successes such as the one that I have described, I welcome the increased spending in the NHS by the previous Government. That has increased health outcomes for all, regardless of the fact that it failed to narrow health inequalities. My area has seen the setting up of excellent facilities such as the James Cook university hospital. As has been mentioned, there is also the data gathering, which is so important in learning how to deal with these problems.

There is still a lot to do. In my constituency, there is a 16-year gap between the life expectancies in the richest and poorest wards. I therefore welcome local health commissioning, which will lead to a more joined-up approach to local issues. An excellent pathfinder GP group is already up and running in Redcar; in fact, it was running as a social enterprise for five years before the recent reforms were introduced.

I welcome the public health agenda and the fact that the budget will go to local authorities. I also welcome the setting up of health and wellbeing boards, although we will have to watch how the money is spent to ensure that the maximum amount gets to the front line. Similarly, I welcome the proposed establishment of Public Health England, which will have the specific aim of reducing health inequalities.

Even more study is needed into, for example, the psychological aspects of why people choose lifestyle options they know to be harmful. Recent research clearly shows that many social problems, including the one we are discussing, stem from income inequality, not from absolute levels of income, and some interesting data are emerging. Sadly, income inequality also widened under the previous Government.

The new Government have made a start, but there is much more to do, and I look forward to the Minister’s comments.

10:00

[Mr Alan Campbell (Tynemouth) (Lab)]

It is a pleasure to serve under your chairmanship, Mrs Riordan. I promise not to mention Leeds, which is nearer to your constituency than it is to the north-east.

I congratulate my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah) on securing this important debate. She set out very well the challenges facing our constituents in addressing health inequalities, which still exist in the north-east, despite the progress made over the 13 years of the Labour Government. I have to say I found the hon. Member for Redcar (Ian Swales) somewhat confusing and confused about the nature of those inequalities—I suppose confusion is one result of trying to face both ways.

I want to make three broad points, and I will be interested in the Minister’s response to them. The first is about health spending in the north-east. The Government’s view is that NHS spending will continue to grow overall in the next few years, and figures from the House of Commons Library certainly confirm that planned spending is set to grow in cash terms. For 2010-11, the cash figure is £102 billion; by 2014-15—at the end of the spending round—it is set to be £114.4 billion. If we look at the issue in real terms, however, and we take 2010-11 as a base figure, the broad trend is essentially flat.

I do not, however, want to argue that point. Instead, I want to ask how that spending affects the north-east and institutions in my constituency. The Government will no doubt tell us that there is a 3% increase for PCTs this year. They will say that is evidence of their commitment to growing budgets; in fact, that is, effectively, what the Secretary of State said on this morning’s “Today” programme. However, the tariff that funds hospital treatment has been reduced. Next year, the budget of Northumbria Healthcare NHS Foundation Trust, which serves my constituency and those of a number of Members here, will be reduced by 1.9%. Hospitals have a key role to play in not only treating patients, but addressing health inequalities, and I want to place on record the excellent work done at my local hospital—North Tyneside general hospital—particularly in treating diabetes and stroke, where we have made huge advances in the past few years, although we are still running to catch up.

My first question to the Minister, therefore, is this: if PCT budgets are rising, why are hospital budgets, which are already under pressure, being cut? Where is the money going? Is it to pay for reorganisation? Will the Minister confirm the fear that PCTs are required to put the extra money into contingency funds to pay not only for reorganisation, but for other things that might arise? Will she confirm that if those things do not arise, that money will be clawed back by the Department of Health and ultimately, one fears, by the Treasury? That helps to explain the difference between the planned expenditure that the Government announced and the actual expenditure in the past 12 months.

The second issue I want to turn to is alcohol-related harm. The north-east has a reputation for heavy drinking, which in some ways reflects our heavy industrial past. The region does significantly worse than the English average on alcohol-related hospital admissions. In February 2009, Balance, the north-east alcohol office, was launched, based on the excellent work of Fresh, which works for a smoke-free north-east. For the first time, we had a strategy that covered the whole region on this issue. One of Balance’s concerns—I remain to be convinced on this issue—relates to the introduction of a minimum unit price for alcohol. There was no consensus in the previous Government on the issue. The Home Office, of which I was proud to be a member, was sceptical about minimum unit pricing, because it was most concerned about addressing alcohol-related crime and disorder. However, the Department of Health, which was more concerned about individuals’ health, was more positive.

Just before Christmas, the Prime Minister entered the debate in The Daily Telegraph, saying that he was in favour of minimum unit pricing and will overrule any Department or Minister who stands in his way. As my hon. Friend the Member for Newcastle upon Tyne Central asked, will the Minister confirm that the Government will introduce proposals for minimum unit pricing and, if so, when? Will she confirm that the Department of Health supports the policy? Is she personally committed to it? Is the Secretary of State a supporter of it?

Thirdly, I want to acknowledge the points that have been made about health inequalities being addressed only if we go beyond NHS professionals and make sure that individuals make the right choices about issues such as smoking, how much alcohol they consume and whether they eat healthily. The Government have a role to play—if they had not played a role, we would not have made the progress that has been made in recent years.

In my constituency, there is a clear link between health inequality and deprivation. Life expectancy in the borough of North Tyneside is 76.8 years for a man and 81 years for a woman, which is about 18 months lower than the English average. However, in parts of my constituency, such as Chirton ward, Valley ward, Collingwood ward, central Whitley Bay and central North Shields, life expectancy can be about 11.5 years less for a man and over nine years less for a woman than it is in the least deprived areas of our country.

As we have been told, the Marmot review recommended that the focus should be on the social causes of health inequality, and it highlighted the need for an effective integrated approach. In my constituency, however, health inequality is worst among those groups and those areas that are most likely to be hit by cuts elsewhere. My hon. Friend the Member for Strangford (Jim Shannon) mentioned Northern Ireland. I recall, as he will, that the Prime Minister—then the Leader of the Opposition—was interviewed by Jeremy Paxman days before the general election. They talked about the scale of public spending cuts, and the Prime Minister was asked to name the regions that would be hit worst. The first one off the tip of his tongue was the north-east and the second was Northern Ireland, so my hon. Friend and I, as well as my other hon. Friends, are here to raise these issues because our regions face the most cuts overall.

Let me give an example of what that means. North Tyneside council has to make £48 million of cuts over the next four years. Next year and in subsequent years, it proposes to charge bowling clubs more to use bowling greens. It also proposes to close more bowling greens in my constituency than in any other part of the borough. The outcome will be that fewer people will be involved in the sport. Many of them will be pensioners, and my constituency has one of the highest numbers of pensioners of any in the country. The proposal could have an adverse impact on their physical and mental health.

I am concerned about getting a joined-up, integrated approach—which just is not happening. The region has a better than average record of reducing child poverty and premature winter deaths, but what effect will the proposed benefit changes have, and what about increasing energy prices, which the Government appear powerless to do anything about? What about the impact of cutting Warm Front? That will affect not just the bills of people who are trying to keep warm, but their health.

Do the Minister and the Government believe that central Government still have a role to play in reducing health inequality? Will the Minister confirm that she is raising the issue of health inequality across Government, wherever Departments want to take action? I tell her this: in our region alarm bells are ringing about the effects on health and a range of other matters. Or has her Department, as the report of the Select Committee on Health suggests today, put its focus and energy on a costly NHS reform Bill, which no one asked for and for which there is decreasing support?

10:11

[Guy Opperman (Hexham) (Con)]

My grandmother was an NHS matron, and I worked with health care professionals for nearly 20 years in my former profession as a barrister. I also spent far too much time as a patient, attempting to become an expert on all health matters. I probably hold the House record at the moment for the most time spent in hospital in the past year. I certainly spent a lot of time in hospital in my other former profession of jockey. I think that I have broken 19 different bones at various times. I was actually quite a good jockey, but I did not always stay on board in a 20-year career. If people ride over fences at 35 mph, they occasionally hit the deck.

I congratulate the hon. Member for Newcastle upon Tyne Central (Chi Onwurah) on obtaining the debate and welcome the chance to speak on behalf of the citizens of Northumberland whom I represent. I should make a declaration that, before I first came to the House, I worked as a barrister in health care matters. I also worked for the Free Representation Unit, providing assistance as a lawyer in health care cases. I am proud that two successive Labour Governments gave me awards under the national pro bono scheme for lawyers. I do not expect that to happen again in a hurry, but it is still a great source of pride about the work that we did on behalf of patients.

As I was ill last spring and summer, I could not speak in the health debates about the children’s heart unit, but I am most pleased to support the Freeman hospital in its campaign to keep its amazing unit open. The hospital is outstanding. It is not in my constituency, but everyone in the north-east recognises that it is a flagship. We all very much support the work that it has done and continues to do. I was proud to see that my constituents Graham and Andrea Wylie, who have raised a phenomenal amount of money and supported the hospital very well, were able to bring their daughter Kiera home last week.

The debate is about inequality in health care, and all hon. Members present would acknowledge that disparities exist within the region. I accept that in Northumberland the quality of the health care and the results and optimum findings will be better than in some of the more urban parts of the region. There are also disparities by comparison with other parts of the UK. The point that I was trying to make in intervening on the hon. Lady was that clearly, when compared with Surrey or other places down south, there is a genuine difference. We all recognise that. The statistics are overwhelming. The point can also be made that in Scotland, in parts of Glasgow that I have been to, where life expectancy is barely 59 or 60 for some people, the situation is considerably worse.

I spoke in the debate on alcohol pricing before Christmas and expressed my support for an alcohol Act similar to the one that exists in Scotland. It seems to me that that is supported—to this extent I disagree somewhat with the hon. Lady—by a vast number of health care professionals and clinicians. I hope that the Minister will support that today. I welcome the fact that the Prime Minister seems to have swung behind the idea of an alcohol Act. We should all applaud the work done by Balance and Smoke Free North East. When I was a barrister, I used to see the effects of crime and the links to alcohol. Hon. Members who go out on the beat with the police in any of our constituencies will be aware that the rate of alcohol-related admissions is the highest in the country; 46% of all violent crime is alcohol-related; and about 50% of domestic abuse is alcohol-related. I strongly support the campaign of my hon. Friend the Member for Totnes (Dr Wollaston) to change the law.

To touch briefly on hospitals, I am lucky enough to have Hexham hospital in my constituency. I accept it was built by the former Prime Minister, Mr Tony Blair—[Hon. Members: “Personally!”] Not personally; he was not there with the bricks and mortar, but he certainly signed off on the upgrade to the original hospital. It is an outstanding hospital, with a tremendous cancer support group, which I went to listen and talk to in the summer. The quality of care and its integration into the health care trust’s programme is outstanding. However, I am pleased that finally, after successive Governments—I am going back in history 20, 30 or possibly even 40 years —the small hospital in the west of Northumberland called Haltwhistle is being rebuilt. It is impossible to go there without being asked when the hospital will be rebuilt, and I think that successive MPs have had to deal with that repeatedly.

I want to talk about inequality in relation to provision throughout the region. I represent the far west of Northumberland and the people of Bellingham, Kielder and the far west are very conscious of the fact that there is no hospital or ambulance provision all that close to them. There are outstanding paramedics and other people and a system that works very well, but there are rural inequalities, and I wholeheartedly support the campaigning by the Friends of Bellingham Surgery and by those who are trying to introduce a more integrated system to take care of the inequalities suffered by those who are far away from hospital. It is not easy to explain why the hospital at Hexham, which was built as a particular type of hospital, is unable to deal with certain things on an ongoing basis, including significant accident and emergency. It is necessary to drive past that hospital to Wansbeck, the Royal Victoria infirmary or other hospitals.

I am living proof that people should not necessarily go to the nearest hospital, but should go where the specialists are. I wholeheartedly support—I hope that the House does, too—specialist hospitals where people go for the best possible treatment. When I was taken ill on 26 April and collapsed in Central Lobby, I was taken initially to St Thomas’, which is a very good hospital; there is no dispute about that. I was subsequently taken to the National Hospital for Neurology and Neurosurgery, a specialist hospital for the treatment of meningiomas and brain tumours. I have broken umpteen bones, and I would want to go to the hospital that is best able to deal with the problem and that does so regularly.

I will finish on two matters on which I want to give support. First, I strongly urge local authorities to work together with the health care trusts during the coming changes, because across the region there are examples of local authorities’ failure to do that. I urge them to integrate the provision of services, particularly care, on a continuing basis. Finally, in the north-east, we are proud to be the champions of certain screening programmes. I raised the matter of bowel cancer screening in an Adjournment debate on 23 November. Two hospitals in the north-east, in South of Tyne and Wear and Tees, piloted bowel cancer screening by Flexi-Scope. It is likely that the pathfinders for the future will be there, too. I applaud and recommend to anyone the quality of continuing health care screening that successive Governments have introduced.

10:20

[Mr Iain Wright (Hartlepool) (Lab)]

It is a pleasure to serve under your chairmanship, Mrs Riordan. I apologise for turning up late to this debate. I was chairing another meeting, which I was obviously doing badly because we overran our time.

I congratulate my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah) on securing this debate, which is on one of the most important issues facing the north-east. The health inequalities in my own constituency are certainly unacceptable. For many years, the health of the people in Hartlepool has generally been worse than the national average. Although progress has been made, health levels remain too low and are not improving fast enough for many of my constituents.

Life expectancy in Hartlepool is lower than in the rest of the country. A boy born in Hartlepool today would expect to live until he was 75.9 years old, which is two years shorter than the national average. A girl born in Hartlepool would expect to live until she was 81 years old, which is longer than her counterparts in Middlesbrough, Gateshead, South Tyneside or Sunderland. None the less, her life expectancy is still more than a year shorter than the national average for girls and women.

Those figures have improved dramatically over the past 15 years, which reflects increased health funding, more investment in primary care, a greater emphasis on prevention and rising living standards. However, there are several worrying elements within the data. First, generally rising life expectancy rates mask huge inequalities within Hartlepool that simply should not be tolerated in a civilised society. A constituent of mine living in Stranton, Dyke House or Owton Manor would expect to die up to 11 years earlier than a similar constituent living in the area close to Ward Jackson park.

Secondly, the mortality rate for women of all ages has fallen across all parts of the country, with the exception of those in my constituency. Data show the contrasting fortunes of different local areas. In the decade after 1998, the mortality rate for women in Kensington and Chelsea fell by more than 40%, but it barely moved in Hartlepool. I suggest to the Minister, who has some experience of Hartlepool, that women in my constituency consider the health of their children and family over and above their own. What can she do to address that cultural issue, so that the caring nature of Hartlepool’s womenfolk is retained, but not at the expense of their health?

Thirdly, much behaviour in Hartlepool leads to poor health outcomes. For example, estimated healthy eating, smoking rates and obesity are significantly worse than the England average. Although deaths from heart disease and strokes in Hartlepool have fallen, they remain well above the national average, while death rates from cancer remain some of the worst in the country. Hip fractures for people in Hartlepool aged 65 and above are off the scale by comparison with other areas in England. Why? It is mostly because of our place in history and the manner in which we have been affected by de-industrialisation.

Given our legacy as a place of heavy manufacturing, we have a disproportionate amount of people suffering from industrial diseases and injuries. I particularly want to highlight the number of chest-related diseases. The number of people suffering from asbestos-related diseases such as pleural plaques and mesothelioma is heartbreaking. The present Government’s delay in setting up any response to deal with those cases is prolonging the suffering for many constituents and their families. I urge the Minister to speak to her counterparts at the Department for Work and Pensions and the Ministry of Justice to ensure that the employers’ liability insurance bureau is established as quickly as possible.

[Ian Swales]

rose—

[Mr Wright]

If the hon. Gentleman will forgive me, I will not take interventions because a lot of my hon. Friends want to contribute to this debate.

I mentioned the de-industrialisation of the past 30 years. The loss of the shipyards, the docks and many of the steelworks and our engineering firms has hit Hartlepool’s prosperity hard. As my hon. Friend said, there is a very clear correlation between income, employment and health. Given the bad and deteriorating economic situation in my constituency and the wider north-east, the Minister needs to be mindful of the implications on health of the Government’s economic policy.

As unemployment in the north-east and in Hartlepool is high and rising, and there is a direct link between being unemployed and being unwell, the significant health inequalities that my constituents experience will only get worse. Only this week, the Centre for Cities highlighted a growing divide between northern cities and their southern counterparts in prosperity, innovation and resilience to an economic downturn in 2012 and beyond. That is bound to have a worsening effect on health inequalities, whether physical health or mental well-being.

The Minister will recognise the direct link between economic policy and health inequalities. How will she combat the health fall-out from the failures of the Chancellor’s economic policy and the neglect of the north-east? The problem will be made worse by the Chancellor’s announcement in the autumn statement to regionalise public sector pay. That will have enormous repercussions on the NHS in the north-east. Although highly professional, the NHS in the region is already struggling to recruit and retain appropriate staff tasked with addressing health inequalities in our region. Health services are already under strain not merely because of budgetary pressures, but because of difficulties in recruitment.

My hon. Friend the Member for Tynemouth (Mr Campbell) mentioned difficulties in attracting and recruiting GPs. My area has one of the lowest GP per capita rates anywhere in the country, and that does not help to reduce health inequalities. Does the Minister not think that that problem and therefore health inequalities will get worse under the Chancellor’s proposals for regionalised pay, and how will she counteract it with regards to recruitment and retention in the NHS?

Let me refer to the ongoing saga of the University hospital of Hartlepool. The Minister will be aware of the closure of accident and emergency last year, which no one in Hartlepool wanted. It has been announced recently that some services will migrate back, which is very welcome, but the whole health economy in my area and, by implication, the health inequalities in the region remain uncertain because of the lack of a clear decision about the new hospital and its funding arrangements.

Will the Minister today provide some clarity about what will happen with regards to the future provision of a hospital in Hartlepool? I do not want to take away the welcome news of a new hospital for the constituents in Hexham, but what about my constituents in Hartlepool? Will she reconsider the proposals put forward by Lord Darzi five or six years ago? In short, can we have clarity with regard to the ongoing provision of a hospital in Hartlepool?

We in the north-east and in Hartlepool have suffered for far too long with disease, ill health and early death, much of which is linked to deprivation and poverty. Government policy threatens to make that worse, so I hope that the Minister can provide us with some reassurances this morning.

10:27

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

It is a pleasure to serve under your chairmanship for the first time, Mrs Riordan. I congratulate my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah) on securing this debate. The number of Opposition Members who are present today is a testament to the issue’s importance. I wish we had a little longer to speak, because I will have to truncate my remarks.

I served on the Committee that considered the Health and Social Care Bill, and I am a member of the Health Committee. As someone who has worked in the health service for more than a dozen years, I can say that the subject is very close to my heart. I am grateful to a number of organisations for their work, including the Association of North-East Councils, the National Education Association, the Campaign for Warm Homes, Durham county council, the North East Public Health Observatory and Health Works, which won a national award last week for its innovative and pioneering work in tackling health inequalities at the very heart of my constituency, and I thank that organisation for the information that it provided to Members for this debate.

The NHS reforms contained in the Health and Social Care Bill are only one aspect—a very important aspect—of how Government policies will increase health inequalities. We must make it clear that there is no consensus on this matter. There is clear blue water between the views of the Opposition, who think that resources should be applied to the areas of greatest need to address real and fundamental problems, and the attitude of Government Members. Across every Department, coalition policies will exacerbate socio-economic inequalities and, ultimately, health inequalities, as indicated by Professor Sir Michael Marmot in his report. I wanted to mention some figures in my region, but I do not have enough time.

Chronic obstructive pulmonary disease, or COPD, is particularly prevalent in the north-east. It is often associated with heavy industry, coal mining and the like. Last year, my own primary care trust received a national award for its innovative approach to tackling this public health issue within our community. COPD costs the NHS an estimated £491 million every year.

Mortality rates in the north-east are higher than in the rest of England, accounting for 6% of all deaths in England, and the inequality gap appears to be increasing, which is a real concern.

I want to focus on two significant issues in the limited time that I have: first, inequalities in access to health service, which is a key factor that influences health outcomes; and secondly, the broader problem of health inequalities produced by deep-seated differences of social class.

As we have heard, in 1979 the Government’s chief scientific adviser, Sir Douglas Black, produced a report on the extent of health inequalities in the UK, and he acknowledged that the NHS could do much more to address those inequalities, alongside other improvements across the Government. As I mentioned earlier, those improvements include ones to child benefit, maternity allowances and pre-school education, as well as an expansion in child care and better housing. All those changes would address health inequalities.

Those findings by Sir Douglas Black were subsequently reinforced by further research and reports by Professor Peter Townsend and Sir Derek Wanless and more recently by Professor Sir Michael Marmot, all of whom I have had the pleasure to meet in one forum or another before and after I was elected to serve in the House.

There is a stark danger—a clear and present danger—of a downturn in the progress that has been made in addressing health inequalities because of decisions being made by the Government, both in the Department of Health and elsewhere, and severe cuts to services for the most vulnerable. That makes it all the more important that the NHS focuses on tackling health inequalities. Let us make no mistake: under Labour, good progress was made to address health inequalities, but a great deal more needs to be done.

I have served on the Health and Social Care Bill Committee for a year now, as well as on the Select Committee on Health, and I would argue that that Bill changes the fundamental aspects of our NHS. The NHS has been fragmented, with privately led commissioning, the reintroduction of a postcode lottery, an unco-ordinated health system and greater competition. That fragmentation risks entrenching the inequality of access to health services and health outcomes. Fragmentation is the antithesis of a co-ordinated approach. We need more co-ordination, more integration and a more focused approach.

Stephen Thornton, chief executive of the Health Foundation, talked about health inequalities when he was one of the expert witnesses who gave evidence to the Health and Social Care Bill Committee. He said:

“a duty needs to be placed on the national commissioning board and the consortia”—

the commissioning groups—

“to embed shared decision making in all care and treatment”.––[Official Report, Health and Social Care Public Bill Committee, 8 February 2011; c. 19.]

Only by reinforcing the duty on the commissioners themselves to reduce health inequalities is there any chance of achieving that goal.

The cuts that are falling across every Department are clearly hitting the poorest hardest. The Association of North East Councils has shown that the north-east will be worst affected by those cuts between now and 2013. Child poverty is rising in my constituency. Currently, one child in three in my constituency is living in poverty, but in the Eden Hill ward in Peterlee 48% of children are in poverty, and in Deneside in Seaham, which is next to where I live, the figure is 40%. Those figures should concern not only the local MP but the national Government.

Recently, the TUC produced figures after the unemployment figures were released that show that, on average, 7.5 jobseekers are chasing every vacancy, but in the constituency of my hon. Friend the Member for Hartlepool (Mr Wright) the figure is as high as 24 jobseekers chasing every vacancy. Youth unemployment is rocketing, and the coalition Government seem to have no intention of reducing health inequalities.

[Ian Lavery (Wansbeck) (Lab)]

I will make a very brief intervention. My hon. Friend has just mentioned statistics about child poverty, unemployment and jobseeker’s allowance applications, and earlier in the debate other colleagues talked about the inequalities in the north-east regarding the situation within the NHS. Those statistics and that situation are wholly unacceptable. The Prime Minister said before the election that he would attack the north-east first and then Northern Ireland second. That is happening. With the Welfare Reform Bill, there will be a continued attack on the north-east. Does my hon. Friend agree that that does not bode well for the future of the people in the north-east and that things can only get worse?

[Grahame M. Morris]

I am grateful to my hon. Friend for that intervention, and I agree with him. I was shocked to attend a meeting in my constituency last Friday about the contingency plans that are being put in place for emergency feeding centres after 2013. Those centres are the soup kitchens that we have not seen since the 1930s or the miners’ strike in 1984.

My final point is that the Labour Government produced the first ever targets to reduce health inequalities in the population, and the poorest were healthier when we left Government than they had been when we took office in 1997. My plea to the Minister is this: raise the standards and be a champion for public health and not an apologist.

[Mrs Linda Riordan (in the Chair)]

Order. I remind Members that I will call the Front-Bench spokespersons from 10.40 am onwards.

10:35

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

It is a genuine pleasure to serve under your chairmanship, Mrs Riordan.

I congratulate my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah) on securing this debate. Also, I want to welcome to Westminster Hall the two Tanzanian women MPs who are shadowing me today. Whether they like it or not, they are finding out a great deal about health inequalities in the north-east of England.

I will be very quick; I am becoming good at truncating my speeches now. We have heard some excellent speeches that have been based on well researched statistics. I do not intend to use any statistics today. I will be unashamedly emotional and, like the hon. Member for Hexham (Guy Opperman), I will start by talking about my own family, because I want to talk about the practicalities of health inequalities.

I attended a memorial service in the village of Esh Winning last summer, which was to remember the men—they were men—who had died in the three pits of the Deerness valley. There was a huge list of men who had died; there were 75 names on it. Those three pits had never had a major disaster, but over 100 years 75 men were killed in them, including my grandfather, Andrew Corrigan, who I think was 27 when he died, and his brother, Peter, who was 25 when he died. They were on my father’s side of the family. On my mother’s side of the family, however, Alix Wright, who was 25, and his brother, Jack, who was 22, died in the trenches of world war one within two months of each other.

I will not pretend that wartime deaths were unique to the north-east, but they came on top of all the health inequalities that existed in the north-east. If people survived the trenches and the pits, they were very likely to succumb to consumption, problems in childbirth or the diseases of poverty. That continued right through the two world wars, and through the ’50s, the ’60s, the ’70s and ’80s. We created tens of thousands of ships, we hewed coal and we made iron ore into steel. That industrialisation left us with a massive legacy in the north-east—a history of early deaths from cancers, emphysema, stroke and heart disease.

The Labour Government did something about that situation. For the very first time, they focused on the social causes of health inequalities and put together a planned and integrated system to level the playing field. What concerns me is that, although the current Government are saying that they are committed to tackling health inequalities, what we are seeing is a complete difference between the drivers that they have put in place to deliver their stated objectives and what actually happens. There is a real skew between what they say and what they do.

I sat through the debate yesterday in the main Chamber on food prices. I do not want to be rude but I must say that it was almost as though the Secretary of State for Environment, Food and Rural Affairs was handing out bouquets at a village fete. We are faced with people telling us that there have been massive increases in charitable food banks and in middle class poverty; a return of diseases such as rickets among children; and children being admitted to hospitals during school holidays with malnutrition, which shocked me. However, the Secretary of State said to us that she welcomed the increase in food banks as a sign of the success of the big society. I see that as being a massive skew between what the Government are saying and what they are actually delivering.

I will finish by saying that in the north-east we have things that we are rightly proud of. We have a proud history; we fired the industrial revolution. As I have already said, we built tens of thousands of ships and we provided the powerhouse for this country for many years. And we have things that we can still rely on: our community and kinship; our social cohesion; our stability; and our wonderful surroundings, of which we are rightly proud. But we are saying to the Government, “You have a duty to ensure that we live long enough to be able to enjoy these things.”

10:40

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

It is always a pleasure to serve under your distinguished chairmanship, Mrs Riordan.

I congratulate my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah) on securing this debate. Its importance to the north-east is exemplified by colleagues’ high level of attendance this morning, but it is also important because the lifestyle issues and the social and, if I might say so, class determinants behind health inequalities lie at the heart of bringing down levels of acute diseases such as cancer and heart attacks. Until we tackle the range of public health issues that underlie health inequalities in the north-east, we have no hope of building a healthier Britain overall, or of containing the cost of the national health service.

My colleagues have comprehensively dealt with the data on health equalities in the north-east, and I do not plan to repeat most of them. I want to talk specifically about smoking and alcohol, which are big issues in the region, and to pose some questions to the Minister. I was very pleased to visit Newcastle last year, at the invitation of the then, and current, leader of the city council, Councillor Nick Forbes. I chaired a round table on tobacco and alcohol, and heard about the work of Fresh under the leadership of Alisa Rutter, and saw a presentation by Balance North East. On the same day, I visited Newcastle Royal Victoria infirmary and discussed the devastating impact of the excessive alcohol consumption in the local community with a top north-east liver specialist and consultant gastroenterologist, Dr Chris Record. He kindly gave me a chart of alcohol units, and I have it up in my office because I need reminding that the average glass of wine nowadays contains 2.5 units. How many people know that?

There is no question but that we did not achieve all we wanted to on health inequalities under the previous Labour Government, but we did make progress, and I hope that the Minister will acknowledge that. Drilling down into the overall figures shows that we made progress in specific areas, and the Minister acknowledged during a speech to a fitness industry conference in London that the previous Government were indeed firmly committed to reducing health inequalities. As colleagues have said, and as the North East Public Health Observatory tells us, the health of people in the north-east generally is worse than that of people in England as a whole, and that is largely to do with the social determinants I referred to earlier, and also the region’s industrial legacy.

I now want to talk specifically about tobacco. Work in this area is an example of good practice and partnership, but it is the sort of public health work that is potentially threatened by some of the changes the Government are bringing forward. Smoking remains the major cause of premature death and disease in the north-east, killing more than 5,000 people a year. It costs the region £174 million, the NHS £104 million—£35 million through passive smoking—and businesses £34 million in absence days alone. The average age at which people start smoking in the north-east is 15. The region has historically had the highest smoking rate in England, but, as we have heard, the rate has come right down due to the activity of Fresh.

Fresh has won all sorts of awards, including the gold medal in the inaugural chief medical officer’s public health awards, and it delivers work across eight key strands, but it is concerned about the changes in public health that are coming forward. It is currently funded on an annual subscription basis by all 12 north-east PCTs, and the PCTs are worried about what will happen when they finally fold. I understand that discussions are under way to secure the continued commissioning of the Fresh programme by local authorities. Is the Minister aware of those discussions? Can she update the House on what progress has been made to secure funding for this important and successful initiative, which is leading the nation?

Fresh is also concerned about the loss of the regional tier of tobacco control programmes in England as a whole, and the advent of the localism agenda might make it more difficult for local authorities to co-ordinate, and to attack some of the public health issues. How will the Government ensure that all local authorities prioritise tobacco issues? How does the Minister plan to ensure that there is no fragmentation or duplication of resources and efforts when the PCTs go? How will she ensure that localities work together to achieve economies of scale and have a population-level impact, as we have seen happen so successfully with Fresh? Can the Minister tell the House today when the new tobacco marketing strategy will be published? Will the Government ensure that there is a clear focus on tobacco?

Alcohol is another major cause of health inequalities in the north-east. We know that generally the affluent tend to consume the most, but for a variety of reasons the health effects of disproportionate alcohol consumption are felt most keenly among the poorest, and in areas such as the north-east. We also know that although in a recession levels of drinking tend to level off, among young people they go up, and we are seeing evidence that levels of self-harm are going up among young people. Alcohol is therefore a worrying issue, not just because of the physical health issues, but in relation to mental health and public order. The north-east continues to have the highest rate of alcohol-related hospital admissions, and in the past nine years alcohol-related liver disease has increased, sadly, by 400% among 30 to 34-year-olds, which is the highest rate in the country. I want, therefore, to know from the Minister about the Government’s alcohol strategy. Is she content that the constituents of my hon. Friend can buy two litres of cider for £1.34? That is less than the cost of an equivalent quantity of a soft drink.

On my recent visit to the region, I found that availability was a genuine concern, with alcohol available 24/7 and many off-licences centred in the more deprived areas. I see that in Hackney; we have more off-licences and bookies than shops where we can buy fresh food.

[Guy Opperman]

Will the shadow Minister give way?

[Ms Abbott]

I would love to, normally, but I have to try to get through my speech so that we can hear from the Minister.

Last September, the leader of Newcastle city council, Nick Forbes, amended a motion calling for the introduction of a minimum price for alcohol. He made the motion more comprehensive, calling for a wider range of measures to address the availability of alcohol. They included more powers for the council to refuse or withdraw licensing applications, following a report last year that linked under-age drinking to areas with a high density of licensed premises. Nick Forbes said:

“Figures show that alcohol is being sold for pocket money prices in Newcastle. Cider is available for 16p a unit…Most pubs back the idea of a minimum price for alcohol, as it would only affect the loss-leading deals offered by some supermarkets and wouldn’t have any impact on the price of a pint. It’s a controversial step, but there’s evidence that more and more people are ‘pre-loading’—downing cheap spirits at home before going out on the town. Minimum pricing would reduce this, and thereby reduce the overall figures for anti-social behaviour and hospital admissions”.

What decisions are being made at a national level to support local leaders such as Nick Forbes, who are committed to reducing health inequalities overall, and are taking strong action on issues such as alcohol?

The figures show that NHS North East has been told to set aside £143,350,133 to pay for the Government’s plans over the next two years. The NHS operating framework published in November requires health trusts to set aside 2% of their budget to pay for the Health Secretary’s changes in the Health and Social Care Bill. County Durham PCT has to set aside the greatest amount, followed by Sunderland and Northumberland. It is wrong to force local health trusts to set aside money to pay for bureaucracy and redundancies, when patients in the north-east, and constituents up and down the country, are waiting longer for treatment.

The Minister will know that the Heath Committee, chaired by not just a Tory Member of Parliament but a distinguished former Health Minister, the right hon. Member for Charnwood (Mr Dorrell), has raised a number of concerns about public health. It is concerned about whether the so-called responsibility deals can help alcohol and obesity problems, and about whether the health premium will just involve money going to people in regions where they are managing to tackle the problems, perhaps because they do not have the underlying social and class issues of other regions, at the expense of regions with genuine problems. The Health Committee also raised concerns about the closure of public health observatories in regions including the north-east.

What we are debating is not just a matter for the north-east. The underlying social issues apply to the health service all over the country. Even the north-east, with all the challenges posed by its industrial past, has examples of excellence and of path-breaking partnership work. We want an assurance from the Minister that the proposed changes—the confusion, chaos and cuts—will not hold back that work, and that she will not confine herself to discussing Labour’s record in general terms but will address the issues that affect the day-to-day lives, life expectancy and life chances of millions of people throughout the country, including in the north-east.

10:50

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

It is a pleasure to serve under your chairmanship, Mrs Riordan. I congratulate the hon. Member for Newcastle upon Tyne Central (Chi Onwurah) on securing this debate on a matter of considerable importance, and not only for the UK. Non-communicable diseases are a problem around the world, and inequalities also exist in Tanzania. I welcome Tanzanian MPs’ interest, as I do my new daughter-in-law, Maureen Rachel Mwasha, who married my son in Dar es Salaam at Christmas.

However, I will return to inequalities, if you will forgive me, Mrs Riordan. It cannot be right that people in one part of the country are likely to live about 11 years longer than people elsewhere, or that the likelihood of developing heart disease or cancer is determined to a significant degree by postcode. I stress that some of the detail of inequality is missed, and that it is necessary to consider large, significant but often hidden populations of inequality in otherwise affluent areas.

As the hon. Lady mentioned, inequalities in the north-east are particularly poignant and generally worse than in England as a whole, but although I recognise that spending on health increased under the past Government, so did health inequalities. As the hon. Member for Hartlepool (Mr Wright) stated, links between education, employment and health are well recognised, but we inherited a dreadful budget deficit, a terrible economic climate and worsening health inequalities.

[Debbie Abrahams]

Will the Minister give way?

[Anne Milton]

I am afraid that time does not allow me to.

Health in the north-east has historically been poor due to a legacy of heavy industries such as coal mining and shipbuilding, lifestyle choices and a complex web of factors. Levels of deprivation are high and life expectancy for both men and women is lower than the national average. Members might be interested to know that the Hartlepool shadow health and wellbeing board is already having a detailed debate about tackling the issues mentioned by the hon. Gentleman, including child immunisation. The proposed health reforms are enabling the people of Hartlepool to address the issues through local solutions instead of a top-down approach.

Even within local health authorities, wide and unacceptable health inequalities remain. Life expectancy can vary by as much as 18 years within a relatively small geographical area. On the plus side, although previously falling rates of early death from cancer have started to level off, death rates from all causes among males have fallen faster than the national average in recent years.

I reassure the hon. Member for Newcastle upon Tyne Central that I do not pretend about anything. She must look to her own party for the answers to her concerns. They were in Government for 13 years.

[Debbie Abrahams]

Will the Minister give way?

[Anne Milton]

I have only six minutes, and I have numerous questions to answer. The north-east has made commendable efforts to tackle its problems, acknowledging some of the things that happened under the last Government. At the core of Better Health, Fairer Health is a drive to tackle inequalities through multi-agency partnerships.

The north-east has its own tobacco control office, the first of its kind in the UK; Fresh began life in 2005. I am sure that the local authorities will recognise the work that has been done. It will be down to them to decide how the money is spent in local areas to improve their stubborn smoking rates. In the north-east, Fresh has managed to reduce the number of smokers by 137,000, and local NHS stop smoking services continue to provide support to the highest number of people in England. We in Government have introduced a tobacco control plan, and I assure the hon. Member for Newcastle upon Tyne Central that we will be consulting on plain packaging and continuing progress, as detailed in the plan, which I am sure she has seen.

However, the major part of poor health in the area will be remedied only by widespread changes in behaviour. It is this Government’s policy to encourage people to change how they live—[Interruption.] Hon. Members might gain slightly more from this debate if they listened to the answers rather than shouting at me from across the Chamber. We cannot frog-march people out of the off-licence, compel them to stop smoking or force them to practise safe sex. Our challenge is to make the case that freedom without responsibility is not sustainable, so for the first time, allowing for the progress of the Health and Social Care Bill through the House, the Secretary of State will have a specific responsibility to tackle health inequalities, whatever their cause, and will be backed up by similar duties— [Interruption.]

[Mrs Linda Riordan (in the Chair)]

Order. Will Members let the Minister be heard in this debate?

[Anne Milton]

Maybe they would do better to reflect on their own record.

For the first time, the Secretary of State will have a specific responsibility, backed up by similar duties on the NHS commissioning board and clinical commissioning groups, which will create a focus on reducing those inequalities.

Balance, the north-east alcohol office, was set up in 2009. Its remit is to change the culture of drinking to reduce alcohol consumption. The hon. Member who raised the issue might do well to remember that one of the problems with alcohol involves the discrepancy in price between supermarket alcohol and alcohol sold in pubs, and that the Licensing Act 2003, introduced by the previous Government, played a significant part in the availability of cheap alcohol.

We are doubling the number of family-nurse partnerships and increasing the number of health visitors by 4,200, and we have said that we will increase NHS funding, but critically, we will improve people’s life chances by ring-fencing public health money for the first time, so public health budgets will not be raided to fund services. We are introducing the first public health outcomes framework.

The hon. Lady mentioned older people. This year, a £30 million budget is being distributed to local authorities so that they can take action locally in ways that will reduce the number of local resident deaths from cold weather. I remind hon. Members that the previous Government’s policy was to cut funding in the NHS. We are ring-fencing the public health budget and increasing duties on the Secretary of State.

The proposed mandate for the NHS commissioning board and the suite of outcomes frameworks for the NHS and public health will enable organisations to be held to account for the first time on health inequalities. The Health Secretary will also have new responsibilities to address health inequalities as part of the NHS reforms.

The hon. Member for Tynemouth (Mr Campbell) is confused about funding. I point out to him that the Department does not distribute funds to local hospital trusts. He mentioned alcohol in particular. It would be simplistic to suggest that the rise in alcohol harm and alcohol misuse is due to price alone. The issue is complex, and we will be introducing an alcohol strategy in the near future.

Tackling inequalities and supporting the principles of the Marmot review are a priority. Inequalities are deeply embedded in society and highly resistant to change. What echoes with this Government is the fact that public health funding will finally get the priority that this country deserves and that was missed by the previous Government.

Self-Employment

Tuesday 24th January 2012 Westminster Hall

11:00

[Richard Harrington (Watford) (Con)]

It is a pleasure to serve under your chairmanship, Mrs Riordan, and I am pleased to see so many hon. Members present, particularly the Minister for Further Education, Skills and Lifelong Learning and the shadow Minister, the hon. Member for Chesterfield (Toby Perkins).

This debate came about as a result of a conversation between me and my hon. Friend the Member for Wyre Forest (Mark Garnier), who is sitting next to me, about people in this country setting up their own businesses. We reached the conclusion that not enough people do so. Everybody knows the benefits of people setting up their own businesses, but there is a certain culture against self-employment and business in this country, notwithstanding everything that this and the previous Government have tried to do. Politicians brand the terms “entrepreneur,” “small and medium-sized enterprises” and similar without really understanding what they are about. My hon. Friend and I have, therefore, decided to focus the debate on how Governments can change attitudes.

Like so many people of my generation, I was the first member of my family ever to go to university. Few people at that time had the idea of setting up their own business, and I do not think that much has changed. I have two sons, one in his late teens and the other in his early 20s, and from what I have observed of my family life, as well as that of my sons’ friends and during my constituency duty of visiting schools—some very good, others not so good—and further education colleges, there is very little idea, culture or yearning among people, from the most academically gifted to the least so, to set up their own business. However, I commend people such as my hon. Friend the Member for Newton Abbot (Anne Marie Morris), whom I am pleased to see and who is co-chair of the all-party group on micro-businesses. Others have also tried very hard in the main Chamber, as well as elsewhere in the Palace of Westminster and throughout the country, to help the cause of small business. The Government themselves have also made a lot of effort, and I do not feel that it would be right for me to criticise them.

This debate will be divided into two halves. I will deal with social, cultural and educational barriers, and what I think the Government might do about them. My hon. Friend the Member for Wyre Forest will then deal with taxation, regulation and other more direct governmental aspects. It is also nice to see so many other hon. Members present who want to take part.

On the face of it, self-employment seems to be going well. Recent figures show that 300,000 people have become self-employed in the past year, which means that they are registered with Her Majesty’s Revenue and Customs as being self-employed, but I do not think that that necessarily means that they have set up their own business. Some of them will, legitimately, have taken on part-time functions that classify as self-employment. I do not want to get into a political debate about whether that is self-employment or not, or whether the recession is to blame, because I want to focus on a culture that will give ambitious young people the desire to set up their own business.

The education system is the most important opinion-former for young people, and many aspects of it are encouraging. Like many other hon. Members, I have Young Enterprise groups in my constituency. We have Hertfordshire Young Enterprise in Watford, and I have seen many teams of young people setting up little businesses at school. They are largely supported by voluntary contributions from local businesses and they get mentors. In fact, only last Saturday, there was a display of the best teams at the Harlequin centre in Watford, which is well known to some Members present and to those more illustrious alumnae of the better Watford girls school—without naming names—whom I am also pleased to see present. It is interesting to see that these teams set up real businesses, producing bracelets, handbooks and all sorts of things. Some of the products make them a bit of money, and it is good to see local businesspeople helping them. This, however, is only useful if it gives those young people a desire to say that, when they graduate—assuming that they want to go to university; I am not saying that that is necessarily the most important thing—they want to set up a business, but I do not find that to be the case.

I recently visited Watford grammar school for boys, which is one of the better schools in the country— 30 boys are going to Oxford or Cambridge this year. After I finish my talk to the sixth form, I always ask them what they want to do after university—most of them go to university, but I would ask a similar question at a school where not so many pupils do so. When I ask how many want to be lawyers, accountants or involved in advertising or the media, many hands go up, but when I ask who wants to set up their own business, very few want to do so, including those who have taken part in the education system’s successful schemes.

[Toby Perkins (Chesterfield) (Lab)]

The hon. Gentleman is making an important case for the role that education can play. Another part of getting young people excited about running their own business is the experience of those who do so at the moment. Today’s Financial Times includes an article on an Aviva report that involved interviewing 500 owners of SMEs for its research. A quarter of them said that they were considering returning to work as an employee, because of how difficult it is at the moment to run a small business. When people who actually run their own business find it that difficult, will it not be more difficult to persuade young people to do so?

[Richard Harrington]

The shadow Minister makes a valid point. I read that article in the Financial Times online—if I cannot sleep at 3 o’clock in the morning, I find that that is the best way to get back to sleep. It focused on the general problems of the economy and how much more difficult it is for people who are self-employed and have their own business. Some of those people look towards employment as an answer, and I do not disagree with anything that was said. I am sure that some people want to go back to the comparative security of employment, but I do not think that that changes my main argument. People becoming self-employed and setting up their own businesses is one of the most important things for this country to expand the economy.

[Priti Patel (Witham) (Con)]

I come from a small business family. My parents were immigrants to this country and it is interesting to see the number of immigrants who are self-employed. My hon. Friend’s premise is to get young people engaged in self-employment. Does he agree that part of the challenge is getting started, which is always very difficult, particularly for young people who feel insecure about doing so? Does he also agree with the concept of a youth investment fund to provide Government funding or incentives that give people a cushion and confidence to develop their own ideas to become self-employed?

[Richard Harrington]

I appreciate that comment, because I intend to address the youth investment fund, which is important. Indeed, Sir Richard Branson has expressed an interest in this debate. He is elsewhere in the House at the moment and will join us later. The fund is important, but it is just one aspect and I hope to come back to it shortly.

On the education system, it frightens me that 60,000 people a year do GCSE business studies—this was true of my own sons—and are forced to learn accounting ratios, liquidity ratios and the difference between US generally accepted accounting principles and British accounting standards, but there is nothing whatsoever that will give any of them any desire or incentive to relate to business as they see it, which is buying a product and selling it at a profit, or providing a service for which people will pay. That is a real gap in the system, which, at the moment, is filled by Young Enterprise and various other very good schemes. However, that does not change the deep cultural point that people in this country do not perceive business as something to do that is either socially or economically worth while.

[Mrs Helen Grant (Maidstone and The Weald) (Con)]

On igniting the flame of desire for a young person to start a business, does my hon. Friend agree that it would help if we had better, bolder, more ambitious career advice encompassing enterprise for our kids and young people at school and university?

[Richard Harrington]

That is a very valid point. It could help and it is part of the whole picture that I want to build up in this brief speech.

We have to tell young people that setting up a business and employing people is socially acceptable and good for the country, and that they will make a lot of money. If they want fast cars, big houses and all that stuff, providing they pay their taxes, well done to them. It is very easy in politics to take examples of capitalism not working, of people being paid large amounts of money without doing much work for it and of people avoiding tax. We all have our views on those things and I think that everyone would agree that many of those issues need correcting. However, my fear is that such matters help to fuel the view among young people that business is not a very cool thing to be in, which is not right.

A socially responsible young person should be told, “Yes, you can do the kind of occupation that is directly socially responsible. You can be a teacher; you can be a nurse; you can qualify as a doctor and help to cure cancer; you can be a social worker. Those are all very good. But if you decide that you want to go into business and employ people, providing you pay your taxes, that is as much use to the country, if not more, because you are helping many people in their way of life. You are helping to fund the teachers, the doctors and the social workers and it is a very, very creditable thing to do.” Society should say to such a young person, “Well done to you. You have done something that is very worth while. Do not believe the stuff about Gordon Gekko and greed is bad. Actually, greed is quite good. Providing you pay your taxes and employ people, you are really contributing a lot to society.”

One of the big problems in this country is leaping over that barrier to make people think. Let us consider the notion of wanting things. People will only go into business to make money. I did it to make money. I did it because I did not have any money, and I did not like not having it. There is nothing wrong with that. People have to understand that going into business is a good thing to do. When I got my business to the level of employing 600 people, it was a constant nightmare. I was often worried. I did not sleep at night for thinking, “Have I done the right thing?” My wife once told me at 4 o’clock in the morning—she did not help matters; she never says things at 4 o’clock in the morning that help matters—that I was directly responsible for the lives of nearly 2,000 people. That is quite a burden of responsibility. People might think, “He’s filthy rich,” or, “He makes loads of money.” However, whatever people think and say about those in business, they do not believe that they are performing a socially responsible function.

I want the Government and all of us who are in the opinion-forming business—that is what politics is, irrespective of what party hon. Members belong to—to realise that something has to be done to change that attitude, because it is in the national interest.

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

Does my hon. Friend agree that teachers have a major role to play? What does he think teachers need to be doing and saying to young people on the subject of enterprise?

[Richard Harrington]

I thank my hon. Friend for that comment. The problem is that teachers by definition have chosen teaching as a career, so it is very hard for them to communicate on that. I do not want to take much more of this Chamber’s time, but I will come on to a proposal that I think answers my hon. Friend’s question.

I am not being critical of what the Government are doing. Yesterday, the Prime Minister and other Ministers made an announcement about this year being the year of the business and said that a minibus will go around different institutions, helping to give people the idea to set up businesses. All that is very good, but the cream of young people who are thinking, “I’m going to go to Goldman Sachs,” or, “I’m going to become a top man or woman at the Bar,” or, “I’m going to be a partner at Deloitte,” need to think, “Actually, the status of my setting up my own business and employing people will launch me to a higher level in society. I will be applauded and not thought of as a person who tries to avoid taxes and should hide the fact they have bought a decent car.”

The last vestige of the class system in this country is contained in the attitude that business is a bit grubby, something to be looked down and not something that proper chaps do. Until we change that attitude, we will not have enough people setting up businesses, employing people and providing the growth that we need in the future.

[George Freeman (Mid Norfolk) (Con)]

rose—

[Richard Harrington]

I will give way, after which hon. Members will be relieved to know that I shall be brief with my comments.

[George Freeman]

I congratulate my hon. Friend and my hon. Friend the Member for Wyre Forest (Mark Garnier) on raising this important debate. I also congratulate Virgin on the support and work that it is doing in this field. Like many hon. Members here, I am sure that he agrees—he has touched on this—that part of what we must do is to help those youngsters who do not have the experience of entrepreneurship and self-employment through their family, so that they can experience it through schools. Many of us in our constituencies can help and, indeed, are helping with schemes. In my constituency, we have set up a programme called the Norfolk Way enterprise bursary and we are linking school leavers with local businesses, which can be very empowering. Lastly, does my hon. Friend agree that it is very striking that some of our best entrepreneurs, for example, Richard Branson and Bill Gates, are not graduates? They started their businesses pre-university, which sends a very powerful message to youngsters who are feeling disillusioned and disengaged by the mainstream curriculum. Some of our most deprived communities could benefit hugely from such initiatives.

[Richard Harrington]

My hon. Friend makes very valid points. I hope that I speak for all hon. Members involved in this debate when I point out that Richard Branson and Bill Gates are examples of people whom we would regard as being very successful and would look up to. Both Richard Branson and Bill Gates were rejects from the mainstream academic system. Obviously, when I say “rejects”, I do not mean that they were not up to it, but that they were, through whatever personality they had or whatever came about, not part of it. My hon. Friend’s helpful intervention supports my argument, rather than the other way round.

In my constituency of Watford, there are some excellent initiatives. For example, Wenta, which is run by Chris Pichon and Sharon Gaffney, has many schemes to help schools give young children the opportunity to become entrepreneurs and to create an incubator for people who are without a job to help them set up their own business. Lots of good efforts are happening, but the fundamental point is to ask people to think culturally, socially and educationally. There is still a feeling against the acceptability of business in this country that is not present in Germany or the United States. As I have said, such an attitude is a result of hundreds of years of looking down on business.

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

I agree with everything my hon. Friend has said. Back in the 1980s, the manpower allowances service scheme was brought in by Margaret Thatcher’s Government. That scheme took people who were on the unemployment register and gave them twice the amount of unemployment benefit, so that they could go self-employed. Indeed, I was one of those people, and I built up a business that employed more than 100 people and experienced the same sleepless nights as my hon. Friend.

[Richard Harrington]

I absolutely agree. Indeed, I was also one of those people. My hon. Friend is talking about a business start-up scheme whereby if someone was unemployed, they got £100 a week. If they did well, they paid tax on it. That scheme helped a lot of people to start their business. I think that my hon. Friend the Member for Wyre Forest will discuss many of the schemes that the Government are doing.

I have a final proposal for the Minister. There should be an institution at university level—whether it is called a university technical college, a special university college or whether it is part of an existing university, such as the university of Hertfordshire, which does a lot of work in the field of business studies and management training—that exists entirely to train and help people to set up businesses. The course should be run predominantly by people who are successful in business and who are prepared to give up their time to do that, rather than by people who have taken business studies. At least half the course should involve practical work on how to set up a business. Sir Richard Branson’s scheme for the youth investment fund could help to fund it, as perhaps could the Government if local business people were to become involved. Students may include mature students as well as those from sixth forms going into the normal higher education system, and when they graduate they should have set up a business that either works and is doing well, or does not work. If it does not work, it should not mean that they do not graduate, because many people in business try things that do not work.

[George Hollingbery (Meon Valley) (Con)]

rose—

[Mrs Grant]

rose—

[Richard Harrington]

I give way first to my hon. Friend the Member for Meon Valley (George Hollingbery).

[George Hollingbery]

I have set up several businesses, some of which were not successful, but one of which was, and I am very aware of the shadow Minister’s reasonable point that 25% of people are seeking to go back into employment because of the difficulty in starting a business. Does my hon. Friend agree that we must be careful not to sugar-coat setting up a business? It is a difficult career, full of challenges, and if we teach it in schools and universities, we must be realistic. People must understand that failure is part of the education process, and that although it may lead to success, the road on the way will be bumpy.

[Richard Harrington]

That is an exceptionally good point, and I am sorry that my hon. Friend, like me, in later life has had to do the job that we are doing now instead of being in business. However, I know that he, like me, benefited greatly from his time in business. His serious point was well made. The alternative of salaried employment for a company is not secure either, and many people lose their jobs. My generation may be the last one that believed that the professions provided a job for life. There is a risk element now.

I return to my university college, which I hope the Minister will immediately decide should be located in Watford, because that is the obvious place for it. Watford is a good example for small businesses. It used to depend on two heavy industries—printing and lorries—but it now has more than 1,600 small businesses, and the employment background is small business, so Watford would be a suitable place for the college. It would be an ideal location because of being well known internationally as a centre for commerce, culture, intellect and so on.

My serious point is that the Government, with all the excellent measures that they are taking, should consider introducing a degree on setting up a business—obviously, that is not what it would be called—helped by local business people who would agree to take part for perhaps two or three days a week. Students could set up real businesses that would go on to provide real employment for people. That is where academia should meet the practicality of setting up a business.

[Toby Perkins]

rose—

[Richard Harrington]

I will happily give way to the hon. Gentleman, but my hon. Friend the Member for Maidstone and The Weald (Mrs Grant) rose first.

[Mrs Grant]

Does my hon. Friend agree that banks need to be more reasonable in their behaviour and attitude to businesses and potential business clients, and that if they were, that would encourage business and future enterprise? At the moment, banks are so overly cautious that they are impeding business.

[Richard Harrington]

I agree with my hon. Friend, and my hon. Friend the Member for Wyre Forest will speak about that.

[Toby Perkins]

I want to explore the hon. Gentleman’s idea. He has rightly identified that many successful entrepreneurs with great business careers were not academically inclined, and perhaps those who have that motivation and spark do not sit well with long periods of study. How does he square that argument with his idea that people should undertake three or four years of study to set up a small business, when many of the best small business people have been instinctively brilliant rather than studiously and academically brilliant?

[Richard Harrington]

I have to accept the logic of that point. Not everyone who wants to go into business would go to the sort of college that I am proposing. Many people would start businesses as happens now. Many people who have been in employment may decide when they become a bit older that that is for them. There are different routes to the same objective. However, I believe that an all-star college with teaching by people such as Sir Richard Branson and senior politicians and business people—people who have been in business—would show that the Government are serious, and that the status of such a course is as good as those at Oxford, Cambridge and so on. It is wrong for people of my age to use the expressions of younger people, but that would show that it is cool to set up a business, and just as good as anything else. In addition to the many other things that the Government do, they could help with that, and it would not cost too much money.

11:25

[Mark Garnier (Wyre Forest) (Con)]

I thank my hon. Friend the Member for Watford (Richard Harrington) for his helpful and useful comments. As he said, I will speak about the slightly more tangible and gritty problems facing businesses. Before getting into the meat of my speech, I am struck by how many MPs are in the Chamber and the fact that I cannot see one who has not been in business. It is remarkable that the Chamber is so full, although I am sorry not to see more support for the shadow Minister with responsibility for small businesses. It is incredible to see so many politicians here, all of whom have extensive business experience.

As my hon. Friend said, I want to speak specifically about taxation, regulation, access to finance and cash-flow management. For the purposes of clarity, we are interested today in self-employed people and those who employ fewer than five members of staff—small businesses and micro-businesses. It would be wrong to start my speech without highlighting some of the initiatives that the Government are already taking.

On finance for businesses, the Government are introducing measures to increase the availability of equity finance through venture capital trusts and improvements to the enterprise initiative scheme. They are making regional growth fund allocations for business opportunities and addressing tax initiatives, such as rolling over capital gains into new venture funding. The national loan guarantee scheme is seeking to push debt finance further down the line, and the emergence of community finance organisations, which my hon. Friend the Member for Mid Norfolk (George Freeman) highlighted, is providing locally based informal financing opportunities.

On helping businesses with advice, my hon. Friend the Minister has recently announced three new websites. The Business Link website has an information section offering help on a range of business-related issues, including how to start up a new business. The “mentors me” website offers an opportunity not just for new businesses to find business mentors, but for business people to provide mentoring services. My hon. Friend the Member for Meon Valley (George Hollingbery) made the very good point that setting up a business is tough and that having the benefit of the experience of business people who have learned from their mistakes and can impart their wisdom to new businesses is incredibly important. Websites such as “mentors me” are a way of disseminating that information.

Finally, the improved Business Link website has a wide range of information on how to finance and grow a new or expanding business. However, were I to stand here praising the Government’s glorious achievements, many though they are, as I am sure all hon. Members agree, the Minister would have nothing to say, so I shall turn to some of the problems facing businesses. I hope that he will address some of them and explain how the Government can help and thereby reinforce the process of developing part of the economy that has so much potential for growth and is so liberating for a huge number of people.

I shall start with taxation. No one wants to pay tax, but if we all want to enjoy the wealth of services that the Government provide and to sort out the problems that we inherited, we accept that we must make a contribution to tax. But as we know, it is widely reported that the UK tax system is the most complex in the world. Whether that is true is a moot point, but irrespective of where we are in the ranking of complexity, the fact that we have tax complexity at all is completely at odds with any sort of entrepreneurial spirit that we may want to foster. The last thing a bright, young and enthusiastic business creator wants is to have that entrepreneurial spirit crushed by the dead hand of taxation regulation.

There are various simple answers. On national insurance, for example, the Chancellor has not only put in place a policy to help small businesses by giving employers a national insurance holiday for the first 10 employees, he is investigating doing away with that pointless and superfluous tax. That is definitely a noble direction, but things such as the accounting period for national insurance and PAYE and the fact that two forms must be filled in doubles the bureaucracy facing small businesses. Something as simple as dealing with that would be a quick fix.

We are familiar with the Federation of Small Businesses, which is an incredibly rich source of information on issues facing many small businesses. However, for micro-businesses and the self-employed, there is little specific data. The FSB definition of a small and medium-sized business is one with up to £25 million turnover and 250 employees. I do not know about other hon. Members, but certainly in Wyre Forest anybody bigger than that is quite a large employer locally, and there are few of them.

[Glyn Davies (Montgomeryshire) (Con)]

I agree from a standpoint of running a micro-business myself: I have been a farmer and my wife has been a restaurateur. Regulation, and the fear of it, is particularly damaging to a micro-business, because the individual running it simply has to have the capacity to deal with all these things. In a larger business, often other people can deal with such matters, but it is typical of the small and micro-businesses that we meet for one person to do so. That is incredibly difficult. Fear of regulation and not being able to deal with health and safety issues are probably more of a deterrent than anything else.

[Mark Garnier]

I will come to the regulatory burden in a minute. My hon. Friend is right. I have seen a turkey farm that has had to comply with huge industrial reporting requirements for toxic chemicals, because turkeys produce ammonia, but it also has to prove that it is not producing a great range of other chemicals. These are the unintended consequences of over-bureaucratic regulation.

The FSB provides a great deal of helpful data on business attitudes. Sticking with the taxation issue, 60% of FSB members—two thirds of businesses—complained that the UK tax system is not only too complex, but has a negative impact on their ability to take on more staff and expand.

[Guto Bebb (Aberconwy) (Con)]

The VAT threshold creates problems for micro-businesses. The fact that that kicks in at £73,000 is a cliff edge for many small businesses, because if they hit that level, they end up being penalised to the tune of £10,000, so they make a decision not to grow. Having a tax cliff edge of that nature is a barrier to growth for many micro-businesses in my constituency.

[Mark Garnier]

I agree. Our complex tax code is full of all sorts of unintended consequences exactly like the one that my hon. Friend mentioned. It is ridiculous having a tax that means businesses going above £73,000 will have to start charging their customers. That is a disincentive to growth in terms of going out and gathering business. If people stay below that threshold, it is a disincentive to employ more people.

[Toby Perkins]

The hon. Gentleman is talking about the difficulty with taxation faced by small firms. Will he support Opposition Members calling for a national insurance holiday for any micro-business with less than 10 employees that takes on a new member of staff?

[Mark Garnier]

A national insurance holiday? I think that we are already doing it. That is a policy of ours.

[Toby Perkins]

For micro-business.

[Mark Garnier]

I am sorry; the hon. Gentleman is talking about extending it to micro-businesses. Yes, all this has to be put into the mix of things that we need to look at. It is important to consider any way that we can help more micro-businesses.

FSB members say that our tax system is detrimental to their ability to make capital investments in their business, which again is another reason why people are being held back.

On a wider social point—sticking with tax complexity—it is worth noting that a complex tax system allows a huge range of opportunities for tax avoidance and tax evasion, which makes it extraordinarily complex for Her Majesty’s Revenue and Customs to collect tax and ensure that we avoid the tax gap, which is estimated at anything between £40 billion and more than £100 billion a year. The rest of us have to pay for that tax gap and lack of revenue through increased taxes.

Half of small businesses spend at least two hours every week complying with their tax responsibilities alone and for 10% of businesses, particularly small micro-businesses, that can take up to six hours per week—six hours when those businesses should be capturing new customers, developing new products and investing in their future.

Two thirds of businesses feel that they need professional help to complete their tax returns, which costs them on average an extra £3,000 a year. One third of them find that national insurance in its various forms is difficult to understand. Half of businesses find allowances difficult to get to grips with. Frankly, it is all far too complicated and too expensive in man hours and financial resource to administer.

Regulation is the second area of extreme unrest for micro-businesses. According to the World Economic Forum’s global competitiveness report, the UK is ranked 89th out of 139 for the burden that regulation places on businesses. Aside from the obvious problem of possibly deterring inward investment, the overburden of regulation, especially in the realm of employment law, is cited by businesses as a reason not to expand.

In a business survey in 2008—that was some time ago, but it gives a good idea of trends—a third of businesses thinking about expanding cited fear of regulation as a significant headwind to be faced in expansion and therefore a key factor in their decision. The same survey revealed that half of businesses planning to downsize or close rated regulatory burden as important in their decision to do so. The 2008 survey was undertaken in difficult trading conditions, but regulatory burden should not be a significant factor when businesses are struggling to stay alive in a difficult environment.

Possibly more worrying is the fact that in the 2009 business survey 34% of businesses that were no longer employers cited complying with legislation as a reason for no longer employing staff. This is madness.

[Karen Lumley (Redditch) (Con)]

In my constituency, I have been working closely with small businesses. Does my hon. Friend agree that they feel isolated, with a perceived lack of business support around them?

[Mark Garnier]

Yes. Being a small business man is quite an isolating experience, as many hon. Members will know. People are out there on the front line, struggling to get more business in. They can join network groups and all the rest of it, but they feel like they are in a foxhole, with letters in brown envelopes coming at them from HMRC and all sorts of regulators. That is not necessarily a particularly enthralling experience. My hon. Friend is right.

In addition to accountants and tax specialists to handle tax compliance, a plethora of organisations offer advice on human resources, fire and emergency, health and safety and other things. All that is welcome and they provide an excellent service, but the fact that they are needed and that a sub-class of business advice has been created shows the amount of regulation that we have to face.

The Government have made some progress on access to finance and cash flow. I do not want to be an apologist for the banking crisis. I have to declare an interest here. I was an investment banker and one or two other hon. Members here were, too. It is important to understand that banks have an aversion to risk. Part of the problem faced by the banks is that the Basel III and the Vickers’ recommendations, and so on, are trying to deal with the problem of not wanting the banks to fail. On one hand the banks are being asked to tighten their balance sheet, and on the other they are, rightly, being asked to lend more money. For the banks, those are opposing requests. We need to take great consideration of that as we go through the process of implementing the recommendations of the Independent Commission on Banking, because we cannot ask the banks to take on more risk and expect them not to go bust. That is a contradiction.

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

Is my hon. Friend aware that in my constituency—with particular reference to the fishing industry—someone receiving training who then wants to start a business needs to purchase a fishing vessel? The banks will not just accept that fishing vessel, although it is a valuable asset, as collateral for a loan. They ask for additional collateral, such as a charge on a property, which a lot of young people do not have. That is stopping industries that support our coastal communities from expanding. Does my hon. Friend think that there is an answer to that?

[Mark Garnier]

My hon. Friend raises two important points. First, on the general point about raising finance for businesses, part of the problem is that, in the past, loans have not so much been business finance loans as mortgages, where a bank has taken a secure guarantee, such as a property, thereby effectively giving a mortgage used to finance a business and the cash flow out of the business is used to service that debt. The feeling that I get out there is that banks have slightly morphed away from being business financers to being mortgage companies dressed up as business financers.

Secondly, my hon. Friend mentions marine finance. We have one of the finest marine businesses in the world. We produce the most fabulously made yachts—we are world class. I hope you will forgive me for getting in a plug for one of my constituents, Mrs Riordan, but Sealine in the middle of landlocked Kidderminster builds very good ocean-going yachts, and if you ever get a chance to take one out, you should. However, this country does not have a significant marine financing industry, and that is a real problem for all the marine industry, whether we are talking about luxury yachts or working fishing boats. I am working with constituents and various marine industry representative bodies to see whether we can address that point, because we must look at it specifically.

In addition to problems with equity and debt, part of the problem businesses face lies with cash flow. All too often, small businesses suffer as a result of delayed payments. To return to the FSB, three quarters of its members have received late payments in the past 12 months, while nearly half claim that a third of invoices are paid late. That is costly in terms of the time spent chasing invoices. In addition, a fifth of the claims for money owing to those businesses are for more than £20,000. Many businesses go bust not because they do not have enough capital or customers, but because of their cash flow. The problem is that, although a business is perfectly viable, it can easily go bust because of a late payment.

[Christopher Pincher (Tamworth) (Con)]

Further to that point, is the problem not that businesses have difficulties with their cash flow, but that banks do not offer decent overdraft facilities to tide companies over in such difficult times? We need to ensure that, when banks lend money, they do not simply do so through loans tied to interest rates and specific rules. They should be much more flexible about offering overdrafts, so that businesses can get through difficult times.

[Mark Garnier]

My hon. Friend is right. Various factoring, invoice and financing arrangements can be put in place for businesses. They are designed, in theory, to help businesses through their cash-flow problems, such as paying for stock to put on their shelves and sell on. A number of the banks in my constituency are certainly much more cautious about asset filing and invoice filing than they were. That is a serious problem, but it can be dealt with, despite some of the bigger problems that the banks face in meeting the Basel III requirements. My hon. Friend makes an incredibly important point.

I want to look at what the Government can do to help. I ask my hon. Friend the Minister to take note, and I am sure he will have some helpful comments at the end of the debate. First, we already have the Office of Tax Simplification, and it is incredibly important that we get the Government to take on its recommendations. We must make absolutely certain that any tax changes are properly thought through in terms of simplicity and that they have a good economic and social justification. If we are going to write taxes, we should do so with an eye to international competitiveness. They should make it easier for our businesses to trade and for us to attract businesses to come and invest in our country.

I talked a bit earlier about merging income tax and national insurance contributions, but I should stress again that it would be incredibly helpful if the collection of national insurance and PAYE could be merged, so that people have a simple form to fill in, rather than two complex forms.

The one-in, one-out system of regulation is welcome, and it should start to force some helpful changes. However, the system needs to be rigorously enforced, and the Government’s commitment to it must remain strong.

[Lorely Burt (Solihull) (LD)]

The hon. Gentleman makes a really important point. Does he agree that, as well as introducing regulations in a rigorous way when they are absolutely necessary, we should measure whether they do their job, with a post-examination within a specific period, so that we can sunset those that we do not need and get rid of them?

[Mark Garnier]

Yes, absolutely. I agree with the hon. Lady. She is absolutely right on UK regulation, but we should also do that on European regulation. We simply cannot have endless regulation coming through, and we really need to see whether it is worth having.

[Julian Smith]

Does my hon. Friend agree that, with very small businesses and start-ups, the Government might need to be more radical than they are being at the moment? On issues such as flexible working and the right to request training, there may be an argument for exempting very small businesses and new businesses from legislation. We should seriously think about more radical measures, such as making it easier for small businesses to get rid of staff. That is politically difficult, but I would like to encourage the Government to think carefully about those proposals from Adrian Beecroft.

[Mark Garnier]

My hon. Friend could have been reading my speech, because my very next point was exactly that. It is vital that we help businesses. Ronald Reagan introduced a law under which businesses with fewer than five employees were exempt from a lot of business regulation, and he increased the number of jobs by 30 million as a direct result.

On a practical point that is deliverable, rather than necessarily doing something wholesale, it is vital that we have a system under which we exempt micro-businesses with fewer than, say, five employees from new legislation. We should also give such businesses a holiday when new measures are introduced. If we introduce new regulation—to follow on from the comments of the hon. Member for Solihull (Lorely Burt)—we need to see how it beds down with those organisations that can afford to implement it. If it works and it is sensible, we can translate it through to smaller businesses when we know how to implement it. We should not load it on to small business right at the beginning and expect them to tackle it and to be the crash-test dummies, when they do not really have the resources to deal with such regulations.

Another problem with regulation is that its introduction is like Chinese water torture, with one drip after another throughout the year. It is quite difficult for many businesses to tackle that drip-feeding of regulation. If we are to bring in regulation, we should bring it once a year. That would make it a lot easier for businesses to focus and comply.

Finally, there is no doubt that the Government have plenty of opportunities to help businesses on cash-flow issues. They have quite a lot of money, although, admittedly, not as much as they used to, and they have a useful cash flow. When they take on contractors, particularly SME contractors, they could achieve a number of things by having a process whereby invoices were paid within 10 days. First, that would set an incredibly good example to the business community and show that early payment is important. Secondly, the Government could push such early-term payments from the contractors to the sub-contractors. Such a process would also give them the ability to persuade their sub-contractors and contractors to sign up to an agreement to help businesses by adopting better payment terms. Those are just a few suggestions, and I am sure that hon. Members will have many others.

I am heartened to see the Minister in his place. He has been in the private sector and has worked hard in business in the past. It is incredibly heartening to see so many business people here, including the Minister. I have every confidence that he will have some helpful comments when he winds up. Much more importantly, when he goes back to his civil servants, he will have a zeal and an enthusiasm for helping small businesses that can come only from somebody who has first-hand experience of the business world.

[Several hon. Members]

rose—

[Mrs Linda Riordan (in the Chair)]

Order. I intend to call the Front Benchers at 12.10. A number of hon. Members are trying to catch my eye. I would like to call as many Members as possible. I therefore urge Members to make short speeches.

11:48

[Sarah Newton (Truro and Falmouth) (Con)]

I will speak for two minutes, and I will probably speak very quickly so that more colleagues can get in. I congratulate those who secured the debate on the excellent way in which they opened it.

I would like to talk about enabling self-employment from the point of view of groups of people who find it difficult to engage with the workplace. These are not necessarily people who would go on to set up a business of their own. One such group is people living with disabilities that make it difficult for them to leave home. Another is women who would like to balance employment with caring responsibilities for children, an elderly relative or perhaps somebody with disabilities. I am really talking about people being self-employed as home workers.

I would like to share with Members the story of a really successful organisation I have been working with over the past 12 months. It enables call centres to be in-sourced back to this country by creating a network of call centre operators based in their own homes. The Government are investing a great deal of money in superfast broadband, and we are definitely benefiting from that in Cornwall. The networks I am talking about would be a good way of utilising that investment to encourage people who are probably not in a workplace now to get training and to become self-employed as call centre operators from their homes.

In America, such an initiative was set up a couple of years ago. It was specifically targeted at getting people off welfare and into work. Globally, the company to which I am referring and which invested in the technology employs more than 22,000 people. It set up in the UK just 12 months ago. It employs 1,500 people and is taking on 2,000 this year. Companies such as Littlewoods and many well known holiday organisations are involved.

With a concerted effort, all of us as Members of Parliament can promote what I have described. I would also like my hon. Friend the Minister to consider something that President Obama is considering this week. I am talking about giving tax incentives to the very big employers, the very big national companies, such as BT, that are outsourcing their call centres throughout the world to repatriate those jobs to the UK—to in-source them back to the UK. Barack Obama is considering giving financial incentives to companies through the taxation system—a financial incentive for every job that they bring back to America. I would like the Minister to examine what is being done in America to see whether we can do the same to repatriate what would be tens of thousands of jobs to these shores and enable people who are finding it difficult to fit into the workplace—such as people with disabilities and people with caring responsibilities—to be self-employed.

11:51

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

I shall be brief. I intended to make two points, but I will now make only one, in the interest of enabling other hon. Members to speak. I want to talk about the role of education and of finance and how help can be provided to people. I fully confess to being heavily influenced by a constituent of mine, who has been working under the scheme led by Virgin Media. In the past year, she has taken steps to establish a competitive business. In fact, while she was at college, she was so entrepreneurial that she decided to use some of her student loan to help to fund the website that is driving her business. The entrepreneurial spirit is to be admired. I have no idea whether she was allowed to do that, so I will not name her, but it shows that with some lateral thinking, perhaps some of the young talent that exists can be put to good use.

I myself did not go to university. I went to a technical college in Cambridge, which I am told is now a university. The business studies course that I did was a sandwich course. It struck me that the only choice that I had during that sandwich course was to go to a placement that was put to me by the college, very helpful though it was at the time. Why cannot we set up an arrangement whereby we allow a sandwich year, even in a course of reduced time length, to become an opportunity for someone, under mentoring and guidance and with the ability to use student finance at their disposal, to take their first steps towards running a business?

If we think creatively, we can not only foster the educational and mentoring skills that are so vital; we could even allow people access to finance, perhaps on the same terms as those of the student loans scheme. I suspect that it would not be able to extend its remit to do that and we may have to look elsewhere for other sources of financing. However, if we are genuinely saying, “Let’s educate and let’s motivate,” and we have students who are showing character and willingness by seeking out the courses, there could be a useful match with an existing system in order to help them. At the end of the day, the payback to them as individuals will be substantial—the payback to the economy will be vital.

I therefore ask my hon. Friend the Minister to give the initiative that I have described some consideration and not to lose sight of something that we all too glibly talk about—

[The Minister for Further Education, Skills and Lifelong Learning (Mr John Hayes)]

I have given that some consideration and I am grateful to my hon. Friend. I think we will do it. I think it is a very good idea and I will ask my civil servants to work something up.

[Nick de Bois]

I say, when you’re ahead, quit. I thank the Minister.

11:54

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

I will be brief, given the number of hon. Members who want to speak. The UK Commission for Employment and Skills, which reported last August, said that we are at an all-time high; we have 4.1 million people in self-employment at the moment. That report was particularly interesting because it examined what drives the increase in self-employment, and it does not depend on the economy, as we might have thought. It is principally driven by looser regulation, access to finance and Government policy that specifically drives unemployed people into self-employment. The 1980s was a particularly fine example of that.

[Mr Gary Streeter in the Chair]

Let me deal with each of the three elements. With regard to Government policy, the new enterprise allowance has been a great step forwards; I endorse it entirely. The Government now need to consider whether, having extended it from young people to the whole working population, they should take away the requirement for a person to have been on jobseeker’s allowance for six months as a precursor to being eligible to receive it. Many people see unemployment as a bit of a stigma. They may want to come into employment after having brought up children or for many other reasons.

Equally, the Work programme is excellent. I am working with the Minister of State, Department for Work and Pensions, my right hon. Friend the Member for Epsom and Ewell (Chris Grayling), who is responsible for employment, to consider the extent to which the Work programme is enabling and encouraging individuals to become self-employed rather than going into employment.

I come now to the two other issues raised by the commission’s report. On regulation, the Government have clearly taken a very good first step by exempting micro-businesses from regulation for three years. However, I urge them to exert all their energies on getting the European Union to exempt micro-entities—that is a new definition for the very smallest businesses—from new regulation. I gather that that is being discussed, but I urge the Government to push it forward as a priority.

The Government’s red tape challenge has been extraordinarily useful and powerful. It has explored 12 different areas of red tape—12 sectors—and five more are to come. The Government have said that they will report on that three months after the closure of the consultation. I look forward to those results. I urge the Government to examine in particular those regulations that disproportionately disbenefit the self-employed and the very smallest businesses. The EU has recognised the need to simplify regulation for the very smallest businesses. I ask the Government to work hard at insisting that the EU has its own red tape challenge. It has examined simplification, but it has not considered root-and-branch removal, which is crucial.

Finance is the third issue. Points have been made clearly and well about the challenge faced by the self-employed and the small business in trying to access finance. Tributes have been paid to Business Link. A new portal, Business in You, sets out a number of schemes that are available. There are 851 of them. My advice to Government would be that it is a great idea, but some guidance is needed because it is quite difficult for a self-employed individual to work out which of those is particularly beneficial.

The real challenge is ensuring that a very small business can find information about the opportunities available. It is the case that 28% of micro-businesses are not online, so we need to make the information available in libraries and to encourage the chambers of commerce and the local enterprise partnerships to play a role in disseminating that information. Without that, we will not secure the change that we need.

There was mention of the Government schemes to support access to debt, equity and guarantees. Most of those schemes are aimed at the whole remit of the SME community, which takes us up to 250 employees. The banks, who are usually the people delivering the schemes, will go for the easy wins because they are in business to make money, and the easy wins are the bigger businesses with good business plans and a good track record. The Government need to ring-fence—perhaps they will do this with their credit-easing proposals—a pot specifically for the self-employed, recognising that they are looking for smaller pots of money and do not have well developed business plans.

Perhaps the best initiative has been the growth of the community development finance initiative. The Fredericks Foundation should be recognised for the work that it has done to provide loans to those businesses that cannot find money anywhere also. I also pay tribute to the Government for considering making credit unions able to lend to small businesses, rather than just making loans to individual people. In addition, the Virgin Media pioneers proposal to enable those wanting to set up a business to be given financing at the same rate as applies to a student loan is definitely to be welcomed.

I pay tribute to my hon. Friend the Member for Watford (Richard Harrington), who initiated the debate. He is absolutely right to say that culture change is the key. In the November report of the all-party parliamentary group for micro-businesses—I have to declare an interest here because I chair that group—the research that was supported by the London Business School, Lancaster university, Imperial and Manchester Metropolitan indicated that we needed an education change, not just at university level but at primary and secondary level. We need to consider how to inculcate the idea that setting up a business is a good, valuable and genuine alternative.

I am delighted with the Government’s support for the National Association of College and University Entrepreneurship, which has put in £500,000 to support the establishment of entrepreneur groups in universities across the country. It has succeeded in establishing groups in about three quarters of the universities across the country. It is now looking at colleges.

Finally, we need to enable the self-employed who are setting up small businesses to have bottom-up mentoring support. Although there is a Government scheme to create 40,000 mentors, a scheme that will require the banks to mentor those who get refused loans and the “mentors me” website, which is great, it is still not enough and we need to consider bottom-up volunteering, and, as has been suggested by the Virgin Group, we need local chambers of commerce and others to take some responsibility as well.

I look forward to hearing the Minister’s reply. I hope that I have not taken up too much time and I welcome the changed agenda that this debate heralds.

[Several hon. Members]

rose—

[Mr Gary Streeter (in the Chair)]

Let me remind colleagues that wind-ups begin at 12.10. Let us try to get in three more colleagues.

12:01

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

Government should, of course, try to make it easier for entrepreneurs to start businesses. Like my hon. Friend the Member for Newton Abbot (Anne Marie Morris), I welcome the reintroduction of the enterprise allowance scheme, which enabled me to kick off my business in the early ’90s. I learned last night that in India, thanks to advances in technology, it is possible to incorporate a firm in 24 hours, which we cannot do here. We also need an increase in the availability of start-up loans. Banks should get better at providing some of the money that they were bailed out with.

In the spirit shown to my hon. Friend the Member for Enfield North (Nick de Bois), perhaps the Minister will consider this idea. Graduates who start businesses and then employ people should be eligible for university fee debt relief—well, that clearly went down well in the Chamber. I appreciate my colleagues’ support!

Starting a business should not be an ambition exclusively for young people. Many successful entrepreneurs become self-employed later in life after a successful career. They may be interested in helping others make money or they may become self-employed out of necessity or because of redundancy.

Advances in technology have led to an explosion of people working from home. As such an approach has advantages for family life, I urge the Government to continue their efforts in ensuring that every part of the UK gets access to superfast broadband.

If there is one thing that entrepreneurs know, it is that waiting for Parliament to act will get them nowhere. Entrepreneurs do not wait around for help; they take action. Although business people cannot do anything about clearing university fee debt or increasing the availability of start-up capital, which is down to the banks and venture capitalists, one obstacle they can help young people and anybody wanting to start a business overcome is lack of knowledge.

I am encouraged by the Government’s plans to set up a network of experienced mentors. For too long, business advice has been doled out by well meaning people who invariably have never run a business. Recently, I met some careers advisers who had hardly ever spoken to local employers.

I am pleased to say that via the excellent local business accelerators programme, which was set up by the Newspaper Society and backed by the Prime Minister and that excellent newspaper The Selby Times, I shall be providing mentoring to a local Selby business called LRB Trophies run by the Butler family. The company was born out of adversity, but it will hopefully go on to great things.

[Andrew Bingham (High Peak) (Con)]

Is my hon. Friend aware that the Prince’s Trust also runs a business mentoring scheme? I was a business mentor for the Trust, which helps young people to start businesses. Again, such organisations are really helpful for young people.

[Nigel Adams]

I am aware of that, and I am pleased that my hon. Friend is involved in such a scheme. It is crucial that people get to speak to those who have been at the coal face. There is nothing like real world experience to help people with small businesses.

The Government should say to existing business people with an interest in encouraging the next generation of entrepreneurs, “If you know anyone who is interested in entrepreneurship, be their mentor. Check out the excellent apprenticeship programmes at your local college and hire some apprentices. If you have kids of your own, involve them in your business at an early stage and show them that entrepreneurship is a viable option for them. Let anyone you come across know about the benefits and thrill of being their own boss.”

Finally, we should be celebrating entrepreneurs and the wealth creators and not demonising them. There is nothing wrong with success and there is nothing wrong with those who fail while trying to succeed. Those who put everything on the line to grow businesses, to create jobs and to pay the taxes that pay for the public sector and our services should be applauded and supported.

[Several hon. Members]

rose—

[Mr Gary Streeter (in the Chair)]

George Hollingbery followed by Marcus Jones. Mr Jones will be the last speaker.

12:05

[George Hollingbery (Meon Valley) (Con)]

I am very grateful to you, Mr Streeter, and I shall be very brief.

I shall mention two things that the Government have put in place. The first is universal credit, which is coming through as part of the Welfare Reform Bill. The 65% taper takes away the 16-hour-a-week cliff edge, which is incredibly important. Those who are unemployed and who are looking to start their own business from their own homes now have an incentive to look forward to the future. I am talking about them having not just a limited income but a proper business run for the long term. They can now go through that 16-hour barrier and not see some of their benefits disappear. That has a beneficial effect for those bosses who would employ such people in, say, restaurants, bars or whatever. They can invest in the training of such employees and expect them to remain full-term employees for the long term. That has to be a good thing both for the employer, who is generally self-employed, and the employees.

The second area is planning. Hon. Members who know me well will not be surprised to hear that I am going to bore them slightly on planning. They may ask, “How can that possibly relate to self-employed businesses?” Let me say very straightforwardly that I chaired a conference on that matter last Thursday. We talked about neighbourhood planning. It is now entirely within the remit of small businesses, especially rural ones, to petition for the go-ahead of neighbourhood development plans that take a real account of what local businesses need, particularly in regard to converting farm buildings and using redundant rural buildings for accommodation. I urge all hon. Members to make it plain to their constituents that there is a real opportunity for small businesses here. Small businesses can shape their communities around them and take full account of affordable housing all the way through to the conversion of redundant buildings for their business for the long term. It is a huge opportunity, and one that they should all take.

[Mr Gary Streeter (in the Chair)]

Marcus Jones, you have three minutes.

12:07

[Mr Marcus Jones (Nuneaton) (Con)]

I will try to use that time wisely, Mr Streeter.

Many people often have a rosy view of self-employment. They think of afternoons spent on the golf course, corporate boxes at cricket matches, sloping off early and the large financial rewards that come with all that. In reality that is not the case. The hon. Members in this Chamber who have run their own businesses know that running a small business involves hard graft and long hours. That is particularly the case to start with, when there are often few rewards and plenty of stress. My hon. Friend the Member for Watford (Richard Harrington) hit the nail on the head earlier when he mentioned taking on people and the fact that for small businesses it is about not only employing people and the difficulties that come with that but being in a situation in which people are dependent on them for their living and their livelihoods.

As I have so little time, I will focus on the issue of risk and reward, particularly in relation to taxation. I will then specifically focus on the relationship between people who operate very small and micro-businesses and those who then expand those businesses so that they can take on people to grow our economy. When I looked on Wikipedia, it said that taxation may well be higher for someone starting a small business than for someone who is actually employed. We must ensure that we allow people to expand those businesses. One example that I want to bring to the Minster’s attention is that of a hairdresser who may go from renting a chair in an existing business to taking on their own premises, if they were so incentivised. A VAT threshold of £73,000 could cause a problem with incentivising people. That is one micro-example, but we need to consider taxation in the round and think about how it affects micro-businesses and small businesses in comparison with medium-sized enterprises and larger businesses to ensure that the Government create an enterprise culture, which was sadly lacking under the previous Government.

12:10

[Toby Perkins (Chesterfield) (Lab)]

It is a great pleasure to speak under your chairmanship, Mr Streeter, even if only for 10 minutes. It has been an excellent debate and I congratulate the hon. Member for Watford (Richard Harrington) on obtaining it and on his speech.

Like some other hon. Members, I have run my own business—twice: the first time was at the back end of the last century, when I set up an IT recruitment firm; subsequently in 2005 I launched a rugby product business, Club Rugby, which I continued to run until I was elected. As someone who has been on that journey twice, I know very well the different motivations for heading towards self-employment. In my case, it was inspiration on one occasion and desperation on another. In fact, many great businesses have been created from fledgling inspirations caused by the desperation of those trying to feed a family and keep a roof over their heads in tough times. Certainly, some will still thrive in these most desperate of times. However, the fact that some will still come through, and that the strongest may still thrive and survive, is not a reason for the Government not to do everything in their power to support people in all walks of life and all parts of the country to take that first brave step and put their name above the door.

One of the lessons of the recent past is that we must create an environment that gives the greatest number of new business people an opportunity to be a successful business owner. Why would any Government not want to do that? Therefore I particularly welcome a debate in which the hon. Member for Watford expressed his frustration at what he sees as the unglamorous image of running a business in Britain today. Of course, he is right to say that we all—politicians, school teachers, careers advisers, business leaders, media figures and trade union leaders—have a responsibility to promote the vital importance of new start-ups and small businesses in creating the growth we need to get the economy moving again. For that reason I welcome television programmes such as “The Apprentice” and “Dragons’ Den”, which for all their flaws at least tend to get young people to see business in a sexier light.

[Justin Tomlinson (North Swindon) (Con)]

Will the hon. Gentleman give way?

[Toby Perkins]

I am afraid that there is not time, if I am going to leave time for the Minister.

“The Apprentice” in particular also has a welcome focus on the importance of sales techniques and ability, which is a vital and intrinsic part of business success, which the nation has neglected for too long, and which I want to promote through the Labour party’s policy review. I started my first job in sales at the age of 17. The old adage that until someone sells something in a business nothing happens has never been truer than it is today. As part of the Labour policy review programme Nigel Doughty, a tremendously successful business investor, is chairing our small business task force. Within that policy review process, he hosted a session on high-growth businesses. There were many contributors to that session from across the business spectrum, but one of the key defining facts revealed during it was that about 7% of all businesses will go on to become high-growth firms, irrespective of market sector or geographical location. The key to getting more high-growth firms coming out of the bottom of the funnel is to get more going into the top.

Of course, we have been here before. Starting in 1997, Labour’s new deal programme was the most successful back-to-work programme in British history. The self-employment programme was the most successful part of it. Some 70% of the people who started on it went into business, and 81% of those businesses were still trading three years later. Moreover, they were employing, on average, an extra 1.6 people each, meaning that for every 100 people who started on the programme, 112 were employed three years later as a result. That may be the first and only back-to-work programme ever to have a greater than 100% success rate.

The key features of the success of that programme that are not being duplicated by the current Government’s back-to-work programme are the special provision with a ring-fenced pot of new deal money specifically for the self-employment option and the financial cushion in the early stages of self-employment, which was so important in giving new business people an opportunity to test trading as a viable career option. In that context, the void in face-to-face business advice left in the absence of Business Link is deeply worrying.

It is a key aim of the Government to encourage the unemployed to look towards self-employment as a viable career option, and we entirely support them in that general aspiration. However, we must also be aware of the dangers of false self-employment. Bogus self-employment has rocketed in the past decade, particularly in the construction industry. Workers are often told that they will be taken on only if they agree to declare themselves self-employed, thus giving up hard-won employee entitlements such as national insurance contributions, and sick and holiday pay. Recognition of the unique challenges that the unemployed face in setting up new firms or becoming sole traders must lead to specific actions to support them into self-employment. The unemployed are less likely to have the cash to enable them to set up in business, and less likely to be able to borrow money towards start-up costs. They are likely to be less able to cope with the early cash flow shortages that are often inevitable for fledgling businesses.

As a Member of Parliament, I am a publicly employed representative of the people, who earns about £64,000 a year. Yet if I decide to write an article, provide advice or even take on a directorship to provide me with extra income, I am legally entitled to do so. However, if an unemployed person on £65 a week wants to see whether they can make a go of a business as a painter or hairdresser and does a few jobs before coming off benefits, they are committing a criminal offence. In the new deal, there was an opportunity to recognise the fact that the informal economy plays an important part in helping people to move from unemployment to self-employment.

On the new deal programme, the test trading aspect entitled people who were unemployed to enter the world of self-employment with a six-month financial cushion between leaving benefits and setting up. Subsequently the tax credit system replaced that financial cushion. Originally there was hope that the universal credit would also be an effective tool. However, as it is currently structured it works on the narrow basis of a set number of hours and set earnings, which does not fit easily with the self-employment model. Under Labour’s policy review, we are investigating an enterprise credit that would recognise the flexibility of income derived from self-employment and replace that all-important cushion to give new start-ups the security that they need.

I want to touch on a couple of speeches by other hon. Members. The hon. Member for Watford talked about the sleepless nights that often come with running one’s own business—and, indeed, we are led to believe, with being a Conservative Member of Parliament. He expanded on his wife’s role and the lack of help that she provides him with on those occasions, which she may wish to discuss with him at a future date. He also talked about children who want to go into fields such as advertising or marketing, but who do not see setting up their own business as a viable or exciting option. He rightly mentioned the huge social value in setting up a business and going on to provide employment to other members of the community.

The hon. Member for Wyre Forest (Mark Garnier) supported Labour’s policy on a national insurance holiday for micro-businesses that take on a new member of staff. He was also right behind us on pushing the Government to take forward the late payments directive. We thank him for that support. I hope that he will be successful in persuading other hon. Members to be equally enlightened.

The hon. Member for Newton Abbot (Anne Marie Morris) shared my concern that the “mentors me” website may not provide enough support for new businesses, and she expressed the importance of that. The hon. Member for Selby and Ainsty (Nigel Adams) said how important it is to celebrate entrepreneurship and highlight people’s success. The hon. Members for Nuneaton (Mr Jones) and for Meon Valley (George Hollingbery) warned us not to give a sugar-coated view of the ease of running a business. In doing that, however, I feel that the hon. Member for Nuneaton added to the myth that Britain has a particularly difficult regulatory system. The reality discovered by the World Bank is that Britain is the easiest place to set up a new business anywhere in the EU and the fourth easiest place in the world. It is important that hon. Members speak up for all the positive aspects of running one’s own business and do not exaggerate the difficulties.

There is a broader context to the discussion. When the Government have choked off the recovery with their anti-growth policies, they cannot seriously expect the private sector to provide the growth that we so desperately need. That is why we have put growth at the heart of our five-point plan and why we called for a temporary cut in VAT; it is why we supported the call by the Federation of Small Businesses for a cut to a rate of 5% for VAT on home improvements; and it is why we are calling for a national insurance holiday for micro-businesses to boost employment at small firms.

People want more than gimmicks from Government. They want a genuine programme for growth. Where the Government deliver that, they will have our support. We recognise the vital role that self-employment can play in delivering growth, creating jobs, reducing unemployment and, most of all, giving people back their pride and their sense of belief. They need have no doubt whatever about Labour’s commitment. After all, we got Britain working for itself before.

12:20

[The Minister for Further Education, Skills and Lifelong Learning (Mr John Hayes)]

It is a pleasure to serve under your chairmanship, Mr Streeter, and to speak in this important debate, to which there have been many valuable contributions. I do not want to be excessively partisan—as you know, I regard it as vulgar—but it is noticeable that this debate has been dominated by my party, the party of business. It must be slightly disappointing for the shadow Minister that he has been so poorly served by his own Back Benches. There is almost no one here to support his—I was going to say oratory, but I do not want to overstate the case.

Ezra Pound, the great poet, said that genius is the capacity to see 10 things where an ordinary man sees only one, so I shall try to make 10 points in response to what has been said in this debate. Education was mentioned in the introductory remarks of my hon. Friend the Member for Watford (Richard Harrington), whom I congratulate on securing this debate. He led it with style and acumen, making a strong point about the importance of education, of ensuring that young people are imbued with a sense of enterprise, which permeated several Members’ contributions, and of countering the prevailing prejudice against business.

[Justin Tomlinson]

Will the Minister give way?

[Mr Hayes]

No, will not, because of time. Forgive me. Chesterton said that those who were impatient enough to interrupt the words of others seldom have the patience to think of good words themselves. I put on record that that is not true of my hon. Friend, but just in case, I will not give way.

My hon. Friend the Member for Selby and Ainsty (Nigel Adams) spoke about the importance of finance. My hon. Friend the Member for Nuneaton (Mr Jones) discussed enterprise and small business, and what a champion he is for the small businesses of Britain. My hon. Friend the Member for Wyre Forest (Mark Garnier) spoke about tax and the importance of having the right tax regime. My hon. Friend the Member for Maidstone and The Weald (Mrs Grant), who is no longer in her place, made a useful contribution on information about careers. My hon. Friend the Member for Montgomeryshire (Glyn Davies) made a point about the disproportionate effect of regulation on very small businesses. My hon. Friend the Member for Selby and Ainsty also mentioned skills, my hon. Friend the Member for Newton Abbot (Anne Marie Morris) mentioned mentoring and my hon. Friend the Member for Meon Valley (George Hollingbery) discussed the communal value of business. I think that I have covered most of hon. Members’ contributions. If I have not, I apologise. They were all immensely valuable, and are valued by the Government.

It is important to recognise the critical role that small business in particular plays in our economy. As an expert on these matters, Mr Streeter, you will know that small and medium-size enterprises are a crucial engine for growth and are critical to our national economic success in every sector. Together, they are responsible for almost half the private sector’s £900 billion output and 60% of private sector jobs. Since 2000, the 31% increase in businesses has been driven entirely by SMEs. Small business is the backbone of our nation and the driver of innovation. It is the embodiment of enterprise, because it is in start-up businesses that ideas have their genesis and subsequently germinate. Every business starts as a small business.

Politely—almost flatteringly—several Members referred to my own business career. I was lucky in business. All success in business is a combination of good luck and good judgment. I entered the IT industry when it was growing; what a great place it was to be in the 1980s. I learned there that politicians must be sensitive to the needs of business. They particularly need to understand that by and large, businesses want politicians to get off their back and on their side. The Government play their part through regulation, the tax system, information, support and pump-priming, but they must step back to let business thrive.

Having said that, I will mention the 10 things that Government can do, in the six minutes available to me. First, we are focusing on education. We are establishing an enterprise village website, which we will develop further, enabling teachers to access free online resources to assist them in developing school businesses. Secondly, on the “inspiring the future” website, we have made more information available about business and business education to at least 2,500 local enterprise champions and role models.

Thirdly, the National Association of College and University Entrepreneurs, which was mentioned in the debate, is building sustainable national infrastructure to develop and drive forward student enterprise societies across higher education institutions and further education colleges. I expect about 90 universities and 160 FE colleges to be involved in that initiative. Fourthly, reducing the small profits rate from 21% to 20% from April 2011 and reversing the previous Administration’s plans to raise the rate to 22% will undoubtedly help business.

Fifthly, we have increased the national insurance contributions threshold for all employers by £21 a week above indexation from April 2011, reversing the previous Government’s plan, which I think the hon. Member for Chesterfield (Toby Perkins) failed to mention because he is embarrassed about it. He is a decent and honest man, so I can understand his embarrassment, and I will not dwell on it further.

[Toby Perkins]

Will the Minister give way?

[Mr Hayes]

No, I cannot, because of time.

Sixthly, the Government also know that ensuring the flow of credit to viable small businesses is essential and a core priority for the Government. We want to ensure that the financial sector can supply the affordable credit that businesses need, and we would like to see more sources of credit and finance. I accept that banks have a role, but other organisations need to play their part too.

Seventhly, in April, we will launch a new seed enterprise investment scheme to encourage investment in new start-up companies. Eighthly, at the same time, we are launching two new Business Link services with an additional investment of £1.2 million and a new initiative to recruit and train 15,000 volunteer business mentors, which numerous people have welcomed during the debate.

Ninthly, as I am sure you know, Mr Streeter, the Government have placed great emphasis on start-up Britain. This is the year of enterprise. We want everyone to know what is happening in the UK, to promote enterprise and to give young people who wish to set up a business access to diverse sources of finance. We want to support SMEs with improved information and streamline the process by which they and others can get the knowledge and information that they require to set up their business.

Tenthly, the introduction of a national loan guarantee scheme to help businesses raise funds from non-bank sources, the £1 billion finance partnership to invest in medium-sized businesses and SMEs, the continuation of the enterprise finance guarantee scheme, a new export enterprise finance guarantee scheme, the continuation of the Government’s enterprise capital funds programme and, of course, the encouragement of the business angels scheme that we established will give businesses the boost that they need.

What has been repeated in speeches throughout this debate is that we need to change the culture to one that recognises that business has not only a communal role in delivering the growth that we need to prosper but also a vital role in enabling many of our citizens to achieve their potential to be the best they can be and, through that role, to create jobs and growth, seeding recovery in every community in Britain. The problem in Britain is not that none of that exists; far from it. We know from our constituencies and our personal business experience that that spirit exists. The problem is creating circumstances that allow it to thrive.

In those terms, the contrast between this Government and the last is profound. There is no doubt that the last Government were starry-eyed about the glitz and glamour of money, but it is clear that they were blind to the needs of small business and enterprise in particular. I hope that there has been a change, as the hon. Member for Chesterfield said. My hope is that we can understand throughout the House that business is virtuous, because it builds jobs, sustains growth and fuels healthy communities. My business is the promotion of growth, and my mission is the pursuit of the common good. It is clear that in that mission, I have the support of many colleagues in my party and throughout the House who share my enthusiasm for British business and my determination that business will prosper under this Government.

084 Telephone Numbers (NHS)

Tuesday 24th January 2012 Westminster Hall

12:29

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

Thank you very much, Mr Streeter, for presiding over my debate.

In 2008, in response to a consultation, the Department of Health concluded that for some individuals on low incomes and unable to access a fixed line, the use of NHS 084 telephone numbers constituted a significant proportion of their weekly income. In April 2010, as a result of that conclusion, the Department amended the general medical service contract and the personal medical service agreements for GP practices to ensure that

“persons will not pay more to make relevant calls to the practice than they would to make equivalent calls to a geographical number.”

GP practices were given until April 2011 to comply with the amended terms, but unfortunately, now, nine months after the deadline, Which? and other organisations estimate that 13% of surgeries in England continue to use 084 or 085 numbers that cost more than the equivalent geographical call.

One might think that as the amendment was made at the end of the previous Labour Government and we now have a new Conservative-led coalition, there would have been a change of policy, but that is denied. The Under-Secretary of State for Health, the hon. Member for Guildford (Anne Milton) said, on 12 July:

“It is absolutely clear that there is no distinction between landlines, mobiles or payphones. The directions are very clear that patients should not expect to be charged any more.”—[Official Report, 12 July 2011; Vol. 531, c. 150.]

So we can only conclude that 13% or thereabouts of GPs, including at the Crossley practice, which serves a deprived part of my constituency, and at least one other service in Coventry, are in breach of their own contracts, which were agreed by the previous Government and are supported by the current one. We have to ask why they are being allowed to continue to do that.

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

Will my right hon. Friend give way?

[Mr Ainsworth]

If my hon. Friend can wait, I will try to give way later. A number of Members want to intervene.

The GPs argue that they have entered into contracts that give them enhanced telephony solutions, and that they cannot get out of them. That is the kind of thing that they say to justify their non-compliance, but none of it is true. All the arguments are flawed, and there is the simple solution of migrating to an 034 number, which provides the same supposedly enhanced telephony services. As an aside, I will say that what we mean by such services is call queuing and call diversion options. When in the middle ages people fell foul of the inquisition, they were shown the instruments of torture but not made to pay for them, but people are now being made to pay for these supposedly enhanced telephony solutions.

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

Will the right hon. Gentleman give way?

[Mr Ainsworth]

If the Minister does not mind, a number of Members want to intervene, and he will have an opportunity to respond in a moment.

The people affected are disproportionately the more deprived members of our community. It is no longer the case that people who use mobile phones are among the better-off. That might have been the case once upon a time, a generation or so ago, but there is proven evidence that people who do not have access to a fixed line and therefore depend on a mobile phone are disproportionately from the poorer sectors of society. The other people who are disproportionately affected by the excessive charges are those who are concerned about the cost of their fixed lines and have therefore entered into contract agreements that charge for the use of the access numbers for GP surgeries because they do not fall under the contracts. How can we can allow GPs to continue to flout their contracts? Why are we not effectively enforcing them?

At the moment, the Minister is trying to convey to the House that the NHS will not be made unaccountable through his health Bill, and it would really help his argument if he made an effort to show that he is prepared to make the NHS accountable, as it currently is. I would therefore like to know what he intends to do about this. I want him to issue new Department of Health guidance that makes it clear to the GPs who are effectively trying to deny it that the use of such telephone numbers is in breach of their contract and that they must comply without further delay and migrate to an 03 number or provide a landline equivalent. He must not take no for an answer.

I wonder whether all the changes that the Minister is imposing upon the NHS are affecting PCTs’ ability to enforce what they are supposed to be enforcing. I want him to ensure that PCTs, to which he appears to have passed the buck of responsibility for this, enforce compliance by GPs. GPs must stop evading their responsibilities, under the very principles of the NHS, to enable people to access services without enhanced costs.

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

Has my right hon. Friend been able to measure the profit being made from the poorer members of society, who are most likely to need the services? That might be difficult; it might be a question for the Minister. Less well-off patients are clearly being exploited, so does he have any idea how much they are being exploited by?

[Mr Ainsworth]

The GPs will deny that there is any profit and will say that they provide an enhanced service for which the customers pay. But if there is profit in the partnership at the end of the year, it returns to the doctor, so potentially there is a profit, and that would clearly be in breach of the contract. People could be provided with access to their GP services without any enhanced charges, but GPs, because they have chosen to enter into the contracts, are passing the costs on to their patients.

[Mr Andrew Smith (Oxford East) (Lab)]

I congratulate my right hon. Friend on securing this important debate, on an issue that my constituents, in Risinghurst in particular, have raised with me. I commend his suggestion to the Minister that renewed guidance be issued. Could the Department not send out with it a legally watertight template letter that any GP practice that is genuinely worried about its legal status regarding its present contract could use, to change to the cheaper alternatives that he has mentioned?

[Mr Ainsworth]

That is a good idea. If the Minister communicates with GPs again, he should do so in the strongest of terms, because it is clear that well over 10%—the estimated figure is 13%—of GPs have totally ignored the Department of Health to date. They are determined to continue not to pick up the costs of the systems that they have put in place and to pass them on.

[Jim Shannon (Strangford) (DUP)]

I am grateful to the right hon. Gentleman for bringing this critical issue to the House’s attention. Many of my constituents do not have landlines, but they have mobiles, the costs of which are extreme. A call to a doctor can cost £4, and some of my constituents’ tariffs have run out while they were on the phone. Does the right hon. Gentleman agree that it is time to return to a landline number rather than an 084 number?

[Mr Ainsworth]

The 03 number would give people an opportunity to use the system for no enhanced charge, and the GP should, if they are not prepared to migrate to an 03 number, provide a landline alternative. Since I first raised this issue, most of the people who have contacted me have been pensioners. They have told me that they have contracts with their telephone provider and have found that, at the end of the quarter, the charges under discussion are additional to the contract and therefore to their bill. People who use mobile phones are probably not as ready to contact a Member of Parliament, or do not listen as closely as pensioners to such debates. People who use mobile phones—overwhelmingly poorer people—are being charged extortionately for access.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

This is a very important issue, because it affects all parts of the UK. A much smaller percentage of people in Scotland are affected by 084 numbers, but more than half of them are in the Grampian health board region. I am concerned, because although I share the right hon. Gentleman’s sentiments on the difficulties faced by people in lower income groups in relation to 084 numbers, if we secure a ban on them, how will we prevent the goalposts from shifting and another revenue-sharing number from taking their place?

[Mr Ainsworth]

We can do that only if the Department of Health is determined, right up to ministerial level, to enforce the contract. The terms of the contract are clear, as I hope the Minister will say when he responds. No one should pay enhanced charges to access their GP.

[Mr Simon Burns]

indicated assent.

[Mr Ainsworth]

The Minister is nodding. Let us hope that he says that and that, for heaven’s sake, we do not have non-Government and that, having made a decision, they make sure that it is complied with across the board. I look forward to hearing the Minister’s response.

12:44

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

I congratulate the right hon. Member for Coventry North East (Mr Ainsworth) on securing this debate on the use of 084 telephone numbers in the NHS. The Government’s position is extremely clear—when patients contact their GP or anyone else in the NHS, they should not be charged more than they would be to call their next-door neighbour’s landline. Those are the rules. That is why we have retained the previous Government’s directions, published in December 2009, and regulations, passed in April 2010, which make it a contractual requirement for GP surgeries to ensure that that is the case.

Under the directions and the amendments to the general medical services and primary medical services regulations, it became compulsory for GP practices and NHS bodies to review how much it cost patients to call them. If they found that patients were being charged more than a standard local landline call, they had one year to take all reasonable steps, which could include varying the terms of their telephony contract, cancelling the contract, or offering an alternative number to call, such as an 03 number, which charges callers at a local rate. GP practices should not, in any case, enter into, extend or renew their contracts with their telephone supplier if patients are being charged more than a local call.

This legislation was the result of a lengthy consultation by the Department in 2009, to which there were about 3,000 responses. The vast majority agreed that patients should not be charged additional costs to contact their GP. However, many also valued the enhanced services they receive when calling their GP, such as queuing and additional booking options, but we are clear that that should not cost patients any more than a local landline call.

[Mr Andrew Smith]

Will the Minister give way?

[Mr Burns]

I will not at the moment, because I do not have much time to answer all the points raised by the right hon. Member for Coventry North East. [Interruption.] I might give way in a moment, although hon. Members should remember that the right hon. Gentleman did not give way to me either.

We must also be clear that the additional services can also be offered on other number ranges—such as 01, 02 and 03—and GP practices should feel able to choose the number that is most suitable for their patients, provided that it does not cost them any more to call.

Many people ask why we do not simply ban 084 numbers outright. I fear that that would not solve the real problem, which is that some patients continue to be, or believe that they are being, charged too much to contact their GP.

[Mr Andrew Smith]

Given that the Minister has said that practices should not charge more than the cost of a landline call to a neighbour, if a patient can demonstrate from their bill that they have been so charged, will they be able to get the money back, and how would they go about that?

[Mr Burns]

The right hon. Gentleman has anticipated something that I will deal with shortly, namely the 1,300 GP practices mentioned by his right hon. Friend the Member for Coventry North East that have allegedly been abusing the system.

As I have said, I fear that banning 084 numbers would not be the panacea that Opposition Members might believe it to be. The Department, to its credit, banned the use of premium-rate telephone numbers beginning 087 and 09 in 2005, but new number ranges with additional costs began to appear. Although it seems to be a simple solution, I do not think that it will be over the medium and longer term, because people will seek to avoid it. That is why it is crucial that the previous Government rightly sought to tackle the problem at source and why we have continued the policy that they introduced in the dying days of their regime. The 2010 regulations make it clear that patients must not be charged more to contact their GP than they would be if they called a local number.

Since the rules came into force, I understand that there has been confusion in the NHS about what the regulations and the directions include. I am grateful for this opportunity to clarify some of those misconceptions in the NHS and elsewhere. There have been claims that mobile phones are not covered by the 2010 regulations, but that is not true. The regulations cover landlines, mobiles and payphones equally. The legislation is absolutely clear that if a person calls a GP surgery with an 084 number from a mobile, landline or payphone, they should not pay more than they would if they called a local landline number from the same phone.

That is very important, because more and more people now use mobile phones as their primary form of communication, as has been mentioned by the right hon. Member for Coventry North East. That is particularly true of the less well-off—the right hon. Gentleman also made this point—where 25% of households only have access to mobile phones, and for young people, where a third of people under 25 only use mobile phones for communications purposes. In 2011, for the first time, the majority of call minutes originated from mobile phones.

Questions have also been raised about how a patient can challenge their GP practice or PCT if they believe that they are being charged more than the cost of an equivalent local call. Any action taken should be on the basis of robust evidence. GP practices and their PCTs should look at evidence of call costs to determine whether their patients are being charged more than they should be. Such evidence could include cost-per-call information from providers, such as O2, Vodafone and BT. A suitable sample should be considered, bearing in mind the different contracts that patients can choose to sign up to.

A practice can also look at cost-per-call information that is provided by patients. Using that information, it would be possible to compare directly the cost of calling a GP practice’s 084 number with the cost of calling a local land-line number. If the evidence suggests that using a specific number is not costing patients more than it should, the GP practice should be free to continue using 084 numbers. If patients are being charged more than they should be, they should take the steps that I have already mentioned to rectify the situation.

[Mr Ainsworth]

Although I welcome a lot of what the Minister has said, I am not at all sure that we can afford to leave this problem to the individual. There is deference towards doctors and people are loth to offend or upset their doctor. The Department and the local PCT must be prepared to take action to ensure compliance, and they should not expect individual patients to do so.

[Mr Burns]

The right hon. Gentleman anticipates a point that I was about to make. As a preface to that point, however, I must say that patients can be extremely helpful in providing evidence that can help to prove if this practice of overcharging, which is in defiance of the regulations and directions, is going on.

I now come on to the point that the right hon. Gentleman made about the figure that is in the public domain and that is used a lot, namely that there are 1,300 GP practices that are—in effect—defying the regulations and charging patients more than they should. I have made inquiries and I can find no evidence to support that figure. People say that there are 1,300 GP practices that charge more than they should; what they do not say is which practices they are, and they do not provide the robust proof that overcharging is happening.

I say to the right hon. Gentleman, and to anyone else who has an interest in this important subject, “Please send us the evidence”, because we cannot find concrete evidence that overcharging is going on. If it is going on, we want to see the evidence and we want to see which GP practices are engaged in it, so that the PCTs, which enforce these regulations, can take action. I assure the right hon. Gentleman that if we get the evidence and if it is proven that overcharging is happening, the PCTs and—after the modernisation of the NHS—the NHS Commissioning Board, which will have responsibility in this area, will also vigorously pursue the matter because, like his Government, we believe that such overcharging is unacceptable.

However, I must reiterate that we need the evidence. We do not need anecdote or the “friend of a friend”, who has said this or that. We need precise, concrete evidence, to be able to pursue this matter.

As I have said, PCTs are currently responsible for ensuring that GP practices meet the terms of their contracts, including ensuring compliance with these regulations. The Department will soon clarify the existing guidance, which I hope will help GP practices and PCTs to understand this issue more fully and to dispel some of the myths and misunderstandings about the use of 084 numbers.

This Government are committed to creating a patient-focused NHS, as the right hon. Gentleman said we were planning to do; I can confirm that he was accurate when he said that. One of the key elements of that process is ensuring that patients find it easy to access the services they need, when they need them. Using an 084 number can help a GP practice to offer additional services that improve patients’ access to care. It is right that GPs remain responsible for their own access arrangements, including their telephone number, opening hours and booking arrangements. Those arrangements will be different for different practices, and the ability of GPs to be locally responsive is something that we know patients value. Primary care is the cornerstone of the NHS. Around 90% of patient contact with the NHS takes place in a primary care setting, with around 300 million consultations per year, so it is essential that patients can easily access care, and have a choice about how to do so.

One way that we are improving access to care is through the roll-out of the NHS 111 service, which will be available to everyone in England by April 2013. That service will give the public a phone number that is easy to remember and free to call when they need help urgently but do not know where to turn. Callers will be quickly assessed, and sent to the right service on the first point of contact. The primary aim of NHS 111 is to ensure that patients get to the right service, and quickly, at any time of the day or night. In most areas, patients can also expect to be able to see their out-of-hours GP through NHS 111, which will simplify how patients access NHS services and improve patient experiences.

NHS 111 will replace NHS Direct’s 0845 4647 service, which obviously uses an 084 number. NHS Direct was exempted by the last Government from the directions and regulations, and rightly so. That is because the Department had already begun considering plans to implement NHS 111, and it would have been confusing to the public to change NHS Direct’s number shortly before introducing a new number for patients to call that will be free to the user.

By April 2013, there will be a simple system in place, whereby patients can access care quickly and easily. If there is an emergency they should dial 999, but if people do not know where to go they should dial 111, and otherwise they should continue to use their GP as usual.

I give an assurance that we take these directions and regulations very seriously indeed. We expect them to be adhered to and obeyed. I can assure Opposition Members who raised this issue that PCTs carefully monitor the situation to ensure that, when there are complaints about 084 numbers, GP practices are adhering to the regulations and not costing patients more than they should. The PCTs vigorously enforce the regulations. I also reconfirm that we are issuing clarification guidance to GPs, which I hope addresses another point that the right hon. Gentleman made.

I cannot emphasise strongly enough, however, that despite the numbers that are bandied around—as I said earlier, 1,300 is the number that is most commonly used to describe the number of GP practices that are not adhering to the regulations—we cannot find any evidence to establish the accuracy of that figure. Nevertheless, we are anxious that the regulations are enforced. So, if there is any concrete information, proof or evidence that GPs are abusing the system and not abiding by the regulations, it is important that that it is provided to the PCT, which acts as the enforcement officer. If the right hon. Gentleman himself has concrete evidence— following the research that he has conducted to secure this debate and then take part in it—and wants to send it to me, I would be more than happy to accept it and I will direct it to the appropriate body, whichever PCT it is, so that the allegation can be investigated.

In conclusion, the use of 084 numbers is controversial but we are very clear that patients should not be charged more than they would be to make an equivalent call to a local number. That is the belief and principle that underlies the policy, one that we are continuing from the last Government’s term in office. However, we also believe that we should not restrict the freedom that GPs have to improve access arrangements for their patients, provided that they are complying with the regulations. I hope that this debate has not only clarified the situation but has set a challenge to the right hon. Gentleman and others to provide evidence if they have it or come across it, so that if there are any abuses we can put an end to them.

HMS Affray

Tuesday 24th January 2012 Westminster Hall

13:00

[Tim Farron (Westmorland and Lonsdale) (LD)]

It is a great pleasure to serve under your chairmanship, Mr Streeter. I am extremely grateful to have the opportunity to raise such an important matter in this Chamber.

HMS Affray was an A-class submarine, which entered service in 1946. She left Gosport harbour at 4.30 pm on 16 April 1951 on a training exercise. She was due to resurface at 10 am the following day, but no signal was received. Within three hours of her failure to report, a major search began, in which the entire home flotilla and many foreign vessels took part. The search was scaled back on the evening of 19 April. Some weeks later, the wreck of the Affray was discovered on the sea bed north of Alderney in the Channel Islands, beneath 260 feet of water.

The tragedy took the lives of 75 men. It is clear that it could easily have been avoided and that those men lost their lives needlessly. The inquiry that took place at the time was a closed inquiry. When its details were made public under the 30-year rule in 1981, it became clear that it had been staggeringly inadequate. In the words of a widow of one of the men lost on the Affray, this was an inquiry of the admirals, by the admirals and for the admirals—it was not for those who died or for those they left behind.

The widow I have just quoted is Mrs June Tower. June is a constituent and, in 1951, she was married to 23-year-old John Treleaven. John was one of 25 trainees among the 75 crew who lost their lives. On 16 April— 61 years after the event—June will attend a ceremony on the island of Alderney, where a plaque will be unveiled to commemorate the 75 who died in the Affray tragedy. The event presents the perfect opportunity for our Government to make amends for six decades of obfuscation.

The closed inquiry in 1951 reported to James Callaghan, who was Parliamentary Secretary to the Admiralty. It reported that the loss of the Affray was most likely caused by metal fatigue and faulty welding on the Affray’s snort—a long tube added to the vessel in 1950 to act like a large snorkel. When the wreck was discovered, it was reported that the snort had snapped and that the likely cause of the tragedy was the resulting influx of water into the ship.

What was not included in the report to the Minister was the Affray’s dubious history, the extraordinary lack of experience among the crew and the fact that the Affray was carrying a significantly larger crew than normal. The mechanical problems that beset the Affray included the fact that her battery flooded without warning during trials, defects she had experienced in a starboard supercharger on her way to Australia and the need for a partial refit when she was in Singapore.

By 1950, the Affray had done 51,000 miles and was not rated highly by seamen who knew her well. Chief Petty Officer David Bennington reported that

“she leaks like a sieve and when doing a deep dive the other day the water poured into the engine room faster than we could keep it out”.

He also described an occasion when an engine broke down. After the same exercise, he stated that

“we limped in on one”—

one engine—

“and just as we arrived in the other went...I think that this boat is just about finished.”

The snort was fitted in January 1950, but it developed defects very quickly. Mechanic William Day was responsible for raising and lowering the snort, and he detailed a number of defects with the device, adding that

“as soon as we surfaced from snorkelling there was always a lot of water in the engine room”.

Lieutenant Commander Blackburn, who captained the Affray and died with his men, told the crew that they would be going on a short, five-day voyage because the Affray was booked to go into dock at the end of those five days due to trouble with her battery.

There is plenty of evidence that the Affray was bordering on unseaworthy, if not actually unseaworthy, and that the Admiralty was well aware of that. The Affray was an unfit vessel. Each of the 75 men who died was talented, dedicated and proud to serve their country, but as a collective unit, they were the wrong crew for the wrong ship—again, something the Admiralty was fully aware of.

The Affray carried 75 crew on that voyage, but she was meant to carry only 61 in peacetime. Even in wartime, which this was not, she was meant to take a crew of only 66. Worse, only 26 of those on board were part of the Affray’s regular crew. A further 20 crew members had been moved out of barracks at the last minute to take part in the exercise, due to confusion over Easter leave. There were also four Royal Marines and 25 trainees. Among those trainees was John Treleaven, who, in the words of June, his widow,

“had spent 2 years on HMS vanguard but hadn’t a clue about submarines and had never been out in the Affray”.

This was, therefore, an unfit submarine, carrying a brave but unsuitable and oversized crew. Yet, the inquiry, which was hushed and rushed, reporting just three and a half months after the tragedy, concluded that the cause of the loss of 75 men was a snapped snort pipe. The snort was no doubt snapped, but was it the cause of the tragedy or the result of an explosion caused by the faulty battery? I have no idea, but the closed inquiry made no serious attempt to look at the issue.

When all is said and done, though, there are two failures for which the Admiralty must take responsibility. One was sending out a vessel with 75 men on board when it was clearly not fit for duty. The second was sending out an ill-prepared, inexperienced crew on such a ship. It is entirely possible that an accident happened that day and that it could have been mitigated had the crew been smaller or more experienced.

One of the other widows, Mary Henry, who was married to First Lieutenant Derek Foster, told June that she had found her husband in the garden on 15 April, the day before the Affray set sail. He was working unusually furiously at his garden, and his wife inquired what was upsetting him. He replied that

“we are taking a gash—or rubbish—crew and they’ll all be sick and get in the way, it’s dangerous”.

June Tower talked to one of the men who was taken off the crew at the last minute due to double booking and the complications over Easter leave. He told June that

“it was incredible that they took those trainees out in the Affray, if there had been an emergency they wouldn’t have known what to do”

He added that

“the affray leaked like a sieve, she was always turning turtle but nothing that an experienced crew couldn’t deal with”.

He explained that the 20 crew who were swapped over at the last minute to allow those in barracks to join the ship were later told by their superiors not to talk about the incident for fear of blackening the Navy’s name.

That gives us a clue as to what happened in the hushed and rushed inquiry. Britain was, and remains, rightly proud of her Navy. In 1951, we were in the early and fevered days of the cold war, and out in Korea, it was getting decidedly heated. The foolhardy decision to allow an unfit ship, crewed by the inexperienced and the untrained, to take part in a challenging exercise, which led to such a dreadful tragedy, must have been a matter of huge embarrassment to the Admiralty and the Navy as a whole. The need to present a picture of an invincible Navy must have overridden the need to ensure justice for the families of the dead. However, that was 61 years ago. Do we need to allow those considerations to haunt us today, while June and other relatives are still yearning for answers? I am sure the answer is that we do not, of course, need to allow those considerations to hold us back.

June Tower is an incredible woman. For 61 years she has sought justice for John. Now, she is a widow for a second time. Like the other relatives of those who died, she is delighted by the decision to unveil the plaque to them. She is hugely grateful to the Essex Submariners Association, which has led the work in raising the funds for, and organising, this important memorial. When John died, she was overwhelmed by the gifts of condolence sent to her and the rest of the bereaved families from right across the Commonwealth. Happily, she remarried in December 1954. She married a GP, Julian Tower, with whom she spent more than 50 wonderful years. When she and Dr Tower married, the Affray fund provided her with a generous dowry. She says that she has much to be grateful for and many to be grateful to.

The great shame is that the Navy and the country to whom June’s first husband was so dedicated, and for which he gave his life, have acted quite differently. We have had a hushed and rushed inquiry, a lack of truth and no contrition, no admission of fault and no apology. I hope my hon. Friend the Minister agrees that that is a dishonourable position for us to be in. I hope he will do all in his power to put that right.

June is clear that the wreck of the Affray is a grave and that it should remain undisturbed. She does not want it lifting to the surface, and she does not want divers to risk their lives to investigate it, because it lies on the bottom of the English channel. However, there is sufficient evidence above the water for there to be a reinvestigation of the evidence, and I formally ask the Government to do just that. Secondly, June and the other relatives of the crew deserve an apology from the Royal Navy and Her Majesty’s Government for the mistakes made in sending out an unfit submarine with an inexperienced crew. Thirdly, I would be grateful if moneys remaining in the Affray fund could be utilised to pay for the maintenance of the bronze plaque on Alderney, so that it will remain a fitting and proud tribute to the 75 who lost their lives.

June wrote a delightful and extremely moving book about her relationship with her husband John, culminating in the Affray tragedy. She wrote the book, “Maritime Mail”, because she wanted to provide a memorial for those brave men. The plaque and June’s book are tremendous memorials and outstanding tributes to a brave crew who died needlessly. The most important tribute that we can pay them today is to agree that a reinvestigation should take place and that an apology should be made.

13:11

[The Minister for the Armed Forces (Nick Harvey)]

I commend my hon. Friend the Member for Westmorland and Lonsdale (Tim Farron) on raising this important issue through the vehicle of an Adjournment debate. I acknowledge his concerns for his constituent, who lost her first husband in this tragedy. I would, of course, like to pass on my sympathy to her and to all the families and relatives of those who were affected by this loss. I also have a constituent affected by this, Mr Kevin Cook, whose father went down on the Affray in the months before he was born. He has approached me for help with this issue as a constituency MP.

As my hon. Friend explained at the outset of his speech, it is now 50 years after the Affray was lost with all hands. However, what passes as history for many can remain a fresh concern to some, particularly if they feel—as clearly my hon. Friend’s constituent does—that there remains unfinished business. We have a duty to ensure that concerns are addressed as fully as they can be and that they are dealt with sensitively, within the bounds of what can reasonably be achieved this far after the event.

Let me set out a little of the background. HMS Affray was an A-class submarine completed in 1946. The class had originally been designed to undertake operations in the far east during the latter part of the second world war. The submarine used diesel-electric power-plant. Diesel engines were used for surface propulsion and charging of the electric batteries, which were used to power electric motors for propulsion when dived. Subsequently, Affray was fitted with a snort mast, which was a breathing tube to permit the submarine to run its diesel engines while at periscope depth, much reducing the chances of it being detected.

As we have heard, on 16 April 1951, Affray left Gosport on a training exercise under the command of an experienced submarine captain, Lieutenant Blackburn. There were 75 men on board and she was scheduled to make a surfacing report by radio at 10 o’clock the next morning, 17 April. When that was not received, Operation Subsmash was ordered in accordance with standard submarine search and rescue procedures, beginning at 11 o’clock the same morning. Over the next few days, many ships and aircraft were involved in the search for the Affray, but, sadly, to no avail. On 19 April, the Admiralty accepted that the Affray was lost, with no reasonable hope of any survivors. It was not until 14 June that the wreck of Affray was detected and identified north of Alderney in the Channel Islands, lying in 260 feet of water. In the following months, divers from HMS Reclaim spent much time investigating the wreck, hoping to discover the reasons for her loss. That was considerably dangerous work.

The board of inquiry convened to investigate the loss of HMS Affray presented an interim report on 19 July. The board considered a number of possible causes. Material failure was considered the most likely cause. That was not, however, a definitive finding. The board also considered issues of human error or the possibility of collision. The board of inquiry continued to seek further evidence. Diving continued to be carried out on the wreck, using some of the most advanced techniques available at the time, but no firmer conclusions could be reached and diving was brought to an end in early November 1951.

The final report of the board of inquiry reached conclusions that were broadly similar to those of the interim report: that the submarine was lost because of the material failure of the snort mast, which broke off without warning, and that the resultant rapid influx of water resulted in the submarine dipping markedly by the stern, becoming increasingly heavy and sinking to the bottom. The board also concluded that the rapidity of events did not allow the release of position indication signals, that the crew died rapidly and that the search organisation was rapidly and energetically implemented.

The report was laid before the House on 14 November 1951 by the First Lord of the Admiralty, Mr J P L Thomas. It noted that there was no certainty about the reasons for her loss and that the broken snort mast might be either the cause or the consequence. The Government judged that any attempt to salvage the Affray would be dangerous, expensive and not at all certain to be successful. With the extra risk to life that salvage would have incurred, the Government decided that it was best not to proceed. As a result, the definitive cause of the loss of the Affray could not be proven and the wreck of HMS Affray would therefore be the final resting place for the 75 souls on board.

As I am sure the House will agree, it is fitting that that grave is now protected from being disturbed under the Protection of Military Remains Act 1986. I took note that my hon. Friend told us that his constituent’s clear preference was that it should not be disturbed. As Members may be aware, claims were made in print in 2007 alleging that the true cause of the loss of the Affray was known but suppressed to spare the embarrassment of senior naval officers. A study of those claims has been carried out by the Naval Historical Branch of the Royal Navy, but it has concluded that there is no reason to disagree with the findings of the original board of inquiry. Indeed, scrutiny of the paper trail around the inquiry found that it was far from a review carried out by the Admirals for the Admirals, which was, I think, the expression my hon. Friend used. In fact, far from the Royal Navy hierarchy encouraging the board of inquiry to the conclusion that what happened was caused by the mast snapping, they were, on the contrary, very sceptical about that account. They did not encourage the inquiry down that line, but continued to question whether that was the true explanation. Some people have called for a new inquiry to be launched on the basis of those various allegations.

I listened to the points that my hon. Friend has raised today. He stated very confidently that this was an accident that could easily have been avoided and that the lives were lost needlessly. I cannot see any evidence that enables so bold a statement to be made. It is perfectly true that there had been problems with the condition of the vessel, but it had spent three months in the dockyard earlier in 1951, during which time most of the serious problems were addressed.

Furthermore, it is true—this is, effectively, common practice—that the Affray was booked in for further repairs to be carried out. However, the decision on whether or not she was fit to go to sea was not taken by the hierarchy of the Admiralty in the fashion described by my hon. Friend; the decision rested with the commander of the vessel, who was, as we know, a popular, decorated and extremely experienced captain. He judged that the vessel was in a fit condition to go to sea, although it is also true that there were more people on board than usual because the exercise was going to combine two different training exercises: one for the submarine crew and one for a small number of Royal Marines who were on board for that purpose. Again, the captain made the decision that the size of the crew was reasonable in all the circumstances, and that it was appropriate to go out to sea with that number on board.

Some of the issues that have been raised, and some of the points that were made separately in the Bennington letters, were known to the Board of Inquiry when it was considering the events that led up to the tragedy. We cannot say with any certainty at this point what the board members made of each of those pieces of information, but we can say with reasonable confidence that those factors were known about at the time, and were considered by the Board of Inquiry. I am struggling to see that new evidence is available today that was not available to the Board of Inquiry when it looked into the matter. It is my duty to tell the House that in the absence of any new evidence, it would not be possible to authorise a new inquiry. The main purpose of a Board of Inquiry is to ascertain the cause of an incident so that a recurrence can be avoided.

The House will understand that submarines of the same class as Affray have been out of service for more than three decades. Indeed, we do not even have any diesel electric submarines in the 21st-century Royal Navy. The subsequent safety record of the Royal Navy submarine service since the sinking of Affray has been excellent—Affray was the last submarine lost at sea—so it is exceedingly unlikely that a new inquiry could make recommendations that would materially affect the running of our modern nuclear-powered Vanguard, Trafalgar or Astute class submarines. A new investigation, even with new technology, would involve significant expense and significant risk, and we would have to be realistic about what it would be capable of discovering, particularly if we respected the wishes of those who would not want graves to be tampered with.

My hon. Friend also raised a question about the Affray fund. It is an independent fund, and is not controlled by the Ministry of Defence. The trustees are the Lord Mayor of Portsmouth, the mayor of Gosport and the Public Trustee. If he wishes to pursue any matters pertaining to the fund, it would be best if he addressed them to the trustees.

Submarines are complex ships, operating in an environment that is extremely dangerous, even in peacetime. Submariners operate at the limits of human ingenuity, and that is to their credit. They are among the bravest men in the Royal Navy, and soon to be the bravest women too. The loss of Affray and the men who served on her was a national tragedy, as well, of course, as a personal tragedy for many. We all understand only too clearly why those who were personally affected want definitive answers, but nothing can bring the fallen back, and after more than 50 years, there seems to me to be no realistic likelihood that we can ever provide the answers that, for understandable reasons, they crave. I cannot see that any new evidence is available to us now that was not available to the original Board of Inquiry. The passage of so much time seems to me to make the prospect of discovering anything new infinitesimal.

[Tim Farron]

The Minister is right to say that there is not much in the way of new evidence, but there are two clear sides that were never really put together. He referred to Affray’s dubious service and maintenance history, and the technical and mechanical problems that it experienced. It is the marrying together of sending the craft out in that state with a crew that was oversized and, probably crucially, under-experienced—25 trainees and a crew that was two thirds inexperienced in that ship—that makes Mrs Tower and me believe that those in charge were culpable. I accept that the argument about the inquiry is one thing, but an apology should be made for that poisonous cocktail of an inexperienced crew and an unfit vessel.

[Nick Harvey]

I have already touched on the points about the condition of the vessel. The records of its condition were all available and properly documented at the time. They were available to the Board of Inquiry to consider. It is true that Affray had had some service and maintenance issues, but there is no particular evidence that their number was unusually high for submarines at that time. Therefore, the decision by the commanding officer and the chain of command was based on their judgment at that time about the safety of the vessel. There is no evidence that anyone can see that they were pressed to take the vessel out. According to the standards of the day, the risk was within the parameters of what they considered to be normal. It is also true that there was quite a large number of relatively inexperienced trainees on board at the time, but again that was not radically out of the ordinary. The captain judged at the time that the blend of experience and trainees on board was acceptable, and that the vessel was fit to set sail.

I would be hugely regretful and deeply sorry if either of those factors contributed to the loss of the Affray, but there is no evidence in truth that either factor did. We must be realistic about what we can hope to establish as definitive fact 50 years after the event when a Board of Inquiry conducted in the immediate aftermath with all the information at its disposal at the time was not able to say with certainty exactly what the cause was. It remains a huge tragedy for the Navy and a personal tragedy for those involved, but after more than 50 years, I just cannot see any new evidence or any realistic prospect that we would be better able to identify the cause of the disaster now than we were at the time.

I am delighted that in April some of the relatives will go out to commemorate the anniversary. I hope that my constituent, who is planning to go with them, finds the experience moving and meaningful, but I just do not think that there is anything we can do to put to bed the unanswered questions, because I do not believe that any more information is available to us today than was available then. I fear that the 75 souls who were lost will have to be left in peace on the sea floor, and that we will not find out anything new as a consequence of the allegations that have been made in the recent few years.

Legal Aid (Women and Families)

Tuesday 24th January 2012 Westminster Hall

13:30

[Mr Virendra Sharma (Ealing, Southall) (Lab)]

It is a great honour and a privilege to present this debate under your chairmanship, Mr Streeter. Legal aid was first established by the post-war Labour Government under the Legal Aid and Advice Act 1949. It was established to ensure that ordinary members of the public who cannot afford legal fees can obtain legal services when they need them in areas such as family law, mental health, education, immigration and asylum, consumer issues, welfare benefits, employment and criminal defence.

The aim of legal aid is to ensure that individuals are able to defend or to enforce their rights, or to obtain advice on how to tackle the problems they face. As a result, it plays a key role in tackling social exclusion, and in helping individuals to protect their rights against richer and more powerful opponents. Since its creation, it has formed a central plank of the post-war welfare state. It is the arm of the welfare state that keeps the other arms honest and ensures that they are all directed towards the public good.

Legal aid funds private practitioners to provide that service, rather than setting up a legal equivalent of the NHS. As a result, many legal aid practitioners provide support through a comprehensive network of outlets, often run by self-employed individuals in small partnerships, as opposed to the state directly contracting lawyers. But that makes them uniquely vulnerable to major systemic shocks, such as current plans brutally to cut social welfare legal aid.

[Rehman Chishti (Gillingham and Rainham) (Con)]

I am grateful to the hon. Gentleman for giving way and congratulate him on securing this important debate, which I know he cares passionately about. On funding and sustainability, does he accept that our legal system costs more than £2 billion a year and is one of the most expensive in the world and that that is, in current economic and financial circumstances, unsustainable?

[Mr Virendra Sharma]

The hon. Gentleman is a lawyer who has practised in the past. I will respond to his point later.

The Government know that many legal aid practitioners provide support in the way that I have described. That is why the Cabinet Office has taken over this Minister’s mess and is trying to ensure the long-term viability of the advice sector. Legal aid support, particularly early intervention, demonstrates effective value for money for the taxpayer. According to cost-benefit analysis by Citizens Advice, for every £1 of legal expenditure on housing, debt, benefit and employment advice savings are made, although I will not give all the figures, which I am sure are available to hon. Members. As a result, it is clear that the savings made by cutting the legal aid budget will be dwarfed by increased costs elsewhere to the public purse. That is why cuts to advisory services, particularly to welfare advice, are both short-sighted and short-termist.

There is also a human cost. In any given year, legal problems such as divorce, eviction or debt will be experienced by one in every four people, but by one in three people with long-term sickness or disabled people, half of unemployed people and half of lone parents. People with one unresolved problem often accumulate other problems rapidly. If you cannot resolve early-stage problems, more problems will often accumulate and end up in a vicious circle. These cycles can result in people losing their jobs and income, suffering stress-related illnesses and experiencing relationship and/or family breakdown.

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

I, too, congratulate my hon. Friend on securing this important debate. Does he agree that if we do not deal with the whole cluster of problems, we might allow problems to get worse? If people’s employment and debt problems are related, and we resolve the debt problem but not the employment one, we are merely postponing the problem and it will come back again.

[Mr Sharma]

I thank my hon. Friend for her important intervention. I agree with every word that she said. I will come back to this matter and develop it later in my speech.

Such problems are closely related to social exclusion, poor outcomes for children and levels of crime and antisocial behaviour, all of which represent significant costs to public services. Children whose families are experiencing civil and social problems are more likely to become involved in truancy, exclusion, and offending.

For the past 40 years, local law centres have been providing legal advice and support to the most vulnerable and needy in their communities. In the late 1970s and early ’80s I worked as an advice worker in a law centre and have experience in that field. I dealt with communities that suffered due to unemployment and other reasons. Law centres are an essential part of community life and are the first port of call for many people experiencing social and civil legal problems.

Law centres must be protected because of their experience. They have been working for 40 years with local communities, building a relationship with the public, landlords, organisations, local authorities and projects. They have local access; they are well established in communities; they are easily accessible; and they are trusted by communities. The brand power of law centres, like citizens advice bureaux, lies in their having gained public trust and confidence. They provide face-to-face advisory services and build trust and stronger relationships with clients. Services provided by the 52 law centres in England and Wales can be divided into three strands, namely individual casework, education and prevention, and developing policy. All three strands of services provided by law centres and CABs demonstrate the important strategic role played by these organisations in their local communities.

[Rehman Chishti]

On advice centres, does the hon. Gentleman welcome the fact that this Government will spend £4.7 million to fund 44 court-based independent domestic violence advice positions across the country, which clearly shows that they are committed to supporting the most vulnerable in our society?

[Mr Sharma]

I will answer that question later in my speech.

Issues raised in individual casework are often the root causes of problems faced by communities, which places law centres in the unique position of being able to disseminate information to other support bodies and to propose remedies. Research by the New Economics Foundation calculated the contribution of law centres by quantifying the social value such institutions provide and found that for every £1 invested in a law centre, a further £15 of social value is generated.

Family legal work remains the most costly area for the civil legal aid budget. It covers issues of child welfare and protection, as well as divorce, property and relationship breakdown issues. The proposals have retained legal aid for cases where domestic violence or forced marriage is involved and for cases where children’s safety is in danger.

[Jim Shannon (Strangford) (DUP)]

I, too, congratulate the hon. Gentleman on securing this debate. A lady in my area who reared her children and left her job, and depended on her husband for income, finds herself needing legal aid after a messy divorce, but cannot receive it. Does the hon. Gentleman share my concern that families—ladies in particular—will find themselves vulnerable at this time?

[Mr Sharma]

I agree. As I stated earlier, the impact will be on families in society.

Abundant research has been carried out into the adverse consequences of family breakdown. There is also ample evidence suggesting that job loss, financial difficulties and loss of income can bring about family break-up. Therefore, the provision of advice for other civil law problems, such as employment, housing and debt are important in preventing problems from escalating.

The Government’s proposals would seriously damage access to justice, especially for the most vulnerable in society. The Ministry of Justice impact assessment shows that there will be a disproportionate effect on women. Similarly, the cuts disproportionately impact on black and minority ethnic clients and those with disabilities. As legal aid is targeted to those with low incomes, it will have a disproportionate effect on this section of the community. However, it is likely that those on very low incomes will be particularly negatively affected.

And then there is domestic violence. I direct the Minister to a speech of great power delivered by the noble Baroness Scotland in another place to the Minister, Lord McNally:

“look at the average case, such as when a woman has run from her home. She manages to go to her GP, who sees the injuries and notes them and then sends her to hospital because there are fears that she may have cracked a rib or another bone. She is seen by the medical staff and they verify that the injuries that she complains of are genuine. Her neighbours may have come in to rescue her from an assault. They may not have seen the assault taking place but have noted what was happening and taken her away. Social services may have come along and examined the children, spoken to them and heard what they had to say. All of that might have been used by the police who then came along and arrested the man. He may then acknowledge that he has indeed committed the offences that are alleged against him. Even if all those things had happened, under”

the Government’s current

“provisions the woman would not be entitled to legal aid. That cannot be right.”—[Official Report, House of Lords, 18 January 2012; Vol. 734, c. 595.]

[Rehman Chishti]

Does the hon. Gentleman accept, in relation to the interdepartmental working between the Ministry of Justice and the Home Office, that the Home Office is providing more than £28 million of stable funding until 2015 for specialist local domestic and sexual violence support services and £900,000 to support national domestic violence helplines and the stalking helpline, and that that shows its commitment on this issue?

[Mr Sharma]

Again, the hon. Gentleman makes a very good intervention, but at the same time we need to consider the impact of the reductions and where the resources are going. That is what the debate is about.

[Alex Cunningham (Stockton North) (Lab)]

Does my hon. Friend agree with the noble Baroness Scotland that the definition that the Government plan to adopt on domestic violence could result in some 46% of the cases that currently attract legal aid no longer doing so?

[Mr Sharma]

I thank my hon. Friend. Every hon. Member who has spoken has made a very good intervention. I agree with what he has said and am sure that everyone will have recognised and noted it.

I was referring to the speech delivered by Baroness Scotland. She is a practitioner of great experience and ability and is, of course, right.

I am fortunate enough to have the brilliant Southall Black Sisters in my constituency of Ealing, Southall. It is one of the UK’s leading organisations for black and minority ethnic women, and it told me that those women will be particularly hard hit by the Government’s plans. It said that

“the Legal Aid Bill will make it difficult for all vulnerable sections of society, especially BME women, to access justice and in doing so, remove meaningful legal protection from them and instead push them into community forums such as religious arbitration tribunals where not only will they be denied justice and protection but they will be encouraged to reconcile with abusive partners in order to uphold so called religious and family values. Women who have experienced and are at risk of violence and abuse will be at further risk of domestic and sexual violence, sexual exploitation and forced labour.”

It has been widely reported as fact that women who have experienced domestic violence will still be eligible for legal aid in private family law proceedings, such as disputes concerning the care and upbringing of children, but that is simply not the case. Experts in the field have unanimously raised the concern that too many women who have experienced domestic violence and need help will fall through the gaps in the proposals.

[Mrs Helen Grant (Maidstone and The Weald) (Con)]

Does the hon. Gentleman agree that men are likely to be financially better off than women and therefore better able to pay for legal work privately and that women are more likely to be in non-unionised jobs?

[Mr Sharma]

I agree with every word that the hon. Lady has said. I am sure that the Minister will also take note of those points in his response.

Experts in the field cite two particular concerns. First, the definition of domestic violence currently used in the Legal Aid, Sentencing and Punishment of Offenders Bill is inconsistent with the cross-Government definition of domestic violence, which guides statutory agency practice and governs access to Government services. Importantly, the definition used in the Bill fails explicitly to refer to financial abuse and sexual violence, which are particularly insidious forms of domestic violence. It is not clear why the Bill uses a different definition of domestic violence, unless the purpose is to restrict the number of cases that will be deemed eligible for legal aid. Under the current proposals, many who are already known to be victims of domestic violence by other departments will not obtain the legal support that they need.

[Karl Turner (Kingston upon Hull East) (Lab)]

I am obliged to my hon. Friend for giving way; he has been very generous. I wonder whether he would like briefly to address the fact that 23 special domestic violence courts are closing on the current Government’s watch. How will that affect women?

[Mr Sharma]

I think that I will come back to that. I thank my hon. Friend for the intervention. When I reach the last lines of my speech, he will hear about the impact of the various proposals on women.

Under the proposals, victims of domestic violence will be expected to provide “objective evidence” of that violence to qualify for legal aid. Experts unanimously agree that too many victims will remain ineligible for legal aid because the evidence that they will be required to present is dangerously restrictive. The evidence of domestic violence that the Government propose to accept relies on victims taking civil and criminal proceedings against perpetrators, yet we know that a large proportion of victims do not take those routes. To ensure that all women affected by domestic violence are protected, it is essential that the evidential criteria used reflect the experiences of women and the reality of domestic violence. That must include evidence from specialist domestic violence organisations, health services and social services. The Government have failed to think through their proposals adequately.

The notion that “We are all in it together” is not alien to the Labour party. Indeed, this may be the first time that a Conservative Prime Minister has adopted a socialist slogan as his mantra. However, these cuts are deliberately, unashamedly and, I argue, viciously targeted at those who most need help. I am looking at the time; I am sorry, but I have indicated that I need to rush. As I have said, the cuts are targeted at those who most need help and, in the case of domestic violence sufferers, there can be no defence.

I ask the Minister to think again, particularly on domestic violence. In its current form, the Bill will leave thousands of women who have experienced the trauma of domestic violence, trafficking for the purposes of sexual and other forms of exploitation and exploitation as a migrant domestic worker in a private household with a stark choice between representing themselves in legal proceedings or taking no legal action at all to protect themselves. It will also have a life-threatening impact on black and minority ethnic women, who, as a result of cultural, religious and other social pressures and racism, already struggle to access the legal system. The Bill will violate the rights and fundamental freedoms of all vulnerable women, but it will have an immensely disproportionate impact on black and minority ethnic women.

It is not too late to think again, but if the Minister does not make up his mind to do what I have asked, I pray that my colleagues in the other place will make his mind up for him.

13:47

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

I congratulate the hon. Member for Ealing, Southall (Mr Sharma) on securing the debate. This is an important topic and one that we have discussed at length. I recognise a number of Bill Committee colleagues in the Chamber today. As the hon. Gentleman said, the issue is still being discussed in the other place, as the Legal Aid, Sentencing and Punishment of Offenders Bill continues its passage through Parliament. However, I welcome the opportunity to have a debate on this specific topic today.

It is notable that the subject of the debate on the Order Paper emphasises the effects of our reforms to legal aid, rather than leading us to debate only the justification for those reforms. It may be helpful, therefore, if I give the wider context for our proposals, without which a proper response about the effect on women and families cannot be given.

I start by confirming that the Government are committed to the principle that domestic violence victims need support both legally and otherwise. The Home Office is providing more than £28 million of stable funding until 2015 for specialist local domestic and sexual violence support services and £900,000 to support national domestic violence helplines and the stalking helpline.

The Ministry of Justice has contributed towards the funding of independent advisers attached to specialist domestic violence courts since 2007-08 and will have contributed just over £9.25 million by the end of 2012-13. In addition, the victim and witness general fund will provide a total of nearly £15.5 million in grant funding over the next three years to voluntary sector organisations that support the most seriously affected, vulnerable and persistently targeted victims of crime. Of that, nearly £4.7 million will be used to fund 44 court-based independent domestic violence adviser positions across England and Wales for the next three years. My hon. Friend the Member for Gillingham and Rainham (Rehman Chishti) was right to mention that. We will also allocate nearly £3 million a year for the next three years to 65 rape crisis centres, and we are working with the voluntary sector to develop the first phase of the new rape support centres where there are gaps in provision.

Domestic violence protection orders are being piloted in three police force areas. They are designed to give immediate protection to victims by banning a perpetrator from returning to the house, thus giving the victim the breathing space that they need to consider their next steps. Such orders show a real commitment by this Government to tackling domestic violence—and, if I may so, it is a commitment that is rarely recognised or taken into account when directing criticisms to our proposals for legal aid.

[Karl Turner]

I am obliged to the Minister for giving way. Will he address the point that I made in my earlier intervention? What effect does he think that the closure of 23 special domestic violence courts will have on women?

[Mr Djanogly]

The hon. Gentleman is avoiding the reality of the situation. In all except for fewer than five of those courts, the service is being transferred to other surrounding courts. I will write to him with the specific details because I do not have the numbers in front of me.

With that context in mind therefore, I will move on to the specific issue of the legal aid reforms. The £2 billion annual cost of legal aid, combined with the economic climate of the day, mean that hard choices must be made. It is essential that resources are focused on cases where legal aid is most needed—that is where people’s life or liberty are at stake, where they are at risk of serious physical harm or immediate loss of their home, or where their children may be taken into care.

As well as retaining legal aid for criminal cases, we are also keeping legal aid for mental health matters, asylum matters, debt and housing matters where someone’s home is at risk and legal aid for judicial reviews of public authorities. All of those are directly relevant to family welfare. That means that we are retaining legal aid to seek an injunction to prevent domestic violence and to oppose a child being taken into care. We are also retaining legal aid for private law family cases where domestic violence is a feature. We will also be keeping and extending legal aid for family mediation. The power to waive the financial eligibility limits in cases where someone is seeking an injunction against domestic violence also remains, so those who need help securing protection will be able to get it.

[Mrs Grant]

Does the Minister agree that excluding undertakings from the domestic violence gateway could have the perverse effect of encouraging litigation, thus potentially increasing costs?

[Mr Djanogly]

As I said in Committee, the Government are looking at the question of undertakings and that continues to be our position. We hope to come forward with that as the Bill progresses through the other place. If I am to say very much more, I will not be able to take any further interventions.

We are also retaining legal aid for all child parties in family cases, and of course exceptional funding will be available in any out-of-scope case where a failure to provide legal aid might breach the European convention on human rights or EU law. Taken together, we expect such provisions to mean that we will continue to spend around £120 million a year on private family law legal aid, based on 2009-10 figures. When we include legal aid for public family law matters, spending will well exceed £400 million, again based on 2009-10. We will continue to spend nearly £130 million a year on legal representation for child parties. That represents around 95% of current spend.

I accept that women and children will often be directly and indirectly affected by private family law proceedings, but, as I have said in the past, we have had to make tough choices here. We cannot afford to fund generally lengthy and often intractable disputes in the family courts. However, we know that mediation can lead to better results that are consensually and less acrimoniously agreed and that are potentially longer-lasting than those imposed by a court. We expect an extra 10,000 mediations a year, which is up from the current figure of around 15,000.

Mediation will not always be appropriate, however, particularly when domestic violence is involved. We know that it can have a devastating effect on women and children, as well as men, who are a significant and often overlooked group of domestic violence victims. Domestic violence is also a significant predictor of children being taken into care as well as a precursor to all sorts of other social problems. On top of that, we also know that perpetrators of domestic violence can assert a controlling, insidious power over their victims, which could potentially stop a victim from effectively presenting their case against the perpetrator in court. On those points, I agree with the hon. Member for Ealing, Southall and with Baroness Scotland. However, the hon. Gentleman’s example of a woman who would not get legal aid after running from an abusive husband is not accurate. That sort of case would get legal aid. When a person is convicted of domestic violence against a partner, the partner will be eligible, as conviction would count as evidence. That is why we have made a large, and extremely important, exception in our proposal to remove most private family legal aid from scope of our reforms—that is where domestic violence is a feature.

There has been much debate about the definition of domestic abuse in the Bill and the fact that we do not use the definition of the Association of Chief Police Officers. We are considering that as the matter proceeds through the other place.

There has also been much focus on the evidence criteria for domestic violence to qualify for legal aid in private family law cases. We need clear, objective evidence of domestic violence to target taxpayers’ money on cases where the victim needs assistance. The allegation, which has again been made today, is that the Government’s criteria will miss a great number of genuine victims, and various pieces of evidence have been adduced to support this, and we will continue to look at them. They include the evidence provided by Southall Black Sisters, who have made a significant contribution to the whole case.

Those pieces of evidence refer to domestic violence victims as a whole and point out their difficulties in dealing with the civil or criminal justice systems. We are dealing with a subset of that group—those who are seeking private family law legal aid. They will have, in certain respects, slightly different characteristics to domestic violence victims as a whole. By definition, they will be engaged in the civil justice system. A significant number, nearly 10,000 in 2009-10, will be seeking civil legal aid for a protective injunction at the same time as they seek legal aid for their private family law matter. They will all meet the evidential criteria. We know that in total there were 70,000 legal aid family cases in 2009-10. Let me compare that figure to the prevalence of the types of evidence that we are requesting. Around 24,100 domestic violence orders were made in 2010, the great majority with the benefit of civil legal aid. Around 74,000 domestic violence crimes were prosecuted in 2009-10, and there were 53,000 domestic violence convictions. Around 43,000 victims of domestic violence were referred to Multi-Agency Risk Assessment Conferences in the 12 months up to June 2010.

We also propose that an ongoing criminal proceeding for domestic violence and a finding of fact in the courts will be taken as evidence. Now these figures will clearly overlap to some degree, but what they point to is that a significant proportion of those 70,000 private family law cases that we currently fund will continue to be funded. We think that this proportion will be around 25%, which matches our rough estimate of the prevalence of domestic violence. I should also say, though, that this comes from a number of sources, and definitive evidence is not available.

I have also committed to look again at whether the issue of undertakings in a court can be used as evidence. We are clear about the need to ensure that those who are victims of domestic violence and need legal aid can access it and these requirements are designed to enable that.

Turning to legal aid for children, we have protected funding in areas that specifically involve children. We have retained legal aid for child protection cases, civil cases concerning abuse of a child, and for cases concerning special educational needs assistance. We have also made special provision so that legal aid is available for children who are made parties to private family proceedings.

I should highlight that in civil cases, such as clinical negligence, claims brought in the name of a child are usually conducted by their parents acting as the child’s “litigation friend”, rather than the child themselves. That is a normal part of the rules around civil litigation. As I mentioned earlier, there will also be an exceptional funding scheme for cases where legal aid will not generally be available, which will take into account a person’s ability to represent themselves in legal proceedings where the European Court of Human Rights applies. That will clearly be an important factor in the case of children who might otherwise be left to present their case without assistance.

It is worth noting that the Government published an equality impact assessment, which laid out our assessment of the effects on women of planned changes to legal aid. It recognised the potential for the reforms to have an impact on women and children, but in the context of the cuts that need to be made, and the deliberate focus of legal aid on those who are most vulnerable and in need, we do not believe that this impact is disproportionate.

I do not pretend that the choices we have had to make will have no impact, but they needed to be made.

14:00

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

Written Ministerial Statements

Tuesday 24th January 2012 Written Statements

Tuesday 24 January 2012

Executive Pay

Tuesday 24th January 2012 Written Statements

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

Last September, I published papers which explored the issues around the rapid growth in executive pay in our largest listed companies. Yesterday I announced the package of measures that the Government will take forward to tackle this issue on four fronts:

Greater transparency;

More shareholder power;

Reform of remuneration committees;

Best practice led by the business and investor community.

Through secondary legislation later this year the Government will require companies to publish clearer and more informative information about how executives are being rewarded. This starts with remuneration reports being split into two sections: one detailing the proposed future policy for executive pay; the other setting out how pay policy has been implemented in the preceding year.

When outlining future policy, remuneration committees will be expected to explain why they have used specific benchmarks and how they have taken employee earnings—including pay differentials—into account in setting pay. They will have to explain how they have consulted and taken into account the views of employees.

Companies will be required to say clearly and succinctly how the proposed pay structures reflect and support company strategy; how performance will be assessed; and how it will translate into rewards under different scenarios.

When reporting on pay for the previous year, companies will have to provide a single figure for total pay for each director and to explain how the pay awards relate to the performance of the company. To provide context, companies will be mandated to produce a distribution statement, outlining how executive pay compares with other dispersals such as dividends, business investment, taxation and general staffing costs.

Alongside more information, shareholders need new powers to hold the board to account. I will consult shortly on proposals to reform the current voting arrangements and give shareholders a binding vote, enabling them to exert more pressure on boards. The consultation will include the following options:

A binding vote on future pay policy, including details of how performance will be judged and real numbers on the potential pay outs directors could receive. Companies will have to include a statement on how they have taken account of shareholder views and the result of previous votes.

A binding vote on any directors notice period which is longer than one year and on exit payments over one year’s salary.

Binding votes are more difficult to apply retrospectively because of contractual complications and I will consider whether there should be further sanctions when a remuneration committee report attracts significant dissent on an advisory vote.

The consultation will also look at what level of shareholder support companies should have to get in order to pass pay proposals, and consider raising the threshold for a successful vote to 75% of share votes cast for the motion.

The Government will address fundamental conflicts of interest in the pay-setting process. We will require greater transparency around the role of consultants, how they are appointed and paid, and to whom they report and advise. I will also ask the Financial Reporting Council to amend the UK corporate governance code to put an end to the practice of serving executives sitting on the remuneration committees of other large companies.

This package of measures will create a more robust framework within which executive pay is set and agreed. However, lasting reform depends on active shareholders and responsible business leaders accepting the need for change and pushing the agenda forward. In the following weeks and months I will strongly encourage business and investor groups to build on the current momentum for reform, agree on what best practice looks like and promote this more widely.

Post Office Network

Tuesday 24th January 2012 Written Statements

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey)]

On 9 November 2010, the Government published a statement on their plans for securing the future of the post office network. This set out the Government’s recognition that post offices serve a distinct social purpose and pledged that consequently the Post Office would not be for sale. Instead, Post Office would remain in Government ownership.

At the same time, the Government committed to maintaining the post office network at its current size of around 11,500 branches and building a long term sustainable future for those branches. This commitment is underpinned by a £1.34 billion funding package to 2015, a substantial proportion of which is for an ambitious and challenging investment programme. It will refresh and modernise the network—addressing its underlying economics, to win new customers and to build new sources of revenue.

I am pleased to update the House on the progress that has been made since that statement was published.

Royal Mail and Post Office Ltd—Relationship Going Forward

Work to separate Post Office Ltd into an independent business alongside Royal Mail has continued throughout the past year. In line with Government commitments. Post Office Ltd now has a strengthened board with both a new chair and a senior independent director appointed in September 2011. Further non-executive appointments will be made in due course. This new board will ensure that Post Office Ltd benefits from increased levels of oversight and challenge as it moves to being a separate business from Royal Mail group in the coming months.

During consideration of the Postal Services Act in its Bill stage, Moya Greene, the chief executive of Royal Mail told the House that

“To me it is unthinkable that we would ever have anything but the very strong relationship we have now with the Post Office”.

This reflects the fact that Royal Mail relies on the Post Office to provide access to its services for the public and that Royal Mail is the Post Office’s biggest customer. I gave a commitment to the House at that time that the Government would ensure that the two companies would put in place an appropriate new contract ahead of any separation of the businesses.

I can now confirm that both of these pledges have been met. A new 10-year agreement has been signed between Royal Mail and Post Office Ltd. This will ensure that the full range of Royal Mail products—including stamps, parcels, air mail and special delivery—will continue to be available over post office counters throughout the country for the long term. The agreement was commercially negotiated between Royal Mail and Post Office Ltd and reflects the clear continuing commitment of each business to the other.

Post Office Revenue Streams

The new agreement with Royal Mail provides a solid base for the relationship between those two companies. Clearly the Post Office cannot rely on mail income alone, and other traditional sources of income are in decline. The Government recognise Post Office Ltd must therefore develop new revenues if it is to thrive.

A Front Office for Government

Becoming a “front office” for central and local government are a key objective for Post Office Ltd. This will take time but I believe that Post Office Ltd is now well placed to build on its existing strengths—in particular its trusted role in communities and its extensive network—to further develop its role in this area.

Post Office Ltd faces a clear challenge as services are increasingly provided online or to consumers directly. Post Office Ltd has set out its clear ambition to work with this shift, providing services to support digital delivery. These include face-to-face ID verification, data capture for digital applications, and assisted services for those unable to access online services.

I fully support this ambition, and have been pleased to note the significant successes that Post Office Ltd has achieved so far. Most recently, the company was chosen to collect digital data—fingerprints and photographs—for the UK Borders Agency biometric residency permits. This contract could be worth up to £36 million to the Post Office over the life of the contract. Post Office Ltd has also recently been selected to provide a variety of services which play well to its “front office” ambitions. For example, from November it has been providing identity verification for Criminal Records Bureau checks, to provide licences for London taxi drivers on behalf of the Public Carriage Office. Post Office Ltd will also provide a face-to-face service as part of a wider identity-based registration service to enrol learners to a “Learner Passport” service on behalf of the Skills Funding Agency. At the local level, Post Office Ltd won a contract from Westminster city council to provide a range of “front office” services (the first of which went live in November). It has also been selected to provide a face-to-face enrolment service that will allow local authority employees to access secure Government systems.

The Post Office continues to actively engage with Government as it scopes out how it will deliver more key services in the future. By doing this it is developing its services to ensure a pipeline of services that Government and citizens wish to use. A good example is the Post Office working with the Cabinet Office as part of the identity assurance programme. Through this, the Post Office is further expanding its existing identity verification capability—a function that will be increasingly important as Government deliver more services online. The Post Office also continues to work with Departments—DWP and HMRC—on a number of pilots to test different services, which will help to inform the delivery plans for major Government priorities, such as the future introduction of universal credit. As part of this, the Post Office is developing new offerings to assist those who are currently unable to access services or information online, building on information from pilots such as print-on-demand kiosks—currently operational in Reading and Birmingham. This supports Government’s digital by default agenda.

I also fully support closer engagement between Post Office Ltd and local government. A year-long pilot partnership between Post Office Ltd, Sheffield city council and the National Federation of SubPostmasters has recently concluded and reported its findings. The partnership sought to identify ways of improving the sustainability of the local post office network and to establish the scope for post offices to deliver a wider range of public services. The partnership demonstrated that closer engagement would deliver clear benefits for Post Office Ltd, local government and consumers. We are now exploring these initiatives further with Sheffield as well as an additional 25 local authorities in England and Wales. Similar developments are taking place in Scotland following a successful meeting held with the Scottish Government, Convention of Scottish Local Authorities, National Federation of SubPostmasters and Post Office Ltd.

Financial Services

The expansion of accessible and affordable personal financial services available at post offices is another important element of the Post Office’s strategy. Here, too, good progress is being made. For example, Post Office Ltd recently launched a Junior ISA and it remains the No.1 provider of foreign exchange. Its mortgages and its savings bonds have been prominent in the best buy tables. Over the last year Post Office Ltd has won a range of consumer awards for savings, loan, mortgage and insurance products. Post Office also continues to review and consider the introduction of new products that could be suitable for a range of different customer groups—including the financially excluded—while also contributing to the commercial viability of the network.

Royal Bank of Scotland (including NatWest) customers are now able to access their current and business banking accounts over post office counters, meaning that around 80% of people can now access their current accounts in this way. These arrangements are particularly important to those without easy access to alternative banking facilities nearby. For this reason, I would like to see 100% of current accounts accessible in this way. We have held discussions with the remaining banks that do not currently offer this service—HSBC and Santander—and hope that they will choose to do so in the near future.

Post offices also provide a series of services for credit unions, more than 20 of which use the Co-operative bank’s banking platform for cash receipts and payments as well as balance enquiries. Over 60 credit unions use Post Office’s bill payment facilities to enable repayments and the Post Office also has established a scheme whereby credit unions can utilise its “payout” service, with a small number currently doing so. Some individual sub-postmasters also carry out manual “paper” transactions for local credit unions within their private retail business alongside their post office. I hope that Post Office Ltd’s links with credit unions can be strengthened even further as the sector develops in the future.

National Savings & Investment’s recent decision to withdraw some products from sale at post offices (either because sales of those products were being stopped completely or because they are now to be offered solely through direct channels) presents the Post Office with an opportunity to further develop its own growing range of competitive savings and investments accounts to enhance customer choice. At the same time, premium bonds, which currently account for 75% of all NS&I sales by value through post offices, will still remain available for purchase at any post office.

Post Office Network

All of these initiatives are making a major contribution to improving the sustainability of the post office network. The latest quarterly figures at end December 2011 show a network of 11,801 outlets, of which 5,351 are in urban areas and 6,450 in rural areas.

Post Office Ltd is committed to maintaining the network of at least 11,500 branches throughout this Parliament and it will continuously seek to recruit a new sub-postmaster to replace the incumbent wherever there is not an immediate transfer of the business under a commercial sale. The closure programmes of the past will not be repeated under this Government. These minimum network commitments ensure that services will be available in the places where people want them, but services must also be available at the times people want them—for example on their way to or from work.

Expanded pilot trials of new operating models which can deliver these changes, “Post Office Main” and “Post Office Local”, are continuing and are currently operating in 153 locations across the UK. Both of these new operating models involve investment into the location and are aimed at creating better environments for customers with longer and more convenient opening hours. The purpose of pilots is to enable these models to be refined and developed in the light of experience. Consumer and retailer issues identified in the pilot phase are being closely monitored and addressed. These pilot trials are therefore providing valuable insight into the potential of the new models for both customers and operators. They are also giving an opportunity to further develop and tailor the products and services offered in order to match customer demand and usage as closely as it is possible to do on a sustainable basis. Independent research shows that the Post Office Local pilots have been very well received and are generating high levels of customer and operator satisfaction. In the most recent research interviewing over 1,000 customers in November 2011, 91 % stated they were extremely or very satisfied with the overall branch experience. If you add those who stated they were “fairly satisfied” the total figure is 98%. Extended opening hours for the convenience of customers is a significant benefit of the Post Office Local operating model. A typical traditional post office might be open 46 hours per week. The average for the Post Office Locals that are currently being piloted is 81 hours per week.

These convenient opening hours are attractive to customers—the latest Post Office research suggests a third of the customers of the Post Office Locals are visiting the post office in the early morning or later in the evening.

These longer hours appear to be cutting queues. The survey also found that 68% of Post Office Local customers were served with no wait and of those who did have to wait to be served, 89% found the waiting time acceptable.

From the summer. Post Office Ltd, drawing on the experience and results of the extensive pilot trials, will begin a carefully managed, but voluntary, programme of converting branches to the new operating models in places where introducing the models enhances both customer service and the long-term sustainability of the post office. This will be linked to an accompanying programme of substantial investment in the network. Where a relocation of post offices services in any particular community appears to be appropriate, the proposal will of course continue to be subject to consultation with local authorities and local residents before changes are made in accordance with the code of practice set up by Post Office Ltd and Consumer Focus. In line with the views of the Post Office’s stakeholders, including Consumer Focus, the whole logic of this investment activity is to seek to complement the aspirations of consumers, local communities and local sub-postmasters. That is why the programme is one of investment to sustain and improve the network and to provide greater convenience to customers. Collectively the aim is to draw a line under the past steady decline of the network.

Mutualisation

Looking forward, I believe that the continued success of this strategy will deliver a profitable business and a thriving post office network and that Post Office Ltd can be most successful when all of its key stakeholders are engaged in that goal. In due course, the Postal Services Act 2011 allows for Post Office Ltd to become a mutual but, in addition to a requirement for Parliament to approve any transfer, the Act imposes a further key condition that any mutual post office continues to act for the public benefit. Our public consultation “Building a Mutual Post Office”, which sought views on the mutual concept and how it might be structured, closed on 12 December. Responses are now being studied and we expect to publish the Government’s response in the spring.

Costa Concordia Incident

Tuesday 24th January 2012 Written Statements

[The Minister of State, Foreign and Commonwealth Office (Mr Jeremy Browne)]

and The Parliamentary Under-Secretary of State for Transport (Mike Penning): We would like to update the House on the Government’s response to the sinking of the Costa Concordia cruise liner, which hit rocks off the Italian island of Giglio overnight on Friday 13 January.

In doing so, we wish to express our profound sympathy to the families and friends of those who have died or are missing as a result of this dreadful event, and to pay tribute to the Italian emergency services who acted promptly and professionally to ensure such large numbers of people reached safety.

In the immediate aftermath, our priority was to establish whether all British nationals involved were safe. We immediately deployed a British embassy team of consular experts to Porto Santo Stefano and sent a rapid deployment team from London. They worked in close concert with the Italian authorities and the cruise company throughout the weekend to identify all British nationals believed to be on board the ship, and to establish that they were safe.

The FCO crisis centre in London published a hotline number for worried family members and friends, cross-checking information on missing persons with that received from port authorities, the cruise company and local hospitals and hotels. As a result of this painstaking work the Foreign Secretary was able to announce on Sunday morning that all 35 British nationals known to be on the ship had been accounted for: 23 passengers and 12 crew members. The teams ensured that those British nationals who wanted to leave Italy were able to do so, even those whose passports, money and other valuables were left on the ship. Teams were deployed to the airport, as well as local hotels where British nationals were staying, to facilitate their return to the UK.

We have offered the Italian Government any assistance they may find useful in responding to this accident. In particular, we have made available the considerable maritime expertise available in our Maritime and Coastguard Agency and Marine Accident Investigation Branch.

At this time, the cause of the accident remains unknown. We must wait for the results of the investigation by the Italian authorities before deciding whether any action is required to ensure the safety of other vessels. Should the conclusions of the investigation suggest a need for revisions on any aspect of cruise ship design or operation, then the International Maritime Organisation will be the forum for agreeing improvements. The development of passenger ship regulations is an iterative process based on practical experience. By applying the lessons from previous incidents the cruise industry generally enjoys an excellent safety record.

PIP Breast Implants and Regulation of Cosmetic Interventions

Tuesday 24th January 2012 Written Statements

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

In my oral statement to the House of 11 January 2012, Official Report, columns 181-183, I described the immediate action which the Government are taking to address the concerns of women who have received breast implants made by the company Poly Implant Prothèse (PIP). I said that, in the light of these events, we needed both to review the lessons that could be learnt, and to consider the wider issues of ensuring the safety of people who are considering cosmetic surgery and similar treatments. I therefore announced two reviews, one to be led by my noble Friend the Parliamentary Under Secretary of State (Earl Howe) which will look at what happened in the United Kingdom in relation to PIP implants; and the second, to be led by the NHS Medical Director, Sir Bruce Keogh, to look at the wider issues of clinical safety and regulation.

The review to be carried out by Earl Howe will report by the end of March 2012 and the terms of reference are:

Review of actions of the MHRA and wider Department of Health

“In the context of current EC directives on the regulation of medical devices and the information generally available at the time on the risks associated with breast implants, to review:

1. what information about PIP implants was available from routine adverse reporting systems;

2. what external concerns about PIP implants were brought to the attention of the MHRA or the wider Department of Health, and when;

3. how these concerns and any related information were handled;

4. what advice was sought and from whom;

5. what information was shared between MHRA and its counterparts in other countries in the EU and elsewhere;

6. how decisions were taken, and who was involved in this process;

7. what action was taken to safeguard and advise patients;

8. whether action was sufficiently prompt and appropriate

The review will advise the Secretary of State on what lessons can be learned for application should similar circumstances arise in the future, and on implications for UK input to the ongoing review of the European Medical Devices Directives.”

The review to be carried out by Sir Bruce Keogh will begin in March 2012 and will report within 9-12 months, that is, at the latest by March 2013, and the terms of reference are:

Review of regulation of cosmetic interventions

“Taking into account the Government’s Better Regulation framework and the concurrent review by the EU of current arrangements for the regulation of medical devices:

1. To review the current arrangements for ensuring the quality and safety of cosmetic interventions posing a potential risk to physical or psychological health, and in particular to consider:

i. whether the regulation of the products used in such interventions is appropriate;

ii. how best to assure patients and consumers that the people who carry out procedures have the skills to do so;

iii. how to ensure that the organisations which deliver such procedures have the clinical governance systems to assure the care and welfare of people who use their services;

iv. how to ensure that people considering such interventions are given the information, advice and time for reflection to make an informed choice;

v. whether there should be a statutory requirement for such organisations to offer redress in the event of harm, and if so how this could be funded;

vi. what improvements are needed in systems for reporting patient outcomes, including adverse events, for central analysis and surveillance.

The review will consider issues of governance, data quality, record keeping and surveillance, as well as ensuring that sufficient information is provided to secure patients’ informed consent. It will include consideration of the feasibility of an outcomes-based register of commonly implanted devices.

2. To make recommendations to Ministers, including interim recommendations if appropriate, and to inform the UK contribution to the EU review.

The interventions to be considered for the purpose of this review could potentially include:

a. the surgical insertion of a medical device or prosthesis, or other surgery intended to change the appearance of the body

b. injection with any product, whether medicinal or otherwise

c. any other form of intervention at the discretion of the review team where the intervention is not clinically indicated to safeguard or improve the physical health of the recipient.”

Animal Procedures Committee: Membership

Tuesday 24th January 2012 Written Statements

[The Parliamentary Under-Secretary of State for the Home Department (Lynne Featherstone)]

On behalf of the Home Office and the Minister for the Department of Health and Social Services and Public Safety for Northern Ireland, I am pleased to announce the appointment of Ms Hilary Newiss to the Animal Procedures Committee, which provides Ministers with independent advice on the use of animals in scientific procedures.

Following open and public competition, Ms Newiss replaces a member who had participated as a member of the Committee for two terms and had stepped down.

I am grateful to her for accepting membership of this important advisory committee.