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.