Westminster Hall

Wednesday 25th January 2012 Westminster Hall

Wednesday 25 January 2012

[Mr Charles Walker in the Chair]

UK-India Trade

Wednesday 25th January 2012 Westminster Hall

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

09:30

[Mr Charles Walker (in the Chair)]

Colleagues, I am afraid that an enormous number of hon. Members want to speak in this hour-and-a-half debate. Even if you limited yourself to six minutes each, it is unlikely that we will get everybody in. If you want to try to limit yourselves for the sake of other colleagues, that is fine.

[Stephen Hammond (Wimbledon) (Con)]

Good morning, Mr Walker. It is a pleasure to serve under your chairmanship. It is an honour to initiate this debate, and I am grateful to Mr Speaker for selecting it.

First, I declare an interest: I chair the Conservative parliamentary friends of India group and had the pleasure of travelling to India on official visits in 2009 and 2011, and I begin the debate in that light. I am an unashamed friend of India and believe in the need to strengthen, deepen and improve the United Kingdom-Indian relationship on matters of geopolitical importance, culture, education and particularly trade.

Hon. Members who are historians will know that the UK-Indian trade relationship stretches back some 400 years, with the UK initially being a huge importer of spices, textiles and food items. By the 1850s, the relationship was such that the percentage of total UK trade in goods with India was 8.5% of our trade. Throughout the early decades of the 20th century, the UK enjoyed a huge, growing surplus in bilateral trade, but with independence came caution on the part of India and a distrust of international trade and capital. That was witnessed by the fall of India’s share of world exports, from 6% to 2%. Consequently, by the 1970s, UK-India trade had fallen to just under 2% of total UK trade in goods.

Today, of course, it is a different environment. India is now one of the world’s fastest-growing economies. In respect of UK trade, our imports from India have risen by 250% in the decade 2000 to 2010 and our exports to India have risen by 140%. However, our relative position with this fastest of all fast-growing economies is revealing and shows the harsh reality. In 2000, the UK was the fourth most important location for Indian exports, but it was the seventh most important by 2010. In 2000, the UK was the third most important importer to India, but we had slipped to 22nd place by 2010. That dramatic decline may have many causes, but it is worth dwelling on, or at least making some observations about, why that happened.

First, our shared past and shared language can be both an opportunity and a barrier. I sense from a number of discussions that such familiarity caused an expectation on one side that contracts might be won, but the expectation on another side was that contracts had to be worked for. I suspect that the UK was perceived, in respect of many bids, as not having done the research into the bid process done by many European competitors striving to gain a foothold in that market.

Secondly, the UK was slow to exploit some of its traditional strengths, despite having those clearly signposted. A mark of a fast-growing economy is the need for infrastructure. The UK has been for many years one of the world’s leaders in world civil engineering and infrastructure, yet we were slow to embrace that and were often beaten to contracts by others. The same is true of higher education.

Thirdly, from 2000 to 2010, the UK appeared to concentrate more on European markets, with exporters regarding that as their overriding priority to the exclusion almost of other opportunities, whereas others saw Europe as one market and the world as their oyster.

I hope that the Minister says something about the Government’s position in ensuring that the mistakes of 2000 to 2010 will not be replicated in their policy of encouraging trade.

Latterly, there has been a complete refocusing. I am sure that every hon. Member in this Chamber welcomed the Queen’s Speech of 2010, which explicitly cited India as a destination for the UK to concentrate on in respect of trade. The Prime Minister’s visit in July 2010, with many senior industrialists, has set the tone, which I hope will continue for many years.

[Mark Pritchard (The Wrekin) (Con)]

On the importance of bilateral trade, does my hon. Friend agree that it is important that British companies are confident when doing business in India? Therefore, ahead of the Indian Prime Minister’s visit in June, it would be good if all outstanding matters surrounding the Commonwealth games were dealt with. Outstanding bills for companies, such as SIS LIVE—the British company that is the world’s largest satellite broadcasting company— need to be paid if British companies are to have confidence in doing business in India.

[Stephen Hammond]

My hon. Friend is known for his clear-sighted view of the future. He pre-empts remarks that I will make in the very near future. I share his sentiments. As he rightly says, we look forward to welcoming Dr Singh to the UK. I hope that his visit will be seen as a further expression of our shared values and common interests, but much more importantly, with regard to economics and trade, I hope that it will be regarded as a reiteration of the target of at least doubling bilateral trade in the next 10 years. I hope that my right hon. Friend the Minister will be able to say something about the plans in the business arena that he expects to see from Her Majesty’s Government in June.

[David Simpson (Upper Bann) (DUP)]

The Foreign Secretary made an interesting statement in December last year, saying that Asian consumer spending will reach a high of approximately £42 trillion by 2030. I am sure that the hon. Member for Wimbledon (Stephen Hammond) agrees that the Indian and Asian market is a vast one for British companies. However, the onus is on the British Government to make it easier for companies to export into Asian countries, by helping to remove a lot of the bureaucracy and paperwork that is tied up in relation to that.

[Stephen Hammond]

I thank the hon. Gentleman for that remark. I will deal with that point specifically in a few minutes. It is the job of government to ensure that there is an environment in which business can thrive. The onus is on both the British and Indian Governments, particularly with regard to some of the bureaucracy.

My hon. Friend the Member for The Wrekin (Mark Pritchard) mentioned SIS—Satellite Information Services. I declare that I have already spent a day in Delhi, meeting local journalists and local people, trying to ensure that that company receives the correct treatment that it deserves from the Indian Government. The contract was awarded to SIS to cover the Commonwealth games, against a difficult backdrop, including late access to the stadiums, and it was generally accepted that an outstanding job of coverage was completed. The troubles began at that stage, but the company has enjoyed the support of the UK Government, with interventions from Ministers in the Department for Business, Innovation and Skills and the Foreign and Commonwealth Office, and from the high commissioner in Delhi.

In essence, for hon. Members who are not aware of this story, allegations of impropriety in the awarding of a number of contracts were made. Why such allegations arose may be speculated on: whether to do with domestic Indian politics or disappointed companies. None the less, in response to Opposition and media pressure, the Indian Government commissioned a high-level report, known as the Shunglu report, which has now concluded.

The issue is that SIS has not really been given a chance to state its case: it was not given the chance to submit evidence or to be questioned by the Shunglu Committee. Moreover, the company has still only received 60% of the contractual payment due to it, with 40% remaining unpaid, and it has had to pay a 10% subcontract, so 50% in terms of monetary value remains unpaid. It is a matter of regret that the committee failed to check and to verify some of the information in its report. It is a matter of even greater concern that the second report by the Comptroller and Auditor General failed to pick that up. SIS sought to resolve the matter, correctly, through diplomatic and commercial channels, but it is disappointing that the efforts by her Majesty’s Government and high commissioners from the United Kingdom and many other nations have not had success. I sincerely hope that the legal proceedings in India will not be involved.

On the point made by the hon. Member for Upper Bann (David Simpson) about some of the issues facing companies that trade with other nations, to many in the commercial world, the failure to settle a contract that was set up in good faith by an internationally respected organisation will be of concern, because it will show that if a company becomes involved in a long-running domestic political dispute, non-payment of funds could threaten its economic operation. In the sporting world, where the Commonwealth games were a success, India is scoring an own goal post those games, and there is a chance, as my hon. Friend the Member for The Wrekin said, that the visit by the Indian Prime Minister will be overshadowed by this matter. It is important to put that on the record.

[Mr Laurence Robertson (Tewkesbury) (Con)]

I know the company very well from my activities in the House. It is very strong in charitable work and many other aspects, and it is indeed bad that the matter remains outstanding after so long.

[Stephen Hammond]

My hon. Friend is, of course, correct. We can only hope that the Indian high commission in London will make that point to its Government. I know that my right hon. Friend the Minister has already made the point.

I return to the issues surrounding Dr Singh’s visit and the matters that we must reiterate to the Indian Government for doubling bilateral trade. We all accept the need to rebalance our economy, but we must exploit those areas of competitive advantage, and clearly a major one is and will remain financial services. The City of London corporation has been working actively in India for some time to build the City as the partner of first choice for the provision of financial services and to highlight the UK as a location of choice for overseas investment. The opening of the Mumbai office, and the lord mayor’s regular visits allow a continuing dialogue on the issuance of capital, insurance, asset management, infrastructure finance, consultancy, London exchanges, and legal matters. I could go on.

Our ability to expand trade in financial services would benefit from the removal of some of the restrictions that are in place on foreign institutions. There has been some liberalisation of the rules for foreign banks, which are now allowed to open 12 new branches a year, but there is a huge appetite among many international banks and particularly UK banks for a much greater allowance for branches in India. There is also countervailing pressure on UK banks that want to become established in India, not to open branches, but to form wholly owned subsidiaries, thereby receiving national treatment. They receive only partial national treatment, and that does not equate to the same treatment received by Indian banks that are trying to set up. I hope that the Indian Government will listen to the need for further liberalisation.

The same is true for both legal services and the accountancy profession. Broadly speaking, restrictions are such that internationally respected firms of lawyers and accountants are unable to practise on the Indian subcontinent.

[Priti Patel (Witham) (Con)]

India’s economic liberalisation has been taking place over the past 20 years, and things are moving fast. Does my hon. Friend agree that India must concentrate on sorting out business practices and ethics to ensure that all businesses in India and those in the UK that choose to go to India are not affected reputationally, as SIS has been?

[Stephen Hammond]

My hon. Friend is absolutely right. One of the greatest encouragements to international trade is certainty in the business environment, whether political, legal, accountancy or business ethics. She makes an outstanding point, which is absolutely correct.

I have touched on the financial services industry, and I hope that the Minister will outline what the Government are doing to ensure that pressure is maintained for further liberalisation of the area. There are other industries in which the relationship between the United Kingdom and India is growing and could be pivotal to us if we accept the opportunities. In the telecoms world, the UK has traditionally enjoyed, and still does, a competitive advantage over many countries in Europe and the world. It has been a leader in the development of mobile and tele-optic fibre technology and policy.

India suffers from a highly fragmented mobile technology market and might benefit if it were slightly less fragmented, but it is undeniably true that the market is dynamic. In one of the past six months, 18 million new mobile connections were made, and there is significant demand from the Government for the enhancement and expansion of broadband and some machine solutions to manage logistics. There is an opportunity for the UK telecoms industry, and it could become pivotal to our future.

The same is true of the higher education sector. One of the last high commissioners, His Excellency Nalin Surie, expressed disappointment that the UK had failed to grasp the opportunities that India thought that it was opening up to UK academic institutions and at its inability to open faculties in India. At last, over the past two or three years, there has been reversal of that. There are immense opportunities for new faculties and collaboration on high tech and pharmaceuticals, particularly in some areas of post-doctoral research. The UK higher education sector would do well to grab them.

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Member on bringing this debate to the Chamber. He referred to education and the adoption of cultural links. In my constituency, Orange district lodge No. 4 has been actively involved in raising money to build a school for orphan children and for their health. Comber rotary club has been raising money for polio vaccination. Business opportunities come through health links, church links and human rights links. Does the hon. Gentleman believe that such links are overlooked by the Government and should be encouraged?

[Stephen Hammond]

I agree entirely that there are huge opportunities outside the industries that I am talking about. Owing to pressure of time, I shall conclude my comments in the near future, but I am sure that colleagues will want to talk about opportunities and other industries. The hon. Gentleman is correct. I had the opportunity of seeing one of the major Indian health care providers and what it is offering to the UK. There is collaboration with UK pharmaceutical firms on drugs to the Indian generic market. There are huge opportunities.

The Indian economy will grow less slowly this year than in previous years, but at 9% it will still be one of the fastest growing economies in the world. That will inevitably bring pressure for further infrastructure development. The new five-year plan suggests that it wants $1 trillion added to its infrastructure budget for capacity in power, roads, rail, ports, aviation, housing, office and social infrastructure. The UK has not only civil engineering expertise and project management ability, but acknowledged skill in project finance. I hope that the UK infrastructure industry, in the widest sense, will embrace the opportunity of that size of development.

[Jeremy Lefroy (Stafford) (Con)]

Does my hon. Friend agree that one of the key drivers of bilateral trade is inward and outward investment? In my constituency, Perkins has just announced the building of a factory in India, and there is inward investment in the constituency of my neighbour, my hon. Friend the Member for South Staffordshire (Gavin Williamson), by Tata through Jaguar Land Rover.

[Stephen Hammond]

I thank my hon. Friend for his intervention. Indeed, I thank all the hon. Members who are intervening; they are helping me along with my speech. I was about to deal with inward investment. My hon. Friend is, of course, right. India may well be setting the pace at the forefront of the global economy. Indian companies’ entrepreneurship and management techniques are certainly influencing business practices across the world. However, let us be clear: the UK must not only welcome Indian investment into the UK, but be hungry for it and go out and seek it.

As my hon. Friend pointed out, there are huge advantages to investing in this country. They include the skilled work force and the certainty on law, politics and accountancy. Tata’s investment in steel production and car manufacturing is an example. Other Indian businesses have chosen to base themselves in London or elsewhere in the United Kingdom, partly because of the expertise and skills on offer. We must make certain that other Indian firms looking to invest know that Her Majesty’s Government stand ready to welcome Indian businesses. I hope that the Minister will echo the remarks of his colleague, Lord Green, who has said that

“those days of complacency on the British side are over.”

Britain is open for business.

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

I congratulate the hon. Member for Wimbledon (Stephen Hammond) on obtaining this important debate. This issue is close to the heart of many members of the all-party group on India, as well as hon. Members more generally. Does the hon. Gentleman recognise the value of the state-based schemes to promote UK-India trade? I have worked closely with, for example, the UK Kerala Business Forum and the UK Telugu Association, both of which are making great progress in building links for investment going in both directions.

[Stephen Hammond]

The hon. Gentleman is, of course, right. I am sure that the Minister will want to refer to his remarks. As I said, it is the job of government to encourage and to provide the environment in which business can thrive. It is for business to grasp that opportunity. Dr Singh visits this country later this year. I hope that the tone and the tenor of the debate will ring out today and send the message that Britain is open for business and particularly for Indian business.

[Several hon. Members]

rose—

[Mr Charles Walker (in the Chair)]

Colleagues, as you can see, time is getting away from us. The winding-up speeches start at 10.38 am. The Backbench Business Committee is under-utilised at the moment, so I am sure that it would like to receive a representation from hon. Members who are not called to speak today.

09:49

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

I congratulate the hon. Member for Wimbledon (Stephen Hammond) on securing the debate. It comes at a vital time in the trading relationship between these two countries, because the European Commission and the Government of India are aiming to conclude the free trade agreement during the EU-India summit on 8 February in Delhi. The next fortnight is therefore a critical opportunity—the last opportunity—for us to try to influence that agreement.

I urge the Minister to do all in his power to ensure that it is not just a free trade agreement, but a fair trade agreement. A number of significant and expert non-governmental organisations working in this field have raised serious concerns about the consequences for some of the poorest people in India of the free trade agreement as proposed by the EU at the moment, and are seeking amendments to the agreement in this last phase.

When I raised the question with Ministers at the Department for Business, Innovation and Skills, I was referred to the conclusions of the European Union’s sustainability impact assessment. The Minister pointed out that as a result of the FTA, there would be an overall reduction in both rural and urban poverty. The study does come to that general conclusion, but there are sections in the report, particularly relating to the rural poor of India, that give cause for concern. It demonstrates that there will be an increase in the wealth of the rural poor only if they are, for example, connected to the supply chains that will flow from the FTA and if they are in suitable locations, with adequate infrastructure. The problem is that most of the rural farmers do not operate with adequate infrastructure and are not organised in the way in which the FTA describes; nor is domestic policy likely to change that. Therefore, the impact assessment by the EU, as against one by our Government, is, in this and many other areas of the report, at best wishful thinking or at worst simply determined to prove the case for the FTA.

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

The hon. Gentleman touches on an important point. The UK farming industry and, in particular, small businesses that excel in the international market can assist in poor rural areas in India, especially in terms of delivering higher yields through best practice, and can assist in promoting trade between the UK and India.

[John McDonnell]

That is exactly right, and it is one of the issues that need to be dealt with in the final negotiations so that people are appropriately placed and organised to enable that to happen.

In contrast to the EU’s assessment of the FTA is the more realistic and deeply worrying alternative assessment of the potential impact of the FTA that was published only a few weeks ago, in December, by organisations working in this field: Misereor, the Heinrich Böll Foundation, Anthra, the Third World Network and Glopolis.

[Lorely Burt (Solihull) (LD)]

Like the hon. Gentleman, I am focused on the EU-India summit in February. Does he agree that that summit is not likely to achieve the free trade agreement that we all wish to see and that a major block relates to mode 4 services? I am referring to the negotiation of a temporary transfer of personnel from a partner country to provide a service to a corporation. If the UK Government can move on mode 4, we may well be able to move things along much better.

[John McDonnell]

There are real opportunities for the UK Government, with their vast experience of trading relations with India, to influence the FTA in a more realistic way, which will achieve all our objectives.

There was a previous assessment in 2008 by the organisation Traidcraft, with which many hon. Members have worked. It concluded that there were real concerns. It stated that

“the proposed…FTA…risks stripping away the very tools that India could use to re-balance the gains from growth and to ensure that the poor are not further marginalised.”

That reflected not just statements from NGOs, but a statement from the UN itself.

The joint report, published in December, focused on undertaking a right-to-food impact assessment—the impact on people’s ability simply to feed themselves. The results are worrying and warrant serious consideration by the Government in relation to the final drafting session for the FTA.

The FTA is designed to liberalise substantially all areas of trade. It contains sections on services, investment, public procurement, intellectual property rights and many other areas. It will oblige India to eliminate 90% of its tariffs applied to the EU within about seven years. The assessment by the NGOs focused on a limited number of farming or agricultural issues. I will give just some examples. Some 14 million Indian farmers are currently involved in dairy production. Most of them are small-scale, marginal or landless farmers. Their market access, incomes and right to food would be threatened if tariffs for EU skimmed milk power were cut from 60% to zero as planned.

[Tony Baldry (Banbury) (Con)]

India’s economy is growing at 7% a year. Does not the state of India have some responsibility itself to ensure that the benefits of that growth in its economy are more evenly shared among the people of India?

[John McDonnell]

Of course. In the negotiations to which I am referring, it is important that the UK Government in particular, with their influence in Europe, enable the transitional period of the next seven years to be used effectively, so that it does not impoverish people but ensures the growth and wealth of both countries.

I am giving just three examples; I am worried about a shortage of time. The dairy industry will be faced with agriculture in the EU continuing to be heavily subsidised. Reform of the common agricultural policy has not happened, so EU farmers will be relying on export refunds. The dairy quota has been abolished. They will increase their production and therefore put at risk many poor Indian farmers.

The risk is the same in relation to poultry keeping. About 50% of India’s landless and marginal farmers use poultry keeping to supplement their livelihoods. Again, they will be at risk as a result of the reduction from 100% to zero in the current tariffs that is taking place.

About 37 million people in India work in the retail sector. There are 10 million street vendors. It is envisaged that if multi-brand retail is opened up to EU retailers, such as Carrefour, Metro and Tesco, that will bring 1.8 million jobs, but possibly at the cost of 5.7 million people working in that sector.

There are concerns about land distribution, which is highly unequal in India, where 83.29% of farmers have an average land holding of less than 2 hectares and own only 41.42% of agricultural land. There are real concerns that the FTA’s protection for increased inward investment will hold up land reforms.

There are real concerns about third-country impacts. In the case of Bangladesh, the EU’s own assessment says that there could be a 0.5% loss of exports, which does not sound significant, but as the Bangladeshi garment workers union has pointed out, that could cost 150,000 women their livelihoods.

Given the FTA’s implications for India’s poor—I remind Members that the latest estimate is that 224 million people, or 26.9% of the population, live with chronic hunger—and given our concern about the significant weaknesses in the EU’s initial impact assessment, it falls to this Parliament and this Government to ensure that the FTA secures fair trade.

I congratulate the Government on having been courageous in maintaining their support for aid to India, but that support could be wiped out as a result of the FTA’s unfairness. May I therefore briefly suggest a number of things that could be inserted into the treaty to assist in protecting India’s rural poor?

First, before the FTA is signed, it should be agreed that the EU and the Indian Government conduct a comprehensive human rights impact assessment, and that should include the principles in the UN rapporteur’s right to food. That is in line with a 2008 resolution in the European Parliament, which agreed that such impact assessments should take place before trade agreements are signed.

Secondly, before the agreement is concluded, there should be meaningful consultation with all stakeholders, and particularly the vulnerable, with full openness and transparency. Thirdly, the tariff lines for poultry and dairy products should be exempted in the agreement at this stage. There should also be a mechanism in the treaty for identifying any other products that may need protection, particularly during the transitional period.

In addition, there should be a special safeguard mechanism to enable India to react to sudden import surges. There should also be no provisions in the treaty limiting the right to secure the redistribution of land. Finally, there should be a monitoring mechanism in the treaty to ensure the continuous assessment of the FTA’s human rights impact as a result of the trade in goods.

Those provisions are critical. We have a detailed knowledge of what has happened when FTAs have been concluded elsewhere in the world and not been properly scrutinised. They have not only failed to tackle poverty, but undermined the ability of individual Governments to reduce it. Armin Paasch’s report for Ecofair Trade Dialogue has evidenced and exposed the fundamental shortcomings of many EU FTA treaties.

It is not often that I pray in aid Peter Mandelson, but he argued in yesterday’s Financial Times that, before such a treaty is put in place, we have a responsibility to ensure that the domestic capabilities exist to enable it to be used to the best advantage of both the trading partners signing it. That has not happened in this case.

We have a few weeks to resolve this matter. If we do not act at this critical stage, the traditional Indian and UK relationship of good trade, which those of us who have spoken in the debate are urging should continue, could be undermined.

[Several hon. Members]

rose—

[Mr Charles Walker (in the Chair)]

Order. I remind colleagues that the winding-up speeches start in 34 minutes.

10:04

[Tony Baldry (Banbury) (Con)]

I shall make three brief points. First, following on from the comments of the hon. Member for Hayes and Harlington (John McDonnell), there is no stronger advocate in the House than I of the need for the UK to have a strong international development programme. As a former Chair of the Select Committee on International Development, I think we all owe a duty of care to the very poorest in the world. However, India, which has a nuclear programme and a space programme, and which spends a considerable amount of its GDP on defence, also has a duty of care and a duty to ensure that the growth of its economy is more fairly shared among its people. We should be careful that we do not find ourselves in a position where the west and Europe are somehow expected to look after India’s poor, while India’s middle and upper classes continue to get wealthier and, on occasions, disregard the poorest in their community.

My second point is this. When I was fortunate enough to be a Minister in John Major’s Government, we set up the Indo-British partnership initiative, so there has been no shortage of UK Governments seeking to engage with India and increase trade with it. However, as my hon. Friend the Member for Wimbledon (Stephen Hammond), who introduced the debate, accurately described, we have been falling down the league table very fast. Twenty years ago, we were very high in the league table, but we are now in something like 15th position. Some of the countries that have overtaken us, such as Nigeria, may well have done so because they are selling a lot of oil to India, but some work needs to be done by the Foreign Office, BIS and UK Trade & Investment to analyse why we are falling down the league table. What are other countries doing that is moving them further up it? In part, as my hon. Friend said, it is because the Indian Government still restrict activities in areas of the economy where Britain is strong, such as banking, insurance and legal services. However, that does not, of itself, necessarily explain why we are falling down the league table. We therefore need a solid piece of work and analysis in Whitehall by the Foreign Office, BIS and UKTI as to why that is happening.

My third and final point is this. Yesterday in the House, the Foreign Secretary announced a further round of sanctions on Iran. Two days ago, the Indian Oil Minister announced that India would seek to purchase considerably more oil from Iran, given the lowering of the price of Iranian oil. India has aspirations to join the Security Council, but it cannot show two faces: it cannot show one face to Europe, as a partner to Europe and the international community, and seek to be a member of the Security Council, but then show a different face to some of its neighbours in Asia. If international sanctions against Iran are to be effective, every responsible nation must enforce them, and that includes India and China. They cannot take advantage of the fact that the European Union and many other countries are imposing oil sanctions on Iran to seek to purchase cheaper oil from Iran for gold, which would have various other consequences. India must be a full player in the international community if it is to be taken seriously.

[Mr Charles Walker (in the Chair)]

Thank you, Mr Baldry, for your brevity.

10:08

[Barry Gardiner (Brent North) (Lab)]

I am delighted to serve under your chairmanship, Mr Walker. In accordance with your guidance, I will try to speak exceedingly quickly. I am delighted to speak in the debate, and I pay tribute to the hon. Member for Wimbledon (Stephen Hammond) for initiating it. He has made many valuable points.

For the past 15 years, I have counted myself, and been counted, as a friend of India. In 1999, I founded Labour Friends of India, which I now once again chair. I set up and currently chair the all-party group on UK-India trade and investment. I declare those matters as interests. I have argued the case for, and often defended, India in Parliament. However, true friends do not just tell us what we want to hear, and today I want to be a true friend of India—yes, praising her development and economic progress, but also highly critical of her failure to achieve her full potential for economic growth.

There is no doubt that India’s growth is impressive. Like all the BRIC nations, she has consistently outgrown long-term predictions, with average growth of 7.45% between 2000 and 2011. India emerged practically unscathed from the international financial crash, with GDP dropping only as low as 5.8%—a figure unimaginable to us in the UK during peak periods.

The advancement in infrastructure has been clear to see for those who are frequent visitors, and the UN recently reported that India is on target to reduce her poverty rate from 51% in 1990 to 22% by 2015. The suggestion of the hon. Member for Banbury (Tony Baldry) that the Indian Government are not doing enough to tackle the country’s domestic poverty is frankly outrageous. However, of all the BRIC nations, India is the furthest removed from its potential, and the causes of that disparity show no sign of changing soon.

India’s failure to reform its markets, deal with the problem of corruption and establish a market conducive to foreign investment means that it has consistently failed to realise its potential for growth. If those structural problems continue to plague India in the years ahead, it will struggle to maintain the current rate of poverty reduction and development, and will stand no chance of building the infrastructure that it will require, just a quarter of a century from now, to deal with what will then be an ageing population.

On regulatory reform, India has consistently dangled the carrot of liberalisation in front of investors, only to renege on its promises and refuse to change. Making promises of reform that remain unfulfilled is more damaging than refusing to reform in the first place. Just last week, the central Government caved in to public pressure and paused the long-awaited retail sector reforms.

A recently released study estimated that those reforms would have opened the door to more than $1 billion of foreign direct investment in the food retail sector and increased the size of the organised retail market to $260 billion by 2020. That would have resulted in an aggregate increase in income of $35 billion to $45 billion a year for all producers combined, 3 million to 4 million new jobs directly, and 4 million to 6 million new indirect jobs. The Government also stood to gain by the move and would have expected to receive an additional income of $25 billion to $30 billion, by way of increased tax collection and reduction of tax slippages. That investment is not only on hold, but at permanent risk, as investors begin to question whether India will ever follow through its pledges on liberalisation.

Retail is just one sector where foreign investors are begging for the reforms that will allow them to start pouring capital into the country. Last week I met representatives from the UK’s banking, accounting, insurance and legal sectors. They told me that they had been poised to invest heavily in India for decades, but their patience, too, is wearing thin. In the retail banking sector, the largest foreign bank in India is limited to fewer than 100 branches, in a country with a population of more than 1 billion. It considers itself fortunate; the strict licensing laws have until now limited almost all other foreign banks to one branch in Mumbai.

With liberalisation, the banking sector would pour tens of billions of dollars into India. In the legal sector, the limitations are even stronger. No foreign lawyer is allowed to practise in India. The Indian market is dominated by small-scale practices rife with corruption and inefficiency. Liberalising the legal sector would improve productivity, pull billions of dollars of foreign investment into the country and go a long way towards eliminating the graft that stagnates that legal system.

Perhaps the best example of India’s hesitance on market reforms, however, is the EU-India free trade agreement—the longest awaited free trade agreement in European history. Time and again, negotiators have made compromises and offers, only for the goalposts to be moved. Despite compromises on medical patents, immigration and other areas, the Indian Government seem as far away as ever from signing.

India now insists that reforms in such areas as financial services and retail are for bilateral agreements, not EU-wide treaties. Those involved in the negotiations from an EU perspective have begun publicly doubting whether India wants to sign the treaty at all. The FTA exemplifies the failure of Indian leaders to grab the bull of reform by the horns, and drag India into the modern global economy.

It is not just market reform and liberalisation that hold India back. On a range of issues including the use of technology, agricultural productivity, education and the problem of corruption, India needs to do more. We know that India can transform sectors when it decides to. The infrastructure strategy for the current five-year plan is astonishing. The Government have predicted that $1 trillion will be spent on infrastructure over the next five years. That means billions of dollars of foreign investment that will revolutionise the infrastructure of the country and prepare it for its future needs in transport, energy and housing. It is just a shame that that bold vision is not repeated in other areas of the economy.

On corruption, Congress has repeatedly refused to take the steps that would not only mark the beginning of the end for corruption in India, but would reassure Indians, as well as foreign investors, that the Government are serious about tackling the problem. Anna Hazare and his supporters have been attacked. They have been deliberately frustrated and undermined by politicians from all parties.

[Priti Patel]

Will the hon. Gentleman give way?

[Barry Gardiner]

Other colleagues want to get in, so I will not take interventions.

The most recent version of the Lokpal Bill has question marks over it with respect to the independence of the body it would create and why senior politicians and judiciary should be excluded from its reach. A stronger Bill, which satisfied all the concerns, would have sent the message across the world that India will no longer tolerate corruption and graft.

I reiterate that I outline these criticisms out of concern for India, and in the hope that its Government will indeed make the necessary reforms to enable the country to bloom in the coming decades. But India is by no means alone in its failure to change.

Here in the UK, we have fundamentally failed to realign our trade and investment towards the economies that will offer the best prospects for growth and returns in the future. I praise the focus that the current Government have placed on trade with India, including the Prime Minister’s first overseas visit, but we need to do much more.

Between 2000 and 2010, the UK’s imports from India rose by 250%, while UK goods and services exported to India rose by 140%. Over the period, India has become a relatively more important trading partner for the UK. UK imports from India in 2010 accounted for 0.9% more than in 2000 and exports of goods and services to India accounted for 0.4 of a percentage point more than in 2000. That is to be expected. As India has grown in importance on the world stage, so it has grown in importance to the UK’s overall trade.

However, it is not against the percentage of overall UK trade that we should judge whether trade with India has grown enough, but against the percentage of overall Indian trade. That is the only way to see whether British companies are making the most of the opportunities available in India, and whether the Government are doing enough to prepare businesses and the general population for the shift in the balance of economic world power that will move eastwards in the rest of the century.

Despite growing at such a high rate, between 2000 and 2010 the UK fell from fourth to seventh in the list of India’s largest export markets, and was overtaken by Singapore and the Netherlands. Similarly, in terms of import partners, the UK fell from third in 2000 to 22nd in 2010. Most recently, we were overtaken by the Republic of Korea. The UK now provides only 1% of all imports into India. That shows that Britain is falling behind in the world race to provide India’s population with the goods and services they want. In our current economic situation, with the lowered demand of our domestic and European markets, we cannot afford that to continue. Our companies must begin to look to India far more as a source of growth and as an essential market for their future survival. The trade delegations and CEO forums will undoubtedly help to close the gap, but the Government need to be much more active in promoting India to British businessmen and entrepreneurs.

There are good programmes, which must be increased in size. The UK-India education and research initiative is a scheme designed to increase links between educational institutions in our two countries. Education is one sector in which India needs huge growth in the coming years, and it also happens to be one in which the UK is a world leader. The scheme establishes relationships between universities, but so far has involved supporting the development of only two new universities in India, and supporting a small number of exchange students.

If we are serious about targeting India as a major source of our future growth, we need to support tens of thousands of Britons to study in India and build the personal and cultural connections that will help them successfully navigate the Indian market in the future. We need to work with all UK educational providers to offer them active assistance in penetrating the Indian market.

My view of the relations between the UK and India is a real masala. I am profoundly hopeful, but also seriously worried. I am hopeful that India will make the changes needed to maximise its growth, eradicate poverty and prepare for the future, but I am worried that the required leadership may come too late. I am hopeful that British companies can take their proper place in the Indian market and help to provide our economy with growth for the future, but worried that UK businesses and entrepreneurs have become too hesitant to grasp the opportunities.

Finally, I note that the high commission does not have a presence here today. That is extraordinary for a debate of this nature on India. I have never known that to happen before, and it shows not only a lack of rudder at the high commission but a downgrading in the mind of the Indian Government of the importance of what we say in this Chamber, and of the UK in India’s relationships.

10:19

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

It is a pleasure to be here under your chairmanship, Mr Walker, and in a debate initiated by one of my close friends in Parliament, my hon. Friend the Member for Wimbledon (Stephen Hammond). I will speak, if I may, very briefly.

I have made two visits to India—in 2003 and in 2006. Between those years, there was a change in Government. What struck me was the confidence of the business and political classes in New Delhi and Bombay. I suspect that, six years on, there will be an even greater sense of a country that is forward looking and confident of the future, notwithstanding all of the issues that have been raised by hon. Members in this debate.

Above all, it is important that we do not see India as just another Asian nation. Both UKTI and the Foreign Office have tended to regard Asia as just one area, which is what we tend to do with eastern Europe as well; we see it as an homogenous area rather than recognising its great historical importance.

One of the issues that I hear time and again, particularly where our companies are competing against German companies, is that the German embassies based in India, China or South Korea recognise that their role is not to be some sort of propagandist for their country but to drill down and work out who is really important in the local community. Therefore, it is important to have attached to the embassies people who are there for many years, developing long-term relationships.

[Keith Vaz (Leicester East) (Lab)]

Will the hon. Gentleman give way?

[Mark Field]

If the right hon. Gentleman does not mind, I will not give way, because other Members wish to speak.

There is a lot of doom and gloom at the moment. We have seen today that our economy has contracted by 0.2% in the past three months, which I suspect may be the precursor to a fully fledged recession in this country in the next few months. Clearly, there are major problems in the eurozone market, which are not going to go away any time soon. In fact, I fear that they will be there for a long time to come, because there is not the political will to drive forward. As a result, it is perhaps easy to be gloomy about the economic situation. One of the interesting things about the IMF report yesterday was that it was presented as being very negative, but even the most pessimistic scenario suggested that there would be global growth of 3.3% next year. Indeed, some 4% was suggested during 2011.

In a conversation with one of the two Chinese law firms that have opened in London in the past couple of years I mentioned the global economic recession. A partner, who was a Chinese native with perfect English, smiled and said, “Back home, we call it the north Atlantic crisis”. There is a very important lesson for us to learn. Amid all that doom and gloom, let us get out there and recognise that we have great strengths.

In relation to India, some of the important issues have already been mentioned. We clearly have some good connections on the manufacturing side, especially in the technology and bio-technology sphere. There is much that India can teach us. Nehru has that legacy of those five great technology universities that remain a great success.

The Minister has done a phenomenal amount of work in this area in often difficult circumstances. Privately, he knows that I do not entirely support our immigration policy and I suspect that, behind closed doors, he has some sympathy with my views. We need to be a beacon for the brightest and the best. We must encourage young Indian, South Korean and Chinese people to come to this country. If they spend two or three years as students here, they will be ambassadors for this country for the rest of their lives. I am afraid that our policy on the headline figures is wrong. [Interruption.] I do not wish totally to eliminate the Minister’s career, and I am sure that he has a few words to say.

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

I completely support the policies of the Government of which I am a Member. There is no numerical limit on the number of overseas students coming to study in Britain, provided that they have the proper qualifications and they are going to attend a legitimate higher education institution.

[Mark Field]

I do understand that. Will the Minister also recognise, though, that the message is that this country is not entirely open to those brightest and best people? We must have a message that we are open not only for business but for the brightest and best to come to this country.

[Paul Uppal (Wolverhampton South West) (Con)]

rose—

[Mark Field]

If my hon. Friend will excuse me, I will not give way because others really do wish to speak.

As a London Member of Parliament, I believe that if we are to exploit these connections with India, we urgently need to invest in our infrastructure—what I am about to say now will give the hon. Member for Hayes and Harlington (John McDonnell) some satisfaction—which means a 21st-century airport. Even before Boris Johnson talked about an estuary airport on Boris’s island, I was a great believer in an entirely new airport. Patching and mending either Heathrow or Gatwick is not the right solution. A new airport will be one of the most positive messages that we can put across. We want to attract the brightest and best, particularly out of Asia. An estuary airport will provide the dozens of flights that we need each and every night to come through from those countries to land in London without disturbing the constituents of the hon. Gentleman or of many other London MPs. Thank you, Mr Walker, for allowing me to make a brief contribution.

10:25

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

I congratulate my hon. Friend the Member for Wimbledon (Stephen Hammond) on securing this important debate and on having led, in September, a parliamentary delegation to India, in which I was fortunate enough to participate. Coincidentally, our delegation went to India at exactly the same time as a delegation of members of the Solent India Business Network. India is a large country and we did not manage to meet up.

I want to draw attention to the work done since 2009 to foster business links and trade relations between small and medium-sized enterprises in the Solent region, which the Minister will be particularly pleased about and proud of, and British business groups in India.

The delegation attended a conference in Pune and a historic memorandum of understanding was signed between the British business network in the UK and the British business group in that part of India. The co-chairmen of the network are a local solicitor, Amarjit Singh, and the deputy vice-chancellor of Southampton university.

[Paul Uppal]

In reference to the discussion that we had about attracting the brightest and the best, Leeds university is taking a lead on this with a campus in Bhopal. That is one way to get service providers and students working together around the immigration problem.

[Caroline Nokes]

I thank my hon. Friend for those comments. Pune university has a staggering 650,000 undergraduates, which is an enormous number compared with Southampton university. However, that does not prevent the two institutions from working together to share business visions and fresh perspectives. My hon. Friend the Member for Cities of London and Westminster (Mark Field) mentioned that young people are the future, and that is exactly the sort of initiative and message that is being promoted in the Solent region.

I am conscious that my comments about Anglo-Indian trade relations will be exclusively positive because that is the experience of the members in my constituency.

[Priti Patel]

I am delighted to hear that the experience of my hon. Friend’s constituents has been positive, because, as we have heard during this debate, things have not always been perfect. Does she hold the view that when Dr Singh comes to visit this country later this year, it is incumbent on our Government to raise some of the barriers to doing business, particularly relating to corruption and the other issues that have been raised here today?

[Caroline Nokes]

My hon. Friend makes an important point. We cannot focus just on the positives, although they are there and they are important. We must ensure that some of these issues are resolved, preferably before the Prime Minister’s visit in the summer.

I hope that the initiative that we have seen in the Solent region is not the first, and that it is something that can be spread across the whole of the UK. I know that UKTI has been very positive in supporting that view and is looking forward to welcoming the delegation from Pune when it comes to Southampton later this year. In short, I regard our relations as wholly positive. I have kept my comments deliberately brief so that other Members can contribute. I hope that the links that we have established in the Solent region will go from strength to strength.

10:28

[Lorely Burt (Solihull) (LD)]

My hon. Friend the Member for Cities of London and Westminster (Mark Field) should have no fear about the need to build a Boris island, because we are having our runway extended in Birmingham, in the west midlands, where a great number of members of the Indian subcontinent reside and we will be able to take another 18 million passengers.

The biggest employer in my constituency and a key player in the west midlands in terms of jobs and growth is Jaguar Land Rover. We have heard about corruption, but that company is exemplary. It is a far-sighted company that looks towards the medium and the long term and cares for its employees.

I want to speak briefly about the EU-India free trade agreement. We have already heard about the summit that is due to take place on 10 February. However, despite hopes that negotiations about the agreement will reach a conclusion, it has become clear that the best expected result is a limited agreement on trade in goods. Crucial negotiations on services, investment, public procurement and intellectual property rights will continue. The failure to reach agreement on those areas is a shame, because there are huge benefits for the EU generally in reaching agreement with India. India is a market of more than 1.2 billion people, with a burgeoning middle class and an economy that, according to some statistics, is now growing faster than that of China.

For the UK, trade with India is hugely important. In 2009, it was worth £11.2 billion. Moreover, the UK seems a natural partner for collaboration with India, particularly on education, which has already been mentioned, as well as on low-carbon and energy efficiency development, science and research, and advanced manufacturing, including in the aerospace and defence sectors.

Among the most serious obstacles in the negotiations about the EU-India free trade agreement are the unwillingness of India, first, to include the automotive sector in the agreement and, secondly, to reduce the tariff on car imports, which is currently 100%. India is also unwilling to include wines and spirits in the agreement. For example, our wonderful Scotch whisky receives a tariff of 150% in India. And another obstacle is the reluctance of India to include a sustainable development chapter in the agreement.

I am sorry to say that the EU is also putting in place obstacles to the agreement. They include an obstacle related to mode 4 services, which is a controversial “defensive” interest for the EU. “Mode 4 services” refers to where the EU negotiates the temporary transfer of personnel from a partner country to provide a service within a corporation for a limited period of time. The EU normally only negotiates trade commitments for professionals if they have at least a university degree-level of education. It is a great shame that we cannot allow other people to come into the EU for a limited period when they have skills to bring, including training skills, and when they have a contribution to make to the economy of the EU, including the British economy.

[Keith Vaz]

The hon. Lady makes a very powerful case for relations with India. I want to make one point. When our Prime Minister and our other leaders go to India for summits, far too often they take “the great and the good” with them. Is it not important that they should also try to take representatives of some smaller businesses, which are the driving force of growth in trade between our two countries? And those representatives of smaller businesses should of course come from Birmingham too.

[Lorely Burt]

The right hon. Gentleman makes an even more persuasive case by referring to Birmingham. He is absolutely right that small businesses are the generator that is dragging us out of this recession, and the ability of small businesses to access Indian markets is vital. He could not have made a more appropriate point.

Can the Minister say whether the Government will reconsider their position on mode 4 services and come back with an improved offer as a means of unlocking the EU-India free trade agreement, hopefully by the end of this year?

[Mr Charles Walker (in the Chair)]

Wind-ups will start at 10.38 am.

10:33

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

Thank you very much, Mr Walker, for allowing me to catch your eye and speak in this debate. I will follow the lead of my hon. Friend the Member for Banbury (Tony Baldry) and make a few points briefly. I hope that someone else might be able to speak before the wind-ups begin.

The first thing to note is that I think that this is one of the first parliamentary debates that we have had on trade in the past five years, and the popularity of this debate shows the importance of trade. As Britain learned in the 17th and 18th centuries, trade is not a zero-sum game. The more that nations trade, the more that they create prosperity and jobs, so trade is hugely important.

The problem for us is that 65% of our trade is with countries in north America and Europe, but between now and 2020, the gross domestic product of those countries as a proportion of world GDP will decline by 40%. By contrast, between now and 2030, GDP in the BRIC countries—Brazil, Russia, India and China—as a proportion of world GDP will increase by 40%. Basically, we are not trading with the right people; we need to increase our trade with the BRIC countries, whose economies are growing.

I entirely agree with my hon. Friend the Member for Banbury that both UK Trade & Investment and the Department for Business, Innovation and Skills need to do a proper job of work to determine why the UK’s trade deficit with India has increased hugely during the past 10 years, as demonstrated by the statistics that the hon. Member for Brent North (Barry Gardiner) has just cited. UKTI needs to benchmark itself against rival successful operations around the world, such as the trade organisations in Germany and Hong Kong, to find out what it could do better to encourage more trade with India and other countries.

Trade is a two-way thing; it is not only about exporting but about foreign direct investment. One or two Members, including my hon. Friend the Member for Stafford (Jeremy Lefroy), have mentioned FDI already. FDI is incredibly important to this country. Why did Li Ka-shing, the Hong Kong property tycoon, invest in Felixstowe, our biggest port, and transform our port industry? Why did the Japanese invest in our car makers, effectively bailing them out, in the 1960s and 1970s? FDI—inward investment—is incredibly important for jobs. Not only do we need to encourage more FDI, but we need to encourage those foreign companies that have already invested here to invest more here than they have already.

I want to mention education. My right hon. Friend the Minister will be interested to know that 38,500 Indian students came here to study last year, but guess what the number was for China: 110,000. In India, 600 million people are under the age of 30—a demographic that will propel India into the world lead for centuries to come. Consequently, we should pay much more attention to educational links with India. I went to the university of Madras, which is one of the “Nehru five” universities. It is emerging on the world stage in terms of its research, including the number of patents that it files. Indian higher education is becoming a really important factor in the world.

I also want to pick up on the point made by my hon. Friend the Member for Cities of London and Westminster (Mark Field) that unless we maintain internationally competitive infrastructure, we will not remain internationally competitive in trade. I am afraid to say that the Government need to rethink High Speed 2. There is nothing wrong with HS2, but there is nothing right with it either. There are much better solutions to the transport problem. We need to think of a holistic approach, which incorporates connectivity right around the country and getting freight on to the railways, which in turn incorporates getting people out of their cars. Having internationally competitive infrastructure is really important.

We also need to think about trade barriers, both here and in India. When I was in India in 2008, there was no doubt that there were still considerable trade barriers in India for our legal services, accountancy services, insurance and banking. Everyone is quite right that, when Manmohan Singh comes to this country later this year, we need to erase those trade restrictions with his country.

Equally, we must retain our own trading competitiveness. There is no doubt that our immigration structures are problematic. I am not advocating to my right hon. Friend the Minister that we should join the Schengen agreement, but we must recognise it as a fact that is limiting our trade. Why did Huawei, which is now the second largest manufacturing company in the world, move its European headquarters from the UK to Dusseldorf? It was because of the Schengen arrangements. We must recognise the fact that we have a problem with our visa system.

Finally, I just want to say again that trade is vital to our country. If we are going to get out of the economic problems that we are in, we must reorient our trade with the rest of the world. Trade is good for our country, and for our companies as well. Between 1996 and 2004, companies that traded increased their productivity by 34% and the average figures for those companies that did not trade showed that their productivity decreased by 7%. There is an overwhelming and compelling case for trade. We need to have more of these debates, and this is an advanced bid for the Backbench Business Committee to consider having more debates on trade.

10:38

[Mr Iain Wright (Hartlepool) (Lab)]

It is always a pleasure to serve under your chairmanship, Mr Walker, as I did in the Education Bill Committee. My mother sends her regards. [Interruption.] That was a private joke; hon. Members would need to have been in the Education Bill Committee to understand it.

I congratulate the hon. Member for Wimbledon (Stephen Hammond) on securing this debate, which has been excellent. The contributions to it from right hon. and hon. Members have shown how important the economic, social and cultural links between the UK and India are. At the heart of our countries’ relationship is our close historic links. However, we should not look at the relationship too sentimentally. Instead, as we have done in this debate, we should assess how increasing trade with India could significantly boost income and prosperity for both countries.

Right hon. and hon. Members have mentioned the links between India and their own constituencies. For example, the hon. Member for Solihull (Lorely Burt) mentioned Jaguar Land Rover, and I will be pleased to meet representatives from the company later today. The hon. Member for Romsey and Southampton North (Caroline Nokes) mentioned the Solent India Business Network. In my constituency, we have Tata Steel, and that combination of Indian investment and Hartlepool skills provides steel pipes that are exported all over the world, are laid across the globe’s oceans and provide prosperity. The North East of England Process Industry Cluster has very strong links with the Indian chemical sector, and delegations have visited the north-east and India in recent years. A focus of this debate has been India’s huge potential, and as the global economy moves eastward, the potential for closer trading links with India should not be underestimated or overlooked.

India has emerged very resiliently from the global recession, with economic growth averaging at about 7.2% for 2000 to 2008, slowing only marginally since the world financial crash, to about 6%. The medium and long-term forecast is 8% to 10% per annum. As a result of a growing middle class in emerging markets, it is estimated that international trade and investment will expand faster than general gross domestic product, and that is particularly true of India where robust domestic demand, a high savings rate and a young population all play into the forecast that expenditure will rise fourfold in the next 20 years. We need to be at the heart of that. My hon. Friend the Member for Brent North (Barry Gardiner) said that although trade with India has become relatively more important to us in the UK, it is becoming less important to India. That point needs to be addressed, and I hope that the Minister will give a response.

The fact that India is a parliamentary democracy, with a mature civil service and an independent judicial system, should serve to reassure investors and exporters. One theme of today’s debate has been concern about corruption in India, which will compromise potential business investment, and I want to mention last week’s ruling by the Indian Supreme Court that Vodafone does not have to pay the tax bill on its acquisition of Hutchison Essar in 2007. My sense is that that demonstrates that the judicial system is independent of the Government, and that should help to provide a huge boost to foreign investors in India. It would be useful to get the Minister’s opinion on that matter.

The hon. Member for Wimbledon was particularly strong in saying that we should work to our competitive advantage. We are very good at exporting to India the likes of business and financial services, but we need to do a lot more because we are underutilising our potential. He was right in saying that we are very behind the curve when it comes to things such as construction services and exploiting the huge investment in infrastructure, in the road and rail networks that India will be providing. We need to do a lot more, and I hope that in his winding-up speech the Minister will say how we will broaden the range of export activities that we can provide to India, not just business and financial services but in the fields of construction, chemicals, science and infrastructure.

[Mark Field]

Another very important area, particularly given the common language—the official language in India is English—is intellectual property. Given the passion for sport, there is an opportunity to export premier league rights and other things. We are increasingly able to export a huge amount of animation and other UK products, not just to India, but to other parts of Asia.

[Mr Wright]

The hon. Gentleman is absolutely right about intellectual property, and I hope to come in a moment to the matter of legal services.

It has been almost a year since the Government’s trade White Paper was published, and the Opposition agree with its broad direction and rhetoric, particularly its focus on emerging markets. I suggest that that journey started under the previous Government and that the present Government are continuing it. In the White Paper, the Government stated that the conclusion of an EU-India free trade agreement was a top priority—a focus of today’s debate—and it was estimated that it would produce an additional €4 billion in trade by 2020. We agree that the successful negotiation of a trade agreement is important, but that negotiation has stalled. The White Paper stated that a conclusion was expected by the end of 2011, and I recall that when the Secretary of State for Business, Innovation and Skills made a statement to the House on the White Paper, he specifically mentioned the agreement and said that progress was being made—a fact mentioned by my hon. Friends the Members for Hayes and Harlington (John McDonnell) and for Brent North. Will the Minister update the House on when the free trade agreement negotiations will be concluded? Will they be concluded by 8 or 10 February? What will we see in the agreement? Will it be watered down to the point at which it is meaningless?

The White Paper also states that the Government will work towards a doubling of trade with India by 2015. This is a fairly dramatic objective, although laudable in its ambition, and I wonder precisely how the Government will help businesses to achieve it. That will be difficult, given that the most recent trade figures show a growing decline in exports to non-EU countries, including India. Moreover, the CBI monthly trends survey for December reports that export order positions remain well below long-run averages for the second month running. Companies are stating that present export orders above normal are plus 12, but those reporting below normal are minus 44. Given those concerning figures, will the Minister outline how the doubling of trade, which, as I said, is laudable, will be achieved?

Part of the solution is to encourage and incentivise as many British firms as possible to consider exporting their goods and services to India, but in doing that businesses face several problems, which have been highlighted today. The British Chambers of Commerce’s international trade survey found recently that 70% of small and medium-sized enterprises are not current exporters and are not likely to be in the next few years. I agree with the hon. Member for The Cotswolds (Geoffrey Clifton-Brown) that we need to encourage and incentivise trade outside the EU to boost prosperity in our country. What will the Government do to help achieve that? What will the Minister do to address that issue, specifically with regard to India?

A potential barrier is the lack of appropriate finance for exports. The export enterprise finance guarantee scheme has been up and running for about a year now, so will the Minister update the House on how many businesses it has helped, and in particular how many businesses have benefited from the scheme in exporting to India, and the value of the goods in respect of our economy?

I want to talk about regulatory barriers to trade between us and India, particularly in relation to high-value professional services, such as banking, legal services and accountancy. As has been mentioned, we still await the liberalisation for foreign banks and the opening up of competition to foreign players. That could significantly increase British exports in this field, particularly in parts of India with no banking provision. What work are the Government doing, alongside the World Trade Organisation, to ensure that India’s banking system is opened up to competition? There is a similar position regarding legal services. It remains illegal for foreign lawyers to practice law in India, and it is proposed to address that issue in the EU-India free trade agreement, but will the Minister say something about the work being done to come to some agreement on the provision of legal services?

In my profession of accountancy and auditing, there remains a restriction on the ability of global accountancy and consultancy firms, many of which are based in Britain, to use their brand names for auditing and accountancy purposes. The Institute of Chartered Accountants of India has negotiated a memorandum of understanding with the Institute of Chartered Accountants in England and Wales, of which I am a member, which allows members of one body to join the other in certain circumstances. That should boost trade between the two countries. It should provide regulatory and auditing rigour, which should improve corporate governance and reporting, and therefore reassure investors, which in turn would help the Indian market to grow. Given our expertise in knowledge-intensive industries, we have huge potential here, but it would be useful to hear more from the Minister about how he intends to facilitate such growth.

The hon. Member for Cities of London and Westminster (Mark Field) said that we should be a beacon for the brightest and the best, and that brings me on to student visas. I am very pleased that my right hon. Friend the Member for Leicester East (Keith Vaz), the Chairman of the Home Affairs Committee, is here. We have a huge reputation in higher education, but there is a perception that student visas are somehow a barrier and that we are somehow closed for business. Will the Minister outline the discussions that he has had with his counterparts in the Home Office about how that will be addressed?

Close historic and social links have the potential to grow into equally close and mutually beneficial investment, commercial and trading opportunities. We welcome the scope for more Indian direct investment into the UK, while wishing to see our exports grow to ensure that India becomes a more significant partner. Given the strength of feeling and the backing of Members in this debate, I hope that the Minister will be able to outline how UK-India trade will grow still further.

10:49

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

This has been an excellent debate. I congratulate my hon. Friend the Member for Wimbledon (Stephen Hammond) on calling for it and on opening it so effectively.

The Government absolutely recognise that trade between Britain and India is vital as we seek to rebuild and rebalance our economy at home. We are committed to ensuring both that the UK remains a top destination for foreign direct investment and that our businesses engage properly with high-growth emerging markets. As several hon. Members have said, there can be no better example of a high-growth emerging market than India. My hon. Friend put it particularly well when he said that we should not be complacent, because contracts are not won but worked for. We should all remember that motto.

The British Government are therefore committed to making our relationship with India broader and deeper, and that certainly includes the trade area. That commitment was clear in the Prime Minister’s decision that his first major overseas visit should be to India, with a delegation of Ministers, including me, and senior business figures. The Prime Minister has made it clear to us that that was not a one-off but part of a process of continuing engagement with India. Indeed, I have been back on two further missions since then involving trade, universities and research.

I welcome the intervention by my hon. Friend the Member for Romsey and Southampton North (Caroline Nokes). She mentioned the Solent India Business Network and the university of Southampton. I can report to the House that I took with me a gift for my Indian opposite number. I remembered that the university of Southampton, as my hon. Friend knows, holds the archive of the Mountbatten papers, including the papers from the negotiations with Gandhi on Indian independence. We politicians are sometimes accused of writing our ideas on the backs of envelopes. The archive includes documents from the period when Gandhi was negotiating with Mountbatten. He had made a vow of silence, so he was not speaking directly to Mountbatten, and I can report that he did indeed write his proposal for the future of India on the back of used envelopes. I took copies to give to my Indian opposite number.

We have historic ties, but this debate has rightly focused on our trade relationship. The British Government are clear that we aim to double trade with India by 2015. That is our objective. To achieve it, we must offer more help to small and medium-sized enterprises to export. We still have an insufficient number of SMEs in the export business. We must help our companies win major, high-value contracts. We need to attract much-needed inward investment, which builds trade links, and to build strategic relationships with key companies. The hon. Member for Solihull (Lorely Burt) made an effective case. We recognise fully that Jaguar Land Rover is a classic example of a key company.

We focus on India not just because we understand its high growth prospects in the abstract but because we have analysed particular sectors where we can see that growth happening. India plans to spend $1 trillion over the next five years on improving its infrastructure. That is a market. It is expected to be the world’s third largest car market by 2020; that is another crucial opportunity. Its health care market is expected to triple to $150 billion by 2017.

Several hon. Members have mentioned my particular responsibilities. The Indian Government have plans for 40 million extra university places and for 500 million more people to receive vocational training over the next 12 years. When I have had discussions with Kapil Sibal and other Indian Ministers, they have recognised fully that to achieve those extraordinary ambitions, they must work with others. Who better to help them than Britain, given our strengths in education and vocational training?

[Guy Opperman (Hexham) (Con)]

rose—

[Keith Vaz]

rose—

[Mr Willetts]

I give way to the Chairman of the Home Affairs Committee.

[Keith Vaz]

The Minister, of course, was on the side of the angels when we considered student visas. Is it still the view of his Department, as opposed to the Home Office, that we want more Indian overseas students to come and study at our universities?

[Mr Willetts]

The British Government have a shared view, to which, of course, all Departments subscribe. Included in that, as I said, is the fact that there is no limit on the number of suitably qualified foreign students who can come to legitimate universities. However, I fully accept the challenge of communicating that effectively, given how the policy has sometimes been reported, not least in the Indian media. One reason why I have paid visits to India is to communicate as clearly as I can that there is no numerical limit on legitimate students coming to legitimate higher education institutions.

[Mr Virendra Sharma]

rose—

[Guy Opperman]

rose—

[Mr Willetts]

I am terribly sorry, but I have only five minutes left, and I have several other issues to touch on.

One issue raised by several Members involves the problems that a number of UK companies have experienced obtaining payment for goods and services provided during the Commonwealth games. Some UK companies, most notably SIS LIVE, are alleged to have been involved in instances of bribery, which they have strenuously denied. Several hon. Members have vouched for those companies in this debate. All those cases are being examined by the Indian Central Bureau of Investigation. Until that work is complete, we doubt that any resolution of the matter is possible. All the Commonwealth games cases have been handed over to a group of Indian Ministers, who will decide what needs to be done.

I assure hon. Members who have raised the matter that the British Government are energetically pursuing the concerns of British companies with the Indian Government. The high commissioner met the Indian Secretary for Home Affairs and followed up with a letter. Our Prime Minister has written to Prime Minister Singh about the outstanding payments, and Ministers and officials are working to resolve the outstanding issues. My right hon. Friend the Secretary of State for Culture, Olympics, Media and Sport has written to his Indian counterpart, the Minister for Sport, requesting that the investigation be expedited as quickly as possible. We remain very much engaged with the issue.

[Mr Virendra Sharma]

Will the Minister give way?

[Mr Willetts]

I apologise, but it has been a crowded debate. We understand the arguments made by my hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown) for more debates on these issues.

I was asked about the EU-India free trade agreement, including by the hon. Member for Hartlepool (Mr Wright). The UK has been one of the strongest supporters of the FTA since negotiations started. We believe that there is now a genuine prospect of concluding an ambitious agreement this year that will deliver significant benefits to UK business, with a potential value of £2 billion over 10 years. We now look forward to the EU-India summit in February, to which several Members have referred, and hope that progress will be made there.

We have made it clear throughout the negotiations that in order to conclude an agreement, it is essential for India to open up markets in key areas such as services, wines and spirits and the automotive sector, which the hon. Member for Solihull mentioned. India’s implementation of reform in single-brand retail is a positive sign, but we need more progress on services including multi-brand retail, banking and insurance.

Some Members asked what that will mean for migration. We expect the chapter on international trading services in the FTA to include provisions on the temporary movement of highly skilled professionals from India to the UK and from the UK to India. We recognise that a key element of the UK’s offer in trade negotiations is its willingness to admit temporarily to the EU highly skilled professionals under mode 4. However, any such measure must be consistent with our commitment to limit levels of economic migration to the UK. We expect the outcome of the negotiation with India to allow for the operation of minimum salary thresholds and wage parity testing. The Government are strongly committed to policy in that area.

In conclusion, the British Government absolutely agree with hon. Members from all parties about the importance of our relationship with India. That is why the Foreign Secretary has announced the expansion of our network across India, creating 30 new positions. It is a truly cross-Government effort. Our relationship is much wider than trade and investment; we co-operate closely with India on education, science and research. The UK India Education and Research Initiative has now reached a scale of £90 million, and I have launched improved research collaboration with India. We are also researching and working together on climate change and development. We have an increasing defence and security relationship, and we are working with India on international issues.

Despite the global downturn, India continues to enjoy rates of growth that are the envy of Europe and the US, with the north Atlantic problem to which an hon. Member referred. We will continue to work across Government and with the private sector, universities and our Indian friends. We want more UK companies to do business in India, and we welcome those opportunities.

11:00

Sitting suspended.

Postgraduate Education

Wednesday 25th January 2012 Westminster Hall

[Mr Philip Hollobone in the Chair]

14:29

[Mr Philip Hollobone (in the Chair)]

I welcome hon. Members and warn them that we may be interrupted by Divisions in the House. If that happens there will be a 15-minute interruption to proceedings. Let us hope that that does not happen.

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

It is a pleasure to speak in Westminster Hall again, Mr Hollobone, but under your chairmanship for the first time. I hope that I will not need much calling to order during my remarks.

The Minister knows about my long-term interest in higher education and so do my colleagues. I thank my hon. Friend the Member for City of Durham (Roberta Blackman-Woods), truly a good friend and not just formally so, who had the original idea when she asked, “Isn’t it time that we talked about postgraduate education?” thereby inspiring me to request this debate, which I am delighted about and lucky enough to introduce.

I introduce this debate with a fair-minded point of view. Many hon. Members know that I have a long-term interest in education. I chaired the Education Committee under its different names for 10 years and particularly enjoyed my time as the Chair of the Education and Skills Committee, when I had a brief covering higher education, stolen away as it was when I became the Chair of the Children, Schools and Families Committee, which did not have the higher education remit. I have missed it.

Many years ago, I started the all-party parliamentary university group, on which my hon. Friend the Member for City of Durham now has a senior position, because it was important that this vital sector in our economy had a good relationship, good conversation and good communication with Members of both Houses of Parliament.

I have a long-term interest. I am now involved in the newly formed Higher Education Commission, chaired by Lord Broers, the first inquiry of which will look at postgraduate education. It is important to discuss that part of higher education because it is a bit isolated—on its own—and we have had a pretty eventful period for undergraduate education over the past months and years. Everyone has been busy looking at student finance for undergraduates, which has led, unfortunately, to our taking our eye off the postgraduate world.

I read somewhere recently that the Minister said—I believe him—that the noble Lord Mandelson could not be persuaded to include the postgraduate sector in the Browne review of higher education. I shall give way to the Minister if he wants to correct me.

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

In the negotiations that happened under the previous Labour Government, when Lord Mandelson was Secretary of State and I was shadow Secretary of State, I specifically urged that the terms of reference should make it clear that postgraduates, not just undergraduates, were included. The terms of reference included postgraduates, but Lord Browne did not advance any specific proposals. Postgraduates were included in the terms of reference partly at the request of the official Opposition.

[Mr Sheerman]

It is good to get that on the record. Of course, there is barely a page in the Browne report about the postgraduate world.

We desperately need to consider postgraduate education, because higher education can only be considered holistically. Where do we get our students from? What are the qualifications for getting into university? Who is pitching up to be taught as undergraduates in universities? How difficult is it for children of all the talents to get into university and higher education, even into elite research institutions? We have concerned ourselves with many things to do with universities and will continue to do so.

In respect of the changes under the Browne recommendations and the coalition Government’s implementation, there has been a fundamental shift and change in the situation for undergraduates. I will make my remarks today pretty much on an all-party basis, so there will be no hauling over the rights and wrongs of that. We are where we are, but to deny that the new situation for undergraduates does not have real implications for the postgraduate world would be foolish.

In a sense, we are in a bit of a policy vacuum in respect of postgraduate education. I urge the Minister and the Government to set themselves the task of filling that vacuum with something that is innovative, informative and positive. The fact is that, taking the dismal view of the situation at the moment, it might be said—in terms of economics being a dismal science—that the health of our research base could be threatened. The universities are some of this country’s greatest assets. Indeed, if universities were taken out of many of our towns and cities, they would be in a parlous state.

Any hon. Member who saw this week’s review of the health of cities will know that, although there is not entirely a correlation, a city without a university is likely to be in the lower percentile of success as a city. I am greatly concerned about our universities being threatened in any way. My wonderful university of Huddersfield is the largest employer in the town. It is a vast, expanding and developing university in the top 10 for employability and for widening participation. It is debt-free, successful and is developing and expanding, with strengths right across the arts, the sciences and design—in almost every subject that can be thought of—but with a practical bent in most departments.

Looking across the university estate, the problems faced by postgraduate education are different depending on where it sits. Universities are at the heart of our national wealth and well-being and are absolutely at the heart of the likelihood of our economy remaining diverse and successful. I shall speak about the threat to our research base, particularly in respect of the science, technology, engineering and mathematics subjects—big science—and will come to that in a moment.

Higher education is going through a period of uncertainty and change, with the new funding arrangements coming from the Browne report and the reduction in funding for teaching—the £9,000 cap. That is the situation that we are in.

I would be happy if the Minister mentioned something that we all discussed at some length when the Government produced the White Paper, “Higher Education: Students at the Heart of the System”. I told the Minister that I was a bit worried about that, because he kept saying that students had to be in the driving seat. When I worked for a living—[Interruption.] That is supposed to be an amusing aside. When I worked for a living I used to be a university teacher and I have reflected on the fact that, when students pitched up to be taught by me, I expected and thought that teaching staff were in the driving seat. Sometimes our job was to be quite nasty to undergraduates if they did not work hard enough or did not take their courses seriously enough. Part of the university experience is to get some pretty good, firm advice. I was worried that, with the White Paper, we seemed to be moving into a rather soft world, where we treated students as the consumer and the consumer could do no wrong, and we would have to dance around and provide nice soft courses and a lovely three years before students were ushered out into the wide world.

A lot about the students quite worried me, but I was waiting with anticipation for an education Bill. Suddenly, to my great surprise, shock, horror, I had to reach for my iPad and tweet. That is how serious it was. An early tweet—that method of communication provides early news—informed me that there would not be an education Bill any time soon. Today is a splendid opportunity for the Minister for Universities and Science to put us right. There have been rumours that a Bill will not be presented for two or three weeks, two or three years, or until 2013-14. There are also rumours that the Liberal Democrat part of the coalition has said, “No, no, no”, and that it will not be this side of an election. If the Minister wants to enlighten us, I will happily give way.

[Mr Willetts]

The Government will set out authoritatively our position on how we will implement our reforms in the White Paper very soon, but not in response to the bait being offered by the hon. Gentleman at this very moment.

[Mr Sheerman]

I think the Minister has gone as far as we can persuade him to go. Perhaps there is time for reflection, because there was almost nothing about postgraduate research in the White Paper, and perhaps this is an opportunity to cover that. If the higher education sector is not considered holistically, something is very wrong indeed. It should be considered from when students are recruited right through to PhD, doctorate and post-doctorate level.

I am sure, Mr Hollobone, that you took part in the Royal Society’s twinning scheme between research scientists and Members of Parliament. It was one of my most enlightening activities as a Member. One realises what a precious resource it is when young people have come through university, obtained a brilliant first degree, are encouraged to go on to a master’s degree, followed by a full research doctorate, and then post-doctoral work. In my placements when I have been part of the scheme under the last Government and now, it is a worry that if there is no continuous educational progression, the research stream starts to dry up. Post-docs get to a stage when they are getting on bit, they are married, they have a couple of kids and they are finding it hard to maintain a decent standard of living, and if there are no full-time scientific research positions or academic posts that are well paid, or relatively well paid—we are not talking bankers here—the whole system starts to look very thin indeed.

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

I congratulate the hon. Gentleman on securing this important debate, and on his excellent work on the matter over many years. On research, does he agree that we must pay tribute to the excellent work of the seven UK research councils which, with the research charities, do a fantastic job in providing support and funding for postgraduate research in innovative areas?

[Mr Sheerman]

I am happy to do that. The research councils are a brave body of men and women, and they are going through tough times, because they are eking out research grants to many people who need and deserve them. It is a tough time to be entering the postgraduate world. They are in the firing line for saying yes or no, and too often it is no.

[Paul Blomfield (Sheffield Central) (Lab)]

I thank my hon. Friend for giving way on the specific point of the research councils. Will he note the comments by Research Councils UK in 2007—the Minister laughs, but I do not think it would change its view now—when it argued:

“There is a critical need to grow postgraduate research…in the UK in order to counter the demographic ‘time bomb’ of an ageing population of academics in some disciplines”

and that without

“a strategy to address this, there will be serious implications for future retirement and replacement needs”?

There remains a concern that there is no strategy.

[Mr Sheerman]

My hon. Friend is absolutely right, and that is why I keep pleading for higher education to be considered holistically through the career path of senior researchers and academics to retirement, and to consider the demographics of that. My hon. Friend makes the strong point that we must keep refreshing and replenishing that stock all the time. Many of our senior academics are approaching retirement age in a bunch as the demographics work.

When it is announced that one has a debate such as this, information pours in from all over the place. I pay tribute to Universities UK, the Russell group, the ’92 group and others who have furnished me with excellent background material. I was reading about some of the important things that we do in the research community: employer engagement, research, executive education, knowledge transfer, regional partnership building, and so on. But I return to teasing the Minister about the policy vacuum.

Let us look at the history. In March 2010, the Adrian Smith review, “One Step Beyond: Making the most of postgraduate education”, was published. What has happened to it? Sir Adrian has been pulled in—I am sure he did not have be pulled in, but was delighted—to talk to the Minister, who has got his team together again for at least one meeting. Will he enlighten us on whether that review is going anywhere in influencing Government policy? That would be useful.

I want to dwell on the rather dark side of the argument. Higher education and the postgraduate world are heavily dependent on a particular market, and when I was Chair of the Education Committee, I looked at the international market in higher education. The Committee learned that it is intensely competitive. Universities all over the world compete, and five years ago the main competitors were the United States, Australia and emerging countries such as India and China, sometimes in partnership with UK and US universities. It is a very competitive world, and includes Saudi Arabia, India and Germany. The Germans and the Dutch are now teaching postgraduate and undergraduate courses in English to attract a broader audience. If the income from international students were taken out of higher education, we would be in a sad state indeed.

That market is heavily dependent on taught postgraduate work—the one-year or two-year master’s degree. It is highly competitive. As a member of the court of governors of the London School of Economics, I know it very well. It is highly competitive, and there is no cap on fees, which are very competitive. At the lower end, there are some good cheap bargains in higher education in the UK. At the higher end, a business master’s degree in some of our better-known departments of management will cost a lot of money.

Growth in the number of international students, great threat from competition, and—I do not want to be partisan—a slightly clumsily organised change in the visa arrangements have had an impact on some good institutions. I am the first to say that there were some dodgy players pretending to be respectable colleges, and we could have used a little more finesse in weeding out the obvious cowboy operators without impacting on the serious players in higher education, but there is no doubt that visas have been a difficulty, as have the cuts in teaching grants. We have no tuition fee loans for postgraduates, and the research councils cannot help with that.

[Rehman Chishti]

Does the hon. Gentleman agree that the Government made it clear that they are committed to supporting funding? They said that they are

“maintaining the annual £4.6 billion budget for science and research programmes with £150 million each year supporting university-business interaction.”—[Official Report, 8 December 2011; Vol. 537, c. 35WS.]

In these difficult economic times, the Government have made it clear that they are committed to supporting that funding.

[Mr Sheerman]

I do not want to be very party political today, but I will be party political in the sense that I still do not think that that is good enough. There is a problem with overall cuts in funding. The view that we are all in it together and so everyone has to stay at the same point is one with which I have never agreed. Why do we have to kill the goose that lays the golden eggs? We need only look at the international competition and how much money is being put into research and development, higher education and postgraduate education worldwide. This is a time when we should be being as ambitious as anything because the payoff, the return to the community, in relatively fast terms is very large. There is a great bonus to be had from moving in that direction. I understand what the hon. Gentleman says, but I think that for higher education, every bit of investment is very worth while.

I do not know the hon. Gentleman’s constituency and community, but in mine, investment in the university is the one way in which we will get regeneration. I cannot remember his constituency, but I have been telling the Government for a long time, because people ask, “Are we in recession or aren’t we?”, that outside London and the south-east, we have been in recession for a long time, and if it was not for the universities, heaven knows where we would be, so any bit of investment in research in universities and any bit of investment that encourages participatory working with small and medium-sized enterprises in our regions is worth while. I would have thought that any Government in their right mind would be pouring money into that.

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

My hon. Friend is making an excellent speech. On regeneration, is it not the case that we will not be able to grow our economy unless we invest in higher-level skills, and that is what postgraduate education is all about?

[Mr Sheerman]

As ever, my hon. Friend is absolutely right about that. I want to gallop through the last part of my speech.

[Rehman Chishti]

I am most grateful to the hon. Gentleman for giving way again; he is very generous and always has been. He raises the issue of universities in different parts of the country. There are four universities in Medway, with 10,000 students, and they do a fantastic job. The point that I want to make to the hon. Gentleman was made to me by Professor John Williams from the university of Wales at Aberystwyth. He said that much of postgraduate funding comes from outside the block grant, and to increase funding, people have to go out there and get more funding from industry and benefactors coming into postgraduate education. What more does the hon. Gentleman think needs to be done to get that funding?

[Mr Sheerman]

I will not be tempted by that question because I intend to talk about that issue at the end of my speech and I would ruin it if I did so now. It might surprise people in Westminster Hall this afternoon, but there is some shape to my speech—a little. Let me gallop through the rest of it. I will come to the hon. Gentleman’s point, I promise.

At present, there is one great danger—well, there is more than one, but let us start with this one that I have picked up over the years. I want as many UK-based students as possible to come through as postgraduates, as the researchers of the future, but too often, I am looking at departments—even the big science departments of the big science universities—that rely too much on overseas students. In science and engineering, students come particularly from China and India. In other subjects, the students are very often from the United States. People can see the statistics on that. UK students are increasingly coming through with high levels of debt—EU students are also pretty stretched in the present economic climate—and I worry that those high levels of debt may be putting them off further study. There is the belief that debt levels will be much higher in the future. Whether they are right or wrong, they are thinking, “Can I afford to go on into postgraduate education and then the commitment of a doctorate and all the rest?”

I become very worried when I look at the statistics and I hope that the Minister will come back to us on the matter. Is he content with the number of UK-based students, particularly in the challenging subjects to which I am referring? We have to have a high density of scientists and clusters of scientists in our country. In particular, is he confident that we will be breeding the postgraduates that we need—tomorrow’s researchers?

We want to keep up the research dynamic in our country. We want to keep up its international excellence. We still have it. We find it very easy to do ourselves down in this country. We say, “Oh, it’s all terrible.” It is not all terrible. We still have fantastic universities that have the top ratings in the world. However, it is possible to become a little complacent and then suddenly our institutions become less attractive, not just to overseas students but to the high-level, high-calibre scientists who we want to come and work in them as part of the teams there. We must keep up the research dynamic if we are to have international excellence.

I am also worried about access to postgraduate education. As Alan Milburn said in his report on social mobility, are we getting into a situation in which only kids from very wealthy backgrounds can contemplate staying on in education long enough to push their talent to its furthest potential? That really worries me. Will we be in a situation in which many bright young people from less well-off backgrounds are put off staying with a science or a social science? Will they be put off staying in education long enough to be part of a successful research future?

Let me return to the point made by the hon. Member for Gillingham and Rainham (Rehman Chishti). I am totally in favour of partnership between researchers and industry. I think that it is fantastic. People can see that I am in my best suit today. This is real Huddersfield cloth. Not many people could afford it, but I am the Member for Huddersfield and am in a privileged position. I should not drop names, but the reason why I am wearing it is not that I am in your company, Mr Hollobone, but that I am having dinner this evening with Lord Bhattacharyya. He is one of the great exponents of partnership across universities. He built Warwick as a partnership university and has had great success.

I believe in partnership, but I also believe in free science. I believe in academics having the freedom to conduct science that has nothing to do with likely commercialisation. That is what I call free science—science for its own sake, or the subject for its own sake. It could be social science; I am a social scientist by training. It should be able to go somewhere where it does not have to be sponsored and does not have to have a tag saying that it might be useful to some institution, lobby group or whatever. The fact is that we will be a poorer nation and will cease to be a high-science nation if we do not have what I call free science. Free science research must be at the heart of what we do. That is not to gainsay at all the wonderful relationships that do other kinds of more applied science.

This is an important debate. I am sure that the other hon. Members present will say much more profound things than I have said, but there is a policy vacuum that needs to be filled. We need a sense of direction for the future of postgraduate education and research in this country. We also need to know that our research universities have a healthy future and that anyone in our country who has talent and the potential to contribute to that will be able to do so.

[Mr Philip Hollobone (in the Chair)]

The hon. Gentleman may be wearing a suit made of cloth from his constituency. I am wearing shoes made by Cheaney’s in Desborough in my constituency. I am sure that we both appreciate each other’s attire.

Mr Speaker has received a very nice handwritten note from Paul Blomfield, so I call him to speak next.

14:49

[Paul Blomfield (Sheffield Central) (Lab)]

Thank you, Mr Hollobone. I appreciate Mr Speaker’s recognition of my efforts to be called today. It is a delight to contribute to the debate under your chairmanship.

I congratulate my hon. Friend the Member for Huddersfield (Mr Sheerman) on securing this debate. There is concern across the sector, which, I think, has been shared by the Minister, over the lack of attention that has been given to postgraduate education in the whole debate about the future of our universities and our higher education system and in the higher education reforms. I am not sure where those reforms stand now in the light of the announcement in The Daily Telegraph yesterday of the Government’s new position, to which the Minister has not added much clarity, but I am sure that he will come back to it later in the debate.

Postgraduate education issues and the failure of the Browne review to look at them were matters that I raised with Lord Browne when he appeared before the Business, Innovations and Skills Committee. It was clear that he did not have the inclination to examine postgraduate study, despite recognising in his earlier evidence that what happened in one area of the sector was important to the other areas. In one of those bizarre moments in our fairly long discussion with Lord Browne, he said that we had to understand the interdependence in the sector. What we do in one part of the sector has an impact on another part, he said. He told the Select Committee that he did not look at postgraduate education in anything other than in the most cursory way. Instead, he pointed to the postgraduate review chaired by Sir Adrian Smith and said that it would tackle the issues, and indeed it did in many ways.

When the Smith panel published its report in March 2010, it identified four significant challenges: promoting the value of postgraduate study to both potential students and employers; ensuring that sufficient emphasis is placed on skills, development and employability; crucially, considering barriers to the access and availability of financial support; and, finally, providing key information better to inform student choice, which has been at the heart of the Government’s narrative.

Not unreasonably, there was an expectation that those issues would be addressed in the White Paper on higher education. Surprisingly, though, they were not addressed, and the White Paper declares an intention to revisit postgraduate funding as the new system of undergraduate funding beds in. Universities UK said that that approach

“does not address some of the challenges the sector faces in maintaining postgraduate provision in the meantime, not least because of the withdrawal of elements of HEFCE teaching funding from as early as 2012/13.”

My hon. Friend has convincingly made the case for postgraduate education. It is an important part of the higher education sector. We have some of the top universities in the world, and our postgraduate education has an international reputation. It makes a vital contribution to the economy and is a major foreign export earner.

Over the past decade, the number of taught postgraduate students has grown significantly—around 40% since 1999. Taught postgraduate students now make up around 20% of the total student population, rising from 17% a decade ago. Much of that growth is attributable to international student recruitment—it certainly was before the visa changes—and to a growing number of young, under 25-year-old, UK students. There was nearly a 16% increase in the number of under-25-year-olds going on to postgraduate taught study between 2008-09 and 2009-10. One of the key reasons for that, which was confirmed by the postgraduate taught experience survey in 2010, was that they wanted to distinguish themselves in an increasingly competitive employment market and to improve their employment prospects.

In advance of today’s debate, I talked to academic and student leaders at the two fine universities in my constituency—the university of Sheffield and Sheffield Hallam university. I spoke to the vice-chancellor of Sheffield, Professor Keith Burnett, who the Minister knows and, like me, respects as one of our outstanding academic leaders. I asked him, “What would be the key points that you would want us to focus on in our discussions this afternoon?” He said that his concerns were twofold, and that they were both about access. First, professions that require postgraduate work, such as law and architecture, will have an increasingly more biased social mix, as the effect of undergraduate loans bears down on applicants from a widening participation background. Secondly, many areas in arts and humanities rely on self-funded students for department income and for training future university teachers. He said that that will lead to universities being staffed by those from more privileged backgrounds.

Professor Keith Burnett’s concerns were echoed by Thom Arnold, student president at Sheffield university. He said that his main concern relating to postgraduate education

“is funding and widening participation, in particular related to the impact of rising prices for postgraduate courses without a funding system in place”—

I hope the Minister will talk about that issue—

“and what impact this will have, particularly on people from lower socio-economic backgrounds. We are concerned that people will be priced out of postgraduate study, and as a result will also be unable to access professions where a masters is a prerequisite. We see a clear need for a review of funding and support arrangements for postgraduates with a view that this review will lead to the development of income contingent loans for postgraduates.”

Reflecting on a point in the Smith review, which I hope the Minister will also address, he said:

“Another area is access to information and guidance. The White Paper aims to put students at the heart of the system by providing more information to undergraduates with the key information sets. However, potential postgraduate students still remain largely in the dark when applying. Despite the limitations of key information sets, an attempt to roll out a KIS style for postgraduate taught students would be positive.”

Jake Kitchener is student president at Sheffield Hallam university and represents students drawn from a different demographic. He had the same concerns but raised an additional point. He said:

“We think it’s disgraceful that there is still no financial provision for those wishing to take up postgraduate study. I have spoken with students who have saved in excess of £10,000 just so that they can afford to go to university. The alternative is a graduate development loan, but it isn’t available to prospective students with a low credit rating, and when the student finishes it is a huge burden.”

Importantly, he said that mature students, who are a significant component of Hallam’s demographic mix, are not taken into account. He said:

“Those returning to study may have families, mortgages to pay and a reduction in income as they dedicate time to their studies. However, currently there are no systems in place to aid postgraduate study. Returning to education is a positive, but currently there is no student funding support to anyone that wants it. It’s a regressive system and our postgraduate students feel disregarded and hard done by.”

Those views are confirmed by a survey undertaken by the National Union of Students, which said that 60% of those whom it surveyed—a large sample—claimed that accessibility of finance or funding was a major factor on deciding whether to undertake postgraduate study. Some 67% of those whom it spoke to were entirely self-funded through a combination of savings, earnings, family loans and, in 15% of cases, overdrafts or credit cards. It also found out that self-funded students, who had often made the greatest effort to undertake that programme, were more likely than funded students to consider leaving or suspending their studies because of the financial pressures.

There is a crisis in postgraduate education funding. If it is not effectively addressed, we can expect to see mounting costs leading to decreased demand, closure of courses and increased reliance on international postgraduate income, which, however welcome in itself, should not be a substitute for the opportunities for UK students. Crucially, the UK population’s skill levels could decline, when we need higher-level skills to support growth and the knowledge economy, as the Minister will agree.

As my hon. Friend the Member for Huddersfield said, the crisis that we face in postgraduate education funding is due to two key factors: the impact of undergraduate higher education funding reforms, with which the Minister will not necessarily agree, but on which I would welcome his comments; and the impact of international student visa changes, with which I guess that he would agree, although he probably will not admit it. It is certainly true, as my hon. Friend said, that those changes were pushed through clumsily, and they could have been finessed better. We should have sought to deal with the issue not on the demand side, by discouraging applications, but on the supply side, by cracking down on the bogus colleges that have been mentioned.

The debate is not, however, just about postgraduate taught-course funding. Postgraduate taught courses, in particular, are a critical route to undertaking research programmes. As the million+ group of modern universities points out, students undertaking postgraduate qualifications not only provide future staff potential, but add significant value to our universities and the academic communities of which they are a part. As I said in an intervention, we need to recognise the concern that Research Councils UK has expressed about the demographic time bomb in our ageing academic population. If our universities are to play the role that my hon. Friend rightly talked about, that issue must be addressed.

Like my hon. Friend, I feel passionately about the role our universities can play in our economic future. Sheffield is a city with a fine industrial and manufacturing history, but it is seeking to identify a new way forward in a changing economy. The critical way that it can do that is by combining the innovation and research expertise of our universities with the traditional manufacturing skills in our city. As the Minister will agree, there is no finer example of that than the Advanced Manufacturing Research Centre at Waverley. That initiative was the work of the university of Sheffield and its key partners, Boeing and Rolls-Royce, and it has led to extraordinary innovation in manufacturing, but it came about only because of the sort of research capacity that we need to cherish.

In conclusion, I hope the Minister will spell out how the Government plan to address the four issues identified by the Smith review: promoting the value of postgraduate study; emphasising skills development and employability; critically, overcoming the barriers to financial support; and providing key information to enable student choice.

[Mr Philip Hollobone (in the Chair)]

I understand that Roberta Blackman-Woods has a postgraduate degree, represents a university town and is married to a professor. Even though she is dangerously overqualified, I am going to call her next.

15:13

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

Thank you, Mr Hollobone. It was very kind of you to make those comments. May I say what a pleasure it is to serve under your chairmanship?

I congratulate my hon. Friend the Member for Huddersfield (Mr Sheerman) on securing this timely debate and on his excellent speech. I also congratulate my hon. Friend the Member for Sheffield Central (Paul Blomfield), who gave such an excellent speech that I am going to repeat some of it.

Postgraduate education is important in a number of different ways. It is important for the individuals who undertake study, because they can improve their employment opportunities, become the innovators of tomorrow and contribute to business development and to solving some of the economic and social challenges facing our country and others.

Postgraduate education is therefore important for individuals, but it is also important for universities, as my hon. Friend the Member for Huddersfield mentioned. Universities obviously benefit from the strengthening of the academic community that results from having postgraduate students. Indeed, I regularly see postgraduate students at Durham university bringing forward ideas, linking them into the work of academic programmes and teams and really taking those ideas in a new direction. That is very exciting for universities.

Increasingly, however, postgraduate education is also a marker of Britain’s academic standing in the world. I see a lot of postgraduate students in Durham from overseas, and they contribute to not only its international community, but its international research teams. Increasingly, that is how research develops in this country, although we mostly see it in science and engineering subjects. Those students are critical to not only securing economic growth, but helping to deal with some of our challenges.

The UK is second only to the United States in attracting international students, so it is important that we ask the Minister some serious questions about whether we will be able to maintain that international standing and whether new procedures or policies will need to be put in place to keep our standing as high as it is. Concern has been expressed in the academic community about whether we will be able to do that.

I thank the Minister again for attending the recent meeting of the all-party university group, when we looked at the White Paper. We really appreciated the time he spent talking to us about it. I hope that the session was not a complete and utter waste of time and that something from the White Paper will emerge in a Bill at some stage for us to consider. As the Minister will know from that session, a number of vice-chancellors have expressed concern about postgraduate study and wanted to hear more from the Government about how it would be strengthened. Indeed, million+ has said that there is a real risk that we will move into a period of decline, particularly in terms of UK-domiciled postgraduate students. Does the Minister share that concern?

There are two big issues with regard to postgraduate education. One is access, which several people have mentioned, and the other is financing. The Milburn report, which was called “Unleashing Aspiration”, addressed access and said that postgraduate qualifications

“have increasingly become an important route into many professional careers—in the law, creative industries, the Civil Service, management professions and others. But these courses are substantially more expensive than undergraduate degrees—often costing up to £12,000 per year—and there is no student support framework equivalent to the framework for undergraduate. New proposals need to be formulated to establish a clear, transparent and fair system of student financial support for postgraduate learners.”

That throws a real challenge out to the Government. If they are really serious about higher education contributing to social mobility, it should not stop at undergraduate level, and we need to look at postgraduate level.

While I am on my feet, I would not like to miss the opportunity to say that I am glad that the Milburn report did not think about widening access to higher education just in terms of getting some—a few—bright students from lower-income backgrounds into Oxford and Cambridge. It considered the wider issue of making higher education available across the piece to low-income students and, importantly, put the issue of postgraduate education on the agenda. I hope that the shadow Minister as well as the Minister will speak about that issue.

There is growing concern about access. I come from a low-income background and did several years of postgraduate study, but I am not sure whether that would be possible now for someone of my background. That is of concern to us. In researching the issue we could not find any study with up-to-date figures about the diversity or lack of it in postgraduate education, or about the current barriers, and we could not discover whether under-represented groups have been considered specifically. Perhaps the Minister would comment on that.

Before the Labour Government left office in March 2010 the Department for Business, Innovation and Skills put forward a series of recommendations on improving postgraduate education, in “One Step Beyond: Making the most of postgraduate education”. To be fair to the Minister, that report and its recommendations did not just fall off a precipice, which has happened in other contexts. They were brought back in the Government’s response to the postgraduate review, and the recommendations are almost identical. Obviously, those are excellent recommendations. One, for example, states:

“Universities UK and Research Councils UK should do more to identify and promote the economic and social value of postgraduate study.”

The response also states that attention needs to be given to funding. Some specific proposals are mentioned about getting research councils to work with other bodies

“to offer longer periods of postgraduate research”

so that perhaps students can earn income as well. I am sure that hon. Members will be pleased that I am not going to go through the list, as there is not time; but are those proposals being addressed? They seem to offer at least a partial way forward for improving access to higher education and the funding regime.

I also want to ask whether the Department has thought about what recent changes in undergraduate student finance and funding would mean for postgraduate education. The withdrawal of about 80% of teaching funding in England is affecting postgraduate courses, and possibly making them more expensive. In addition, students will finish undergraduate courses with a level of debt that may make them less likely to take up career development loans, in particular, or additional debt to undertake postgraduate study. The National Union of Students says that that is a real worry; in its view the average postgraduate taught fee will rise by about 24% by 2012-13. That could obviously add a disincentive.

My hon. Friend the Member for Sheffield Central also pointed out valuable work by the NUS in surveying current postgraduate students about their financial circumstances. It is worth repeating a few of the points that were made. The survey, carried out in October 2010, was a large one, and 60% said that accessibility of finance or funding was a major factor in deciding whether to undertake postgraduate study. That figure rose to 70% among respondents studying full-time. The 67% who were entirely self-funded were very concerned about debt, overdrafts and credit cards. Self-funded students were also more likely than funded students to consider leaving or suspending their studies, owing to financial concerns. I want to raise that with the Minister, because the more we rely on self-funding, the more students may drop out, as they are just unable to carry on with their studies and raise the necessary income. Fifty-two per cent. of those in receipt of financial support said that postgraduate study would not have been an option for them without it. From my experience I would also make that point.

There are two big challenges: access and funding. Addressing those issues is important, because, as hon. Members have said, not only is postgraduate education important for individuals and universities; it is essential for the country to invest in it, if we are to grow our way out of the economic crisis. If the Minister needs evidence for that he need only read the Centre for Cities report produced a few days ago. It made clear the link between growing a knowledge-based, higher-level-skilled economy and being able to ride out economic downturns. We need that to happen here: beyond the five cities that were identified in the report as potentially doing well, we need universities and research to be at the heart of economic regeneration. I look forward to hearing from the Minister how he will ensure that that happens.

[Mr Philip Hollobone (in the Chair)]

Even though Luton Town twice beat Kettering Town 5-0, both home and away, this season, I am still pleased to call the hon. Member for Luton South (Gavin Shuker).

15:27

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

I am particularly grateful, Mr Hollobone, to serve under your chairmanship, and also that you have taken out the bulk of my speech by mentioning those historic victories by the Hatters over Kettering.

Many of my colleagues in the Opposition have raised pertinent points, and I congratulate my hon. Friend the Member for Huddersfield (Mr Sheerman) on obtaining the debate. I want particularly to focus on a couple of areas linked to my experience. I am grateful that I do not have to declare an interest. I am not a postgraduate graduate—or rather, I suppose I should say I am not a postgraduate. If I had been to university for postgraduate education I might have known the exact way to say that. I was born in Luton and went to Cambridge to attend one of the finest universities in the country. [Interruption.] Indeed—I will not repeat the remark made from a sedentary position. I really enjoyed my time at Cambridge, but chose to move back to Luton. When I left, the university of Luton was established; today it is the university of Bedfordshire. Alongside the other modern universities in this country, the university of Bedfordshire is doing incredible work in the postgraduate field. I think that sometimes a lazy shorthand is employed by people who perhaps are not as engaged in the debate as the hon. Members present today, who assume that the bulk of postgraduate education goes on in Russell group universities. The role of modern universities today is hugely interesting. My wife, Lucie, who would want me to point out that she is much smarter than I am, has spent most of the past decade in postgraduate education, and is now a research fellow at the university of Bedfordshire. I met her at the university of Cambridge, and I have witnessed at first hand the work done by the funding councils. I am grateful for it, having been a penniless student myself for most of my twenties.

The broader context of the debate is hugely important. The first thing to say is that there is a growing requirement for graduate qualifications, and Labour colleagues have raised that issue already. We need to compete with the world and that requires us to expand graduate qualifications in this country.

There is high graduate unemployment and underemployment. We know that this crisis is particularly affecting young people in the economic situation that we are in. Upskilling and obtaining graduate qualifications can be a good route through which to ensure that we—as an economy and as individuals—are able to pull out of the nosedive that we are in.

However, the 80% cut in teaching funding has also knocked on to affect postgraduate teaching, even though it was directly aimed at undergraduate teaching. In a sense, there are no Chinese walls. Many of the teachers at postgraduate level are also working in the undergraduate field. When we lose a teacher, or a teaching place, that loss is felt right across the university sector.

Of course, it is worth pointing out that the Government draw from the pool of postgraduate education and, in many cases, directly fund postgraduate education. I do not know if it is in order, Mr Hollobone, to speculate on the number of doctorates held by people in Westminster Hall today, including the civil servants and Clerks, but I will. I know that there are certainly MPs in Westminster Hall who are “doctors”, but I also know how little help they would be if I stubbed my toe on the way out. I am sure that there are people with doctorates and other postgraduate qualifications present right here in Westminster Hall, who feed directly into the machinery of Government.

Let us also look, for example, at the Department for Education, which directly funds the postgraduate certificate in education. We are already seeing that there are changes being made in that system, for instance the reduction in bursaries. Similarly, the Health and Social Care Bill will take away the requirement to train and develop doctors, nurses and others from the strategic health authorities, and it will pass that requirement to GPs.

In the broader context, therefore, a lot is changing in the postgraduate world. There is not only the reduction in funding to consider but the direct action that the Government can take to fund postgraduate qualifications.

Much of the training for those qualifications takes place in our modern-day universities. My hon. Friend the Member for Huddersfield made a very good point when he said that even if there is not a policy vacuum right now—perhaps there is a series of ideas that are being worked through to an ultimate conclusion, which we will hear about in time—it seems that there has been much focus on undergraduate education and much less focus on postgraduate education.

I spoke about modern universities right at the start of my contribution. What do they do? They support a large number of postgraduates; about two in five postgraduate qualifications are gained in our modern universities. They also provide much greater support to part-time graduate students than older universities; they are the ideal place for part-time students to be working in the postgraduate field, so that they can put their skills back into business and learn on the job, as it were. One in two of the postgraduate qualifications obtained by part-time students is obtained at a modern university. And modern universities also support older students, more so than, say, Russell group universities, which are at the other end of the scale for teaching older students. About 40% of the postgraduate students that modern universities teach are over 35.

In addition, modern universities are more likely to reach students from minority ethnic backgrounds and communities; I see that in my own local university, the university of Bedfordshire. Modern universities have also been proven to do very well in identifying new markets, such as creative industries. Postgraduate qualifications can add something to those sectors and to the economy more broadly.

There are a number of things that can be done, and I hope that the Minister will respond in detail to my points when he winds up. At the moment, however, the situation feels a bit shapeless and baggy. Nevertheless, there is one idea that has a lot of traction—it is the idea of bringing in more funding directly from industry and enterprise.

That idea—of bringing private funding into the system—was made earlier in the debate, and it is a brilliant idea. In fact, I am very disappointed that the Browne review did not pick it up and run with it much more on the undergraduate side; I think that we have been quite vocal about that during the last 18 months.

Whatever system we come up with to ensure that our postgraduate education is among the best in the world—that it is adequately funded and that it reaches the students that we want it to, and not only those people who can feel they can afford postgraduate education or who feel a great expectation on them to study at postgraduate level, but a whole range of demographics—it is really important that the Government play a role in ensuring that the funding for that system is available to all students, regardless of where they choose to study and how they study.

My own preference is quite clear—there are obvious economic benefits in ensuring that funding is protected and enhanced. Where there is private funding, however, it should be the role of Government to ensure that it is available to all, regardless of where they choose to study. For example, a postgraduate student support and loan scheme might be a way forward, but we do not want banks simply shifting towards cherry-picking those students they believe have the best chance of earning significant sums in the future, based on the university that students attend or their background.

A loan scheme should be available to all postgraduate students, regardless of whether they are full-time or part-time students, regardless of their income and regardless of their credit rating or background. If the Government choose to go down the route of having a loan scheme, they should consider making it available to all students across the field.

In summary, I have three “asks” for the Minister and I wonder whether he might briefly comment on them. The first “ask” is quite simple; it is about improving the quality of the data that we collect about postgraduate students. Even in the time that I spent researching postgraduate education for this debate, I clearly noticed how little data we have on the types of students who are coming through. With the big funding changes at undergraduate level, it is all the more important that we start looking at the income, background, ethnicity, student profile and level of debt that people are coming into the sector with, so that we can see whether any changes being made by this Government are working well.

My second “ask” of the Minister is to ask him simply to acknowledge both the interdependency between the postgraduate world and the undergraduate world, and the fact that the 80% cut in the teaching budget will have an effect on postgraduate education as well as on undergraduate education. Indeed, I also ask him to acknowledge the point made by Labour colleagues that the cost of postgraduate education may also go up, just as the cost of undergraduate education has.

My third “ask” of the Minister is to ask him to commit to delivering an equitable scheme that is accessible to all postgraduate students—even if is privately funded or supported—to ensure that all of our universities have the chance, the role, the ability and the privilege of providing postgraduate education and qualifications, regardless of where they are located or the courses they run.

15:36

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

It is a pleasure to serve under your lively chairmanship, Mr Hollobone, and to respond on behalf of the Opposition to what has been an excellent debate.

I congratulate my hon. Friend the Member for Huddersfield (Mr Sheerman) on securing this important and timely debate. He delivered his speech with passion and conviction, and he has a deep commitment to this area of policy. Indeed, he bought additional expertise to the debate, given his involvement in the Higher Education Commission, which is currently conducting an inquiry into postgraduate education. I am sure that all Members of the House look forward to the commission’s report, which will be produced once that inquiry is complete. However, having congratulated my hon. Friend on securing the debate, I must also congratulate my hon. Friend the Member for City of Durham (Roberta Blackman-Woods), who initiated the form-filling that helped to secure the debate.

My hon. Friend the Member for Huddersfield spoke very powerfully about the importance of postgraduate education and the fact that it has been somewhat isolated in the context of the current debate about university education. He also made the important point that higher education should be looked at holistically, and he is absolutely right about that. In addition, he spoke about the impact that the presence of a university has on the city and region in which it is located, and I too can relate to the experience of having a university in my constituency, given that Aston university is in my constituency and both Birmingham university and Birmingham City university are just outside my constituency boundary.

My hon. Friend spoke at length about postgraduate research, which I will discuss later. We also had excellent contributions from the other Members who spoke. My hon. Friend the Member for Sheffield Central (Paul Blomfield) addressed the issues in relation to taught postgraduate courses. He spoke powerfully about issues of access and the effect that widening participation in education can have, especially in improving access to the professions. Having been a barrister before I became an MP, I can absolutely attest to the fact that the professions often feel like middle-class enclaves, and when someone is from an immigrant working-class background—as I am—that is an entirely different kind of world.

My hon. Friend the Member for City of Durham spoke about the role of postgraduate education in strengthening both the academic community as a whole and international research teams, which is a very important point. She also talked about how that speaks to both our role and our reputation in the world. We have always punched above our weight, and we should treasure that. My hon. Friend returned to the important challenge of funding, which I will address later, and my hon. Friend the Member for Luton South (Gavin Shuker) rightly praised the role of modern universities. We are very lucky in this country to have a diverse higher education ecosystem, and we should cherish that diversity of mission, intake and teaching and research strengths.

This has been an important, constructive and necessary debate. Members have already made the point that discussion of higher education in Parliament often focuses on undergraduates, especially on an 18-year-old undergraduate’s journey through the system. That is, of course, extremely important, but it sometimes prevents both recognition of the importance of part-time and mature students at undergraduate level, and adequate discourse about postgraduate education as a whole, which is deeply unsatisfactory. Quite apart from the fact that postgraduate education generates something like £1.5 billion in output, we must, as other Members have said, take a holistic view of the sector if the policies we then formulate are to encourage quality, competitiveness, growth and social mobility.

We very much welcome any expansion of postgraduate education, especially that which took place between 2005 and 2010, as it clearly has benefits for the individual and for society as a whole. Taught postgraduate degrees, particularly when accessed by mature students, can help an individual improve their career prospects or change career entirely, especially with part-time study. Given the tough economic climate we face, coupled with the sheer terror of potential unemployment and what that does to life chances, particularly those of young people, students taking up postgraduate education immediately on completion of undergraduate courses do so increasingly because of the growing belief that we need more than one degree to be competitive.

However postgraduate education is accessed, and for whatever reasons, taught postgraduate education creates an increase in the national skills base and in earning capacity, and in that way benefits the economy and growth. Also essential to innovation and economic growth is research-based postgraduate education, through which we have the best chance of stimulating the kind of innovation we need to effect the rebalancing of our economy and get back to long-term growth, and we believe that the Government can and should play an active role in that. The UK’s delivery of global research output is second only to that of the United States, which demonstrates the health of our sector and the fact that, as I said earlier, we punch above our weight in the world, but with increasing competition from across the globe the Government must ensure that we keep pace with our competitor countries. My hon. Friend the Member for Sheffield Central made an important point about the ageing demographic make-up of the research community, and such issues highlight the need for the Government to bring forward a strategy that maintains the strength and diversity of our research base, especially given the reliance in some parts of the sector on international students, welcome though their contribution is.

One of the biggest areas of concern, as we have heard today, is funding. Funding concerns have been amplified by the Government’s decision to treble undergraduate tuition fees to £9,000. We are concerned not only about the impact that that will have on access to and participation in undergraduate education, but about what higher levels of undergraduate debt will mean for postgraduate education. With cuts in the teaching grant and higher fees, the debt burden gets ever higher, and so too does the prospect that students from deprived backgrounds, who are more likely to be debt-averse, and mature students with family commitments will be locked out of postgraduate education, thereby cementing the dominance of the middle classes. Particularly telling is the situation of those who would have become mature students but are deciding not to bother with postgraduate education because of the higher fees and the associated debt burden. Their aspirations are being blocked because they have come to the view that financially it simply is not worth the risk. That will also have an impact on social mobility, especially when we consider, as other Members have said, that postgraduate education is an important route into professions such as law and the civil service, which are rightly and regularly criticised for the lack of diversity among their intake. That scenario will only get further entrenched in the present situation.

It is in that context that we have argued that the Government should have changed course, to bring the cap on undergraduate tuition fees down to £6,000, a measure paid for by not going ahead with a corporation tax cut for the banks, and by asking the top 10% of graduates to pay a bit more.

[Mr Willetts]

Will the hon. Lady confirm that her proposals would not reduce graduates’ monthly repayments of student loans in any way?

[Shabana Mahmood]

The important point is about the headline level of debt, which I was coming on to make. Our proposal takes into account, and does not change, the Government’s decisions on the overall budgets. It clearly shows that it was still possible for them to do more to bring down the headline level of undergraduate fees by one third, thereby reducing the overall debt burden, which in turn would have had less impact on the numbers of people going into postgraduate education.

We welcome the attention being given to future funding options for postgraduate education by various bodies, such as the Higher Education Commission. I also note the report by CentreForum and its proposal for a £10,000 state-backed loan scheme for people taking one-year taught postgraduate courses, and that the National Union of Students and others are considering possible packages. We welcome the work being done to develop models for the sustainable funding of postgraduate education, and while alternative models are being developed and their viability assessed the Government can and should consider what more they can do to encourage the availability of professional career development loans, and to ensure that they work with banks to get the best possible deal for postgraduate students.

The Government’s White Paper on higher education unfortunately barely mentioned postgraduate education. It certainly did not create any legislative space for the discussion of issues affecting postgraduate education, or of how those issues might be dealt with. That was a mistake, and a missed opportunity. I note that the Minister reconvened the Smith review last year, and that additional work will now be done by the Higher Education Funding Council for England, so perhaps the Minister will take the opportunity today to update us on that funding consultation exercise being undertaken by HEFCE, and the participation review.

It is clear from the contributions to this debate and from the concerns highlighted by the higher education sector that a comprehensive strategy for postgraduate education is needed. We have, as other Members have mentioned, heard rumours in the past couple of days that the Government have U-turned on their policy of expanding the presence of for-profit providers in higher education, and so will not now introduce their planned higher education Bill this summer. The Minister might, therefore, have a bit more time on his hands, and could have even more if he heeded our call not to make any further changes to the core and margin model in 2013-14, allowing the sector to enjoy a year of stability. I wonder if the Minister might take this opportunity to redirect his energies into preparing the comprehensive postgraduate education strategy that is being called for by so many.

15:39

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

Thank you very much, Mr Hollobone, for chairing this debate. I congratulate the hon. Member for Huddersfield (Mr Sheerman) on his opening speech. I have always had a soft spot for him; I remember his chairmanship of the Education Committee, and he was also a student of Michael Oakeshott, so all we Tories have great respect for him. We then heard a series of speeches, which I welcome, from the hon. Members for Sheffield Central (Paul Blomfield), for City of Durham (Roberta Blackman-Woods) and for Luton South (Gavin Shuker), and then from the Opposition spokesman, the hon. Member for Birmingham, Ladywood (Shabana Mahmood). There was a theme, which I am happy to join in the support of, that postgraduate education is very important for a lot of reasons. It is very important for the economy, and for the individuals.

I can tell the hon. Member for Sheffield Central that I was talking to senior managers from Boeing about their overall strategy for research and development. They said that when they were planning an investment in the US, they were taking some leading figures from American universities close to where they were investing to Sheffield, to see at first hand how business-university collaboration could be done successfully. We can get it right, and we should celebrate those examples. Clearly, great achievements have been made at the university of Sheffield and elsewhere.

We have an important and valuable postgraduate education experience. I realise that there are a range of concerns in the sector, expressed by Members in this debate, about the future funding of postgraduate study. Let me make several things clear. First, it is unhelpful to think of it as a problem caused by a pile of undergraduate student debt. The more one looks at the issue, the more it is clear that the idea of a debt mountain that is a burden on people’s shoulders is misleading. It should be thought of not as a debt but as a flow of payments. The model, which we took in many ways from the previous Labour Government, has the best features of a graduate tax. It is essentially 9% of any earnings above £21,000 a year until the cost of the university education is paid for. If a child of mine were leaving university with £25,000 in debt on his or her credit card, I would be worried, recognising that it would threaten their ability to borrow, for example, to pay for postgraduate education if necessary. However, that is not a fair analogy with our student finance proposals.

[Paul Blomfield]

Does the Minister not accept that he is trying to appropriate the language of a graduate tax to describe a system that is actually nothing but an income-contingent loan? He mentioned the central principle of graduate tax. Graduate tax is a system whereby people pay back according to what they can afford, as opposed to what they had to borrow to go to university.

[Mr Willetts]

The total amount to pay back is determined by the cost of the higher education, and it keeps the connection with the university. That is where I part company with the graduate tax. The point that I am trying to make is that graduates will experience only a slightly higher deduction from their pay packet by Her Majesty’s Revenue and Customs, and if their income ever falls to less than £21,000, no payments whatever will be made. That matters to the debate about postgraduate education. I am not simply trying to reopen the debate on our undergraduate proposals.

The idea seems to be that it will be harder for postgraduates to finance themselves, because they will suddenly have an enormous amount of debt. In all the conversations that we have had with lenders about, for example, graduates’ ability to access a mortgage, they have said that what lenders look at is fixed monthly repayments. We have increased the threshold for repayments from £15,000 to £21,000, so the monthly repayments under our system have fallen compared with the system that we inherited from Labour. That matters to postgraduates’ ability to fund themselves. That is the source of Opposition Members’ anxiety: a misunderstanding of the implications of the reforms.

Nevertheless, I accept that there is concern about postgraduate issues. We recognise the need to monitor closely what is happening, investigate if problems arise and be absolutely clear what they are and what will need to be done about them. Today, we published the letter that we sent to the Higher Education Funding Council for England with the grant statement for the coming year. A paragraph in that letter specifically discusses postgraduates:

“We are pleased that the Council is taking the lead on gathering evidence to improve our understanding of the purpose and characteristics of, and outcomes from, postgraduate study, with the intention of reviewing postgraduate participation following the changes to undergraduate funding.”

We accept that it must be monitored.

“We also note the progress the Council is making, with its HE Public Information Steering Group”

on better information for postgraduate students. Also, of course, we refer to continuing

“work on strategically important and vulnerable subjects”.

[Mr Sheerman]

Where can we get hold of that letter? We would like it urgently. I also remind the Minister, who always mentions that I studied under Michael Oakeshott, that I was also taught by Ralph Miliband.

[Mr Willetts]

That in turn gives the hon. Gentleman an opportunity to educate the junior Milibands. The letter was published today on the website of the Department for Business, Innovation and Skills.

We have asked HEFCE to monitor the situation. I accept that one finds when one digs into the matter that we need better access to data. Some data are collected by the Higher Education Statistics Agency, and some by HEFCE. The hon. Member for Luton South, in particular, discussed that. We need to do better at making those data accessible.

I have asked officials to continue to consider all the policy issues on postgraduates. This is a coincidence, I think, but this very afternoon—probably as we speak—a round table discussion on postgraduate education is being held with BIS, HEFCE, the research councils, the learned societies, mission groups and other interested parties. We recognise the importance of watching for any effect on behaviour and seeing whether any policy proposals are called for. However, we must not forget that at the moment, postgraduate education is a mixed economy.

Of course there will be a lot of interesting ideas. People have referred to Tim Leunig’s paper for CentreForum, one of the few policy ideas proposed so far. I would welcome a more wide-ranging debate, but good for Tim Leunig for setting it going.

I do not think that there is scope under any political party for the creation of a new public spending programme. We would have to be very careful. We already support postgraduate education and research through a range of expenditure programmes, not just through HEFCE, although that alone contributes to the cost of supervision to the tune of £200 million. We also support postgraduate work through the research councils, and the proportion of PhD students training in cohorts through centres for doctoral training is increasing. Those centres have been shown to have value for students. They develop people who are internationally competitive and more productive and have a high impact.

Only yesterday, at the university of Reading—again, this is a coincidence—I announced a £67 million new investment in postgraduate training and development in the biosciences. Over the next three years, the doctoral training partnerships that I launched yesterday will support 660 four-year PhD students, as well as 70 other postgraduate studentships from this autumn. Those programmes aim to ensure that postgraduate study and research in the UK continue to have strength and depth.

The coalition recognises the value of the postgraduate experience to both the individual and the economy. We recognise that it is a key part of our universities’ role, and that it has grown more rapidly than the undergraduate experience. It is a source of important revenue, notably external revenue, for our universities. We will collect more data on participation than previously. We are continuing to see what policy options are available if they should be necessary, but we must work within a framework. We do not wish to create a new public expenditure programme when, historically, the mixed economy has worked successfully.

Stoma Care

Wednesday 25th January 2012 Westminster Hall

[Mr Philip Hollobone (in the Chair)]

Someone has asked me to explain the subject of this debate on sponsored nurses and off-script tendering in stoma care, but I do not know where to start, so thank goodness that the hon. Member for Cardiff North (Jonathan Evans) is here to reveal all and enlighten us.

15:59

[Jonathan Evans (Cardiff North) (Con)]

Thank you, Mr Hollobone, for that generous introduction. It is a privilege to serve under your chairmanship for the first time in my political career, and I hope that I will enlighten you.

Every year, more than 40,000 people in this country are diagnosed with bowel cancer. Bowel cancer is the UK’s second biggest cancer killer, but if found early enough, 90% of patients can be treated successfully. Often, colon or bladder surgery will lead to the fitting of stoma products or bags. Two thirds of such patients are estimated to need stoma care for the rest of their lives. With more advanced screening and the excellent work that is being done to raise awareness, it is expected that those patient numbers will only rise to even higher levels.

Valuable work is being done by many charities in this sector, and I give particular praise to Lynn Faulds Wood for her efforts in highlighting the prevalence of bowel cancer and for campaigning for greater awareness and early intervention. The charity Beating Bowel Cancer has designated this week as “be loud, be clear” week, and the charity is at Westminster today—its members are at the Speaker’s apartments as I speak—raising awareness among our parliamentary colleagues.

We are all in debt to such individuals and organisations for their campaigning work, but I want to make it clear that the focus of this debate is not on the challenges of bowel cancer itself, but on two specific concerns in relation to the current operation of stoma care—the care of those who have had colon or bladder surgery and require the fitting of medical devices, such as stoma bags. My concern relates to the private commercial sponsorship of stoma nurses and the potential impact of major changes that are being discussed between private sector manufacturers and primary care trusts that might eliminate any patient choice in relation to the medical appliances that they receive.

I am grateful to the three major patient groups in this sector—the Colostomy Association, the Urostomy Association and the Ileostomy and Internal Pouch Support Group—all of which have supported me in drawing attention to these issues and provided helpful background information.

Let me set this debate in context. There is almost daily comment about the Government’s proposed reforms of the NHS, and any such debate regularly throws up the charge that change in the NHS inevitably means privatisation of the NHS. Only last week, the House debated those issues, and over the weekend the head of the Royal College of Nursing added his voice, on behalf of the nursing profession, to those who are calling on the Government to abandon their reforms. It has therefore been a major surprise to discover over the past 18 months that the vast majority of NHS nurses who provide stoma care through health trusts in the UK actually have their salaries met by private commercial sponsors.

[Glyn Davies (Montgomeryshire) (Con)]

I am one of the 40,000—I contracted bowel cancer in the past and have had a colostomy. I also have a commercially sponsored stoma nurse, who is a guardian angel. We need to realise that a number of stoma nurses are marvellous. My stoma nurse made it clear to me that there were alternative products that I could have used, but it so happens that I accepted one from the same company that was paying for her. It was clear that I could choose any product that I wanted, and I was not put under any pressure.

[Jonathan Evans]

I respect my hon. Friend’s views on many matters and also have only praise for stoma nurses, but that does not take away many of the concerns in relation to sponsorship. Sponsors have a direct interest in the clinical decisions made by nurses, because they are the manufacturers of the products that are being prescribed under the NHS.

If the Secretary of State for Health had proposed the introduction of such an arrangement—the sponsorship of nurses by commercial organisations—as part of his current reforms, we can imagine the outrage it would have produced. “Newsnight” and the “Today” programme would have relentlessly questioned the Minister. We might even have seen a “Panorama” special on the BBC. The reality is that this extraordinary situation started more than 30 years ago and expanded to its current pre-eminence during the years of the previous Government.

The concept was thought up not by the commercial firms themselves, but by the health care trusts, which first approached the manufacturers to explore the commercial opportunities. The Department of Health does not appear to have played any part in the dialogue, not even in terms of establishing a protocol that could reassure the public that commercial sponsorship does not impact upon clinical judgment, just as my hon. Friend the Member for Montgomeryshire (Glyn Davies) has said that he is satisfied that that was not the case in his experience.

[Jim Shannon (Strangford) (DUP)]

Does the hon. Gentleman think that it would be acceptable if sponsorship were offered to help the patient or the health board itself?

[Jonathan Evans]

I am not going to propose the end of sponsorship, but we need more robust mechanisms of managing the potential conflicts of interest. I will develop that argument in the limited time available.

The Department of Health appears to take comfort in the professional code of nurses, which states:

“You must ensure that your professional judgement is not influenced by any commercial considerations.”

Surely, we can be sure that that code is being properly observed only if the Department undertakes, at least from time to time, some assessment of the commissioning decisions being made, but it has never done so.

In January 2001, The Guardian drew the practice to wider public attention, reporting that the NHS planned to crack down on these commercial sponsorship deals. The paper claimed that more than half of stoma nurses were funded by commercial deals that were worth— remember that this was a decade ago—up to £100,000 a year to each health trust. The RCN claimed that the manufacturers specified that a minimum percentage of patients had to be fitted with the commercial sponsor’s products.

The previous Government’s response to The Guardian’s revelations was to issue new guidance requiring NHS trusts to review all such arrangements in which suppliers met all or part of the cost of members of staff, discounts on drugs and equipment, or subsidised research and training as a condition of the contract. Nevertheless, Health Ministers maintained that they did not want to prevent collaborative partnerships between the NHS and private contractors—nor do I—but they also said that clinical decisions should always be based on evidence of what was best for the patient. I agree, but how do we know? Again, the Department did not undertake any assessment of its own to reassure itself that that was being done.

By 2003, sufficient concern was being expressed over these commercial deals that the then Government launched the first of what was to be a series of consultations on the arrangements for paying appliance contractors. By 23 January 2006, the Government issued a report on the consultation, noting:

“Specific and frequent mention was made of the issue of sponsored nursing posts in secondary care, with most parties”

—I stress, “most parties”—

“feeling that this practice was inappropriate, and that it should cease.”

The Department of Health’s response to that concern was to ignore it. It maintained its policy of resisting any assessment of impact of commercial sponsorship on commissioning decisions, and that strand of concern was, interestingly, subsequently eliminated from further consultation on these matters by Health Ministers.

In Scotland, the Scottish Executive took a completely different line. The Scottish Government decided that commercial sponsors could no longer directly subsidise specialist nurses in stoma care. The nurses were taken on and paid directly by the NHS. In fact, the British Healthcare Trades Association funded transitional support to the Scottish health boards for two years because of that dramatic financial change. The outcome was also dramatic. Free samples of stoma products were withdrawn from Scottish hospitals by the manufacturers that had always previously provided them, and it is estimated that, over the following five years, the number of specialist stoma nurses in Scotland fell by up to half.

In Scotland, therefore, the policy has been to ban commercial sponsorship—this addresses the concerns expressed by my hon. Friend the Member for Montgomeryshire and the hon. Member for Strangford (Jim Shannon)—with a consequential fall in both the quality and the availability of specialist stoma care to patients. By contrast, the policy of Health Ministers here has been to refuse to undertake any assessment whatsoever of the impact of commercial sponsorship on these arrangements within the rest of the UK.

As I hope I have made clear, I am not arguing for the Government to follow the Scottish policy. Patient groups have made it clear to me—this is endorsed by the words of my hon. Friend the Member for Montgomeryshire—that they recognise that the quality and the availability of stoma care in Scotland has fallen markedly. I want to make it clear that I am not questioning in any way the commitment or the concern of stoma nurses. Again, I can say that patient groups who have briefed me for this debate have made it clear that they deeply value the services that are provided by stoma nurses.

Nevertheless, as I indicated to the hon. Member for Strangford, there are real questions about conflict of interest, which successive Governments, sadly, have ignored. Let me draw an analogy with another sector that we debate a lot in the House: the financial services sector. Today, all financial services companies are required to satisfy the regulator that they have robust processes in place that are fully understood by all staff for managing conflicts of interest. Can we imagine a Minister standing at the Dispatch Box talking about concerns with financial services and saying that he is entirely satisfied there is no need for robust conflict of interest processes because he is satisfied that the professional code of those who work in financial services will always require them to act properly? That is a ludicrous proposition. There is a need for the management of conflicts to be subject to a similarly robust process in terms of stoma care.

In March 2011, Health Ministers were asked by parliamentary colleagues some basic questions to glean information on the number of stoma care nursing posts sponsored in the UK. No helpful response was provided, and the Department had no statistics to share with colleagues. So, for this debate, I have had to turn to the British Healthcare Trades Association for the figures. According to the association, stoma care manufacturers sponsor more than 200 of the 337 departments in England at a cost of £10 million a year. However, some of those manufacturers share the same concerns about commercial sponsorship that I am outlining. They only maintain their sponsorship for fear that other suppliers will otherwise corner the market. Those manufacturers have even expressed their concern to me that the current commercial arrangements might fall foul of the new Bribery Act 2010. Have Ministers undertaken any assessment of that?

On 15 October, I wrote to the Minister and received a response from him on 9 November confirming again that the Department had not made any assessment of the commissioning decisions of PCT employees sponsored by private enterprises. Again, he highlighted the fact that Ministers relied on the code of professional conduct, but he said in his letter that he was satisfied that that was a concern and that he had asked his officials to make further studies into the activity. I hope that the Minister can tell us the outcome of those studies.

The issues that I have raised relate to the maintenance of patient choice in the appliances that are prescribed for stoma care, and the concerns are shared by patients, charities and several manufacturers. Such concerns have been shown to be very well-founded by reports of recent discussions between major manufacturers of stoma care products and PCTs about what has come to be called off-script tendering, which you mentioned in the second part of your comment, Mr Hollobone. What is being proposed is that preferred or single supplier agreements are made between commissioners and manufacturers, in which the commissioning body would get a bulk discount for requiring all patients to take one manufacturer’s products. The arrangements would then bypass the operation of the drug tariff for the provision of such products, which is regularly reviewed on an annual basis by the Department.

Currently, a GP or suitably qualified nurse issues a patient with a prescription—an FP10—and the patient is free to take that to the manufacturer of their choice to have the product dispensed by a pharmacy contractor or an appliance contractor. The drug tariff industry forum considers the advantages of that system to be patient choice, cost and value for money, quality of products and a centralised system working on a local basis. The British Healthcare Trades Association has obtained legal advice that suggests the off-script arrangements being discussed by big manufacturers might be beyond the powers of health trusts. However, the question arises whether such arrangements could be taken forward as part of the Government’s health reform.

Those questions were raised by the Urology Trade Association, which is a body representing 95% of manufacturers, and by the Urology User Group Coalition on behalf of patients in evidence given last year to the Select Committee on Health. Unfortunately, follow-up questions by parliamentary colleagues confirmed the long-standing Department of Health response that no assessment of those issues had been undertaken either.

The thousands of patients who suffer bowel or bladder cancer and require ongoing stoma care deserve better. They should be assured that the Government will defend patient choice and maintain robust processes for managing real or perceived conflicts of interest in the commissioning of services. The Government should ensure the continued provision of specialist nursing advice and support and reassure us that it is in no way influenced by financial or commercial considerations.

[Mr Philip Hollobone (in the Chair)]

All has become clear. What are the Government going to do about it?

16:16

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

It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate my hon. Friend the Member for Cardiff North (Jonathan Evans) on securing the debate and on setting out so clearly his concerns. I want to spend the rest of the debate trying to address the points he has made.

I certainly echo my hon. Friend’s comments about the excellent work that Lynn Faulds Wood has been doing over the years to highlight and raise awareness of bowel cancer, not least through her personal experience. This month, the first ever Government funded “Signs and Symptoms” campaign for bowel cancer has been launched and the pilot of the roll-out of flexi-sigmoidoscopy has also begun. The Government can therefore rightly claim to be taking these matters very seriously indeed and to want to see significant improvements in survival rates from bowel cancer.

My hon. Friend also talked about the fact that—this might come as a surprise to some people who listen to this debate or read it afterwards—private involvement in the NHS is not some creation that has occurred in the past 18 months. The interrelationships between the NHS and the private sector have been there right since its foundation and were a growing feature of it during the life of the previous Administration.

[Glyn Davies]

Will the Minister give way?

[Paul Burstow]

Let me develop my point a tad further and then I will be more than happy to give way to my hon. Friend, although I hope to ensure that I conclude answering the questions of my hon. Friend the Member for Cardiff North.

My hon. Friend is absolutely right. As part of the reforms that the Government are introducing, we need to ensure that we close the loopholes that the previous Government left gaping in their legislation. We also need to ensure that, as a Government, we have transparency and clear rules under which people operate, so that we see competition as a servant of the patient’s interest and not as an end in itself. That is absolutely integral to those reforms.

[Glyn Davies]

I simply wish to say how shocked I was to discover the arrangements nearly 10 years ago, when I was given a colostomy nurse of my own. I was making the very point that my hon. Friend the Member for Cardiff North (Jonathan Evans) made—that by pushing the matter, I was threatening the future of the service in that particular hospital. If we try to address what is a legitimate concern, we must have a guarantee that there will be funding, so that we do not have a repetition of the Scottish experience.

[Paul Burstow]

That is a very succinct summary of the case that our hon. Friend has made in his Adjournment debate today.

Let me say something about prescribing arrangements because it may help if I set out the arrangements for these products or appliances, as they are usually called, in terms of the NHS in England. Prescribers operating under the NHS primary medical care contracts are able to prescribe as appropriate for their patients those stoma and neurology appliances listed in part IX of the drug tariff. There should be no barriers to prescribing a stoma product on the NHS, as long as it is listed in part IX of the drug tariff. NHS dispensing contractors, pharmacies, dispensing appliance contractors and dispensing doctors are able to dispense prescriptions of these products. Primary care trusts are responsible for ensuring that general practitioners are complying with their primary medical care contractual arrangements and that dispensers are complying with their contractual frameworks. Within that, there is a set of checks already in place to deal with the prescribing practices of GPs.

[Jonathan Evans]

In that context, will the Minister say that he deprecates off-script tendering arrangements, in which major manufacturers—in fact, multinationals—seek an arrangement with PCTs making them the sole supplier?

[Paul Burstow]

I will come to that part of my hon. Friend’s speech a little later, if he will forgive me.

New services associated with dispensing such appliances in primary care were introduced in April 2010—I stress that date—including emergency supply of appliances at the request of the prescriber, repeat dispensing service and, where pharmacies and appliance contractors choose, provision of appliance use, reviews and customisation of stoma appliances. Customisation—personalisation and greater choice—is an essential part of what we need throughout health care delivery.

The key point in my hon. Friend’s debate is sponsored nurses, the role that they play and possible conflicts of interest, highlighted by all hon. Members who contributed. There is concern in some parts of the industry, including companies in my hon. Friend’s constituency, which led him to write to the Minister of State, Department of Health, my right hon. Friend the Member for Chelmsford (Mr Burns).

[Jonathan Evans]

And patient groups.

[Paul Burstow]

My hon. Friend rightly mentioned patient groups and I pay tribute to their work.

Stoma specialists play a vital role, as we have heard, supporting patients adapting to a life with a stoma, which often involves a number of physical and psychological changes. Stoma care patients face a number of issues, many of which are still considered taboo and can lead to embarrassment and distress. Services provided by stoma nurses are therefore much valued, as we have heard today, by those receiving them.

I am aware that the employment of some specialist nurses is funded by some manufacturers of stoma products to support patients in hospital and in their own homes. That can also lead to concerns, which have been so well set out today, about potential conflicts of interest. Although I recognise the potential for conflicts of interest, my hon. Friend will forgive me if I repeat the code of professional conduct that he mentioned, because it is relevant to this point, and I will mention why it remains relevant.

The code states that nurses must ensure that their professional judgment is not influenced by any commercial considerations. Any concerns about professional conduct are of course within our framework of regulation of professional groups, which is a matter for the Nursing and Midwifery Council. As a result of my hon. Friend securing this debate, I have made further inquiries of the NMC and the Royal College of Nursing, asking whether they are aware of any concerns being raised. The answer was no. I suspect my hon. Friend would say that that is because they are not reviewing and monitoring this matter either.

I will follow up on the report published some years ago by the RCN, which my hon. Friend mentioned, because although it is a little bit out of date it clearly speaks to some of the issues that he talked about. I will go further than that, because officials have had discussions of the sort mentioned by my right hon. Friend, in his response to my hon. Friend’s letter of November 2010, with suppliers and trade associations on sponsorship. I understand that one prominent trade association, the British Healthcare Trades Association, is discussing the industry’s views with its members. We have yet to receive the final feedback on those issues from the industry. I hope that, through this debate, we can ensure that we get that response, because the Department will certainly want to see it.

The BHTA code of practice—another code of practice—for health care and assistive technology products and services states:

“No pressure must be exerted on the sponsored individual to favour the sponsoring company’s products over any other. At all times the products supplied should be that which the professional considers is best suited to the client’s needs.”

Clearly, the trade bodies themselves recognise that potential risk and have identified it in their own codes of conduct with regard to their members.

On localised formularies and tendering, I am sure my hon. Friend is aware of the pressures facing NHS organisations as a result of our ageing population, and the increased diagnosis and treatment of cancers that he mentioned. On top of that, the NHS obviously has to achieve the Nicholson challenge of £20 billion of efficiency savings by 2015 through a focus on quality, innovation, productivity and prevention. Every saving made from that is being reinvested in patient care to support front-line staff. As we move forward, it is very important that NHS procurement is undertaken at national, regional and local level via the NHS supply chain, regional collaborative procurement organisations and individual trusts. Some NHS organisations may also use formularies to form the basis of a recommended list of products for prescribers, which is intended to provide a sufficient range of choice to meet the clinical needs of most patients. They may also run tenders to acquire local supply of these products. Local formularies or tenders are generally prepared by multi-disciplinary teams and reflect, as far as possible, best clinical practice.

I understand the concern that the hon. Gentleman has about choice and I appreciate the importance that stoma patients often place on continuing to receive a product in which they have confidence. We want to ensure that patients are at the heart of the clinical decisions that are being made about them, which is one of the reasons that we want to see a wide range of products available through the drug tariff to meet different needs of individual patients. However, and it is important that I stress this, any local arrangements of the sort that the hon. Gentleman has described do not override the clinical judgment of the GP who is still free to prescribe products listed in part IX of the drug tariff to meet specific needs of patients. Any decisions to undertake local procurement activity rest with local NHS organisations—primary care trusts now, clinical commissioning groups in the future—and we expect them to act in accordance with the principles when they are exploring the opportunities for tendering.

When it comes to patient choice, we want to go further than that. As part of our commitment to this policy of any qualified provider, we identified continence services as a good candidate for the approach. We felt that the competition should be on quality and not on price.

[Jonathan Evans]

Before the Minister concludes his remarks, let me again raise one question in relation to sponsored nurses. He referred to the code of professional conduct, which places the onus on the nurse. Nurses have to exercise independence of thought while knowing that their salary is being met by a commercial sponsor. Is it not the case that the position of those nurses would be enhanced if the Government were to ensure that there was a robust arrangement for the management of conflicts of interest, which manufacturers knew existed, rather than leaving all the onus on the nurses themselves? That is placing too much on them and not ensuring that the public are satisfied that we have the same processes for requiring management of conflicts that we require in other public policy areas.

[Paul Burstow]

The Government recognise that sponsored nurses provide a valued service. We have heard that very well expressed in this debate. There is a potential for conflict of interests. There are codes that provide a framework in which those decisions should be made. My hon. Friend has presented very clearly his concern on behalf of a range of patient groups that that is not working as well as it needs to. We have already indicated our desire to engage with the trade associations and we need to carry that through to its conclusions. We are looking forward to the response of the trade associations. I would certainly be happy to give further thought to the points that my hon. Friend has made during this debate. Our reforms are very much about ensuring that conflicts of interest are identified, managed and transparent. I hope that, as a result of this debate, we have brought this issue to this Chamber in a way that is very helpful so that we can move it forward after today.

Micro-Businesses

Wednesday 25th January 2012 Westminster Hall

[Mr Philip Hollobone (in the Chair)]

We cannot mention the word micro-business in this House without thinking of the hon. Member for Newton Abbot (Anne Marie Morris). We now have a very important micro-debate on micro-businesses.

16:29

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

I look forward to serving under your chairmanship, Mr Hollobone, and I am delighted to see the Minister in his place. As you rightly say, micro-business is absolutely at the heart of what I have been doing in my time here in the House. Perhaps I should start by saying that there is no division or debate about the importance of micro-businesses. I am absolutely clear that the EU and the UK recognise their importance and the role that these very small businesses play in growth and community stability. The challenge for us today is this: what can we do to ensure that Government policy is best shaped to help that growth? I will consider that in relation to four different areas.

First, we need to consider how we might clarify what we mean by a micro-business. Secondly, we need to examine regulation. We need to consider what the Government could do to reduce the burden of regulation and to reduce not just the amount of taxation—that is a difficult issue—but the bureaucracy that goes with it. Thirdly, I should like to consider how we might help micro-businesses to get access to finance and to consider alternative sources. Finally, I should like to consider the culture change that we need to make to help this country to grow micro-businesses and to help young people to see them as a career route to which they might want to aspire.

In the UK, we do not have a definition of a micro-business. The EU has definitions; they are not compulsory but voluntary ones. It defines small and medium-sized enterprises, micro-enterprises and micro-entities. Perhaps when the Minister is considering any changes at EU level, he will suggest that the last two names are too similar. Let me explain the difference between a micro-enterprise and a micro-entity. A micro-enterprise is a business with fewer than 10 employees and a turnover of less than €2 million. By contrast, a micro-entity still has a cut-off of 10 employees, but the turnover cut-off is €700,000. There is an additional option test of assets worth up to €350,000. Those are ceilings to the definition, and the criteria—whether we consider the number of employees, turnover or assets—are optional, so it is a very flexible definition.

As a matter of practice, the UK Government and particularly the Department for Business, Innovation and Skills have accepted the ceiling in most cases, but it is interesting to note that the Department for Work and Pensions has recognised that there is a significant difference between those businesses with fewer than five employees and those with more than five employees. It has recognised that a business with fewer than five employees does not have the same managerial support and expertise. Therefore, the burden of regulation is that much greater. In secondary legislation under the workplace pensions reform, the DWP said that micro-businesses should mean businesses with fewer than five employees. That is particularly relevant now, because the EU is considering reviewing the definitions again, while it reviews the Small Business Act.

The Minister will know that I have argued for some time that the definition of fewer than 10 employees encompasses too large a group of businesses to enable the Government to focus their policy, not that I would choose a smaller definition to exclude businesses from relief. On the contrary, unless the definition is realistic and properly applies to a recognisable group, there will be fewer exemptions from which small businesses will benefit.

My real concern, however, is that when the European Union looks again at the definition, it may choose to remove the flexibility and instead have a fixed definition, with a fixed number of employees and turnover. That will significantly reduce the UK’s ability when it wishes to use those definitions, as indeed it may be required to under EU legislation. So I think that it is for the Minister and the Government to decide now what they think the right definition is, not only so that they can lobby the Small Business Act review group, but for their own purposes, so that should they want to use a small definition for a tax scheme or in relation to pensions, they still have the flexibility to do so.

Both the EU and the UK are committed to reducing the burden of regulation on these very smallest of businesses. Indeed, for new legislation, the EU has a lovely mantra: “Think Small First”. That is spot on. Going forward, it has concluded that any new legislation should, de facto, exclude micro-entities—that is the smallest size that it has come up with—unless there is a good reason for including them. That sounds like a good starting point. It also says that for the next size up—micro-enterprises—any new legislation should have a light-touch approach.

[Andrea Leadsom (South Northamptonshire) (Con)]

My hon. Friend has done extraordinarily well to obtain this debate. Micro-businesses are such an important part of our economic growth going forward. Does she agree that as more than 90% of very small businesses are UK-only, it is astonishing that the EU is telling them what to do at all?

[Anne Marie Morris]

My hon. Friend makes a very good point. Such businesses need the freedom and flexibility to do what entrepreneurs do extremely well. Her intervention is absolutely en pointe.

Turning to the UK, I am pleased that the Government have introduced a three-year exemption on new regulation, and they are to be commended for that. The real challenge for the EU and the Government is what do we do about the pages and pages of existing regulation. The Government have introduced the red tape challenge, and I commend them for that. They have already looked at 12 sectors, and there are five more to come. I believe that they will report in three months or so, which will be valuable. Will the Minister adopt the EU mantra, “Think Small First” when he considers what can be got rid of? The EU has also gone through a simplification procedure on a number of occasions, but at the end of the day, we need to move faster and further.

The Minister has already looked at one area that needs further review from the perspective of micro-businesses: employment law. The British Chambers of Commerce has raised the issue with Ministers and in its various reports, but recruitment and dismissal procedures are onerous for very small businesses. No one wants to take away an employee’s rights, but the overall protocols and processes are complex. The second issue that small businesses have raised with me is health and safety. Lord Young has done some valuable work, and I look forward to it being implemented so that low-risk businesses can be excluded from much of the burdensome regulation and a more pragmatic approach is taken to those in higher-risk categories.

Still under the heading of regulation, I want to raise some issues about taxation. Paying less tax is clearly something that we would all be happy about, but it is the burden of the process that causes real pain for very small businesses. First up is fuel duty. I would, wouldn’t I?—I have been approached by a number of small businesses—plead with the Minister not to implement the fuel duty rise in August and to look again at a price stabilisation mechanism, because that would make the cost of petrol affordable and predictable for the smallest businesses. Both things are equally important.

Turning to national insurance, the Government have a good record on the rate and the holiday that they introduced for new businesses, so that they would have relief from employer national insurance for their first 10 employees. I suggest that we could allow mini-micro businesses—we have so many definitions on the table at the moment, but those with fewer than five employees—who take on up to four employees, so those with a total work force of four, not to pay employer’s national insurance for the first year, although employee contributions would stay in place. That would enable them to assist with the cost of the training and general upskilling of those new employees.

The group employing one to four employees represents 7% by turnover of the private sector, so it is not a small group for which I want to the Government to provide support. They are already considering the challenge of aligning PAYE with the national insurance regime, and I look forward to the results. May I encourage the Minister and his Cabinet colleagues in the Treasury to look at simplifying the classes, because there are so many that the average bookkeeper is totally confused?

I turn now to business rates. Again to the Government’s credit, they extended the small business rate relief and said that the scheme they were introducing would apply for a further year. I suggest to the Minister that that becomes a permanent feature, or lasts at least until the end of this Parliament. It is valued by small businesses, and that really would make a huge difference. However, business rates give rise to process issues, the first of which concerns valuation. Why do so many of the large business players, such as Tesco and Sainsbury’s, seem to be paying less than the smaller players? There is something wrong with the way in which the valuation criteria work, and they might sensibly be reviewed. I am often approached by small businesses that believe that they are suffering hardship and are frustrated by the appeals procedure. It is so bureaucratic and takes so long from start to finish that generally they are out of business by the time that they have finished the process, which simply cannot be what the Government intend.

My final point on business rates concerns empty properties. I accept that an incentive is needed to bring such properties back into use, but allowing six months, or three months for retail, to do so is not long enough, and the penalty for leaving them empty longer than that is disproportionate.

I turn now to VAT—a tax that is necessary and without which we would not be able to take this country back into the black. None the less, it has some wrinkles that the Minister and his Treasury colleagues might helpfully look at. We have on a number of occasions talked about the possibility of reducing rates for restoration and repair of houses, bringing the rate down to 5% rather than the full 20%. It seems to me that, given the pressure on the Government to increase the available housing stock, now is the time to look at that again.

Colleagues have considered a reduced rate of 5% for the accommodation charge for bed and breakfast and in hotels. Given that this is our Olympic year, why do we not set the rate at 5%, just for this one-off tax year, and let it be part of our marketing campaign to get people to visit the UK and enjoy the Olympics?

Perhaps one of the biggest challenges is the VAT cliff: once a business is earning £73,000, it has to register for VAT, and if it provides services to individual customers who are not VAT registered, the increase in profitability that it has suddenly to achieve is significant. I suggest that we look at introducing a ratchet mechanism or a VAT rebate, which will ease the situation so that the full force of VAT does not affect the business in the first year.

[Jeremy Lefroy (Stafford) (Con)]

Does my hon. Friend accept that in some cases the VAT threshold—the cliff edge—acts as a disincentive to growth?

[Anne Marie Morris]

My hon. Friend makes my point extraordinarily well. It prevents growth, and if we can find a way of easing the burden, that would be well worth while.

My final point on VAT concerns the enforcement challenge. Only last night a small business came to me saying that it was one week late with its VAT and had been asked to pay £955 as a penalty on an original bill of £6,370. Clearly, we want people to pay, but that business was only a week late and the penalty seems disproportionate.

The third issue is access to finance. The challenge is how to make better use of what we have and how to find new sources and new organisations to provide money to very small businesses. Under the existing arrangements, the problem for the banks is that they are in a cleft stick. Given the capital adequacy requirements, if they offer a loan to what is inevitably a risky start-up business, they have to do so at very high rates, so the loan might not be accepted. Can we consider capital adequacy adjustment for the banks—just for loans to micro-businesses, not for the rest? The Government schemes to provide equity, debt and so on are aimed at the whole SME community, ranging from those with no employees to those with 250. Banks are in business to make money and are targeting most of their help at the larger businesses with good, clear business plans and a track record. We need some ring-fenced schemes specifically for micros. The Minister might like to consider that with his Treasury colleagues when we get to credit easing.

The Government are consulting on new sources of finance until the end of this week. The Federation of Small Businesses has looked at other sources of funding and will share its findings with the Government. I recommend that the Government look at what is going on in central and eastern Europe, in Asia and in south America—countries that have more experience than we do of different funding mechanisms.

I have an additional suggestion. One of the challenges faced by most small businesses is that, when they start up, they cannot separate the risk and the liability of the business from personal assets and find themselves having to mortgage their house and give personal guarantees. Can we not consider extending the limited liability partnership?

16:45

Sitting suspended for a Division in the House.

16:57

On resuming—

[Mr Philip Hollobone (in the Chair)]

It is likely that we will be called to another vote imminently, but I shall call the hon. Member for Newton Abbot (Anne Marie Morris), who might want to use these next two or three minutes to wind up her remarks.

[Anne Marie Morris]

I shall repeat my last point, because it might have been lost. I should like the Minister to consider using the limited liability partnerships legislation to create a new limited liability sole trader equivalent, which would enable the enterprises to have the limited liability benefit without the corporate registration requirement.

In conclusion, I believe that the Minister has enough to think about, and I should like him to go away and indeed think about the matter, and then come back and tell me what might and might not be possible. I recognise that not only does the detail need to be addressed, but that we have the bigger challenge of changing the culture through our education system—primary, secondary and tertiary—our local businesses, which might support these little baby businesses, local government, which can provide incubators and start-up units, and our local enterprise partnerships, which can also provide support and guidance. I therefore look forward, with pleasure, to the Minister’s response.

[Mr Philip Hollobone (in the Chair)]

The Minister with responsibility for small businesses, but with a big heart: Mark Prisk.

09:54

[The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk)]

You are very kind, Mr Hollobone. Within the 10 minutes that I gather I have, I should like to try to respond to the smorgasbord of ideas suggested by my hon. Friend the Member for Newton Abbot (Anne Marie Morris). Although this is indeed a debate about micro-businesses, it is nevertheless significant—colleagues are still streaming back from the vote in the main Chamber.

This country has a strong tradition of entrepreneurship, and we as a Government really do have an ambition to ensure that we retain, and indeed strengthen, our position as one of the best places in which to start and grow businesses, throughout their life cycle—start-ups, micro-businesses, small and medium-sized enterprises, and so on. About 4.3 million micro-businesses exist in the UK, and yes, they represent about 95% of all enterprises in the country. In that cohort lies a huge variety of enterprise, everything from the university high-tech business—the spin-off—right the way through to the traditional family concern. Therefore, the Government need to be clear and effective in focusing on the right long-term framework for all types of enterprise, regardless of size and throughout their development. That will relate, in a moment, to the question of definition.

My hon. Friend has rightly set out her thoughts about how we can best help micro-enterprises, and I want to put very firmly on the record, as you have done Mr Hollobone, that with her enthusiasm and knowledge she is one of the best champions in this field. We could do with more champions like her.

I shall address the question of definition, and then come on to some of the other issues, at reasonable speed I am afraid, given the time before me. The issue that has been highlighted is: how do we define micro-enterprises? In some cases, people have argued that we might look at that group of up to and no more than four employees—

[Mr Philip Hollobone (in the Chair)]

Order. I am sorry to interrupt the Minister, but what we feared would happen has happened: there is another Division in the House. I encourage Members to come back as quickly as possible. I should like to restart the debate at 16 minutes past 5, at the latest.

17:01

Sitting suspended for a Division in the House.

17:09

On resuming—

[Mr Philip Hollobone (in the Chair)]

I thank hon. Members for returning so quickly. We have until 5.21 pm.

[Mr Prisk]

I shall recap, although Hansard will seamlessly slide through the process, unlike the rest of us.

I was trying to respond to my hon. Friend’s suggestion that we need to revisit the definition of a micro-business, not least to make the policy more effective. This has largely revolved—in our previous discussions, including with other hon. Members—around whether we need to narrow that definition from 10 employees to fewer than five to target better the policies, as my hon. Friend highlighted.

I understand the point. I share the view that when we set policy, we need to ensure that it really addresses those people we are trying to help. It is also true that the Treasury will rightly want to ensure that when we are using taxpayers’ money, we direct financial support accurately at what they like to call leakage, which is a strange phrase but one that is understood in terms of the money being spent not necessarily reaching the people one is trying to support.

The definitions that we use are quite well established across Government and within the Office for National Statistics. As my hon. Friend also rightly said, those are clearly understood and are adopted on the basis of policy development in the EU as well. Without securing a change in definition across Whitehall and with the ONS and the EU, there is danger of confusion between different definitions when we develop policy.

Let me give some practical examples. At the moment, we are in the middle of discussions with EU partners about exemptions for micro-businesses from future regulations, to which my hon. Friend alluded. These are important. If we were to engage in a process, which would probably take a year or so to establish, according to which we might wish to define micro-businesses in a way that is different from the EU as a whole, clearly there would be a problem. It would be similar, in a sense, to our discussions with our EU partners over the next round of structural funds, which would start in 2014.

It is also true that we need to be careful about domestic policy and how that is applied. For example, my hon. Friend mentioned the micro-business moratorium, the moratorium from regulation, giving micro-businesses relief from the burden of additional changes in rules and red tape. We have secured significant reductions: the two that immediately leap to mind are, first, the postponement of the change in rules banning the display of tobacco products in shops, which is now only applicable to supermarkets, giving small businesses three years to consider how their business might be developed and, secondly, giving them the opportunity not to face those costs up front.

A similar case with a greater financial benefit to the smaller firms is the exemption that we secured, mentioned in part by my hon. Friend, on auto-enrolment for pensions. Again, that is a big saving for small businesses. Were we now to change the definition, there is a danger that there would be an immediate impact on firms employing between five and nine employees that are currently enjoying micro-business status.

I should like to highlight that, although there are benefits from considering whether the definition is accurate, our concern would be that there are obviously adverse consequences as well.

[Anne Marie Morris]

Does the Minister agree that it is crucial that we engage with the debate at European level about what those definitions should be, so that they work not just for other European member states, but for ourselves? Although I accept what he says, it is perfectly possible, without conflict, to have a UK definition that works within this ceiling umbrella, which the EU has created.

[Mr Prisk]

I think that that is true. My only concern would be that, as the policy is applied, if a business found itself defined as a micro-business in terms of one set of policies but not another, there is a danger of confusion in the very group that we are trying to help. I understand my hon. Friend’s point. We are not oblivious to the fact that, often, government of all forms probably thinks of small businesses as businesses employing 100 people, let alone ones employing three, four or five people, as we are discussing.

I shall deal with the definition, then I will get on to the practicalities in respect of what we are doing to help this important group. I am not seeking to dismiss the issue; I am trying to explain why the Government would be cautious about embarking on this path. I am happy—I have said it to my hon. Friend before, but am happy to put it on the record—to engage with her and the all-party parliamentary group to look precisely at how the definitions work, where the pinch points lie and how Government policy can best help this group.

My hon. Friend mentioned numerous important issues, and I will canter through them briefly in the few minutes that I have. The first is tax. I am grateful for her support for the changes that we have made, for example to small business rate relief. We have extended that holiday for smaller businesses for a further six months from October this year.

I understand the point about appeals. It is always a little challenging for a sole trader to take on the process. I trust and will ensure that my ministerial colleagues in the Department for Communities and Local Government consider that, and it is certainly high on our agenda.

Tax enforcement is always a sensitive issue. Clearly, it is principally a matter for my colleagues in the Treasury, but as the Minister with the privilege of responsibility for small businesses, I can say that we occasionally have a direct dialogue—he said carefully—with my Treasury colleagues and the tax and revenue authorities. They need to understand that ultimately, all of us, as public servants, are paid for by those same businesses, so the manner of enforcement is important. A careful distinction must be made between the real rogue and the person who has made the odd mistake on their VAT return late on a Sunday afternoon at the end of a working week. It is an important one.

I am also grateful to my hon. Friend for supporting what we have achieved on national insurance. She raised numerous other issues about tax, including fuel duty and the VAT threshold. Ironically, the VAT threshold—the cliff edge, as I think our hon. Friend the Member for Stafford (Jeremy Lefroy) called it—is, in a way, a cutback to the argument about how to define micros. We must be careful, but I welcome the points raised by my hon. Friend the Member for Newton Abbot. As I would like to remain the Minister with responsibility for business and enterprise, I will not pre-empt what the Chancellor might or might not say in his Budget in a few weeks’ time. However, those are good representations, and I am sure that the Treasury is listening.

Access to finance is an important issue. We have tried to think about micros. The enterprise finance guarantee was put in place specifically for those businesses without security to offer when seeking a loan, and it is very important for a micro-firm. Under the Merlin agreement, lending to small businesses increased in the past year over the previous year. Perhaps it might not achieve the full 15%, but we have yet to see the final figures.

[Anne Marie Morris]

Has my hon. Friend’s Department asked the banks to break down what sizes of business are benefiting from the schemes, so that he can see how many sole traders and mini-micros with fewer than five employees have benefited? That would be informative.

[Mr Prisk]

The Small Business Economic Forum regularly meets the small business organisations and the banks. We will ask it for that kind of breakdown, so that we can get a better understanding of the scale of micro, small and medium. It is important.

I agree with my hon. Friend that some of those proposals do not necessarily reach the smallest businesses. That is why we have supported the community development finance institutions. Working through the regional growth fund, we have put together a package in response to an application, so that some £30 million of taxpayers’ money can unlock something like £60 million of lending. The money involved is very often the several thousands of pounds that a micro-business needs to make the difference between a good idea that becomes a profitable venture, and a good idea that remains just a good idea. It is an important area and very often it is an area where, frankly, retail banking struggles to justify the work involved to deal with such loans, and CDFIs are well placed to fill that gap.

In finance terms, the business angels are a crucial part of this equation. When we think of micros, we tend to focus simply on the type of lending—whether that is loans, credit cards or whatever—that the smallest of enterprises engage in. But I am a strong believer that, alongside the larger venture capital funds, we need to ensure that business angels are encouraged. That is why we have put together a co-investment fund of £50 million, to start to grow that market substantially.

[Anne Marie Morris]

That is a great idea, Minister; my challenge is to get that communicated. Can we ensure that the local enterprise partnerships have a role in that communication, because the money is there but nobody knows about it? The new website—the “Business In You” website—has 851 of these schemes listed, and it is fantastic, but it is not something that is easy for someone to work their way around.

[Mark Pritchard]

Indeed. It is not too difficult, on the basis that I can work my way around it, so it is fair to say that it is not too challenging. Nevertheless, I understand the point that my hon. Friend is making and, yes, communication is important. That is the purpose of the campaign that has been announced by the Prime Minister.

To conclude, we very much welcome this debate. It has been a useful opportunity—albeit one that has been slightly interrupted—to address the questions of what we mean by micros and how can we best help them. As a Government, we are determined to provide the support that micros need and I am confident that in the years ahead the UK will remain one of the best places in which to start, invest and grow a business.

Question put and agreed to.

17:20

Sitting adjourned.