House of Commons

Monday 10th September 2012 Commons Chamber

Monday 10 September 2012

The House met at half-past Two o’clock

Prayers

Monday 10th September 2012 Commons Chamber

[Mr Speaker in the Chair]

Business before Questions

Committee of Selection

Ordered,

That Michael Fabricant, Mr Mark Francois and Angela Watkinson be discharged from the Committee of Selection and Mr David Evennett, Anne Milton and Mr John Randall be members of the Committee until the end of the current Session.—(Mr Randall.)

Oral Answers to Questions

Monday 10th September 2012 Commons Chamber

The Secretary of State was asked—

[Robert Halfon (Harlow) (Con)]

1. What estimate he has made of the number of people moving from benefits to work in Harlow constituency in each of the last six months.

[The Minister of State, Department for Work and Pensions (Mr Mark Hoban)]

Figures are not available for flows from all benefits into work. Over the past six months, 3,330 people have left the claimant count in Harlow. Research suggests that, nationally, around two thirds of people leaving jobseeker’s allowance enter work.

[Robert Halfon]

I thank my hon. Friend for his reply and congratulate him on his appointment. Is he aware that the number of apprenticeships in Harlow has increased by 76%? Will he also note that we have a long way to go to increase employment in Harlow and therefore support the Harlow jobs fair that I am backing, which is supported by 100 local businesses, Harlow jobcentre and Seetec, and throw his weight behind it?

[Mr Hoban]

First, I thank my hon. Friend for his congratulations. We have a lot to do, but the numbers of people in work have increased since the Government came to office. I congratulate him on setting up the jobs fair and am delighted that Jobcentre Plus has worked with him to ensure that it is as effective as it can be so that it gets as many people in Harlow as possible into work.

[Mr Peter Bone (Wellingborough) (Con)]

2. What recent assessment he has made of employment levels in the private sector.

[The Minister of State, Department for Work and Pensions (Mr Mark Hoban)]

The latest figures, covering February to April 2012, show almost 23.5 million people employed in the private sector. That is a rise of 222,000 on the previous quarter and more than 900,000 since 2010.

[Mr Bone]

What a splendid answer. Would the Minister like to increase that figure a little more? A company in my constituency has won an export order for 90 air conditioners to Egypt, but it is being blocked by red tape from the Foreign Office from carrying out the order. Could he provide some help and encouragement so that the order can happen?

[Mr Hoban]

My hon. Friend is absolutely right to highlight the need to rebalance the economy and to encourage more businesses to export. His comments will have been heard by our right hon. and hon. Friends in the Foreign Office and I shall ensure that they are made known to them directly.

[Kevin Brennan (Cardiff West) (Lab)]

We know that nearly 1.5 million people in part-time work would like to have full-time work, so why do the Government cut their tax credit support if they cannot get more hours?

[Mr Hoban]

The vast majority of people in part-time work actually want to work part time, but we need to find more ways to encourage people who want to work full time to do so and we will work very closely with Jobcentre Plus to ensure that those opportunities are available.

[Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)]

The private sector and private sector employment can be supported if there is a strong network of jobcentres. Will the Minister explain why his Department plans to close the Old Swan jobcentre in my constituency, making it harder for businesses to recruit workers?

[Mr Hoban]

The hon. Lady will be aware that the Old Swan jobcentre in her constituency was subject to an arson attack in May. The cases dealt with at the centre and the 63 members of staff working there have been moved to the West Derby jobcentre. I am confident that they can provide the same quality of service from there as they could from their previous centre.

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

3. What discussions he has had with officials in his Department on the long-term financial benefits to the Government of up-rating frozen expatriate pensions.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

We estimate that the cost of uprating frozen pensions would be about £655 million a year. We believe that this is substantially in excess of any hypothetical savings arising from changed migration behaviour that might follow a change in policy on frozen pensions.

[Stephen Phillips]

I am grateful to my hon. Friend for that answer. He will be aware of the Oxford Economics report published last year that suggested that the Government could make a net saving overall in relation to pensioners who wish to retire overseas but are incentivised not to do so by the frozen pension situation. He will also be aware of the grave injustice against British pensioners who have already retired overseas whose pensions have been frozen. Now that there appears to be an economic case for righting that historic wrong, will he undertake to reconsider the question so that those who retire overseas can enjoy the fruits of their work in this country?

[Steve Webb]

I have indeed read that report, which I think is flawed on a number of grounds. To give an example, it assumes that if we uprate pensions, far more people will emigrate, and it counts savings from health and social care that might not materialise for 15 to 20 years while counting the costs up front. Our colleagues in the Treasury are not so far seeking policies with large costs for the current comprehensive spending review period that will give savings in 2030.

[David Mowat (Warrington South) (Con)]

4. If he will make it his policy that the National Employment Savings Trust should have greater freedom to compete in the market for occupational pensions.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

NEST has been designed to complement, rather than replace, existing good-quality pension provision by offering low charges and simple choices to a target group of earners and employers. The Work and Pensions Committee has suggested that the NEST constraints might not be working in the way that was intended, potentially resulting in consumer detriment. We think that the evidence is not unequivocal and so are gathering further evidence to determine how to proceed.

[David Mowat]

I thank the Minister for that answer. He will be aware that for the past two decades we have had the highest pension charges in the OECD. Part of the solution for the next two decades is NEST, yet there are a number of restrictions on its operating model that are really quite onerous, owing to an onerous interpretation of state aid rules. Will he undertake to look at that again before auto-enrolment comes in, which could save many hundreds of thousands of people a lot of money?

[Steve Webb]

It is important to stress that NEST is not an end in itself, but a means to an end, and the end is making sure that all employees under auto-enrolment have access to good-quality, low-cost pension provision, not necessarily through NEST, but because of the effect of NEST in the market. As things stand, in the early days of auto-enrolment, which starts in about 10 days’ time—I will therefore not change the rules right now—the early adopters of auto-enrolment are getting good-quality, low-cost pensions because there is huge competition, but we need to ensure that that remains the case.

[Nic Dakin (Scunthorpe) (Lab)]

Why does the Minister not stand up for lower-income savers, stand up to Brussels and make the case for setting NEST free now?

[Steve Webb]

We are, at the moment, continuing with Labour’s constraints on NEST, and the reason is that those constraints were designed to encourage NEST to focus on low-income savers. It has therefore innovated on, for example, products and on language and has been a good thing. If we think that NEST is unable to achieve the job it is there for, we will change the rules, but the early evidence does not support that.

[Angie Bray (Ealing Central and Acton) (Con)]

5. What recent steps he has taken to prevent benefit tourism.

[Mr Mark Spencer (Sherwood) (Con)]

8. What recent steps he has taken to prevent benefit tourism.

[Mr Marcus Jones (Nuneaton) (Con)]

11. What recent steps he has taken to prevent benefit tourism.

[Gareth Johnson (Dartford) (Con)]

16. What recent steps he has taken to prevent benefit tourism.

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

The European Commission wants to end the habitual residence test. As a result, we would have to pay benefits to EU migrants as and when they arrive and they would not have to prove that they have been here, are working and have a residence. I believe that that is fundamentally wrong, as do the Government. The habitual residence test is vital to protect our benefits system and to stop such benefit tourism. I also do not believe that the EU has any rights in that area, and we are working with other countries that feel much the same.

[Angie Bray]

I thank my right hon. Friend for that answer. Does he agree that any measures that encourage benefit tourism place an intolerable burden on counties, such as ours, that provide generous welfare provision and that we need an agreement across Europe to protect countries from that threat?

[Mr Duncan Smith]

Yes, I agree with my hon. Friend. I referred to working with other countries, and a large number of other member states also have real concerns about the move and believe that they, too, will be affected. Among them are 17 member states, including Germany, Netherlands, Sweden, Denmark and Finland, that attended a conference we held and they all expressed their concern. We are working with them on a set of agreed principles that we will present to the EU, which I hope will end this nonsense.

[Mr Spencer]

I am glad to hear that the Secretary of State will be robust in his dealings with the EU. What message does it send to hard-working taxpayers in Sherwood who, when they need the safety net of the state, find that it is being abused by those who simply step off a boat and who have not contributed to the system in the UK?

[Mr Duncan Smith]

My hon. Friend is of course right that we want to support people who, through no fault of their own, fall out of work, and we want to do that for our own citizens. We also accept that for those who have been here for a period of time—hence the habitual residence test—because it is important to support those who are genuinely resident in the UK and delivering something for the UK economy. His constituents will understand fully that it is right to do that. However, it is not right for us to end up with a system—other countries agree on this—in which someone can literally arrive here and, only days after, decide that they are not working and, therefore, they are eligible for benefits. That would be quite wrong for the British taxpayer.

[Mr Jones]

My constituents will be horrified with this proposal from the EU Commission but heartened by the robust stance my right hon. Friend is taking. Does he not agree that, in addition to a consensus across Europe on the issue, we need a firm and robust consensus across this House? Therefore, what representations has he received from the Labour party in this regard?

[Mr Duncan Smith]

I actually have not received any representations from the Labour party but, to be fair, I did not ask for any. I always look forward to seeing my opposite number over a drink, although we have not had one recently, and he is more than welcome to make representations. He should know that we have had good representations from other countries that were not part of this, including Portugal, Slovakia and Slovenia. I want to put it on the record that the costs of the proposal could be enormous. If we did not have the British residency test, it is estimated that right now the cost would be something in the order of £155 million, although that could change.

[Gareth Johnson]

I welcome the Secretary of State’s announcement on the habitual residence test. Does he agree that the test is vital in preventing abuse of our welfare state? Perhaps most of all, however, surely we should be deciding on such issues, not the European Union.

[Mr Duncan Smith]

Again, I agree with my hon. Friend. We already have an issue that should be dealt with beyond that, with people who declare themselves as self-employed on arrival here—some coming in as sellers on the street, and so on. There is a way in which they can claim benefits. We do not want to open that up to everybody; we would rather deal with that but not lose the habitual residence test, which is my plan.

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

Will the Secretary of State none the less acknowledge that, in fact, migrant workers are more likely to be in work and disproportionately less likely to be claiming benefits than non-migrants? Does he not think it important that we conduct the debate with the facts accurately and reliably portrayed?

[Mr Duncan Smith]

I agree that we want to ensure that the door is open to those who want to come and work here and benefit the UK. That is part of the agreements in the European Union. However, we have concerns, and we are not alone: 17 countries and others are beginning to ask why this is necessary. Freedom of movement exists; what the habitual residence test does is protect our understanding of that, not damage it. Indeed, we have no intention of damaging it, but we certainly want to protect British taxpayers from any kind of change.

[Graham Evans (Weaver Vale) (Con)]

9. What recent estimate he has made of the number of people in work not saving for a pension.

[Mark Garnier (Wyre Forest) (Con)]

14. What recent estimate he has made of the number of people in work not saving for a pension.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

Around half of all employees—around 13.5 million people—are currently not saving in a workplace pension. That is why we are pressing ahead with the introduction of automatic enrolment, to transform our long-term savings culture and support people in taking responsibility for their retirement.

[Graham Evans]

Can my hon. Friend confirm that our policy of auto-enrolment, which is due to start in October, will mean that between 6 million and 9 million more people will benefit in retirement?

[Steve Webb]

My hon. Friend is exactly right, and that indicates the scale of the policy. I often say that everyone will know someone who has been auto-enrolled. We are talking about a huge transformation, which is supported, I believe, in all parts of the House. It will be a revolution in pensions saving, and I look forward to the formal commencement just next month.

[Mark Garnier]

The Minister will no doubt agree that a good grounding in financial literacy encourages individuals to make proper decisions about providing for their futures, including with pensions. What discussions has he had with colleagues in the Department for Education about putting financial education in the curriculum?

[Steve Webb]

I agree with my hon. Friend that financial literacy and financial education are important. He will know that our colleagues in the Department for Education tend to take a light-touch approach to the curriculum, rather than wanting to be over-specific. However, there is a great deal that can be done in the existing curriculum. For example, compound interest is a pretty fundamental pensions topic and, in my view, ought to be in every maths lesson.

[Andrew Miller (Ellesmere Port and Neston) (Lab)]

A substantial number of those who are in pension schemes are saving well below the level needed to enjoy a comfortable existence in retirement. What are the Government doing to campaign for the better uptake of better schemes and encourage people to save earlier in their lives?

[Steve Webb]

The hon. Gentleman is quite right: around one in five of those who will be automatically enrolled are in their 20s, and if we can just get people starting earlier in pensions saving, that would be a good thing. Next week we are launching television advertising about automatic enrolment. The key is good quality workplace provision, automatic enrolment—which most people will stay in—and incentives from the Government. To give just one example, people on the universal credit will get additional help with their pension, because their pension contributions are allowed against their income for universal credit, so low-income households will get an extra boost if they save for a pension.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

In all parts of the House there will be agreement about the importance of auto-enrolment. However, the hon. Member for Warrington South (David Mowat) has already raised the issue of high costs and charges. Does the Minister agree that in order to meet his coalition pledge to reinvigorate occupational pensions, there must be full disclosure of all pensions costs and charges to the saver, and that this is a prerequisite to ending rip-offs and reinvigorating occupational pensions in the United Kingdom?

[Steve Webb]

I think we have common cause across the House in wanting to see good value for money and transparency in charges. That is why I welcome recent initiatives—not just by the National Association of Pension Funds, but by the Association of British Insurers—to try to find ways of presenting such information simply and consistently. So far, under automatic enrolment competition is driving charges down, but we have the powers to cap charges and we will use them if we need to.

[Joan Walley (Stoke-on-Trent North) (Lab)]

10. What proactive investigation work he has commissioned the Health and Safety Executive to undertake in relation to legionella.

[The Minister of State, Department for Work and Pensions (Mr Mark Hoban)]

Following research commissioned in 2011, the Health and Safety Executive is developing a revised intervention strategy to promote better control of legionella risks by companies with potential sources of legionella. The strategy will involve working with stakeholders, as well as following up a safety notice that the executive issued in July reminding companies of the precautions required for cooling towers and evaporative condensers.

[Joan Walley]

I welcome the Minister to his new post. In the light of the statements that we are to have this week about regulation, what he has just said means that we have to ask whether one person’s unnecessary burden is somebody else’s death sentence.

I refer the Minister to a research study carried out by Environmental Health News. It shows that in 40% of cases, local authorities were not carrying out proactive inspections. Given that local authorities and the Health and Safety Executive have shared responsibility for preventing legionnaires’ disease, we need a clear statement about the role that the HSE will take to prevent outbreaks such as those that we had in Stoke-on-Trent in the summer.

[Mr Hoban]

The Health and Safety Executive is taking a proactive stance on the issue. It is issuing guidance to stakeholders and others and ensuring that there is a risk-based approach to inspections, focusing on installations likely to cause the highest risk of legionella. We are taking action to tackle the problem and no one’s life will be put at risk as a consequence of the changes that we are making.

[Andrew Bridgen (North West Leicestershire) (Con)]

Does my hon. Friend agree that it is essential for the Health and Safety Executive to work closely with local authorities, as they are the bodies that interact with, and regulate, many of those in the sector that are prone to legionella?

[Mr Hoban]

My hon. Friend is absolutely right. There is a shared responsibility, and that requires the HSE and local authorities to work closely together. It requires them to identify the risks in their areas and take the right steps, proportionate to those risks, to tackle the risk of legionella.

[Nick Smith (Blaenau Gwent) (Lab)]

12. If he will make it his policy that Work programme providers should be allowed to share comprehensive data with local authorities on their own performance.

[The Minister of State, Department for Work and Pensions (Mr Mark Hoban)]

From June 2012, providers have been able to share management information on referrals, attachments, job entries, and specified information on job outcomes with local authorities that have signed confidentiality agreements.

[Nick Smith]

The Government’s own Cabinet Office says that publishing data about our public services makes them better, yet the Work programme has been shrouded in secrecy. Will the new Minister let the light shine in?

[Mr Hoban]

The hon. Gentleman should listen to the answer before asking the supplementary. I made it very clear that since June 2012 information has been shared with local authorities that are prepared to sign the confidentiality agreement. We are very keen to ensure the integrity of official statistics. The information is there to be shared and I look forward to local authorities’ working with contractors to use that information to develop effective schemes at a local level.

[Sir Nick Harvey (North Devon) (LD)]

When the Minister gets this autumn’s official data on job outcomes and sustainment payments under the Work programme, will he have another look at the funding model for local training providers? He may be aware that, a few months ago, I raised with his predecessor the plight of a small provider in my constituency, and I was not exactly thanked for doing so. Is he aware that another provider in my constituency has now gone out of work in addition to two others? Will he promise to keep the matter under constant review?

[Mr Hoban]

I will be happy to meet my hon. Friend to discuss the situation that he has outlined.

[Stephen Timms (East Ham) (Lab)]

The Minister’s predecessor made sure that nobody could find out what was really happening on the Work programme, and he has had his reward.

I warmly welcome the new Minister to his position. He can now make a clean breast of all this. I hope that he will heed the CBI’s call, made in July—after the announcement to which he has just referred—for Work programme providers to be allowed to tell local authorities everything about how they are doing. The CBI is right: the Work programme will not fulfil its potential unless that happens.

[Mr Hoban]

First, I thank the right hon. Gentleman for his congratulations; he and I have worked together from different sides of the Dispatch Box before, during his previous incarnation at the Treasury.

We have said that we will publish information. The first official statistics on Work outcomes will be published in November this year. We are keen to see providers, local authorities and other partners working closely together and using the available data to develop the right response. We are seeing success stories—such as in Barking recently, where there has been that local collaboration.

[Mr Liam Byrne (Birmingham, Hodge Hill) (Lab)]

One!

[Mr Hoban]

The Secretary of State should pipe down. [Interruption.] The shadow Secretary of State should pipe down.

I say to the right hon. Member for East Ham (Stephen Timms) that there are success stories. We will publish the full data in November and he should wait for that.

[Stephen Timms]

I am grateful for what the Minister has said. I hope that he will pay very careful attention to what the CBI has called for. I am delighted to hear that we finally have a date for the publication of the first Work programme job outcome data, almost 18 months after the programme started. Will he, unlike his predecessor, accept that needless secrecy holds back public services such as the Work programme?

[Mr Hoban]

The right hon. Gentleman should remember that this is a two-year programme. Payments are made after six months of sustained work activity based on work outcomes. We need to build up the evidence to see how effective the Work programme is. I am confident that the statistics to be published later this year will demonstrate its effectiveness. It is a vital part of the work that we need to do make sure that we get more people into employment.

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

13. What recent progress he has made on the mandatory work activity scheme.

[The Minister of State, Department for Work and Pensions (Mr Mark Hoban)]

Between May 2011 and February 2012 there were nearly 50,000 referrals to mandatory work activity and 16,790 starts. The scheme was expanded in June 2012, meaning that there are approximately 28,000 places available in 2012-13.

[Mr Wilson]

The mandatory work activity scheme is important in sending out a signal that sitting around on benefits is not an option under this Government. May I therefore congratulate my hon. Friend on securing its extension, with another 70,000 people a year doing placements in return for receiving benefits? Is he as ambitious as my constituents to see it extended to all able-bodied people on benefits?

[Mr Hoban]

There are a range of actions we can take to help more people to get off benefits and into work. Because of the effectiveness of this scheme we have been able to expand it and ensure that more people benefit from mandatory work activity.

[Lindsay Roy (Glenrothes) (Lab)]

15. What estimate he has made of the proportion of workers from the recently closed Remploy factories who have gained alternative employment.

[The Parliamentary Under-Secretary of State for Work and Pensions (Esther McVey)]

In the short period since closure, 35 people have immediately found jobs, and the vast majority of workers have already taken up the offer of personalised support with caseworkers, which this Government have introduced to ensure that there is support and which the previous Government did not do. The Remploy board is still considering nine factories at the best and final offer stage. When it has made that decision, I will write to the Members affected and place a copy of the letter in the Library.

[Lindsay Roy]

I thank the Minister for that answer and welcome her to her new position. I am disappointed to learn that there is low uptake, but any new job is most welcome. Remploy Marine in my constituency, in Leven in Fife, which has an unemployment rate of 18%, manufactures high-quality life jackets that are sold internationally, and its order book is full. Nevertheless, the employees are anxious about their future, and the phase 2 bidding process seems to be shrouded in secrecy. When will we get details of the process and the time scales?

[Esther McVey]

First, I thank the hon. Gentleman for his kind words about my coming into this new position. If Mr Speaker will indulge me, I want to say how delighted I am to be here, particularly at the close of the Paralympic games, which have been such a sensational success. As Sir Philip Craven, the international Paralympics president has said, these have been the greatest Paralympic games of all time, with more medals in more sports— 120 medals—for Team GB and record ticket sales of 2.7 million in London compared with 480,000 in Beijing.

Let me return to the hon. Gentleman’s question. I know how much work he has done on this and that he delivered a 100,000-signature petition to the Prime Minister. Further work and analysis is continuing to determine the stage 2 process for the Remploy sites. Work is going forward. He, like me—I have read the words he said—wanted a viable business. That is exactly right, and that is what we are looking for. Where there is a viable business, it will continue, because we are looking for sustainable, long-term employment for all those employees.

[Paul Maynard (Blackpool North and Cleveleys) (Con)]

I, too, welcome the Minister to her position. Will she remind the House how many more disabled people will benefit from the transfer of funds from Remploy, which is getting more disabled people back into work than was the case under the previous system?

[Esther McVey]

I thank my hon. Friend for that question. He is quite right. At the moment, the money for sustained employment for disabled people goes to just a fifth of the number of people it should. We are maintaining the budget of £320 million and we want it to work more effectively for more people. We are aiming to have people getting sustainable work as we move forward.

[Ann Clwyd (Cynon Valley) (Lab)]

I thank the new Minister for her swift reply to my letter, in which I raised the question of the tax rates that redundant Remploy workers have been issued with. They have been given a temporary tax code, so some of them are paying 50% of their money in tax. They cannot wait until the beginning of the next tax year, so will the Minister do something urgently about the situation, because it is adding insult to injury?

[Esther McVey]

I thank the right hon. Lady for her question. We have worked on the issue immediately. Straight away, she will be pleased to know that everybody affected will have their redundancy pay and, therefore, money. She is right to say that a 50% emergency taxation rate was put on that. We have spoken to Her Majesty’s Revenue and Customs and to the personal caseworkers they will all get, who will help them fill in the forms and get the money back as soon as possible. I thank the right hon. Lady for highlighting that issue.

[Mrs Anne McGuire (Stirling) (Lab)]

First, I welcome the hon. Lady to her post and wish her well. She has a very special role as a champion for disabled people both outside and, perhaps more importantly at times, inside Government.

The hon. Lady wrote to her local paper about her local Remploy factory in Birkenhead and was highly critical of management and very supportive of, in effect, a workers buy-out. Now that she is in a position to make a real difference, will she consider halting the current Remploy programme in order to allow workers throughout the rest of the country to benefit from a workers buy-out, which is the very policy that she supports?

[Esther McVey]

I visited my local Remploy factory and met its workers, and I was hugely impressed with them. I was horrified to find out what had and had not happened with their proposed business plan, so I pursued the matter. The automotive industry on Merseyside was expanding at the time—we now have 24-hour work at Jaguar in Halewood and Vauxhall has been saved—and I thought that something could be done. That did not happen and I tried to get to the bottom of it—I was most disappointed with the management and that is on the record. What we are looking for is viable businesses, which we will support in every which way we can. I am also meeting various disability groups to consider the shape of the Remploy business in the 21st century and what we can do. I will be a champion for disabled people and I am looking at future job opportunities for them.

[Jane Ellison (Battersea) (Con)]

18. What steps he is taking to support people eligible for universal credit with budgeting.

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

We hope that most people will be able to manage their money successfully and we are working towards that, but we also recognise that, in the development of universal credit, there will always be some people who will need additional support. We are looking at and trialling that and making arrangements. There will be a range of budgeting support services available for those people to help them prepare for universal credit and to provide ongoing support. We are consulting on these matters at present.

[Jane Ellison]

I thank my right hon. Friend for his reply. I meet a local single mothers support group, the Women of Wandsworth, on a regular basis. Some of the mums have expressed concern about monthly budgeting and are worried that it will just be assumed that they can manage. Will my right hon. Friend confirm that, under universal credit, my constituents can be reassured that support is in place and that there will be no question of them just being left to their own devices?

[Mr Duncan Smith]

Absolutely—I can give that assurance. That is exactly what we are working and consulting on at the moment. Of course, people will be concerned about it, but there are positives to take from this. The most important thing is that, by trying to move people, eventually, on to a monthly payment, that will bring them much more into line with the world of work. One of the great problems we have had is that, when people who have been unemployed go into work, they find it very difficult to cope with having suddenly to take on and manage their arrangements. The key thing is that we want to get those who can do so to that point, and we will work with the others. For some, there may be interim two-weekly payments. At the moment, we are looking to trial a whole series of arrangements to make that much easier for them, and we will make sure that that happens.

[Mr David Anderson (Blaydon) (Lab)]

Is part of the Secretary of State’s strategy to help people move on to universal credit the expansion of food banks, which is seen as a disgrace and a condemnation of this Government across the country?

[Mr Duncan Smith]

Not at all. When we came to office, I was told by the Department that despite the constant requests from a variety of people who provide food banks, in particular the Trussell Trust, to put their leaflets in jobcentres to advertise what they were doing, the last Government said no, because they did not want the embarrassment of their involvement. We immediately allowed them to do so, which is one reason for the increase in the number of people seeking food banks.

[Mr Nick Gibb (Bognor Regis and Littlehampton) (Con)]

I congratulate my right hon. Friend on retaining his position. Given that eligibility for free school meals is a key factor in determining deprivation and a key indicator of a child’s educational life chances, what assurances can he give that the structure and income bands of universal credit will not undermine the ability to target educational improvement where it is most needed?

[Mr Duncan Smith]

May I say first that the work that my hon. Friend did at the Department for Education will stand the test of time and that people will thank him for it? The consultations and work we are doing on things such as passported benefits are critical to ensure that everybody’s position improves as a result of universal credit. I give him my personal guarantee that that is exactly what we will do.

[Dame Anne Begg (Aberdeen South) (Lab)]

Does the Secretary of State accept that somebody on jobseeker’s allowance with a disposable income of less than £70 a week who manages with fortnightly payments is actually very good at budgeting? The danger of monthly payments is not budgeting but the lack of money to buy everything that everybody else takes for granted and that a person should be able to buy with their benefit.

[Mr Duncan Smith]

Absolutely—I accept that we have to deal with those issues. We are seeking to move to monthly payments. When payments moved from being weekly to fortnightly, everyone said it would cause major problems, but very little happened. We are putting in place requirements so that people may receive their money on a two-weekly basis if they are unable to cope. We recognise that when we introduce this process, people will have to transition into it so that they are not left with a period without any money. All that is under consideration. We are trialling the programmes to ensure that we get this right. I give the hon. Lady my assurance that we will not move on this unless we are certain we can make it work.

[Stephen Lloyd (Eastbourne) (LD)]

I am a strong advocate of universal credit, as the Secretary of State knows, but I retain a couple of concerns. The plan for a single person within the family to receive all the universal credit could be detrimental to women in particular. Will he confirm that there will be enough flexibility to ensure that women do not lose out?

[Mr Duncan Smith]

That issue has been raised, so we have discussed it with a number of people and will allow for it. People will be able to nominate who should receive the payment. If there is a problem, in certain circumstances we will agree that an individual should receive the money. There is huge flexibility over where the payment should go and we are consulting on that at the moment. We will make any changes we need to make.

[Tony Lloyd (Manchester Central) (Lab)]

The Secretary of State will recognise that among the people who will need help with budgeting under universal credit are women and men in flight from domestic violence and seeking refuge. Will he give an absolute guarantee that they will not suffer from a lack of places and that refuges will not be penalised, causing a reduction in places for the women and men who need them?

[Mr Duncan Smith]

I can give the hon. Gentleman that guarantee. If he has any concerns that he thinks we might not have dealt with, my door is open for him to come and talk to me. I am talking to many organisations, including Refuge, to ensure that we cover those issues. This is a priority concern for us and I give my absolute guarantee that that will happen.

[Andrew Griffiths (Burton) (Con)]

19. What recent representations he has received on the setting of an annual benefit cap at £35,000.

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

We have received a number of representations on the benefit cap, which will be introduced from 2013 and be set at a maximum of £26,000 net a year. That is about restoring fairness to the system and ensuring that those on benefits no longer receive more in state support than the average earnings of a working family. We have worked hard to identify the households and families that will be affected by the cap well in advance of the April start date. There is additional funding of some £190 million to smooth the transition over the spending review period.

[Andrew Griffiths (Burton) (Con)]

I thank the Secretary of State for that answer and congratulate him on the work he has done on this issue.

The average salary in my constituency is £22,400, and people cannot understand why anybody would oppose a cap on benefits that is substantially more than they earn to feed their families. A week on Friday I am organising a jobs fair in Burton, which we expect 2,500 people to attend. Does the Secretary of State agree that it is important to tell jobseekers that they will always be better off in work than on benefits?

[Mr Duncan Smith]

This is one of the most popular programmes that this Government are introducing, and the public genuinely believe that it is the right thing to do. The only group, it seems, who do not think it is the right thing to do are those sitting on the Opposition Benches.

When we recently started dipping into the issue and surveying those who were likely to be affected, it was interesting to find out that, already, well in advance of what is going to happen, about a third of people have admitted that they are out looking for work as a result of the oncoming benefit cap. Some 88% are now up to date with their rent, and 1% have reported having to move.

[Fiona Mactaggart (Slough) (Lab)]

20. What discussions he has had with companies that manage contracts under the Work programme on collaborating to reduce unemployment in the area in which they work; and if he will make a statement.

[The Minister of State, Department for Work and Pensions (Mr Mark Hoban)]

Like my predecessor, I intend to use every opportunity to meet providers to discuss all aspects of the Work programme. I will do so later this week. Effective partnership working is key to the successful delivery of the Work programme, and it is in providers’ interests to engage with a range of local partners including local authorities, employers and voluntary organisations.

[Fiona Mactaggart]

I thank the Minister and welcome him to his post. On Monday I chaired a meeting in Slough of the local authority, the local college and local businesses as part of a campaign that we have run together to try to tackle unemployment locally. All the partners there were concerned about the lack of collaboration with Work programme providers and the lack of information and working together from them. Those findings are echoed in the recent Manchester Business School study, which stated that although centralisation has cut the cost of procurement, it can also undermine the very local engagement that underpins service innovation. What is he going to do to tackle that?

[Mr Hoban]

As the hon. Lady will know, in contrast to schemes produced by the previous Government, Work programme providers are incentivised to perform well to get people into work. They are paid by results, so they need to be as effective as possible in working with local partners to get the right outcomes. For example, I know that the contract that covers her constituency includes close work with further education colleges to improve outcomes for participants in the scheme.

[Margot James (Stourbridge) (Con)]

May I welcome my hon. Friend to his post and congratulate the Government on the progress made under the Work programme? In my area, significant numbers of participants have now been in work for more than six months. Does he agree that one of the best ways of reducing unemployment further is to improve labour mobility at the lower end of the income scale?

[Mr Hoban]

My hon. Friend is right. There is a range of interventions that we can make to help people get back into work, and mobility is one. Welfare reform and universal credit are another, because they will ensure that people are better off working than not working. We want to see which levers and which policies work, to get as many people as possible into employment.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

As the Minister indicated, some information about the Work programme will now be made available to local authorities on a confidential basis, but there is no accountability without transparency. When will he see the light and allow all of us who have an interest in ensuring that people can get work through the Work programme to have access to information about its performance?

[Mr Hoban]

I remind the hon. Lady that, as I said earlier, information is already shared with local authorities on a confidential basis. [Interruption.] We need to maintain the confidentiality of the data to ensure the integrity of national statistics. [Laughter.] The Opposition may treat national statistics cavalierly, but it is absolutely right that we protect the data to get the best information out there. There are no constraints on employers, local authorities or Work programme providers working together to share information, to get the most effective possible scheme in place.

[Pauline Latham (Mid Derbyshire) (Con)]

21. What steps he is taking to develop new measurements of child poverty?

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

The latest figures show that despite the previous Government spending huge sums—more than £300 billion—on working age welfare and tax credits, during their latter stages the level of poverty actually rose, and it was clear that the figures for measurement do not work as well as they should.

The Government are committed to eradicating child poverty and to the targets that we set up, but we are also interested in developing better measures through a consultation that will be launched this autumn.

[Pauline Latham]

Does the Secretary of State agree that if we are going to tackle child poverty, we must tackle its root causes?

[Mr Duncan Smith]

My hon. Friend is absolutely right. One problem with some of the ways in which child poverty is measured is that not enough credence is given to the fact that we need to get beyond the simple point about money, and look into what causes some families to remain persistently in poverty. Although the latest figures show that relative poverty fell by 2% over the past year, I do not try to claim any point of success because levels of absolute poverty remained flat. The reason relative poverty fell is that during the major recession the overall economy fell as well, but that is no way to measure whether people are in poverty or not.

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

I am sure that in the recent past the Secretary of State has met non-governmental organisations such as Save the Children, the Children’s Society and Barnardo’s. Does he intend to meet those organisations during his consultation period to hear their genuine concerns about the change in the measurement of child poverty, and the difficulties it will cause that may distort outcomes at the end of the process?

[Mr Duncan Smith]

I agree with the hon. Gentleman. We are consulting widely with those organisations, and when we introduce the consultation process we want to hear from them all about how best to look at the issue of measurement so that the effect of what we do is felt by those who need it most. We are taking the recommended steps suggested by Save the Children, and we are committed to eradication. Universal credit is critical to the process of taking some 900,000 adults and children out of poverty, which we should all support.

Topical Questions

[Mrs Linda Riordan (Halifax) (Lab/Co-op)]

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

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

I pay tribute, as my hon. Friend the Member for Wirral West (Esther McVey) has done, to our Paralympic athletes, whose feats we have watched over the past fortnight. They have impressed us all and excited us by the very idea of competition, as well as overcoming their major difficulties. Next week my Department will publish the responses of thousands of disabled people to the “Fulfilling Potential” consultation that was launched earlier this year. Changing perceptions is key to helping disabled people overcome the barriers they face, as is tackling discrimination wherever it occurs.

[Mrs Riordan]

Will the Minister explain why so many people with Parkinson’s disease, such as my constituent Ian Barraclough, face endless form filling and bureaucracy to get the money to which they are entitled? Are welfare reforms failing when such people are failed?

[The Parliamentary Under-Secretary of State for Work and Pensions (Esther McVey)]

The principle behind the new guidelines is that we see and meet every individual and help them to overcome the barriers they face, and that is exactly what we will do.

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

T9. What impact does the Minister believe the payments-by-result Work programme has had in reducing unemployment in recent months?

[The Minister of State, Department for Work and Pensions (Mr Mark Hoban)]

We are seeing that the flow from benefits is continuing at the same level as expected, but payment by results focuses providers’ minds on getting people into sustainable employment, and we will see the first results in November.

[Mr Liam Byrne (Birmingham, Hodge Hill) (Lab)]

May I associate myself and my hon. Friends with the Secretary of State’s words of congratulations to our extraordinary Paralympians, who have simply dazzled us over the past couple of weeks?

I am delighted to see that the Secretary of State has survived the enthusiastic support of his friends in the Treasury, but may I press him on the price of his survival? When universal credit is fully rolled out in 2017, the Office for Budget Responsibility says that the extra costs will be £3.1 billion. The Treasury in its budget says that the price must be no more than £2.5 billion. With whose estimate does the Secretary of State agree?

[Mr Duncan Smith]

The OBR agrees with me and I—strangely enough—agree with the Treasury. Our view is that we will roll this programme out at a cost of £2.5 billion per year. as originally estimated. I think the right hon. Gentleman is referring to a partial statement in a document produced before March by the OBR, and for the sake of the House I will read what it actually says. Although the OBR originally looked at this and wondered whether £3.1 billion would be reasonable, it has

“adjusted this down to £2.5 billion as the Government has stated in the Budget that final decisions on policy design”

are essentially now made.

[Mr Byrne]

I am afraid the Opposition simply cannot accept a think-tank set up by the Treasury putting the figure at £3.1 billion and the Treasury, in the March Budget, revising it down to £2.5 billion. The Secretary of State must accept, as I am sure many in the House do, that an extra £600 million will have a huge impact on whether people will be better off in work or on benefits. The Treasury clearly believes there is a state of chaos around universal credit, as do the Cabinet Office and No. 10. Surely it is time he tells the House exactly what is going on, and sets before us the business case that he is trying to keep secret from us. Is there something he is trying to hide?

[Mr Speaker]

Order. We have a lot of business to get through.

[Mr Duncan Smith]

There is absolutely nothing to hide—[Interruption.] No, no. We are committed to the £2.5 billion all the way through and we will deliver universal credit on time, as it is and on budget. Any time he would like, he is welcome to come into the office and look through some of our business matters, as is his colleague, the right hon. Member for East Ham (Stephen Timms). I will show him how we are on time, on target and on budget.

The right hon. Member for Birmingham, Hodge Hill (Mr Byrne) did rather jump the gun. He referred over the weekend to universal credit as a car crash in the making. I need no advice from the man who produced the biggest car crash in British economic history.

[Gareth Johnson (Dartford) (Con)]

T10. The Secretary of State will be aware that Bluewater shopping centre in my constituency recently announced a further 1,500 jobs to add to the jobs of 7,500 people who are employed there. Will he accept my invitation to visit Bluewater with me to see first hand the job creation that this Government have helped to make possible?

[Mr Duncan Smith]

I look forward to visiting my hon. Friend and shall definitely come. He gives us a great reminder—the Opposition do not like this very much—of the three-quarters improvement in employment, and of falling unemployment and benefit claimant numbers. More importantly, as a direct result of what the Government have done in our welfare reforms, there is a lower number of economically inactive people than at almost any time since those records began.

[Alex Cunningham (Stockton North) (Lab)]

T2. As other hon. Members have mentioned, the introduction of universal credit will mean that housing benefit will be paid not directly to landlords but to tenants, and that it will be paid monthly rather than fortnightly, causing tenants to go into substantial arrears. Does the Secretary of State agree that, when assessing whether a claimant is vulnerable enough to be exempted from monthly payments and receiving their housing element directly, it should be standard practice to consider the feedback of third parties such as social services and voluntary sector services as well as claimants?

[Mr Duncan Smith]

I do, yes. We want to pay people directly, and we already pay local housing allowance to such tenants directly, which the hon. Gentleman and all hon. Members should remember. The vast majority cope with that payment—they are very similar. The point is this: we do not intend to cause problems, but the more we continue to treat people in receipt of benefits like children, the less likely they will be able to cope when they go to work. Those who can absolutely must get on to that payment schedule, but we will obviously talk to all the bodies to which he referred to ensure that we identify those who cannot. If people cannot get on to that schedule, we want to surround them with help and support to find out why they cannot manage their payments, and to rectify that rather than just throw money at them.

[Charlie Elphicke (Dover) (Con)]

I thank the Minister for his assurances that the implementation of universal credit is on time. Will he confirm that it is on track to reduce child poverty by 350,000? As hon. Members will recall, child poverty rose sharply in the previous Parliament.

[Mr Duncan Smith]

It is good to see my hon. Friend—as usual, I absolutely agree with him. I can assure him that universal credit is on time and on budget. I want to stay to see it through and ensure that we deliver it on time.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

T3. I am contacted every day by vulnerable constituents bruised, battered and sometimes made ill by the Secretary of State’s Department trying to force them off benefits that they desperately need. He knows that huge sums of benefits go unclaimed. What is he doing to ensure that those on benefits understand their full entitlement, particularly in respect of Warm Front payments, on which I understand there will be an underspend this year?

[Mr Duncan Smith]

I agree. The hon. Lady raises an important point about an area of work—I was just talking to my ministerial colleague about it—that universal credit should help to rectify and improve dramatically, because putting everything into one location will allow us to target it correctly on the intended recipients. One of the biggest problems is that the complexity of the system does not allow that to happen, meaning that lots of people fall through the cracks.

[Sir Tony Baldry (Banbury) (Con)]

Universal credit will be the greatest revolution in the benefits system for more than a generation. Will my right hon. Friend ensure that every Member has the opportunity, between now and the introduction of universal credit, to get to grips with its minutiae, so that we can be confident of ensuring that our constituents understand how it will work?

[Mr Duncan Smith]

I will follow through on that very good suggestion. We are already consulting. My hon. Friend might be aware that in July we had a series of consultations in the Committee Rooms with Members of the other place and of this House. We intend to continue that consultation and to set up demonstrations of how it works at the front end and of what they will need to do. We are determined to ensure that Members understand how to claim it—I hope that some of them may have to use it in due course.

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

T4. We were told that universal credit would ensure that every additional hour that people worked would pay. Is the Secretary of State aware of concerns of the Children’s Society and others that many thousands of families face a cliff edge at the point when eligibility for free school meals kicks in? What is he doing to ensure that families do not lose out or find themselves better off working fewer hours?

[Mr Duncan Smith]

We are discussing that with the Department for Education and others, and consulting the relevant bodies and interest groups outside. We are looking for the best way of integrating the process to eradicate such problems and cliff edges in order to create a seamless process that allows people smoothly to engage and improve the quality of their lives, rather than having to negotiate at the edges of those difficulties.

[Philip Davies (Shipley) (Con)]

The Secretary of State knows that I fully support his introduction of a benefits cap and his measures to ensure that people are always better off in work, but does he concede that some people are still better off on benefits than other people in work and that to tackle that issue we need to reduce the cap even further?

[Mr Duncan Smith]

It is interesting, of course, because I have had correspondence from people throughout the country saying that we should reduce the cap because it is too high. We have introduced the cap at this level because we think it is fairest—it ensures that average earnings are not exceeded by people who are out of work and that people who pay their taxes do not feel that they are paying them to people who do not work as hard as they do.

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

T5. A constituent has written to me stating that she has had terrible trouble finding work because she has a daughter under the age of six and has child care needs. She has visited Jobcentre Plus but has been told that jobs in term time are few and far between. She asks whether the Government have studied the situation in France, where 65% of women with children under the age of six are in work.

[Mr Hoban]

We have sought to create flexibility in Jobcentre Plus, particularly in respect of lone parents—I do not know whether the hon. Gentleman’s constituent is a lone parent—so that it recognises the need for flexibility around term times and some of the challenges around child care. If he wishes to write to me with the details of his case, I will look into it.

[Damian Hinds (East Hampshire) (Con)]

Jam jar accounts can help families’ budgets, protect housing associations and promote a savings culture. As credit unions can offer these at a much lower cost than existing commercial offers, will my hon. Friend do all he can to encourage them?

[The Minister of State, Department for Work and Pensions (Steve Webb)]

I congratulate my hon. Friend on his tireless work in support of credit unions. As he knows, as part of the universal credit roll-out, we are piloting different sorts of budgeting accounts, including jam jar accounts, and we would be delighted if credit unions were to play a full part in that process.

[Julie Hilling (Bolton West) (Lab)]

T7. As we all know, the Atos work capability assessment is deeply flawed. How many people have died from their illness or disability since losing their disability benefits, and how many of them committed suicide?

[Mr Hoban]

We inherited the work capability assessment from the previous Government. Through the work of Professor Harrington, we have sought to introduce a series of reviews to improve the assessment’s functioning, and we will announce further changes shortly. We want to get this right, and are prepared to listen and learn from the work of Professor Harrington and not leave the system unchanged.

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

There is concern among visually impaired people that they might be treated differently according to whether they use a long cane or a support dog, rather than being assessed on the level of their disability. Will the Minister reassure me that such discrimination will not exist in the final criteria for personal independence payments?

[Esther McVey]

I assure my hon. Friend that assessments will fully reflect the changes that are required for blind and partially sighted people, and that there will not be any discrimination like that. We have not finished consulting; it is an ongoing process. We have listened to people’s concerns and altered the assessment as it goes, and we will be taking all of this into account.

[Mr Speaker]

I call Mr Gavin Shuker. Not here. I call Paul Goggins.

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

In response to the question from my right hon. Friend the Member for Cynon Valley (Ann Clwyd) about the high tax being paid by sacked Remploy staff on their redundancy payments, the Minister gave an encouraging reply and said that the matter would be dealt with as soon as possible. Will the Secretary of State confirm that that means the money will be returned to those sacked staff in the current tax year?

[Mr Duncan Smith]

I fully support the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Wirral West (Esther McVey), and I really welcome her arrival. She said that the matter was being looked into right now, and she will receive my full support while that happens.

[Gavin Barwell (Croydon Central) (Con)]

The Government are piloting a scheme in my constituency in which the young unemployed who have never worked will be required to do voluntary work in return for their benefits. Does my hon. Friend agree that that will be good for the long-term job prospects of the young people concerned, and good for confidence in the benefits system, in showing that people will not get something for nothing?

[Mr Hoban]

My hon. Friend is absolutely right. We are implementing that scheme in conjunction with the Greater London authority, and it will provide an important way of getting more young people into work. That will be to their benefit and to the benefit of society and taxpayers generally.

[Alison McGovern (Wirral South) (Lab)]

Further to the Minister for Work’s answer to my question on 6 December on the International Labour Organisation’s meeting at which the crisis of youth unemployment was discussed, will the Minister tell me what briefing he has received from the UK representatives, given the damage that the eurozone crisis is doing to manufacturing in my constituency and to the possibilities for young people who want to enter industry?

[Mr Hoban]

I am sure that the hon. Lady will welcome the youth contract and the work we are doing to ensure that young people come off benefit and get into work. She should also recognise that youth unemployment is lower now than it was in 2010, once we take into account policy changes. We are tackling the issues, but we do recognise the impact of the eurozone on our economy.

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

I am delighted that the Secretary of State has announced that advice will be given to vulnerable claimants on how to spend universal credit. Who will provide such advice in deeply rural areas in which there are no jobcentres and no access to citizens advice bureaux?

[Mr Duncan Smith]

I can assure my hon. Friend that we will work closely with local councils—whom we are consulting right now—and all those involved, including those distributing the social fund, at local level. We will also talk to local groups involved in credit advice and local poverty groups, as well as ensuring, ourselves, through the jobcentres, that those claimants get that advice. They will get that advice. We will work with them, identify them and ensure that they improve the situation they are in.

[Mr Dennis Skinner (Bolsover) (Lab)]

Will the Secretary of State explain why, when disabled people are justifiably being applauded the length and breadth of this land, he has chosen this time to close Remploy factories that employ thousands of disabled people? Will he withdraw those closures and put an end to that hypocrisy?

[Mr Duncan Smith]

May I say to the hon. Gentleman that the process was started by his Government? It was they who closed 29 centres. The difference is that they never put in place any support measures for unemployed Remploy factory workers. We, however, are spending £320 million and adding another £15 million to that to ensure that, with the new programme, we try to get them back into mainstream work. It was the lobby groups that wanted us to do this, because they do not like segregated employment.

Industrial Strategy

Monday 10th September 2012 Commons Chamber

15:34

[Mr Chuka Umunna (Streatham) (Lab)]

(Urgent Question): To ask the Secretary of State for Business, Innovation and Skills to make a statement on the Government’s industrial strategy.

[The Secretary of State for Business, Innovation and Skills (Vince Cable)]

Creating a strong and balanced economy continues to be the Government’s priority. This means creating an environment in which entrepreneurs find it easy to start and grow a business, and pursuing demand management policies that stimulate growth and maintain financial stability.

There is also a role for an industrial strategy, which I shall set out in detail tomorrow. This means addressing the need for a long-term vision and having the courage to take decisions that bear fruit decades later, and focusing on the things we do best. There are two main themes, one of which is the need for long-term decision making. Many industries operate on that basis, including a company that I worked for, Shell, which thought in terms of decades. The other theme is the need for partnership between business and industry. Very few countries have a purely laissez-faire approach, and we should learn from their experience. We also should draw on our experience; I have learned much from some of my predecessors, particularly Lord Heseltine, who has an office in my Department and is contributing valuably to thinking on this subject.

We have identified several specific fronts on which Government action can have a real and early impact, including access to finance; partnership with specific sectors; support for emerging technologies; creating a pipeline of skilled workers; Government procurement; and the development of supply chains. In the short time available, let me say a little about each of them.

On access to finance, we are living in the aftermath of a disastrous banking collapse. Big firms, by and large, can raise short and long-term finance via capital and equity markets. The latest SME Finance Monitor, however, shows that in the last 12 months, 33% of businesses that applied for loans were rejected. The big banks, including the semi-state-owned banks, are preoccupied with repairing damaged balance sheets and there is a real shortage of long-term patient capital for business. We are tackling these issues by launching the funding for lending scheme, which reduces the cost of funding for banks that increase their lending; running schemes such as the enterprise capital funds and the enterprise finance guarantee to help early-stage businesses without a track record or collateral to access venture capital finance or bank finance; and stimulating the development of non-bank financial sources through the £1.2 billion business finance partnership. The big banks have launched the £2.5 billion business growth fund to provide equity. We are now actively looking at a proposal to establish a business bank that could work through alternative providers such as the new challenger banks and non-bank lenders to direct private capital towards growth and innovation and to corral our existing interventions, such as co-investment and guarantees.

Secondly, let me say a word on the sectoral approach. The second strand of the industrial strategy is to build on a collaborative strategic partnership with key sectors. Of course, different industries require different degrees of business support and collaboration. At one end of the spectrum, much of the economy flourishes on its own. Here our efforts are best placed on making the UK a good place to do business, with attractive policies on taxation, regulation and free and efficient markets. At the other end of the spectrum, there are sectors that require a long-term, strategic partnership with Government; the Automotive Council and the aerospace leadership groups are good examples. Tomorrow, my Department will publish a new analysis of UK sectors, setting out those areas where support should be focused—in particular, advanced manufacturing; knowledge-intensive services, professional services and higher education; and industries that provide key inputs to our internationally traded activities, such as the digital economy and the energy supply chain.

Thirdly, on technology, one of the most powerful levers at our disposal is the potential of innovative technologies. Ground-breaking technologies are often too risky or resource-intensive for individual companies to nurture on their own, so the Government have an important role to play in accelerating the journey from academic research to commercial application. The Government Office for Science is in the process of updating its Foresight report on “Technology and Innovation Futures”, taking a fresh look at technologies with the potential to support sustained economic growth over the next 20 years or so. The report has identified a number of technologies that can have a material effect on future growth rates. The Technology Strategy Board is now concentrating on supporting the nascent disruptive technologies that have the potential to grow into new industries within a decade or more.

We also need a long-term commitment to world-class skills. The Government have focused on apprenticeships, and we have seen a 63% increase in the number this year, with 400,000 new starts in the first three quarters alone. However, we recognise that we cannot rest on our laurels, and Doug Richard will report next month with ideas on how we can gain even more value from apprenticeships.

As employers know better than anybody the long term-skills needs of their work force, we have launched an employer ownership pilot scheme which is giving business direct access to £250 million of funding for vocational training. Employers, working together in sectors or supply chains, have put together a wide range of innovative proposals to design and develop their own training programmes. One of the biggest long-term challenges will be the supply of engineers; we are chronically short of them at present, and have been for a long time. That is why we decided—as announced in the aerospace strategy—to fund, jointly with industry, 500 masters degree places in aerospace engineering between 2013 and 2016.

Lastly, on procurement, we acknowledge that we have a responsibility to take seriously the role that public procurement plays in creating the confidence that enables businesses to make long-term investment decisions—alongside, of course, value for money. We are overhauling the way in which the Government procure services in order to increase clarity for businesses, particularly small and medium-sized enterprises. In April we published data on £70 billion-worth of future Government contracts that are planned for 13 sectors over the next five years. We are also assessing what the 13 pipelines tell us about the strategic capabilities that will be required in the future.

Those are the broad contours of the industrial strategy on which we will work with industry in the months ahead. The strategy will contribute to the generation of the confidence that is needed to ensure that business invests for the long term, and I commend it to the House.

[Mr Umunna]

May I ask first why the Secretary of State is not setting out his strategy in full to the House of Commons, instead of doing so in a speech tomorrow?

Earlier this year, the Secretary of State rightly said that the Government lacked a compelling vision. Having made 15 speeches in which he told us that he wanted this strategy, he has at least set it out today. He said, as on previous occasions, that Lord Mandelson had bequeathed him a good platform on which to build such a strategy; for example, he has praised us for what we did in respect of the automotive sector. But why has it taken so long?

There is little controversy over the role of Government in creating the right business environment—improving infrastructure, access to finance, skills, corporate governance and so on—but an industrial strategy is about much more, which is why I broadly welcome the general approach that the Secretary of State has set out. We would not advocate a return to picking winners, but we do believe that Government can and should support and develop sectors in which we have a competitive strength and a comparative advantage. After all, success in the global economy will not come from being quite good at a lot of things; there is a premium on being the best.

It will, however, be impossible to implement the strategy without the unequivocal backing of No. 10 and the Treasury. Lord Mandelson was successful because he was fully supported by his Chancellor and Prime Minister. Can the Business Secretary say the same now? Does his strategy even enjoy the support of his ministerial team, let alone that of other Departments? While, in the 1970s and 1980s, he was working for the late great John Smith, his new deputy—the Minister of State, Department for Business, Innovation and Skills, the hon. Member for Sevenoaks (Michael Fallon)—was working for Lady Thatcher, and it is her approach that the Minister of State was going around advocating over the weekend. That explains why, while at the back of the business section of yesterday’s edition of The Sunday Telegraph the Secretary of State was making the case for the strategy that he has outlined today, his Minister of State was saying, in an interview featured in the front of the main section,

“Deregulation and privatisation worked before”,

suggesting that that was the answer to the problems that we are experiencing today. Who is in charge of policy in the Department? Who should businesses listen to when trying to make sense of the Department’s direction of travel?

Above all, the Secretary of State must give business the certainty that will enable it to invest, and that means aligning Government support, Departments, higher education, skills and regional structures with his strategy. Sadly, however, all those have been thrown into disarray by the Government.

In the short term, we need the growth on which we can build the foundations of the future. The Government’s overall economic policy, which the Secretary of State continues to champion, has pushed the country into a double-dip recession, and that needs to change as well.

[Vince Cable]

My opposite number challenges me to set out our approach to this in full, but I was trying to respect the conventions of the House, and in particular your emphasis on brevity, Mr. Speaker, which I have done. The hon. Member for Streatham (Mr Umunna) also quotes me as having said that his party bequeathed us a good platform. I cannot remember ever saying that, but I shall hastily correct the record if what he thinks I said is correct. Let me set out what that collapsing platform actually involved. In 1997, the share of industry in the British economy was 18% of GDP, yet when we inherited it, it was just over 10%, which represents the most rapid decline in any major western democracy. Employment declined even more, of course. On international trade, the share of British merchant goods in international markets halved, from 5% in 1997 to 2.5% in 2011, when we took over. That is the platform that we are trying to build from, and it is not a very strong one.

Of course, I acknowledge that there were good ideas, and Lord Mandelson, like Lord Heseltine and others, had a sensible approach to working with the public and private sector in a collaborative way. Institutions such as the Automotive Council are good, and I have been very happy to work on them and develop them.

We are not returning to picking winners, as it is sometimes called. As the hon. Gentleman kindly pointed out, I worked with the late—and, indeed, great—John Smith in the late 1970s. I worked in his office in the Department of Trade and Industry, and we saw evidence of the failures of picking losers. Vast amounts of public money were used in very unproductive forms of public intervention, but I think that subsequently the pendulum swung too far in the opposite direction. We must now get to a sensible middle point, often learning from the experiences of other countries, including South Korea, Germany and Finland, where there is a sensible balance between the role of Government and the role of the private sector, and that is what we are striving for.

The hon. Gentleman seems to imagine that there is some kind of one-size-fits-all policy for business, but there are many companies that do not want Government anywhere near them; they just want to get on with their job of making money. Large numbers of small companies are in that space, and we respect that and want to create an environment in which they can operate, but many others are quite different, such as those with long-term technological horizons and big and complex supply chains, and need a more collaborative approach, and we are seeking to develop that.

Let me just emphasise that this industrial strategy has the full support of the Prime Minister, the Chancellor and my colleagues behind me on the Treasury Bench, and that we shall be working together on a team basis to deliver it.

[Several hon. Members]

rose—

[Mr Speaker]

Order. I appeal for brief questions and brief answers, in order to maximise the number of contributors.

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

I applaud the Secretary of State for the work he has done with the automotive sector; we have seen the benefits in Stratford-on-Avon. He is rightly not going to be picking winners, but does he agree that what we should be doing is picking sectors where we can be world beaters, and improving and supporting those sectors?

[Vince Cable]

My hon. Friend is right; we need to make that distinction. There are many examples. He chose the automotive sector, where Britain is now performing extraordinarily well. For the first time in a generation we have a trade surplus in the automotive sector, with £6 billion in new commitments of investment, but there are many other sectors whose experience also serves to illustrate the wisdom of Government and the private sector sitting down together, and one of them is the space sector, as my colleague who represents higher education, the Minister for Universities and Science, knows very well. Britain now has one of the most outstanding space sectors in the world, and a lot of that is a product of sensible collaboration.

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

I broadly welcome the Secretary of State’s comments, which in many respects are long overdue. However, can he reassure me, and organisations such as the Engineering Employers Federation, that the lack of political will of which his Government accuse past Governments on this issue will now change? What reassurances can he give us that the political direction will change, and that the new political backing will ensure this policy is rather more successful than the economic plan for growth introduced last year?

[Vince Cable]

There is strong political backing for this. The hon. Gentleman refers to various industrial groups, and I am well aware that the Engineering Employers Federation, and, indeed, the CBI, have called for an industrial strategy of this kind. I will be working very closely with them and the other business groups.

[Steve Baker (Wycombe) (Con)]

Will my right hon. Friend reassure me that he will not allow Opposition Members, in their clamour for economic intervention, to drive us back to the misery and impoverishment of the 1970s?

[Vince Cable]

There were certainly many mistakes in that era, which I saw at first hand; I was in government at the time. We are determined to learn from both the positive and the negative experiences of that time.

[Mr Nicholas Brown (Newcastle upon Tyne East) (Lab)]

If the Government have an industrial strategy supported right across government, why is HMS Ark Royal to be decommissioned abroad, rather than in the north-east of England, where she has a long association and where there are eight workers for every job available? The shipbuilding skills are there to decommission the ship in the north-east: why cannot that be done?

[Vince Cable]

I am certainly very happy to talk to my colleague the Secretary of State for Defence about the cost-benefit analysis he will have undertaken in order to make that decision. Historic associations are not really a good base for business decisions; none the less, the right hon. Gentleman has made a case and I will try to establish why that business decision was made.

[Martin Horwood (Cheltenham) (LD)]

May I congratulate the Secretary of State on visiting the Sustainable MotoExpo in my constituency over the weekend, and on the support it demonstrated for green technology design and engineering, which the Government are already giving through bodies such as the Technology Strategy Board? I hope that that continues and increases.

[Vince Cable]

My colleague reminds me of an event that took place on Saturday in Cheltenham that was a very good advertisement for the industrial strategy approach I am describing. The Government have put some £400 million into the development of electric vehicles, and my colleague the Secretary of State for Transport has supported the bounty for charging points. We are now seeing that technology getting to a take-off point. My hon. Friend showed me dozens of examples of small and large car makers in his constituency—led by the Nissan Leaf, which we have been supporting directly—that will make this a major industry in future years.

[Mr George Howarth (Knowsley) (Lab)]

The right hon. Gentleman likes to present himself as the voice of progressive dissent within the Cabinet. How does he square that with taking responsibility for measures to make it easier to sack people?

[Vince Cable]

I certainly like to think I am a voice of progressive opinion. We are dealing with changes in the tribunal system that will help small-scale companies to deal with some of the issues they have. But as I pointed out to the House the other day, the specific proposal of no-fault dismissal is not something we are proceeding with.

[Richard Fuller (Bedford) (Con)]

With the Government accounting for 50% of the economy, I am sure the Secretary of State will agree that industrial strategy should be based not on more borrowing for more government, but on more encouragement for more entrepreneurs. Will his Department therefore look at the local enterprise funds initiative, which has the potential to galvanise people who can invest in businesses in their local community to do so, and which more than 83 Members of Parliament have already expressed an interest in setting up in their local communities?

[Vince Cable]

That is an extremely good suggestion and I am very happy to talk to the hon. Gentleman in more detail about how he sees this happening. Of course, we have the local enterprise partnerships—perhaps they have a key role in making that happen. However, his premise is correct: it is entrepreneurs in the private sector who will drive recovery, and they are fundamental to the industrial strategy.

[Alison Seabeck (Plymouth, Moor View) (Lab)]

There was no mention in the Secretary of State’s statement of the defence sector, yet we have had some notable losses of export opportunities, a lot of rhetoric and very little action in the last two and a half years. Will he set out what lessons he thinks he can learn from the United States and France in the way they work with, protect and promote their defence industries?

[Vince Cable]

Of course, the defence sector does have an important role to play in the approach I am developing, particularly in procurement and in research and development. We want that approach to be fully cross-government, and it will include defence. We work closely with the French, as the hon. Lady knows, in the aerospace sector and we learn from their experiences, not all of which are successful, one has to say.

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

Does the Secretary of State agree that as well as having an industrial strategy we need to do everything we can to encourage business confidence and that at this moment we need everyone to get involved, including the Opposition?

[Vince Cable]

Yes, I totally take that point. I thought the comments today were a little carping and negative and not terribly original, but I will continue to encourage the Opposition to be more constructive.

[Stewart Hosie (Dundee East) (SNP)]

The Secretary of State spoke about the supply chain, a sectoral approach, training, bank lending, a new bank and the importance of procurement. They are all important, but he said precious little about fiscal policy. He will remember that the industrial buildings allowance boosted manufacturing and tourism in the past. Indeed, the agricultural buildings allowance did the same in that sector. Does he see a role for such fiscal change to leverage private investment and grow capacity on the supply side?

[Vince Cable]

The Chancellor is doing a great deal of that. Indeed, he is trying to create an encouraging tax environment for business. Of course, what we have to do—and what he is doing—involves a trade-off between specific incentives and producing an over-complicated tax system, about which I know that the hon. Gentleman, with his detailed knowledge of the sector, would be the first to complain.

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

Given that growth is a key objective, will the Secretary of State cut at least some of the funding for infrastructure projects, as we cannot export bridges, roads or houses, and instead fund tax cuts for small and medium-sized enterprises to encourage them to grow? That is a more sustainable way of reducing unemployment, particularly if the dead weight of regulation is reduced, too.

[Vince Cable]

I may need to reflect on the question, but I do not think that there is a strong argument for cutting back on infrastructure, as efficient infrastructure is crucial to the efficiency of the economy. I might have misunderstood the question, however.

[Mr Ben Bradshaw (Exeter) (Lab)]

Both the right hon. Gentleman and the Deputy Prime Minister have made quite clear their opposition to regional pay, which is welcome. What are he and the Liberal Democrats doing within the Government to stop regional pay coming in by the back door in 20 NHS hospitals in south-west England?

[Vince Cable]

The Government have made it clear that we support local flexibility. The model we have studied was introduced by the Labour Government in the Courts Service. It does not involve large-scale regional differentials, but does involve giving parts of the public sector the opportunity to vary their pay to reflect performance and local conditions.

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

Will the Business Secretary confirm to the House how much happier he is to be developing his industrial strategy in partnership with the Conservative party than he would be with the Labour alternative?

[Vince Cable]

I am very happy developing the strategy at the moment and am open to any support from all comers.

[Ian Mearns (Gateshead) (Lab)]

There has been some discussion in the press this morning in the north-east of England about the Deputy Prime Minister establishing a new inquiry into the growth of the north-east as an economy, involving people such as the chief executive of Northumbrian Water and the Bishop of Durham, with Lord Adonis as the chair. What does the Secretary of State think he can do in conjunction with an inquiry of that nature to grow confidence in the economy so that British business starts to invest the £700 billion that it is sitting on?

[Vince Cable]

I recognise that there are severe problems in the north-east, as I have been there many times and I have talked first hand to representatives and to the business people involved. The north-east has one potentially major advantage in an economy that is rebalancing, as manufacturing forms a high proportion of its total economy, as do exports. I was last in Newcastle a few weeks ago, and there are many good, positive new industrial developments on the Tyne. That might be an indication of better things to come, as might developments in the car industry in that part of the country.

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

I welcome the Government’s announcement of a commission to consider strategy for the north-east economy, chaired by Lord Adonis. May I impress on my right hon. Friend and the commission the importance of the A1 road link and of maintaining the Government’s commitment to renewable energy, both of which are important to industry in the north-east?

[Vince Cable]

My right hon. Friend is a formidable advocate of north-east interests. He makes two specific points. I have heard the point about the road link many times. I do not know quite where we have got to in the process, but I will check up on it. He also emphasises the importance of renewable industries and will be aware that industries are beginning to revive on the Tyne, involving rigs for the North sea, that were previously in the oil and gas sector but have been adapted to renewables. We will see a great deal more such work on the east coast and, of course, it has explicit Government support, financial and otherwise.

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

The manufacturers’ organisation EEF has called for an industrial strategy after criticising the Government’s approach to growth so far as inconsistent, incoherent and unaccountable. It was not clear from the Secretary of State’s contribution whether tomorrow marks a step change in his industrial strategy or more of the same. Which is it?

[Vince Cable]

We are of course dealing with a gradual evolution of policy; business wants certainty and clarity, rather than sudden changes. I return to the point I made in response to the hon. Member for Streatham: we are starting from an inherited position on the manufacturing industry that was very weak after a long period of decline. Turning that around will not be easy.

[Andrew Stephenson (Pendle) (Con)]

The Secretary of State had a starring role in the Channel 4 programme “Bank of Dave”, in which I made a brief cameo appearance. He talked today about access to finance being a key part of an industrial strategy. I hope he agrees with me that local banks such as Dave’s bank have a key role to play in that.

[Vince Cable]

I thank my colleague for that. I have met Dave. He is an impressive entrepreneur and very public-spirited and, as I understand it, is doing a great job in Burnley in channelling savings directly to local businesses. That seems an extremely attractive model that could well be reproduced elsewhere.

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

With the gap between the south and the regions widening, I am disappointed that the Secretary of State has not included a regional element in the industrial strategy. Does he now regret the hasty decision to abolish the regional development agencies and replace them with the impoverished local enterprise partnerships and the incoherent regional growth strategy?

[Vince Cable]

The gap between north and south, which is of course a good deal more complex than the hon. Gentleman suggests—there are parts of the north that do extremely well—has been widening for many years, in spite of the regional development agencies. I am absolutely satisfied that the structures we have introduced, the local enterprise partnerships, are more relevant to local geography, much more business focused and, together with the city deals, will give an energy to the development of some of the areas which have been struggling that they have not had for many years.

[Mr David Nuttall (Bury North) (Con)]

Does the Secretary of State share my concern that all too often viable small businesses are refused loans by high street banks simply because they operate within a sector of which the banks have taken a negative view?

[Vince Cable]

The hon. Gentleman is right. As I said in my brief introduction, there is a serious and declining trend in business lending to SMEs. He is also right that certain kinds of businesses find borrowing extremely difficult. Creative industries are a good example, because they do not have physical security and the banks are extremely risk-averse, which of course is difficult for companies engaged in international trade. That is all the more reason why the Government have to intervene to support lending in such instances.

[Mr William Bain (Glasgow North East) (Lab)]

The Business Secretary mentioned innovation, but does he not recognise that the share of national income spent on research and development has declined over the past three decades? Why did he not advocate in his statement measures to increase Labour’s research and development tax credit to ensure that we do not continue to lag behind Germany, France, America and Japan?

[Vince Cable]

One of the things the Chancellor has done is improve and focus the R and D tax credit, taking it to below-line research expenditure, which was hitherto a major inhibitor. One of the things I very much want to see arising from this work is a much bigger commitment to R and D, particularly the role of the Technology Strategy Board, which I think is one of our best institutions.

[Chris White (Warwick and Leamington) (Con)]

I, too, welcome the Secretary of State’s comments. Today the Associate Parliamentary Manufacturing Group released a think-piece on modern industrial policy, which is available to Members online. It states that we need a formal strategy document, created by the Government and overseen by a dedicated Minister for manufacturing, delivered to Parliament regularly and created in full consultation with industry, trade unions, all political parties and parliamentarians. Will he meet the group to discuss these ideas and how we might be able to integrate them into Government policy?

[Vince Cable]

I am certainly very happy to meet the group. A key part of the industrial strategy relates to manufacturing. However, it is important to stress that the modern economy is much more complex than the old sub-divisions. Much of the value in manufacturing these days derives from what are called intangibles—intellectual property, for example, and IT work. The services sector in its modern form contributes massively to our economy, which is why one of the areas we want to focus on is services that can be sold overseas and that have a large knowledge or technology component.

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

Following on from a previous question, SMEs regularly tell me that they find it difficult to access funding from the big banks, and in some cases the banks are actually obstructive. The question therefore arises: where will the industrial strategy succeed, where the Merlin agreement apparently failed?

[Vince Cable]

The Merlin agreement did not fail. It was not sufficient, but it did have the effect of stabilising lending to SMEs by banks above the level it would otherwise have reached. I am often critical of the banks, but to be fair to them, a major factor is the change in the system of regulation—much of it taking place internationally—which is forcing the banks to hold more capital and to weight their risks in a different way. That has the effect of discouraging lending to SMEs. We are proceeding with a whole lot of interventions that are designed to counter that trend.

[Neil Carmichael (Stroud) (Con)]

I welcome the Secretary of State’s focus on the aviation sector, particularly from the point of view of engineering. However, does he agree that a proper strategy for industry requires all aspects of engineering to be considered by most companies involved in any form of manufacturing and that we also need to give engineers a boost at boardroom level?

[Vince Cable]

The hon. Gentleman is absolutely right, but that requires a big cultural change, and that is beginning to happen. We see from university applications this year that engineering was the most popular subject among applicants, which suggests that we have been successful in recognising that engineering is an essential discipline.

[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

The Secretary of State will be aware that there is a plan for a major wind turbine plant in my constituency and that there are major plans for offshore wind turbines off the east coast of Scotland. I therefore welcome what he said to the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith) about support for renewables. However, people in those industries are asking questions about the commitment to the renewables industry of other people in the Government. Will the Secretary of State take this opportunity to dissociate himself from those in the Government who question the role of renewables in our industrial revival?

[Vince Cable]

There is complete support in the Government for what is happening in offshore wind, which is what the hon. Gentleman was describing. I introduced, with the support of my colleagues, a new centre to promote research and development—in Scotland, as it happens—and I was recently in Edinburgh supporting one of the new ventures there. The Government are fully behind the industry, which is building up on the east coast of Scotland and England in particular, taking advantage of the opportunities in the sector, which has enormous potential.

[Fiona Bruce (Congleton) (Con)]

Developing new sectors is vital, but does the Business Secretary agree that it is equally important to maintain and pass on viable manufacturing skills, some of which have been established over generations? Will he therefore join me in congratulating management and workers on the reopening of the former Ideal Standard factory site in Middlewich, under the new name of Ours Sanitary Ware Ltd? The site is creating valuable new jobs in the UK ceramics industry and bringing back to Cheshire the manufacturing and production of bathroom ware, which has a proud tradition in the area, but was sadly run down under the previous Government.

[Vince Cable]

The hon. Lady is right that a lot of manufacturing capacity was run down under the last Government. We can be positive not just about some of the more sophisticated, high-tech manufacturing, but about traditional sectors—she cited ceramics as one example. The first industrial visit I made as Secretary of State was to a bicycle factory, which was doing extraordinarily well, expanding and exporting to China. With access to good process innovation, traditional manufacturing can do just as well as some of the newer and more sophisticated forms.

[Mr John Spellar (Warley) (Lab)]

The Secretary of State mentioned procurement, yet the Government are, for example, giving away major train manufacturing contracts abroad. Yesterday it was reported that civil servants in the Department for Transport are trying to nobble their new Secretary of State for having the temerity to back British train manufacturer Bombardier in Derby. Will the Secretary of State back his colleague, put those disloyal civil servants in their place and stand up for British industry—and, indeed, for the policy that he has just enunciated?

[Vince Cable]

I do not think there is any question of disloyalty; the public service has a set of different obligations in relation to procurement, one of which, of course, is to obtain value for money. Another is to observe the law, which we all have to follow. My colleague the previous Secretary of State for Transport worked closely with me in developing a more strategic approach to the procurement of trains, and we have begun to see that in the framing of the contracts that are now happening.

[David Mowat (Warrington South) (Con)]

The chief executive officer of Alcan UK has recently said that differentially high energy prices are a much bigger issue for his business than the eurozone crisis. Energy prices have not been discussed so far in this urgent question. Does the Secretary of State agree that it is hard to have an industrial strategy based on more manufacturing when our energy prices are potentially higher than those of our neighbours, such as France?

[Vince Cable]

The hon. Gentleman is right that there is a real problem. That is why, in the last Budget, we agreed to proceed with a scheme that will effectively compensate energy-intensive producers, in the metals industry and elsewhere, for the relatively high cost of electricity that they face. We have been through a process of consultation, which has recently finished, on how that complex set of problems should be dealt with. We fully recognise the problem.

[Paul Blomfield (Sheffield Central) (Lab)]

The Secretary of State has placed great emphasis on the regional growth fund. Is he not embarrassed and concerned that, 20 months after the first-round bidding has closed, companies are still waiting for the money, and facing the prospect of a further 12 months’ wait? What is he going to do about that?

[Vince Cable]

I am not the least bit embarrassed about the regional growth fund, which is a major success story. Wherever I go around the country, I get strong appreciation for the contributions it has made.

The hon. Gentleman knows very well that, once a decision in principle has been reached, there has to be due diligence, which is not necessarily quick. Very often the companies change their own plans, which then have to be negotiated; some fall by the wayside. There is a very large number of projects that not only have disbursed finance but are up and running and creating large numbers of jobs across the country.

[Charlie Elphicke (Dover) (Con)]

I thank the Secretary of State for his personal support for the life sciences sector in east Kent. If there is to be public money behind any partnership, will he particularly consider equity so that the taxpayer can share in the success? Will he also consider the idea that the proposed industrial bank should be the business growth fund retasked, expanded and floated for the future?

[Vince Cable]

It is certainly true that in developing the idea of an industrial business bank, we need to take account of existing mechanisms of funding and bring them together in a more rational way.

I thank the hon. Gentleman for what he said about east Kent, which is a good example of how, even in successful growth industries such as the life sciences, technologies change, competition is intense and companies close. A large part of government is dealing with the painful restructuring that has to happen. We cannot stop markets working.

[Jim Fitzpatrick (Poplar and Limehouse) (Lab)]

The Secretary of State mentioned Lord Heseltine, who is credited with the vision of developing London docklands and beyond. He also rightly mentioned the importance of infrastructure. How does his industrial strategy relate to the construction industry—in particular, possible support for east London river crossings, without which we will not be able to maximise the potential of Canary Wharf, Stratford and the Thames Gateway?

[Vince Cable]

Construction is one of the key enabling sectors; it has to be. It has been doing badly in recent years, since the collapse of the housing and commercial property boom, and is in considerable distress. One of the reasons why the economy is not growing is what is happening in construction projects. To address the problem, the Government are now deploying a combination of support for infrastructure, the guarantees that the Chancellor has announced and the initiatives on housing and planning that were announced a couple of days ago.

[Mr Marcus Jones (Nuneaton) (Con)]

Many of my constituents work in the motor manufacturing industry, which has grown strongly in the past two years. Many UK motor manufacturers are now looking to repatriate their supply chains back to the UK. What support and help can the Secretary of State offer to facilitate that aspiration?

[Vince Cable]

That is absolutely right. It is very important that we stress this. The big investment that has been made by the main car companies—the original equipment manufacturers—is only part of the story. There is now a will to bring back a lot of the lost supply chains, which went for a variety of reasons, including exchange rates and a fashion for outsourcing that has been partially reversed. This is being actively pursued through the Automotive Council, which is involved with the Government in doing so. As my hon. Friend may know, we have a supply chain funding initiative that is currently open to competition, and a variety of bids have come in actively to support the process that he describes.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

To be truly successful, an industrial strategy should be shared on a cross-party basis so that business knows that it can invest without having to see radical shifts in policy. However, it is not altogether clear that both sides of the Government agree on it—after all, it has taken two years to get to this point—so what assurances can the Secretary of State give us that it will not be undermined by the Treasury and the Prime Minister again?

[Vince Cable]

The starting point of the hon. Gentleman’s question is right: there has to be cross-party support, because if we are thinking 10, 15 or 20 years ahead, we do not know what form of Government will emerge over that time. There is undoubtedly cross-party support among Government Members. I think that I heard support from the Opposition, but I was not totally clear about that.

[Mr Peter Bone (Wellingborough) (Con)]

I hate to say this to the Secretary of State, but there is not cross-party support from this particular quarter. His statement sounded to me like one that any Labour Minister in the previous Administration could have made; it talked about state intervention and picking winners and said nothing about cutting red tape and regulation. It was a Labour statement, not a coalition statement.

[Vince Cable]

The hon. Gentleman has his own very distinctive and unique style which we all admire. What I said goes in tandem with the announcements that my colleagues and I made this morning about scrapping a substantial amount of red tape. Of course, for large parts of the small-scale business sector that is rather more crucial. The two things coexist.

[Alison McGovern (Wirral South) (Lab)]

Further to the Secretary of State’s comments about tax, what conversations has he had with the Treasury about helping businesses that want to invest in the technology that we will need if the coalition Government are sincere about rebalancing the economy?

[Vince Cable]

I meet the Chancellor very frequently. He has supported, through the autumn statement and the Budget, a whole series of innovation spending, building on the science budget, which, as the hon. Lady will remember, was ring-fenced in the spending review. He understands the needs in this area very well.

[Jason McCartney (Colne Valley) (Con)]

Does the Secretary of State agree that the multi-million-pound regional growth fund investment in David Brown’s offshore wind turbine gear systems technology innovation centre on the outskirts of Huddersfield shows that this Government are investing in renewables?

[Vince Cable]

The hon. Gentleman took me to that factory, which was one of the first successful projects launched by the regional growth fund. It is a great advertisement for British industry, and I know that he has been personally very supportive of it. There are many examples of that kind which offset some of the negativity we have heard from Opposition Members.

[Nic Dakin (Scunthorpe) (Lab)]

Given that manufacturing badly needs demand, why are infrastructure projects being announced but not started? For example, none of the road schemes announced in the autumn statement has yet started. Will the Secretary of State make sure that things begin to happen?

[Vince Cable]

A lot of those projects are starting. As the hon. Gentleman well knows, infrastructure development needs to be properly planned and permissions need to be sought. The Government are anxious that these projects and infrastructure in general should now move ahead very rapidly.

[Andrew Miller (Ellesmere Port and Neston) (Lab)]

The Secretary of State will be aware that part of his statement lies right at the heart of the current inquiry by the Science and Technology Committee on bridging the “Valley of Death”. Many witnesses told us that the Technology Strategy Board needs to be expanded, and I am sure that the Secretary of State agrees with them, but does he also agree that that should not be done at the expense of investment in the research councils?

[Vince Cable]

No, indeed it should not. I was in Swindon last week talking to the research councils, whose role is entirely complementary to the TSB. They deal with an early stage of innovation. What they do is often highly relevant to British business, but it happens at an earlier stage of development than the work of the TSB. They are complementary bodies and their funding arrangements reflect that.

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

A successful industrial strategy requires decent infrastructure for transport, as well as regional balance. Will the Secretary of State assure us that he will work with the Secretary of State for Transport to ensure that airports such as Birmingham International are able to use their capacity and expand it as and when they need to?

[Vince Cable]

Birmingham International airport does, indeed, have vast potential, and I am a great advocate of it as part of our overall airport expansion, which we will clearly need in the years ahead. I think I am correct in saying that the regional growth fund and the Going Places fund have been used to improve access to Birmingham International airport.

[Alex Cunningham (Stockton North) (Lab)]

The regional development agency did a great job in north-east England and real industrial jobs were created, among others. Of course, we did some things that the Secretary of State now thinks necessary, but in the light of opposition in the coalition he is not able to progress an effective policy. The CBI said that he had “lost the plot”. Does he expect to find it at No. 10 or No. 11 Downing street?

[Vince Cable]

I am not quite sure what the question was. The hon. Gentleman started with regional development agencies. I know that there is nostalgia for them in some quarters, particularly in the north-east, but my experience, particularly in areas like Teesside, is that they are much happier with the LEP approach, which is much more business-focused, much more action-oriented, and actually getting things done.

[Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)]

A number of my hon. Friends have rightly raised the serious criticism of Government today by the Engineering Employers Federation. What is the Secretary of State going to do for the estimated 900,000 SMEs—the backbone of our economy—that are struggling because of reduced capital allowances?

[Vince Cable]

First, the EEF has actually been very supportive of many of the things that the Government have been doing. I am in frequent contact with it. It invited me to give a presentation on employment law some months ago. It is very supportive of our proposals and of what we are doing with regard to industrial strategy.

As far as the SME sector is concerned, let me make one general observation. If the SME sector is so weak, why is it that 900,000 new jobs have been created in the past two years? They have been created by very dynamic entrepreneurs at a grass-roots level, within a business environment that this Government are trying to engineer.

Point of Order

Monday 10th September 2012 Commons Chamber

16:22

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

On a point of order, Mr Speaker. The complex and sensitive issue of assisted suicide is one which thoughtful people on both sides of the argument, on both sides of the House, take very seriously. Have you had any indication that a Government Minister will make a statement on whether or not the rather superficial comments attributed in the media over the weekend to two junior Health Ministers represent any change in Government policy on this important issue of conscience?

[Mr Speaker]

No, but the hon. Gentleman might wish to approach the Backbench Business Committee in pursuit of a debate on this matter.

European Union (Approval of Treaty Amendment Decision) Bill [Lords]

Monday 10th September 2012 Commons Chamber

Considered in Committee

[Mr Nigel Evans in the Chair]

Clause 1

Approval of EU decision relating to stability mechanism

Question proposed, That the clause stand part of the Bill.

16:23

[The Minister for Europe (Mr David Lidington)]

Clause 1 sets out the purpose of the Bill and why legislation is required. It is required by section 3 of the European Union Act 2011, under which primary legislation must be passed to confirm parliamentary approval of certain European Council decisions. The provisions of section 3 relate to Council decisions made under article 48(6) of the treaty on European Union, and the reason for that provision in the Act was that such decisions allow for the revision of European Union treaties. The procedure under article 48(6) is known as the simplified revision procedure. In taking through the 2011 Act, the Government enhanced the role of Parliament in the approval of any such revision of the European Union treaties. The Bill marks the first use of those new provisions.

The purpose of the Bill, as set out in subsection (2), is to approve the

“European Council decision of 25 March 2011 amending Article 136 of the Treaty on the Functioning of the European Union”.

That decision seeks to add a new paragraph to article 136, which recognises that EU member states whose currency is the euro—I stress that the proposed new paragraph applies only to eurozone members—may establish a financial stability mechanism. In other words, it confirms that the eurozone member states can set up a permanent stability mechanism to support fellow eurozone members that are in financial difficulty.

[Wayne David (Caerphilly) (Lab)]

The former Financial Secretary to the Treasury, the hon. Member for Fareham (Mr Hoban), stated in evidence to the European Scrutiny Committee that

“we do not believe that it is legally necessary for the Article 136 change to be made before the ESM comes into force. It is desirable, but I do not think that it is necessary.”

Have the Government changed their position since that statement, or was the Financial Secretary wrong?

[Mr Lidington]

It has been our position since the proposal was first made in autumn 2010 that such an amendment of article 136 would give eurozone member states firmer constitutional and legal certainty than if they simply proceeded to establish the permanent stability mechanism without recourse to such a treaty amendment.

[Keith Vaz (Leicester East) (Lab)]

I congratulate the Minister on surviving the reshuffle. He is well on his way to being the longest serving Minister for Europe for some time.

[Mr Denis MacShane (Rotherham) (Lab)]

Not yet!

[Keith Vaz]

Certainly since my right hon. Friend the Member for Rotherham (Mr MacShane) held the post.

I should have had this point clarified on Second Reading. Will the Minister confirm that none of the funds that we are talking about will in any way affect the ability of the European Union to support new member countries such as Croatia? Will he clarify that this matter is completely separate from and has nothing to do with enlargement?

[Mr Lidington]

Yes, I give the right hon. Gentleman that firm assurance. This is nothing to do with enlargement. In effect, the treaty amendment provides a bridging clause between the existing European Union treaties and the separate intergovernmental European stability mechanism treaty that is being reached by the 17 members of the eurozone. It is that intergovernmental treaty that will set out in detail how the stability mechanism for the eurozone will operate.

[Mr Peter Bone (Wellingborough) (Con)]

I welcome the Minister back to the Dispatch Box. He has been helpful on occasions—[Laughter]—on rare occasions.

What I do not understand—this goes to the heart of the matter—is why, if there is an intergovernmental treaty that has nothing to do with the European Union, that we have had nothing to do with and that the Prime Minister wants nothing to do with, we have to be part of amending the EU treaties. We have been told that it has nothing to do with the EU.

[Mr Lidington]

First, I thank my hon. Friend for being so kind as to say that I am helpful to him on certain rare occasions. I am delighted to be able to return the compliment to him in similar measure.

The answer to my hon. Friend is that the proposal to amend article 136 of the treaty on the functioning of the European Union would change one of the treaties of the European Union. As I am sure he realises, any amendment to the treaty on European Union or the treaty on the functioning of the European Union requires the unanimous agreement of the member states of the European Union through the national ratification process of each member state. The rule that everybody has to ratify treaty changes according to their respective constitutional arrangements still applies even if a change to the treaties excludes one or more countries. Theoretically, there could be an amendment to the European treaties that applied to only one country. That is not too fanciful a hypothesis, because there are protocols to the treaties that apply to only one or two member states, but each none the less has to be approved and ratified by all 27 existing European Union member states. We are simply following proper constitutional and legal procedure.

16:30

[Wayne David]

Will the Minister give way?

[Mr Lidington]

I will let the hon. Gentleman come in again, but then I want to make some progress.

[Wayne David]

The Minister is very kind. I am pleased that he has been reappointed. It is good to have a sensible Europe Minister—relatively sensible, anyhow—in place.

May I go back to the point about when the Government established their position? I notice that the former Financial Secretary gave his evidence to the European Scrutiny Committee relatively recently, in March. Is the Minister for Europe right or was the former Financial Secretary right?

[Mr Lidington]

I simply refer the hon. Gentleman to what I said in response to his earlier intervention. The amendment to article 136 will provide our friends and partners who are members of the eurozone with the additional certainty that they have sought ever since the proposal for a treaty change was first made in the autumn of 2010. He is searching for plots and mysteries where none exists. Over the past two and a half years, in every conversation that I have had with my opposite numbers from the eurozone member states, they have been anxious to find out what position the British Government were taking on the treaty amendment and keen that we should be committed to ratifying it, having agreed to it last year.

[Mr James Clappison (Hertsmere) (Con)]

I, too, am pleased to see my right hon. Friend still in his post. There are undoubtedly Euro-plots, but this is not one of them. As a member of the European Scrutiny Committee, I understood the former Financial Secretary to be talking about the European Union’s view of the legal position, not the British Government’s view. It was the EU’s view that the change was required. It was not the British Government’s responsibility. I think the hon. Member for Caerphilly (Wayne David) is a little confused about that.

[Mr Lidington]

I am grateful to my hon. Friend for that clarification.

Clause 1(3) fulfils the requirements of the European Union Act 2011 relating to the referendum lock. It demonstrates compliance with the condition in that Act that exempts the approval of certain European Council decisions from the requirement to hold a referendum. Section 3(1) provides that a Minister may not confirm the approval of a decision made under article 48(6) of the treaty on European Union unless three requirements have been met: first, that a statement has been laid under section 5 of the Act; secondly, that the decision has been approved by Act of Parliament; and thirdly, that the referendum condition, the exemption condition or the significance condition has been met.

The 2011 Act provides that a decision under article 48(6) is not subject to a referendum if its provisions apply only to member states other than the United Kingdom, and that is the case here. The decision amending article 136 applies only to member states whose currency is the euro, and therefore not to the United Kingdom. It therefore falls within the exemption provided for in section 4(4)(b) of the Act. My right hon. Friend the Foreign Secretary laid a statement before Parliament under section 5 on 13 October 2011 stating that in his opinion the decision amending article 136 fell within the exemption in section 4(4)(b) and therefore did not attract a referendum. To comply fully with the exemption condition, the Bill includes the provision in clause 1(3) stating that the decision does not fall within section 4 of the 2011 Act. I commend the clause to the Committee.

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

I stand briefly to question my right hon. Friend the Minister—I, too, welcome him back to his post—on whether he believes that the European stability mechanism risks prolonging the agony of the eurozone crisis. Although we are not members of the ESM, is it drawing us in yet further and adversely affecting us as a result? The eurozone crisis was caused by excessive debt—that is well established; it was Governments borrowing beyond their means. Being built on debt, we all accept that we cannot borrow our way out of this problem and crisis, yet numerous summits have basically moved debt around the system and between banks or Governments and, quite rightly, the markets are getting tired of that.

I suggest to the Minister that the best solution to the problem is economic growth, and to grow our way out of the problem for the sake of all eurozone countries and the EU as a whole. Where are the measures to encourage greater competitiveness? Where are the supply-side reforms? They are simply not there. I therefore put it to the Minister that he should consider whether the ESM prolongs the agony and delays the inevitable, and whether our interests, as such, are being adversely affected by the position we are taking on this treaty change.

[Mr MacShane]

If I may, I will try to speak to the clause. I might make other comments on Third Reading, but I hope not to detain us long. What is extraordinary about this clause is its sheer impertinence. Our Eurosceptic friends in the Conservative party are for ever telling us that we do not want Europe interfering in our affairs. The proposed legislation, however, says that we should wait until every other national Parliament has made up its mind—

“laid an order certifying that the constitutional requirements of all the members states of the EU have been complied with.”

What business or right is it of this Committee to demand that the constitutional requirements of every other sovereign nation state be met before we make up our minds, and until

“all the related and legal challenges have been disposed of”?

Let us imagine each of the other 26 fellow EU member states adopting the same clause and waiting for their Parliament to ratify the ESM treaty and all legal challenges to be completed.

[The First Deputy Chairman of Ways and Means (Mr Nigel Evans)]

Order. The right hon. Gentleman is talking about amendment 1 as opposed to clause 1.

[Mr MacShane]

As ever, Mr Evans, you are right. I will not repeat my speech but I think the Committee has got the point.

[Keith Vaz]

I, too, wish to be brief, and my point arises from the comments made by the hon. Member for Basildon and Billericay (Mr Baron). I hope that the Bill will proceed, because I support the Government’s proposals, and the hon. Gentleman may know that the Home Affairs Committee has written on a number of occasions about the problems facing countries such as Greece in dealing with migration. Will the Home Affairs Committee have any say or be able to make suggestions about how funds will be deployed under the European stability mechanism? If we feel that not enough attention is being paid to the borders of Greece and Turkey because they do not have sufficient funds, will we be able to make such comments? I gather from the Minister that we cannot be part of the process but will we, at the very least, be able to comment on how the funds are to be spent?

[Emma Reynolds (Wolverhampton North East) (Lab)]

It is a great pleasure, as ever, to debate with the Europe Minister.

As my right hon. Friend the shadow Chancellor and I explained on Second Reading, we are in favour of the Bill and clause 1 specifically, which provides for article 136 of the treaty on the functioning of the European Union to be amended to allow the eurozone to set up a bail-out fund—to be financed and operated by the eurozone—to support eurozone countries when they need it.

The permanent bail-out fund, whose establishment was agreed by EU leaders at the European Council in March 2011, will replace the two existing temporary funds. The Opposition have concerns on conditionality, which I will go into in some detail later, but we believe that the ESM will enhance the stability of the eurozone if it is used appropriately. Given that our economy is so closely connected to eurozone economies through both trade and the exposure of our banks, we believe it is in the UK’s national interest that the fund is allowed to be set up.

[Mr Lidington]

I rise to respond briefly to the points that have been made. I am grateful to the hon. Member for Wolverhampton North East (Emma Reynolds) for her support for clause 1 and I shall respond to the points to which the right hon. Member for Rotherham (Mr MacShane) alluded when we debate amendment 1.

I should tell the right hon. Member for Leicester East (Keith Vaz) that the purpose of the ESM is not to provide an addition to structural and cohesion funds or any of the spending instruments to help with any problem, including Frontex, which rightly concerns him. The ESM is a way of providing a firewall or bail-out facility for a eurozone economy that might run into serious economic problems and have difficulty financing itself.

The direct answer to the right hon. Gentleman on the UK opinion is that we are not a member of the euro and have no intention of joining it, and therefore would not qualify for membership of the ESM. However, there are plenty of ways in which British Ministers and officials, both bilaterally with our fellow member states and at EU gatherings, can make constructive and informed suggestions and have good ideas. It is important that we acknowledge that the eurozone countries are potentially putting their taxpayers’ money on the line in the stability mechanism. Therefore, any suggestions that we might choose to make in future need to take account of that very important truth.

My hon. Friend the Member for Basildon and Billericay (Mr Baron) will forgive me if I do not follow him by giving a detailed analysis of the origins of the eurozone crisis. There are a number of different reasons behind it. In some countries, the problem is public sector debt, but in other stricken countries, the banking system is at the root of the difficulties.

However, I should take my hon. Friend up on his point about economic growth. He was right that the Bill is not the answer to Europe’s economic problems. I have said repeatedly—and, much more importantly, my right hon. Friends the Prime Minister, the Chancellor and the Foreign Secretary have said repeatedly—that the salvation for Europe must lie in its restoring competitiveness and economic growth, and above all in its becoming competitive in a world in which economic power and influence is shifting dramatically to Asia and Latin America. The inventiveness of European nations can stand them in good stead, but we need the right policies at both national and European level to restore competitiveness. I ask my hon. Friend to take note of the European Council commitments made in the March and May summits which, in terms, called for the further development of the single market, and in particular the creation of a single market for the digital economy, and for deregulation measures.

Last year, the Government achieved something of a breakthrough—a new precedent was set—in the European agreement to spare micro-businesses from future European regulations. We are taking that campaign forward with like-minded member states to get Europe collectively to address the burden and complexity of regulation imposed on businesses large and small at an EU level, just as we are committed to reducing the costs and complexity to business of regulation here in the UK.

16:45

Finally, I say to my hon. Friend the Member for Basildon and Billericay that the Prime Minister intervened personally to break the deadlock at the end of 2010 to achieve an EU-South Korea free trade deal, which will benefit British companies and families enormously over the coming years. We are now devoting our energy to supporting efforts to achieve EU free trade agreements with countries such as the US, Canada, Japan and India. I would be the first to acknowledge that a great deal of work still needs to be done—I am by no means an uncritical admirer of the EU and its works—but there are some good and encouraging things about the picture in Europe today, as well as the problems and challenges that he rightly identified.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

[The First Deputy Chairman of Ways and Means (Mr Nigel Evans)]

We now move to clause 2, amendment 1, for which Mr MacShane has already whetted our appetite.

Clause 2

Extent, commencement and short title

[Mr Clappison]

I beg to move amendment 1, page 1, line 14, leave out subsection (2) and insert—

‘(2) This Act shall not come into force until the day after the Secretary of State has laid an order certifying that the constitutional requirements of all the member states of the EU have been complied with and all the related legal challenges have been disposed of.’.

I am grateful to the right hon. Member for Rotherham (Mr MacShane) for giving the Committee a perhaps unintended trailer of the film, as it were, but I hope to persuade hon. Friends that the film is rather better than his trailer for it. The gist of his argument was: what business is it of ours and how dare we lecture Europe on what it should do? But there is a difference between what he said and the amendment, which is concerned with what Europe has decided and how it takes effect in this country. That is rather a different matter, and I hope that I will persuade the Committee that important questions arise from it.

The amendment, which I do not intend to press to a vote, is designed to probe some of those questions. In the negotiations leading up to the amendment to article 136 of the EU treaty, the Prime Minister secured a good deal for Britain. It was a good deal for reasons I shall explain shortly. I do not want to go into the background of how in May 2010 the country became committed to the European financial stabilisation mechanism, which was different from the European stability mechanism, which we are talking about now, and from the European financial stability facility—there is no shortage of such acronyms and measures. In fact, I asked the House of Commons Library this morning how many attempts the EU had made since 2008 to resolve the euro crisis, but it said that it was difficult to say in the time available because there had been so many and it was so complex. However, it gave me a rough estimate of 17, including the latest one from Mr Draghi—we must hope that the 17th is more successful than the previous 16.

[Kelvin Hopkins (Luton North) (Lab)]

I agree with the hon. Gentleman. Some say that these repeated measures to try to save the euro are like kicking a can down the road, trying to fend off the inevitable for a little longer. Is that a fair assessment?

[Mr Clappison]

I pay tribute to the hon. Gentleman, who has been consistent in his analysis. I have not yet heard anyone who has convincingly contradicted his analysis of the underlying economic problems.

[Martin Horwood (Cheltenham) (LD)]

rose—

[Mr Clappison]

The hon. Gentleman has had many goes in the past. I will give him another one now to see whether he can do any better.

[Martin Horwood]

I actually rather agree about the underlying financial and economic problems not being tackled, but that is not what these measures are intended to do. The hon. Gentleman talked about the different mechanisms that have been introduced, but one of those in respect of which the UK has the greatest liability is the EFSM. The whole process being undertaken here will reduce our liability to that mechanism, which will cease to function, so surely he should be welcoming this process, not trying to lay obstacles in its way, however well meaning they might be.

[Mr Clappison]

I am doubly lucky now, because I have two trailers for the film. Neither is entirely accurate, but the hon. Member for Cheltenham (Martin Horwood) is slightly more on the right lines than the right hon. Member for Rotherham. I hope that I made it sufficiently clear earlier that I believe the Prime Minister negotiated a good deal for Britain, so far as it goes, in that he extracted us from our liability under the EFSF, which is the European financial stabilisation facility—

[Martin Horwood]

It was the EFSM.

[Mr Clappison]

I am sorry. It was the EFSM—the European financial stabilisation mechanism. That is different from the EFSF. Britain had liability under one of the two measures agreed in May 2010; it was the EFSM, not the EFSF.

I do not want to make many further points about this matter, because we went into it in the previous debate, but it was agreed in May 2010 that, under the EFSM, this country would have liability in relation to the eurozone which would have resulted in British taxpayers having to fork out with no prospect of Britain receiving any benefit from the EFSM because it was not a eurozone member. [Interruption.] If the hon. Member for Cheltenham can just contain his enthusiasm, he will see the point that I am trying to make on the timetable for all these measures to take effect. That is what the amendment relates to. He will know that there is agreement that, as soon as the European stability mechanism is in force, Britain will no longer have any such liability. It is not yet in force, however, and there are important issues regarding the timing of these events. That is what the amendment deals with. The Bill will come into force on the day it receives Royal Assent.

[Mr MacShane]

If, as seems possible, Ireland were again to find itself in the terrible trouble that it did two years ago, would the hon. Gentleman support help being given by Her Majesty’s Treasury to try to stabilise Ireland, as we did very generously—led by the Prime Minister—in 2010, or is he against any help being given to any other European country?

[Mr Clappison]

The main problem affecting the eurozone is the existence of the euro itself. It is the euro that is causing the loss of competitiveness across Europe, inflicting misery on the southern European states and, indeed, all the countries that have had to apply for a bail-out. The right hon. Gentleman must put his hands up and say that he has consistently argued in favour of British membership of the euro. He must take his share of the responsibility. How these matters are to be mitigated is a different matter, but I believe that the ultimate solution will involve a reconfiguration of the eurozone itself. [Interruption.] The right hon. Gentleman says he thinks that that is a slur on his character. He will have a chance to put that right in due course, but as I understand it, he is still in favour, in principle, of British membership of the euro, as, I think, are members of his Front Bench, although they do not tell us exactly when that should take place. But this is going wider than the matter in hand, and I should like to return to amendment 1.

On the day on which the Bill is passed, the European stability mechanism might not yet have come into force. Its ratification has been held up in at least two member states, with significant challenges having been mounted in their constitutional courts, and there is a possibility of challenges in other member states as well. We know that such a challenge is before the constitutional courts in Ireland, as well as in Germany, where important hearings are to take place later this week.

It is significant that the need to satisfy German constitutional concerns seems to have been one of the reasons for proposing the amendment to article 136 of the treaty in the first place, in order to shore up the legal position of the European financial stabilisation mechanism when there was doubt about whether it was actually needed. That amendment to the European treaty, which was introduced through the simplified revision mechanism, served to shore up the treaty and give legal comfort to the German constitutional court, among others.

I should like to ask the Minister some specific questions, and I would be grateful if he dealt with them in his usual able and comprehensive way. Will he tell us, in the light of those factors, whether Britain will remain liable for any new commitments entered into under the original EFSM, which we entered into in May 2010, until the European stability mechanism takes effect after the ratification procedures have been completed by all the member states? Will that be the case, and even though this Bill might have come into force in the meantime, will we nevertheless retain liability under the EFSM—the original EFSM—until the ESM comes into force? What will be the position if the ESM does not come into force as a result of ratification problems? In that case, could we still have liabilities—new liabilities—under the EFSM? Will the Minister say a few words, too, about existing liabilities under the EFSM? As I have already said, I believe the Prime Minister got a good deal for Britain in the original negotiations, but what is the position on existing liabilities under the EFSM? Will the Minister quantify for us what the Government view as possible future liabilities under the terms of the EFSM?

The Minister will understand a wish for us to have as much detail and certainty as possible in respect of the legal and financial arrangements of the European Union, the institutions of which—including the European Court—have shown themselves to be somewhat flexible in the past, if not completely elastic in their legal interpretations, particularly of treaties. No better example of such flexibility can there be than the so-called legal justification for the EFSM in the first place. As the Minister will recall, this was article 122, which allows financial assistance to be given to a member state facing difficulties

“caused by natural disasters or exceptional occurrences beyond its control”.

As I have already indicated in response to interventions, I believe that the current crisis affecting Europe—the European debt crisis—is not an act of God, but an act of man in the shape of human fallibility over the European single currency. The Government are right to restrict our liability for this, but I would like Ministers to go further in their analysis of the problems. I understand the diplomatic reasons that might restrain them from doing so, but I have heard the incantation so many times before—that “a stable eurozone is in the interests of the United Kingdom”. We hear it all the time. It is inherent in the structure of the eurozone that we see the problems arising throughout Europe today, and that incantation is really quite meaningless and bears no relation to the problems that Europe faces. The truth remains that the euro lies at the root of the economic problems presently ravaging Europe and of all the misery caused throughout Europe but particularly in the southern European countries in the shape of very high levels of unemployment, debt and uncertainty, which is ravaging the prospects of a generation. It is the euro and the political ambitions that lie behind it—ambitions for a centralised, unified European state—that lie at the very root of these problems.

[Mr MacShane]

In responding to how the hon. Member for Hertsmere (Mr Clappison) has introduced his amendment, one might as well say that the pound is the fault and the root cause of all our problems. In my Rotherham constituency, 25% of young people are without work. There is economic and social misery there, but do I attribute it to the fact that we have a certain currency? The notion that a currency causes bad Government policy is absurd.

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

Argument by analogy is never terribly wise, but when the analogy is between a single currency across different countries with different economies and a single currency such as the pound that applies within a single country with a single economy, that analogy is not only false, but completely risible.

[Mr MacShane]

I have respect and affection for the hon. Gentleman, but he might as well have said that when the US and Canadian dollar was the same, one country’s economic difficulties were caused by having the same currency when their social, taxation and economic policies were completely different. The same applies to when Britain’s pound and the pound of Ireland were exactly the same currency.

When I went on holiday to Ireland as a small boy, we took our English sixpences, threepenny bits and half crowns, and the currency was exactly the same there. It is the decisions of individual countries that decide their economic future, not the currencies that they choose. There are many, many countries using the euro that we might be advised to copy in terms of economic output, exports, social investment and long-term strategic thinking, and many of those countries are governed by parties of the centre right—Conservative parties— although, of course, the Conservative party here has broken all political links with its sister parties in Europe.

17:00

[Kelvin Hopkins]

I am astonished that my right hon. Friend should say that the value of a country’s currency is not important. If that is so, why did Britain recover after 1931 only by coming off the gold standard? We devalued our currency in 1949 and in 1967, we allowed for a big depreciation after the crisis of the early 1980s, and after the collapse of the exchange rate mechanism we recovered simply because we devalued our currency substantially to bring it into line with the needs of our economy.

[Mr MacShane]

I do not know whether my hon. Friend has spent much time holidaying in Europe in recent years, but there has been a substantial devaluation of the English pound against the euro since, roughly, 2008, and what have we seen? A recovery in Britain? An increase in exports? A decrease in imports? An increase in the creation of firms and jobs? In fact, we have seen the very opposite. My hon. Friend is right historically—he is always right historically—but I prefer to live today rather than in history.

The main problem with the amendment is that it is a wrecking amendment, and I hope that when the Minister replies he will have the honesty to say so, although the amendment was tabled by his hon. Friend the Member for Hertsmere. The notion that nothing can be ratified until every other country has ratified it and disposed of putative legal challenges is a circle that can never be broken. If the same rule were adopted by even one other EU member state, nothing could be ratified until we had agreed to ratify it, and we could not agree to ratify it until other Parliaments had done so.

Not only are we, as usual, condescendingly and patronisingly lecturing other Parliaments on what their constitutional settlements should be, but this is nothing short of a wrecking amendment, and I wish that Conservative Members would have the intellectual honesty to say so.

[Martin Horwood]

It is generally a pleasure to follow the right hon. Member for Rotherham (Mr MacShane) in European debates, as he and I share a broad enthusiasm for the European Union and its development. However, I think that on this occasion he is being a little unkind to our hon. Friends on the Conservative Benches. I do not think that this is a wrecking amendment; I think that it asks legitimate questions about the timing of the transfer between the European financial stability facility and the European financial stabilisation mechanism and the new European sustainability mechanism—although I think that by demonstrating that we know the difference between the EFSF, the EFSM and the ESM, we are probably all showing that we need to get out more.

The right hon. Gentleman asked whether the old EFSM, which made Britain liable for the financial bail-outs, could be brought back. That is an interesting question, and I too would like to hear the Minister answer it. I assume that a vote by the Council, probably with unanimity, would be required to bring the EFSM back into operation, given that the Council voted to end it, or at least not to involve it in any new bail-outs. If that is the case, I think that it would reassure Conservative Members considerably to know that the EFSM is, in effect, dead and buried, at least in respect of new bail-outs.

There are two problems with the amendment. The right hon. Member for Rotherham pointed out one of them in what was a rather pre-emptive intervention. This amendment ties the triggering of United Kingdom legislation to actions of other countries—to events in Berlin, Dublin or the European Court, for instance. That is a strange principle for Members who have generally been rather keen to emphasise the unique sovereignty and independence of the United Kingdom Parliament to be trying to introduce into a British Bill. It raises a constitutional question, too: should we be putting clauses into British legislation that are entirely dependent on events in other countries?

The second problem is the political roundabout problem. If other countries follow our example and make their ratification of the treaty dependent on others finishing their processes, we will be like cars at a roundabout, with everybody waiting for everybody else to go, and the whole process will completely logjam. I am not sure whether that is what was intended, but it would make the amendment something of a wrecking amendment, in practice if not in theory. I think this is an impractical amendment—albeit perhaps a well-meaning one, which has produced an at least mildly illuminating debate.

[Kelvin Hopkins]

First, let me say that I entirely support what the hon. Member for Hertsmere (Mr Clappison) said, and I was pleased to sign his amendment.

The idea that we are being difficult by talking about delaying our effective support for this European Union measure is wide of the mark. We are being asked for a favour in respect of something that does not technically affect us, because we are neither contributors to nor beneficiaries from this new mechanism. We as a country are being gracious by putting this Bill forward, as we are helping out. It is absolutely sensible that the eurozone countries, who are very different from this country, should make sure that they have approved this mechanism and that there is no possibility of legal challenges before we say, “Yes, okay, as you’ve all approved it, we’ll sign on the dotted line to help you out”—and we should do that at the end of the day rather than at the beginning.

If we were to rush ahead and do this, the left-wing Eurosceptics in Holland would rise up to derail the Dutch situation, or the German constitutional court would decide it did not like the system, and we would be left having approved something that the eurozone countries do not even like very much themselves. We would be in a very silly position. It is therefore entirely sensible that we and other countries outside the eurozone should only go along with any decisions once the eurozone countries have agreed to them.

However, I must say that I still believe this mechanism is simply another measure for kicking the can further down the road and putting off what some think of as the evil day when the euro comes to an end. I do not say that simply because I have been sceptical about the euro from the beginning and disagree with the whole principle of the single currency, because it is not just me saying this now; other people agree. Indeed, this week George Soros said that Germany should leave the euro. It would be daft of the Germans to do that, however, because if they did, the new Deutschmark would immediately appreciate in value and Germany would become very uncompetitive in comparison with other member states.

[Emma Reynolds]

I read reports of that George Soros quote as well, and will my hon. Friend clarify that what he actually said was that Germany should either lead or leave, and that he would prefer the former, not the latter?

[Kelvin Hopkins]

I stand corrected, but George Soros leaves open that possibility of leaving, and by talking of Germany leading he presumably means the country putting vast amounts of German funding into saving the euro.

Others have also been looking at the future of the euro—which I think is doomed. There was an interesting article by Anthony Hilton in last Tuesday’s Evening Standard. He said that, in a sense, the euro is already dead, because a genuine currency has a number of features. It should be a medium of exchange, and some people are starting to mistrust it as a medium of exchange and want to be paid in other ways. Indeed, some economic advisory bodies are advising their clients not to accept especially long-term payments in euros, but to accept other currencies—sterling or dollars, for instance. That is understandable.

Currencies should be a store of value. Even Greek politicians, as I understand it, are buying gold because they do not trust the euro. Greek people do not want their euros to be devalued into drachmas overnight, so quite sensibly, they are buying gold. Trust in the euro as a store of value is dying by the day; so, let us wait a little. This could all happen very quickly, of course. It could happen over 10 days or over a year, but at some point a decision will be made that the euro is no longer going to function.

[Dr Julian Lewis]

Is not the real choice that is going to have to be faced that the euro will be dismantled in an orderly way, or will collapse in a disorderly way? Is not the danger that we feel that we cannot be seen to be sabotaging this project, in which so many of our colleagues in the European Union have invested so much energy and treasure, and yet, by not speaking the truth about the matter, we are making more likely a disorderly collapse, rather than orderly dismantling?

[The First Deputy Chairman of Ways and Means (Mr Nigel Evans)]

The hon. Gentleman will answer that intervention through the prism of amendment 1, please.

[Kelvin Hopkins]

Of course, Mr Evans. Amendment 1 is essentially about delaying our approval of this measure until such time as the eurozone countries have agreed, signed and sealed it. That is a very sensible way forward. The hon. Gentleman is right, and I and others have made the point a number of times that there are examples of single currencies that have been dissolved in an orderly and managed way. When the Soviet Union was dissolved, the first thing its countries did, wisely, was to create their own currencies. Such countries were able to choose an appropriate parity and interest rate, and to do what was necessary to make their own economies work well in relation to others. That is obviously the way forward, and in the journals it is increasingly being said that the dismantling of the euro, which would enable countries to reflate their economies, would be far less painful than what is happening now in some of the eurozone’s weaker countries, which is dreadful for working people. There is mass unemployment and falling living standards, and growth in Greece has fallen by upwards of 20%. They really are in serious pain and difficulty, and it could not be worse if they re-created the drachma, devalued and started selling cheap holidays to British people who want to enjoy the sunshine of Greece. That is their way forward, and the same is true for other countries.

There has been talk about how to help our Irish friends. I have many Irish friends and constituents, and I have said before—even last week—that the way forward for the Irish is to persuade them to re-create the punt, depreciate and come to a sensible parity with sterling. We are their major economic partner, and they belong much more in the sterling zone than the eurozone. That would be massively beneficial to the Irish, including the relatives of many of the people who live in my constituency.

Delay is absolutely sensible and the right thing to do. I ask that, even now, the Government consider delaying our ratification until such time as the eurozone countries have all signed and sealed the deal.

[Kevin Brennan (Cardiff West) (Lab)]

On a point of order, Mr Evans. The Minister for Education and Skills in the Welsh Government has announced this afternoon that there is to be a regrading of English GCSE for those candidates in Wales who sat the Welsh Joint Education Committee examination board. As you will be aware, there are also many candidates in England who sit their English language GCSE on that examination board. Have you or Mr Speaker received notification from the Secretary of State for Education of an intention to come to the House to respond to this development, in relation to the controversy about GCSE English grading this year?

[The First Deputy Chairman]

Thank you for that point of order. No indication has been received that a Minister wishes to make a statement on that matter or any other, but should that change, I am sure that the House will be informed in the usual manner; and those on the Treasury Bench will have heard the point of order.

17:15

[Mr Baron]

I rise to support my hon. Friend the Member for Hertsmere (Mr Clappison), and to question my right hon. Friend the Minister for Europe on a number of what I consider to be design flaws in the ESM.

First, although £500 billion in lending capacity sounds like a big figure—and it is—it would be a drop in the ocean should an economy the size of Italy need help. That is especially the case as the ESM’s mandate will be broader than was initially envisaged. In fact, it could be argued that the perception that the eurozone rescue funds could run out of money could drive borrowing costs higher for the Italian and Spanish Governments and raise the likelihood of such an outcome.

Another design flaw, and perhaps a more fundamental one, concerns the circularity of having the facility guaranteed by the same group of countries that might need to draw on it. What will happen if one of those countries needs to draw on it? The burden on the remaining countries will increase, thereby increasing the likelihood that they, too, will face a debt crisis. That is another potential flaw that I wonder whether the Minister has considered.

A further flaw is the reliance of the ESM on the creditworthiness of all its guarantors. The triple A credit rating that it aims to achieve, and hence the low borrowing costs, hinge on a sufficiently large number of eurozone countries maintaining their credit ratings. We have seen in the past the effects of ratings downgrades, such as in January 2012 when Standard and Poor’s downgraded nine eurozone countries, including France. That was followed by a downgrading of the European financial stability facility only four days later. Has the Minister considered those potential but fundamental flaws in the design of the ESM?

Finally, I put it to the Minister that the ESM would not exist if were it not for the political will to maintain the euro. It is quite obvious to many, and certainly to many eurozone leaders, that one cannot have monetary union without fiscal union and, in large part, one cannot have fiscal union without political union. As many of us on the Conservative Benches and, to be fair, some on the Opposition Benches, have long argued, the euro endeavour is a political initiative to move towards closer political union, and the chickens have finally come home to roost.

If the politicians were not interfering so much, we would have something similar to the Asian debt crisis at the end of the 1990s. For a short period, that was a pretty bloody affair, but as nations’ sovereign debt was allowed to be reneged on, as countries defaulted and as currencies were allowed to depreciate, there was a rapid bounce back in economic growth. GDP was higher two to three years after the start of the crisis than it was at the beginning, because market forces kicked in, currencies devalued and growth rates picked up because of the greater competitiveness. The Asian crisis moved on and the countries involved are in a much better state than at that time, because their currencies were allowed to depreciate.

What do we have? We have a system by which countries are locked into a single currency and cannot devalue, which prolongs the agony. What Greece needs now, desperately, is to devalue its currency so that it can become more competitive and can grow its way out of its problems. Holidays for British tourists, for example, would be 25% cheaper with a 25% devaluation, which would help the economy. The goods that Greece manufactures would be 25% cheaper, which would help it to export its way out of its problems. However, the euro is sealing its fate in many respects, and prolonging the agony. My concern is that the ESM is part and parcel of the package to preserve the euro and prolong that agony.

[Kelvin Hopkins]

To return to the hon. Gentleman’s earlier point about the Asian crisis, the Asian countries were strongly advised by the International Monetary Fund not to do what they did in the end. They ignored the IMF, did what they thought was right—rightly—and of course they recovered, as he said.

[Mr Baron]

The hon. Gentleman is absolutely right, as he has been so many times; he has a long track record of being fundamentally right on this subject.

Although it can be argued that the ESM does not really affect us, that this is just a treaty change and that we should not get involved, I ask the Minister to reflect on the fact that we are actually playing a small part in prolonging the agony of the euro. We need some fresh thinking on this issue, because, to return to a point made earlier, by not facing reality we risk a very disorderly break-up of the euro, which cannot be good for this country or, indeed, eurozone members generally.

[Emma Reynolds]

The hon. Gentleman has outlined the case for Greece leaving the euro. What is his response to the fact that opinion poll after opinion poll shows that the Greek people, by a very significant majority—about 85%, according to a recent poll—want to stay in the euro?

[Mr Baron]

That is up to the Greek people. Unlike many initiatives relating to the eurozone crisis, one is not trying to replace the democracy that exists in Greece, although if we look at what has happened in Italy and, it could be argued, to a certain extent in Greece, we see that it is very much the bureaucrats who are in charge. However, ultimately Greece will have to make a decision; it cannot have it both ways. We have seen the high social cost of Greece remaining a member of the euro, and it is very saddening, with the suicide rate going through the roof and the economy collapsing. Perhaps someone needs to explain to Greece that a course of devaluation would do its economy a power of good.

[Neil Carmichael (Stroud) (Con)]

I want to develop that point, because it seems to me that Greece has effectively decided to stay in the euro—the Government are committed to that—so exactly what business do we have trying to tell the Greeks how to run their economy, especially since we are not in the euro?

[Mr Baron]

One is not trying to tell them how to run their economy at all. I am afraid that my hon. Friend was obviously not listening. What one is suggesting is that the experience of past cases illustrates the merits of devaluation. Since the second world war there have been about 40 occasions when currency blocs have broken up, and in the vast majority of cases—I struggle to think of an exception—the countries that left currency blocs benefited. Their growth rates picked up because they became more competitive, their currencies devalued and, most importantly, their peoples benefited. If my hon. Friend can think of one exception to that general rule, I would be delighted to hear it, because I cannot think of one. In summary, I believe—

[Neil Carmichael]

rose—

[Mr Baron]

If my hon. Friend does not mind, I am about to finish. Interruption.] All right, I will give way, if he can think of an exception.

[Neil Carmichael]

I was casting my mind back to 1967, when the Labour Government devalued the currency, but can see no evidence at all that the decision brought about any improvement. In fact, it was followed by the creation of the Department of Employment and Productivity, and by 1970 that was an unmitigated disaster.

[Mr Baron]

rose—

[The First Deputy Chairman of Ways and Means (Mr Nigel Evans)]

Order. We are going a little wide of amendment 1.

[Mr Baron]

I take your point, Mr Evans. My hon. Friend was clearly not listening, because I was talking about currency blocs, and to the best of my knowledge we were not a member of a currency bloc in 1967. However—I throw this back at him—I do not for one moment believe that he is arguing that our exit from the exchange rate mechanism in 1992 did this country any harm at all. In fact, our economic recovery kicked in, almost to the day, because we left what was in effect a currency bloc.

In summary, I fully endorse the comments made by my hon. Friend the Member for Hertsmere. We should delay the introduction of the ESM. There are too many questions that need answering. I would very much welcome some clarity on the points that I have raised, particularly about the design flaws in the ESM. I would also ask the Minister for Europe to address the fundamental point: why the Government continue to believe that by joining in the political mantra that we need to save the euro, we are doing our eurozone partners any favours. I would point out to him that all the economic evidence suggests that by sticking to that mantra, and indeed by implementing the policy, we are prolonging the agony and delaying the inevitable.

[Wayne David]

I profoundly disagree with the previous contribution. I am no fan of the Government, but it is simply sensible for the Bill to be agreed and the amendment to be defeated, because it is sensible for us to introduce the European stability mechanism as quickly as is practicable. That is in Europe’s interests, but more importantly it is in the United Kingdom’s best interests. I say that for one simple but important reason: about 40% of the United Kingdom’s trade is with our eurozone partners, so it is in our best interests for stability and eventually prosperity to be achieved and maintained inside the eurozone.

[Kelvin Hopkins]

I absolutely agree with my hon. Friend that a large portion of our trade is with the rest of the European Union. Of course, we have a massive trade deficit, and one of the reasons why is the effective undervaluation of the German currency. If the eurozone broke up, the new Deutschmark would appreciate and we would become much more competitive with Germany, which would help our manufacturing.

[Wayne David]

I am afraid that I do not share that confidence. If that course of events took place, it would be a massive step into the unknown. Nobody could say with any definiteness what would happen. Indeed, the converse of what my hon. Friend says could also be true, and there would be greater economic difficulties. It is therefore important to recognise the size of the single market and of the eurozone, and to recognise that much of our trade is dependent on the success of the eurozone.

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

Contrary to what a number of previous speakers have said, the UK currency has devalued by around 20% over the last two years, yet we have had little or no benefit from our trade with the eurozone area, because of the instability. Would not passing this Bill lead to greater stability and a net benefit for the British economy?

[Wayne David]

The likelihood is that that would indeed be case. I am not one of those who subscribes to the Government’s recent mantra that all the problems in the United Kingdom are due to the eurozone. However, it is undoubtedly a fact that for this country eventually to increase its economic prosperity with enlightened policies, we need a successful market in the eurozone that will draw in the products we make.

I could cite numerous examples from economists, but I will focus on important examples from my constituency of Caerphilly, which is still a manufacturing constituency, although it has taken a pounding in recent years. Much of its manufacturing is dependent on exports to the eurozone. I do not suggest for one moment that my constituents are enthusiasts about the eurozone, or indeed about the European Union, but I recognise, in purely bread-and-butter terms, that a stable and prosperous eurozone is in their best interests. Ultimately, their jobs depend on the products they make being exported to the eurozone and being bought there.

[Kelvin Hopkins]

I thank my hon. Friend for giving way again. The problem is a lack of demand—the great chasm where there economic demand should be. That is the case because all the countries in the European Union, including ours, are in a process of fairly savage deflation, including deflation of demand, which means that we cannot sell anything. If the eurozone were to be dissolved tomorrow and all those countries were able to reflate, we would sell more and everyone would be better off.

[Wayne David]

Indeed; I have some sympathy with that last comment, but it is not an argument against the European stability mechanism. It is an argument, which I fully support, for having austerity and the European stability mechanism, but it is also a reason for having a positive, stimulating policy, across the European Union as a whole, to ensure an increase in demand and in the activity of the economy, which is sadly lacking at the moment.

17:30

One of the great ironies in the whole debate about the future economy of Europe is that one of the biggest supporters of the kind of policies that our current Prime Minister is employing is Angela Merkel, who believes that the way forward is for rigid austerity to be imposed ruthlessly. That is having a debilitating effect in the eurozone, just as the Government’s policy is having a debilitating effect in this country. That is not an argument against the ESM, but an argument for getting on with the ESM and for realising that it has limitations but accepting that it is nevertheless a crucial ingredient for ensuring stability. Then we also need to go beyond that, to make sure that there is a radical expansion programme for Britain and the rest of the European Union.

I very much hope that the amendment will be rejected. In essence, it is less than honest—it clearly opposes what the Government are proposing, but does so in a technical and bureaucratic way. It worries me that, if it were passed, we could be enshrining in British law a stipulation that what happens in this country depends on what happens in others, as the hon. Member for Cheltenham (Martin Horwood) pointed out. It is important for this country not to be the last nation in the European Union to respond. We should play our positive role within a reasonable time scale, as is suggested by the Bill.

[Mr Stewart Jackson (Peterborough) (Con)]

I had not intended to contribute to the debate, but frankly I am astonished by the insouciant comments and complacent remarks of some Opposition Members. They ask, “How can this country have the temerity to make a value judgment on legal proceedings with regard to this mechanism?”

There seems to be a fundamental dichotomy for those unable to see the wood for the trees and who will support any initiative from the European Union. They tell us, “Well, this is just one more signature, treaty or concordat that we need to sign up to for us to be at the top table of Europe, and it may be in the UK’s interests or to the contrary.” Yet they then ask us, how dare we make a value judgment on the Pringle case at the Irish High Court—on which, incidentally, the European Court of Justice constitutional decision may hang?

Whatever happened to subsidiarity? Whatever happened to the autonomy, authority and independence of the 27 EU nation states’ own judicial systems? I am concentrating on the amendment tabled by my hon. Friend the Member for Hertsmere (Mr Clappison) in saying that it is absolutely right for us to be certain of our facts and for us to respect the decisions taken by other countries.

I defer to no one in my admiration for the hon. Member for Luton North (Kelvin Hopkins), who is the Nostradamus of Eurosceptics. He has ploughed a lonely furrow on the Labour Benches for many years. He has been saying unfashionable things. The unfortunate thing, from the point of the view of the Labour party, is that he is a socialist and can see the catastrophic economic calamity being visited on working people in Portugal, Spain, Greece and Italy. For what? For a Franco-German political construct. The lives of millions of our fellow Europeans are being sacrificed for the sake of a dead idea and the creation of a political entity called Europe.

It ill behoves the hon. Member for Wolverhampton North East (Emma Reynolds) to quote opinion polls. There was an opinion poll on the Lisbon treaty that said that we should have a referendum and give the people their say. That was the policy of her party in the previous Parliament, and her party reneged on it. Opinion polls say consistently, as they have over a number of years, that we should have a plebiscite on giving the British people the right to make a decision as to whether they wish to remain part of the European Union. That decision is coming, because the people’s voices will be heard by the end of this Parliament. Any party, including my own, that disregards the voice of the people and thinks that they know better will pay a very heavy price at the ballot box.

This is about kicking a can down a road. It is about putting the welfare, careers, vision, energy and lives of a plutocratic Euro-elite before the lives of real people. Real people’s lives are being wrecked. Children in Greece are being adopted because their parents cannot afford to feed them. People are going hungry in Greece because of the economy. That is the human cost of the words of a desiccated calculating machine, as Aneurin Bevan put it, that came out of the mouth of the right hon. Member for Rotherham (Mr MacShane). It is not just about a political idea; it is about real people. It is time that the House of Commons understood what the European Union is doing to the lives of those people, because we are complicit in that crime in allowing it to go on.

It is time that Her Majesty’s Opposition and the Government understood that this is not an academic issue or a matter of simply saying that it is in our interests to support the continuation of the euro at any price There is a world out there—Latin America, south Asia, the far east. We are a global trading nation, but we are locking ourselves into a sclerotic, backward-looking, high-tax, high-regulation customs union. It is destroying people’s lives, and we have a moral obligation to say that. It is appalling that the Government do not have more courage and determination to say that what is going on in Europe is wrong and we should not be part of it.

[Emma Reynolds]

When EU leaders agreed to set up the permanent bail-out fund, the ESM, the intention was to introduce it earlier this year. Regrettably, the original date has been delayed owing to the constitutional issues mentioned by the hon. Member for Hertsmere (Mr Clappison), such as the court cases going on in Ireland and Germany. I agree with him to the extent that he raised some important issues about the EFSF and the EFSM on which I look forward to the Minister’s response. However, while it is important that those constitutional issues are ironed out, they should not in themselves delay the UK’s ratification of the treaty change. As the hon. Member for Cheltenham (Martin Horwood) suggested, if each member state were to delay their ratification in order to wait for the ratification of the next member state, we would have a mass stalemate. Ultimately, that would produce an inertia that perhaps the supporters of the amendment would like to produce—but I will not make any judgment on that. I do not want to intrude on the private grief of Conservative Back Benchers and the Minister, but there seems to be a contradiction between saying on the one hand that the Government got a good deal while on the other arguing for a delay. I am sure that the Minister will tackle that.

On the ESM and more widely, it is regrettable that there have been several delays and that there has been a lack of political leadership and inertia and inaction at a European level which has served to deepen the eurozone crisis. As my hon. Friend the Member for Caerphilly (Wayne David) set out, we believe that the stability of the eurozone is in the UK’s national interest and that the ESM will, if used appropriately, contribute to that stability. Any further delay, such as that proposed by the amendment, would act manifestly against that stability and our national interest. It is complacent to suggest that we should not ratify the Bill, so we oppose the amendment.

[Mr Lidington]

The purpose of the amendment, which was moved with characteristic courtesy and understanding of the issues by my hon. Friend the Member for Hertsmere (Mr Clappison), is to delay the coming into force of the Bill until the constitutional requirements of all EU member states have been complied with and all related legal challenges have been disposed of. I am grateful to him for saying that this a probing amendment, intended to examine various issues connected with the Bill, and that he does not intend to press it to a Division. I am happy to accept that his points are significant and worthy of debate.

It is the Government’s view that to accept the amendment and the consequent delay in the ratification of the change to article 136 would harm the interests of the United Kingdom. It would also not achieve the purpose lying behind the amendment. I will respond in detail to the points that my hon. Friend and others have made.

As my right hon. Friend the Foreign Secretary and I both stated on Second Reading, the decision to amend article 136 is in the interests of the United Kingdom. It benefits the UK in two ways. First, the Prime Minister has secured agreement that once the decision enters into force and the ESM is established, no further commitments will be made under the European financial stabilisation mechanism, which is the mechanism under which the United Kingdom has contingent liability.

Secondly, the Bill and the creation of the ESM serve the interests of the United Kingdom because they will provide euro area member states with a permanent financial assistance mechanism to assist in their quest for stability. My right hon. Friend the Prime Minister has talked frequently about the need for the eurozone countries to put in place an effective and credible firewall. The creation of the ESM is a significant step by the eurozone countries in the direction that my right hon. Friend and this Government have been advocating. We therefore believe that it is in the interests of this country that this treaty change is ratified and the ESM set up as soon as possible.

[Mr Love]

Does the Minister also accept that it is to the benefit of this country that we seem to have a better, more partnership-type relationship with the rest of Europe, and that passing the Bill will assist in that process?

[Mr Lidington]

I think that is true. As I said in an intervention, I am by no means an uncritical admirer of everything that the European Union does or of every aspect of how it is constructed, but whatever the aspirations of any individual Member of this House with regard to the United Kingdom’s relationship with our nearest neighbours and most significant trading partners—the other members of the EU—we are more likely to achieve our national objectives if we conduct ourselves in a way that involves a grown-up appreciation that those other countries also have legitimate interests. If we ask them, rightly, to take account of our interests, it matters that, where we can, we respond sympathetically when they identify vital interests of their own as being at stake.

17:45

The debate has touched on the process of ratification in other European Union member states. The majority of member states have approved the decision in accordance with their constitutional requirements. Most member states require parliamentary and then presidential or royal approval. Germany and the Czech Republic remain to complete their constitutional requirements. That is largely an administrative process. Both countries have to gain presidential sign-off for an agreement that has been taken through the appropriate parliamentary processes. Germany is waiting for a ruling by its constitutional court, which is due later this week.

There is a further stage once the national constitutional procedures have been completed, in that each national Government has formally to deposit the instruments of ratification in Rome. Poland and Italy, as well as Germany and the Czech Republic, have yet to deposit those instruments. However, that is just a formality and it is merely a matter of when that happens. Despite the ongoing case before the Irish courts, which was brought by an individual citizen, Ireland has not only completed its national constitutional procedures, but has formally deposited the instruments of ratification.

All member states, including those that I have mentioned, where one or other aspect of the process has not been completed, are confident of approval by early autumn. We are already one of the later member states to approve the decision. There is nothing to be gained—indeed, there is a bit to be lost—by trying to ensure that we are the last.

I say to my hon. Friend the Member for Hertsmere that it is not clear from the amendment what exactly is meant by “related legal challenges” or what cases might fall within its scope. We think that it is in our interests that the treaty change decision is ratified and that the ESM is established. There are legal challenges, to which a number of hon. Members have referred, in Germany and Ireland, but we do not consider them to be a reason to blow us off course in getting the decision ratified as soon as possible. We judge it to be in our interests to do so and have committed ourselves to the task. In return, we will see the closing off of any future programme of financial assistance under the EFSM.

The Irish case was mentioned in detail by my hon. Friend. My right hon. Friend the Foreign Secretary stated on Second Reading last week that there is a legal challenge to the validity of the decision amending article 136. That case has been referred by the Irish Supreme Court to the European Court of Justice. Our analysis is that we do not expect the ECJ to find against the decision in any way.

In the event that the ECJ did rule the decision invalid, the decision, and therefore the amendment of article 136 of TFEU, would simply not take place. That result would also follow automatically from a decision by any member state not to ratify. The Irish litigant is claiming that the entire decision has followed an incorrect procedure and should be ruled invalid. If, hypothetically, the ECJ decided that that was the case, the whole process would have to start again from square one, if the EU member states so wished. In the event of the ECJ making an adverse ruling and striking down the decision, we would not need amendment 1, because the amendment to article 136 that flows from the decision would automatically fall.

We are also aware that the German constitutional court is due to deliver a ruling on 12 September on whether the ESM treaty and the fiscal compact are compatible with the German constitution. I stress that it is those two things on which the court is due to rule, not the separate decision to amend article 136. The UK is not a party either to the ESM treaty or to the fiscal compact, and I am not persuaded that we should say that the ratification of the article 136 treaty change should depend on a domestic German case dealing with two other international legal instruments to which this country is not a party.

One difficulty I have with some of the arguments made in the debate is that too often there has been a tendency to elide the ESM treaty, which is an intergovernmental matter among members of the eurozone, and the amendment to article 136, which we are asked to ratify. Even if the amendment to article 136 were thrown out by the United Kingdom or any other country, the eurozone countries could still decide to press ahead with the ESM treaty that they have created among the 17. They would lack the legal and constitutional certainty for that action that they are seeking by asking for a reference in the European treaties to the possibility of an ESM, but they concluded the ESM treaty on 2 February and are now ratifying it. It will come into effect as soon as member states representing 90% of the ESM’s capital have ratified it.

I was asked how much money had been contributed under the EFSM so far. Of the €60 billion assigned to it in 2010, €22.5 billion has been made available to Ireland and €26 billion to Portugal, leaving €11.5 billion notionally still available. As the House knows, the UK has contingent liabilities—we have not actually paid out any money—amounting to about 15% of that overall total.

I was asked whether not ratifying the article 136 change would make a difference to our ability to extract ourselves from future liabilities under the EFSM. In all the decisions made by the Council of Ministers and the European Council that are included in the recitals to the decision that we are debating, the extinction of our future liabilities under the EFSM has been expressly linked to the establishment of the ESM.

This is taking us into hypothetical territory, but it seems to me that if the ESM is set up—that is ultimately a matter for the 17 eurozone countries—the decision made by Heads of State and Heads of Government will click into place and our liabilities under the EFSM will end. I do not think it would be sensible for us simply to chuck away on a whim the prize of extinguishing our liabilities, or put it at risk in any way, by taking a decision that would place the ESM on a less secure constitutional and legal basis than if the article 136 change were to go through.

[Mr Clappison]

I am grateful to my right hon. Friend for his careful answers to my questions. I am grateful to him for giving the figures confirming that the majority of the contingent liabilities that could have been allocated under the EFSM have indeed been allocated, and that we already have a significant liability. However, I do not think he has quite answered one of my questions—he may be coming to it. If the ESM is not ratified, or until it is ratified, could we be liable for new liabilities entered into under the EFSM out of the remaining unallocated portion? If so, would that come about as a result of qualified majority voting or would it require unanimity?

[Mr Lidington]

The legal position is that yes, that is possible, and it would be by qualified majority voting. That flows from the decision taken on the final day of the last Government’s time in office. It may be some reassurance to my hon. Friend, though, if I say that the EFSM has tended not to feature in the discussions over the past year. The discussion has been very much about the EFSF, which can draw on a much larger sum and can therefore command much more credibility with the markets.

I say to those of my hon. Friends, and Opposition Members, who have been extremely critical of the European Union, that I have found that there is an understanding in other member states, whether among Heads of Government, Finance Ministers or Europe Ministers, that the EFSM is a sensitive and delicate subject for the United Kingdom and particularly for the House. I do not get the impression that our European Union colleagues want to push us into a corner for the sake of it. What they hope for, and reasonably so, is our co-operation, not in sacrificing our vital interests but in helping them solve the existential financial and economic crisis that the single currency area faces.

[Mr Baron]

My right hon. Friend rightly referred to the fact that the ESM is much larger than its predecessor. Will he therefore address the questions that I put to him about the weakness of the fundamental design of the ESM? By agreeing to it, we are signing up to a system that has many flaws. Does he recognise those flaws, and if not, why not?

[Mr Lidington]

I think my hon. Friend is trying to draw me into writing my own blueprint for a permanent European stability mechanism. I will not be tempted on this occasion, because it would be pretty extraordinary if British Ministers were to start laying down the law in public about the design and scope of a mechanism to which we have chosen not to be a party and into which we do not propose to put a penny of our taxpayers’ money. We should not give such lectures to countries that have decided to put their taxpayers’ money on the line, because they will have to deal with any political reaction among their own electorates. As a democratic House, we need in this instance to respect the sovereign, democratic decisions of the eurozone member states.

[Mr Love]

rose—

[Wayne David]

rose—

[Mr Lidington]

I want to make progress.

There would be an irony to accepting the amendment. I will not use the type of language used by the right hon. Member for Rotherham (Mr MacShane), but it would be a bit odd if we passed an amendment that constrained the freedom of the House of Commons to ratify a treaty that the Government had agreed to. It would have the consequence of allowing the German constitutional court, the European Court of Justice or other courts to determine when our legislation, which we judge to be definitely in the interests of the UK, should come into force. I do not think that delaying this legislation would serve any purpose or help our national interests, and it may do some harm. I therefore hope that my hon. Friend the Member for Hertsmere will be willing to withdraw his amendment.

18:00

[Mr Clappison]

I am grateful to the Minister for his careful reply, and to hon. Friends and the hon. Member for Luton North (Kelvin Hopkins) for their speeches in support of my amendment. This has been a worthwhile debate because it has clarified a number of issues relating to the United Kingdom’s liability under the arrangements agreed in May 2010 to the European financial stabilisation mechanism, the European financial stability facility, and the new European stability mechanism. There will doubtless be many more such bodies in the future.

I have heard the Minister’s reply. It remains the case—I have been making this point throughout the debate—that the Bill will become an Act and be law in our country before the ESM has taken effect. The ESM will not have been ratified before this Bill is enacted. That is hanging in the wind, and I am sure that all questions that arise from that, and from the Minister’s reply, will receive careful analysis in the future.

I agree with the line taken by the Government. As I have said throughout the debate, it is clearly in Britain’s interest no longer to be liable under the EFSM, and I regret that that has not yet come about. I appreciate the line taken by the Minister, and as I have said, there are sound diplomatic reasons for the Government’s continual incantation that a stable eurozone is in this country’s interest. I understand all those who say that and we do not want to lecture our European neighbours on the point. However, let me say gently to the Minister that the more I hear that phrase uttered—even if the Minister is right to do so and there are sound reasons for it—the more it brings to my mind the image of a witch doctor making his incantations over a prostrate patient in some village in remote parts. The witch doctor makes the incantation, the credulous draw comfort from it and there is perhaps a wider feeling that traditions have been complied with, but it makes no difference to the patient who lies prostrate and as sick as ever. That, I am afraid, will be the case with the European economy for as long as we are afflicted by the present eurozone.

The Minister made a point about listening to electorates, but leaders of the European Union—the European Commission in particular, but other leaders too—have never distinguished themselves in doing that in the past. Referendums have been held, European treaties have been turned down and electorates have been told to go back and think again. Even when public opinion has been overwhelmingly in favour of a particular course, or not in favour of something the European Union has proposed, the European Union elite has paid absolutely no attention.

I do not mind discomforting the European elite; I have nothing to lose because I am elected to represent my constituents and I am happy for them to hear my words and judge me accordingly. The European political elite has pressed the cause of European integration without bothering to seek the consent of electorates, and it put in place the European monetary union project as part of that process. Members of that elite must now be held to account for all the sad economic consequences that flowed from that decision, which have been outlined by the Conservative party, and they must be made to face up to their responsibilities, as no doubt some of them will in future. There are few ways in which we can influence the European Commission and organisations of the European Union in a democratic way—I wish it were otherwise—but the European elite must face up to the consequences of its poor decision making.

[Bob Stewart (Beckenham) (Con)]

How can we make those people face up to their responsibilities and take the blame for what they have done?

[Mr Clappison]

My hon. Friend makes a good point. The point I was making is that in many respects we cannot, because they are above and beyond the control of our electorate. That has always been the problem with the European Union. Some in Europe sought to impose their project without bothering to take account of the views of the electorate. That problem lies at the heart of the matters we are discussing today and is one of the reasons we are afflicted by the eurozone. It is time people began to listen and reflect on what electorates have to say and on the lamentable economic consequences of the euro. However, as I indicated I would, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[Mr Lidington]

Clause 2 simply declares that the Bill extends to the whole of the United Kingdom and will come into force on the day on which it is passed, and gives its title.

Question put and agreed to.

Clause 2 ordered to stand part of the Bill.

New Clause 1

Impact of the European Stability Mechanism on the UK

‘The Chancellor of the Exchequer shall make a report to Parliament within one year of the Act coming into force and annually thereafter setting out an assessment of the impact of the European Stability Mechanism on the risks to the interests and obligations of the United Kingdom from eurozone instability.’.—(Emma Reynolds.)

Brought up, and read the First time.

[Emma Reynolds]

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

[The Temporary Chair (Mr Joe Benton)]

With this it will be convenient to discuss new clause 2—Report on the use of the European Stability Mechanism

‘The Secretary of State shall, whenever a loan is made to a beneficiary Member State by virtue of the decision in section 1(2), lay before Parliament a report setting out the nature and terms of the use of the European Stability Mechanism and its potential effect, both direct and indirect, on the interests and obligations of the United Kingdom.’.

[Emma Reynolds]

It is a pleasure to serve under your chairmanship, Mr Benton. We are seeking to add two new clauses to the Bill to underline the importance of the European stability mechanism to the British economy. New clause 1 would require the Chancellor of the Exchequer to provide an annual assessment of the impact of the ESM on the British economy. For instance, in the best case scenario we would hope that if ESM funds were needed and used appropriately, they would enhance the stability of the specific member state they were put in place to support, and therefore also have a positive effect on our economy.

We have some concerns about the conditionality of the ESM, for example if the conditions attached to granting ESM support were too harsh. It would, therefore, be beneficial to have an assessment of the impact of that austerity on the eurozone member state in question and—importantly for new clause 1—of the knock-on effect on the eurozone more widely, and on the British economy. Given that 40% of British exports go to the eurozone, and that our financial sectors and banks are closely connected, it is important that the Government provide systematic assessments of the operation of the ESM and its impact on our economy.

New clause 2 would introduce a specific and timely requirement for an analysis of each instance of ESM activity, without having to wait for the Chancellor’s annual report that is provided for in new clause 1. For example, if the ESM is triggered to provide support for Spain, Italy, Ireland or Greece, there will be varying levels of economic impact on UK trade and growth. An analysis of the downstream impact that each instance of ESM activity might have on the UK would give Members of this House and the other place, as well as the public, a clearer sense of the nature of the conditions imposed and the indirect impact of the ESM’s operation on our economic prospects.

The ESM conditions are to be detailed in a memorandum of understanding between the European Commission and beneficiary member states that will outline specific economic policy and fiscal adjustment conditions. The Committee should be informed of those conditions, and should have the opportunity to debate and scrutinise whether they are fair and reasonable, and whether Ministers should make their own representations on the nature of those terms and conditions.

It is imperative that any conditions imposed are not detrimental to the fragile recovery of the economy of the member state in question, and that any effects of those conditions do not have an indirect negative impact on our economy.

Regrettably, the Government have isolated themselves to such an extent that they might be unable to exert the requisite leverage in debates on conditionality. Nevertheless, the Europe Minister is conducting a charm offensive—he has written various articles, including one written in beautiful French for Le Monde and one written in Swedish for a Swedish newspaper—with the intention of rebuilding bridges with our European partners.

The Opposition applaud the Minister for that initiative —Conservative Back Benchers might not applaud him, but we do not want to intrude on private grief by going through the differences of opinion between those on the Treasury Bench and Conservative Back Benchers who do not agree with them—but we fear that the charm offensive might be too little, too late. We wish the Minister the best in his endeavours.

[Mr Love]

It is important that the Minister speaks seriously to his European counterparts in his charm offensive about the role that austerity can play in depressing the eurozone economy to our detriment. Is it not critical that the Minister speaks up for growth strategies so that Europe can grow and we can grow off the back of that?

[Emma Reynolds]

I could not agree with my hon. Friend more and I recommend that the Minister takes his advice. The Government would have more authority to speak to our European partners about the importance of European growth if our economy were growing, but unfortunately it is not—it is one of two G20 economies to be back in recession, which is a great shame. That unfortunately diminishes the authority of our Government’s voice in proposing the useful measures that my hon. Friend suggests.

I mentioned the Minister using his multilingualism to build bridges with our European partners, which the Opposition believe is essential. Even if it runs against the wishes of Conservative Back Benchers who are nervous about the Government’s continued commitment to European membership, the Minister is right to reassure our European partners that our place is firmly in the EU.

[Wayne David]

On dialogue, which I agree is extremely important, our dialogue with Ireland, which has the same language, is vital. Will my hon. Friend speculate on what would happen to our good relationship with Ireland if the closeness of our two economies were not fully realised? What detrimental impact beyond the economic could that have on our long-term relations with Ireland?

[Emma Reynolds]

Our relationship with the Republic of Ireland, which is incredibly important, is testament to the temporary mechanisms put in place in May 2010, which had cross-party agreement. Conservative Members like to tell Labour Members that the mechanisms were agreed unilaterally, but there is proof in a note by the former Economic Secretary—she is now Secretary of State for International Development—of cross-party agreement on setting up the EFSM at a time when the eurozone looked like it might collapse. The EFSM has been incredibly important to Ireland’s recovery, so much so that Ireland has been able to sell Government bonds on the international markets again since July this year.

[Mr Love]

Have the Government not recognised that? They were critical of the previous Government’s decision, but subsequently gave a substantial loan to Ireland because of its critical position in relation to the British economy?

[Emma Reynolds]

I could not agree more with my hon. Friend. There were some naysayers on the Government Benches who thought the Government were wrong to give a bilateral loan to Ireland, but Opposition Members agreed with the Government, because our economies and financial systems are so closely intertwined. It was therefore incredibly important to make that bilateral loan to Ireland. As I said to my hon. Friend the Member for Caerphilly (Wayne David), it pleases all hon. Members that Ireland’s economy looks like it is getting back on track. That is important for the Irish people—our neighbours—but, given the close links between our economies, it is also important for people in our country.

Given the Minister’s fantastic charm initiative, we hope the Government are in a better position to influence conditionality on the use of ESM funds, as I have suggested. The Opposition do not believe that harsh conditions would be in our interests or in the interests of the member state to which support is given.

18:15

[Wayne David]

Both new clauses call for reports to be made to Parliament. There is a strong case to be made for in-depth reports to be debated on the Floor of the House, but there is also room for debate in Committees, and particularly the European Scrutiny Committee. Does she envisage that the debate should be conducted not just on the Floor of the House, but elsewhere?

[Emma Reynolds]

I agree with my hon. Friend. New clause 1 would mean an annual report by the Chancellor on the economic impact to the UK economy of the operation of the ESM, and new clause 2 would mean the Foreign Secretary submits a report when a loan is made. As my hon. Friend suggests, the reports would be discussed not only on the Floor of the House and the other place, but in the European Scrutiny Committee and other Committees that deem them important.

The success of the ESM is in our national interest. If it is used effectively and appropriately, it could have a positive effect on our economy as well as on the member states to which it gives support. However, what if the ESM’s conditionality is misguided and imposes austere measures?

[Mr Love]

On conditionality, there is currently a discussion on easing the conditions of receiving support from the European Central Bank. Would my hon. Friend welcome Government support for such easing? Will she go further, and suggest that it could spark growth in the southern European economies?

[Emma Reynolds]

Conditionality should not be too severe. The ECB’s initiative to buy Government bonds, which was announced by Mario Draghi last week, would be linked to support provided by the ESM. That is why it is vital that the reports asked for in the new clauses are made to Parliament—there is an interaction between the ESM and the initiatives announced by the ECB last week.

[Wayne David]

That is important. The situation is volatile, nobody knows with any certainty what will happen next, and the interrelationship and co-ordination between different financial instruments—the ECB bond market initiative has a relationship with the ESM facility—are important. That makes a regular, ongoing review to find out how compatible they are in practice all the more important.

[Emma Reynolds]

I agree with my hon. Friend. The new clauses would introduce annual systematic assessments of the impact on our economy of the ESM and, in specific cases, of loans granted by the ESM. As he suggests, that is becoming ever more important, given the complicated interaction with the ECB’s other initiatives. If ESM conditionality is too harsh, we fear that it could have a detrimental effect not only on the member state to which the support is being granted but indirectly on our own economy, and could shrink the eurozone economy.

[Mr Love]

Are the British Government not in an ideal position to make this case, given that they introduced too harsh an austerity programme, the result of which has been a double-dip recession?

[Emma Reynolds]

It is regrettable that, in a way, we are a test case for the detrimental effect of severe austerity. Since we left government, the economy has slipped back into recession and we have seen high unemployment, including an unemployment crisis among young people. My hon. Friend is right that unfortunately Europe is looking to the UK to see what it should not do in its economic policy. I am glad that there has been a shift, to a certain extent, within the European Council, in that member states on the centre left, such as the French Government, are now arguing for growth and job creation, not austerity alone. His suggestion is critical.

[Mr MacShane]

Are not the IMF and World Bank loans, to which Britain fully subscribes—we will be subscribing absolutely nothing to the ESM—also worthy of scrutiny? Would it not be a good idea to extend this concept and invite the Chancellor of the Exchequer to present to Parliament an annual review of all IMF and World Bank loans, the conditionality of which has a huge impact on the British economy and worldwide developments? I am interested in this notion that we are now advancing, which I fully support, that Parliament should debate all the external loans and financial instruments that Britain provides to help other economies get going, as well as those in Europe to which we do not subscribe a penny.

[Emma Reynolds]

My right hon. Friend makes a good suggestion, but I would not want to comment in too much detail on other external loans, given the remit of the debate. I am sure, however, that those on the Treasury Bench will have heard his suggestion.

In either scenario—whether best or worst case with regard to the operation of the ESM—it would be reasonable and enhance scrutiny in this House and the other place were the Chancellor to provide an annual report of the economic effects on the UK, as set out in new clause 1.

[Mr Love]

Would it not be critical for the Chancellor’s report to Parliament to indicate what the British Government had done to make the ESM a success and to relate it to the benefits received by the British economy?

[Emma Reynolds]

That would be important, but, for reasons I have set out, I fear that the Government’s voice and influence will not be as strong as it should be on these matters, because unfortunately they have chosen, through their actions, to isolate themselves—I think of the walkout at the European Council meeting last December and the Prime Minister winding up the French President by telling him, for some reason, that he would roll out the red carpet for French taxpayers. I am not clear why he thought that that would be in the national interest, given that he had already refused to see the French President earlier in the year. For all those reasons, it is clear that the Government place much more importance on keeping their party together—the Conservative party—than on the British national interest. Regrettably, therefore, our influence over ESM conditionality is severely weakened.

[Andrew Bridgen (North West Leicestershire) (Con)]

Is the hon. Lady saying that her party supports UK taxpayers’ money being used, through the ESM, to support the eurozone?

[Emma Reynolds]

It is nice that the hon. Gentleman has made a late entrance but, had he been here from the start, he would have known that the Opposition are not in favour of the Government paying into the ESM. He was not here when I mentioned it, so I shall say again that in May 2010 the then Economic Secretary, the now International Development Secretary, admitted that there was cross-party consensus that if the eurozone collapsed, we would have to agree to the emergency measures drawn up at the last Council, when the then Labour Chancellor, in the interim period after the election, was still in place. So there was cross-party agreement—I can show him the documentary evidence, if he wants to see it.

On new clause 2, it is also important that the Foreign Secretary provides a report whenever a loan is made under the ESM. Both reports will enhance scrutiny in the House.

[Wayne David]

There is one important element of the ESM with which I am not familiar—I frankly admit—and that is the degree of private sector involvement. In this respect, the IMF is an example of good practice, but given that I and—I suspect—many other Members are not familiar with this element, an effective annual report would be crucial.

[Emma Reynolds]

I agree that it would be important. It is not clear when the ESM will be introduced—the constitutional court in Germany will rule on Wednesday —or what the significance or extent of the interaction with the private sector will be. It is important for those reasons as well, therefore, that the Chancellor and the Foreign Secretary produce reports in the way suggested by the new clauses. It would enhance the scrutiny of these important subjects in the House and the other place and make it clearer to the general public exactly how the ESM will operate and how its operations will affect the British economy.

[Martin Horwood]

I will not trouble the Committee for long. It is sometimes tempting with a simple Bill to think of things to put in amendments to provoke debate—it can be helpful—and asking someone to make a report is always quite a good one, but we need to be a little careful with civil servants’ time. To ask the Treasury to make a report to Parliament annually on

“the impact of the European Stability Mechanism on the risks to the interests and obligations of the United Kingdom from eurozone instability”,

and to ask the Foreign and Commonwealth Office

“whenever a loan is made”

to report on the

“potential effect, both direct and indirect, on the interests and obligations of the United Kingdom”,

will involve days and days of civil service time.

[Emma Reynolds]

Will the hon. Gentleman give way?

[Martin Horwood]

No, I will not. I am not going to take up a lot more of the Committee’s time.

The proposals are superfluous, given that we endlessly debate the impact of the eurozone and of the various bits of European constitutional and financial architecture on the United Kingdom and its economy. We also endlessly debate the individual bail-outs, and there are always statements to the House on such matters. If these reports were produced by the Treasury and the Foreign Office, I suspect that Her Majesty’s Opposition would disagree with them anyway. There will be plenty of opportunity to question Ministers on what they think of the indirect or direct implications of any bail-outs.

18:39

Technically, separating the indirect or direct impacts of the ESM from the impacts of previous bail-outs, from the existing EFSF or EFSM actions, from other initiatives by the ECB and the IMF and from the general operation of the eurozone economy would be an activity worthy of an academic PhD. Civil service time should not be taken up preparing reports to Parliament on the matter.

The proposals have provoked another interesting debate—we have had a lot of that this afternoon—but this is essentially a simple, straightforward, technical piece of legislation, and I urge the hon. Member for Wolverhampton North East (Emma Reynolds) to consider whether there is any value in pressing the new clause to a vote. I urge her to withdraw it.

[Wayne David]

I strongly support the new clause. We need to be frank and recognise that this Bill represents a new departure. Inevitably, therefore, we cannot assume that every dot and comma in the European stability mechanism will be absolutely correct, or that there will be no scope for change in the future. There might well be change, and who can tell, in this fast-moving situation, what the demands of the immediate future will be? It is therefore entirely sensible to call for full, comprehensive reports to be provided to the House on an annual basis.

[Mr Love]

Does my hon. Friend believe that the plea that we have just heard from the hon. Member for Cheltenham (Martin Horwood) was a signal that he does not want another row between the coalition partners?

[Wayne David]

My hon. Friend could well be right. Who knows? I would not be entirely surprised if that were the case. However, it is important that we rise above any internecine squabbles.

We are concerned about the well-being of the country, which is why it is important to conduct comprehensive reviews and to debate them on the Floor of the House. As was pointed out earlier, much of the legislation is of a technical—almost esoteric—nature, and the reports will need to go into some detail. It will therefore be insufficient simply to present them on the Floor of the House. They should also be debated by the European Scrutiny Committee, which is well led by the hon. Member for Stone (Mr Cash). Surprisingly, he is not in the Chamber. This must be the first time in a long time that he has missed a European Union debate. I hope to goodness that he is not ill.

[Mr Love]

For what is probably the first time, I agree with the hon. Member for Stone (Mr Cash), in that he insists that the House should do more to scrutinise European matters. Does not my hon. Friend agree that the new clause presents an ideal mechanism for so doing?

[Wayne David]

I absolutely agree with my hon. Friend.

This is an important matter, and it should be debated not only on the Floor of the House but by the European Scrutiny Committee. We should also encourage other Select Committees—the Treasury Committee in particular —to debate these issues. It is one of the weaknesses of the House that, all too often, we tend to put European issues into a neat compartment without fully appreciating the fact that they are cross-cutting, cross-departmental and cross-Committee in nature. If we are fully to appreciate their impact, and the need for them to be changed, we need to discuss them in a number of different Committees.

[Emma Reynolds]

Does my hon. Friend agree that it is regrettable that the Liberal Democrats—who are now in government, not in opposition—should not want increased transparency and scrutiny of the effects of the ESM on our economy? Had they still been in opposition, I am sure that they would have been calling for that today.

[Wayne David]

I can see that the hon. Member for Cheltenham (Martin Horwood) is straining at the leash to intervene on me. I will give way to him, so that he can give my hon. Friend a comprehensive answer. She has made an astute point.

[Martin Horwood]

I would like to put on the record, on behalf of the Liberal Democrats, my belief that this House should indeed carry out much more scrutiny of European affairs. I also agree with the hon. Gentleman that that should be done on a broader basis, and that the departmental Select Committees should be involved. Indeed, we have suggested as much in our submission to the current discussions on European scrutiny. I am not sure, however, that we need ever more reports being discussed in addition to all the legislation and everything else that we debate, interminably, on the Floor of the House. He cannot possibly argue that we do not spend enough time debating Europe in this Chamber, as we are doing now.

[Wayne David]

I do not want to labour this point. I welcome the Liberal Democrats’ desire for more transparency and scrutiny, but experience shows that, all too often, those words come to nothing unless there is a focus on something. The importance of the new clauses is that they would provide that “something” for the debate to focus on. Nothing concentrates the mind better than a report that has a distinct niche in the parliamentary calendar to enable that debate to take place.

[Mr Love]

This is not just a matter of having a focus for the debate. It is also a question of the sheer importance of these aspects of the European Union. Their influence on the eurozone and the British economy make it imperative that we hold such discussions.

[Wayne David]

My hon. Friend makes an extremely good point. We would not be holding a debate for the sake of it, and we are not talking about transparency for the sake of it. We are trying to underline the importance of the ESM, which is being developed for the first time. It is imperative that we have an ongoing debate.

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

Is my hon. Friend aware that, only last week, members of the Welsh Affairs Committee were in Brussels to talk to MEPs and Commissioners about this important issue? Does he agree that that is symptomatic of the enormous appetite for discussion of these strategic issues that have a direct impact on the economic future of Britain?

[Wayne David]

I was not aware that the Welsh Affairs Committee had been in Brussels, but that underlines my point that this issue is absolutely central to the European Union at the moment. Debates in Select Committees should not be confined to the European Scrutiny Committee; other Committees should debate these matters as well. I have to say that I would not immediately have thought of the Welsh Affairs Committee as an appropriate vehicle for that, but I imagine that much of the discussion in Brussels focused on how Wales would be impacted by the developments in the European Union.

[Geraint Davies]

As my hon. Friend has questioned the legitimacy of the Welsh Affairs Committee in that regard, I should make him aware that the Committee has recently published an excellent report on inward investment and prosperity in Wales. A key part of that economic activity involves inward investment from and trade with Europe. That is why we adopted a nationally based view—in regard to the nation of Wales—as opposed to the departmental silo-based views. We have a crucial locus on this matter.

[Wayne David]

I am pleased that my hon. Friend made that intervention, as it takes me neatly to my next point.

The ESM is important for all parts of the United Kingdom—including Wales—because it will help to ensure that the eurozone becomes a stable and attractive market to which we can take products made in our constituencies of Swansea, Caerphilly and elsewhere. That is central to the debate, and it concerns me greatly that some—although not all—Government Members actually want the eurozone to collapse. They want that outcome for a pathological, ideological reason, without realising the immediate material consequences that it would have for jobs in our constituencies.

[Jacob Rees-Mogg (North East Somerset) (Con)]

I would classify myself as one of the people who does want the eurozone to collapse, because I think that only with the collapse of the euro can the economies of Europe begin to grow again. It was the same when the Asian crisis hit, and the economies that devalued were the ones that grew again fastest and soonest.

[Wayne David]

I simply do not agree, and there are plenty of academics and learned people who do not agree either. Most importantly of all, plenty of workers and employers in my constituency do not believe it. As I said, I am not suggesting for one moment that the EU and the eurozone are particularly popular with people—they are not, and I fully understand why not—but in the end people are concerned about their livelihoods and their prosperity, which depend on jobs. That is why it is important for this country to do everything we can to ensure that the eurozone is helped to get over its present difficulties and made prosperous once again.

[Mr MacShane]

Does my hon. Friend accept that we do not have to go to Asia, for example, to see devaluation before our very eyes, because the British pound has been substantially devalued in the last four years, and it has led to a massive loss of jobs, employment and growth, and has brought in a recession? Perhaps devaluation and a sensible Government can help, but devaluation and this Government are a recipe for disaster.

[Wayne David]

Yes, I agree. If we take the argument of the devaluers to the extreme, having competitive devaluation among different states on the continent of Europe is indeed a recipe for disaster. It is a mistake to believe that, because devaluation might have helped one country in one particular circumstance, we can extrapolate beyond that and assume that devaluation is a recipe for everyone.

I have generally supported the ESM, because I think it is necessary and will make a huge contribution—not an exclusive one by any means, but a huge one—to helping the eurozone in its current difficulties. I am not suggesting for one moment, however, that the EU has everything worked out perfectly, so far as the ESM is concerned. What is needed is an ongoing review, and flexibility is required so that the good things are built on and the not-so-good things altered. That is why new clauses 1 and 2 are so important.

I recently read with great interest an excellent research paper produced by the House of Commons Library, which succinctly summarised a number of the reservations that people have about the ESM; it is quite right that people should have some reservations about it, so let me mention a few of them.

The first relates to the amount of €500 billion being made available for lending capacity. A number of people have suggested that, given how the crisis might develop, that amount could be too small, so we need to contemplate a larger amount in future. That applies particularly if it is not just Greece and Portugal that experience difficulties and if things become more problematic in Spain or even in Italy. In those circumstances, it might be necessary to consider having a facility much greater than the currently envisaged €500 billion.

The second reservation by those concerned about the ESM is, as we touched on earlier, the fact that it is but one of a number of different initiatives designed to help the eurozone. We are particularly aware of the initiatives, perhaps belated, of the European Central Bank and of the desire to intervene in the bond markets. That is one of the terms of reference and intentions of this facility as well. We thus need to ensure that there is complete complementarity, no duplication of effort and no contradiction in these different facilities; everybody must be pulling in the right direction. Co-ordination with other lending institutions and with other bodies and initiatives is very important indeed. Linked to the size of the €500 billion facility is the fact that some people believe that in a worst-case scenario, the rescue funds would be insufficient and would run out of money. It is therefore necessary to have an ongoing review of whether that is likely to happen or not.

00:00

[Mr Love]

Is that not recognised by the European authorities, particularly the European Central Bank, in moving part of the way to becoming a lender of last resort, which might be necessary if the eurozone is to be held together?

[Wayne David]

Yes, that is an important point, and the role of the ECB is central. Many of us would like to see it being more proactive far sooner than it has been in the past, but its more assertive role could be critical in the future.

Another concern is the circularity of having the facility guaranteed by the same group of countries that might draw on the fund. For example, we all know that Italy’s situation could become difficult, yet Italy is a country that is, at the same time, ensuring that resources are going into the fund that it might itself be required to draw on. That strange relationship and potential incompatibility at the heart of the ESM needs to be thought about carefully. What is important is what is being established here and now. Nevertheless, as situations develop, it becomes all the more important to review the circumstances.

The credit rating of the ESM is another issue. We all know that certain countries, including a number of eurozone countries, have been downgraded in the not-too-distant past. That includes France, which came as a big surprise to many people. The EFSF has been downgraded, too, and we must be sure that that does not develop further with respect to the ESM.

[Geraint Davies]

My hon. Friend and the hon. Member for Basildon and Billericay (Mr Baron) have made the point that if some countries in a group are both taking and giving money at the same time, it amounts to a problem. What about a simple model of a credit union and a community, from which some people put money in and some take it out? What about a marketplace in which some countries put resources in so that other countries can consume their exports? Is that not part of a system for helping broader growth, which is not a problem at all?

[Wayne David]

My hon. Friend could well be right, and I hope that he is, but it is an issue that needs to be rationalised and thought through carefully. My feeling is that, at this stage of the ESM’s development, it has not been given serious thought. It may be necessary and desirable, but it must, as I say, be thought through carefully. It must not happen by accident, but by proper design. The fact that it is not in the design of the programme at the moment provides all the more reason to ensure that we have a proper review and some time for the objective to be explicitly stated.

My last point is about private sector involvement. It is assumed that we are talking about public money, which to a large extent we are, but there is also a role for private sector involvement, which will be done in accordance with good practice as established by the International Monetary Fund. That is welcome, but, again, it needs to be monitored carefully. If we need to enhance our programme or provide more stipulations, those things must be done.

[Mr Love]

Is not the International Monetary Fund a very good example of private sector involvement? No one has ever lost any money as a result of investing in the IMF, and if we follow prudent principles, the same should apply to the ESM.

[Wayne David]

I agree that the IMF is an example of good practice, and I think it laudable that the ESM is basing much of its operation on the way in which it has operated, successfully, for a number of years. Don’t get me wrong: I am not against private sector involvement—quite the opposite—but I think that clear terms of reference need to be established and monitored.

For that reason, and for all the other reasons that I have given, I think that both new clauses are eminently sensible. I think they will enhance both parliamentary democracy and the role of this Parliament. I also think that, ultimately, they will send our partners in Europe the extremely positive message that we are serious not only about establishing the ESM, but about ensuring that it works effectively well into the future.

[Jacob Rees-Mogg]

It is a great pleasure to follow the hon. Member for Caerphilly (Wayne David), who almost made the new clauses sound respectable. In fact, they are some of the most splendidly pointless measures that we have seen in the House; they serve absolutely no purpose.

[Mr Love]

The hon. Gentleman seems to be arguing against scrutiny of the European Union by this institution.

[Jacob Rees-Mogg]

I am all in favour of scrutiny. I am a member of the European Scrutiny Committee, and I am the greatest admirer in the House of my hon. Friend the Member for Stone (Mr Cash), who scrutinises with an eye like a hawk and ensures that every aspect of scrutiny is carried out to the fullest, most proper and deepest effect. However, I thought that the new clause might be an example of the socialist sense of humour, which involves tabling a motion that is completely and utterly meaningless and, indeed, the opposite of what the Bill is all about.

Perhaps the Members concerned did not listen to my right hon. Friend the Minister, who explained—beautifully, elegantly and with charm—what the Bill was all about. He also explained what the treaty was about, namely getting us out of responsibility and liability for the eurozone mess so that we would not have to pay to prop up the eurozone. The new clause proposes that the poor old Chancellor of the Exchequer, who has quite enough to do—for instance, he has a growth strategy to draw up, and his infrastructure Bill will be presented to us next week—must write a report on why a fund of which we are not part, and to which we do not contribute, has had an effect on the propping up the stability of the eurozone, which is a matter for the people—

[Emma Reynolds]

rose—

[Jacob Rees-Mogg]

Of course I give way to the shadow Minister.

[Emma Reynolds]

I could not agree more with the hon. Gentleman. The Government need to cut through the dither, and the Chancellor needs to see to that as a matter of urgency. However, I do not really understand why the hon. Gentleman objects to the Treasury’s conducting an impact assessment of the operation of the European sustainability mechanism. He takes a great interest in European matters, and I find it surprising that he does not welcome further transparency and further scrutiny of such an important issue.

[Jacob Rees-Mogg]

The hon. Lady flatters me. I do indeed take an interest in the issue.

It is extremely important for the Government to be scrutinised on what they do in terms of European policy, but I do not think that we should scrutinise Her Majesty’s Government in relation to what the Germans or the French do, because that is a matter for them. We are outside this mechanism. The whole point is that a new mechanism is being set up to ensure that there is no liability for the UK taxpayer. What is the Chancellor supposed to say? Must he send a letter to Parliament saying “Something over which I have no authority, something to which we have made no contribution, something which is not actually British in any sense, has worked”, or has not worked? We can read that for ourselves in the Financial Times, or in other reputable newspapers.

We really do not need the Chancellor to be bogged down in more bureaucracy. There is a difference between scrutiny and bureaucracy. Scrutiny is about challenging Her Majesty’s Government to ensure that the Government’s decisions are in the best interests of the British people. These decisions—the European stability mechanism decisions—will not be Government decisions in any sense once the treaty is passed, and once this Act is enforced. They will be decisions over which we will have no control, and that is the whole point. We do not want to have any control, because we are not part of the eurozone, and most sane and sensible people hope that we never will be. It is our aim and ambition to be out of the eurozone.

[Mr Love]

If we take the hon. Gentleman’s argument to its logical conclusion, we must assume that he is urging all Government Back Benchers not to call for countries that are in the eurozone to leave it.

[Jacob Rees-Mogg]

The hon. Gentleman is confusing two completely different things. One is placing an obligation on Her Majesty’s Government, and the other is expressing an opinion.

I might wish to give advice to the central bank of China. I might wish to say that it was about time that it cut its interest rates—which I think it should—and used its reserve requirements for the banks. It has been putting the rates up, and it is about time that they came down. I think that China needs a monetary boost. But are the Chinese Government listening, and have they the slightest interest in my opinion of their monetary policy? I very much doubt it. [Hon. Members: “Of course!”] Hon. Members flatter me again, but I fear that even the Chinese ambassador, most assiduous gentleman though he is, will not report the opinions of the House of Commons on China’s monetary policy. I fear that even if the Foreign Office, our most esteemed and distinguished Foreign Office, that Rolls-Royce Department—possibly a Rolls-Royce made rather more recently, in the 1970s, with a little bit of engine trouble and a little bit of oil leakage, but none the less with very fine leather inside and looking very nice—sent a message to China saying what its monetary policy should be, the Chinese would not take any notice, and the same applies to the new clause. This is not our business; it is a matter for the eurozone countries. We specifically excluded ourselves, and then the Opposition came up with this wonderful wheeze.

I suppose that that is admirable, in a way. The Opposition have to think something up. As Disraeli said, the job of the Opposition is to oppose. All the finest socialist brains in England were sitting around discussing how to amend a Bill consisting of a handful of clauses saying nothing much except that Her Majesty’s Government would be saved from further liability for the euro. “What shall we do? What bold step of policy shall we take? How shall we strive to convince our electors that there will be a new dawn, the new Jerusalem that the socialists are always looking for? We must ask the Chancellor of the Exchequer for a report that is so hard-hitting, forceful and solid that it constitutes a new policy.”

[Mr MacShane]

rose—

[Jacob Rees-Mogg]

The right hon. Member for Rotherham (Mr MacShane) looks as if he wishes to intervene, and I will of course give way to him.

[Mr MacShane]

I assume that this will only be reported in Hansard, and will thus remain a state secret. The hon. Gentleman is pretty much making my speech for me.

That said, I think that the Chinese should listen to the hon. Gentleman. I think that the clatter of chopsticks in North East Somerset should be heard in Beijing when it comes to policy. It should also be noted that we do about £48 billion-worth of trade a year with the other EU member states, and what they do matters to us. The notion that if we do not sign the treaty the continent will be cut off has been a traditional approach throughout the ages of the Tory isolationists of whom he is the most wondrous representative in today’s House.

[Jacob Rees-Mogg]

I am grateful to the right hon. Gentleman, but I must disappoint him. I support the treaty. For once when it comes to a European issue, I think that the Government have got it right, because what they are doing gets us out of the problem. That is the whole point. Once we have got ourselves out of the problem, how Europe deals with it and funds it is a matter for Europe. Yes, it is important that we trade with them, and yes, it is important for there to be stability within the eurozone—although I would prefer a new stability without a euro and with individual currencies, as I think that that would be a better and more prosperous stability—but a report by the Chancellor of the Exchequer to the House on the matter is not going to sell an extra widget to Belgium.

[Andrew Bridgen]

My hon. Friend is as eloquent as ever. Does he agree that, given the speed at which events unravel during the eurozone crisis, even if this were our business—which it is not—an annual report would be at best irrelevant?

[Jacob Rees-Mogg]

My hon. Friend’s intervention is incredibly helpful, because it has reminded me of the one important point that I wanted to make in this little speech against the new clauses. Absolutely the only risk posed to us by the treaty is that it will not lead to repeal of the regulation setting up the EFSM, and that we will remain liable or another article 122 bail-out fund will come through. That is the only risk left to us, and if such a situation were to arise, the House would want to scrutinise it immediately, rather than wait for some pedestrian report to be delivered.

These new clauses are glorious in their way—glorious in their irrelevance and in their failing to appreciate what the whole point of the treaty is. They are a delightful effort to make sure that there is some debate, and they have given me an opportunity to speak when I had, for once, intended to be silent in a European debate. Because of their rank irrelevance, I could do nothing but speak out against them. I have every confidence that Her Majesty’s Government, with a careful operation by the Whips Office, will ensure that they are firmly defeated.

18:59

[Geraint Davies]

The hon. Member for North East Somerset (Jacob Rees-Mogg) has just given us a diatribe in support of laissez-faire economics and casting Britain adrift, and the idea that whatever happens in terms of the ESM will not have any impact on British trade and jobs, which it clearly will.

Like you, Mr Benton, I am a member of the Council of Europe, and we both take very seriously the issue of Europe and our economic, political and social relationships with it. The Welsh Affairs Committee recently visited Brussels to talk to Commissioners, MEPs and others about the prospects for Europe. As we all know, the big debate there, as here, is to do with the challenge of finding the right balance between encouraging growth and making cuts in order to get us back on track. There are very different views in Europe—as there are, of course, across the Committee—about the need to get growth on track, rather than to crush it through excessive austerity measures. The setting up of the ESM will be critical, as will the terms of reference and the details of how it operates.

As to the ESM providing targeted support for Greece and others, the latest debate in Europe is about the interest rate to be applied and the period over which it will be repaid. Those are the two crucial issues for Greece, alongside the question of where the money will be targeted. Instead of being directed towards paying down existing debt, if the money were targeted on solar forests in Greece to provide energy to sell to Europe, on a railway network that supported a more effective tourist industry or on providing universal broadband for Greece to link up to the world, that would provide tools for growth rather than a hammer to hit across the heads of the worst-affected Greek people.

The way in which the ESM operates, its terms of reference, how it impacts on ailing countries and their sovereign debt and its relationship with our country all have major implications for our national interest. I am amazed that those on the other side of the debate—they say they are eurosceptics, but perhaps they should be members of the UK Independence party—deny that there are any implications for our national and economic interests and the jobs of local people in having these proposed reports, and in ensuring they are not merely produced annually, but updated more often.

There is a big difference between what happened in the 1930s, when France, one of the possible locomotives of growth, did not take the opportunity to provide it and instead allowed soaring unemployment in Germany—the rest is history—and what happened in 2008, when we faced a potential depression and Obama and Brown put in place a fiscal stimulus to keep growth going. Recently, we been facing the prospect of a new winter of austerity, but people have at last woken up, and it has now been recognised that the ESM and the fiscal stimulus are about getting Europe back on track, and thereby also securing our own positive future and destiny.

I therefore make no apology for supporting these two modest new clauses, and I hope they will enjoy support across the Committee.

[Mr Lidington]

New clause 1 would require the Government to report annually to Parliament on the impact of the ESM on the UK economy. As the Committee will no doubt be aware by now, the Chancellor already reports regularly to Parliament on Britain’s economic performance through the Budget and the autumn statement. In addition, the Government regularly publish details on our financial relationships with the International Monetary Fund and the European Union and on our bilateral loan to Ireland. As my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) so brilliantly pointed out, placing an additional reporting burden on the UK Government in respect of information that will largely be in the public domain has no apparent gains and serves no purpose.

The other new clause proposes that the Government report on the impact of the ESM on the economic performance of the EU. I hope that Members would agree that it would not be appropriate for the UK to produce reports on the economic policy and performance of our European neighbours. I can guess what the reaction would be in this place if we were to hear about a debate in the Bundestag or the Greek Parliament about the economic policy of the UK; I can envisage the angry points of order, the protests to Mr Speaker, the early-day motions and the requests to invoke Standing Order No. 20.

The new clause is not needed. The Chancellor has regularly updated the House throughout this crisis, including on developments in the euro-area assistance programmes and on negotiations over the ESM. Furthermore, the Opposition have overlooked the fact that the Commission already annually produces a report on the borrowing and lending activities of the EU, including under the different financial assistance mechanisms. The Government, under the normal scrutiny system, produce an explanatory memorandum for Parliament that summarises the report. That is sent to the European Scrutiny Committee, which, as with any such memorandum, has the option to refer the report for debate. It is also within the remit of the Treasury Committee to launch an inquiry into it, or for the Backbench Business Committee to schedule a debate.

These new clauses would create an unnecessary and burdensome obligation, with no clear benefit. As my hon. Friend the Member for Cheltenham (Martin Horwood) said, they would merely serve to tie up civil service resources in order to report on a mechanism that the UK is not even a part of, and has no intention whatever of joining.

An analogy with the Schengen agreement can be drawn. We are not a part of that, and the Government do not publish an annual report on it to Parliament. Of course, however, Home Office and Justice Ministers will answer questions and hold themselves to account if there are any important developments in that agreement that affect this country. In the event of there being any justice and home affairs measures into which the UK Government might choose to opt, the normal scrutiny system would apply, with the possibility of debates being held either in the ESC or on the Floor of the House.

The Bill is concerned only with approval of the decision amending article 136 of the treaty on the functioning of the European Union, and not with the ESM. These new clauses are therefore wide of the mark. In fact, the only reason I can conceive of as to why Parliament might wish to accept such a reporting requirement is if we were planning to be part of the ESM, which, of course, would in turn mean we were planning to be part of the euro. The logic of the Opposition new clauses is that they still have in mind that prospect for this country.

Of course, as we know, the weasel words have already been employed. In this Bill’s Second Reading a week ago, the shadow Foreign Secretary, the right hon. Member for Paisley and Renfrewshire South (Mr Alexander), was challenged as to the prospect of the UK entering the euro, and he said there was no immediate prospect of that happening. We know, too, that when the Leader of the Opposition was pressed on this same matter, he said that whether or not the United Kingdom were to join the euro would be a matter of how long he were to remain as Prime Minister.

Not only did we hear from my hon. Friend the Member for North East Somerset a clear and devastating exposition of why the Opposition new clauses are completely otiose, but we can see in the Opposition’s decision to bring such new clauses before the Committee this evening some hint of the policy yearning which dare not speak its name: they still cherish that lingering dream of taking this country into the euro one day. The Committee should have nothing whatever to do with these new clauses, and we should reject them.

[Emma Reynolds]

I remind the Minister for Europe that it was our Government who did not take this country into the euro, and that is a matter of fact, not opinion. I also remind him that as the shadow Foreign Secretary and I set out on Second Reading, and as I set out earlier today, we are in favour of the European stability mechanism precisely because it will be a bail-out fund operated by the eurozone for the eurozone and, crucially, financed by the eurozone.

Both new clauses introduce a requirement for the Government in the first instance to assess annually the ESM’s impact on the British economy and, in the second instance, to assess the impact on it of loans made by the ESM. I was disappointed and surprised to learn that the hon. Member for North East Somerset (Jacob Rees-Mogg) does not share our desire for additional scrutiny of European matters. We look forward to his future speeches on Chinese monetary policy. He should not underestimate himself—I am sure there is a member of the Chinese Communist party listening carefully to what he is saying, even if they do not take the advice he is proffering.

The Opposition believe that it is incredibly important that the impact on our economy of the European stability mechanism be assessed, and that both new clauses would add to the scrutiny by this House, the other place and the greater public. For that reason, I would like to divide the Committee on new clause 1.

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

19:12

Division 60

Ayes: 179

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Labour: 172
Plaid Cymru: 3
Scottish National Party: 3
Alliance: 1

Noes: 265

---

Conservative: 221
Liberal Democrat: 43

New Clause 3

Report on the impact of the European Stability Mechanism on the economic performance of the European Union

‘The Chancellor of the Exchequer shall make a report to Parliament within one year of the Act coming into force and annually thereafter setting out an assessment of the impact of the European Stability Mechanism on the economic performance of the European Union.’.—(Emma Reynolds.)

Brought up, and read the First time.

[Emma Reynolds]

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

New clause 3 would require the Government annually to update the House on their assessment of the impact of the ESM on the economic performance of the EU. Our economy and those of the member states of the eurozone, as well as those of the wider EU, are closely entwined through trade and our financial sectors. We also use the collective weight of the EU to negotiate free trade agreements with both developed and emerging economies. We therefore believe that it is reasonable to require a regular update from the Chancellor on how the ESM arrangements are affecting our major trading partners in the EU.

We welcome last week’s decision by the European Central Bank to set out its approach to outright monetary transactions, which is an example of the lender-of-last-resort role that such a eurozone central bank ought to have reached many months ago. However, the operation of OMTs will be tied to the operation of the ESM. It is therefore imperative that the operation of the ESM is undertaken appropriately and that any strict conditionality does not harm the delicate path back to economic growth.

As we explained on Second Reading, we are in favour of the Bill, which provides for the treaty change necessary to enable the establishment of the ESM by the eurozone, but we have concerns about the conditionality of the ESM. We will continue to argue that ESM and ECB support needs to avoid the punitive austerity that undercuts confidence and demand in an economy, pushes an economy back into recession, reverses the generation of tax receipts and increases welfare costs. Regrettably, that is exactly what has happened in the UK owing to the severe austerity that our Government have chosen to impose, despite the fact that the Business Secretary admitted yesterday that there is a problem of demand in the economy and despite the fact that he and his party agreed with us before the general election that cuts that went too far and too fast would choke off the recovery.

The question of ESM conditionality is at the heart of the divisions between right-wing and centre-left Governments across Europe. Germany holds a veto on the operation of the ESM, because its share of contributions converts to a blocking vote share. Germany’s representative on the ECB board was the only dissenter to the new ECB policy on OMTs that was announced last week and, incidentally, this week its constitutional court is expected to rule on whether the ESM is constitutional according to German law.

19:29

Although the ECB policy has been adopted, there remains the prospect that it cannot be implemented without stringent austerity conditions because of the tie-in to the operation of the ESM. It is therefore imperative that the ESM remains under close scrutiny by our Government and by Members of this House and the other place. With more than 50% of our export trade going to the wider European Union, we are affected significantly by decisions taken on the ESM. For that reason, we believe that a routine annual process for monitoring developments in the EU economy is of great importance. We believe that new clause 3 would allow that to happen.

[Mr Lidington]

New clause 3 would require the Chancellor of the Exchequer to make a report to Parliament, within a year of the Act coming into force and annually thereafter, setting out an assessment of the impact of the ESM on the EU’s economic performance. To some extent that touches on issues similar to those we addressed when debating the Opposition’s previous two new clauses.

My argument to the Committee is that the requirement the Opposition are seeking to impose on the Government is simply unnecessary and otiose. The ESM treaty—the intergovernmental treaty among the 17 eurozone member states—requires the publication of annual accounts, so we fully expect information on the financial assistance that will be provided by the ESM to be made publicly available. That would be done in the same way that information on the use of the EFSF and its financial assistance programmes is currently made available on a public website. Furthermore, every EU member state is already required, as part of the assessment known as the European semester, to submit annually to the Commission a report on its own economic plans and performance. Therefore, the information that the Opposition are seeking will be in the public domain anyway.

We seem once again to have a proposal that would create an unnecessary reporting obligation and use civil service time in the UK on a mechanism of which the UK is not part. Parliament, through its Select Committees, the scrutiny system and the powers of the Backbench Business Committee, will continue to have plenty of opportunity to require Ministers to come to the House to be held to account for Europe’s economic performance and the United Kingdom’s place in shaping the EU’s economic policies. We do not need the new clause to give Parliament those powers. I hope that the Opposition, on reflection, will choose to withdraw the motion.

[Emma Reynolds]

The objective of new clause 3, as I have set out, is for the Government to monitor closely and assess the impact of the European stability mechanism on the wider economy of the European Union. Our economy is closely connected to the other 26 economies of the EU, with regard to both trade and, crucially, our banking sector. Our banks are heavily exposed to developments in the financial sectors of the other member states. It is therefore important that the Government allow the House to scrutinise the impact of the ESM, as well as their own decisions on the level of influence they choose to have on these discussions, even though we are not a member of the eurozone. It is not our policy that we should join the euro, just to clarify that for the Minister once more. Even though that remains the case, as a big member state in the European Union we should have a significant voice in all its developments, including the conditionality imposed on eurozone member states that seek support from the European stability mechanism.

Such matters may not be our primary responsibility as a non-eurozone member state, but we would nevertheless like the Government to be less isolated and to have more influence on the discussions about conditionality, because, as I set out earlier, we have reservations about the harsh austerity that is being imposed on Greece and other member states and that will probably be attached to support from this fund as well as previous mechanisms. It is for that reason that we tabled new clause 3. We believe that it is important that the Chancellor of the Exchequer monitors these developments closely and gives this House the opportunity to comment on and debate them.

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

19:35

Division 61

Ayes: 172

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Labour: 165
Plaid Cymru: 3
Scottish National Party: 3
Alliance: 1

Noes: 265

---

Conservative: 222
Liberal Democrat: 42

The Deputy Speaker resumed the Chair.

Bill reported, without amendment.

Third Reading

19:40

[Mr Lidington]

I beg to move, That the Bill be now read the Third time.

I want to begin, as is customary, by thanking those right hon. and hon. Members who have taken part in debates on the Bill. Even though it contained just two clauses, many Members have raised a number of interesting and controversial points about the context and impact of the European Council decision that the Bill seeks to approve. I am delighted that the Bill stimulated such parliamentary interest. It is difficult to single out any one Member—I apologise to any whom I do not mention—but I want to place on record my thanks to my hon. Friend the Member for Stone (Mr Cash) and the European Scrutiny Committee. The whole House has benefited from his knowledge and his long held and principled approach to these matters. Although the Government do not always take the same view as he and his fellow Committee members on every point that they raise, the Committee has fulfilled its role commendably.

On the Opposition Front Bench, the right hon. Member for Paisley and Renfrewshire South (Mr Alexander) and the hon. Member for Wolverhampton North East (Emma Reynolds) clearly articulated the Opposition’s position on a number of matters and indicated their support for the Bill, for which I am grateful.

My hon. Friends the Members for Harwich and North Essex (Mr Jenkin), for Camborne and Redruth (George Eustice), for North East Somerset (Jacob Rees-Mogg), for Stroud (Neil Carmichael), for Hertsmere (Mr Clappison), for Rochester and Strood (Mark Reckless), for Basildon and Billericay (Mr Baron) and for Peterborough (Mr Jackson) have all played a part in debates on the Bill. I value the intelligence and thoughtfulness that they have brought to those debates. I also pay tribute to my hon. Friend the Member for Cheltenham (Martin Horwood), who ably represented his party and powerfully made the case for the Bill from a perspective slightly different from that of some of my party colleagues.

I turn to Opposition Members. I thank the hon. Members for East Kilbride, Strathaven and Lesmahagow (Mr McCann), for Swansea West (Geraint Davies) and for Caerphilly (Wayne David). I also thank the hon. Member for Luton North (Kelvin Hopkins), without whom no debate on these matters could be complete. I also put on the record my gratitude for the outstanding work done by officials, at both the Foreign and Commonwealth Office and the Treasury, in putting together this legislation.

As was set out on Second Reading, the purpose of the Bill is simple and straightforward. It provides solely for the parliamentary approval of an amendment to article 136 of the treaty on the functioning of the European Union. That proposed treaty amendment makes it clear that eurozone member states may establish a financial assistance mechanism—the European stability mechanism, or ESM. In other words, it says that the eurozone can support fellow eurozone members in financial difficulty without contravening their obligations under the EU treaties.

Although article 136 applies only to member states whose currency is the euro, and therefore not to the United Kingdom, it is in our interests to ratify the European Council decision to amend it for two reasons. The first is that the ESM will play an important role, providing the eurozone with a permanent financial assistance mechanism to assist eurozone member states in financial difficulty. It will help eurozone countries work towards stability. Stability in the eurozone is crucial to our own stability in the UK. Although I accept all the points made in our debates about the measure not being a panacea and the European Union needing to do many things to make itself much more competitive and to stimulate economic growth in today’s rapidly changing global economy, the Government believe that the measure is one significant step towards helping stability in the eurozone, which will assist the United Kingdom’s economy.

Secondly, the passage of the treaty amendment will bring a direct benefit to the United Kingdom and our national interest. My right hon. Friend the Prime Minister secured an important agreement alongside the treaty amendment. In future, the UK will not be liable through the EU budget for any future eurozone bail-outs under the EU budget once the ESM comes into force.

The treaty amendment was considered by Parliament before the Prime Minister agreed to the treaty amendment decision back in March 2011; at that time, we handled the decision under the provisions of the previous legislation, the European Union (Amendment) Act 2008. At the time, I committed to bring the decision before the House a second time, under the more stringent parliamentary scrutiny of what was then the European Union Bill and is now the European Union Act 2011.

The Bill has been introduced to gain parliamentary approval to enable the UK to complete its ratification process for the treaty amendment through primary legislation, which enables Members of both Houses to debate in detail the implications of the treaty amendment in a way that was not possible under the 2008 legislation, which made provision only for a time-limited debate on a motion before each House.

The treaty amendment is due to enter into force on 1 January 2013, subject to ratification by all member states. Parliament’s approval of the Bill will take us one step closer to ensuring that that happens. It is important that we do not put any artificial obstacles in the way of that happening.

Members have examined and challenged both the brief content of the Bill and the wider impact of agreeing to the treaty amendment decision, as was our intention when we introduced the European Union Act 2011. Although we have heard a broad range of views on the rights and wrongs of the eurozone, on the EU and on the UK’s place in Europe, one thing that has found general agreement on both sides of the House is that approving this Bill makes sense. Agreeing to the treaty amendment is in our best interests because it will extinguish our future exposure to liabilities under the European financial stability mechanism. For those reasons, I hope that the House will give the Bill a Third Reading this evening.

19:56

[Wayne David]

As the Minister explained, the Bill is narrow and specific. It is very short, but very important. I should like to say a few words to put it in a broader context. I was a Member of the European Parliament for 10 years. I was elected in 1989, so I saw the completion of the single market. I well remember Lord Cockfield, Commissioner for the internal market from 1984 to 1988, arguing forcefully for the completion of the single market. I also remember the Cecchini report, which was essential in winning the necessary ideological battle for progress to be made on the single market.

At that time, many of us in the socialist group at the European Parliament had reservations about how it was envisaged that the single market would develop and concerns about the widening gap between the rich and poor parts of the European Union. The response then was to enhance the structural funds. In particular, cohesion funding was brought forward to address initially the concerns of the four poorest member states and it expanded in size to encompass some of the new countries coming into the European Union. As we all know, the Maastricht treaty was in many ways the logical conclusion of what people saw as a journey from the creation of the single market into a fully fledged economic and monetary union.

Britain, of course, had its famous opt-out and that was probably right. That was certainly recognised by the Labour Government elected in 1997. The five economic tests came forward. A judgment had to be made on joining economic and monetary union. Would it provide the United Kingdom with higher growth, stability and a lasting increase in the number of jobs? It was decided that those criteria would have to be met if Britain were to join EMU.

It is important to stress that although there were economic concerns and reservations, there was a tremendous political impetus in favour of economic and monetary union. That was clearly demonstrated when Greece was allowed to join EMU in 2001. Everything was okay as long as the world economy, and the eurozone economy as it developed, were doing well. But the chickens came home to roost with the monetary collapse of 2008 and the consequences that emanated from it. With the benefit of hindsight, many people would probably argue with the way in which a single currency was created and the speed at which that movement was made, and with the fact that many countries, particularly Greece, were allowed to join it without proper economic consideration being given to that. Nevertheless, the political impetus was there.

Now, of course, the question is how we deal with the problems that have arisen in recent times. It would be a huge mistake if the voices of the Eurosceptics were taken seriously and we stepped back into splendid isolation and not only refused to participate in the European venture but wished the end of the eurozone. I say that not because of any ideological commitment to the idea of the eurozone but because I realise pragmatically that a successful eurozone is important for the British economy and the British people.

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

I was not planning to intervene in this debate, but I do so because the hon. Gentleman refers to ignoring the voices of Eurosceptics. Those are the voices of what appears to be the majority of people in this country, if one believes the polls. Perhaps we should allow the public to have a say in a proper referendum, and then it would be for them to decide whether we want to draw back from the EU rather than having pro-Europeans patronising the country about what we should or should not do in relation to Europe.

[Wayne David]

I think that most people in this country are concerned about its economic well-being. Yes, they are concerned about our national sovereignty; even people who describe themselves as pro-European do not want to give up British sovereignty. Many people see the European Union as essentially a mechanism to pool sovereignty in the collective best interests of those who live on that continent. It is important for that spirit to be carried forward in how we relate to the current difficulties in the eurozone.

I generally welcome the pragmatic way in which the Government have gone about establishing the ESM. As the Minister said, nobody would claim for one moment that the ESM, by itself, will solve the problems of the eurozone—it will not—but it is one important step towards resolving them. I therefore hope that this House will give its endorsement to it. However, to take his comments further, the ESM is not enough. It must be monitored, examined and possibly extended in some way if there is a need for that in future, but we must also pursue policies collectively that will enhance the competitiveness of the European Union.

Just as importantly, we need a growth strategy. That is the crucial issue that faces the peoples of all countries within the European Union. If recent history teaches us anything, it is that austerity by itself is not enough. It is not enough in this country—that is why we are in a double-dip recessions—or in the eurozone. I very much hope that there will be an increasing question mark over the German-led policy of austerity above all else. We need to make sure not only that we have reasonable public finances, that the debt burden on our neighbour countries is reduced and that there is competitiveness, but that our economies are collectively stimulated. That is in the best interests of this country. I believe that if the ESM is agreed, it will be an important step towards a more prosperous Europe for us—but it is only one step.

20:04

[Martin Horwood]

I congratulate the Minister on his magnificent handling of the Bill. I am very pleased that he stayed in his place in the reshuffle, because his expertise in matters European is now encyclopaedic. I am sure that the quality of our debates and his contributions has not reduced, but these European Bills are certainly going through faster, as we seem to have got through this one at great speed.

The contributions of the hon. Member for Wolverhampton North East (Emma Reynolds) have been positive and constructive, and there has been a great deal of consensus, even extending at times to some traditional Eurosceptics. I was very impressed to see the hon. Members for North East Somerset (Jacob Rees-Mogg) and for Camborne and Redruth (George Eustice) among those who have been supporting the Bill during its passage. That is as it should be, because this should not be a controversial piece of legislation. We are not going to be part of the ESM intergovernmental treaty; we are merely seeking to facilitate eurozone members in trying to find their way out of what is still an extremely serious crisis.

That has to be in the British national interest, because whether we like it or not— whether or not we are a member of the ESM or the eurozone, or even of the European Union—we are inevitably and inextricably linked to the whole European economy. Some 50% of British trade, worth £450 billion a year, is with other EU member states. Over 100,000 British firms export to other EU countries, 94,000 of them small or medium-sized enterprises. Over 200,000 UK companies trade with the EU every year. Over 50% of our foreign direct investment comes from other EU member states, worth more than £350 billion a year, and over 50% of companies investing in the UK cite the UK’s membership of the single market as a core reason for doing so. The fate of the European economy is inextricably tied up with our own fate and with our ability to grow and to recover from the financial crisis that has affected the whole continent.

This is, in its own small way, an historic Bill. It is the first use of the European Union Act 2011, which sought to strike a balance between Liberal Democrat enthusiasm to maximise the benefits of EU membership and Conservative caution that we take not one step without adequate parliamentary scrutiny and, if necessary, legislation, and without the option of a referendum if power were being transferred from the British level to the European level. No such referendum is necessary on this occasion, as this is merely a Bill to ease the passage of the intergovernmental treaty for other members of the European Union. However, the full panoply of parliamentary scrutiny of legislation has been brought to bear even on this small, technical change.

As the Minister rightly said, the treaty that will, we hope, follow the Bill at European level will not be a panacea even for ESM members and eurozone members. It will not, of itself, solve the deep and serious problems of the European economy, which relate to competitiveness, lack of growth, and debt. These complex, interacting problems still pose a real and present danger to the whole European economy, including this country’s economy. We have not in any way solved those problems in the few days that we have spent debating this Bill, but perhaps we have made one small contribution to the start of the journey towards doing so.

20:08

[Steve Baker (Wycombe) (Con)]

Without wishing to astonish my right hon. Friend the Minister, it will be my pleasure to support the Government on this European matter, for all the reasons that he has set out. I am very grateful to find myself in the company of my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg).

However, I want to place on the record my profound misgivings about the huge centralisation of economic power, almost entirely beyond economic control or legal challenge, that is going to take place in Europe. The European Union has not abolished economic nationalism; it has simply raised it to the continental scale, just in time to be in danger of a currency collapse. Our friends in Europe are potentially entering into a dreadful error from which it may be that democrats and liberals should recoil in horror. I wish that they were not doing so, and I look forward to the judgment of the German constitutional court.

I commend to my right hon. Friend the initiative for a free and prospering Europe that is being proposed by my friends in eastern Europe, which asks for a radical decentralisation of economic power. Europe is going in entirely the wrong direction with the ESM. I wish it were not, and I am very glad that the Government are liberating us from any liability in relation to this monstrous mess.

20:09

[Jacob Rees-Mogg]

It is a real pleasure to speak in favour of this Bill, because it is surprisingly important. The more we have debated it, the more clear its importance has become. It is important because it saves the British taxpayer risking substantial amounts of money. When the treaty was agreed, I was disappointed that we had not asked for more, because Her Majesty’s Government had a strong negotiating position and might have been able to start the process of renegotiation and ask why we did not have a more à la carte Europe, to use a French term, if I may, Mr Deputy Speaker, against the preferred guidance of “Erskine May” that one should stick to English.

The Government have achieved something considerable by appearing to be very modest. We have seen the clawback of powers from Europe for almost the first time. Under article 122 of the Lisbon treaty, we had opened ourselves up to substantial and potentially unlimited liabilities for the failures of the eurozone. Once it was accepted that article 122 could be used for emergency bail-outs and the regulation was not challenged, it was conceivable that further regulations could be introduced and that, although each one would have been subject to challenge individually, once the first was accepted, there could have been a continuous chain of bail-outs, resulting in billions and billions of pounds’ worth of liabilities for us.

If I may make a cheap party political point—there is an occasion for such a thing—it is worth noting that it was the previous Labour Government who signed us up, during their dying days, to this almost unlimited liability.

[Emma Reynolds]

It is always a pleasure to intervene on the hon. Gentleman. I have in my hand an explanatory memorandum by a previous Economic Secretary, who is now the International Development Secretary. It states:

“The Government regrets that the Scrutiny Committee did not have time to consider this document”—

meaning the document on the establishment of a European financial stabilisation mechanism—

“before it was agreed at Council. It should be noted that whilst agreement on behalf of the UK was given by the previous administration,”

to which the hon. Gentleman has referred,

“cross-party consensus had been gained.”

[Jacob Rees-Mogg]

When the hon. Lady started with, “I have in my hand”, I thought she was going to say, “a piece of paper”, and that we were going to be promised peace in our time, but, sadly, she offered party political disagreement instead. It was more like a battle than peace. All I would say is that the Government of the day were Labour. I accept that the incoming Government failed to challenge the use of article 122—they should have done that and it was a pity that they did not—but that was where we were: socialist extravagance spending our money and signing us up to bailing out the whole of Europe over and over again.

What did we get in place of that? We got a sound Conservative Government, with the help, for once—the worthwhile, marvellous and delightful help—of our Liberal Democrat coalition partners, who were robust enough, which some might say is most out of character, to support us in getting powers back from the European Union, which has almost never happened before. That is important because the whole basis on which the powers of the EU have been built—the acquis communautaire—has been one whereby it gets powers and never gives them away again. It is the doctrine of the occupied field that once Europe has taken over a policy area, it is in control of it and it never goes back to the nation state.

It is therefore a real triumph for the Government to have got this agreement on the treaty on the functioning of the European Union and that the article 122 mechanism has been cast to history. Although that is not being said officially—we do not have a signed document saying that article 122 will not be used—we have a very strong political agreement between all the Heads of Government and Heads of State, signed up to by the Commission, and, most importantly of all, a new mechanism.

The other good thing about the mechanism and the treaty approach that has brought it to us is that we have a proper parliamentary procedure to ratify it. It is so marvellous and commendable of this Government that they are taking parliamentary accountability and democracy seriously. They could have done it differently. They could have just bulldozed it through on a quiet Wednesday afternoon in a debate lasting an hour and a half or two hours, but they chose not to do that. They introduced a Bill that required a proper process and they actually allowed time for the debate—so much time that we may even finish early. That is another good argument for parliamentary scrutiny—time is not used up unnecessarily in the House of Commons; it is used for proper consideration of what the Government are doing.

This new Session’s resolution can therefore be: let us support this marvellous Government and let us support the Front Bench and Treasury Bench representatives as they go boldly forth. They stand up, show backbone and act like a lion—not, as somebody may have once said, like Bagpuss—against Europe. They make sure that the British position is put clearly and forcefully and that powers are returned home.

There is a great lesson for Her Majesty’s Government in this: when they show backbone, force and courage, not only do they receive rapturous support from Members on the bustling Back Benches, but they receive support from the country at large. As the Brussels directives are sent away and batted back home, so the opinion poll rating rises. I hope that the Government will learn from this and act on it in future.

20:15

[Emma Reynolds]

As always, it is a great pleasure to follow the hon. Member for North East Somerset (Jacob Rees-Mogg). On behalf of the Opposition, I, too, would like to thank all right hon. and hon. Members who have taken part in today’s and last week’s debates on the Bill.

The Opposition support the Bill, as my right hon. Friend the shadow Foreign Secretary and I set out on Second Reading. Indeed, there seems to be a worrying level of harmony between those on the Opposition Front Bench, the Government Front Bench and the Liberal Democrat Benches. It even extends to the hon. Member for North East Somerset, to whom I say, in French, c’est un plaisir. To return the compliment, it is a pleasure to be in agreement with him. That agreement, however, does not extend to all of the Conservative party’s Back Benchers. As ever, there is some disagreement between those on the Treasury Bench and Conservative Back Benchers, but let us not dwell on that.

The Bill does not deal with the substance of the eurozone’s new bail-out fund, the European stability mechanism; it deals only with the treaty change required to allow for its establishment. To make our position clear, we do not believe that the UK should stand in the way of the eurozone setting up a fund that will be financed by the eurozone, operated by the eurozone and used by eurozone countries should they need that support. We believe that the eurozone must be allowed to take responsibility for this new, permanent bail-out fund.

Forty per cent. of British exports go to the eurozone, and many British businesses rely on the wider consumer market of 500 million people offered by the European Union. We therefore support immediate and decisive action by the eurozone to stabilise the single currency, because we believe that that stability is firmly in the UK’s national interest. The European stability mechanism is one necessary element of that decisive action. For too long there has been an absence of concrete action by eurozone leaders. Political inaction has, unfortunately, become the norm. As the eurozone’s problems developed, that inaction served only to deepen the crisis.

As many commentators have noted recently, had the European Central Bank announced its support for the eurozone two years ago and used the unequivocal terms that we have heard recently from Mario Draghi, who said that the ECB would provide a fully effective backstop for the currency, it is possible that the crisis would not have reached this stage and that it would be nearing its end.

As the OECD stated last week,

“weakness in the periphery is spilling over to the core.”

It continued that

“further policy action is needed to instil more confidence in the monetary union.”

Although the ESM is certainly not a silver bullet to solve the eurozone crisis, its establishment is definitely part of the solution and is exactly the type of action that the OECD has called for.

Speculation on the future of the euro and uncertainty about the political will of eurozone leaders to save the currency have driven instability in Europe’s financial markets. Without that essential market confidence in the eurozone’s readiness to protect its weaker members, borrowing costs for countries on the periphery have rocketed. Coupled with the weak and under-capitalised banking systems of certain countries in the eurozone, that has led to a vicious circle of financial instability.

The OECD has emphasised that:

“Solvency fears for banks and their sovereigns are feeding on each other.”

It also stated:

“Concerns about the possibility of exit from the euro area are pushing up yields, which in turn reinforces break-up fears. It is crucial to stem these exit fears.”

It is clear that as banking systems have become increasingly weakened, pressure has grown on sovereigns, and that as the financial uncertainty has grown, the cost of sovereign borrowing has risen, which has raised borrowing costs for businesses and individuals. As economic growth has stagnated, the Governments of certain eurozone countries have had to borrow more, and as they have become more indebted, fears about their sustainability and ability to support their banking sectors have risen. That has driven an increased cost of borrowing, and the cycle begins again.

In the short term, it is extremely difficult to break that vicious circle without action from an external body, such as the EU, the ECB or the IMF. In Greece, Italy and Spain, the circle has become almost impossible to break without the financial markets believing that the eurozone as a whole is acting as guarantor.

Six weeks ago, the president of the ECB, Mario Draghi, said that he would do “whatever it takes” to save the euro. Only with that guarantee does the ECB believe it can break the vicious circle and begin to lower the cost of borrowing in the eurozone periphery. To that end, the ECB last week announced plans for a new scheme of Government bond buying, which will operate alongside the ESM. Along with other voices around the EU, including our Government and other Governments, we welcome last week’s announcement. Indeed, the French President, Francois Hollande, said in reaction to Mario Draghi’s announcement that “the euro is irreversible” and that the eurozone is now solving problems that have been pending for too long.

[Mr Clappison]

The hon. Lady is giving a most interesting analysis of the situation. What is her view, as the Opposition spokesman, on the means by which the ECB’s interventions will be financed?

[Emma Reynolds]

It was important that in its announcement, the ECB emphasised that there would be some sterilisation of its additional spending, which was intended to allay fears about inflation, particularly in Germany.

[Mr Clappison]

How credible does the hon. Lady think those promises of sterilisation are?

[Emma Reynolds]

The market reaction to Mario Draghi’s announcement suggests that they are very credible, because in the days afterwards, the markets rallied.

[Steve Baker]

People in the markets have a much shorter-term view than is generally suspected. They will always be grateful to know that there is a willing buyer with unlimited funds for whatever they are holding.

[Emma Reynolds]

I agree that they will be happy about that. That is why it is important that what the ECB president set out last week is carried through and supported by the eurozone Governments. It must not be seen as an announcement that will come and go. I believe that Mario Draghi and the ECB have set out important steps that have been needed for some time to provide a back-stop for the single currency.

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

The ECB’s announcement was made alongside the fact that it would impose conditions on the buy-outs of bonds. There is concern in some countries that they will not be able to meet those conditions. Is my hon. Friend the Member for Wycombe (Steve Baker) not right to say that the market is taking a very short-term view? Unless there are strict fiscal conditions so that the situation improves, the buy-outs of bonds will not solve the problem.

[Emma Reynolds]

I thank the hon. Gentleman, because he brings me on nicely to the next part of my speech, which is about the conditionality of the ESM and the bond buying that was announced last week.

The conditionality of the ESM requires further scrutiny. As with our Government’s economic failings, we are concerned that the ESM will impose harsh austerity on countries that receive its support, and thereby choke off economic growth and recovery. In the UK, the effect of such “austerity alone” economics is acutely felt by the 2.65 million people who are unemployed. The former US Treasury Secretary, Larry Summers, last week reflected on the Government’s economic mismanagement at a conference in London:

“We have avoided the prospect of a 1930s-like experience in the US. I cannot say the same with respect to Great Britain. The downturn in British output is more sustained than at any point in the twentieth century. In such an environment, to radically slash public investment is, I would suggest, to violate the Hippocratic Oath—first, do no harm.”

Although he was referring to the catastrophe of our Government’s economic policy, he could have been talking about other countries within the eurozone that have been the subjects of severe austerity.

Although it is true, as the hon. Member for The Cotswolds (Geoffrey Clifton-Brown) suggests, that the fiscal position of countries in the medium term must be looked at—the level of debt to GDP in Greece, which has been over 100% since the early 1990s, is certainly unsustainable—Greece and other countries must be allowed to get back to growth as a means of reducing their deficits and debts. As we are seeing in this country, without that growth, it is more difficult to bring down a country’s annual deficits and longer-term debt.

Thankfully, the debate in Europe is beginning to shift towards a focus on growth and job creation, rather than austerity alone. In particular, we welcome the growth measures agreed at the European summit in June. However, we note that the debate is ongoing in Europe between those who argue for growth and job creation, and those who believe in austerity. It is regrettable that our Government are still very much on the wrong side of that debate.

The Government try in vain to blame the eurozone for their own economic failure, but even their own Back Benchers are not convinced. Last week, the right hon. Member for Haltemprice and Howden (Mr Davis) told an audience in the City that it was wrong for the Government to blame the eurozone for their current economic failings. Before the summer recess, the hon. Member for Bury St Edmunds (Mr Ruffley), a member of the Treasury Committee, said that the Government must not use the eurozone crisis as an alibi. The Opposition recognise the importance of the eurozone and of Britain’s place within the EU in building growth and prosperity. However, the Government’s failure to deliver growth two years ago and their continuing failure to focus on it have left us more vulnerable to the escalation of the eurozone crisis.

I will reflect briefly on the wider future of the eurozone and the role that the ESM will play. In contrast to the unequivocal statements of support for the euro from Mario Draghi and Francois Hollande that we have heard in recent days, some hon. Members have called today and throughout the Bill’s passage for the break-up of the euro and have argued against the establishment of the ESM. However, the break-up of the eurozone is not an easy, cost-free way out of the crisis.

If Greece were to leave the eurozone, the consequences could be disastrous for Greece and for the rest of the EU. If the euro were replaced by a new currency in Greece, the value of that currency would in all likelihood plummet, causing a further disaster in the Greek economy. Moreover, the contagion effect following that could be hugely damaging for the rest of Europe. Far from stabilising the eurozone, a Greek exit might serve only to deepen the sovereign debt crisis. International lenders, seeing Greece cut loose from the euro, may become wary of lending to other struggling states in the eurozone. Greece may become only the tip of the iceberg as investor panic drives up borrowing costs for Italy and Spain, the eurozone’s fourth and third largest economies.

[Mr Clappison]

I am grateful to the hon. Lady for giving way; she has been most generous. Throughout the debate, I have been interested in how the various measures will be financed. She has now turned from Mr Draghi’s proposals to those that we have in front of us today. What is her view of the fact that Italy and Spain seem to be significant contributors to the ESM, even though she has just mentioned them as being prospective beneficiaries?

[Emma Reynolds]

It is not impossible for them to be beneficiaries and contributors at different points, so I do not really see the difficulty that the hon. Gentleman is trying to point out.

Depositor confidence would also be damaged by the contagion effect that I mentioned. In the past year alone, 10.9% of deposits have been withdrawn from Spanish banks, which is a staggeringly high amount. In the event of a Greek exit, it is unlikely that such banks would be robust enough to survive if there were a sustained run. In that scenario, the Greek bail-out could appear small in comparison with the sums that may be needed to support other states in the eurozone.

For the reasons that I have given, we support the Bill. The establishment of the ESM is not a silver bullet, but it is nevertheless a key part of the solution that is so urgently needed to resolve the eurozone crisis. It is manifestly in the UK’s national interest that stability is restored to the eurozone, so we welcome the Bill.

Question put and agreed to.

Bill accordingly read the Third time and passed, without amendment.

Business without Debate

Monday 10th September 2012 Commons Chamber

Delegated Legislation

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Terms and Conditions of Employment

That the draft National Minimum Wage (Amendment) Regulations 2012, which were laid before this House on 19 June, be approved.—(Greg Hands.)

Question agreed to.

Education

Ordered,

That Lisa Nandy be discharged from the Education Committee and Siobhain McDonagh be added.—(Geoffrey Clifton-Brown, on behalf of the Committee of Selection.)

Broadband (East Yorkshire and North Lincolnshire)

Monday 10th September 2012 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Greg Hands.)

20:31

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

I congratulate the Minister on the perfect timing of his arrival in the Chamber, which I can only assume is a result of having some sort of superfast broadband connection to inform him that the debate was about to commence.

The title of the debate could be somewhat confusing. It is about broadband in east Yorkshire and north Lincolnshire, and by east Yorkshire I mean the whole ceremonial county, not the constituency of my right hon. Friend the Member for East Yorkshire (Mr Knight), which should perhaps be called Bridlington and Pocklington, although I am not sure what the good folk of Market Weighton would think about that. [Interruption.] Or Driffield, indeed. Nevertheless, it is good to have my right hon. Friend here to support the debate from his new position as a member of the Government, and I congratulate him on that. I think he is the only Member from east Yorkshire or north Lincolnshire to be serving in government. I was shocked not to receive a call myself, but there is always another year.

The debate will focus on both east Yorkshire and north Lincolnshire, as I represent communities in both. I will therefore split my speech into a number of sections. My main focus is to put some questions to the Minister on certain issues, and I will list those at the beginning of my speech rather than wait until the end—I always think it is fairer to Ministers that way. First, I will talk about flexibility in broadband delivery and particularly whether wireless broadband can be considered as a possible solution along with fixed-line deployment. Secondly, I will ask the Minister whether the north Lincolnshire broadband bid can be moved further up the procurement ladder, and thirdly, I will talk about deployment across the east riding with reference to Kingston Communications. Of course, the position in the broader Hull area is unique, because there is no BT provision, only KC. Fourthly, I will seek assurances from the Minister about the potential funding gap in the east riding’s broadband plan, and fifthly, I will ask for guarantees that projects are on course to be completed by 2015. I believe we have until half-past 10, so I may also speak for a short while about 4G provision, which I plan to get to at about 9.50 pm. We are in for a good evening.

This campaign enjoys cross-party, cross-Humber support, and it is good to see my hon. Friends the Members for Scunthorpe (Nic Dakin) and for Cleethorpes (Martin Vickers) in the Chamber. I know that my hon. Friend the Member for Beverley and Holderness (Mr Stuart) and my right hon. Friend the Member for Haltemprice and Howden (Mr Davis) are also much involved with this issue. In general, superfast broadband cannot come quick enough to the good folk of east Yorkshire and northern Lincolnshire, and in parts we enjoy some of the worst broadband connectivity in the country. As we try and move our economy forward, particularly the renewables agenda and our enterprise zones, it is vital that rural broadband—and, indeed, more urban broadband —is rolled out as quickly as possible.

I congratulate the Government—the Conservative-led Government as we like to call them when things are going well; the coalition Government when things are not going quite so well—on the £8.5 million they are investing in what they are not allowed to call the Humber region: north Lincolnshire and east Yorkshire. We have a number of not-spots across our area, and for my constituents—particularly in villages such as Adlingfleet that rests on the east Yorkshire/north Lincolnshire border, which is currently undefended—there is absolutely no broadband coverage and people struggle to get 0.5 megabits on their fixed-line broadband.

The roll-out of broadband cannot come fast enough. More and more of my constituents have to work from home and want to access telehealth services, which is simply not possible with the sort of connection speeds found in a lot of those communities. I therefore welcome the commitment to have superfast broadband rolled out to 90% of my constituents by 2015, with the remainder receiving 2 megabit broadband through other means.

I mentioned some of the benefits of superfast broadband. In north Lincolnshire, it has been estimated that the average cost of residential care is £18,000 a year per person and, as I mentioned, there is an increasing move to telehealth services, which will return a saving of £11,000 per person in a single year. I went to see telehealth services in operation at Goole in the east Yorkshire part of my constituency and I was incredibly impressed. Of course, if people do not have good broadband connectivity—or none at all—it is not possible for those services to be rolled out.

In north Lincolnshire, 52% of children under 15 are unable to use the same online tools they use at school because of poor or no access to the internet. As my hon. Friend the Member for Scunthorpe will attest, I know from my previous profession that more and more homework is delivered through online tools that young people have to access at home, but that is not possible for a lot of our communities. Indeed, in some communities in east riding, it is not even possible to access those tools at school. I visited Pollington-Balne primary school on the edge of east riding, which is unable even to access BBC education tools. The kids all have iPads and are connected to the school internet, but they are unable to access even the most basic tools on the BBC website.

This morning I kicked off the new school term at Goole college where I had a meeting with the newly appointed principal—I congratulate her on that—and she told me of the problems there. Broadband access, therefore, is a problem not only in rural communities, but also in more urban areas. More and more of our constituents across east Yorkshire and north Lincolnshire are seeking to access education online, whether through distance learning or something else, but find that that is simply not possible given some of the connection speeds.

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

Will my hon. Friend give way?

[Andrew Percy]

I will, of course, give way to my hon. Friend. She is not quite from north Lincolnshire or east Yorkshire, but I know she will have something to say on the matter.

[Anne Marie Morris]

My point is that broadband is not, dare I say it, just a problem in the north of the country; it is also a problem in the south-west. Broadhempston primary school got access to broadband for the first time only last year and, as my hon. Friend has said, without that, how can our young people learn?

[Andrew Percy]

Absolutely, I confess that my geography gets a bit shady south of Sheffield, but my hon. Friend’s constituency—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Just to help with the geography, I am sure we are not going to stretch it too far again. I understand that the hon. Lady wanted to get the south-west on the record, but this debate is about Yorkshire and Lincolnshire.

[Andrew Percy]

There will be no mention of Lancashire, Mr Deputy Speaker, which I know will disappoint you.

My hon. Friend’s point was a general one about the whole country. Many of our schools cannot access the educational tools they wish to access because of poor broadband speeds. Access to those speeds makes such a difference. The double whammy in my area is that schools have lower funding compared with schools in other parts of the country. Investing in more impressive kit therefore becomes more challenging for them.

It is estimated that small and medium-sized enterprises with superfast broadband continue to grow by 4.7%, compared with 0.6% for those without. My hon. Friend the Member for Scunthorpe recently collected an award on behalf of Scunthorpe because it has the fastest-growing online retail business.

[Nic Dakin (Scunthorpe) (Lab)]

I congratulate my hon. Friend and neighbour on securing the debate. He is quite right that the Google award for retail, of which people locally are very proud, went to Scunthorpe last year. He importantly underlines the value of broadband in not only retail, but business generally, health, education and other services. I was pleased when he said that he will urge the Government to bring forward the 2015 date for rolling out broadband in north Lincolnshire and look forward to him getting to that section of his speech.

[Andrew Percy]

I thank my hon. Friend and neighbour for his intervention. He is right. I visited a business in West Cowick on Saturday that wants to grow but that is currently restricted by its broadband connectivity. It attracts many corporate clients—we need that kind of cash in our part of the world—but it will struggle as it tries to expand because of its poor broadband connectivity.

That brings me to one solution and my first main point: the potential for wireless broadband to help with the roll-out. I was unaware of the amount of wireless availability in the area. Jibba Jabba, whose catchy name will resonate with anybody who used to watch “The A-Team”, is part of Lakeside IT and based in Doncaster—we will forgive it for being just over the border in south Yorkshire—and Quickline, which is based in Hessle, are two locally based companies that currently offer between 10 megabits and 40 megabits, which is roughly equivalent to the speeds experienced by urban residents with carbon fibre connections. Their services are available across the whole of east Yorkshire and north Yorkshire and are expanding to cover north-east Lincolnshire.

I met the companies a few weeks ago and told them I would be interested in trialling wireless broadband alongside my fixed-line broadband to see how it works and have been staggered by what happened. I have done a number of speed tests in the past couple of weeks. In the small village of Airmyn, just outside Goole, where I live, I record speeds of about 2.5 megabits for downloads and 0.5 megabits for uploads on my fixed-line broadband. I cannot do a great deal with that—it is just enough to stream iPlayer and such, and sending files is incredibly time consuming. Speeds on my wireless broadband, which is simply a small box on the side of the house, have gone upwards of 28 megabits for downloads and about 18 megabits for uploads. Those numbers are currently reduced because something is being done to the mast, but they will increase.

In many other parts of the world, wireless broadband is being used as part of the roll-out, but it is not part of the delivery plans here. My argument to the Minister is that we need more of a push on wireless broadband. People in the whole of my constituency can achieve significant speeds through wireless broadband, so we need to give it more importance, because we will struggle in parts of the country to roll out fixed-line broadband by 2015.

[Anne Marie Morris]

I support all my hon. Friend says on the importance of flexibility, but as fewer fixed-line companies can compete with BT, does he agree that the new parts of the market he describes become even more crucial as part of the franchise if we are to have the open, competitive market that will solve the problem?

[Andrew Percy]

I agree entirely, and it comes, of course, without all the infrastructure problems. I have a lot of respect for BT and have worked with it on a number of issues, but the roll-out programme is very BT-centric, and we need to consider broadening that. As one wireless provider said to me, “It’s not the entire solution, but it can bring rapid deployment at reasonably little cost”, which would help to justify, particularly in marginal areas, the demand for those areas being commercially fibred—if that is the term. BT is involved in that through its trialling of white space wireless technology. This has to be part of the solution. I am told that in many parts of the world—eastern Europe and the US, for example—superfast wireless broadband is very much part of the mix. We want that mix here. I want wireless broadband rolled out as far as possible by 2015.

[Martin Vickers (Cleethorpes) (Con)]

I congratulate my hon. Friend on securing this debate. He makes a powerful case for our area and will know that the border between his constituency and mine is a particular blackspot. Ironically, Humberside international airport is located in the area around the villages of Kirmington and Croxton. We all recognise the importance of connectivity, both physically and through the broadband network, and he is right that it is vital that this is not entirely an O₂ job and that we look to other providers. As we know, it is competition that makes the difference.

[Andrew Percy]

Of course, my hon. Friend meant BT.

[Martin Vickers]

Yes, I did.

[Andrew Percy]

My hon. Friend is absolutely right. One of the communities on our boundary, South Ferriby, has sourced a wireless solution for the village from one of the providers I mentioned earlier. It has decided to get on and do it itself.

I want to turn to the North Lincolnshire delivery plan. It is good news that in our area BT has commercially fibred the Brigg exchange, while it has recently been announced that the Scunthorpe exchange, which my hon. Friend the Member for Scunthorpe and I share, will be upgraded. Across most of north Lincolnshire, however, the situation will remain unchanged. The broadband delivery plan bid is for £12 million, of which £2.62 million is being provided by Broadband Delivery UK and the rest match funded by the European regional development fund—which, of course, is just British taxpayers’ money by another means and with a big chunk taken out—and by the council and the private sector.

I want to make the case to the Minister on why we must be moved up the list of priorities. North Lincolnshire is a particularly high priority owing to the accessibility and relative compactness of northern Lincolnshire as a rural area. It is also very flat in large parts, which makes roll-out much simpler, and has good ground conditions, making cable laying inexpensive. I am more than happy for him to visit north Lincolnshire, if he wants, to see how easy it is to dig up our land.

[The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (Mr Edward Vaizey)]

With a shovel.

[Andrew Percy]

Yes, he can bring a shovel.

We have high levels of economic growth based on renewables and offshore wind. We have big investment coming that will be a real motivator to delivery as we move forward, and we have two giant enterprise zones, one on the south bank at Grimsby and the Able marine energy park, which will bring with it thousands of jobs. The delivery plan has been highly rated. Indeed, when people came up from the Cabinet Office in the past couple of weeks to look at how North Lincolnshire’s delivery plan was written, they were said to be very impressed. It is a high priority for BT and is sixth on Fujitsu’s priority list. Sadly, however, we are 23rd on the BDUK procurement list and have been given a slot in December. With the issues around state aid, however, there are concerns that there could be some slippage. Given the huge renewables agenda in our area and the high priority given by BT and Fujitsu, we deserve to be reconsidered. All areas will make that claim, of course, but there are specific reasons north Lincolnshire should be moved up the procurement list. I will be more than happy to provide the Minister with even more reasons, should he want them.

[Mr Vaizey]

Has my hon. Friend finished?

[Andrew Percy]

Not quite. I am going to talk about east Yorkshire now; it is a disadvantage of representing two counties. [Interruption.] With almost perfect timing, my hon. Friend the Member for Beverley and Holderness joins the debate just as I move on to east riding.

We have a specific issue in a large part of east Yorkshire. Kingston Communications, the telephone service provider in Hull and the surrounding area up to Beverley, is a separate company that was developed by the local council. There is no BT provision in that area. KC’s internet service, Karoo, has a mixed reputation, but it is delivering broadband speeds of 100 megabits in parts of Hull. KC is, however, excluded from the national procurement framework. Will the Minister take into account the unique nature of the area, given that it has that historical network which specifically excludes BT? KC cables are installed not only in the area from Hull to Beverley but across the whole of east Yorkshire, and they could be tapped into as part of the roll-out.

The delivery of the East Riding’s broadband plan will be particularly difficult, because it is the most rural unitary authority in England. It has particular geographical problems and a lot of small, remote communities.

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

My hon. Friend will also know just how many small businesses there are in the East Riding of Yorkshire. It is not some rural backwater. There is a huge amount of entrepreneurial activity there, and it is increasingly reliant on access to the internet. That is why I congratulate him on securing this important debate tonight.

[Andrew Percy]

My hon. Friend is absolutely right. He is a passionate advocate of better broadband connectivity in his constituency, and I know that he takes a close interest in this issue.

If the funding gap for the East Riding broadband plan is greater than 50%, will Ministers look again at its funding allocation? We welcome the Government’s temporary announcement on broadband infrastructure planning, which we hope will speed up the roll-out. We also hope that safeguards will be put in place to accommodate reasonable objections, particularly in conservation areas. Will the Minister give a guarantee that the projects in east Yorkshire and north Lincolnshire are on course to be completed in 2015?

I am using the opportunity of this longer Adjournment debate to raise all these points, Mr Deputy Speaker, and I hope that it meets with your approval that I am taking more time than usual. There are two counties involved and the case for each of the broadband delivery plans is compelling. I hope that the Minister will be able to respond to my questions on wireless, on North Lincolnshire’s position on the list, on whether there will be a funding gap in the East Riding, and on whether we can look into the KC issue.

[Mr Stuart]

I should like to put on record that my right hon. Friends the Members for East Yorkshire (Mr Knight) and for Haltemprice and Howden (Mr Davis) and I all fully support my hon. Friend in his efforts to make the case for improved broadband infrastructure in east Yorkshire.

[Andrew Percy]

I thank my hon. Friend for that intervention. I should tell him, kindly soul that I am, that I mentioned those colleagues earlier in the debate. We are all on the same page on this issue.

My final point is on the same topic but goes off on a slight tangent. It relates to 4G. We know that 4G technology is going to play a part in the nation’s broadband solution, and it is particularly important for people on the go. For many, that is equally as important as their broadband at home. It is always good to cite a report in Parliament, and I should like to mention one produced by Capital Economics, which found that the deployment of 4G broadband could create or protect 125,000 jobs nationally and lead to £5.5 billion-worth of direct investment over the next three years, adding 0.5% to the UK’s gross domestic product.

We had a conversation recently with Everything Everywhere, which I believe is Orange and T-Mobile, and it has been given permission to roll out 4G on some of its spectrum—tomorrow, I believe. It is important that the 4G spectrum auction, which has already seen significant delays—I want to press the Minister on this point—happens as soon as possible, so that consumers can benefit from more competition in the market and have good access to superfast broadband not only at home, but when they are on the go, too. On those points, I conclude and look forward to hearing the Minister’s response and his assurances.

20:55

[Martin Vickers (Cleethorpes) (Con)]

I congratulate my hon. Friend and neighbour the Member for Brigg and Goole (Andrew Percy) once again on securing this debate on a subject that is vital throughout the country and particularly in our part of northern Lincolnshire. I cannot speak for the east Yorkshire part of my hon. Friend’s constituency, because that is beyond the passport control point.

Northern Lincolnshire has been recognised by the Government in their excellent decisions over recent months in designating enterprise zones in the Grimsby and Cleethorpes constituencies, to which my hon. Friend referred. The Government recognised the possibilities for the renewable sector, particularly the offshore renewable sector. Like my hon. Friend, I do not particularly care for onshore renewable wind turbines, but we recognise the importance of offshore, and if that is to take place, not just the large companies based on Immingham dock—the largest port in the country—but the small, rural villages need to be involved, too. I mentioned in my intervention Croxton and Kirmington in my constituency, which have been particularly badly hit. Their parish councils are doing a tremendous job in constantly bringing that to my attention.

Immingham itself has a number of blackspots. It is fair to congratulate Tom Horton at the Oasis academy which, along with One Voice Immingham, has played a large part in advocating the needs of the area. Indeed, they got Virgin interested in providing an alternative broadband service to that of BT—not to that of O₂, as I mentioned earlier; it would seem that I live in the past, when O₂ was part of BT. As I say, this is important not just for businesses based in Immingham dock, but for small businesses that can develop in the villages around the constituency of the hon. Member for Scunthorpe (Nic Dakin) as well as those in my Cleethorpes constituency. We have also recently heard about difficulties accessing benefits. That can be done online, and we need to encourage it.

In recent months, one of the Government’s actions to boost our area has been the reduction in Humber bridge tolls. Only today the Grimsby Telegraph—that organ of local communication so vital to people of the Grimsby and Cleethorpes area—features a story about a business that relocated into Barton-upon-Humber in the north end of my constituency solely because of the benefits accrued since the reduction in the tolls. We have seen—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I am sure that it is possible to discuss many parts of the county, but I am sure, too, that we want to get back to the subject of broadband rather than the tolls. I can see the benefit of their reduction for businesses, but it is certainly not for the benefit of this debate.

[Martin Vickers]

Thank you, Mr Deputy Speaker, for drawing me back closer to the important issue of broadband.

[Mr Graham Stuart]

Will my hon. Friend give way?

[Martin Vickers]

Gladly.

[Mr Stuart]

I am grateful, and I am sure that he was making the point that the admirable and excellent reduction in bridge tolls, the improvement of the A164, the Beverley southern by-pass and the vast investment in infrastructure—

[Mr Deputy Speaker]

Order. I can assure the hon. Gentleman that that is not part of the debate. Members certainly do not need to reply to the point or bring it into the debate again. I am being very generous and I am trying to help. I am sure that no one wants to test the Chair’s patience at this stage.

[Martin Vickers]

I certainly do not wish to test your patience, Mr. Deputy Speaker, but I welcomed the intervention from my hon. Friend the Member for Beverley and Holderness (Mr Stuart), who, as always, spoke words of wisdom.

[Nic Dakin]

rose—

[Martin Vickers]

I will gladly give way.

[Nic Dakin]

All infrastructure is crucial. As the hon. Gentleman says, the specific infrastructure that is being argued for so urgently this evening is crucial for the development of business, and broadband is an important part of that. I welcome his comments.

[Martin Vickers]

I thank the hon. Gentleman for his intervention. One of the important consequences of the campaign for broadband in northern Lincolnshire is the teamwork that has developed between my hon. Friend the Member for Brigg and Goole, the hon. Members for Great Grimsby (Austin Mitchell), and for Scunthorpe, and me. I believe that we are known locally as the A team.

The importance of broadband to small businesses in my constituency cannot be overestimated. We have developed considerably since the dark days of 20 years ago and the decline of the fishing industry in the neighbouring constituency of Great Grimsby. The development of that industry has actually been encouraged by broadband, and by sales throughout the UK and abroad.

I shall now conclude my remarks and await the comments of the Minister, who I know will have positive news for the people of northern Lincolnshire.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

I call the Minister, with or without shovel for Lincolnshire.

21:01

[The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (Mr Edward Vaizey)]

It is a great pleasure to respond to the debate, which began rather earlier than I had expected. I am glad that the eye-level cameras have not yet been installed in the Chamber, because if they had been, they would have captured graphic high-definition images of my sweating face as I returned post-haste to the Chamber to respond to this important debate.

It is good to be back in the Chamber of the House of Commons, but thanks to modern technology—partly brought about by the advent of modern communications —one is able to keep in touch with colleagues even when one is not in the Chamber. I must say that during the reshuffle madness that overtook us earlier in the week, when some of us were hoping to hold on to our jobs, I was grateful to Twitter for giving me an insight into the mental state of some of my colleagues.

I congratulate my hon. Friend the Member for Brigg and Goole (Andrew Percy) on initiating this important debate. Let me begin by saying that I think he is a great loss to the Front Bench. I know that it is only a matter of time before the Prime Minister sees sense and appoints him to the Front Bench, not least because I have read some of his tweets, which give an indication of the policies that will be introduced when he does join us. Lancashire is to be declared a rogue state; a new Department will be set up, the Department for Brigg and Goole—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I am sure that the Minister does not wish to test the Chair by referring to Lancashire at this stage. I am sure that he is desperate to get stuck into Yorkshire and Lincolnshire—and only the minor parts of both counties.

[Mr Vaizey]

Knowing your personal interest in the future of Lancashire, Mr Deputy Speaker, I thought it important for you to understand the policies that may be presented to the House in future, including, of course, the final policy—the change of name from Snickers to Marathon. But you are quite right: it is important for us to return to the subject of the debate.

Let me also congratulate my hon. Friend the Member for Cleethorpes (Martin Vickers) on contributing so ably to the debate. He is a soothsayer. I read a tweet from him 131 days ago, in which he said “Louise Mensch is a great talent of our party. One day she will be leader.” I read a later tweet regretting her departure from the House of Commons.

[Martin Vickers]

I should point out to the Minister that I do not tweet, and that the account set up in my name is a spoof.

[Mr Deputy Speaker]

Order. I do not think that we should have any more mention of tweets. I think that we should return to the subject of broadband, and not worry about Members who have left the House and given notice that they no longer wish to be part of it. I call the Minister, and I hope that he will return to the subject in hand.

[Mr Vaizey]

It is very important for us to debate the provision of broadband services in the constituency of Brigg and Goole. My hon. Friend mentioned six issues on which he would like to hear from me about progress. The first was wireless provision. The second was whether the bid from his part of the world could be moved up the ladder. The third was the role of Kingston Communications in broadband delivery. The fourth was the question of what steps might be taken if a funding gap arises. The fifth was a request for a guarantee that broadband roll-out will be finished by 2015. The sixth was an update on 4G spectrum. In responding to those six points, I have an opportunity to update my hon. Friend and the House on the progress that has been made in achieving the Government’s objective of stimulating more private sector investment in locations where the commercial investment case is weak.

Let me make it clear that we do not underestimate the importance of superfast broadband in stimulating economic growth and in providing a core service for many businesses and consumers throughout the country. That is why one of the first steps we took on coming to office was to set aside some £530 million to support public intervention. It is important to stress the fact that that money has been provided to support the roll-out of superfast broadband where the market will not deliver.

The market will deliver to about two thirds of the country, mainly the urban areas. That will be done by BT and Virgin Media in competition with each other, and I am delighted to be able to say that both of those companies are investing many hundreds of millions of pounds in rolling out superfast broadband. Virgin Media has doubled the speeds it offers to consumers to about 100 megabits and BT has advanced the roll-out of its commercial broadband programme by a year.

Everybody knows, however, that some public support is needed to get broadband to some areas, particularly rural areas where the cost of laying fibre exceeds the potential market return. The £530 million sum I mentioned has been supplemented by a £150 million urban broadband fund, as well as a further £150 million for mobile infrastructure projects, and because of the way we have set out the programme, there will be additional money from local councils. There will be between £1 billion and £1.5 billion of public money going into broadband roll-out. That is a very significant amount of public expenditure in infrastructure.

The newspapers are full of talk about stimulation for growth and investment in “shovel-ready projects”. This is a shovel-ready project that will be going ahead in the next weeks and months and over the next two years. It will not only provide jobs, as many people will be employed to lay this fibre, but stimulate the economy by providing a broadband infrastructure.

I would like to acknowledge the significant contribution made by local authorities, which have stepped up to the challenge magnificently both in identifying local funds to match the Government contribution and in leading project procurement and implementation. North Lincolnshire and North East Lincolnshire councils have put together proposals for a joint project, and East Riding of Yorkshire council has developed plans for a project in east Yorkshire. Indeed, we have been able to approve all local broadband plans, with the exception of one, Sandwell, which I hope will be ready for approval in the very near future.

Broadband Delivery UK state aid broadband notification has taken longer to be approved by the European Commission than was anticipated. We had hoped it would be approved earlier in the year, but we believe we are now in the final stage of discussions with the Commission on the detail, and we hope it will be signed off shortly. Once we have that approval, the BDUK team in the Department for Culture, Media and Sport will be able to give state aid approval for all projects that are compatible with the notification, allowing for a much more rapid turnaround than if the Commission had to deal with each one separately. I recognise that there has been some impact on the project pipeline, but we will work as hard as we can to meet our 2015 deadline for having the best superfast broadband in Europe.

We have used this time to our advantage. We have prepared projects for procurement under the BDUK framework. The framework contract was agreed by DCMS with BT and Fujitsu at the end of June. It allows projects to undertake accelerated procurement with standard terms and conditions. Five projects are already in procurement using the framework, and we have agreed with the bidders that further projects will enter procurement at a rate of about one per week from October onwards. We expect procurement to be complete by next summer. I would like to recognise the willingness shown by the suppliers to accommodate our shared desire to increase the pace of procurement.

I want to say a few words about broadband in north Lincolnshire. There may be concerns about the pipeline of projects, and my hon. Friend mentioned his concern about where his project resides in the list. The situation is straightforward: projects are listed in line with the order in which local broadband plans were approved. Projects that were able to move more quickly at the early stage have therefore appeared earlier in the list. While there may be other ways of defining the list, our experience has been that the order in which the projects come forward does broadly match their readiness to go ahead. However, if projects are not ready when their procurement slot is reached, we will promote another project up the list. I do not want to encourage my hon. Friend therefore to sabotage other broadband projects, but it is important that he be aware that, in effect, the list reflects when projects are ready for procurement; but the list can change, and it is therefore important that he and the project team keep in touch with BDUK.

BDUK is working to progress projects to preparation at the earliest opportunity, and I understand that north Lincolnshire should be entering the BDUK assurance process in early November and will be able to launch its open market review in that month. That will be a significant milestone for the project.

My hon. Friend also mentioned his concern about funding gaps. Again, I do not want to give him or others who have spoken in the debate false hope, but obviously our door is always open to hear concerns and requests. However, we do need clear evidence of a gap in funding before considering a request for further funding. We certainly expect good evidence to be made available of any shortfall, and we will consider a good case if one is put forward. I stress to my hon. Friend, however, that there needs to be clear evidence of a funding gap.

My hon. Friend also mentioned the position of Kingston Communications. The use of suppliers not listed on the framework is a matter for the project teams. We have of course encouraged projects to use the framework because it saves time and procurement process costs. We expect all the remaining procurements to be undertaken using the framework. We recognise that other suppliers, such as Kingston Communications, may have an interest in this programme. However, it must be for the project team, working with BDUK, to decide whether the benefits of opening the procurement more widely would offset the benefits of effectively departing from the framework contract. That is an important point to make.

[Mr Graham Stuart]

Just to nail this absolutely, can the project team decide to do that? They do not have to go through the framework, so they could, if appropriate, work with a company such as Kingston Communications.

[Mr Vaizey]

It is possible for them to do that, but as I say, they have to work with BDUK to decide whether that is the right way forward. It is for BDUK to sign off a procurement process that goes outside the framework. The decision has to be in conjunction with BDUK; it cannot simply be unilateral. BDUK is willing to sit down and discuss with the project team whether that is the appropriate way forward, but I must stress that it has to be done with BDUK.

[Andrew Percy]

Perhaps the Minister can therefore give an assurance that his departmental officials will offer all possible support to East Riding council, should it wish to investigate that approach further.

[Mr Vaizey]

Of course they will. You have indulged me enormously with my rather frivolous opening remarks, Mr Deputy Speaker, but I hope you will not regard it as frivolous when I say that, although my team of officials working in BDUK is small, they are highly effective and have devoted themselves to this project. I have never found them lacking in their ability to engage with Members.

I have made it a rule as a Minister always to have a meeting with any hon. Member who wishes to engage with me on this project, and the officials at BDUK have been utterly tireless in working with both me and other hon. Members to provide assurances. The team will work with Members, but I stress that it is important to work in partnership with BDUK and to listen to its advice about whether departing from the framework is the right way to go.

I have dealt with moving up the ladder, with how Kingston Communications could be involved, with our attitude to any funding gap and with our desire to reach our goal by 2015 notwithstanding the slight delay in obtaining state aid approval. My hon. Friend mentioned wireless technology and asked whether it would be part and parcel of any solution. We have always taken a technology-neutral approach to the delivery of broadband and it would be up to whoever won the contract to provide broadband in his part of the world to decide on the best delivery methods. For example, that could be provided purely by fibre, with the potential for some wi-fi, although we have always said that satellite could play a small part in the mix, too. It is important to take a technology-neutral approach and for the appropriate mix of technologies to be used to deliver superfast broadband at a cost-effective price.

I should mention a couple of other points. First, we had an important announcement last Friday, which should interest my hon. Friends, about removing some of the planning obstacles to rolling out superfast broadband. That is relevant, as it ensures that the money set aside by the Government and my hon. Friends’ councils to deliver superfast broadband will go as far as possible.

Finally, I know that I have stretched your patience, Mr Deputy Speaker, but my hon. Friend the Member for Brigg and Goole mentioned 4G, which is also an important part of the broadband mix. People have complained that the 4G auction has been delayed and, of course, the 800 MHz spectrum at the heart of 4G has not yet been cleared because it was used for analogue television; we have not fully switched over to digital television and will not do so until the end of October. As I am sure my hon. Friend is aware—he mentioned the company in his speech—Everything Everywhere has applied to liberalise its 1,800 MHz spectrum for 4G and we are due to hold the auction for 4G spectrums 800 MHz and 2.6 GHz at the end of the year. We are on the verge of tipping over to introducing 4G services at the end of this year and throughout next year, which will have a transformative effect on the services available for mobile users.

As my hon. Friend said, more and more people are accessing the internet and, effectively, broadband services using mobile platforms. That is crucial to future growth in the UK economy and the Government will work very hard with mobile network operators to ensure that both the liberalisation of 1,800 MHz and the auction of 800 MHz and 2.6 GHz go as smoothly as possible, because at the heart of this question are the consumers and the businesses that will benefit from the introduction of 4G and of superfast broadband.

Question put and agreed to.

21:18

House adjourned.