Westminster Hall

Tuesday 18th September 2012 Westminster Hall

Tuesday 18 September 2012

[Mr Philip Hollobone in the Chair]

EU-UK Relationship (Reform)

Tuesday 18th September 2012 Westminster Hall

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

09:30

[Andrea Leadsom (South Northamptonshire) (Con)]

I am delighted to be serving under your chairmanship, Mr Hollobone, and to be debating a subject that is of great interest to you personally. I congratulate the Minister on his appointment—I believe this is the first time he is responding to a debate in his new capacity.

I am going to talk this morning about the work of the Fresh Start project, which is a group of Conservative MPs who have spent the past year looking at all aspects of Britain’s relationship within the EU and at how we can get a better deal for British taxpayers. In his foreword to the Fresh Start project’s review, which we published in June, the Foreign Secretary wrote:

“The eurozone crisis is setting in train what may well be profound changes in the structure of the European Union. These will pose very important choices for every country in the European Union, inside the eurozone or out.”

He added:

“Public disillusionment with our membership of the European Union has never been so deep.”

A July 2012 YouGov survey shows that two-thirds of those surveyed want a referendum on or before the general election in 2015. If given a choice today, almost half—48%—would pull out and 31% would stay in, but were the Prime Minister to renegotiate a new deal to protect British interests in the EU, the poll suggests that people would vote in a completely different way: most—42% to 34%—would vote to stay in the EU in a post-reform world.

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

Given those findings, does my hon. Friend not think it strange that a letter sent to the Prime Minister at the end of June, signed by 100 of his parliamentary colleagues, urging him to consider putting a referendum on the statute book in this Parliament calling for a referendum in the next Parliament has not even been answered? Does she think it would be worthwhile for the Minister to answer that question today? I apologise that I will not be here for his reply to the debate, but I have a Foreign Affairs Committee meeting to attend.

[Andrea Leadsom]

I have been following that matter and know that the Prime Minister has said that he will be responding shortly, so I am sure that my hon. Friend’s question will be noted.

[Mr Brian Binley (Northampton South) (Con)]

Does my hon. Friend recognise the need for contingency planning and negotiation before a referendum? Will she be urging the Minister that contingency plans need to be created now and announced well before the European elections in 2014, and will she tell the Minister that, in this country, the F-word is impolite?

[Andrea Leadsom]

I almost entirely agree with my hon. Friend. I favour the idea of reform followed by referendum, but I think the reform is absolutely key and the poll survey shows that the British public think so, too. If the public saw reform, they would be content to remain a part of the EU.

What happens next is about politics, not economics. According to Eurostat, at the end of the first quarter of 2012, euro-area Government debt stood at 88.2% of euro-area GDP. On the other hand US national debt is more than 100% of GDP and in Britain it is 86.4% of GDP. My point is that if all euro-area debt were to be consolidated, the position within the eurozone in terms of consolidated debt would be no worse than either the UK or the US. This is about politics, not economics. It is about the extent to which eurozone members are prepared to underwrite one another’s debt. Politicians must make up their minds what they are going to do about the crisis.

Let me quickly run through where the big eurozone countries stand on debt pooling. Germany is firmly opposed to eurobonds at this stage, but supports greater central oversight of national budgets within the eurozone as a way to export German fiscal discipline.

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

I congratulate the hon. Lady on securing this important debate. Does she recognise that the second largest party in Germany, the Social Democratic party, is in favour of eurobonds? The position of the German Government might well change after the federal election to be held at this time next year.

[Andrea Leadsom]

The beauty of democracy is that it is not over until it is over. It is important to think about who is in power now and not who might be in power in the future. In June, Angela Merkel said:

“I don’t see total debt liability as long as I live.”

She also said:

“Apart from the fact that instruments like eurobonds, eurobills, debt redemption schemes and much more are not compatible with the constitution in Germany, I consider them wrong and counterproductive.”

Angela Merkel has been clear on the fact that she does not believe that debt pooling is the way forward. That does not mean that Germany is opposed to eurobonds in principle; but from Berlin’s point of view, a full fiscal union must be established first. German Finance Minister Wolfgang Schäuble put it very clearly when he said:

“We have to be sure that a common fiscal policy would be irreversible and well coordinated. There will be no jointly guaranteed bonds without a common fiscal policy.”

Italy’s Prime Minister Mario Monti, who is a technocratic, not a democratically elected leader, has said that his position is quite similar to that of Germany in that he believes that central oversight of national budgets is a necessary precondition to eurobonds.

In Spain, the centre-right Government are keen on introducing eurobonds in the next few years and seem to be ready to accept losses of budgetary sovereignty to achieve that. Mariano Rajoy has proposed a three-stage path towards debt pooling: in 2013-14, eurozone countries should adopt measures to meet the fiscal and economic convergence criteria imposed by the European Council; in 2015-16, a European fiscal authority should be created that would oversee national budgets; and in 2017-18, when fiscal targets would be imposed on the eurozone in its entirety, full eurobonds could be issued.

France has not made its position entirely clear. It tends to favour more solidarity immediately and fiscal union later down the track, but in the name of Franco-German solidarity, it seems to have dropped the idea of Eurobonds, at least for the moment.

Most importantly, what about the UK? At the Lord Mayor of London’s banquet, the Prime Minister called for a looser EU

“with the flexibility of a network, not the rigidity of a bloc.”

That is an important indicator of where the UK stands. It is important to recognise that the EU is already multi-layered.

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

For a long time, I dealt with the common agricultural policy, which is far too prescriptive to cover 27 countries with different climates and different soils. We want a flexible approach, so that this country can deliver good agricultural and environmental policies.

[Andrea Leadsom]

I completely agree with my hon. Friend.

The concept of a multi-speed Europe is already a reality: some countries opt in to Schengen, the euro, defence co-operation, and co-operation on justice and home affairs, and some opt out. A multi-speed Europe is already a reality, not something we are inventing for the first time.

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

Is not the danger in saying that we have a multi-speed Europe that it implies that everybody is going in the same direction albeit at different speeds, whereas there are millions of us in this country who do not want to be going in that direction at any speed?

[Andrea Leadsom]

I entirely respect my hon. Friend’s views and perhaps I should say “multi-tier”, because his criticism is very fair—“multi-speed” is the wrong term. The point that I was trying to make is that there can be different relationships with the EU, not that different countries are all trying to get to the same end-point. His criticism is fair; I apologise for my careless writing there.

The key advantage of the EU for Britain’s national interest is that of a trade area. I think that most people, whether or not they are in favour of Britain’s membership of the EU, would accept that Britain will continue to trade with the EU. In fact, 48.6% of UK goods exports now go to the EU as a whole—

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

Will my hon. Friend give way?

[Andrea Leadsom]

However, one can slightly reduce that figure if one looks at the Rotterdam-Antwerp effect, if that was the point that my hon. Friend was going to make.

[Mr Turner]

Not exactly. I was going to say that we can all be in favour of trading with Europe, but we do not have to be in Europe.

[Andrea Leadsom]

Yes. I thank my hon. Friend for that intervention. I am coming straight on to that point now, so I am very pleased that he has raised it.

The EU is already a significant trading partner, but there are significant opportunities for growth. Services account for 71% of EU GDP, but only 3.2% of that comes from intra-EU trade, and the UK Government continue to push for the completion of the single market, especially in services. Financial services gave us 11% of our tax receipts in 2009-10, providing a trade surplus of £31 billion in 2010. Financial services is an incredibly important sector in which there is enormous capacity for growth. Of course, that is why the Prime Minister used his veto last December.

What are the alternatives to EU membership? There are probably four. First, there is most favoured nation terms, under which around half of manufactured exports to the EU would face an average tariff of more than 5%, with some sectors being particularly badly hit, such as UK car exports, which would face a tariff of 10%. That would have a significant effect on UK business, making us a far less attractive location for foreign direct investment. In addition, the UK would lose its influence on framing EU regulations, so it would be required to buy in to EU regulations in order to trade with the EU but would have no say in framing them.

[Mr Binley]

Will my hon. Friend give way again?

[Andrea Leadsom]

I would just like to get through my list of alternatives and then I will give way, if my hon. Friend wants to make a point. I am conscious that lots of other people want to speak.

The second alternative is the European economic area option, or the Norwegian option. The UK would be outside the customs union and hence subject to complex and costly rules of origin. The UK would still be subject to most EU regulations, but it would have limited or little ability to shape them. Access to the single market for goods and services would be maintained; the UK would not be subject to common agricultural policy, common fisheries policy or regional policy; and the UK budget contribution would probably be significantly reduced.

The third alternative is a free trade agreement or the Swiss option, under which the UK would be outside the customs union and subject to rules of origin, but would not be formally subject to EU social or product regulation. In practice, all product regulation would probably be replicated in order to export to the EU. Again, under this option the UK would not be subject to CAP, CFP or regional policy, and the budget contribution would probably be significantly reduced. Free trade would be subject to a negotiated agreement.

Fourthly and finally, there is the option of being part of the customs union, or the Turkish option, under which the UK would be a member of the customs union, with free access to trade for goods, but services and agricultural products would not be covered by that option. The UK would be required to negotiate free trade agreements with any country with which the EU opens trade negotiations. We would be outside the EU treaties and institutions, so we would not be subject to CAP, CFP or regional policy, and it is not likely that we would have to make a significant budget contribution. We would not be subject to social regulation, but we would be subject to all product regulation with no ability to influence the shape of it.

[Mr Binley]

Mr Hollobone, I must point out that I am sitting on a Statutory Instrument Committee this morning and I know that you would not want me to miss that, so I will have to go very shortly.

Will my hon. Friend destroy the myth and say that, because of the £57 billion deficit with Europe, Europe is not going anywhere in trade, simply because it is not in its interests?

[Andrea Leadsom]

That is absolutely correct in principle, but as my hon. Friend—being a business man himself—would admit, we cannot simply change overnight, so we would be subject to an exceedingly long-term renegotiation with enormous complexities along the way. It is not quite as simple as he puts it, but yes, essentially I agree with him—it is certainly in the EU’s interests to continue to do business with us, even more than it is in our interests to do business with the EU.

Personally, I think that if we were to leave the EU, the world would not end, but my point is that it would be far better for Britain to negotiate better terms and to remain part of the EU.

[George Freeman (Mid Norfolk) (Con)]

I congratulate my hon. Friend on securing this debate and on her leadership of the Fresh Start project. Does she agree that the explosion of the EU’s internal contradictions—the collapse of its relentless drive for federalism based on corrupted economics—creates a huge opportunity for this country, and that the majority of people in this country want us to take the opportunity to set out a positive vision of the Europe that we would be pleased to belong to—a Europe based on sovereign nation states trading with each other, which indeed was the Europe that people voted for when they were last given the chance to vote on Europe? Does she also agree that if we are to trade our way out of the present debt crisis, we need to lessen our dependence on the sclerotic eurozone economies and focus more on increasing our trade with the rest of the world, and that the EU framework needs to support that process? In my own field of life sciences, the EU’s policy on genetically modified products, for example, undermines that process.

[Andrea Leadsom]

I am grateful to my hon. Friend for that intervention; he has made some really good points and I will address just a couple of them. It is absolutely the case that the EU is regulating us into being globally uncompetitive—uncompetitive not only within the EU but outside it as well. There are huge opportunities in China and the other emerging economies for Britain’s services, high-technology, financial services, manufactured goods and so on. Reform is essential.

As for the collapse of the euro project—the European project—it is true that, although we can certainly tolerate those who want to create some kind of federal Europe, at the same time Britain cannot be hampered by that movement. In a sense, therefore, their move to ever-greater fiscal union indicates the need for us to move towards having a far more clearly defined role that works better for British interests.

The Fresh Start project is all about saying that what we need is to renegotiate our EU membership—to remain within the EU but to have our absolutely best attempt at renegotiating a relationship that works for Britain, with full and free access to all EU assets, but without being hampered in a global world by EU regulation. What I want to see is fundamental reform.

What the Fresh Start project started to do just over a year ago, and with the support of more than 120 Conservative MPs, was to carry out a serious research project to see how different policy areas within the EU have affected Britain and British national interests; to make a cost-benefit analysis; and to see what we could change and how we could do that. It has been an enormous piece of work, which makes a splendid door-stop—I see that my hon. Friend the Member for East Worthing and Shoreham (Tim Loughton) is weightlifting today as he carries copies around with him. I congratulate him on doing so.

In June, just before the recess, the Fresh Start project published our green paper setting out the options for change. We colour-coded green those things that we can do ourselves, of which there is a surprising number: the British Parliament could simply decide to reform the way that we do certain things and get a better deal for ourselves without even making reference to our European colleagues. Amber options are those where negotiated treaty change would be necessary, but it has often been the case that we have never even attempted to negotiate those treaty changes and we should certainly have a go at doing so. The red options defined in the options for change are those things where we need to say, in Britain’s best interests, that we are no longer willing to entertain EU sovereignty over British sovereignty, and therefore we wish to withdraw.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

On the green options—the things that can be done straight away—does my hon. Friend agree that the present situation is a consequence of the pro-Europe Labour Government, who gold-plated so much EU legislation to interfere in our lives and used the EU as a good excuse to do it?

[Andrea Leadsom]

I absolutely agree with my hon. Friend; he makes a very good point. That was never more true than in relation to the working time directive. Having recently carried out an inquiry with all the royal colleges, I know that the evidence is overwhelming that the training of doctors is suffering seriously as a result of the negotiated on-call hours, which the last Government presided over and allowed to happen, to the detriment of our NHS. They should be ashamed of that.

[Emma Reynolds]

I am sure it was not deliberate, but that is not exactly an accurate account of what happened. We negotiated an individual opt-out, which this country retains. The European Court of Justice interpreted the rules on doctors’ on-call hours in a way that we felt was against our national interest, so we were then trying to negotiate whether being on-call constituted working time. It was no fault of our Government.

[Andrea Leadsom]

That is absolutely not my understanding, but that is not a discussion for now, so we will have to park that.

The Green Paper was published in June and the Fresh Start project is now moving to phase 2, which is to suggest a manifesto for change by Christmas. I am delighted that 10 Conservative colleagues have each agreed to chair a policy area in which they have a particular expertise, and they will look to get buy-in from other colleagues to achieve a consensus on what specific reforms we will recommend that the Government pursue. By Christmas, we will end up with a specific manifesto for reform, which will be a shopping list of things that Britain would like to see changed.

One of the Government’s biggest challenges is the fact that FCO officials wring their hands when we talk about a shopping list of reform proposals.

[Chris Bryant (Rhondda) (Lab)]

No they do not.

[Andrea Leadsom]

Yes they do. I have had several conversations with FCO officials who say that people can negotiate on only one or two points at a time. That is the way in which EU Commissioners and European parliamentarians squash the genuine national interests of one member state. They say, “You can talk only about the rebate, or only about 0% increase in the budget. You cannot talk about all the other issues that you want to include in your shopping list.” That will be the biggest challenge to any reform.

[Tim Loughton (East Worthing and Shoreham) (Con)]

My hon. Friend’s comments remind me of the story about a man wandering down Whitehall who asks the policeman, “On what side is the Foreign Office?”, to which the reply is, “Hopefully ours, sir.” I congratulate her on the fantastic work she has done with the Fresh Start group, which distractions have not allowed me to take part in, but which I look forward to now.

Is not the real tragedy that those who say that we must stay such a close part of Europe, because we trade more with Belgium than with China, Brazil or India, miss the point that we should have been trading much more with China, Brazil or India, beyond the EU? The tragedy is that this country is not leading the crusade for a much more global, liberalising, deregulating, reforming and pro-competition Europe, and we should be. That is what most of our constituents and we all actually want.

[Andrea Leadsom]

I am grateful to my hon. Friend and am delighted that he will be getting involved with the Fresh Start project himself. He is absolutely right. Is it not interesting that it is since this Government came into office that exports to China, Brazil and India have radically increased in percentage terms from the incredibly low level under the Labour Government, who preferred to create non-jobs in the public sector rather than real jobs in the private sector?

I want to run through a few ideas that have come out of the Fresh Start project and suggest them to the Government for serious consideration. There is no doubt that we have not only the opportunity, but the absolute need to get in there and make British interests very clear, long before the next European parliamentary elections in 2014.

Let me quickly run through some of the green options, which are things that we could be doing ourselves but are not doing at the moment. The UK is a significant member of the EU—one of the big three—and has worked with a number of allies to develop its vision of a free-trading, economically liberal EU. The UK has been enormously successful in achieving its strategic aims of enlargement and deepening of the single market. At the time of crisis in the eurozone, it is key that the UK sets out the vision of the EU that it wants and develops alliances in that direction. It is essential to set out a vision for a free-trade area that is globally competitive and determined to advance in the markets outside the EU and not just within it.

We could improve the scrutiny of EU legislation, including pre-legislative scrutiny. I welcome the European Scrutiny Committee’s inquiry into that and the work of the Hansard Society in looking at much more parliamentary scrutiny, including having specific EU questions, not just FCO questions, and having a Europe Department rather than just a Europe Minister in the FCO.

We should certainly look at pre-legislative scrutiny where, as in Denmark, Parliament gives authority to Ministers before they go to negotiate on our behalf, instead of them coming back to us with something that is almost done that we just need to rubber-stamp at the eleventh hour. There are good examples of where good pre-legislative scrutiny has made a big difference, such as the proposed ban on the short selling of equities. Owing to the excellent work of Members of the European Parliament, that was reduced to a ban on the short selling of sovereign debt only. That was a massive saving grace to liquidity and free financial markets.

Better Brits in Brussels is an important issue. We have 12% of the EU’s population, but now only 4% of Commission staff. That has been allowed to slide abysmally. We have not done enough to allow our brightest and best young people to obtain the language skills they need to pass the European Commission test. I am delighted that the Government have restarted the European fast stream. That is an important move on which we should absolutely spend our time. When we visit MEPs and Commissioners in Brussels, we find that they have all gone native; they even speak with a sort of weird part French, part German, part English accent—if there is such a thing. They lose track of whom they represent. What we need is British people in the Commission representing British interests.

We want to remove gold-plating in social and employment laws as soon as possible. We have interpreted some EU directives in a hard and fast way, not least on the opt-out for doctors. As I understand it, in all too many cases, we offer doctors a contract for up to 48 hours a week, and then invite them to opt out of working only 48 hours a week. That is not exactly a terribly tempting offer. We need to look seriously at gold-plating.

We support deregulation at the EU level. The EU has agreed in principle to subsidiarisation for micro-businesses. It is not an EU competence to delve into micro-businesses if they are British-only businesses. They should not be subject to EU regulation, and we should be pressing as hard as we can to exempt British micro-businesses from any EU intervention whatsoever.

Finally, Britain could be using the European Court of Justice to our own ends far more than we are to challenge EU proposals. An example of a good decision by this Government to challenge the European Union is our challenge of the European Central Bank’s proposal that clearing houses with more than 5% of turnover in euros should be based in the eurozone. That is blatantly stealing Britain’s business in a lucrative area, and we are absolutely right to be challenging that decision at the ECJ. We ought to take those opportunities more often.

Those are just some of the green options for reform that Britain could be doing much more on. Other areas require us to get far more sleeves rolled up and people wading in, and I want to cover two. I recognise that a lot of hon. Members want to speak, so I will hurry up. The greatest of those areas is to achieve a rolling opt-in and opt-out of EU policies. There is no doubt that there will be a fiscal union—[Interruption.] Opposition Members laugh. They are not even prepared to listen, which I find astonishing. They should care that the British public have had enough of their ever closer part in the European Union. It is absolutely astonishing.

We should look at whether, for those who are not part of the fiscal union, we could have some sort of rolling opt-in and opt-out of EU policies. The logistics could be incredibly complicated, but when Governments change, policies are often completely changed. It is ridiculous to have an EU where something decided 35 years ago has never changed and a member cannot opt out of it. It would be far better for the countries that do not intend to be part of a federal Europe if they could opt out. When Governments change, they could have a window of opportunity to decide on which policies they want to remain a part of, and which areas of EU jurisdiction they want to remove themselves from. That is entirely possible. That would give the European Commission something else to do, so it can pay itself even more and employ even more staff, so it should be delighted at the prospect.

Perhaps the most logical major reform of all is to repatriate structural funds. We are in the middle of negotiations for the next multi-annual financial framework, which will determine the EU’s budget strategy from 2014 to 2021. The negotiations are subject to national veto, and so offer a huge opportunity to the UK to seek restraint and sensible reform that will better serve the British taxpayer. Perhaps the best example of that is to repatriate the local bit of EU structural funds.

From 2007 to 2013, provision for EU spending on the structural funds amounts to some €280 billion, which is about 30% of the total EU budget. During that period, the UK will make a net contribution to the structural funds of some £21 billion; that is the UK’s contribution after taking into account the money it receives from the structural funds. We pay £30 billion, and we get £9 billion back after the money is converted into euros, administered and 140,000 full-time equivalent European staff have decided which UK regions should benefit. In fact, under the European definition of UK regions, only two, west Wales and Cornwall, are net recipients of structural funds. All the other regions are paying significantly more for every £1 they get back in structural funds, which is a completely ridiculous state of affairs. Additionally, the European Union determines the allocation, not the British Government.

Spending plans are based on EU regions that simply do not fit economic and political realities. There is a top-down structure in which all spending plans require the approval of the European Commission and must comply with EU guidelines. So structural spending completely frustrates local innovation,

No rigorous performance criteria link disbursement of funds to clear results. The think-tank Open Europe finds no conclusive evidence that structural funds have had a positive overall impact on growth, jobs and regional convergence in the EU. The rules on the administration of the funds are excessively bureaucratic. For wealthier member states, including Britain, the funds completely irrationally recycle large amounts of money, via Brussels, not only within the same country, but within the same regions. The UK could negotiate the repatriation of regional spending to richer member states, focusing the structural funds solely on poorer EU countries, which would reduce the total EU budget for the next multi-annual financial framework by some 15%.

[Mr William Cash (Stone) (Con)]

I am listening to my hon. Friend with great interest. So far, she has not mentioned Mr Barroso’s speech of a couple of days ago. I wonder whether she appreciates that, however sensible her ideas may be on lists of functions and attitudes, the European Union does not have the slightest intention of entering any negotiations in that direction. That is the problem. I agree with most of what she says as a matter of aspiration, but the problem is we are not dealing with a European Union that is remotely on the same page.

[Andrea Leadsom]

My hon. Friend makes an interesting point, but he contradicts what my hon. Friend the Member for Northampton South (Mr Binley) said, which is that the EU will not allow us just to walk away, because the EU needs us more than we need it.

There is an opportunity for reform. There is no doubt that, as a non-eurozone member, we will not be subject to the calls for ever greater union. The absolute burden is for us to define what we want that renegotiation to look like. If we do nothing because we are afraid the EU will not listen to us, we will get nothing. We would then end up in a position in which we are either in or out. Having a good go at reform is the way forward, whether we succeed or fail; doing nothing would not be in Britain’s best interest.

Richer member states are perfectly capable of funding their own regional policy and determining which regions should benefit from structural funds. If we were to repatriate those local structural funds to richer member states, we would end up with a 15% headline cut in the multi-annual financial framework for the next period and every one of those richer member states, bar five, would receive a significant reduction in contributions, which is a win-win and something we ought to look to other member states to support.

There are so many areas of reform that would be in Britain’s better interest. I could go on and on, because the opportunities are widespread and the need for reform is urgent. The Prime Minister has prioritised seeking safeguards for financial services, which is Britain’s most important industry, employing more than 1 million people and generating more than 10% of our tax take every year.

Another key area is the social and working time directive. Do we want our 1 million young people currently not in employment, education or training to get jobs, or de we want to prioritise rights for existing workers? Those are the choices that we have to make, and the social and working time directive is undoubtedly hampering the opportunities for young people to get work.

Do we want more and more EU regulation that affects small and micro-businesses? Do we want to see the training of young doctors in the NHS hampered by EU regulation of on-call hours? The Fresh Start project has raised, researched and sought to answer those questions. By Christmas, we will have produced a short and punchy manifesto for change that will be a shopping list of reforms across all EU policy areas, including business, immigration, justice, agriculture, energy and many others. I know Front Benchers are keen to see reform, and I sincerely hope they will accept and adopt as Government policy the work of such a large group of Conservative colleagues.

[Several hon. Members]

rose—

[Mr Philip Hollobone (in the Chair)]

Will those who would like to speak remain standing while we note who you are and how many of you there are?

Under Standing Order No. 47 and the direction of the Chairman of Ways and Means, I will now impose a time limit, otherwise the wealth of talent before me simply will not fit into the time available. The debate finishes in 54 minutes. As a minimum, I have to give the Front-Bench spokesmen 10 minutes each, so I will call them at 10.40. There are 34 minutes for 10 Back Benchers, which means the time limit will be three minutes; the bell will sound after two minutes. If there are interventions, you will not all get in.

10:06

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Member for South Northamptonshire (Andrea Leadsom) on securing this debate.

In the few minutes I have, I will address the impact of EU regulation on fishing and farming and why changes are important. I will also address why a referendum is important, because clearly the people of the United Kingdom of Great Britain and Northern Ireland should make all final decisions.

I presume we are all well aware of the bureaucracy that particularly impedes the fishing industry. There has been a reduction in the days at sea, the quotas boats are able to catch and the numbers involved in the fishing industry. Alongside that, scientists have shown that there are more fish in the Irish sea than Europe, which controls the Irish sea, seems prepared to accept. For example, I am reliably informed that the white fish industry, which only has four boats left in Northern Ireland, conducted a joint survey and examination with scientists on cod in the Irish sea, and the data that were collected show that there is more cod in the Irish sea than is indicated by Europe. If Parliament and the local Assemblies had power, we would be in a position to change that right away so we might rejoice in the stability of our fishing industry instead of worrying about the future and where we go. That is an example of where we are with the fishing industry. Ten years ago, Portavogie in my constituency in Northern Ireland had more than 100 boats; they are now down to 60. That indicates the problem.

We also have red tape in farming. Again, there are regulations imposed by Europe on poultry and pigs. We energetically—perhaps “evangelically” is a better term—enforce all those regulations, but other EU countries ignore the regulations and do not seem to care.

National opinion polls show that 61% of voters would leave the EU today; the YouGov poll shows that even more people want to leave. The time is right for the people of the United Kingdom of Great Britain and Northern Ireland to decide what happens in relation to the EU. I support what the hon. Lady has said, and I ask the House to do likewise.

10:09

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

It is, as always, a great pleasure to follow the hon. Member for Strangford (Jim Shannon). I congratulate my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) on securing this debate.

As chairman of the Lords and Commons “Better Off Out” group, I agree that we should repatriate powers from the European Union. The only difference is that I think that we ought to repatriate all powers. Other countries in Europe should not have the power to tell this country what to do. Given all the problems in the eurozone, it is a fruitful time to renegotiate our relationship with the European Union.

However, based on the precedents, I fear that the hope of success is not great. Nevertheless, it is not beyond the bounds of possibility that in a few months or in two or three years’ time, those who wish to stay in the European Union and repatriate some powers will be successful. The British people will then be faced with what I call an in/in referendum: they will be given the choice of the status quo—staying in as we are now—or staying in with 17/20, 18/20 or 19/20 of the status quo and repatriating a few powers. I suspect that for millions of people in this country, that will simply not be good enough.

The question is what those people should do who think, as I do, that we would be better off outside the European Union. Faced with an in/in referendum, those who wish to be outside the European Union should take part in the referendum and, as a third option to come out will not be granted, simply write the word “out” on the ballot paper. Even if those votes are not counted, it will be clear how many spoiled ballots there are. We will know how many voted for the proposition, how many voted against it and how many voted to come out. That is one way for those of us who think that we would be better off outside the European Union to make our voices heard.

[Mr Philip Hollobone (in the Chair)]

Without interventions, we are on track to get everybody in.

10:12

[Chris Bryant (Rhondda) (Lab)]

I, too, congratulate the hon. Member for South Northamptonshire (Andrea Leadsom), who has been a fiery speaker on these issues ever since she arrived in Parliament and is obviously making a big name for herself. I completely and utterly disagree with her. She made a fundamentally old-fashioned speech. It was as though Joseph Chamberlain and Arthur Balfour were among us again and protectionism was the order of the day.

We must turn around how we look at the issue. If we keep looking at it from the inside of the European Union rather than the outside, we will miss the fact that the growing economies—Russia, China, Brazil and the whole of Latin America—do not look on each individual country in Europe and think, “How can we do business with them?” They look at the whole of Europe and think, “How can we make investments that make sense across the whole of Europe?” The hon. Lady cited rising figures for exports from the UK, but she failed to mention that during the same period, EU exports to China, Russia and Brazil have grown faster than those in the UK. Many people suggest that visa liberalisation would do more to improve our trade with those countries, but I am hesitant about liberalising visas to Russia, Mexico, Brazil and China at the moment; I think that there could be profound dangers.

Several hon. Members have said that shared policies are a problem. Personally, I think that the common agricultural policy operates in an immoral way. It means that people in poor parts of the world are unable to feed themselves properly because we deliberately overproduce. However, if there were no common agricultural policy, there would be a French agricultural policy, an Italian agricultural policy and doubtless a British one, which would be even worse. I would like us to keep the policy but slash it in half.

Similarly, there are many aspects that benefit us directly. We need strong borders around Europe so that UK borders are strong. When Brits travel abroad, as they do in their millions every year, we need to ensure that they enjoy good medical standards. Brits buying homes in Spain need the rule of law. We need more Europe on some issues, rather than less. For instance, on mobile telephony, I have never understood why, when Europe is meant to be a single market, we are charged more for making a phone call in France or Germany than here at home in the UK.

Somebody said that we should trade with Europe and not in Europe. That is fundamentally naive about the politics of Europe. As for the idea of having a rolling opt-in and opt-out programme, it would mean that every country would abandon all its treaty obligations at every general election. That fundamentally misunderstands the whole nature of international law.

I agree with the hon. Lady about two things. One is an element of the repatriation of structural funds. It is crazy that we recycle money through Europe and that nobody can then follow the money, which is why the auditors cannot track it. The other is EU questions.

10:15

[Mr Peter Bone (Wellingborough) (Con)]

It is a great pleasure to serve under your chairmanship, Mr Hollobone. It is also a great pleasure, as always, to follow the hon. Member for Rhondda (Chris Bryant). I return his compliment by saying that he spoke exceptionally well, and of course I disagree with every word that he said. He has a great ability to speak for the Labour party, which has made it clear that it wants more Europe, not less. That should be the message that goes out from this Chamber: Labour wants more and more Europe. That is perfectly fair, and I congratulate him on saying it.

I do not know whether you have noticed, Mr Hollobone, but more than 20 Conservative Members of Parliament have attended this debate. There are two Members representing the Democratic Unionist party and one representing the Liberal Democrats, but as for Labour, until the hon. Member for Rhondda came along, there was just the shadow Minister and her Parliamentary Private Secretary. It shows how little interest Labour has in Europe.

I congratulate my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) on securing this debate and on how well she spoke. I regret that she was able to make that speech; in my opinion, she should have been in Government. She is highly talented. The only reason why she is not in Government is that she put her principles first and voted for the EU referendum. She is a highly respected Member and deserves to be listened to. Equally, I am delighted that we have a Minister who should also have been in Government a long time ago. I am sure that now he is here, there will be a change in the direction of Government policy. I live in hope.

A few years ago, I could have made the speech that my hon. Friend the Member for South Northamptonshire made. I have now come to realise that what she described will not be achieved by staying in Europe. The only way that we will achieve it is by leaving Europe and renegotiating. I think that it would be simple for the Prime Minister to unite the Conservative party, give us a huge leap in the polls and bring UK Independence party members back to voting Conservative. He could use the idea suggested by my hon. Friend, which is to renegotiate, then put two options to the British people: accepting the renegotiation or coming out of the EU. After the renegotiation, the Prime Minister can decide whether he will campaign for the new terms or for coming out. That would unite the Conservative party, and it is what I want to see our Prime Minister do when he leads us in the next general election.

[Mr Philip Hollobone (in the Chair)]

I call Julian Lewis, then Bill Cash and Alec Shelbrooke.

10:18

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

Mr Hollobone, thank you for announcing the batting order in advance. I have waited many years to find myself between a Bone and a Stone, and today I have achieved that poetic distinction. Having said that, I deeply resent the fact that my hon. Friend the Member for Wellingborough (Mr Bone) has just made the speech that I was about to make, particularly the remarks about my hon. Friend the Member for South Northamptonshire (Andrea Leadsom)—the Front Bench’s loss is the Back Benches’ temporary gain—and my hon. Friend the Minister, who worked extremely hard in opposition as the shadow Minister and richly deserves his belated promotion.

That great Eurosceptic Tony Benn would not thank me for saying that he has something in common with the arch-federalists, but I am afraid he does. Whenever Labour lost an election for being too extreme and left-wing, he would always say that the result of that election showed that the Labour party had had not enough socialism in its manifesto, rather than too much. That, I am afraid, is what we are experiencing with Europe at the moment: the worse it gets, the more federalist it wishes to become. History owes a debt of gratitude to the former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), without whose intervention the previous Labour Government would have signed us up to the European single currency. That goes to show that everybody is good for something. It is only a pity that the modern Labour party does not subscribe as firmly to the blocking tactics that former Prime Minister employed so successfully, to the benefit of the country.

I do not mind looking back a little, because the longer one is in this place the more one sees the same things going round and round. Again and again, people such as my hon. Friend the Member for Stone (Mr Cash) are derided as being in some way on the fringe of politics, as outlandish, extreme and wrong; they are then proven to have been right, and the people who were actually wrong always end up carrying on as if nothing had happened. I am a little concerned that our current Chancellor of the Exchequer seems to accept that there is a remorseless logic to fiscal union for the people on the continent. Fiscal and political union on the continent is not in Britain’s interests and we should oppose it. We should not allow ourselves to be drawn down that route. Our benefit lies in a system of free, interacting nation states within Europe.

10:21

[Mr William Cash (Stone) (Con)]

My appeal is for all the Eurosceptic movements—the Euro-realists—to join together. The situation has now become critical. The Barroso speech sets out an agenda of more integration and a federal Europe, and we are now confronted by the reality that they are not listening to us. They did not listen to us on Maastricht—it was our own Government who did not listen to us then. Fortunately, the Prime Minister himself has now said that he thought there should have been a referendum on that treaty, and that that would have sorted the matter out there and then. However, we are where we are. I am not seeking confrontation; I am seeking solutions. The situation is far too grave for us to be in a state of difficulty due to personalities or whatever else: we have to unite around certain central principles.

I welcome the speech by my hon. Friend the Member for South Northamptonshire (Andrea Leadsom). She knows that I believe—I said so in an intervention—that time has run out. In the Liaison Committee the other day, my right hon. Friend the Prime Minister said that he agreed with me that the situation in Europe was now unacceptable. I used the word “untenable”, but we came to an agreement. I suggested that we should have a convention so that we could get ahead of the curve and provide our basis, based on the principle of consent—on the fact that the people of this country, and for that matter the people of other countries, should decide, not the Euro elite and not the Governments who created this failed project, this undemocratic situation that has been allowed to develop. We need to get together. He said that that was a perfectly reasonable suggestion and that conversations were taking place in Europe. Unfortunately, the reality is that they have now been overtaken by the Barroso agenda. I fear that my right hon. Friend is, if I may say bluntly, in a contradiction: on the one hand, he says that it is unacceptable, but on the other hand he says we will not leave the European Union.

This kind of negotiation, or renegotiation, involves asking such fundamental questions about our relationship that other member states will not accept them. When they do not, our option will be clear: however much we might not want to, we will have to leave the European Union if that is the position that we have arrived at. The Barroso speech indicates that we are on a different page, so I call for urgency. We should have a referendum before the next general election. We should create the circumstances in which we are able to ask the British people, “What kind of Europe do you want?”

10:24

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I warmly congratulate my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) on the immense work she has done in leading on this important subject.

I was born in 1976, two years after the last referendum on Europe. A great many of my colleagues—I look at my hon. Friend the Member for Wycombe (Steve Baker)—have had absolutely no say in Europe. We are now Government Members and this cancer of Europe has eaten away at debate throughout almost my entire political career, from the moment I was delivering leaflets on the doorstep 20 years ago. It is time to get this problem sorted out.

The constant rush for federalisation will have precisely the opposite effect to what the European Union was set up for in the first place. The laudable point of a European union was to try to prevent another war in Europe, but if people’s sovereignty is withdrawn, they will strike back: eventually, right-wing parties will get elected and say enough is enough and rise up in nationalistic fervour. Those who do not think that such things could happen only have to look back 20 years to Yugoslavia and see how dangerous it can be when people do not feel they have control of their destiny. We need a sensible way forward.

I do not propose that we withdraw from the European Union, although I fear, as my hon. Friend the Member for Stone (Mr Cash) outlined, that might be where we end up; but we do need to renegotiate the relationship and to withdraw from the interference in our lives. When I say to people, “You had the vote and you decided,” they reply, “No we didn’t. We voted for a common trading area.” That is the point: the people voted for a common trading area, not for a European Union of increasing federalisation. This review is a very important piece of work. The Minister would have the support of the vast majority of Government Members if the Government worked to ensure that we have a common trading area, not a federal Europe.

10:27

[Mr Peter Lilley (Hitchin and Harpenden) (Con)]

I join in the congratulations to my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) for all she has done to bring reason and detailed consideration of the facts to the debate on Europe. In doing so, she has contributed to the growing recognition, not just in the Conservative party but in other parties and in the country as a whole, that we need a better relationship with Europe. The question now is not whether we want or need a better relationship, but what the relationship should be and how we should get it. I will focus on how.

Some of my colleagues think the answer is an in/out referendum, which they see as a “get out of jail free card”. It is not. It is wrong in principle to pose abstract questions to the electorate, but it is also unwise in practice. A detailed study of every referendum since the second world war, where there are opinion poll data, shows that on average there is a 17% swing back in favour of the status quo. I remind my hon. Friends that that means one has to start with a 34% lead for change to have a 50% chance of winning. If we start from the present position, with roughly half of people being in favour of leaving and a third in favour of staying, as my hon. Friend the Member for South Northamptonshire said, the idea that we would automatically win a referendum and that a majority would vote for “out” is probably a mistake. What we should do and what we ought to do in constitutional principle is negotiate a new deal. That is why we elect Parliaments and elect Governments, and we should elect a Parliament committed to doing that.

Because a new deal will require unanimity among our partners, that will be possible only if our partners are the demandeurs: if they are going to be coming to us saying, “We want a new treaty, we want to change the existing treaties,” and they are probably going to be doing that on several occasions. The question that we ought to be confronting, and it would be proof that we are considering these matters seriously if we do, is whether we should go for a big bang solution and put forward everything that we want to change in one negotiation, or instead emulate the Euro-federalists and employ salami-slicing tactics—a slice here and another slice for the next treaty, and so on.

We should record that the first change will be the most difficult, because Europe has the doctrine of acquis communautaire, under which no power once ceded to Europe can be referred back to individual nation states. The EU will put up the most almighty opposition if we merely want to repatriate powers over regulating birdwatching. If we want more serious things, the opposition will be even greater, but we have to establish first the precedent that powers can come back to member states; then, we can get ever more. Personally, I think salami slicing is probably the approach to use, but we should be discussing these issues. When we do, we will prove that we are serious about getting the new relationship that this country wants.

10:30

[Mr Laurence Robertson (Tewkesbury) (Con)]

I congratulate my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) on securing this debate and on a comprehensive speech.

We are coming to the end of the debate and a lot of what I should have liked to say has been said. The only thing that I disagree with a little bit is the idea that we are, in any way, going to reform the European Union. We can tinker here and there, but we cannot achieve fundamental reform of the EU, partly because, as my hon. Friend the Member for Stone (Mr Cash) said, the other member states are simply not interested. The whole project is not about subsidiarity at all, or about recognising and respecting the rights of sovereign states; it is about ever-closer union. That is its objective. Because of that we will not achieve the kind of reform that we would like.

That is not to say that while we are in the EU we should not try for reform. I am delighted that the right hon. Member for North Shropshire (Mr Paterson) was promoted in the reshuffle, because I worked with him a lot in Northern Ireland and know that he is the sort of man to take on the Department for Environment, Food and Rural Affairs and, more importantly, to take on the EU, because it is in that Department that the EU has its worst effects. There is a chance for some change there, but overall I do not see us creating the kind of EU that we want. So we have to go for an in/out referendum.

My hon. Friend the Member for Elmet and Rothwell (Alec Shelbrooke) gave his age away, so I shall give mine. I am 54—[Interruption.] I know I do not look it. I have been a Member of Parliament for 15 years and have been in business and I have never had a vote on whether we should be in the EU, either in a referendum or in this place. I have never had any say at all—although I have paid tax and been in business and politics—and neither have my constituents.

When the Conservative party went into the previous general election, it said that it wanted to connect people again with politics—with the decisions that affect their lives. There is no bigger example of how they feel disconnected, and why they feel that way, than the EU. They cannot influence what it does and we Members of Parliament cannot. It is time that the people were given the right to say in or out.

10:33

[Roger Williams (Brecon and Radnorshire) (LD)]

I congratulate the hon. Member for South Northamptonshire (Andrea Leadsom) on securing this debate. I am glad that I am among hon. Friends from the coalition, although they are thinning out and perhaps their number will have thinned out even more after my contribution.

Many people are saying that the eurozone crisis and the vulnerability of the eurozone at the moment provides the opportunity for the UK to repatriate some of its powers, but this is wrong thinking. The single market is the key to our economic success and is about much more than tariffs and quotas; it is about environmental standards, product standards, property rights, how qualifications are measured and even about social and employment standards.

There is a much more important national interest for the UK at the moment: risks from deeper eurozone integration include the UK lacking access and influence. We must ensure that we retain our full rights. For example, the hon. Lady mentioned that financial institutions dealing in significant amounts of euros may have to relocate physically within the eurozone. We must fight that and speak up for our financial institutions.

The Norwegian and Swiss models have been mentioned, but those countries have to accept much European legislation and regulation to maintain their membership.

We are making progress, even now. I pay tribute to my right hon. Friend the Member for Kingston and Surbiton (Mr Davey), who ensured, when a Minister in the Department for Business, Innovation and Skills, that many regulations relating to small businesses were repealed by the EU. The EU will consider many more of the regulations applying to small businesses with a view to limiting or reducing them.

We have had a useful debate. I am sorry that other hon. Members have not been able to play a bigger part in it. This is a key issue for us and a key national issue as we face this economic crisis.

10:35

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

It is a great pleasure to serve under your chairmanship, Mr Hollobone. I congratulate the hon. Member for South Northamptonshire (Andrea Leadsom) on securing today’s debate. I also congratulate the Minister on his appointment. I did not realise that we would have such an early opportunity to debate such an important issue.

The hon. Lady’s debate concerns the reform of the relationship between the UK and the EU, but it is worth mentioning briefly that we are against the nuclear option of reform: leaving the EU, as some Government Members have called for. We Opposition Members believe that the UK should remain in the EU. We reject many of the arguments advanced by hon. Members today, saying that it would be in the UK’s national interest either to leave the EU or reduce our relationship to one based on trade.

[Mr Bone]

I am grateful that the shadow Minister is so honest and courageous so early on in her speech. She has made a clear pledge that the Labour party will definitely never give this country an in/out referendum.

[Emma Reynolds]

I did no such thing. Perhaps if he listened a little more attentively to what I said, the hon. Gentleman would not make such pointless interventions.

The EU remains the largest and richest single market in the world and accounts for more than half of our total exports. We export more to the German Länder of North Rhine-Westphalia than to China and India combined. We do more trade with Ireland than with the so-called BRICs—Brazil, Russia, India and China—put together. Without our exports to the EU and the rest of the world, the British economy would have gone back into recession a year ago.

[Dr Julian Lewis]

Given the hon. Lady’s typically robust response to my hon. Friend the Member for Wellingborough (Mr Bone), are we to take it that the Labour party is not ruling out giving an in/out referendum to the British public?

[Emma Reynolds]

The hon. Gentleman seems to understand me better than the hon. Member for Wellingborough (Mr. Bone). Our position is that a referendum at this time would be a distraction from the Government’s priority of getting the economy back on track. The question about what our relationship with the EU will become is open now, given the nature of Mr Barroso’s speech last week, mentioned by the hon. Member for Stone (Mr Cash). We will see how that relationship develops in terms of what kind of political and fiscal union the eurozone states want to form.

[Mr Cash]

Does the hon. Lady recognise that the timetable has been accelerated by that speech and those who thought that it might be better to keep the matter open, including the Prime Minister, are now effectively finding that time has overtaken them—or soon will.

[Emma Reynolds]

The hon. Gentleman makes an interesting point. It is not yet clear at what point the European Commission, the German Government or other Governments will want to put treaty change on the table.

[Mr Cash]

It is. He said so.

[Emma Reynolds]

In his speech, Mr Barroso mentions putting that treaty change on the table before the 2014 European parliamentary elections—I have read his speech closely—but it is still unclear whether that will happen in time for those elections. There will be a report by Herman Van Rompuy to the Council in December, which will be an important time for our Government to start to have a policy on the European Union. I shall come on to that.

Many of the hon. Members present who argue for withdrawal offer a false choice between trade with emerging markets and EU membership. They say, “Remain in the EU, or trade with the likes of China, India, Brazil and Russia.” We must of course improve our export performance to the rest of the world, but we will not build real export success if we start by cutting ourselves off from our largest existing market and our largest collective negotiating tool. The EU provides the collective political weight that we need to maximise our influence in negotiations. Hon. Members need not take that from me, they can take it from the Europe Minister, as set out in written evidence to the Foreign Affairs Committee as recently as May of this year, when he said:

“On trade, one voice representing half a billion consumers is heard more loudly in Beijing, Delhi and Moscow, than 27 separate ones.”

British businesses, workers and consumers will see the benefit of EU free trade agreements, such as the recent FTA with South Korea, which is worth £500 million to UK exporters, or the potential future agreements with the US, Canada, Singapore and India.

[Mr Laurence Robertson]

When will that happen? I take a deep interest in Irish politics, and we export more to Ireland’s 4.5 million people than we do to more than a third of the world’s population in those emerging markets. We keep hearing how good it will be, but when will it happen?

[Emma Reynolds]

That question might be more appropriate for the Foreign Office Minister. The point that I am making, if the hon. Gentleman will listen, is that it is more likely that we will be able to prise open markets and change the rules of the game on intellectual property rights and other issues if we are part of the collective weight of the European Union. China, with 1.3 billion people, has much more interest in forming a trading relationship with a European Union representing 500 million consumers than with a single country within that Union.

[Alec Shelbrooke]

I am listening carefully to what the hon. Lady said about being in Europe to negotiate such trade terms. Will she clarify whether that means that we should have much further integration to open up those markets?

[Emma Reynolds]

That was not my point. We have much more influence and weight in international trade negotiations acting as part of the European Union than we do alone. I now want to make some progress.

Our membership of the European Union is also vital to attracting foreign direct investment. I want to agree with one point made by the hon. Member for South Northamptonshire, which is that it would not be in our national interest to be in the position of Norway. A recent report by some Norwegian academics pinpoints a democratic deficit in Norway’s relationship with the EU, because the country is bound by the single market’s rules, regulations and laws, over which it has no say. If we were to put ourselves in that position, it would not be in our national interest, so I agree with the hon. Lady on that.

We are in favour of our membership, but we are not defenders of the status quo. We would like to see a Europe that is more outward looking, that is stronger in the world, that is—crucially, at the moment—better able to deal with the eurozone crisis and that reforms some of its internal policies. We would like to see the multi-annual financial framework more focused on growth and job creation, a reform of the common agricultural policy and, crucially, a completion of the single market in services. The only way to achieve such reform, however, is to have influence in the EU and not to be stranded on the sidelines.

Regrettably, as a result of the Prime Minister’s walk-out at the European summit in December, our stock in Europe sits at an all-time low. [Hon. Members: “ Rubbish.”] If hon. Members visited European capitals and discussed with other politicians the stock of UK influence, they would have a pretty bad surprise. Negative tactics such as vetoes and empty chairs are instruments of last resort; they are open to member states and we should be prepared to consider their use in defence of a vital national interest, but in December no vital national interest was defended. The Prime Minister’s protocol on financial services was rejected as a retreat from existing single market rules, and the rest of Europe simply carried on without us. The Prime Minister’s action therefore incurred a loss of influence for no tangible gain. Ironically, as a result of what he did in December, the Government are more reliant on an institution that many Conservative Members love to hate, the European Commission, which we must now depend on to protect the single market and its integrity.

[Andrea Leadsom]

I have to disagree completely with the hon. Lady. The Prime Minister’s use of the veto, far from giving us less influence in Europe, had the opposite effect. What was astonishing was the complete wall of ambassadors and others from the European Union coming to see many of those known to be interested in the EU to find out what the problem is, what was going on and what it is exactly that Britain wants. So she is completely wrong—what the Prime Minister did was a wake-up call and definitely in the interests not only of the City but of Britain.

[Mr Philip Hollobone (in the Chair)]

Order. Before the hon. Member for Wolverhampton North East (Emma Reynolds) responds, she needs to think about bringing her remarks to a close. She has about two minutes left.

[Emma Reynolds]

I could not disagree with the hon. Lady more—I have made that clear.

Today’s debate is reminiscent of the 1990s: the divisions of the Tory party have not yet healed. We have seen three different positions on the Government side: no change and stay in; stay in and argue for repatriation and renegotiation; and to get out. The Conservative party is utterly divided. As long as the Government put the party interest before the national interest our stock in Europe will remain low and our ability to argue for reform will remain incredibly limited. It is regrettable that the Government are divided at home and weak in Europe, and that they are therefore incapable of being a strong and effective voice for reform in Europe.

10:47

[The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mark Simmonds)]

I am delighted to see you in the Chair this morning, Mr Hollobone. I am sorry that the Minister for Europe, my right hon. Friend the Member for Aylesbury (Mr Lidington), could not be present this morning. He very much wanted to participate in this important debate, but I was enthused to understand that I would be responding within my first 10 days in my new ministerial role.

I congratulate my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) on securing the debate and on the articulate, intelligent and comprehensive way in which she introduced it. I thank all colleagues who have participated, many of whom fall into the category of what I call distinguished and principled colleagues. In the time available, I am afraid that I will not be able to answer all the specific questions.

I also want to put on the record the Government’s thanks to my hon. Friends the Members for South Northamptonshire, for Daventry (Chris Heaton-Harris), for Truro and Falmouth (Sarah Newton) and for Camborne and Redruth (George Eustice), who deserve enormous credit for the valuable, significant and serious work of the Fresh Start group. I hope that my hon. Friends and others will continue to engage with such a vital issue, in particular as we analyse the balance of competences in a process that my right hon. Friend the Foreign Secretary announced just before the summer recess and about which I intend to say more later.

[Mr Cash]

One fundamental competence that I hope my hon. Friend agrees needs to be reviewed is whether the British people are able to govern themselves by their own consent in general elections. Does he not agree that that is the most fundamental democratic question that needs to be addressed on the European issue?

[Mark Simmonds]

My hon. Friend will not be surprised to hear that I will not answer that question directly this morning. I urge him and others, however, to engage positively and constructively with the forensic analysis of the balance of competences, which will feed into a national debate about the relationship that we should have with the European Union.

I want to be up front in ensuring that all hon. Members understand that the Government have been absolutely clear that there should be no further transfer of competence or powers from the UK to the EU over the course of the Parliament. That is in stark contrast with the Labour Government’s record. They were clearly wrong to sign the Lisbon treaty without consulting British voters in any way. They were quite wrong to give away £7 billion of our rebate and to get nothing in return, and they were quite wrong to drop out of our opt-out from the social chapter, which means that employment laws are decided in Brussels, not here.

[Alec Shelbrooke]

Does that not illustrate the folly of the comments by the hon. Member for Wolverhampton North East (Emma Reynolds)? She said that Britain is more isolated by taking a stance. We gave away all that money, and what did we get for it?

[Mark Simmonds]

I agree with my hon. Friend. The Prime Minister’s veto back in December played a significant role in ensuring that he and the Government are always seen to be protecting the UK’s national interest. That is absolutely right. The comments of the hon. Member for Wolverhampton North East (Emma Reynolds) on this matter are confusing, particularly in view of her unwillingness to rule out British membership of the euro, which the Government have done.

[Chris Bryant]

If we are talking about things that will happen in the future, I would be delighted to know when the Government expect to have a resolution of the next financial perspective. The advice of the hon. Member for South Northamptonshire is to have a shopping list for the next couple of years, but a shopping list normally involves some spending, and I wonder whether, to secure some of the things she wants, the Government will abandon the rebate in that perspective discussion.

[Mark Simmonds]

It is clear that the UK’s agenda and priorities—I hope to come to them in a moment—are about driving global competitiveness and economic growth to alleviate some of the problems that are prevalent in the eurozone. That includes further trading with the eurozone and—my hon. Friend the Member for Mid Norfolk (George Freeman), who is no longer in his place, made this key point—not just with the eurozone, but further afield. This debate is extremely timely, and provides an early opportunity to discuss the issues. It is clear that events in the eurozone will have wide-ranging implications, and its ultimate shape is unknown and uncertain. The Prime Minister made it clear on the Floor of the House in June that as Europe changes to meet the current challenges, our relationship with it may also change. It is vital for Britain’s national interest, and for the European Union’s strength and prosperity, that we meet those challenges.

The coalition agreement that was set out at the beginning of this Parliament stated that the UK should be a positive participant in the European Union, working with our partners to ensure that all European nations are equipped to face the challenges of the 21st century, by far the most important of which is global competitiveness. I am the first to acknowledge that there is still much more to do to restore growth, both inside and outside the eurozone. The Government remain vigorously committed to developing the European single market, to smarter and less costly EU regulation, and to more free trade between Europe and the rest of the world. We need a Europe that delivers prosperity, job and wealth creation, and security, and a Europe that is more outward-looking, more dynamic and more competitive on the global stage.

[Emma Reynolds]

Would the Government not have more authority and influence when talking about growth in other European countries if we had growth here in the UK?

[Mark Simmonds]

The hon. Lady makes an interesting point. It is vital in a globalising world to remain on the competitive side of the line. The reforms that this Government have put in place since the May 2010 election will make a significant contribution to that. They include making our tax system the most competitive in the G20, making the UK the best place in Europe to start, to finance and to develop a business, encouraging investment and exports as a route to balancing the economy after the shambolic economic mess that the Labour Government left to the coalition Government, and creating a more educated work force. Over time, those changes will deliver economic growth.

Aligned with that, the single market is a significant driving force for prosperity. That is why we will continue with an ambitious programme of deepening the single market while seeking to reduce unnecessary burdens. The single market supports UK jobs, prosperity and growth through increased trade and, vitally, helps the UK to attract inward investment from inside and outside Europe. We want the single market to continue to encourage competition and innovation throughout Europe, to help to increase productivity in the UK, and to bring down prices for consumers so that UK businesses can benefit from a single regulatory regime, simplifying regulation, liberalising services and developing a single digital market that will bring benefits to the UK.

Our national interests, our influence and our values are all advanced internationally through the co-operation of states. However, as many hon. Members have rightly said, there is no doubt that the EU requires reform, and we certainly do not agree with everything the EU does. It is absolutely clear that reform is required now more than ever. In our view, the UK should champion growth and the single market, and take the opportunity to shape Britain’s relationship with Europe in a way that advances our national interest in free trade, open markets and co-operation.

We have led the debate on reducing the burden of EU regulation on business, and securing agreement on a breakthrough step to exempt micro-businesses from new EU proposals, but clearly more needs to be done. We have secured agreement on a unitary patent after 23 years of EU negotiation. Amid all that change, my right hon. Friend the Foreign Secretary announced an analysis of the balance of competences between member states and the EU. That vital review will be an audit of what the EU does and how it affects us in the United Kingdom. It will look at where competences lie, how they are used, whether exclusive, shared or supporting, and what is important for our national interest. The process will begin in the autumn, and I urge all right hon. and hon. Members to participate.

[Mr Bone]

Can my hon. Friend answer the question that our hon. Friend the Member for Basildon and Billericay (Mr Baron) posed earlier? He and I delivered a letter to No. 10 Downing street with more than 100 signatures from Conservative Members requesting legislation in this Parliament for a referendum in the next Parliament on the balance of competences

[Mark Simmonds]

I am grateful to my hon. Friend for that intervention. I confirm that the Prime Minister met my hon. Friend the Member for Basildon and Billericay (Mr Baron) on 9 July to discuss the contents of the letter, and I understand that a formal reply will be sent to him shortly.

We have pressed for an open trading agenda that presents real opportunities and allows us to benefit from investment in the UK. Our commitment to free trade is why the UK is still the leading destination for foreign investment into Europe.

[Mr Cash]

Will the Minister give way?

[Mark Simmonds]

Perhaps my hon. Friend will bear with me. I am coming to a conclusion, but I will be happy to discuss with him afterwards the point he wants to make. I am running out of time, and I want to make a couple of key points.

The UK has been leading the way in trying to facilitate free trade negotiations and agreements, and it has done so successfully with South Korea. It is leading the drive for such agreements with Japan, Singapore, the USA and Canada.

My hon. Friend the Member for Stone (Mr Cash) referred to the Barroso speech. I confirm that we are looking closely at its contents. We agree with some of the President’s analysis of the EU’s financial problems, such as the unsustainable levels of debt, the lack of competitiveness and some irresponsible behaviour in financial institutions, but the direction of travel is not always one that the UK wishes to take.

In conclusion, the immediate priority must be to restore market confidence, to drive growth, to negotiate more trade agreements, to open up new markets, and to create wealth and jobs through competitiveness, innovation and liberalisation.

Energy Resources (Lancashire)

Tuesday 18th September 2012 Westminster Hall

10:59

[Eric Ollerenshaw (Lancaster and Fleetwood) (Con)]

Given how many times I have previously raised this subject, I thought that I might bore the Energy Minister if I did so again. However, there has been a reshuffle and there is a new Minister, so I now have a new audience. I take this opportunity to thank the previous Minister, my hon. Friend the Member for Wealden (Charles Hendry), who always dealt with the matters I raised seriously and with his usual good humour. I am sure that the same will be true with the new Minister, my hon. Friend the Member for South Holland and The Deepings (Mr Hayes), whom I congratulate on his new position.

Put simply, my constituents and I are concerned that a huge amount of energy exploration and production is going on across Lancashire and a lot more is planned. Energy production of almost every variety is being planned across the county, much of it in or around my constituency. We have wind turbines in abundance, both onshore and offshore. We have nuclear power in Heysham and the possibility of a new reactor there. We had the discovery of shale gas just outside my constituency—the fracking process, which was being undertaken by Cuadrilla, is currently on hold—and Halite Energy Group has applied to store natural gas in salt caverns in Preesall. We have small-scale hydro and solar schemes across the county, and we even have a serious proposal for a tidal barrage across the mouth of the River Wyre in Fleetwood, which has been on hold since 1991; we are still waiting for a national statement on tidal power.

If any or all of those schemes go ahead, we face the additional pylons and substations needed to transfer the power from Lancashire to the national grid. To underline the problem, I add that before any of those new schemes have happened, the existing wind turbines in the Irish sea have led National Grid to consult on brand new pylons that would cross the Lake district. The power would come over land or under the sea to Heysham, which is just outside my constituency, and arrive at the village of Quernmore, where a new substation is proposed; then, to connect the power from the existing turbines in the Irish sea to the national grid, large new pylons would be erected down the core of my constituency and others to reach Pendle in Lancashire. That proposal takes no account of any of the other plans that I mentioned a moment ago.

My question in a nutshell is: with all those proposals, where is the overarching plan? Who assesses the effect of the multiple types of energy? How will all those energy developments impact on one another? Can the fact that other schemes are planned be considered as part of the planning process by the relevant planning authorities? I am also concerned because applicants resubmit applications that are almost entirely the same in nature, for the same sites, time after time, in a sort of salami-slicing process designed to wear down opposition. The Minister has a lot of questions to deal with, so to give him time, I shall highlight just one or two major proposals in my constituency.

We are near the end of the planning process for proposals to store gas in excavated salt caverns under the River Wyre in Preesall. This is the third application: two previous applications from a company called Canatxx were refused; and the third application to store the gas is from a new company, Halite. Residents are concerned about safety—we had the collapse of an old salt cavern in Preesall—and about the impact on the unique geology of the River Wyre. Alongside the Protect Wyre Group, I and my fellow MPs will again oppose that third proposal. I pay tribute to the Protect Wyre Group, which is a residents’ association that has fought year-in, year-out against the proposals, with no extra money. It has none of the resources of energy companies, but it is defending its bit of my constituency. What concerns the group is the repeated applications, which it tries to deal with by fighting planning battles. The uncertainty in the meantime reduces property values because of worries about safety and the possibility of compulsory purchase orders in the area.

I even question the need for the development, and this is where the Ministry comes in. We understand that there have been more than enough applications for natural gas storage to meet national needs for years, yet we in Wyre and Preesall are faced with yet another application. Where is the overall national concern about how many applications will be allowed in the process? The joined-up nature of the plans is what I question.

The application to store gas in Preesall is also relevant because it highlights how one scheme might impact on other. Gas storage on its own may be deemed safe, but what if fracking were given the go-ahead on a larger scale just across the River Wyre in the constituency of my hon. Friend the Member for Fylde (Mark Menzies)? Because of minor earthquakes, the Department of Energy and Climate Change has suspended the operations there, which were being conducted by a company called Cuadrilla, but how do those operations affect the proposal for the storage of natural gas in salt caverns on the other side of the River Wyre? My understanding is that the planning inspector is looking at the link as part of the Halite application, but I am unsure how much weight a hypothetical development elsewhere carries when reaching a conclusion on the application that is in front of the planning inspectorate.

I turn to the shale gas development. As I have stated in previous debates, I am not against the development of shale gas, and many of my residents also see the national need for gas. However, local people—particularly people living in Bleasdale—are concerned because they get their water not from the mains, but from bore holes. One can see why they are concerned about the protection of watercourses if the process is pursued. They will need reassurance about tight regulations and controls where underground watercourses may be affected.

As I have mentioned in other debates, Lancashire is in danger of becoming like a British Texas, given all the energy exploration, but the key thing about Texas is that, despite the obvious blight, the wealth then goes to local people. What I find difficult to explain to people is that we are part of the Duchy of Lancaster, and it is the duchy that controls and owns the mineral rights. Any farmer who grants permission for fracking to go ahead and gets the drills going will not get much return, and nor will the county or the district. If the process is to be pursued and supported nationally, local people must see a benefit, and from what I understand, the employment benefits are not large.

Fracking also has an impact on the scenery. If, in addition to the pylons and wind turbines, storage wells are to be built all over that part of Lancashire, the natural scenery will be destroyed. I am also concerned about the new substations and pylons needed for the transportation of the gas.

[Mark Menzies (Fylde) (Con)]

As my hon. Friend knows, many people in Fylde are concerned about fracking. I call on the Minister to recognise that what I am pushing for is tight, robust regulation that is fit for purpose. We also have to take into account population densities, because as my hon. Friend mentioned, our area is not like Wyoming or South Dakota. Lancashire is a densely populated place, which must be a major factor.

[Eric Ollerenshaw]

As usual, my hon. Friend hits the nail on the head. It is not so much that the people of Lancashire are opposed to the development; they see opportunities in it both for them and for the country, but they are concerned about who will regulate it and who will provide assurances about safety. At the moment, the only people in Lancashire doing the running on this issue are those who are against any kind of development, and a lot of my residents are left wondering who is telling the right story.

I want to underline to the Minister the mineral rights issue. That is a key issue in Lancashire. Who is to get the benefits if the developments go ahead? I know that the Minister’s brief does not include planning, but knowing him as I do, I am sure that he has a wide interest in energy impacts and in the planning process. I have mentioned before that repeated planning applications unsettle local residents, especially when it comes to wind farm developments. In another example, in Claughton moor, at the other end of my constituency, the original application submitted by the developer was for 20 wind turbines between 110 and 126 metres high in an area of outstanding natural beauty. It was rejected unanimously by the planning authority, but the applicant then came back with another application, this time for 13 turbines. That was rejected and then rejected again on appeal, but we are now faced with a third application, this time for 12 turbines. Hon. Members can see what is worrying residents. If the third application is thrown out, will there be a new application for 11 turbines? When does the process cease?

It is all right for the developer and, presumably, the energy company behind it—they are willing to speculate over a long period with a great deal of money—but what about the local residents? Here, I pay tribute to the Friends of Eden, Lakeland and Lunesdale Scenery, the FELLS group. They are volunteers, who have steadfastly fought and fought and fought the applications, but they are beginning to ask: when does the process come to an end? Residents in Preesall are in exactly the same position. They are fighting the third application from Halite. Will that be the final application? Will that be the end? I believe that the Government must step in and say, “Enough is enough.”

We in Lancashire recognise that there is an important national need in relation to gas, electricity and, indeed, any other kind of energy. Lancashire is clearly prepared to play its part. As I am sure the Minister knows, it was, historically, the centre or part of the centre of the industrial revolution. In the energy revolution, however, we face so many applications and the possibility of all sorts of things—pylons in particular—scarring the countryside, that we are asking: who will take a balanced view on this? Will I and my fellow Members of Parliament for Lancashire face a succession of repeated applications, with residents worn down trying to deal with those applications?

I would like to get a plug in for the proposed tidal barrage on the River Wyre. There is another oddity in the energy balance in this country. It has always seemed to me odd that even though this is an island with seas and the power of the waves, we are right at the bottom of the table when it comes to using that energy. I know that the Government have brought through new proposals, but I repeat that what some of us want is a national statement on tidal power. The proposal for the River Wyre has existed since 1991. In 1991, the county council went through a whole planning process in relation to that tidal barrage, but now, all these years later, we are still sitting here with the price of electricity rising.

People can argue for or against a tidal barrage. Many people would argue that it would have far less impact in the form of scarring of the natural scenery in my part of Lancashire than other proposals and that it would have huge potential for regenerating the town of Fleetwood and in terms of flood protection. The proposal is being handled by a small group of people who are determined to try to get it on the agenda, but there is no possibility, it seems to me, of solid financial support to see whether it is a runner in 2012. I say to the Minister that if it was a possible runner in 1991, it must be even more of a possible runner in 2012, particularly given that the revived proposals for the Severn barrage are on such a massive scale. What some of us have proposed in Wyre is the Wyre tidal barrage, because it would be on a much smaller scale, being seen as a pilot to test the engineering necessary for a scheme as huge as that on the Severn.

We all strike a different balance between the different parts of the energy process. Some of us prefer this, some of us think that that might be better, and some of us like the other. What I am trying to underline in the debate is that the pressure on Lancashire, particularly my part of the county, is such that residents are questioning where national, joined-up government is in the approach taken to these matters. In the next few months, as I mentioned, we will have the proposal from National Grid for new pylons in relation to existing wind power from the Irish sea. That proposal and others will ratchet up the debate. There will be the final hearings in relation to Halite and there is the possibility of a new nuclear station at Heysham. Interestingly, the support for a new nuclear station at Heysham is pretty widespread because people can see the strength of the proposal and the job opportunities that it would provide. Given the safety record of the present Heysham power stations, which is second to none, there are very few quibbles from the majority of the population in my area about the proposal. Again, however, although the proposal has been made, I am not sure exactly where it lies in the national strategy.

What we want in Lancashire is a share of the cake. I underline the duchy and mineral rights issue, which is real. What we want in Lancashire is, obviously, jobs. What we want in Lancashire is support to make up for the disastrous lack of planning by the previous Government over 13 years. People understand that, but no one has got to grips with it. We want some security. We want to know that the Government are taking a balanced view and that Lancashire will not just become a Texas where there is no money, where the scenery is scarred by the different attempts by different energy companies to get their proposals through, and where residents have finally given up the fight because they have to carry on with their normal lives and their own jobs or work. We need some reassurance from the Department that people are considering these issues and considering them sympathetically. Lancashire can deliver so much—so much—but we need that security for our residents. They need to know that they will not be ignored, that they will not be trodden over by energy companies and that the scenery that they have will be protected.

11:17

[The Minister of State, Department of Energy and Climate Change (Mr John Hayes)]

It is always a delight to serve under your benevolent and sagacious chairmanship, Mr Hollobone. I congratulate my hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw) on securing the debate. Disraeli said,

“Man is only truly great when he acts from the passions”

and my hon. Friend has shown that passion admirably today on behalf of his constituents and the area that he represents. I hope that I can equal that passion in my determination to do right by his constituents; of course, we must do right by the national interest simultaneously.

My hon. Friend is right to focus on the circumstances in Lancashire with regard to energy infrastructure—gas storage, shale gas, nuclear and wind. He covered all those matters in his remarks. He knows that securing sufficient energy is vital for the UK’s future—for national well-being but also for economic growth—but it is also vital that communities play their part in making key decisions about the character of that investment. It is right that they feel a sense of ownership of those decisions and that they are fully involved and consulted before any such decisions are taken. After all, those issues, as he said, will impact on them now but also for years to come. They are matters of considerable concern for those who look to their children’s and their grandchildren’s future, as well as to the immediate prospects that he has described.

I think that the Government can be proud of the approach that we are taking to these concerns, not least through the sustainability appraisal process for the national policy statements at a strategic level, but also at the project level for nationally significant infrastructure, where interactions between developments are considered independently and objectively. The debate is an excellent opportunity to highlight the Government’s overarching strategy for energy and infrastructure and to provide reassurance to my hon. Friend and other Members. I see my hon. Friend the Member for Fylde (Mark Menzies), who has been a worthy champion, in his place and I would not ignore my hon. Friend the Member for Wyre and Preston North (Mr Wallace). My hon. Friend the Member for Lancaster and Fleetwood made a powerful case on behalf of his constituents in defence of what he identified as the strategic changes and cumulative effects of energy matters. My hon. Friend the Member for Fylde has been notable for his keen interest in the development of shale gas particularly. I will say a little about it today, but more in due course.

We should be in no doubt about the massive scale of investment required to ensure our energy security over the coming decades and to make the transition to a lower-carbon economy. Our electricity plant is old and needs replacing. About a fifth of our existing capacity is due to close over the next decade and will be replaced by energy sources that are increasingly intermittent, such as wind, or inflexible, such as nuclear. As my hon. Friend the Member for Lancaster and Fleetwood knows, almost all our existing nuclear plant is due to close by about 2023. Despite being aware of the time scales, in recent years, as he described, we simply did not see the necessary levels of investment.

For the first time in a generation, we faced the prospect that at the end of the decade there would simply not be enough electricity to meet demand. That is clearly not merely unpalatable, but wholly unacceptable for our economy and wider society. Our priority therefore is to rebuild our power sector to guarantee our energy security, and to do so in a genuinely low-carbon way at the lowest possible cost to consumers. Those are the balancing elements in the task that I have been set in my job: to ensure energy security at the lowest possible cost, to attract investment, and of course to do so in a way that is sensitive to local communities and delivers the sense of ownership to which I referred a few moments ago.

To put it in crystal clear terms, we need twice as much investment in every year of this decade, as in the last decade. To put it in numbers, we need £110 billion invested in our energy infrastructure in this decade alone. I learned that fact on the first day I came to this job, and I came to appreciate, perhaps as never before, the scale of the task. Every part of the country has a role to play, and all stand to benefit from secure energy supplies, the jobs created—as my hon. Friends the Members for Lancaster and Fleetwood and for Fylde mentioned—and the stimulus to the UK economy. We need to proceed in a way that is appropriate in terms of not only the energy mix that we deliver, but the environmental impact of the investment. My hon. Friend the Member for Lancaster and Fleetwood made that point repeatedly and powerfully here and previously.

The energy national policy statements designated in July last year set out the need for new energy infrastructure to deliver power to the low-carbon economy. They help to ensure that the UK is a truly attractive market for investors in energy infrastructure, by ensuring that the planning system is rapid, predictable and accountable. The overarching national policy statement EN-1 sets out an overview of the Government’s strategy, and the policy that will lead to an 80% reduction in greenhouse gas emissions by 2050, while maintaining security of supply and ensuring affordability for customers.

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

At the last two meetings I had with the Minister’s predecessor—at one stage my hon. Friend the Member for Lancaster and Fleetwood also met with him—it was made clear to us that there were more than enough applications for gas storage in the pipeline to cover national need. Will the Minister reaffirm that that is still the case and that this particular application does not necessarily make or break the national strategy?

[Mr Hayes]

I am looking at gas storage closely; indeed, I met with my officials on it in anticipation of the debate. We will shortly publish our gas strategy, and it is inconceivable that consideration of storage will not form part of it. I have personally asked to take a very close look at the matter for the reasons my hon. Friend highlights. It is critical to see it as part of the solution to the challenge I describe, but to do so in the round. I hear what he says and will certainly feed it into the discussions we are having. The policy statements were subject to a rigorous sustainability appraisal process, which looked at the strategic impacts of a range of policy options.

My hon. Friend the Member for Lancaster and Fleetwood mentioned shale gas, which I will speak about at some length. As he knows, the Select Committee on Energy and Climate Change carried out an inquiry into shale gas, which confirmed that, providing good industry practice is followed and careful regulation applied, hydraulic fracturing—fracking—is unlikely to pose a risk to ground water or aquifers. The Royal Society and the Royal Academy of Engineering recently reported on a detailed study into the potential risks of shale gas extraction and how those can be managed.

Let me be absolutely clear: before there is any return to the exploration necessary—long before production, by the way—I will ensure that rigorous measures are in place to minimise risk, to take local community interest into account, and to allow for a rigorous and thorough planning process. It would be absolutely wrong to proceed on any other basis. As a result of the debate, and of course the earlier work that all my hon. Friends here today have done, I am happy to meet them to talk through the issues prior to publication of any further statement from the Government on the subject. We shall make those arrangements through my officials in the normal way.

Clearly, there is a need to navigate a careful path in overseeing this interesting new energy source. The Government have been active in ensuring that regulations and monitoring systems in the UK meet that need, not least in their current consideration of the comments received in response to expert reports on seismic tremors in Blackpool last year, as my hon. Friend the Member for Lancaster and Fleetwood will be aware. The constituency in which much of the activity takes place is often described as Blackpool, but is in fact the constituency of my hon. Friend the Member for Fylde, which is partly why he has been such a champion of the interests of local people. We published the report of a panel of independent experts and are considering the comments received. The Environment Agency has concluded that any further fracking operations in Lancashire will require permits, which will of course be subject to public consultation.

To ensure full co-ordination of the work of the regulators, we have established a strategy group, chaired by the Department of Energy and Climate Change, including the Health and Safety Executive, the Department for Environment, Food and Rural Affairs, the Department for Communities and Local Government and the Environment Agency, to oversee the strategic and regulatory issues of shale gas. It is right to say that shale gas in the UK is still in its earliest days; just one well in the UK has been drilled and fracked, and the production prospects are unknown at this stage. However, it may prove to be an interesting, additional energy source, providing that the regulations are in place and all the necessary precautions are taken. My hon. Friends take a measured, moderate and sensible approach to such things.

As you see, Mr Hollobone, I am rushing through my speech at immense speed. My hon. Friend the Member for Lancaster and Fleetwood also mentioned pylons. Network companies, such as National Grid, are required to make a balanced assessment of the benefits of reducing any environmental impacts against the costs and technical challenges of doing so, following extensive consultation with stakeholders. My Department will assess each application on a case-by-case basis, taking advice from local authorities. We will certainly take into account visual amenity and other impacts, as well as consultations with, and representations from, affected communities.

In addition, I will personally work with the Planning Minister. As a result, once again, of the debate, I have arranged a meeting with him to do just that. It is important to keep such things under regular review to see whether the existing system is fit-for-purpose in delivering the outcomes we all want. After all, are we not in politics to pursue truth and beauty? Is beauty not the expression of truth? We must not see things in entirely utilitarian terms; perhaps that has been the problem with the debate in the past, but now I am here to put that right.

My hon. Friend the Member for Lancaster and Fleetwood also mentioned wind power. It is of course right that we meet our targets for emissions, and he will also know that there is a renewables target. We consider such matters carefully in all respects. I hear what he says about cumulative impact and I know the views of the House on these matters. I will look again, as any new Minister would, with appropriate rigour and vigour.

My hon. Friend made many other remarks, with which I have not been able to deal, but, as is my habit as a Minister, I will write to him picking up in detail all the matters that he raised. My officials are already busy constructing that letter. It has been a pleasure to speak in the debate and a pleasure to hear from him. Let us move forward together, in confidence, delivering energy security sustainably.

11:30

Sitting suspended.

Teachers Pay

Tuesday 18th September 2012 Westminster Hall

[Mr Philip Hollobone in the Chair]

14:30

[John Pugh (Southport) (LD)]

I congratulate the Minister for Schools on his new role, and I welcome him to that post. One downside of having such a role is ending up on a Tuesday afternoon, when he probably has better things to do, for over an hour and a half in a half-empty Chamber answering a debate. Fortunately, I have prepared a Castro-like peroration that should adequately fill that time, and more, should we need it.

I apologise in advance, Mr Hollobone, because you will also have to put up with my presentation not being as seamless as I would wish and with my being more discursive than I ordinarily am. That is largely a product of the fact that, having extensively prepared for this debate, I e-mailed myself my thoughts and considered analysis, only to discover about half an hour ago that the e-mail had not actually arrived. I therefore had to reconstruct everything from the beginning all over again. However, I broadly know what I want to say, and I genuinely want to put it on the record. It is worth while to discuss what will soon be a topical issue, particularly at the Liberal Democrat conference, where we will debate regional pay.

Teachers pay has always been subject to national negotiation, and most teachers have been paid on the same scales across the country. There have always been independent schools. Some, such as Eton, have paid a lot more than the state’s going rate; some—the poorer ones—have paid a lot less; and some have shielded themselves behind the state system. It was quite common for independent schools to have a pay spine that adequately reflected the state system, which enabled an easy interchange of teachers between the state and the independent systems. However, most independent schools had arrangements that allowed them some of the benefits of the state system as well as additional opportunities—for example, to give people particular allowances or perks for coaching sports and the like. Independent schools had real advantages from that arrangement, partly because teachers could obviously retain their pension arrangements when they moved from sector to sector.

There was a halcyon day long ago when the particular scales and positions on offer at an individual state school were determined by the local authority. Certainly, in my early days on a local education authority we discussed whether this or that school should have, for example, further scale 4 posts or deputy head or senior teacher posts. Those days disappeared when schools argued quite vocally for more control over such matters. The tendency started in Cambridge, with local management of schools, and it spread rapidly through the country and was eventually enforced by the Government.

The whole picture of teachers pay is one of increasing flexibility. One flexibility offered recently has been the ability of head teachers to be remunerated irrespective, almost, of the size of their school. At one time, a head teacher’s wage was entirely fixed by the number of pupils in their school. In their wisdom, the previous Government saw fit to give governing bodies some discretion over that. Not surprisingly, right across the country, head teachers salaries went up very appreciably, regardless of the size of their school.

In the previous Government’s education policy, the thinking was that teachers who wished to stay in the classroom and were good classroom teachers should be remunerated more flexibly. Yet again, a new offer was put on the table and it was taken up avidly in many schools, in which pretty well everyone, regardless of the quality of their teaching, was given additional funds. Historically, there was a real identification of the need to remunerate teachers in areas of appreciable stress, particularly inner-city areas. That goes back a long way. I think that, under the previous Conservative Government, teachers working in areas of identifiable deprivation were given an additional salary for remaining there. The net effect was not quite what was intended: in some cases, such teachers simply stayed there, because to move anywhere else would normally have resulted in a loss of income. They were to some extent beaten into submission over a period, and they remained for decades in the same school, ploughing the same furrow.

Recently, people have thought of bringing performance management into teachers remuneration. That is clearly reflected in the current scales and the arrangements whereby teachers can move between different scales. It has to be said, however, that the research is mixed on the actual benefits, and I have seen research from the OECD that raises some questions. Locale has obviously been another determinant of teachers pay. Historically, for as long as anybody can remember, there has been a London weighting that reflects the difficulties that teachers sometimes experience in acquiring affordable housing in the London area. Finally, another flexibility that can be identified is that Governments have periodically put extra funding on the table to attract teachers in particular shortage subjects or to welcome into schools those who had not previously been teachers.

There have been variations over time. I accept that such variations will continue and will have different effects, and that some of the intended effects will be wholly successful and some will not. However, the bulk of the changes that I have outlined have been relatively uncontentious, because they were seen as clear and necessary and they recognised adjustments to schools’ needs. The picture resulting from those various manoeuvres has not been a big political difficulty for anyone. It is quite clear that there are different degrees of teacher turnover throughout the country—teachers find it hard to move out of some areas and hard to move into other areas.

The profile of teachers to some extent varies across the country, in different places at different times. I suggest that the profile of the teacher work force in London represents a younger cohort than, for example, in the north-west, where I live. However, the teaching force of England, under the arrangements for teachers throughout the country, has by and large subscribed to the argument that it is a good principle to have equal pay for equal work.

[Kevin Brennan (Cardiff West) (Lab)]

For the record, will the hon. Gentleman acknowledge that in the context of national pay scales for teachers, we are talking—this is rare these days—about England and Wales?

[John Pugh]

I am happy to do so. Historically, however, equal pay as a principle has not been adhered to, because there was a phase—long before the living memory of anyone in the room—when female teachers were paid less than male teachers. There has been a recent drive in local authorities to equalise pay in schools, for, say, people working in catering establishments. Previously, manual workers in local authorities were usually female and were paid less than their male equivalents.

[Kevin Brennan]

I am glad that the hon. Gentleman has mentioned that. On that basis, does he regret as much as I do the Government’s decision to abolish the support staff body that was trying at least to set some guidance on pay scales for such staff?

[John Pugh]

I am aware that most local authorities have had to dig deep into their coffers to adhere to a principle, which, at the time at least, was thought to be largely uncontentious but entirely necessary. In fact, it was prohibitively expensive for a large number of councils.

The principle of equal pay for equal work is not peculiar to teaching or to the public sector. Many national employers—I shall not bother to list them now but I can provide the details if Members are interested—are not aware of where their workers live and, by and large, wish to pay people the same amount for the same job. As this is such an obviously transparent principle, we do not want to depart far from it or we would require a good reason for doing so. That is where my argument takes off. I am suggesting that equal pay for equal work is a sound principle and that to depart from it requires a solid reason.

A reason that has emerged in recent days, which no one would put as blatantly as I will, is that we do not need to pay equal pay for equal work because we can get away with not doing so. Most people would not generally announce such an argument in all its gory detail because if we follow it through, we would probably end up paying women less than men and migrant workers less than native workers, and do a whole series of things that would be regarded as poor industrial practice. None the less such practice may be implied by some talk about market-facing pay.

Another reason why teaching can depart from the principle of equal pay for equal work is that it can be applied to an individual employer. It could be argued that state independent schools—academies and the like—cannot differentiate within their work force, but they can differentiate between their work force and other people who work for other institutions. In that case, teachers are seen not as a national work force but as an individual work force assigned to a particular school. We are, therefore, accepting the principle that each individual school can make up its own mind. I am told that 35% of academies have, to some degree, departed from national pay and conditions. The majority of them, for quite sound reasons, have not done so because it creates more ructions than people need or welcome. Even independent schools that are not in the state sector prefer, for quite solid practical reasons, to abide by the national pay schemes. If our employers play fair by all their employees, I cannot argue with them and say that they are not offering equal pay for equal work.

There are two other arguments that I want to attend to and dwell on. One argument for paying teachers differentially in different areas, which has been put quite forcibly in recent times, is that it will have other non-educational benefits for those areas. We might refer to that as the crowding out theory, which is quite well analysed in the document “Crowding out: fact or fiction?” Notwithstanding that it is prepared for Unison, it contains a lot of pretty solid research in and around the subject. It insists that if teachers in a low-wage area are paid less—in other words closer to the average wage for those areas—more people would seek work in the private sector and fewer would seek work as teachers.

It is not obvious to me that we want fewer people seeking to be teachers in areas of disadvantage, or that more people seeking work in the private sector where jobs are scarce and oversubscribed would be a good thing. There is no real shortage of vacancies in the private sector in those areas where teachers are paid above the average wage for that area. Certainly, the idea of getting more teachers to drift in that direction would not necessarily solve any problems, nor would it make a difference to the number of jobs available in either sector. I simply do not follow the logic presented there. It is quite clearly the case that in the private sector, there is a real dearth of jobs.

[Kevin Brennan]

Just to keep the hon. Gentleman going on that point, is it not also perfectly possible that, as a result of his argument, there could be fewer jobs in the private sector as a result of such a policy, because its net effect would be to reduce the spending power in that locality? That would impact on the availability of private sector jobs, as the demand for labour is a derived amount.

[John Pugh]

The hon. Gentleman could almost be quoting from this excellent document on regional pay, which is submitted by more than 20 Liberal Democrat MPs. The point is that the one thing that we will do if we repress the amount of money going into the areas of less advantage is to reduce demand for private sector opportunities, services and goods. That is demonstrable. If we want to balance out the economy, as the Government do, and so they should, that is not a part of doing that. We could argue that as a result of public sector jobs being that little bit cheaper, we will get more public sector jobs in those areas, so the total amount of money will not diminish. However, I am not aware that it is the Government’s current intention to increase the number of public sector jobs.

[Kevin Brennan]

Would not the whole point of such a policy be to bring about a fiscal transfer away from those areas in order to be able to pay a greater salary to public sector workers in other areas?

[John Pugh]

Yes, I do not dispute the hon. Gentleman’s analysis. We could assume—this would be the sole salvation of the theory—that there are lots of people currently teaching or in other public sector areas who have the in-demand skills that cannot easily be found in the private sector in the less advantaged areas. However, I see no evidence that that is the case. It rather goes against the general view that we need to attract science graduates into schools and away from better paid jobs in industry, which both Governments have endeavoured to do. The theory baffles me and it is incapable of intelligent presentation. A confirmatory bit of evidence that might lead us to think that there is something seriously flawed about this theory is that it is rarely voiced by people who are genuinely engaged with the business of regenerating disadvantaged areas. I have been to many events where the main topic has been the regeneration of the north and I have not come across anyone who has ever said, “What we want is for somebody to take public sector wages down a slice. That would do it.”



Curiously, the only people whom I have heard put those sentiments are bright young men in think-tanks in London; people who have their feet firmly on the ground, particularly the ground in the north, tend not to say those things, if ever. As an argument for regional pay for teachers, that does not seem to be sustainable.

I want to look at another argument for having variations in teachers pay across the regions that has emerged very recently. It is a different type of argument and, frankly, it is one that, when I put together the analysis for the Liberal Democrat submission on regional pay, we did not really take on board. The regional pay submission deals quite adequately with issues such as crowding out, and so on, but what we did not expect was an argument that public services themselves would improve if teachers were paid differentially across the country.

The new argument emerged from some research carried out by the university of Bristol—by Carol Propper and her team, I think—into the benefits of a regional pay system, or, to put it the other way round, the disadvantages of a national pay system. Members will recall that the research was covered quite extensively in the press, and it seemed to have the consequence of leading people to believe that if pay in London or the south-east was markedly better than pay in Humberside or the midlands, not only would that be “a good thing” or make it easier to get teachers to London, but it would improve the performance of schools in London; and that a national pay system actually disadvantaged educational outcomes in the south-east and other areas of high average wages. The research received an enormous amount of media coverage about two weeks ago, and it paralleled previous research by the same body at the university of Bristol which argued that similar sorts of effects could be observed in the health service—that, for example, people in certain high-demand or high-wage areas were more likely to die as a result of a heart attack than people in other areas, simply because there were national pay scales.

Looking briefly at that research, it is based on an examination of pupil progress between key stage 2 and key stage 4 and of average professional wages in different parts of the country. It notes that pupil progress, as measured by class data in a value-added way, does not seem to be as significant or as appreciable in high-wage areas as it is in low-wage areas—in other words, those who live in a wealthy part of the country are less likely to see the same degree of value-added progress in their school as others elsewhere do. I will explain that in a little more detail. We are not talking about attainment here, as attainment by pupils in wealthy areas is better than that of pupils in poorer areas. We are talking about the difference from key stage 2 to key stage 4, and in particular whether key stage 4 replicates or improves on key stage 2.

When that research was reported, the press coverage was fairly stark and fairly crude. I have to say that the press release for the research was also fairly stark and fairly crude. I do not believe that the report is wholly warranted by the data as presented by the Bristol team, but the quality of the research is pretty hard to judge, because the correlation established is not based on raw data; it is arrived at after data have been manipulated and tweaked in a very complex way. The description of what was done to the data is a little opaque for the faint-hearted and for journalists, and perhaps also for policy makers. I wanted to terrify the Hansard writers by reading out the equation, or set of hieroglyphics, that is presented in the research. It is enormously formidable, I am afraid. It says that it is:

“A simple education production function…which considers the importance of controlling for alternative labour market opportunities when examining the degree to which teacher wages affect student outcomes”.

I can only illustrate this visually, but there follows a line of hieroglyphics containing so many variables that it would take a brave man to say what each individual one means. I must say that there is an opacity to this equation—the way that the variables are treated—that makes it rather difficult for all but the most resolute to understand how the data have been treated, and consequently we have seen nothing so far in the way of peer review. The equation is described as being relatively “simple”, but anybody who has looked at page 9 of the Bristol research will have been terrified by what they saw and may not have ventured any further; consequently they will be reluctant to engage in intensive peer review.

The theory claims to establish only an association between being in an area where average professional wages are high and not seeing an enormous amount of value-added effect between key stage 2 and key stage 4. That is not the same as a causal connection. As far as I can follow it, the research does not claim that national pay causes lesser progress in wealthy areas, although of course that could be claimed and in fact many of the press reports read into that research exactly that claim. Furthermore, the research does not necessarily imply any clear policy response even if a causal connection were to be established. After all, regional pay along the lines anticipated by the researchers might actually widen the differences in attainment between richer and poorer areas. We might argue whether or not that would be a good thing.

There are other associations that we could talk about, which show the difference between establishing association and establishing a causal link. It is generally the case that in areas of wealth, the behavioural challenges presented by pupils tend to be less, and in areas of deprivation the behavioural challenges presented by pupils tend to be greater than those found elsewhere, but it would not be safe to draw the conclusion that pupils in the wealthy areas need to play up a bit in order to get better results. That would be a wholly inappropriate conclusion. As I say, establishing association is not establishing a causal link; that is the first point.

My second point is that it could be said that research by the university of Lancaster into value-added, which Members may be familiar with, shows that there is only a loose connection between what a school does and value-added measures. There is a lot of research on this subject, which brings into question what value-added data actually tell us. Also, it is interesting to note that selective grammar schools that teach their pupils well score comparatively poorly on value-added measures. We may not be assessing the school in the way that we believe we do with the current value-added measures.

I do not want to be counter-intuitive and suggest that teachers’ salaries in areas of high cost make absolutely no difference, but I am sceptical that they make the difference that the Bristol research suggests. Obviously, if a teacher moves to an area such as London, a lot of their salary will be used to pay the mortgage; people have always recognised that and the need for a London weighting—it has added to an already overheated market, but I think people can see a broad case for it, none the less. Housing aside, however, living in the capital is not necessarily more expensive than living in Yeovil or Norwich. Certainly transport in London is a lot cheaper than in those places, and utilities and consumables are at least as cheap, if not cheaper, in London.

I do not dispute that high house prices have an influence on staff turnover; they clearly do. Often when a young couple want to start a family, they have to move to areas of cheaper housing to find family-sized accommodation. Therefore, quite naturally, London’s teacher profile tends to have a disproportionate number of second wage-earners, many of them female, and young teachers who have not yet got to the stage when they want to start a family. That may be a good thing; it is not necessarily a bad thing.

The Propper thesis, however, is that national pay schemes lead to worse outcomes and experiences. That is the nuts and bolts of it—the heart of it. It is fundamentally what Propper is leading us to believe, and it is the conclusion that some people are inclined to draw. How does one respond to that?

[Kevin Brennan]

Is it not also part of the theory that much of what teachers do is—I think Propper used this word—discretionary, and therefore there is a wage disincentive effect that means that teachers are, in effect, lazier in certain areas than in others?

[John Pugh]

From the value-added data, there is an implication that in high-value areas—wealthier areas, where housing costs are higher and where we may want to make some adjustments in teachers’ salaries—something is happening in the teaching force that explains the difference in the value-added data between such areas and others.

My response to that is to set Propper against Popper, by whom I mean Karl Popper, author of “The Logic of Scientific Discovery”. I am sceptical about economics as a science—certainly as a predictive one—but the one hallmark the philosopher Karl Popper taught us to look for in any theory was: how might it be falsified? If a theory cannot be falsified and yet is potentially falsifiable, it is a good theory and worth sticking to. The question one has to ask is: if the theory holds water, or if the data stand the interpretation given, how would one know that?

I would like people to ask themselves this question: what ought not to happen if Propper’s theory is true? I will suggest just one thing. What ought not to happen—what we ought not to find—is that lessons in wealthy areas, where the teaching pool is smaller, are as good as those in less wealthy areas. That is easily testable by looking at not the data, but Ofsted reports and the number of lessons that the reports say are satisfactory and less than satisfactory. I presume—I have not checked this, although I have tabled questions—that those reports show nothing that will confirm the Propper hypothesis, and that lessons in Barnet are just as good as those in Salford. I expect that to be the case, so I do not think that we need to be over-detained by the theory, despite the publicity it has received. We should put the theory rapidly to a clear test and see whether what the theory leads us to anticipate in fact happens. I suggest that it does not, and we probably know that.

Why is all that important? Why have I gone out of my way to criticise both the crowding out theory and the Propper data? It is because there is an important issue concerning the debate on regional pay that is probably bigger than that debate itself. Politically, it is stupid for any Government to antagonise the teaching profession, which normally thinks, in a communitarian spirit, that regional pay is not necessary and which will not be persuaded by the need, rationale and motives behind the regional pay push. I think it is unnecessary to antagonise a group that is already sufficiently involved in asking questions of the Government regarding policy on pensions, pay freezes and the like.

The big game for all of us is to improve educational standards in the country. We need teachers to buy into the Government’s agenda and to make it theirs. In my experience of education policy, nothing much is achieved without teachers embracing, endorsing and involving themselves in it. We have seen Secretaries of State over the years come forward with initiative after initiative, and only some of them have had an impact. Those have been the ones that teachers have been able to believe in themselves, such as local management of schools, which I mentioned earlier and which I think is widely believed in. The ability to build a consensus across the piece, which is necessary, will be hampered if we get into a debate about regional pay apropos teaching. It is simply not worth the candle for the limited dividends it potentially can bring, even for those whose support it, and it will produce only tears at the end of the day.

Improving education is a long and collaborative process. Yesterday in the Chamber, the Secretary of State introduced quite significant reforms that we need to examine. Not all teachers have necessarily bought into them straight away—they have concerns about them, and they wish that they had been consulted in advance as well as post hoc—but it is possible to get everyone behind the same agenda, and if we do not do that, we simply do not get any results. We saw elements of that yesterday in the Chamber. I was watching the debate on the monitor, and I noted significant contributions from the right hon. Member for Sheffield, Brightside and Hillsborough (Mr Blunkett) and the former chair of the Select Committee on Education, the hon. Member for Huddersfield (Mr Sheerman). Both said exactly the same thing to the Secretary of State: if we are going to make progress—the kind of progress that no one disputes should be made—there must be a prevailing consensual atmosphere.

[Kevin Brennan]

Does the hon. Gentleman agree that the problem with the way in which the Secretary of State has gone about reform in this area—an area in which we all believe there should be reform—is that he has chosen to do so in order to make a political point about rigour and standards, not an educational one? If he had wanted to make that point, he would have shared his approach with the Opposition, teachers and the devolved Administrations, rather than ridden roughshod over everyone.

[John Pugh]

I think the Secretary of State said, at the end of his statement yesterday, that he was offsetting the 10 years of drift and confusion—frankly, I think that was a rather schoolboy remark. Teachers listening to it will have recognised that there have been difficulties in exams, that changes have been made and that we need to make further changes, and teachers will get behind further changes, but to say that 10 years has achieved nothing and that today we will start on a new venture in which everything will be that much easier, is to mistake what has always happened throughout the history of British education. When things work well and progress is made, everyone has their shoulder behind the wheel because everyone can see the sense of it. When we try to appropriate success or schemes that other people either do not acknowledge, do not understand or do not appreciate, we hamper the degree of progress, even by our own lights, that we intend to make.

I have gone on long enough and my Castro-like peroration is now at an end. There is not an intelligently defensible case for regional pay—certainly, neither the Propper hypothesis nor the crowding out theory provides such a case, although I am happy to debate them ad nauseam—but even if there were, it would be a political minefield that, judging by the extent of the political opposition, is not likely to lead to beneficial results but is likely to lead to a scarring debate that will hamper progress in significant areas of education.

15:11

[Kevin Brennan (Cardiff West) (Lab)]

I thank the hon. Member for Southport (John Pugh) for his speech and congratulate him on securing this debate. His peroration was not Castro-like at all; it was considerably better argued than a Castro speech and considerably shorter, although it was perhaps long for this Chamber. As usual, his extremely well argued speech was a philosophical trot through the issues.

I also welcome the Minister for Schools, the right hon. Member for Yeovil (Mr Laws), and wish him good luck in his new role. As he knows, his job is very important. This is the first time I have faced him since the reshuffle. We came into the House at the same time. In fact, we made our maiden speeches on the same day, so I have watched his progress with great interest; obviously, I will watch his progress with even greater interest in the months to come. In the reshuffle, a number of Education Ministers have gone: the hon. Members for Brent Central (Sarah Teather), for Bognor Regis and Littlehampton (Mr Gibb)—whom the Minister replaces—and for East Worthing and Shoreham (Tim Loughton). One other Education Minister wanted to go but was unable to do so. If, as often happens after a reshuffle, training is offered to Ministers, the Schools Minister might want to suggest an assertiveness training course for Lord Hill for the next time he tries to resign from the Government.

The Schools Minister takes his post at a time when teacher morale is at a pretty low ebb, and he needs to do something to try to improve that situation, because low teacher morale is not good for learning or for standards and outcomes. He may be aware that I was a teacher in a previous period of low morale in the 1980s, which sadly resulted in a great deal of disruption because of an approach to pay and conditions that led to a great deal of unhappiness among teachers. In the context in which we meet today, at a time of low morale with the Government considering the whole issue of national pay and conditions, it would be a welcome step if the Minister took a grip and rejected, for many of the reasons outlined by the hon. Member for Southport, the approach to teachers pay to which the Secretary of State seems philosophically wedded.

The Minister may be aware that the School Teachers Review Body is currently considering teachers pay at the Secretary of State’s behest. The other day, I read with interest the Secret Teacher’s contribution to The Guardian on teachers pay, which summed up quite well some of the teaching profession’s anxieties. The Secret Teacher’s birthday is on 28 September, which is the deadline the Secretary of State has given Patricia Hodgson, the chair of the School Teachers Review Body, to return her recommendations on teachers pay. I hope the Minister does not use that information to try to ascertain the secret teacher’s identity, but the Secret Teacher points out just how anxious teachers are about the steps the Secretary of State is taking to consider market-facing pay, regional pay or whatever we call it in the end. The Secret Teacher also points out that one of the common features of high-performing jurisdictions, which, by the way, we are too in this country—perhaps the Secretary of State should say that more often—is long-term investment in pay to attract a higher quality of applicant to the job. The Labour Government tried to emulate that.

The hon. Member for Southport mentioned that teachers pay is now linked more to classroom performance, and I make no apology for that. Certainly when I was a teacher, often the only way for a teacher to get paid more, apart from through the incremental points for experience, was to take on a responsibility outside the classroom. Some of the best teachers ended up doing administration rather than what they should have been doing, which was standing in a classroom and using their excellent teaching skills to help young people to achieve their potential.

There is a great deal of unhappiness among the teaching associations and unions on teachers pay, and I hope the new Schools Minister will take an approach of dialogue, consensus and working in partnership with the teaching profession to work through some of those issues, rather than taking the more confrontational and “impositional” approach that the Secretary of State tends to take from time to time.

On regional pay in education, the hon. Member for Southport gave a fairly comprehensive presentation on the arguments. The argument seems to be that, where local pay and costs of living are below average, the Government can get away with saving money by paying less. That is certainly one reason why the Government could go for local and regional pay. Another argument is that relatively high pay in the public sector makes it harder for the private sector to recruit, which he referred to as the “crowding-out” argument. He also referred to research from Bristol university, which I will come back to towards the end of my remarks.

Why would the imposition of local and regional pay on teachers be the wrong approach? Well, there are a number of reasons, both educational and economic. Earlier, we discussed the potential damage if spending power is taken out of the economies of more deprived areas. Economics is a dismal science, as the hon. Gentleman hinted in his remarks, and it would be a big mistake simply to take a micro-economic argument in isolation from the macro-economic argument, which is exactly the mistake the Government are making in their overall economic policy on the deficit. On regional pay, if a significant amount of spending power is taken out of those areas of the country by reducing the wages of reasonably well paid public servants in the hope that that would make the private sector more attractive to them, the Government would have to posit a huge increase in private sector productivity for that to have a positive economic impact. Those of us with our feet on the ground know that, in practice, cutting fairly well paid jobs in such areas would take spending power out of the local economy, thereby damaging the provision of public services and damaging the private sector by suppressing demand for goods and services, so there is a strong economic argument against going down that road. It would also make it harder to recruit good teachers in more deprived areas. As the hon. Member for Southport suggested, the job is often more challenging in such areas, which are not necessarily seen as the most desirable places to live in.

The hon. Gentleman also raised the basic philosophical issue of equal pay for equal work. Yes, we could take a purely laissez-faire approach and pay different people at different rates for the same work; but we still have a national education system, despite the increased number of academies, and it seems to me that we should try to hold on to that basic principle.

As to the overall impact on teacher morale—I referred earlier to the Secret Teacher article—there is no doubt that it is at a low ebb at the moment. Introducing relative pay, or reducing it in some areas, especially in the current context of pay freezes, would have a major impact on teacher morale. The question would arise, I guess, of how to stop schools paying what they wanted to. The only way would be to reduce the funding available in areas where it was intended that pay should be reduced. There are thus also huge implications for school funding, which are not being planned for.

Bureaucracy is also an issue. What structure would be required to determine the rates that would apply; or would that be left purely to the market? There is no real evidence that relatively high public sector pay damages the private sector. At a time such as now, when there is high unemployment, including graduate unemployment, there is, if anything, an excess supply of labour available for the private sector to recruit from. Regional pay variations in similar jobs are relatively small. Large organisations in the private sector typically tend to have national pay structures as well, with limited variation, except, of course, for the same variation that has existed for some time in the teaching profession, for London and the south-east. Of course, the TUC recently gathered evidence about regional pay. Its research found that very few large private sector employers use local pay. That was attributed to the wish to have some sort of control over labour costs, and to avoid a duplication of the bargaining process, with the time and resources that that would entail. The complexity of regional or local differentiation outweighs the possible gains for those employers.

[John Pugh]

The hon. Gentleman is surely also aware that what is envisaged may be more complex than was at first thought even by those who support the concept. The Department of Health, under the previous Secretary of State, made a submission suggesting regional pay—but only at a certain level of the hospital structure. As to facing the market, in the higher reaches of the hospital structure the market was national rather than regional; so even within one institution regional pay might not be right. Equally, it is recognised that there are hot spots within regions, where it would not be desirable to pay much less than London rates.

[Kevin Brennan]

The hon. Gentleman puts his finger on the point that I was making, which is that the policy introduces a level of complexity that leads to cost—the opportunity cost, and the time that people will have to spend on resolving anomalies and complexities in the system, unless the Government intend to take a laissez-faire approach to public sector pay. As far as I know, that is not what they propose, but the costs, otherwise, cannot be ignored.

There are good reasons why regional pay is not common practice among large private sector employers. A lot of the commentary about regional pay seems to be based on poor knowledge of private sector pay systems, and of the existing flexibilities within the public sector pay system, including those affecting teachers. A recent “Today” programme on Radio 4 posed the question why a teacher should be paid the same in Sunderland as in Surrey. Well, those teachers are not paid the same. The pay system has four bands or zones, and teachers in Sunderland are in a different band from those in Surrey. It seems there is not enough knowledge generally about the current system; people do not understand that it is sufficiently flexible to remove any need for a much more laissez-faire approach to teachers pay.

The teaching unions have made a joint submission to the pay review body, and as its report is imminent I shall summarise some of their points. In their view, local pay in teaching would not contribute to the raising of standards, because schools in disadvantaged areas already face the greatest challenges in recruiting and retaining teachers, and in providing opportunities for the most disadvantaged students. Local pay would create even greater obstacles to overcoming inequality and raising standards of attainment for all—an objective that I think all hon. Members share.

The unions believe that local pay would be likely to inhibit teacher mobility and create long-term teacher shortages in areas where pay was reduced. There is no particular reason why it should assist with teacher supply problems elsewhere. It also offends against the principle that we discussed earlier: the rate for the job and equal pay for equal work. The unions believe that pay cuts would be likely to fall more heavily on women teachers, so there is an equality aspect to the issue. The Government would, I think, need to carry out a full equality assessment of any proposal to introduce a regional or market-facing pay system.

The approach would also make determination processes costlier—something that we have already discussed. Other interrelationships with pay flexibility should be considered, because the limited use of existing pay flexibility for recruitment and retention suggests that schools do not believe that the pay structure should develop further in that way. Increasing the scope for variations in pay could lead to schools competing for staff—at local level anyway—through wages. Another issue is reconciling the introduction of local pay with a clearer and more transparent funding system for schools, and more effective financial planning by schools. The unions echo the points that I made about private sector employers and the local economy.

That leads me on to the Bristol research, which the hon. Member for Southport spoke about. As he said, in August a study by the centre for market and public organisation at the university was published, under the somewhat non-academic title of “Wage Regulation Harms Kids”. It claimed to show that pupils’ performance at GCSE is affected by how teachers pay compares with pay generally in the area. As the hon. Gentleman said, it suggested that where pay is generally high compared with teachers pay, pupils do worse, and vice versa. The conclusion that is drawn is that there should be more variation in teacher pay, and, in particular, that teachers in high-wage areas should be paid more.

[John Pugh]

I think the hon. Gentleman used the phrase “do worse”, but I believe the conclusion is that those pupils improve less: in high-wage areas, generally speaking, attainment is better, or higher.

[Kevin Brennan]

I think improving less probably is doing worse; but I take the semantic point, and those who want to perform a textual exegesis on our deliberations this afternoon can take a look at it later, when they consult Hansard.

The argument runs that where teachers have low pay compared with others in their area, teacher recruitment will be more problematic, and teachers will be less motivated. That relates to the point that I was discussing earlier with the hon. Gentleman. “Wage Regulation Harms Kids” says:

“The nature of teaching is that a large proportion of the work is discretionary (lesson planning, after-school programmes, time invested in individual children) so there is scope for reductions in effort in response to relative wages.”

The case is based on the contention that teachers in more affluent areas are lazier than teachers working in other areas, because the ratio of their wages to wages for other jobs in the area is lower than that of teachers in other areas of the country. The study offers no real objective evidence to support that contention. The hon. Member for Southport has gone through the methodology used; it is almost entirely an exercise in statistical correlation, and relies less on causation than on an association of numbers from the evidence that it considered. No evidence is offered that the amount of teacher pay compared with pay in the area generally has a causal relationship to pupil performance, despite the report’s title.

Nor does the document consider any alternative hypothesis for the statistical link that it claims to have identified, which seems strange. It makes no attempt, for example, to consider Ofsted ratings for teaching, as the hon. Gentleman suggested could be done in different areas, to see whether there is inspection evidence that teaching is worse or teachers lazier in more prosperous, high-wage areas. It does not consider whether the challenges of teaching in less well-off areas require more of teachers and, conversely, whether a lot of schools in more prosperous areas are coasting and not being challenged by the nature of the task. It might have nothing to do with pay. That explanation is at least worthy of some investigation by such a study.

The case of London is especially relevant, as the hon. Gentleman said. London has high and rising standards, certainly in recent years, but also the largest gap in the country between teacher pay and pay generally. It does not seem to make a great deal of sense. Much of the analysis is based on dividing the country into just two areas and comparing them. That is a very broad-brush approach that can miss many local variations. I will not go on, but there are also problems with the report’s grasp of how teacher pay works and some confusion about external tests at key stages 1 and 3, which no longer exist. That did not inspire much confidence in me either.

The Secretary of State has been known from time to time to take pieces of research such as the programme for international student assessment tables, ignore the parts that he is not keen on and highlight only the bits that he is keen on, or even to ignore completely some pieces of research, such as the pupil achievement research on trends in international mathematics and science study. I am not suggesting that he will necessarily do so, but if he is planning to use this piece of research to justify the introduction of regional pay on the basis that teachers in areas such as his constituency are lazier than teachers in other parts of the country, without any real evidence for doing so, he is on extremely shaky ground.

I end with a couple of questions for the Minister. What is the Government’s current position on regional pay? We have heard conflicting voices from within Government in recent months; one minute it is on, the next minute it is off. Will he give us an update on the latest position? Does he think that Yeovil teachers should be treated differently from teachers in Surrey for doing the same job, and paid a different rate? Does he grasp how demotivating this debate is for the teaching work force that he now has the privilege of serving, in addition to the pupils and parents of this country, in his role as Schools Minister? What assurances can he give us that all of this is not just a softening up for the ultimate privatisation agenda that some of us think the Secretary of State has in mind in the longer term?

15:35

[The Minister for Schools (Mr David Laws)]

I thank my hon. Friend the Member for Southport (John Pugh) for the kind comments that he made at the beginning of his speech, and I congratulate him on securing this important debate. As he mentioned a number of times, the issue is incredibly important for many people across the country, particularly in the north and in his constituency, and he will understand that it is an issue throughout much of the country beyond the south-east, including the area that I represent in the south-west of England. The Government acknowledge how sensitive it is for many people who work and do extremely important tasks within the public sector.

My hon. Friend has raised the issue at an important moment. As the shadow Minister, the hon. Member for Cardiff West (Kevin Brennan), mentioned, the School Teachers Review Body is considering the issues and will report relatively shortly. I think the shadow Minister said that he was expecting the response on 20 September. The latest information available to me indicates that it is more likely to be published towards the end of October. The shadow Minister will be aware from his own experiences in Government that the report will be made initially to the Secretary of State, who will then have to decide when to publish the evidence, alongside the Government’s response to the recommendations. I have no doubt that my hon. Friend and the shadow Minister will be assiduous in considering the evidence base and the response and following up with any issues and observations they have.

Before I go into the detail of my response to my hon. Friend, I should say that I agree with him on two strategic observations that he made about this debate. It is incredibly important that measures should be evidence-based. There is a lot of prejudice on different sides of the debate about issues of flexibility in pay, regional pay and local pay, but there is complete agreement between my hon. Friend and the Government that it must be evidence-based. He mentioned that he published his own report on the issues, bringing to the surface some of the evidence available on the issue of regional and local pay, even though it is not uncontested territory.

My hon. Friend referred earlier to having tabled a question to the Department about the regional variations in quality of teaching measured by the Ofsted framework. From my recollection of the last few days, he can expect a letter from the chief inspector on that issue pretty soon. I will be interested to hear his analysis after he has looked through the information, which I think will be quite detailed. It will perhaps take the debate further.

He and the shadow Minister made an important point. We acknowledge that education is an area in which the Government cannot simply press a button in Westminster or Whitehall and create particular policy responses across the country. There are 23,500 schools in this country, and education is delivered not by Ministers but by the people who teach in schools, head teachers and all the others who contribute in educational settings. Motivating and inspiring those people, and supporting them in the common aspiration of improving the education of young people, involves a partnership between the Government and those who serve in education. We are conscious of the need to keep them motivated and to make them understand that the Government want to support them in doing their job as effectively as possible.

The shadow Minister indicated that he is concerned about morale in some areas of the teaching profession. I have no doubt that there are various different propositions to make in this area. From my own visits to many schools across the country, particularly in my own constituency having taken on this role only recently, I think a lot of teachers and head teachers acknowledge that the Government, in difficult financial times, have put in place a good financial settlement for schools, given the pressures on other areas, including the pupil premium, which is ensuring that schools, particularly in disadvantaged areas, have the funding needed to tackle some of the challenges they face.

Before I respond to my hon. Friend, I would like to say that I am grateful to the shadow Minister for his kind comments about me taking up this role. I look forward to working with him as co-operatively as I can, and as the usual cross-party niceties allow. I would also like, as I did when I spoke a few days ago in the House, to pick up on his comments about the three Education Ministers who left in the reshuffle. I think he was indicating and hinting that those three individuals were passionate about their work and were regarded as very strong in the areas they championed. I think all hon. Members wish them all the best for the future, whether they agreed with every one of their policy proposals or not. I have no doubt that all three will go on contributing to the debate about education and children’s services.

In preparation for the debate, I read with interest my hon. Friend’s recent paper on the subject of regional and local pay. As I indicated, it is an important and timely contribution to a timely and topical debate. I will address some of the points he raised in that paper, as well as the points that came up in his speech. First, however, it is important and useful to set out, to some extent, the approach the Government are taking on reforms to teachers pay and the debate about regional and local pay across the public sector.

In the autumn statement in November 2011, the Chancellor said that pay review bodies would be asked to consider how and if public sector pay could be made more responsive to local labour markets. He then wrote to pay review bodies in December 2011. His letter to the School Teachers Review Body said:

“there is substantial evidence that the difference between public and private sector wages varies considerably between local labour markets. This has the potential to hurt private sector businesses that need to compete with higher public wages; lead to unfair variations in public sector service quality; and reduce the number of jobs that the public sector can support for any given level of expenditure.”

Those are some of the suggestions that my hon. Friend was commenting on in the debate and in his paper.

As my hon. Friend will be aware, there are already four geographical pay bands—the shadow Minister commented on this—that apply to teachers pay: inner London, outer London, the London fringe, and the rest of England and Wales. The current pay bands have rigid boundaries, which at the point they were devised took account of areas that historically had higher teacher vacancy rates and costs of living. The starting salary for classroom teachers is £21,588 in the England and Wales pay band and £27,000 in the inner London pay band. I think I am right in saying that all parties across the House, and my hon. Friend, acknowledge that there are some areas where there are very high costs, and where not having a degree of flexibility in pay would mean that it would be very difficult to recruit people who worked in those areas. Many of us are very passionate about ensuring that young people, particularly in areas such as inner London where there are big challenges in many schools, should have very high quality teachers and they should not be penalised as a consequence of teachers not being able to live and teach in those areas. The debate, then, is not whether there should be any element of regional variation within the system of teachers pay, but whether we should have different or greater variation.

The single most important determinant of a good education is for every child to have access to a good teacher. The available evidence suggests that the main driver of variation in student achievement at school is the quality of the teachers. The effects of high-quality teaching are especially significant for pupils from disadvantaged backgrounds, and research from the Sutton Trust has suggested that poor pupils may lose out on a whole year’s worth of education if they spend a year in a class with a poorly performing teacher, when compared with the education that they would have received from a very good teacher. International evidence shows that the top performing school systems consistently attract more able people into the teaching profession, leading to better pupil outcomes. That is a reason why the pay incentives and the overall levels of pay have to be right, as my hon. Friend would agree. Competitive salaries, in line with other local graduate professions, help to ensure that high-quality graduates are attracted into and retained within the teaching profession across the country.

[John Pugh]

The Minister is suggesting, and I agree, that teachers in disadvantaged areas have probably greater potential to make a difference to children’s lives. It is relatively unsurprising, then, that value added is identified in those areas of relative deprivation, as the Propper data show.

[Mr Laws]

That is a good point, but it is perhaps not the whole debate. I will explain why as I proceed through the comments that I have to make.

Recent research from the OECD showed that our teachers are amongst the best paid of all OECD countries. There was an improvement under the previous Government, which we welcome—that is good news. However, alongside ensuring that salaries are competitive we need to consider the case for arrangements for teachers pay that drive up the quality of teaching by rewarding good performance; giving schools as much freedom as possible to spend their money sensibly as they see fit to meet their pupils’ needs; ensuring the best teachers are incentivised to work in the most challenging schools, as my hon. Friend has acknowledged; and ensuring—an important point both for and against the argument for regional pay—the best value for money for the taxpayer in the money that it is allocated. That is why the Secretary of State, responding to the Chancellor, has asked the experts, the School Teachers Review Body, to consider how reforms to the teachers pay system might support schools and head teachers to recruit and retain the best quality teachers. That is in line with the approach being taken for other public sector work forces and will ensure that any changes that are made—this is my hon. Friend’s concern—must be based on the best evidence available.

In his remit letter to the STRB, the Secretary of State asked it to consider a number of factors: first, how we might reduce rigidity within the pay system so that it best supports the recruitment and retention of high quality teachers in all schools; secondly, how teachers pay could be better linked to performance and whether there are existing barriers to that within the current system; and thirdly, whether to make teachers pay more flexible following the commitment in the 2011 autumn statement to ask pay review bodies to consider how public sector pay can be made more responsive to local market conditions. The question of how teachers’ pay can be made more responsive to local labour markets is only one of the things—an important point that I want to draw out from today’s debate—that the Secretary of State has asked the STRB to consider, and it is important that I set out all of the issues on which the Secretary of State has asked for recommendations.

To support the STRB’s consideration of its remit, the Secretary of State submitted written evidence. The STRB has also taken into account evidence from bodies representing employers of teachers, school governors, and teacher and head teacher unions. The Secretary of State’s evidence raised concerns that under the current system the rate at which teachers are paid is more closely associated with the time they have served as a teacher than it is with their performance in the classroom. Almost every teacher on the main pay scale progresses to the next spine point each year, and almost half of qualified teachers across all pay scales are on a higher spine point than the previous year.

Our analysis of vacancy rates shows that some schools find it more difficult to recruit and retain teachers than others. There are different vacancy rates between different regions, between local authorities in the same region, and between schools in the same local authority. There are also differences in vacancy rates between subjects, as my hon. Friend is aware. For example, there are above average vacancies in English and mathematics posts, but below average vacancy rates in the arts and humanities. Where vacancies are filled, some subjects are significantly more likely to be taught by non-specialist teachers, which is a major concern. For example, 21% of physics lessons are taught by non-specialist teachers, compared with 10% of history lessons.

The Secretary of State’s evidence to the STRB suggested five options for reform that it may wish to consider, illustrating the range of approaches that are available to it when making its recommendations. In late October, following careful consideration of all the evidence submitted, the STRB will make its recommendations to the Secretary of State. The Secretary of State has stated his intention to then issue a second remit to the STRB that may ask it to produce more detailed recommendations, or to consider further issues on which it has not yet reported. Hon. Members will be pleased to know that no decisions have been made and the Government remain open-minded about these reforms.

My hon. Friend’s paper and his speech clearly set out a number of key arguments made in the recent debate about regional pay for public sector workers. I should like briefly to touch on some of the issues that he highlighted. I remind him that issues relating to how public sector pay reflects the local labour market will be considered alongside other priorities, which I mentioned earlier.

[John Pugh]

Will the Minister consider the following point? We have used the expression “responsive to the local labour market” all the way through, as though we know in every case what the local labour market or the pool of workers is that we are pulling from. It would be useful to have an additional piece of research figuring out, when, say, a school head teacher or head of department post is advertised, the actual field of applicants. Where do they come from and how do people move between one area and another? In teaching, people at a certain level are prepared to move appreciable distances. Often in an advertisement in the paper, a school is appealing to the labour market of the whole nation, not just the local labour market. We cannot talk as though the local labour market is a fixed thing that we always understand.

[Mr Laws]

My hon. Friend makes a good point. He will also appreciate that the reasons that motivate people to take on particular posts or to stay within geographic communities are based not just on pay, but on other connections that individuals may have with an area.

The first of my hon. Friend’s arguments was that the private sector might be disadvantaged in local labour markets where public sector workers are relatively highly paid. He referred to this as the crowding-out hypothesis. As the Secretary of State’s evidence to the STRB showed, there is variety in supply and demand within the teacher labour market, including in the relative pay of public and private sector workers. This appears to be reflected in vacancy rates, with schools in some regions finding it more difficult to attract candidates into vacancies. However, as the Secretary of State’s evidence also shows, there is variation between regions, between local authorities and between schools in the same local authority. Schools also appear to experience greater difficulty appointing specialists in some subjects compared with others. Stakeholders have submitted a large amount of evidence to the STRB and the other pay review bodies in this regard and detailed representations have been made on crowding out. I am confident that the experts will therefore have all the information they need to consider this specific issue carefully when making its recommendations.

My hon. Friend’s paper also considers whether the Government could make savings by reducing the pay of public sector workers in line with local labour markets. Increasing autonomy for schools is central to the Government’s education reforms. Although of course we wish to achieve value for money in all public spending decisions, we have clearly prioritised autonomy for head teachers to allocate the funds available to them in the way that they think is most appropriate to provide for the needs of their pupils, subject to the disciplines that any of us would expect in the public sector. Where pupils from disadvantaged backgrounds attend school, we have made sure that there is additional money through the pupil premium, which my hon. Friend strongly supports, for head teachers to spend on the additional support that they think is necessary. However, there are always advantages and disadvantages in such an approach—my hon. Friend set them out carefully—and those matters will be carefully considered by the STRB in its deliberations.

The final point mentioned by my hon. Friend was public sector pay in other countries. He specifically mentioned in his paper the experience in Sweden. As is well documented, the Secretary of State and the Government wish to learn carefully the right lessons from all education systems that perform most strongly in international comparisons. We have considered the Swedish system, but we are interested in all public education systems where pupils perform well compared with their counterparts in other countries, particularly where the attainment gap between the least and most advantaged children is small compared with the large gap that still exists in this country. We trust that the STRB will take into account systems employed in Sweden and elsewhere in the world. These will inform its recommendations to the Secretary of State.

Regional pay has been at the forefront of recent debates about public sector pay reform. However, my honourable Friend will recognise that, although we have asked the STRB to consider how teachers pay could be made more flexible locally or regionally, there are issues other than regional pay under consideration when it comes to teachers specifically. Increasing the flexibility that head teachers have to determine the pay arrangements suited to their school could be a key element of the drive to increase autonomy from government. We want head teachers, particularly in the most disadvantaged schools, to be able to use the additional funding that they have through the pupil premium to attract and retain top quality teachers to work where the pupils need them most. We need carefully to consider whether the current system enables them to do that.

Our approach all along has been to provide the STRB with the evidence that we think is most relevant to its deliberations and to encourage others to do the same. We are encouraged that contributions to the debate are being made by organisations and individuals who are not among the statutory consultees of the STRB. My hon. Friend has made his case clearly and publicly.

In setting out the Government’s approach after the Chancellor made his statement last year, my hon. Friend will be aware that the Chief Secretary to the Treasury made a speech at a union conference in June, saying:

“Despite some of the more excited press reporting, the only thing we have decided is to look at the evidence…before we decide anything, we want to hear from everyone with a contribution to make to this debate—employers, academics and, yes of course, the Trades Unions. There will be no change unless there is strong evidence to support it and a rational case for proceeding.”

I thank my hon. Friend for his contribution to this important debate. I am sure that, like me, he looks forward to reading the STRB’s report and the Government’s response, and I have no doubt that he will respond again in detail to those.

GCSE English (Marking)

Tuesday 18th September 2012 Westminster Hall

15:58

[Nic Dakin (Scunthorpe) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate the Minister on her new role, to which I am sure she will bring great energy and commitment.

Unlike the current Ministers, I have no experience of work in the media or policy think-tanks. I simply bring experience of how things work or do not work in the real world outside Westminster, where real families toil, real kids go to school and real professionals work jolly hard to achieve the best they possibly can for our young people. I have a lifetime’s experience of teaching English. The easiest exam to prepare kids for was O-level English literature, and the exam that gave the most perverse, unfair outcomes for kids was O-level English language. The Government’s theoreticians may think a return to O-level will be a good thing, but I very much doubt it.

Criterion-referenced GCSE English has gone through many changes over the years, but today’s world has been transformed from the world of 1988, when the first cohort of students took the then new school leavers’ exam introduced by the Conservative Government. In all its manifestations, however, I can say without hesitation that GCSE has been far more demanding for students than its predecessor. It is a much tougher qualification to prepare students for and has a much tougher assessment regime for them to meet, but it has been fairer—until now, when a Government obsessed with ideas rather than realities are presiding over a monumental injustice.

At its heart, the GCSE fiasco this summer is not about Ministers and MPs, or exam boards and technical stuff. It is about something a lot simpler and a lot more important: it is about whether the assessments given to young people this summer were fair. The head of Ofqual, in her outrageously flippant remark that some candidates “got lucky”, seems to recognise that she failed in her duty to ensure that the outcomes in one year were fair to all candidates. As the editor of The Times Educational Supplement wrote this week:

“Obsessed with maintaining standards between years, Ofqual has failed to maintain them within a single one. It has completely undermined confidence in the exams it is supposed to protect.”

The Ofqual report “GCSE English Awards” lets the cat out of the bag. A technical document, designed to whitewash, it is obsessed with controlling statistics, not standards. It makes it clear that young people’s achievements at 16 are capped by their achievement at 11. The whole review hinges on

“the predictions made by the exam boards of results for each GCSE…based on prior attainment data”—

key stage 2 results—so that achievement at 16 is being capped by achievement at 11. An exasperated National Union of Teachers collectively sighs:

“Such an approach begs the question—does secondary education just not matter?”

Excellent analyses by the National Association for the Teaching of English and the National Association of Head Teachers demonstrate that Ofqual and the Government are, in essence, returning to norm referencing by the back door. Although the Secretary of State, in a very brief answer to my question yesterday, said that norm referencing was off the table, it is very much on the table, and I think that there needs to be some honesty about that. It is hardly surprising that the whitewash document also includes an admission, on page 19, that

“this year’s English results have come as a shock to some schools, and some of the school-level outcomes are hard to explain”.

You bet they are, if the aim is to cover up a monumental cock-up.

What is clear to me from talking with local head teachers in the Scunthorpe area whose students have been affected is that something significant and exceptional has gone wrong this year. They are solid, decent professionals whose judgments I trust, and they are universally telling me that if we look back across their schools’ predictions for the past five years in GCSE English and GCSE maths—the two key progression qualifications—their predictions for students attaining C and above have been consistently within a 4% tolerance of the final outcomes, except for this year, when maths remains within that tolerance, but English is more than 10% out. These are professionals who know what they are doing, and they tell me that the same students predicted a C this year would have achieved a C last year.

[Mr John Denham (Southampton, Itchen) (Lab)]

I will be brief, because I had the chance to speak in the main Chamber. What my hon. Friend’s professionals are telling him in Scunthorpe is precisely what professionals are telling me in Southampton. I was, with the current shadow Chancellor of the Exchequer, one of the two architects of Ofqual. We took the decision to establish an independent regulator. Does he agree that we have to face the fact that the guarantee of independence, which we delivered, was no guarantee of competence? The worst thing we can do now is to overlook the fact that Ofqual has got this wrong and to say that there is nothing that we can do to right the injustice that has been done to thousands of students this summer.

[Nic Dakin]

My right hon. Friend makes a salient and pertinent point. What is important is that young people in Scunthorpe, in Southampton and indeed throughout the land are treated fairly. The regulators recognise their own incompetence when one of them comes out with comments such as some students “got lucky”, but that is not good enough, is it? The incompetence that they recognise should not stand in the way of young people being treated fairly.

It is worth noting that, nationally, 26.7% of students doing the foundation paper in June 2011 got a C grade, while only 10.2% got a C grade in June 2012. Those statistics corroborate my local head teachers’ view that students taking the exam in June 2012 were disadvantaged compared with similar students who took the exam in June 2011.

[Kevin Brennan (Cardiff West) (Lab)]

Does my hon. Friend agree that one of the conditions on which Ofqual was set up by my right hon. Friend the Member for Southampton, Itchen (Mr Denham) and the now shadow Chancellor was that its duty was to maintain confidence in the exam system? How does a comment from the chief executive of Ofqual that some kids “got lucky” maintain such confidence?

[Nic Dakin]

It is clear that there is no confidence at all in Ofqual among education professionals, among people working in industry and business who I met the other day—they clearly do not have confidence in Ofqual—and, most importantly, among parents and the students themselves. Ofqual has failed that crucial test.

[Julie Hilling (Bolton West) (Lab)]

If the exam marking was so fundamentally flawed and the exam was too easy or whatever, why was the barrier between A and A* not changed? Why were those marks kept the same? Why was the C grade changed?

[Nic Dakin]

I thank my hon. Friend for that intervention. As I shall explain, there were impacts on other grade levels. The focus has primarily been on the borderline between C and D because that is such a crucial progression lever for young people, but there have been effects on other grades as well.

Why does this matter? It matters because GCSE English is a progression qualification: it makes a difference to individuals’ lives, to what they do next and to where they go next. It matters because we have a duty to young people to ensure that the assessments at 16 are fair. They have clearly not been fair this year. Worse than that, the Secretary of State and the regulator obfuscate, appearing more interested in covering up and protecting themselves than in ensuring that young people are treated fairly. Worse still, as my hon. Friend says, the focus has been on the unfairness to students missing out on a C and having to adjust their careers accordingly, but as a former principal of a sixth-form college I know that those students getting a B instead of an A will be disadvantaged next year when they apply for higher education. Their choices will be limited.

On 23 August, the Secretary of State for Education received news of the fall in success rates for students in their GCSEs with a certain smug satisfaction: failure for young people was success for him. It was all about rigour, standards and other buzzwords, not about achievement, progression and fair outcomes. Gradually, though, a darker story began to emerge. As schools analysed the results, they identified a significant change in how GCSE English had been marked in June compared with January. Something had gone very wrong, with grade boundaries being significantly adjusted in year to ensure that fewer students met their predicted grades.

In one school in my constituency, because of the boundary changes, the percentage of students achieving five A* to C grades fell from 80% based on January marking to 62% in June. As a consequence, the percentage of students achieving the important five A* to C grades including mathematics and English fell from 62% to 52%. At another local school, the changes meant that 25 pupils did not achieve the C grade they were predicted to achieve, and the school’s English results fell from 53% achieving C last year to 40% this year. At another school, almost 25% of the cohort taking exams were negatively affected by the boundary changes. These are drastic and startling figures, and I assure you, Mr Hollobone, that in all my years as an English teacher and then a sixth-form college principal, I have never seen anything quite like it.

One local head teacher described the impact on students and the school as catastrophic. Students who had achieved a C in English in January were re-timetabled for extra maths; they achieved their maths C in June, but because the school did not draw down their English marks until June, the C they had banked in January became a D in June. How on earth can that be fair?

Schools are very good at self-evaluation, but this episode has undermined their confidence in what they are doing. Their confidence in teaching GCSE English has also been undermined as further confused messages such as those we heard yesterday come out. There is also a lack of confidence about how they are preparing this year’s cohort for next year’s exam, so the impact of this year’s cock-up is being felt not only by this year’s students, but by next year’s students. That is why it is so important that the Government act now to put things right for the youngsters and schools affected.

The Association of School and College Leaders believes that one quarter of all secondary schools in England and Wales have been damaged. At first, it was thought that tens of thousands of pupils were affected, but the situation is far worse. We now know that 133,906 pupils have been affected on the boundary between grades C and D alone, before all the other boundaries are taken into account. If that injustice is not reversed it is likely to have a long-term impact on the social mobility of the students affected. Research from ASCL shows that those affected are disproportionately from areas of high deprivation, ethnic minority groups and poorer families. Parents have written to me to explain that their children have been devastated by the news that they cannot pursue the courses and jobs they had set their minds on. I have an example here of a student who has moved on to further education, whose mother writes:

“My daughter is one of the many thousands involved in this injustice and we've now heard that the AQA resit for English Language is 7th November. This fiasco needs to be sorted NOW before it’s too late! As it is she is having to do extra work to ‘revise’ for the resit on top of her college assignments. It’s simply not fair.”

Similarly, teachers have told me about the anxiety that the situation has caused them, with one describing Ofqual’s actions as immoral and inhuman.

Last week, The Times Educational Supplement published letters between Ofqual and Edexcel showing that the regulator had, at the 11th hour, pressured the exam board into revising the grade boundaries against its professional judgment. Ofqual told the exam board to

“review the English award at grade C in order to produce outcomes that are much closer to the predictions and so in line with national standards”.

We must remember that the predictions are based on key stage 2 assessments at age 11. In its response, Edexcel protested that

“we have put considerable effort into producing what we consider to be a fair award”,

adding that

“our award is a fair award and we do not believe a further revision of our grade boundaries is justified”.

Those are the professionals, who have looked at the work, not just carried out a statistical exercise. Ofqual then sent a final letter, warning Edexcel that

“their expectation”

was

“that Edexcel will produce outcomes...that are within the 1% of the overall prediction”.

Edexcel then capitulated.

Last week, the chief regulator and the Secretary of State appeared before the Select Committee on Education to answer the growing avalanche of questions. It was a master class in obfuscation. After their appearance, the Chair of the Select Committee spoke for everyone when he said:

“There are many important questions in this to which we do not have satisfactory answers”,

adding that the explanations given were “inadequate”. The Secretary of State has hovered between bullish and sheepish in his response to the gathering storm. He blusters and hides behind an unaccountable quango, which in turn hides behind a cloak of statistical confusion.

Adding further to the unfolding chaos, the regulator in Wales—the Welsh Government—has taken clear action by ordering the Welsh board to re-award grades to Welsh candidates. That means that students in Wales will be treated fairly, but my constituents who did the Welsh board English GCSE—believe it or not, Mr Hollobone, the Welsh exam board is popular in Scunthorpe—will not. How on earth can that be proper? How can it be just?

There is a further contradiction and a further worry. The Secretary of State seems to be saying that GCSE results must not go up, but that in every school more than 40% of pupils must get five A* to C grades. Those who have signed up to a conspiracy version of history see that as an agenda not only to fail students, but to fail schools. A consortium of schools, academies, further education colleges, local authorities and professional associations is taking legal action this week. I wish them success, but it should not have come to that—wasting public money, time and energy on legal costs and process. Ofqual and the Secretary of State should be big enough to hold up their hands, admit that they got it wrong and take action to put it right. That is the moral code that we teach our young people, and our leaders should also follow it.

Who is accountable for the cock-up? An unelected quango that is doing the Secretary of State’s bidding. Surely it would be better if he were directly accountable to the young people of this country and ordered an immediate independent inquiry into what has happened or, better still, followed the Welsh Government’s example and ordered Ofqual to instruct the exam boards to re-award their grades, so that all students taking the exam this year are treated fairly and in line with their contemporaries the year before.

Being a modern MP, I asked my Twitter and Facebook followers what questions they wanted to be answered. Overwhelmingly, they were variations on the following. Can the Minister explain to youngsters and their families how pupils can get a lower mark in January and do better than someone who gets a higher mark in June? That is what happened this year. While the Minister is considering that, I will ask three further questions. Will she urge the Secretary of State to stand up and be counted, to apologise for this year’s cock-up and to take action to ensure that this year’s students are treated equally and fairly, based on the professional judgment of the exam boards—the people who have seen the children’s work? Will she say whether she is happy that achievement at 16 is apparently being capped by achievement at 11, in a move back to norm referencing? Finally, will she ask Ofsted not to fail schools that can demonstrate that they missed the threshold owing to the impact of GCSE English marking this summer?

16:17

[The Parliamentary Under-Secretary of State for Education (Elizabeth Truss)]

I thank the hon. Member for Scunthorpe (Nic Dakin) for securing today’s debate. I recognise that he has a lot of expertise in the sector. He taught English at Greatfield high school, and is a former principal of a further education college, so I respect the knowledge that he has brought to today’s debate.

I want to restate what the Secretary of State has already made clear. I have great sympathy for all those students who did not receive the grades they were expecting in this summer’s GCSE English results. There is a process whereby hon. Members can register their concerns with Ofqual, which is rightly dealing with queries. If schools or students are concerned, I suggest that they raise those concerns with Ofqual as soon as possible.

The hon. Gentleman asks me to set out what action the Government are taking, and what action I believe they should take. It will come as no surprise to him that, as the Secretary of State made clear at the Select Committee earlier this week, it would be totally wrong for the Government to intervene in marking or grading decisions. That is Ofqual’s responsibility, and as other hon. Members have said, Ofqual was set up by the previous Secretary of State to oversee and maintain standards and qualifications. Grade boundaries and maintaining standards is a matter for Ofqual, which is directly accountable to Parliament. It is important that where there are independent regulators, they should conduct investigations and answer queries—in this case, that process is still ongoing—without undue political interference.

Ofqual published its initial report into the concerns about GCSE English, finding that the June grade boundaries were properly set and that candidates’ work was properly graded. It has also said that the January grade boundaries were set generously. The hon. Gentleman has referred to Glenys Stacey’s comments on that matter.

[Nic Dakin]

First, does the Secretary of State have a role in ensuring the competence of the regulator? Secondly, Ofqual has not looked at any work; it is a mere statistical sample of 75%. It is not even a technical analysis of 100%, according to the report, which is signally flawed. Does the Minister accept that point?

[Elizabeth Truss]

On the hon. Gentleman’s first point, our exam system is undergoing reform. I shall comment later on the modular system and the impact that that had on grading decisions.

Ofqual is looking at the details of individual students and why they got the expected results, while others did not. That is why I am encouraging hon. Members to send concerns to Ofqual, which will produce its final report in October. It is the right body to investigate the matter, rather than the Department for Education, because otherwise we end up in a system where politicians interfere with the grading review. The hon. Gentleman alluded to Wales, and that is a problem with the approach being taken there.

The hon. Gentleman also mentioned problems with the current system, presenting a rosy description of GCSEs in the years since their introduction. Although he spoke about O-levels, I am not able to remember sitting such exams, because I took GCSEs. Therefore, I sadly do not have his wealth of knowledge about different qualifications going back through history. The specific problem with English GCSE was the modular examination system, which we are changing. A lot of convoluted technical processes were created that made it more difficult to moderate and mark the exams. The Government and the Secretary of State have been clear about wanting to move away from a modular system to one in which students study subjects in depth, and where what students have learnt can be assessed at the end of the course. We think that modular exams and re-sitting exams get in the way of sound subject knowledge and sound subject teaching.

We believe that modular examinations were a factor in what happened with the English GCSE exams, but that is a matter for Ofqual to investigate. As I have said, the report is expected at the end of October. It will be up to Parliament to examine the findings, as Ofqual is ultimately accountable to Parliament, which returns to the question that the hon. Gentleman asked about what the Secretary of State’s role should be.

We are restoring the end-of-course exams for students starting GCSE courses this September. Yesterday, the Secretary of State announced the new English baccalaureate certificates that will be introduced in the core subjects. They will be linear and results will be given at the end of the course. I understand that that does not answer the specific question of what happened with students this summer, but again, that is being investigated by Ofqual. The proper role of politicians is to consider how the system can be reformed to work properly, rather than intervening in specific decisions that it is right for the regulator to make.

On the hon. Gentleman’s rosy perception of the past few years, there is widespread, bipartisan agreement that the level of grade inflation cannot be justified. He also had warm words for the examining bodies, even though they have been criticised for the role that they played in that inflation. I do not think, therefore, that they can be entirely part of the solution—in other words, we need to consider different approaches to GCSE exams.

Since 2000, England’s performance in international reading, mathematics and science tests have flatlined. Andreas Schleicher from the OECD has described the UK as stagnating over that period. The specific comments about the English results cannot hide the fact that under the previous Government we did not see the increase in standards that was seen in comparable countries. In 2000, the UK was ranked 12 places ahead of Germany in mathematics, but by 2009, it was 12 places behind. In 2000, the UK was 16 places above Germany in science, but it is now three places below. In reading, it was 14 places above Germany, but it is now five below. We cannot ignore international evidence showing that what was being reported as happening as a result of our exam system was not accurate, compared with fast-improving jurisdictions across the world.

[Nic Dakin]

I say gently to the Minister that those points are for another debate. We should focus on the hundreds of thousands of young people who have been negatively affected by something that, as the general secretary of ASCL said, has gone seriously and significantly wrong. Such people do not say things like that glibly. Something is wrong here and it is in an area that the Government, if they had intestinal fortitude, would do something about.

[Elizabeth Truss]

The reason it has gone wrong is because of the system we inherited, which was based on modular examinations. While we saw grade inflation in the UK, we were being overtaken by other countries.

[Mr Denham]

I urge the Minister to consider this point: the students do not care about the wider debate on examination standards. Something has gone wrong in the assessment of the English language examination this year. It has nothing to do with the debate about wider standards or how things are run, and it is frankly insulting—I must say that to the Minister, who is new in the job—to talk about other issues when students are wondering what will happen to them.

[Elizabeth Truss]

It is relevant, because the modular English exam was introduced by and the system was set up under the previous Government. The former Secretary of State was clear when he established Ofqual that it was an independent regulator of standards. It is not right, therefore, for Ministers or the Secretary of State to interfere with the marking process. Ofqual must conduct that investigation and the proper process is for schools and individuals, with the encouragement of MPs who feel that the treatment has not been fair in their constituencies, to apply directly to Ofqual. I have made that point clear, but there is no doubt that the long-term problems in our system have created incentives for schools and exam boards to behave in particular ways, and those issues need to be sorted out. That is the point behind the introduction of the English baccalaureate certificates. The race to the bottom between exam boards needs to end, so that we have a system that accurately reflects standards. At the moment, it does not.

I am extremely sympathetic to students who did not get the results that they expected. However, the proper course of action is through Ofqual, which is conducting the investigation, and the proper role of politicians is to reform the exam system so that we deal with issues such as modularisation, which caused these problems.

[Mr Philip Hollobone (in the Chair)]

We now move to the next debate. I would be obliged if the Parliamentary Private Secretary would remain in his seat so that we can carry on with the debate in the Minister’s absence.

Rail Services (Paddington to Herefordshire)

Tuesday 18th September 2012 Westminster Hall

16:29

[Bill Wiggin (North Herefordshire) (Con)]

Ensuring that my constituents have first-rate rail links has always been a top priority. Proper rail services are vital to businesses, local families and in helping to ensure that we are the greenest Government ever, but it has been apparent for many years that the railway service from London to Hereford is unacceptable. The timetable offered by First Great Western was poor, and that did not promote tourism or business investment in the area. In fact, it hardly worked at all.

The Department for Transport’s invitation to tender for the operation of the franchise should therefore serve as an opportunity to help to improve rail services across the United Kingdom, not allow them to remain poor or even unchanged. Sadly, that has so far been a missed opportunity. The invitation to tender only requires

“broadly the same number of trains to run between end-to-end destinations as is the case today”.

The Minister, who has entered the Chamber, might find my giving him the first page of my speech very helpful. I believe that what is in the invitation to tender will, at best, lead to a continuation of the status quo. At worst, it will decrease the number of direct trains going to and from Hereford. I am sure that the Minister agrees that that is not what he wants and it cannot be acceptable.

First, the rail services to and from Hereford must not get worse. I believe that, to guarantee that, First Great Western must not be awarded the Great Western rail franchise. Secondly and most importantly, we owe it to the constituents of Herefordshire actively to promote a vastly improved timetable. Currently, weekday connections from Hereford to London start at 5.35 am. That train is scheduled to arrive at London Paddington at 8.51 am. It is therefore near impossible for anyone living in Herefordshire to get to an office in London by 9 am. If the trains started just 35 minutes earlier, at 5 am, that would allow enough time to make it. At the end of the day, the trains do not leave late enough. On weekdays, the latest direct train leaves London Paddington at 7.22 pm, and on Sundays it is even earlier, at 5.42 pm. Those running times are extremely restrictive and only serve to isolate Herefordshire and its people. Crucially, there are only five direct trains between Hereford and London a day.

I, along with my hon. Friends the Members for West Worcestershire (Harriett Baldwin), for Mid Worcestershire (Peter Luff) and for Hereford and South Herefordshire (Jesse Norman), want to see an hourly service. At the moment, trains start too late, finish too early and do not run frequently enough. Within the terms set out in the tender document, it is solely up to the new franchisee to decide whether those times will improve.

With proper investment to ensure more services, Herefordshire could begin to compete with Birmingham, Warwick and Newport, where people currently choose to travel. “The Eddington Transport Study” found that good transport links can support the regeneration of an area where there is existing potential. That was the case with the Jubilee line extension into the docklands area of east London. The Confederation of British Industry and the Federation of Small Businesses considered that investment in transport was one of the most economically productive areas of public spending. That was in a report by the Select Committee on Transport in 2010-11.

Herefordshire is trying to take part in a superfast broadband pilot for rural areas, and that should boost our local economy. Of course, a lack of good transport could undermine that excellent development. A report released last week by Sustrans has revealed that our current transport planning system is forcing people into buying cars that they cannot afford or leaving them stranded, denying people access to jobs, schools, hospitals and shops. Obviously, that is unacceptable.

North Herefordshire is a very rural constituency, and efficient transport links are fundamental to its prosperity. My constituents are losing faith in the railways, and that will lead to reduced demand. However, it does not have to be like that. It is up to us to provide the services in order to attract more passengers. Regular, reliable, affordable and punctual services will lead to more passengers and more commuter fares being fed through to the Exchequer. It will boost local economies and those further afield by enabling people to visit shops and restaurants more frequently.

Alongside timetable changes, I would like to encourage a more efficient train service. “The Eddington Transport Study” concluded that the most obvious and direct benefit of an improvement in transport is a reduction in the time spent travelling. My constituents have voiced concerns that, at present, connection times on indirect services offered by First Great Western are often too long or even too short to reach the connecting train. I was therefore saddened to read in a letter from the former Transport Minister, my right hon. Friend the Member for Chipping Barnet (Mrs Villiers), that the invitation to tender allows for journeys that are now provided by through trains to be delivered using a connection. The invitation to tender obviously allows for a downgrade of our current service at a time when we urgently need an upgrade.

For train services to become a viable transport option for my constituents, the issues that I have set out need to be addressed. Furthermore, we need improved reliability, affordable fares and clean carriages. My constituents understand that delays occur, but First Great Western has a poor record of communicating information about those delays. Less than half of those surveyed for the Office of Rail Regulation’s national rail trends yearbook felt that First Great Western dealt well with delays. There have also been endless complaints about difficulty collecting fares on board at the end of the line. That not only loses revenue, but leads to inaccurate records, pushing up the price of fares for those who do pay and incorrectly reflecting demand.

What do other bidders offer? The Department for Transport does not allow the details of other bids to be exposed, so we must put our faith in the DFT’s decision alone. I believe that urgent change is needed, so I urge the Minister to alter the terms set out in the invitation to tender document. I know that that is hard and I also know that his office would prefer him to have an easier life and to leave the document alone, but it must be remembered that 15 years is a long time for us to bear the responsibility of a diminished service.

At present, the tender does not push for the improvements that we on the line so desperately need, and worse, it allows for the current standards to slip. My constituents and I need reassurance that the awarded bidder will actively try to deal with the problems. The franchisee must remember to deliver on their promises. I believe that that should be enforced by the Government.

There have been a number of concerns about the franchising process—namely, those recently voiced by Virgin Rail Group. At a Select Committee sitting in the House of Commons, Virgin criticised the Department for Transport’s failure properly to assess the relative risks of the bids that it received. It asserts that premium payments depend almost entirely on projections of passenger numbers. I have reservations about First Great Western’s chance of achieving those passenger numbers, given its current record of service on the London-to-Hereford route.

In the course of its previous franchise, which has been under way since April 2006, First Great Western has seen a larger-than-expected decline in passenger numbers. That has meant that payments that it was scheduled to make to the Treasury have been reduced. With it having previously pulled out of the Great Western franchise, it would not seem sensible to re-award the franchise to First. That still leaves the Minister three other bidders. I know that he is aware of the shortcomings of the service and will redouble his efforts to deliver for the people.

Aside from the franchise agreement, I would like to draw attention to the need for infrastructure investment on the Paddington-to-Hereford line. As it is only a single-line track between Worcester and Hereford, only a limited number of services can run per day. As trains going in both directions need to share the same track, the capacity of the line is reduced. Also, if one train is delayed, there is an inevitable domino effect on all later trains—they are all delayed. I would like investment in that line to ensure that there is a passing place outside Ledbury. That would be an excellent way to help to improve services and ensure that Herefordshire achieves its potential. The Office of Rail Regulation yearbook confirmed that First Great Western Ltd paid the Government £103.7 million in 2010-11 and £110.1 million in 2011-12. It is fair to say therefore that some of that revenue could be re-invested into the infrastructure of the route.

I would be most grateful to the Minister if he focused on three key things that need to change. First, I would like to re-emphasise my belief that the invitation to tender document must be improved. At a time when we need to boost our economy and get Britain going again, it is all the more important that our rail services are as good as they can be. Allowing broadly the same number of trains to run between end-to-end destinations is simply not good enough. We need a guarantee that our service will improve, not a document that allows it to get worse.

Secondly, there is a vast need for infrastructure improvement due to the single track between Worcester and Hereford. It is clearly an enormous hindrance to an efficient running timetable and must be considered. Working with Network Rail, we could double parts of the line, which would undoubtedly help to secure more direct London-to-Hereford train services. Thirdly, and crucially, my priority is to ensure that there are more and better direct services on the London-to-Hereford route. That needs to happen now, without obstruction or delay.

I know that the Minister understands the difficulties my constituents face daily. I am confident that a new train operating company can transform the services. The appointment of the new operator must of course be taken very seriously, and so should the terms set out in the invitation to tender document. I recognise how difficult it is for him to do this, but he is a highly skilled and brilliant politician and this is his moment to rise to the challenge, to deliver for the people, to soar with the eagles and to ensure that we deliver on our election pledges for the environment, for growth, for Britain.

16:41

[The Parliamentary Under-Secretary of State for Transport (Norman Baker)]

I am grateful for the opportunity to reply to that wonderful peroration from my hon. Friend the Member for North Herefordshire (Bill Wiggin), whom I congratulate on securing the debate. He is now free to make his points because, I am sorry to say, he is no longer with us at the Department for Transport in the capacity in which he served previously.

As my hon. Friend said, on 27 July this year the Government issued the invitation to tender for the new Great Western franchise—Great Western, of course, being the description of the area, rather than implying which company might deliver the service. It is the future franchise operating train services on the route between London Paddington and Hereford, so the debate is timely and I welcome his contribution to it. The Great Western rail network plays an important role in the economy of the many parts of England and Wales it serves. Rail connectivity provides crucial support for jobs and growth, and delivering high-quality rail services is a means of tackling road congestion and pollution by encouraging modal shift.

My hon. Friend set out with great clarity the importance of the Great Western rail network to his constituency. The Government have prioritised investment in our rail network in response to passenger concerns about overcrowding and to support jobs and growth. The programme of capacity expansion to which we are committed is bigger than any seen since the Victorian era. He will be aware that there are now more people travelling on the network than at any time since 1929, even though the network is much reduced in size. I am happy to be able to tell him that the usage figures for Hereford station in his constituency show that in 2007-08 fewer than 900,000 people used the station annually, but the figure had reached over 1 million by 2010-11, so there has been significant growth in passenger numbers. The figures for Ledbury station show that in 2007-08, there were 162,000 annual usages, up to 189,000 for 2010-11; and the numbers for Colwall station have risen from 56,000 to 61,000. All three stations on the line, particularly Hereford, have shown significant growth, but I have not mentioned Leominster.

[Bill Wiggin]

Leominster is on a slightly different line. A problem we face at the end of the line is the failure to collect fares, so although the Minister’s figures show an increase, the actual increase might be even greater, because there has been such an appalling effort made to collect the fares and therefore the statistics that go with them.

[Norman Baker]

It is obviously right that people pay their fares and we take fare evasion seriously. It is not only a loss to the railway, but unfair on the passengers who pay for their tickets properly. The Department has focused on it, not least through rolling out smartcard arrangements and gating across franchise areas.

A number of the most ambitious and important changes will take place in the Great Western franchise area, so if you will forgive me, Mr Hollobone, I will refer to the line as a whole, as it is relevant to my hon. Friend’s constituency. The Government’s announcement that the Great Western main line between London and Oxford, on the route to Hereford, will be electrified has been warmly welcomed by all; that will be taken through to Newbury, Bristol and Swansea as well, and brand-new intercity express trains are planned for those routes. The bi-mode version of the new trains will be able to use electric power where new electrification has been installed, and run under their own power on sections of line beyond, so it is entirely possible that the new franchisee will want to run intercity express programme services with new trains to destinations such as Hereford. I am sure that my hon. Friend would welcome that if it came to pass. The Reading station area is being remodelled and the station itself rebuilt to modern standards, which will reduce delays. The Crossrail tunnels are already under construction there.

Ultimately, those projects will generate major benefits for passengers and for the economy of the area served by the new franchise, but delivering such an improvement programme is bound to have a short-term impact on services, so a major challenge for the new operator will therefore be to facilitate the efficient delivery of the programmes and maximise the benefits they can offer for passengers once completed, while minimising disruption during the introduction of the improvements. Franchise bidders will be expected to present robust proposals for minimising disruption during the upgrade works, with a keen focus on the needs of passengers.

This is not just “jam tomorrow”. A success story of Britain’s railways is the large number of additional passengers now using them, although that can of course bring crowding, and overcrowding. As the Department for Transport’s statistics show, train services on this part of the network have some of the highest levels of crowding, which my hon. Friend’s constituents have no doubt mentioned to him. I am therefore pleased to say that this year, additional carriages, funded by the Government, have been introduced on to First Great Western train services. The busiest services operated by high-speed trains, including some to and from Worcester, now have an additional standard class coach. I hope that my hon. Friend welcomes the recent arrival of five fully refurbished class 180 trains, which now operate nearly all services to and from Hereford and Worcester not operated by high-speed trains, bringing a much improved level of comfort for passengers. The turbo trains displaced from those services are being used to add extra capacity to First Great Western train services closer to London.

The Government’s plans are not limited to big, attention-grabbing schemes such as those. We recognise that the wider improvements will not benefit the largest number of passengers unless accessibility at stations is improved. The Government’s access for all scheme continues to fund improvements to access for disabled people at stations. I am pleased to say that improvements to accessibility are planned at stations on the route, with lifts and a new footbridge for Hereford; improvements, including a ramp, at Malvern Link station; and work under way to establish how lifts can be introduced to Worcester Shrub Hill station. Elsewhere, lifts have been installed at Leominster station in my hon. Friend’s constituency—indeed, he has been assiduous in pressing for that.

Shortly after taking office, the Government consulted on plans to reform the way the rail franchising system operates, and this is perhaps coming to the kernel of the issues my hon. Friend wanted to raise today.

[Bill Wiggin]

Before the Minister leaves the access for all programme, I want to say that I am grateful for the lifts in Leominster. They were supposed to be monitored so that drunk people do not damage them and people do not get locked in. Unfortunately, they were not monitored as they should have been and people have been locked in. Can we make sure that the monitoring happens, and will he include Ledbury in the next round of the access for all scheme, because the demand there is equally important?

[Norman Baker]

I am sorry to hear that there has been a problem with the lifts at Leominster. We will certainly pass on those comments to the train operating company and Network Rail. I am deeply surprised to find that my hon. Friend has anything approaching anti-social behaviour in his lovely constituency; nevertheless, I will take away what he says. We have allocated a further £100 million under the access for all programme in the forthcoming control period, and I will ensure that the position at Ledbury is examined at part of that process for ongoing works.

Returning to the franchising system, the new Great Western operator is being given greater flexibility to respond to customer demand in a commercial way within a framework set by the franchise that protects key outcomes for passengers, taxpayers and the economy. I will mention in passing that both coalition parties endorsed that general approach in the run-up to the general election and subsequently in the coalition agreement. The requirements on the new operator are set out in the invitation to tender published on 27 July. Our starting point for the development of the new train service specification has been the current level of train services, rather than the lower contracted minimum in the existing First Great Western franchise agreement. My hon. Friend will know that services have been added since the last franchise was set, so it is important to recognise that we are taking the current high level rather than the low level that existed under the previous Government.

[Bill Wiggin]

I am grateful to the Minister for his explanation. I urge him to ensure that the high level goes to the end of the line. My understanding is that the tender document insists on a number of services per day and increases the number of those to Worcester and Malvern, but it needs to reach the end of the line at Hereford and not just raise the game halfway. That is really the nub of the argument.

[Norman Baker]

I take my hon. Friend’s point and I will come on to give more details about how the franchise system will work in respect of his constituency.

We expect the franchise to include requirements on passenger satisfaction—for example, in relation to stations—and we have set stretching objectives for managing the changes I described a moment ago to deliver an operationally sound and efficient railway that provides enough capacity for passengers. The new franchise will be for 15 years, and we believe that the increased certainty will encourage private sector investment in the railways. A longer franchise should also make it easier for the new operator to build the long-term working relationships with Network Rail and other stakeholders, such as local authorities, that are crucial to an efficient and successful railway. The initial alliancing project in South West Trains has shown good initial results.

Part of the Government’s approach is to provide greater flexibility for operators to react to their passengers’ changing needs as well as to commercial opportunities, and to support operators in delivering a more efficient operation. That is why we have adopted and developed a less prescriptive approach to franchise specification that seeks to avoid the micro-management of the past while protecting key services. In doing so, we have sought to balance the needs of passengers, the railway industry and the wider economy.

The Government believe it is right to give operators greater say in how to deploy their train fleet more efficiently, for example—this is my hon. Friend’s point—by permitting a connecting service where a through train is currently provided and by redefining the relationship between journey flows and station calls. In respect of my hon. Friend’s constituency, bidders for the franchise must continue to provide, as an absolute minimum, 16 services in each direction between London and Worcester each weekday. However, we are aware that about 60% of passengers from London to Hereford choose to change trains at Newport or Birmingham, so we considered whether it is appropriate to prescribe the detail of the exact current service pattern for the next 15 years. Accordingly, we decided that, of the 16 trains to Worcester, eight must provide easy connections to Great Malvern and five to Hereford, as a minimum. The connection must be to another of the franchisee’s services, not to a different operator. As such, operators will need to consider whether to run through-trains or to lease additional rolling stock to provide a connecting train, if that is what they wish to do. As I said, it is entirely possible that through-services will prove to be the more viable option for those operators. If there is a connection, it must not require excessive waiting time and must provide an accessible route that can be navigated easily by passengers with luggage, those travelling with children, or people with disabilities.

Operators are, of course, free to continue to provide through-journeys or a higher frequency of services, as has recently been illustrated by the west coast franchise competition. In that respect, the Government’s policy is to mandate today’s service levels more flexibly and to encourage bidders to propose investment and improvements over the longer term of the franchise. We will look closely at bidders’ proposals later this year, but in the meantime I encourage my hon. Friend to speak to the bidders to set out what he wants for his constituents.

In addition, we have mandated that, as a minimum, Worcester should receive 85 daily calls, measured as station departures—47 at Shrub Hill and 38 at Foregate Street. A minimum of 71 calls per week day will be required for Malvern Link, Great Malvern, Colwall, Ledbury and Hereford stations, but the operator can allocate them in a way that best meets demand. That is designed to guarantee a comparable level of service to today’s, without prescribing the timetable itself.

My hon. Friend is concerned that the new franchise arrangements may lead to a diminution of services in his constituency. By not micro-managing or setting in stone exactly what has to be delivered, we are giving bidders an opportunity to provide an improved level of service for his constituency. Indeed, with railway numbers increasing year on year, as they have been, it is important to give space to a successful bidder to improve services and if possible, if they choose to do so, within the franchise arrangements to increase the number of through-services. That is not an impossible outcome. We are engaged in the biggest rail building programme since Victorian times. We are looking at how to increase, not decrease, the extent to which people can travel by train. If I may say so, we should therefore see the arrangement not as a threat, but as an opportunity for franchise bidders to develop services that do more to meet the needs of passengers than would a rigorous, rigid franchise arrangement.

[Bill Wiggin]

I fully accept and welcome the Minister’s intentions. What he is trying to do is very good. Does he agree that the easiest way to demonstrate that flexibility and achieve improvement is simply to increase the number of compulsory journeys, by perhaps just one, to the very end of the line? Thus, on paper, there would be a minimum improvement, even if train operating companies failed to take advantage of all the flexibility that he has so kindly given them. That way, it is beyond debate—it would be clear that a sixth journey to Hereford is a raising of the standards and that, beyond that, everything else is a bonus. I think that that is what he is hinting at.

[Norman Baker]

I want to answer my hon. Friend’s three key points before we finish. The invitation to tender has been issued; it was dealt with by the then Minister of State, who is now the Secretary of State for Northern Ireland. In a sense, that moment has passed: the invitation to tender cannot sensibly be withdrawn and nor should it be. That would cause all sorts of problems for the Department and, indeed, for the bidders, so it is not an option.

I recommend that my hon. Friend does what many local Members do—I, too, have done it, in absenting myself from departmental decisions on my local franchise—which is to engage with bidders by talking to them and putting the case that he wants to see for his particular lines. I have certainly found being able to put the case for what I want in my patch to be a rewarding experience, and that bidders have been quite receptive. In this new world, in which we are giving franchise bidders more flexibility to develop services, I would not underestimate the opportunity for bidders, which they welcome, in talking to local Members, understanding what they want and building that into their plans. He and other local Members have that key point of influence where they can talk to franchise bidders and influence them accordingly.

On infrastructure improvements, my hon. Friend will be aware that, as I have mentioned, we are engaged in huge works across the country to improve the railway network. There is always enthusiasm about looking at any scheme that provides value for money. As I understand it, a 15-year period potentially allows a bidder to include in its bid that particular improvement—a passing place at Ledbury—as part of the offer that it makes to the Department. Bidders are putting forward such schemes in other bids, and he could encourage his bidders to do so. Alternatively, he could engage with Network Rail in relation to both what is left in control period 5, or indeed what is in control period 6, to make sure that such an improvement is properly programmed in for future work. We are now seeing significant improvements to track capacity across the country, including redoubling between Swindon and Kemble, so the concept of providing more capacity is certainly one that Network Rail is up for at the moment. There is more of an open door for such schemes than there has been for many years.

On direct services to Malvern, I cannot do anything about the invitation to tender that has been issued. However, I can say that, personally, I think there is a good case for more direct services, and I hope that the franchise bidders will reflect that in their bids. No doubt, they will listen to my hon. Friend’s comments and my response, and I hope that that will be reflected in the sort of bids that he wants, as and when they come into the Department.

Question put and agreed to.

16:58

Sitting adjourned.