House of Commons

Wednesday 28th November 2012 Commons Chamber

Wednesday 28 November 2012

The House met at half-past Eleven o’clock

Prayers

Wednesday 28th November 2012 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Wednesday 28th November 2012 Commons Chamber

The Secretary of State was asked—

[Andrew Stephenson (Pendle) (Con)]

1. What recent discussions he has had with his ministerial colleagues on the prospects for the energy generation sector in Wales.

[The Secretary of State for Wales (Mr David Jones)]

Before I answer the question, Mr Speaker, with your permission I would like to express my sympathy—and, I am sure, that of the whole House—for the victims of the flooding in north Wales and our thanks for the hard work of the emergency services. I propose to visit the affected area tomorrow.

I have regular discussions with ministerial colleagues on the prospects for the energy generation sector in Wales, particularly in relation to the recent good news that Horizon Nuclear Power has been bought by Hitachi, helping to secure the future for new nuclear on Anglesey.

[Andrew Stephenson]

I thank my right hon. Friend for that answer and join him in paying tribute to our emergency services. On the specific issue of nuclear power, in my constituency of Pendle we have the excellent Graham Engineering, which is part of the nuclear supply chain and supports more than 300 local jobs. In light what he has just said about the Hitachi-Horizon announcement and nuclear generation in Wales, can he say more about supply chain job creation in both Wales and other parts of the UK?

[Mr Jones]

The announcement by Hitachi provides an enormous opportunity for all those involved in the nuclear industry in this country, particularly those in the supply chain. I am heartened that Hitachi has already said that up to 60% of the total cost of the first nuclear reactor will come from British content. I have no doubt that there is a tremendous opportunity for companies such as those in my hon. Friend’s constituency.

[Albert Owen (Ynys Môn) (Lab)]

I welcome the support the Secretary of State has given to Horizon and for the takeover by Hitachi. To get 21st-century technologies such as offshore wind and nuclear power on to the grid, we need to improve the infrastructure, and 21st-century infrastructure should include subsea and subsea stations. Will the Secretary of State agree to meet me to discuss the proposals from National Grid that are in front of the public in north Wales?

[Mr Jones]

I commend the hon. Gentleman for the work he has done in seeking to obtain new nuclear on Anglesey. He knows that I have always been anxious to work closely with him on all aspects of nuclear generation on Anglesey and of course I am prepared to meet him, because he has raised a very important point.

[Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC)]

As the Secretary of State knows, Wales is very well placed for energy generation and the Swansea bay tidal lagoon project plans to offer educational services to the university in Swansea to foster skills in green energy creation. Will he commend the project and those similar to it for their commitment to creating jobs and local expertise in Wales?

[Mr Jones]

The right hon. Gentleman makes an important point. Green energy presents enormous opportunities to Wales and I commend the project he mentions. We now have the green investment bank, which has just been launched today. It will provide the most enormous opportunity to leverage investment into that important future sector.

[Mr Llwyd]

I thank the Secretary of State for being so positive. He knows that renewable energy generation in Wales increased by 58% between 2004 and 2010 and employs hundreds of people, including in the solar panel industry in mid-Wales, and of course we have seen the developments on Ynys Môn, the energy island. Does he agree that now is perhaps the time for us in Wales to showcase our skills, our resources and our prospects to the rest of the world at a green energy summit? If he is so minded, would it not be a good thing to place that summit in the enterprise zone at Trawsfynydd?

[Mr Jones]

Actually, I had not thought of that, but it is an excellent idea that we should take further. I was speaking to the leader of Gwynedd council, Councillor Dyfed Edwards, the other day and discussed the important enterprise zone at Trawsfynydd. Let us explore the prospects of a summit at Trawsfynydd.

[Glyn Davies (Montgomeryshire) (Con)]

2. What discussions he (a) has had and (b) plans to have with the Welsh Government on effective ways of increasing organ transplantation in Wales.

[The Parliamentary Under-Secretary of State for Wales (Stephen Crabb)]

We continue to work closely with the Welsh Government on their proposal to introduce an opt-out system of consent for organ donation in Wales. We have made considerable progress across the UK over the past four years with organ donor numbers rising by about 40% over the baseline year of 2007-08.

[Glyn Davies]

Since the organ donation taskforce was set up by the previous Prime Minister—it reported in 2008—there has been a massive increase in organ donation across the UK, particularly in Wales, where the level of donation is higher. What plans does my hon. Friend have to discuss with the Department of Health at Westminster and the Welsh Government the ways in which we can work together to build on that success?

[Stephen Crabb]

Extensive discussions are under way involving all the Departments and Ministers that my hon. Friend mentioned with a view to achieving further increases in organ donation across the UK. We have yet to see the detail of the Welsh Government legislation, but we hope it will contribute to a further increase, not cut across it.

[Paul Flynn (Newport West) (Lab)]

Hon. Members may recall the visit of Mr Matthew Lammas of Newport to the House just over a year ago. At the age of just 23, he gave a harrowing account of his wait, the frustrations and delays, for a heart transplant. Tragically, Matthew died two months ago, but is not the example of the frustration and delay that he faced a powerful argument for supporting the proposals of the Welsh Assembly Government?

[Stephen Crabb]

The hon. Gentleman brings a powerful example to the House of why we need to do more at different levels, in both the UK and the Welsh Governments, to increase the number of organ donors across the UK, and to that end we look forward to seeing the detail of the Welsh Government legislation.

[Mr Speaker]

I call Mr Roger Williams.

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

Question 3, Mr Speaker.

[Mr Speaker]

I did not realise the hon. Gentleman wished to ask Question 3. I shall call Nia Griffith first. We will get to the hon. Gentleman; we are saving him up.

[Nia Griffith (Llanelli) (Lab)]

I very much welcome the Welsh Government’s initiative of introducing legislation to increase organ donation, but after the Supreme Court justices described as “bizarre” the referral by the Secretary of State to the court of the Welsh Government’s byelaw legislation, will the Minister give the House unreserved assurances that the Wales Office will not delay this life-saving legislation and will not waste taxpayers’ money by making any more spurious referrals to the Supreme Court?

[Stephen Crabb]

My Department and the Department of Health have been in close discussion with the Welsh Government about the detail of the legislation, and we are optimistic that all outstanding devolution issues will be addressed before publication of the legislation.

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

3. What steps he plans to take to implement the recommendations of the first report of the Commission on Devolution in Wales published in November 2012.

[Mr Mark Williams (Ceredigion) (LD)]

5. What steps he plans to take to implement the recommendations of the first report of the Commission on Devolution in Wales published in November 2012.

[The Secretary of State for Wales (Mr David Jones)]

I welcome the publication of the commission’s first report. It is an important piece of work that is thorough and wide-ranging, and I am giving each of the 33 recommendations my full consideration in consultation with Treasury and other Cabinet colleagues. The Government will respond formally in due course.

[Roger Williams]

I, too, congratulate Paul Silk and his team on the excellent work they have done and on the report they produced. Will the Secretary of State make a commitment to introduce legislation in this Parliament to carry forward some of the recommendations in the Silk report?

[Mr Jones]

This matter has been referred to Her Majesty’s Treasury and is the subject of negotiations with the Welsh Government. I can confirm that the legislation will be looked at with a view to proceeding as expeditiously as possible.

[Mr Mark Williams]

The Silk Commission makes a compelling case on the devolution of partial income tax to the Assembly. How swiftly does the Secretary of State believe that we can proceed on this, given the apparent reluctance of the First Minister to countenance reform before full Barnett reform, despite a very good agreement that was brokered in October?

[Mr Jones]

The First Minister’s position is a matter for him, but Paul Silk makes it clear that the commission recommended the devolution of income tax-varying powers within different bands, subject to agreement between the Welsh and the British Governments on issues such as funding. That matter must continue to be looked at.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

Does the Secretary of State agree that those who argue that Wales does not have the tax base to partially devolve income tax are fiscally illiterate?

[Mr Jones]

I do not know whether I would go that far, but clearly there is an argument to be made, and it is under consideration.

[David T. C. Davies (Monmouth) (Con)]

Does the Secretary of State agree that if the Assembly is given, and uses, powers to raise unlimited amounts of income tax, the effects on the Welsh economy could be devastating?

[Mr Jones]

I think it unlikely that the Assembly could raise unlimited amounts of tax, because it would need unlimited levels of income, which everyone would agree it does not have. Paul Silk’s work is important, and it deserves careful consideration, and that is what is happening at the moment.

[Owen Smith (Pontypridd) (Lab)]

May I first add my words of sympathy and best wishes to those who have been affected by the floods in Wales, and my thanks to the emergency services and volunteers, and to the Secretary of State for going there tomorrow?

As the Secretary of State will know, the Silk commission’s report is a very important document that has produced recommendations relating to air passenger duty and income tax—issues that affect not just Wales, but the whole of the UK. Does he therefore agree that the whole House ought to be able to debate those issues, and can he explain why he seems to want to limit that debate to the Welsh Grand Committee?

[Mr Jones]

I believe that we should have an early debate in the Welsh Grand Committee on this important issue. The hon. Gentleman will know that my office is in touch with his office and the offices of the leaders of other parties with a view to agreeing that. It should be done as quickly as possible. On the question of a further debate, that is clearly a matter for the Treasury, the Wales Office and the Welsh Assembly Government to progress the work that is being done to discuss the issue, and at that stage we should consider a further debate, which could potentially be on the Floor of the House. Certainly, any legislation would require primary legislation, which would have to be a matter for the House to deal with in the usual way.

[Owen Smith]

I think the Secretary of State said he is in favour of a debate on the Floor of the House, which is welcome, as his predecessor committed to holding such a debate when we last discussed the Silk commission. In anticipation of that debate and outside the Silk commission, so to speak, the right hon. Gentleman will know that borrowing powers are extremely important to the Welsh Government. Can he confirm that the Silk commission’s recommendation that £200 million-worth of non-income tax powers would constitute, in his view, an independent income stream that would facilitate borrowing for the Welsh Government?

[Mr Jones]

That matter is under active consideration between the Welsh Government, the Wales Office and the Treasury. The hon. Gentleman will have seen the announcement that was made at the end of October and will have been able to draw his own conclusions.

[Andrea Leadsom (South Northamptonshire) (Con)]

4. What recent assessment he has made of repatriating from the EU regional policy as it relates to Wales.

[The Parliamentary Under-Secretary of State for Wales (Stephen Crabb)]

In July my right hon. Friend the Foreign Secretary announced to the House the launch of the Government’s review into the balance of competences of the European Union. The review will look at the scope of the EU’s competences as they affect the UK and what this means for our national interest. The review will be completed in 2014.

[Andrea Leadsom]

As the Government’s position, set out in the fifth cohesion report in January 2011, is that wealthier states should not receive structural and cohesion funds, what assessment has my hon. Friend made of the impact on the Welsh regions of repatriating regional policy to the UK?

[Stephen Crabb]

The Government have made consistently clear our belief that wealthier member states have both the ability and the capacity to finance their own regional development policy and hence do not require structural funds. However, as the Prime Minister made clear on Monday afternoon, we also recognise that the more prosperous member states, such as the UK, need to be given time to make the adjustment and so should continue to receive funding during the 2014-20 programming period. The Government will consider the right balance of competences in terms of regional policy in the autumn of 2013 as part of our review.

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

Does the Minister accept that Wales does not get its fair share of UK funding in either capital or revenue from Barnett, that the money paid, for instance, to Swansea university—£60 million from the European Investment Bank and £30 million from convergence—helps Wales to succeed, and that we would like to see the UK Government help Wales in the same way?

[Stephen Crabb]

I do not accept that Wales is underfunded. This Government have demonstrated in our announcements on investment in rail infrastructure in Wales and broadband infrastructure in Wales that we are providing funding over and above the Barnett formula for Wales, so I do not accept the hon. Gentleman’s proposition at all.

[Mr David Hanson (Delyn) (Lab)]

6. What assessment he has made of the effect of proposed changes to housing benefit in Wales.

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

11. What assessment he has made of the likely effect of changes to housing benefit on people in Wales.

[The Parliamentary Under-Secretary of State for Wales (Stephen Crabb)]

Information on the expected impact in Wales and across Great Britain of our housing benefit reforms is set out in the relevant impact assessments.

[Mr Hanson]

Many of my constituents who are in work on low incomes face an unpalatable choice in April next year. Do they face unaffordable increases in rent, do they downsize to non-existent one-bedroom flats, or do they make themselves homeless? What advice would the Minister give, particularly at a time when the Government are giving a tax cut to millionaires?

[Stephen Crabb]

Many, many people in work face exactly the same difficult choices about their living arrangements as the ones that the right hon. Gentleman described. One of the central principles of our reforms is that people receiving benefits should have to make the same practical decisions about their living accommodation as people in work.

[Chris Evans]

Many disabled constituents have come to me because, despite having had to make adjustments to their homes simply to accommodate their disability, they now face being kicked out for having an extra bedroom. Does the Minister think that is fair in the 21st century?

[Stephen Crabb]

The Government are making available transitional funds to help people who have made significant adaptations to their homes in order to cope with serious disability—exactly the circumstances the hon. Gentleman describes—because we recognise that there is a vulnerability and we want to protect those people.

[Jonathan Evans (Cardiff North) (Con)]

Does my hon. Friend recognise that the housing benefit budget in this country is £23 billion and that 5 million receive it? With a budget of that size, surely it is appropriate that the Government are demonstrating to the taxpayer that they are working to get value for money.

[Stephen Crabb]

My hon. Friend is exactly right, but our reforms are based not just on the need to achieve value for money for the taxpayer. Underpinning our welfare reforms is the need to elevate the principle of making work pay and to ensure much greater fairness in the way our welfare system is delivered.

[Alun Cairns (Vale of Glamorgan) (Con)]

7. What recent discussions he has had with UK Trade & Investment on attracting investment to enterprise zones in Wales.

[The Secretary of State for Wales (Mr David Jones)]

When I met the chief executive of UKTI last month we discussed how to attract more investment into Wales, including via enterprise zones.

[Alun Cairns]

The progress of enterprise zones in Wales has been somewhat patchy, compared with those in England. Will my right hon. Friend agree to work with the enterprise zone in St Athan in seeking to attract major international airlines because of its policy on aerospace?

[Mr Jones]

We would like to see faster progress in the Welsh enterprise zones. Having said that, my hon. Friend is entirely right that St Athan is well placed as an enterprise zone, and I am hopeful that major airlines will be attracted to the facilities it offers.

[Nick Smith (Blaenau Gwent) (Lab)]

14. With 11 jobseeker’s allowance claimants chasing every vacancy, we need jobs in Blaenau Gwent. A planning application for a world-class motor sport project will be kick-started this week. Will the Secretary of State help the investors to meet the Treasury to nail down the tax incentives needed for that game-changing development?

[Mr Jones]

I commend the hon. Gentleman for his efforts on behalf of that enterprise zone. He will know that I have met the potential operators of the race track. I understand that bids for enhanced capital allowances have been made by the Welsh Government to HM Treasury. As he knows, I am always happy to discuss these issues with him in person.

[Wayne David (Caerphilly) (Lab)]

8. What recent estimate he has made of the number of long-term unemployed people in Wales; and if he will make a statement.

[The Parliamentary Under-Secretary of State for Wales (Stephen Crabb)]

The economy is our top priority, and I am very pleased that unemployment in Wales fell by 5,000 over the last quarter and by 14,000 over the last year. In October 2012 there were 21,000 people in Wales who had been claiming job seeker’s allowance for 12 months or longer.

[Wayne David]

Does not the fact that long-term unemployment in Wales has risen for 17 consecutive months demonstrate that the Work programme has been an abysmal failure?

[Stephen Crabb]

It demonstrates nothing of the sort. The statistics published yesterday for the Work programme should not be the basis on which its overall success is judged, because it is a long-term programme. Many of the biggest gains from the programme will be seen in the second year, and statistics will follow this time next year.

[Hywel Williams (Arfon) (PC)]

Recently in Caernarfon 300 people applied for three jobs at a supermarket checkout and 30 people applied for a junior secretarial post, some of them with higher degrees, and I could give further examples. Why are the Government punishing people who are looking for work when that work is not to be found?

[Stephen Crabb]

We are not punishing people who are looking for work at all; we are incentivising them to go out and find work. I remind the hon. Gentleman that unemployment is falling right across Wales. There are pockets where more needs to be done, particularly in rural and isolated areas, but he should not doubt our ambition to see all of Wales enjoy some of the good things we are currently seeing in the Welsh labour market.

[Mr Philip Hollobone (Kettering) (Con)]

9. What departmental savings he plans to make in 2013-14.

[The Secretary of State for Wales (Mr David Jones)]

The Wales Office will be making savings of around £550,000 in 2013-14, which amounts to a 10% saving in its administration budget.

[Mr Hollobone]

With Wales, Scotland and Northern Ireland now having Assemblies or Parliaments of their own, many of us would like to see the three territorial Departments rolled into one to save taxpayer funds. Given that that is not part of the coalition’s programme, will my right hon. Friend at least look at more joint working and shared services between the three Departments so as to save money for the taxpayer?

[Mr Jones]

I am pleased to say that that joint working already takes place. In fact, the Wales Office is working actively with the other territorial offices to identify shared working arrangements and we also have a shared parliamentary team. I must take issue with my hon. Friend: I think that Wales benefits immensely from having a Wales Office here at Westminster and I would not want to see it submerged in a quasi-colonial office.

[Stephen Mosley (City of Chester) (Con)]

10. What discussions he has had with (a) his ministerial colleagues and (b) Welsh Government Ministers on the development of enterprise zones in Wales and the Welsh borders.

[The Secretary of State for Wales (Mr David Jones)]

I am determined that we should maximize the opportunities that enterprise zones can offer in attracting private sector investment and growth into Wales. I am working with ministerial colleagues and the Welsh First Minister to secure this.

[Stephen Mosley]

My right hon. Friend will be aware of the proximity of the Deeside enterprise zone with those in Wirral Waters and Daresbury. Does he think there is a case for those three enterprise zones to work together to maximise the potential for economic growth in the economic sub-region?

[Mr Jones]

Yes. As my hon. Friend has said, the Deeside enterprise zone is close geographically to that in Wirral Waters, and I believe that there is a tremendous opportunity for synergy between the two zones. In fact, I have already had discussions with the chairman of the Deeside enterprise zone to see what can be done to advance that.

[Mr Stephen O’Brien (Eddisbury) (Con)]

What processes does the Secretary of State have in place to try to resolve some of the issues that Welsh border constituencies have with access to the NHS, road maintenance and other services? They are finding it very difficult to resolve such issues through their local MPs, because the Welsh Assembly and Government will not give time to consider them.

[Mr Jones]

My hon. Friend raises an important issue. I believe that, in his part of the world, the Mersey Dee Alliance is an appropriate focus and I was very heartened by the proposals in Mrs Elizabeth Haywood’s report to the Welsh Government to create a cross-border city region focused on the Mersey Dee Alliance area.

[Guy Opperman (Hexham) (Con)]

12. What steps he is taking to tackle fuel poverty in Wales.

[The Parliamentary Under-Secretary of State for Wales (Stephen Crabb)]

The Government are committed to tackling fuel poverty and helping people in Wales and across the UK, and especially those in low-income vulnerable households, to heat their homes more affordably.

[Guy Opperman]

I thank the Minister for that answer. The Office of Fair Trading looked at fuel poverty in both Wales and Northumberland. Does the Minister agree that the energy reforms will bring about real change for hard-pressed consumers?

[Stephen Crabb]

I absolutely agree with my hon. Friend. The Government cannot, of course, control volatile energy prices on the world markets, but what we can do is ensure that consumers in the UK get access to the very best deals on their energy bills. That is what we are committed to doing, as demonstrated by last week’s announcement by my right hon. Friend the Energy Secretary.

[Mr Speaker]

Order. A very large number of noisy conversations are taking place in the Chamber. Let us have a bit of order for Mr Guto Bebb.

[Guto Bebb (Aberconwy) (Con)]

13. What recent discussions he has had with the Secretary of State for Transport on capital investment in rail infrastructure in Wales; and if he will make a statement.

[The Secretary of State for Wales (Mr David Jones)]

I discussed railway infrastructure with my right hon. Friend the Secretary of State for Transport when I met him last month. Last week I met local authorities and business leaders in north Wales to confirm my commitment to progressive electrification of the railways in Wales.

[Guto Bebb]

I was disappointed to read in a recent letter from the Minister of State, Department for Transport, my right hon. Friend the Member for Chelmsford (Mr Burns) that the Welsh Government has not prioritised the electrification of the north Wales line. In view of the fact that the Welsh Government do not seem to be interested in north Wales, will the Secretary of State provide an assurance that the Wales Office will prioritise expenditure on the north Wales line in due course?

[Mr Jones]

As my hon. Friend will know, only last Friday I held a meeting in Llandudno, the consequence of which was the formation of a working group to work towards the electrification of the north Wales coast line. The group has started its work and I hope that it will receive support from hon. Members in this House.

[Ian Lucas (Wrexham) (Lab)]

Far from the Assembly’s Transport Minister not being interested in north Wales, he represents a north Wales seat and has been communicating with me about electrifying the Wrexham-Bidston line. Will the Secretary of State please join our communication and work with us to improve public transport networks in north-east Wales?

[Mr Jones]

The Wrexham-Bidston line was also a matter under discussion last Friday. I mention again the two enterprise zones in Wirral Waters and Deeside, which would benefit enormously from the electrification of that line. I am very supportive of what the hon. Gentleman says.

[Andrew Selous (South West Bedfordshire) (Con)]

15. What recent discussions he has had with his ministerial colleagues on increasing private sector employment in Wales.

[The Parliamentary Under-Secretary of State for Wales (Stephen Crabb)]

The Government have taken action to protect the economy and have set out a comprehensive strategy to achieve strong, sustainable and balanced growth. Because of this action, we have seen over 1 million private sector jobs created across the UK since we came to power. [Interruption.]

[Mr Speaker]

Order. The House is now immensely disorderly. In the interests of the hon. Gentleman, let us have a bit of order.

[Andrew Selous]

In two years, this Government have created 1.2 million net new private sector jobs—nearly double the amount that the previous Government created in 10 years. How have we done in Wales?

[Stephen Crabb]

I am very pleased to inform the House that we are seeing similar good progress in Wales. The House of Commons Library tells me that an estimated 60,000 additional private sector jobs have been created in Wales since May 2010.

The Prime Minister was asked—

[Henry Smith (Crawley) (Con)]

Q1. If he will list his official engagements for Wednesday 28 November.

[The Prime Minister (Mr David Cameron)]

Before I answer, I am sure that the whole House will wish to join me in expressing our sympathies to the victims of the appalling flooding that we have seen across our country in recent days, and in giving support and praise to our emergency services—the police, fire and ambulance services—and to the Environment Agency, local councils, voluntary bodies and good neighbours, who have all done extraordinary things to help those in distress.

This morning I had meetings with ministerial colleagues and others. In addition to my duties in this House I shall have further such meetings later today.

[Henry Smith]

The whole House will of course endorse the words of the Prime Minister in paying tribute to our fantastic emergency services in responding to the terrible floods, and those who have been victims of them.

Tomorrow sees the publication of the Leveson report. Does my right hon. Friend agree that those who should be uppermost in our minds are the victims, unfairly, of previous media intrusion? Does he also agree that the status quo needs updating?

[The Prime Minister]

My hon. Friend is absolutely right in what he says. The status quo, I would argue, does not just need updating; the status quo is unacceptable and needs to change. This Government set up Leveson because of unacceptable practices in parts of the media and because of a failed regulatory system. I am looking forward to reading the report carefully, and I am sure that all Members will want to consider it carefully. I think we should try to work across party lines on this issue. It is right to meet other party leaders about this issue, and I will do so. What matters most, I believe, is that we end up with an independent regulatory system that can deliver and in which the public will have confidence.

[Edward Miliband (Doncaster North) (Lab)]

Let me associate myself entirely with the Prime Minister’s remarks about the victims of flooding. All my sympathies and the sympathies of Labour Members go to those victims, and our thanks go to the emergency services and the Environment Agency for the fantastic job that they do.

Let me also associate myself with the Prime Minister’s remarks about the Leveson report, which will be published tomorrow. I hope that we can work on this on an all-party basis. This is a once-in-a-generation opportunity for real change, and I hope that this House can make it happen.

When the Work programme was launched in June 2011, the Prime Minister described it as

“the biggest and boldest programme since the great depression.”

Eighteen months on, can he update the House on how it is going?

[The Prime Minister]

Yes, I can update the House. Over 800,000 people have taken part in the Work programme, over half of whom came off benefits. Over 200,000 people have got into work because of the Work programme. It is worth remembering that the Work programme is dealing with the hardest to employ cases in our country; these are adults who have been out of work for over a year and young people who have been out of work for over nine months. On that basis, yes, we need to make further progress, but it is the right programme.

[Edward Miliband]

But the scheme is supposed to create sustained jobs for people, and in a whole year of the programme just two out of every 100 people got a job—that is a success rate of 2%. The Government estimate—[Interruption.] I do not know why the part-time Chancellor is chuntering—yesterday in Cabinet he was telling off the Work and Pensions Secretary for the failure of the Work programme.

The Government estimate that without the Work programme—this is the basis on which they did the tender—five out of every 100 people would get a job. Is it an historic first to have designed a welfare-to-work programme in which someone is more likely to get a job if they are not on that programme?

[The Prime Minister]

I have to say to the Leader of the Opposition that I listened very carefully to what he said, and what he said was wrong. He said that only 2% of people on this programme got a job. That is not correct. More than 800,000 people have taken part, and more than 200,000 have got into work. The specific figure that he referred to concerned people continuously in work for six months—but of course, he is only looking at a programme that has been going for a year, and the figure is 19,000 people. He should listen to the CBI, which said that

“the Work Programme has already helped to turn around the lives of thousands of people”.

Those are people who Labour left on the scrap heap. The right hon. Gentleman should be apologising, not attacking the Work programme.

[Edward Miliband]

I think that is as close as we get to an admission that I was right and he was wrong.

The Prime Minister boasted that his flagship policy, the Work programme, was about tackling the scourge of long-term unemployment. Will he confirm that since the Work programme was introduced in June 2011, long-term unemployment has risen by 96%?

[The Prime Minister]

Let me give the right hon. Gentleman the employment numbers: a million more private sector jobs over the past two years; since the last election, 190,000 fewer people on out-of-work benefits; in the last quarter, employment up by 100,000 people and unemployment down by 49,000. While we are at it, let us remember Labour’s poisonous legacy: youth unemployment up by 40%; unemployment among women up by 24%; and 5 million people on out-of-work benefits. That is the legacy we are dealing with, and we are getting the country back to work.

[Edward Miliband]

I wish for once that the Prime Minister would just answer the question. I asked him a very simple question about whether long-term unemployment has gone up by 96% since the Work programme was introduced, and the answer is yes. While he is talking about Labour’s programmes, let us talk about the future jobs fund. Last Friday, the Government issued a very interesting document. The Prime Minister spent two years rubbishing the future jobs fund but what did this document say? It said that the scheme provided

“net benefit to participants, their employers and society as a whole.”

In other words, it was a success. The Prime Minister rubbished the programme yet it helped 120,000 young people into work. His Work programme has helped only 3,000—[Hon. Members: “What does it cost?”] They shout, “What does it cost?”, but we cannot afford not to have young people in work. Is the truth that the Prime Minister got rid of a Labour programme that was working, and replaced it with a Tory one that is not?

[The Prime Minister]

Once again the right hon. Gentleman is completely wrong so let me give him the figures. The Government’s work experience programme sees half of the young people who take part get into work. That is the same result as for the future jobs fund, and it costs 20 times less. That is the truth: our programme is good value for taxpayers’ money and it is getting people into work. The right hon. Gentleman wasted money and left people on the dole.

[Edward Miliband]

The more the Prime Minister blusters, the redder he gets and the less convincing he is. That is the reality. We know in real time what happened at yesterday’s Cabinet—they were at each other like rats in a sack. The Chancellor blames the Work and Pensions Secretary; the Work and Pensions Secretary blames the Chancellor for the lack of growth. The Prime Minister is doing what he does best and blaming everyone else for the failure. Is the reality that the Government’s failure on the Work programme is a product of their failure to get growth, and the failure of their whole economic strategy?

[The Prime Minister]

The right hon. Gentleman worked in a Government where the Prime Minister and the Chancellor could not be in the same room as each other—rats in a sack does not even cover it.

Why not have a look at what the right hon. Gentleman has achieved on welfare this week? Once again this week, Labour voted against the welfare cap. Today, the Opposition are asking us to vote on a motion in the House on welfare. Last night, the motion specifically said they wanted further reform of welfare, but today the motion mentions nothing about it. The truth is that they are against the benefit cap, against the housing benefit cap and against the Work programme. They are officially the party of something for nothing.

[Edward Miliband]

I will tell the Prime Minister the reality. His welfare reform programme is failing because there is not the work, and his economic strategy is failing. That is the reality. He has a Work programme that is not working, a growth strategy that is not delivering, and a deficit that is rising. The Government are failing, the Prime Minister is failing and the British people—

[The Prime Minister]

rose—

[Edward Miliband]

Calm down, calm down. The Prime Minister just cannot keep his cool when he knows he is losing the argument, and it is the British people who are paying the price for his failure.

[The Prime Minister]

I think what we can see is a leadership that is drowning. This Government have cut corporation tax, scrapped the jobs tax, introduced enterprise zones, backed the regional growth fund, and funded 1 million apprenticeships, and we are rebuilding our economy so that we see 1 million more people in private sector work. We are putting the country back to work; Labour wrecked it.

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

Q2. Will the Prime Minister join me in congratulating the Milton Keynes-based Red Bull Formula 1 team on winning the world championship for three years in a row? They are another fine example of British technological innovation.

[The Prime Minister]

I am delighted to praise and pay tribute to the Formula 1 team based in my hon. Friend’s constituency, which sadly beat the Formula 1 team—Lotus Renault—based in mine. It is a remarkable fact that almost all of the Formula 1 cars, wherever they are racing in the world, are built, designed and engineered here in Britain. It is an industry in which we lead the world, and we should be very proud of it.

[Jonathan Ashworth (Leicester South) (Lab)]

Q3. The Prime Minister must have studied his Government’s own report that shows that the future jobs fund had a net benefit to participants, employers and society. Given that report, and that youth unemployment is now higher in Leicester than it was at the general election, why did he tell me in questions a year ago that the future jobs fund provided only “phoney jobs”?

[The Prime Minister]

The hon. Gentleman needs first to explain why youth unemployment went up 40% under the Labour Government. The facts of the future jobs fund are these: the figures show that 2% of the placements in Birmingham under the future jobs fund were in the private sector, but the rest were in the public sector. The cost of the scheme was 20 times higher than the work experience placement, which is doing just as well.

[Mrs Cheryl Gillan (Chesham and Amersham) (Con)]

My right hon. Friend—[Interruption.]

[Mr Speaker]

Order. The right hon. Lady must be heard.

[Mrs Gillan]

My right hon. Friend is aware that the Government are consulting on the compensation people will receive if High Speed 2 goes ahead. This is critical for people in my constituency. Will he give me a personal undertaking that he will study the proposals for the final packages for compensation and ensure that those people whose homes, businesses and lives will be totally disrupted by the scheme if it goes ahead are both fairly and generously compensated?

[The Prime Minister]

I absolutely give that undertaking that I will look carefully at the scheme. As my right hon. Friend knows, we are consulting at the moment. The proposals we have put forward are as good as the scheme for HS1 and better than the compensation scheme for previous motorway developments. As she also knows, there is an advance purchase scheme for property purchase to simplify the process for property owners in the safeguarded area. There is also a voluntary purchase scheme to allow home owners outside the area to have their homes purchased. I am very happy to discuss with her and others how we can ensure that the scheme works properly for people.

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

Q4. On Monday, the police and crime commissioner, Bob Jones, and Chief Constable Chris Sims, called for a fair deal for policing for Birmingham and the west midlands, which arguably has the highest policing needs outside London. How can the Prime Minister hope to build one nation if areas such as Birmingham and the west midlands lose 800 front-line police officers while low-crime areas such as Surrey get an extra 250 bobbies on the beat? Do not we all deserve to live in safe communities?

[The Prime Minister]

The point I would make to the hon. Lady is that yes, we have asked the police to make funding reductions. They have been able to do that, keeping a higher proportion of bobbies on the front line, which has been effective, and taking people out of back-office jobs. At the same time, crime has fallen and public confidence in the police has risen. Yes, we are asking the police to take difficult decisions, but they are doing it and they are delivering.

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

Q5. I congratulate the coalition Government on introducing regulations to protect the welfare of wild animals performing in travelling circuses. This House voted overwhelmingly for a complete ban in 2011. While we wait for a draft Bill to be published, will the Prime Minister commit to introducing legislation so that this ban can be introduced in this Parliament?

[The Prime Minister]

It is our intention to do just that. My hon. Friend is absolutely right to raise the fact that we have changed the regulations in advance of legislation, so that the clearly expressed will of this House can be met.

[Mr Nigel Dodds (Belfast North) (DUP)]

Petrol prices in this country are among the very highest in the EU, and diesel prices are the very highest. Given that the Prime Minister is introducing minimum limits on alcohol pricing, can he turn his mind to maximum limits on fuel duty and start reducing the price of petrol and diesel for hard-pressed families and businesses across the UK?

[The Prime Minister]

The right hon. Gentleman makes an important point. Because of the changes we have made, petrol and diesel are 10p less a litre than they otherwise would have been if we had kept the tax increases that were put in place by the Opposition. That is the effect of this Government and we want to go on making that progress.

[Mel Stride (Central Devon) (Con)]

Q6. I thank my right hon. Friend for visiting Buckfastleigh with me yesterday, a town in my constituency severely affected by flooding. What the people of Buckfastleigh wish to know is how they are now going to get flooding insurance at affordable rates, particularly given that many homes have been blighted. Will he join me in pressing the Association of British Insurers to stop grandstanding in its negotiations with the Government, to get down to the table and thrash out a deal so that my constituents can get the insurance they need?

[The Prime Minister]

My hon. Friend makes an important point. I very much enjoyed visiting his constituency with him yesterday, seeing at first hand the appalling damage done by the floods and speaking with local people, the emergency services and the Environment Agency about all the work that is being done to protect more houses in future. We need to address the insurance issue and negotiations are under way. The Minister for Government Policy, my right hon. Friend the Member for West Dorset (Mr Letwin) is leading for the Government. I want us to get a resolution so that insurance companies provide what they are meant to provide, which is insurance for people living in their homes who want proper protection.

[Chris Ruane (Vale of Clwyd) (Lab)]

I thank the Prime Minister for his expressions of sympathy for the family of my elderly constituent who died in the floods. I join him in expressing sympathy to the families of all those—I think four people—who have died in the floods. Will the Prime Minister immediately reverse the 30% cuts he has made to flood defences in the past two years? What part will he play in the issue of flood insurance for those who live in flood risk areas?

[The Prime Minister]

Let me join the hon. Gentleman in paying tribute to his constituents, who have had to bear some truly terrible floods. The pictures of floods in St Asaph were of biblical scenes. The emergency services have performed extraordinary feats to rescue people and to help people at what is a very difficult time. On flood defence spending, the Government are planning to spend more than £2 billion in the next four years. That is 6% less than in the previous four years, but we believe that by spending the money better, and by leveraging money from private and other sectors, we can increase the level of flood defence spending. The spending that is already under way will protect an additional 145,000 homes between now and 2015, but if we can go further then of course we should.

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

Q7. More than 3 million people a year fall victim to postal scams, telephone calls and e-mails making false promises of lottery wins, windfalls and inheritances. Is my right hon. aware that £3.5 billion a year is lost by UK consumers? Will he commit to working with the Home Office to amend existing legislation to protect the predominantly elderly and vulnerable victims?

[The Prime Minister]

I think my hon. Friend makes an important point. This is a growing area of crime and criminality that takes advantage of people using the internet and often those who are vulnerable. That is why, as part of the National Crime Agency, we are setting up a new unit dedicated to tackling this problem that will work across agencies to catch criminals and take the steps she rightly speaks about.

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

Q8. A moment ago, the Leader of the Opposition asked whether long-term unemployment had risen by 96% since the introduction of the Work programme, but he did not receive an answer. I ask the Prime Minister again: has long-term unemployment risen by 96% since the Work programme was introduced?

[The Prime Minister]

I have given the figures for the Work programme: 800,000 people taking part and 200,000 people getting work. That is against a background where, over the last quarter, unemployment and the rate of youth unemployment have been falling and there have been more people in work. That is a record we can build on.

[Dr Liam Fox (North Somerset) (Con)]

A free press is a necessary counterbalance to a strong state and the British people also have an inherent sense of fairness, so we do not need to restrict the press; we need to focus on redress when the press cross an unacceptable line. With that in mind, will my right hon. Friend look at access to justice in this country to ensure that the libel and defamation laws we already have are available to everyone, not just the rich and famous?

[The Prime Minister]

My right hon. Friend makes an important point about access to justice, but one of the key things that the Leveson inquiry is trying to get to the bottom of is: how can we have a strong and independent regulatory system, so that we do not have to wait for the wheels of the criminal justice system or the libel system to work? People should be able to rely on a good regulatory system as well in order to get the redress they want, whether prominent apologies, fines for newspapers or the other things that are clearly so necessary.

[Derek Twigg (Halton) (Lab)]

Q9. The Department for Education is proposing to close its Runcorn site, with the loss of at least 220 jobs. It is in the 27th most-deprived borough in the country. How will that help with unemployment and social deprivation in my constituency? It is a pity that the Education Secretary has refused to meet me to discuss this matter.

[The Prime Minister]

I know that the hon. Gentleman has met the permanent secretary at the Department for Education to discuss the matter, and I will certainly discuss it with the Secretary of State as well. Of course, there will be consultation with affected staff and other local MPs, but let me make this important point: we all know that we have to try and find savings in departmental overhead budgets in order to maximise the money going into the schools. The Government have managed to maintain the per-pupil funding, and I am sure that hon. Members who think about it will consider that the most important thing for our schools, our children and our education system.

[George Freeman (Mid Norfolk) (Con)]

Last year, more than 10,000 men in Britain died from prostate cancer, the silent killer. Survival rates have increased from 20% to 70%, because of earlier diagnosis and better drugs. I pay tribute to the Prime Minister’s commitment to the NHS cancer drugs fund. Will he join me in welcoming the Movember campaign’s work to raise male health awareness and champion British leadership in cancer research?

[The Prime Minister]

I not only join my hon. Friend in praising the Movember campaign but praise his efforts lurking tentatively under his nose. This is an important campaign, because it raises awareness of cancers, including cancers such as the one he mentioned, which people are sometimes worried about mentioning and talking about. Raising awareness is important, as too are things, such as the cancer drugs fund, that ensure we get the drugs to the people who need them.

[Ian Lucas (Wrexham) (Lab)]

Q10. I once represented a seriously injured car-crash victim who was hounded and hurt further by an irresponsible press. When he set up the Leveson inquiry, the Prime Minister said: “I accept we can’t say it is the last chance saloon all over again. We’ve done that.”For the victims—for the McCanns, the Dowlers—will he keep his word?

[The Prime Minister]

The hon. Gentleman is absolutely right, as is my hon. Friend the Member for Crawley (Henry Smith), in saying that uppermost in our minds, as we consider the report, should be the victims of press intrusion and invasion of privacy, and the appalling things, in some cases, written about them and their families. We owe them a regulatory system that will work for them and which the public will have confidence in, and that is what we hope Leveson will produce.

[Jake Berry (Rossendale and Darwen) (Con)]

Leaving home before it is light and returning from work when it is dark, hard-working families in my constituency have a gross household income of just £25,000. Does my right hon. Friend think it right that their neighbours living on benefits currently earn more?

[The Prime Minister]

My hon. Friend makes an important point. Only this week we have yet again had a vote on our welfare benefits cap—which most people would see as generous at £26,000—and once again Labour has voted for unlimited welfare. We have long memories: we can remember that under Labour, some families were getting £70,000, £80,000, £90,000 or £100,000 of housing benefit. Labour did nothing about it because it believes in something for nothing.

[Mr Michael Meacher (Oldham West and Royton) (Lab)]

Q11. Since the Prime Minister denounced aggressive tax avoidance as “morally repugnant”, why are his Government now actively promoting aggressive tax avoidance by cutting the tax on multinationals that open a finance company in a tax haven from the current 23% to just 5%? How can we be one nation when the Government are on the side of the tax dodgers?

[The Prime Minister]

I think the right hon. Gentleman has misunderstood what we are doing. We are introducing a general anti-avoidance rule—something that he, in 13 years of Labour Government, never managed to do. We will do it in three.

[Greg Mulholland (Leeds North West) (LD)]

We were all inspired by the amazing London 2012 Olympic and Paralympic games, in an incredible summer of sport, but it is so important to get people involved in grass-roots community sport. Will the Prime Minister meet me, the Sport and Recreation Alliance, the county sports partnership network and Sport England to discuss the “Be Inspired, Get Involved” initiative, the first fair of which is this evening in my constituency?

[The Prime Minister]

I am happy to meet my hon. Friend about this issue. It is important that we take the legacy of the Olympics and turn it into increased rates of participation. That means, yes, working with the organisations that he spoke about, but also recognising the many heroes and heroines right around our country who run the Saturday morning football clubs, rugby clubs and cricket clubs. It is those clubs that provide so much of the answer for getting more sport into our communities and more sport into our schools as well.

[Jeremy Corbyn (Islington North) (Lab)]

Q12. Will the Prime Minister, like me, welcome the ceasefire in Gaza last week and regret all those who died as a result of the conflict, but also recognise that, fundamentally, the future of the middle east lies with peace and justice for the Palestinian people, be they in Gaza, the west bank or refugee camps? We have to recognise the Palestinian people, so tomorrow, will the British Government accordingly cast our vote at the United Nations in favour of Palestinian recognition without any preconditions—such as suggesting they should not have access to the International Criminal Court—as an independent, recognised nation?

[The Prime Minister]

I certainly join the hon. Gentleman in welcoming the fact that there is a ceasefire and that that conflict has ceased. I do not go all the way with him on the rest of his question, but my right hon. Friend the Foreign Secretary will be making a statement about this from the Dispatch Box in a few moments. I do not want to steal his thunder, but I think it is important that we use our vote to try to say to both sides in this conflict: “We need talks without preconditions.” In the end, as I said on Monday, the only way we are going to see a peace process that works is when Israelis and Palestinians come to the table and talk through the final status issues, including Jerusalem, including refugees and including borders—when they do it themselves. We can wish for all we want at the United Nations; in the end, you have got to have direct talks between the direct parties to get the two-state solution we want.

[Mr Shailesh Vara (North West Cambridgeshire) (Con)]

The Prime Minister will be aware that tomorrow’s business on the Order Paper includes a debate in my name to mark the 40th anniversary of the expulsion of Asians by Idi Amin from Uganda and their arrival in the UK. However, because of the need for a statement on the Leveson inquiry, it is likely that my debate may not now take place. [Hon. Members: “Oh!”] I and the community at large fully appreciate the circumstances. However, does the Prime Minister acknowledge the need for and the importance of such a debate, and will he also do whatever he can to ensure that I am given another debate as soon as possible?

[The Prime Minister]

The reaction of colleagues from right across the House shows that my hon. Friend speaks for the whole House—and I believe the whole country—in wanting to speak up for the Ugandan Asians who came to our country in the 1970s, who have made the most fantastic contribution to our national life. It is very good to see. I remember meeting my hon. Friend’s parents and how proud they are of him—second generation, coming to this country, sitting in the House of Commons and speaking up so well on these and other issues. Although I do not have control of the House of Commons agenda—sadly—I very much hope that the people who do will listen carefully to the point he made and reschedule his debate as fast as possible.

[Gemma Doyle (West Dunbartonshire) (Lab/Co-op)]

Q13. Will the Prime Minister confirm that, as a result of his cutting the 50p tax rate, 8,000 people earning over £1million will next year gain an average of £107,500? Whose side is he on?

[The Prime Minister]

What I can confirm is that, at 45p, the top rate of tax will be higher under this Government than it was in any of the 13 years of the last Government. That is a fact. The richest in our country will actually be paying more in income tax in every year of this Government than in any year of that Government.

[Robert Halfon (Harlow) (Con)]

In Harlow, Comet has made 80 home delivery and shop staff redundant, and the jobs of at least 65 transport and logistics staff are now at risk. Many of the redundant workers are suggesting that there has been malpractice. Will my right hon. Friend ask the Business Secretary to investigate this, to ensure that anyone who has lost their job gets the proper support and help that they are entitled to?

[The Prime Minister]

I am very happy to look carefully at what my hon. Friend has said. Clearly, what has happened at Comet is a tragedy for those who work for that business. I will talk to the Business Secretary about this, and see what can be done in the way that my hon. Friend suggests.

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

Q14. Last week, the Prime Minister told me and the House that the Government were investing an extra £900 million to combat tax avoidance. In fact, as Her Majesty’s Revenue and Customs will confirm, no such investment is taking place, and HMRC is facing a 15% cut in its budget. So is the Prime Minister guilty of fact avoidance or fact evasion?

[The Prime Minister]

The truth is that this Government have put £900 million into the specific measures of getting hold of tax avoidance. All these schemes grew up under years and years of the Labour Government, but they never did a general anti-tax avoidance. They presided over a system where people in the City were paying less tax than their cleaners, and it took this Government to sort it out.

[Philip Davies (Shipley) (Con)]

May I warn my right hon. Friend not to be remembered as the Prime Minister who introduced state regulation of the press? A free press is an essential part of a free democracy. Does he agree that state regulation of the press is like pregnancy? Just as someone is either pregnant or they are not, so we can either have state regulation or not. There is no alternative third way.

[The Prime Minister]

Where I would agree with my hon. Friend is that a free press is absolutely vital for a healthy democracy. We should recognise all that the press has done, and should continue to do, to uncover wrongdoing and to stand up to the powerful. That is vitally important and, whatever the changes we make, we want a robust and free press in our country.

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

Q15. Research by the charity Save the Children reveals, shockingly, that one in seven children in our country do not have a warm coat this winter. The Government are now cutting child benefit support to 100,000 families who look after disabled children—[Interruption.] Whatever our views on how our economic problems were brought about, surely it cannot be right that children, the poorest and the most vulnerable pay the most for this economic crisis.

[The Prime Minister]

I listened carefully to the hon. Gentleman, and the point that I would make is that we are removing child benefit from people earning over £60,000 a year. We think that that is the right step to take, because those with the broadest backs should be bearing the greatest burden. We have frozen child benefit for other families, but we have increased the child tax credit that goes to the poorest families.

Petition

Wednesday 28th November 2012 Commons Chamber

Chris Williamson (Derby North) (Lab)

- Hansard - - Excerpts

I rise to present a petition that has united the whole of the city of Derby and the city council, because people are fed up with the unfair funding cuts to which Derby has been subjected. The level of cuts in Derby is far higher than in many other parts of the country. Only yesterday, 350 more staff were made redundant from the council, and all three party leaders have written to the Secretary of State, calling for a fair deal for Derby. The petition is headed “Fair Deal for Derby”. It states:

The Petition of citizens of the United Kingdom,

Declares that they believe there has been a disproportionate impact of the Government’s austerity programme on Derby compared to other local authority areas and that the cumulative impact of the cuts being forced on Derby City Council will amount to £75.77 per person compared to a few pounds in other more affluent parts of the country.

The Petitioners therefore request that the House of Commons urges the Secretary of State for Communities and Local Government to ensure a fair deal for Derby by reducing the amount of cuts made to Derby City Council.

And the Petitioners remain, etc.

[P001139]

Palestinian Resolution (United Nations)

Wednesday 28th November 2012 Commons Chamber

12:33

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

With permission, I will make a statement on the Palestinian resolution to be moved at the United Nations General Assembly tomorrow. The resolution calls for the upgrading of the Palestinian UN status from observer to non-member observer state. I wish to inform the House of the discussions the Government have had about this with the Palestinian leadership, and of how we intend to proceed.

Achieving a two-state solution to the Israeli-Palestinian conflict is one of our top international priorities. We support a negotiated settlement leading to a safe and secure Israel living alongside a viable and sovereign Palestinian state, based on 1967 borders, with agreed land swaps, with Jerusalem as the shared capital of both states and with a just, fair and agreed settlement for refugees. That is the only way to secure a sustainable end to the conflict, and it has wide support in this House and across the world.

There has been a dangerous impasse in the peace process over the last two years. The pace of settlement building has increased, rocket attacks on Israel have increased, frustration and insecurity have deepened on both sides, and the parties have not been able to agree a return to talks. The crisis in Gaza and tragic loss of Palestinian and Israeli life shows why the region and the world cannot afford this vacuum in the peace process.

I pay tribute today to Egypt, the United States and the UN Secretary-General for their role in bringing about a ceasefire in Gaza, and we now need to build on it to bring about a lasting peace, including an end to the smuggling of weapons and the opening up of Gaza for trade as well as for aid.

I set out in the House last week our belief that the United States should launch a new initiative urgently to revive the middle east peace process. If progress on negotiations is not made next year, the two-state solution could become impossible to achieve. Yesterday, I said to Secretary Clinton that such an effort led by the US would need to be more intense than anything seen since the Oslo peace accords, and it should backed by a more active role for European nations as well.

Given the overriding need for both Israelis and Palestinians to return to negotiations as soon as possible, we asked Palestinian President Mahmoud Abbas not to move a resolution at the UN General Assembly for the time being. Our view was that it would be better to give the US Administration the opportunity to set out a new initiative. We pointed out that a UN resolution would be depicted by some as a move away from bilateral negotiations with Israel. We were also concerned about the considerable financial risks to the Palestinian Authority at a time when their situation is already precarious, if a vote led to a strong backlash from Israel and within the US political system.

Nevertheless, President Abbas has decided to press ahead—a decision we must respect. No one should be in any doubt that he is a courageous man of peace. Our central objective remains that of ensuring a rapid return to credible negotiations in order to secure a two-state solution. This is the guiding principle that will determine the way in which we will vote on any resolution at any time.

The frustration felt by many ordinary Palestinians about the lack of progress in the peace process is wholly understandable. Illegal settlement activity in the west bank, which we condemn, threatens the very viability of the peace process, and after many decades the Palestinians still do not have the state they aspire to. That is why we have consistently asked Israel to make a more decisive offer to Palestinians than in the recent past, and have also called on Palestinians not to set preconditions for negotiations.

We want to see a Palestinian state and look forward to the day when its people can enjoy the same rights and dignity as those of any other nation. For us to support a resolution at the UN, it is important that the risks to the peace process are addressed, so that the chances of negotiations beginning after it are enhanced rather than diminished.

I spoke to President Abbas on Monday and my right hon. Friend the Deputy Prime Minister spoke to him yesterday. We explained that, while there is no question of the United Kingdom voting against the resolution, in order to vote for it we would need certain assurances or amendments. The first is that the Palestinian Authority should indicate a clear commitment to return immediately to negotiations—without preconditions. This is the essential answer to the charge that by moving the resolution, the Palestinians are taking a path away from negotiations. Given the great difficulty in restarting negotiations in recent years and the risk that some will see this resolution as a step that is inconsistent with such negotiations, this commitment is indispensable to us.

The second assurance relates to membership of other specialised UN agencies and action in the International Criminal Court. Our country is a strong supporter, across all parties, of international justice and the International Criminal Court. We would ultimately like to see a Palestinian state represented throughout all the organs of the United Nations. However, we judge that if the Palestinians were to build on this resolution by pursuing ICC jurisdiction over the occupied territories at this stage, it could make a return to negotiations impossible. This is extremely important, given that we see 2013 as a crucial year—for the reasons I have described—for the middle east peace process.

We have also said to President Abbas that we would like to see language in the resolution that does not prejudge any deliberations by the UN Security Council, and for it to be clear that the resolution does not apply retrospectively. We believe these changes would not be difficult to make; that if they were made either in the text of the resolution or in accompanying statements as appropriate, they would win wider support for the resolution without any prejudice to final status issues; and that they would increase the prospects for negotiations moving ahead.

Up until the time of the vote itself, we will remain open to voting in favour of the resolution if we see public assurances by the Palestinians on these points. However, in the absence of these assurances, the United Kingdom would abstain on the vote. That would be consistent with our strong support for the principle of Palestinian statehood, but also with our concern that the resolution could set the peace process back.

We call again on the Palestinian Authority to make every possible amendment to win the widest possible support and to give the strongest possible assurances. We call on Israel to be ready to enter negotiations, and to agree a two-state solution before it is too late. Whatever happens at the General Assembly, we call on Israel to avoid reacting in a way that would damage the peace process or Israel’s international standing. We would not support a strong reaction that undermined the peace process by sidelining President Abbas, or risked the collapse of the Palestinian Authority. We also look to the US, with our strong and active support, to do all that it can in the coming weeks and months to restart this process.

The only way in which the Palestinian people can be given the state that they need and deserve, and the Israeli people can be given the security and peace to which they are entitled, is through a negotiated two-state solution. That requires—now—Israelis and Palestinians to return to negotiations, Israel to stop illegal settlement building, Palestinian factions to be reconciled with each other, and the international community —led by the United States and supported by European nations—to make the necessary huge effort to revive the peace process.

12:41

[Mr Douglas Alexander (Paisley and Renfrewshire South) (Lab)]

I thank the Foreign Secretary for early sight of his statement, and welcome his decision to come to the House to debate this matter today.

Only last week, the Foreign Secretary admitted in the House that

“Time is running out for the two-state solution.”

I agree with his assessment. Belief in the possibility of a negotiated two-state solution is today haemorrhaging, and haemorrhaging badly, across the region. The Foreign Secretary is an eloquent man, but I struggle to reconcile his statement of today with his analysis of last week. Exactly eight days ago, he told the House:

“There is a perfectly respectable and legitimate case for saying that it would be right to pass such a motion because this has gone on for so long and because Palestinian frustrations are so intense, for understandable reasons. I believe, however, that the balance of judgment comes down on the side of saying that to do so would be more likely to retard efforts to restart the peace process than to advance them”.

Following his statement today, may I ask the Foreign Secretary whether he has, in fact, changed his mind?

Let me now address the criteria that the Foreign Secretary tells us that he will use to determine how the United Kingdom votes. First, let me turn to the issue of the International Criminal Court. It is a matter of record that, as the Foreign Secretary repeated today, our country is a strong supporter of international justice and of the ICC. It is also a matter of record that Israel is not a party to the ICC treaty, and does not accept its jurisdiction within its own boundaries. Given that, as recently as two weeks ago, the British Government were urging Israel to adhere to international law, will the Foreign Secretary explain why the UK Government now apparently wish to exempt it from possible actions in the ICC for any future breaches of international law in the Occupied Palestinian Territories?

The second criterion that the Foreign Secretary mentioned was a return to negotiations without preconditions. Only eight days ago, he told the House:

“Owing to unacceptable settlement building on the west bank and in east Jerusalem, we are not far from a two-state solution becoming impossible and unviable.”

So why, just eight days later, is he apparently suggesting that Israel’s refusal to suspend the expansion of illegal settlements—changing the very facts on the ground as the basis of the negotiations, even as future talks get under way—is a reasonable position for the Israelis to adopt? Is it not the truth that, for all today’s sonorous words from the Foreign Secretary, he let the cat out of the bag eight days ago when he explained his own thinking on the issue? He stated then that

“because of the possible reaction of the US Congress and the possibility of Israel withholding tax revenues, the position of the Palestinian Authority could be made worse by the passage of such a resolution.”—[Official Report, 20 November 2012; Vol. 553, c. 450.]

Let me ask the Foreign Secretary this. Does he really believe that threats issued by a Republican-controlled Congress to punish the Palestinians for taking this diplomatic step are a reasonable basis on which to determine British policy? Does he really believe that Israel’s threat to withhold tax and customs revenues that it collects on behalf of the Palestinians, which legally belong to the Palestinians, are a reasonable basis on which to determine British policy on this vote? When will the Foreign Secretary understand that statehood for the Palestinians is not a gift to be given, but a right to be acknowledged?

I warn the Foreign Secretary that if the United Kingdom abstains tomorrow, it will not be a measure of our growing influence; it will be a confirmation of our growing irrelevance to meaningful engagement in the search for peace. Across Europe, countries such as France and Spain have already made it clear that they will join what I believe will be an overwhelming majority of the 193 members of the UN General Assembly in voting for enhanced observer status for the Palestinians. That vote can, and must, send a powerful signal to the Palestinians that diplomatic efforts and the path of politics, not the path of rockets and violence, offer the route to a negotiated two-state solution.

Let us be honest: in recent days Hamas-run Gaza has, in the midst of conflict with Israel, welcomed the secretary-general of the Arab League, the Prime Minister of Egypt and the Foreign Ministers of Turkey, Iraq, Jordan, the Palestinian Authority, Qatar, Tunisia, Saudi Arabia and Sudan. In his statement today, the Foreign Secretary rightly lauded President Abbas as a “courageous man of peace”. If, as the Government assert, they genuinely want to support moderate Palestinians and efforts to engage in meaningful negotiations, what signal would an abstention tomorrow send about whether violence or politics secures legitimacy and results?

Just eight days ago the Foreign Secretary sought to explain his position by telling the House that recognition at the UN could “risk paralysing the process”. He spoke again of the process today, but when will he understand: there is no process; there is only paralysis? Indeed, can the Foreign Secretary explain what process he was referring to today? In the last two years, there have been continued illegal settlement-building and continued rocket attacks. There has been fear, anxiety and continuing conflict. There has been continued occupation. There has been continued blockade. But there have been no meaningful negotiations. That is why, for more than a year, Labour has been clear that recognition at the UN for the Palestinians is one of the steps required to achieve a negotiated two-state solution. Abstention tomorrow would be an abdication of Britain’s responsibilities.

Let me appeal to the Foreign Secretary as a historian, by referring to a figure from history whom he and his party rightly revere. The phrase “to govern is to decide” is attributed to Winston Churchill. I urge the Foreign Secretary, even at this late hour, not to dither, but to decide to vote for enhanced recognition for the Palestinians tomorrow at the United Nations.

[Mr Hague]

Although there are clearly some differences between us, the shadow Foreign Secretary expressed common ground when he said that time is running out. The analysis of all of us in all parties on both sides of the House starts from that point, although we draw some different tactical conclusions from it. Indeed, my statement, and our attitude, is based on a sentiment the right hon. Gentleman expressed: we support the right to a Palestinian state. I supported that very strongly in my statement. I have not, however, changed my mind about anything. The right hon. Gentleman was looking too hard for changes between what I said last week and this week because, so far as I am aware, I said the same things about the risks to the peace process, the risks in the US Congress and the risks in Israel.

The right hon. Gentleman asked: is there a process? One of the main points I have been stressing is the need to revive—to restart—that process. There have been many attempts to do that over the past year, and, in particular, the Kingdom of Jordan has played a very constructive role. There are many obstacles to achieving that, however, including Israeli settlement building—which I think is condemned across the House—but another obstacle has been an unwillingness by Palestinians to remove all preconditions for negotiations. It is important to have the commitment from Palestinians to return to negotiations without preconditions, which is why that is one of the criteria we have set. We need both sides to do that, and to be ready to do so whatever happens at the General Assembly. We would welcome that—and, of course, we would particularly welcome it if it could be made clear before the vote. It would be the single most crucial factor that would enable us to vote for the resolution. We will still welcome it if the Palestinians can say that after the vote.

The right hon. Gentleman asked about the International Criminal Court. We are certainly not arguing that Israel should be exempt from the ICC, but it is important to remember that, given the urgency on which we all agree, our overriding objective is for negotiations to resume and to succeed. The right hon. Gentleman appealed to me as a historian, and the lesson of history in respect of negotiations is that we have to have enough common ground to bring the two sides together, and that it is important to avoid doing things, certainly in the short term, that make it harder to bring the two sides together. That is the reason for that criterion. So these are sensible criteria for us to have put forward. The right hon. Gentleman expressed his support for voting for the Palestinian resolution even before seeing the resolution. I have waited to see the resolution and then looked at how it can be improved and how we can react to it in a way that maximises the chances of successful negotiations.

It is very important for the Opposition to ask themselves this: if we succeeded and the Palestinians did give the assurances I have asked for, would the chances of negotiations taking place and succeeding be improved? Yes, they undoubtedly would if the Palestinians made those commitments. If they do not give those commitments and we abstain, will the United Kingdom still be in a position, with the Palestinians, with the Israelis, and with the United States, to advance whatever we can make of the peace process? Yes, we will. Therefore, what I have expressed is the optimum position for the United Kingdom and the best for the middle east peace process.

This is not about just agreeing with a resolution because we sympathise, as we do, with the position of the Palestinians; we are a country, not a newspaper or a pressure group. We have to use our vote with all considerations and the ultimate objective in mind. It does not help the Palestinians to help them celebrate for one day while at the same time failing to address the wider needs of the peace process. That is the reason for our position. Whatever happens with this resolution and in the vote tomorrow, the United Kingdom will continue to be at the forefront of working for peace, stability and security in the middle east.

[Mr James Clappison (Hertsmere) (Con)]

I agree with what my right hon. Friend has said about the urgent need for talks. I also agree with my right hon. Friend the Prime Minister, who has said that for the Palestinians

“there is no path to statehood except through talks with Israel.”

Both territory and security for Israel must be addressed in the course of that. Will the Foreign Secretary give us some indication of the precise nature of the assurances he has sought from the Palestinians about membership of the International Criminal Court and the other international bodies? Have any assurances so far been offered from the other side and the Palestinians?

[Mr Hague]

I am grateful to my hon. Friend for that. The assurances are those I have described in the statement. On the recourse to the ICC, at this stage, in the occupied territories because of the impact on the ability to bring about a negotiated settlement, we are not talking about that. As I said in response to the right hon. Member for Paisley and Renfrewshire South (Mr Alexander), we are certainly not advocating some permanent exemption. We have not received any assurances on those points, which is one of the reasons why we continue to seek them and why, as things stand, we cannot vote for the resolution. We will continue to seek them over the coming 24 hours.

[Mr Jack Straw (Blackburn) (Lab)]

Will the Foreign Secretary please understand that this complex conditionality of which he speaks is too clever by half and that what it will most achieve is to undermine Britain’s influence, both with the Israelis and in the Arab world, and at the same, and more crucially, to undermine the position of the man he has praised, President Abbas? What has happened in the past three weeks is that Hamas has seen its power and influence enhanced and that the message has gone out, not least from Israel, “If you send enough rockets over the border, you can get to negotiations”, while one condition after another is imposed on the peace-seeking Palestinians. This approach, I am afraid, is not going to help.

[Mr Hague]

I do not agree with that, although the right hon. Gentleman has a lot of experience in these matters. I can tell him that in all the conversations that we have had with Palestinian negotiators, and that the Deputy Prime Minister and I have had with President Abbas in the past few days, our relations have been excellent. That deep friendship will continue. The financial and political support that this country gives, with very strong cross-party support, to the Palestinian Authority, which is among the foremost in the world, is understood well by the Palestinian Authority and will, of course, continue. That is very clear, and so I do not believe that anything we have said or done is in any way undermining of President Abbas. It is also important for us to maintain our close relations with all the other countries involved in the peace process. So I do not accept the premise of the right hon. Gentleman’s argument.

[Nicholas Soames (Mid Sussex) (Con)]

May I say to my right hon. Friend that I certainly understand the fiendish difficulties of this matter, but I profoundly disagree with what he says? Whatever this resolution says, these conditions are unnecessary, one-sided and grossly unfair. What further steps does he plan to take to help and encourage the Palestinians to proceed with these vital peace talks, without which the middle east will continue to sink into an abyss?

[Mr Hague]

Clearly my right hon. Friend and I have a different view on this point, as is very apparent to the House, but we will go on arguing for the same things. Although the concentration at the moment is, understandably, on tomorrow’s vote, what is very important is what happens on Friday. Whatever the result of the vote and however individual nations vote, we must discourage any steps by any parties involved, including Israel, that would be damaging to the peace process and negotiations. We will continue to urge the Palestinians to do the things that I have described—in particular, to enter into negotiations without preconditions. As he knows, I have been very, very critical of Israel on settlement building and on not making a big enough, generous, decisive enough offer to the Palestinians, but we also have to be critical of Palestinians at times, when opportunities are not taken. They have failed on several occasions to take the opportunity of negotiations, because too many preconditions have been set, and we have to be frank about that. So I will encourage them in that direction.

[Richard Burden (Birmingham, Northfield) (Lab)]

Does the Foreign Secretary think it would be reasonable for this country or the international community to make Israel’s continued full membership of the United Nations dependent on meeting conditions laid down by him or by the international community? If he thinks that would be unreasonable, as I do, why does he apply different standards to the Palestinians? Does he not realise that the position he has articulated today will again be seen as a classic double standard on the part of the United Kingdom? Why will he not join the more than 100 Members of this House who have signed an early-day motion calling for recognition? Why will he not join France, Spain, the majority of the United Nations General Assembly and the more than 1.5 million people who, in an online poll, supported upgrading the Palestinian recognition? Is it not time to drop the double standards?

[Mr Hague]

What we want is, as I have explained, a successful negotiation. We deal with the hand that history has dealt to us all. Decisions about Israel’s membership of the United Nations were taken long ago, but decisions about Palestinian membership were not, so now we have to try to resolve that. We want to see Palestine in the United Nations, at the United Nations and in all the organs of the United Nations. However, I stress the point the Prime Minister made at Prime Minister’s questions in answer to the hon. Member for Islington North (Jeremy Corbyn): this will come about only as a result of a successful negotiation with Israel. If that is true, and I have not heard anyone argue that it is not, everything we do should be consistent with promoting, facilitating and bringing to a success such negotiations. That is our guiding principle; it is an overriding principle set against all the other factors that, understandably, people raise.

[Martin Horwood (Cheltenham) (LD)]

May I applaud the Foreign Secretary for bringing Britain closer to a yes vote in support of Palestinian aspirations than any previous British Government have done, but say that Liberal Democrat Members, too, would have preferred a British yes vote with no preconditions? In anticipation of the General Assembly as a whole voting yes, will he tell us what representations he has made to the Governments of Israel and the United States to discourage either of them from giving a punitive response to this peaceful diplomatic initiative?

[Mr Hague]

I am grateful to my hon. Friend for that, and he will be pleased that the Deputy Prime Minister has been so much involved in our efforts over the past few days. Of course, we have made such representations, doing so directly in Israel and in the United States. I referred to the conversations that I had with Secretary Clinton yesterday, which of course covered this subject. We will make urgent such representations if the resolution is passed by a large majority, as is expected, on Thursday night. So those representations will be strong and continuous.

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

For two years, the Palestinians have refused to go back to the negotiating table. What will convince the Foreign Secretary that enhanced status for the Palestinians at the UN will encourage them to go back to the negotiations in which they have refused to take part for the past two years?

[Mr Hague]

This is the other side of the argument. I have pointed out that as well as our criticism of Israel, which has been very strong, I am also critical of Palestinians for sometimes, including over the last year, setting preconditions for going back into negotiations that meant that such negotiations did not take place. I believe in their wish to enter into and conclude such negotiations, so I do not go as far the other way as the hon. Lady. Since those negotiations are the only way to bring about a settlement of the issue for Israelis and Palestinians, we must promote them, however difficult they are.

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

My right hon. Friend has correctly told the House that time for a two-state solution is running out. He has also told the House that that is the only thing that can guarantee statehood for the Palestinians and peace for Israel. How long have we got?

[Mr Hague]

I think that we do not have very long and that is why urgency has been expressed across the House. The pace of settlement building is steadily reducing the time available for a two-state solution, as has the sheer time that has been exhausted over so many years of trying to bring it about. Although I would not count the time in months, we do not have many years. We might have only one or two years to bring this about, hence the urgency of restarting negotiations.

[Sir Gerald Kaufman (Manchester, Gorton) (Lab)]

So the right hon. Gentleman offers President Abbas all support short of actual support. May I warn him, just as I warned Yitzhak Rabin when he was Prime Minister of Israel? I said to him personally in conversation that if he failed to give validity to Fatah, all that would be left would be Hamas. Mr Rabin shook hands with Arafat on the White House lawn; the right hon. Gentleman sits on his hands.

[Mr Hague]

I do not think that that is what the Palestinians would think after all the discussions we have had with them over the past few days. Of course, I do not agree with the right hon. Gentleman on that point. Support takes many forms and our strong support for the Palestinian Authority as well as the huge financial and other support we give are maintained and much appreciated by the leaders of the Palestinian Authority. Of course there are disagreements about our vote tomorrow, but I hope that no one in the House will pretend that we do not have good relations with and support for people, particularly those of a moderate persuasion, in the Palestinian Authority. There is no doubt that we have such relations and that they continue.

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

The Foreign Secretary is absolutely right to seek those assurances and I give him credit for that. I think he said that he wanted to see public assurances by the Palestinians. Will they be in writing and will he ensure that they are not time limited?

[Mr Hague]

They could take many forms, of course, and I have made that point to the Palestinians. What we are seeking could be in the resolution, which can be amended at a very late stage—even right up to the vote tomorrow—it could be in the speech we expect President Abbas to deliver in New York tomorrow, or it could be in writing and published. Such assurances could take many forms and there is still time to give them.

[Mr Nigel Dodds (Belfast North) (DUP)]

In the House in October, the Foreign Secretary described the Palestinian application as a “divisive symbolic” gesture. In the absence of the assurances or amendments he seeks, does he stand by that statement? Will he update the House on the progress that has been made in getting Hamas to renounce its commitment to the absolute annihilation of the state of Israel?

[Mr Hague]

Sadly, no one has made that progress with Hamas yet. Indeed, it is vital for Hamas to recognise previous agreements, forswear violence and recognise the right of Israel to exist. It is good that talks are taking place under Egyptian auspices on Gaza and that those talks include how to prevent the smuggling of weapons into Gaza as well as how to open it up. It is important and good that those talks are taking place. As I said in the statement, we asked the Palestinians not to proceed with the resolution at this time because our fear is that although it could be symbolic, which is why many people want to support it, the fact that it could be divisive in the peace process is a danger. The assurances we have sought would make it more than symbolic and would mitigate any divisive effect. That is the logic of what we are doing.

[Sir Tony Baldry (Banbury) (Con)]

Following the answer my right hon. Friend gave to our hon. and learned Friend the Member for Sleaford and North Hykeham (Stephen Phillips), what will happen if the two-state solution fails? Will the Palestinians for ever remain an occupied people? Will they for ever remain stateless? Will they for ever remain in a situation where more and more of their land is being taken by illegal settlements?

[Mr Hague]

The outlook is very bleak if a two-state solution fails, but the outlook is bleak for Israel, too. That is the message in our constant conversation with Israeli leaders: unless they conclude a two-state solution within the kind of time frame that I have been talking about, they are faced with one-state solutions, which pose many profound challenges for Israel and the nature of its society. That is why it is so important for both sides that this is addressed and such challenges would be so difficult that I do not want to speculate about what they would lead to at this time.

[Mr Ben Bradshaw (Exeter) (Lab)]

A yes vote would mark an historic and very welcome shift in British Government policy. I congratulate the Foreign Secretary for edging towards that position and my right hon. Friend the shadow Foreign Secretary for encouraging him to do so, although I regret the conditions. The Americans, as ever, are critical. How hopeful was the Foreign Secretary after his discussion yesterday with Mrs Clinton?

[Mr Hague]

After my discussions with Secretary Clinton yesterday, I think there is a good understanding of the strength of view across the world, including in countries such as ours as well as in other European countries, and of the urgency of the matter. It is very important for that understanding to be shared across the American system. I have worked closely with Secretary Clinton over the past two and a half years, but she intends to depart office as Secretary of State in the coming weeks. This will be the No. 1 item we discuss with the incoming Secretary of State of the United States; indeed, I have already discussed it with some of the people who might become Secretary of State. It has been prominent among our discussions with President Obama, and the Prime Minister and I have both put the point strongly to the President. The understanding is there in the United States but we now need to help them translate it into real action.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

I pay a great tribute to the Secretary of State for not only ensuring that this is a UK Government foreign policy priority but trying to ensuring that it becomes a second-term American Administration foreign policy priority. On the difficult issue he has addressed of the ICC jurisdiction, I understand exactly what he is trying to do. Is it his hope not that the ICC should not have a jurisdiction but that if the Palestinians and Israelis come to the table for peace talks, the question of the ICC can be parked for a time so that the attempt to get a peace deal is not skewered by sending the question to courts that would take much longer to resolve it?

[Mr Hague]

My right hon. Friend is right, of course, about the second-term priorities. Given the urgency of the situation and given that from January the Israeli elections will have taken place and the United States will be at the beginning of a second-term Administration, if we are not going to address and resolve the problem then, when on earth will we ever do so? We see this question as very important for the re-elected US Administration. He is also right about the ICC and that is what we are saying. We are saying not that anyone should be exempt from the ICC for the long-term future, but that since a negotiation must succeed everybody has to accept some things that are temporary or unpleasant. We had our own experience of that—many hon. Members have much experience of it—in the Northern Ireland peace process. We had to do things we were very reluctant to do but that were necessary to bring about a settlement. That is true in the middle east, too.

[Hazel Blears (Salford and Eccles) (Lab)]

My right hon. Friend the shadow Foreign Secretary set out the very powerful case that support for the resolution could act not as a block to peace but as a bridge. Earlier this year, I met President Abbas and I was convinced that he was a man of courage who wanted to get back to negotiations. How has the Foreign Secretary weighed the importance of empowering President Abbas to kick-start the negotiations against the assurances he has set out, which although they are important are a very high bar? That balance is key if we are to make progress for both Israel and Palestine.

[Mr Hague]

The right hon. Lady is absolutely right. That is the judgment—how to weigh those things. We want the Palestinian Authority to succeed, and we believe that President Abbas is the best interlocutor that Israel will have to bring about peace. We also believe, however, that the other factors that I have described are essential for that to work. Our way of weighing those two factors in the balance is to try to combine them in a successful resolution.

I make again the point that I made in response to the right hon. Member for Paisley and Renfrewshire South: if these assurances were received, and we could vote for the resolution, and it was passed with a large majority, would the chances of negotiation beginning again and succeeding be greater than they are today? The answer is undeniably yes, and that is the logic of our position.

[John Howell (Henley) (Con)]

I refer the House to my entry in the Register of Members’ Financial Interests. I welcome the Foreign Secretary’s statement. When I was in Israel and the Palestinian territories, I did not detect any appetite for overreacting to the passing of the resolution. What has he heard that has changed his mind?

[Mr Hague]

As my hon. Friend can imagine, we have discussed this with the United States and Israel in detail, and there are people who do not in any way hold extreme views on these things who are concerned about possible reactions and about—we certainly hope that there will not be—any sudden, dramatic, adverse reaction to the passing of the resolution. They are concerned that the result might be stagnation and that it could make it more difficult for the United States to do the sort of thing that we have all called for in the House today. That is why we have asked for additional assurances.

[Simon Danczuk (Rochdale) (Lab)]

The Palestinian people deserve the support of the British people and the British Government. Why does the Foreign Secretary ask the Palestinian people not to set conditions, only to set conditions on his support for the Palestinians at the United Nations?

[Mr Hague]

We are simply trying to frame the resolution and what goes with it in the right way to remove preconditions. An obstacle to negotiations in the past year, as I explained, has been preconditions on the Palestinian side. We want to get rid of that obstacle and secure a commitment to return to negotiations without preconditions. I do not see any problem with that condition.

[Dr Matthew Offord (Hendon) (Con)]

I understand that the Foreign Secretary had a conversation with President Abbas about the resolution. In that conversation, at any point did President Abbas indicate that his priority was to return to peace talks without preconditions? If he did not, does the Foreign Secretary agree that this is just a distraction?

[Mr Hague]

We have had many conversations with President Abbas on this subject, and we have discussed many times over the past two and a half years how to get back into negotiations. At one stage, for a brief period, that happened at the end of the 10-month settlement freeze. I have no doubt of President Abbas’s sincerity in wanting to bring about successful negotiations, but he did not respond to my request by saying that he would say publicly that there would be no preconditions. We will continue to encourage him to do so, but we should not draw any adverse conclusions about President Abbas on that either. We simply have to keep encouraging him in that direction.

[Mr David Winnick (Walsall North) (Lab)]

How Britain votes at the United Nations will surely be a test of how genuine our commitment is to the Palestinian cause. Arising from previous questions, does the Foreign Secretary accept that the choice is really for Israel, leaving aside the resolution at the UN, on whether it accepts a viable and independent Palestinian state—the Palestinian people are certainly not going to disappear any more than Israelis are—or a one-state solution with safeguards for both communities? That may not be the best choice for Israel, but the choice lies with Israel.

[Mr Hague]

Well, I will go so far with the hon. Gentleman: absolutely, of course that is an important test for Israel, which is why it needs to enter negotiations in the right spirit and with the right generosity. However, the Palestinians need to play their part. Any such negotiation requires both parties to conclude it successfully, and they must be prepared to make the necessary compromises. There are important tests for both sides, and our vote in the UN General Assembly should be determined by our determination to see them make a success of those negotiations, rather than to demonstrate that the Palestinian cause is more important than Israeli security, or the other way round. The test for us is supporting negotiation.

[Duncan Hames (Chippenham) (LD)]

We have heard today the consequences for the Palestinians if they place any preconditions on entering peace talks, but what consequences does the Foreign Secretary see for the next Israeli Government, both political and economic, if they fail to end the illegal settlement activity that he said threatens the viability of any peace process?

[Mr Hague]

As I mentioned, there will be serious and accumulating consequences for Israel of failing to bring about a two-state solution. Settlement building is a major contributor. It is the single biggest factor in removing the time and opportunity to create such a two-state solution. So, yes, Israel will face greater problems in future. As for other measures—my hon. Friend is seeking diplomatic penalties and so on for Israel in future—that arises when we turn our minds to how the United States should restart the peace process, and how European nations can support that. We will want to do so in a very active way, but I do not want to speculate about what measures we could take at this point.

[Jeremy Corbyn (Islington North) (Lab)]

The Foreign Secretary must be aware of the misery of refugees living for 60 years in the camps in Lebanon, Jordan and Syria; of the people of Gaza, imprisoned effectively by the Israeli blockade; and of the west bank under occupation. Why has he made a statement that effectively says that the diplomatic objectives of the US and Israel are holding a veto over our vote at the UN tomorrow? Will he not put himself on the side of history, rather than talking about the hand of history, and vote for the unconditional recognition of Palestine?

[Mr Hague]

I do not think that I was talking about the hand of history. That was a Tony Blair phrase—I have not adopted it. The lesson of history—I shall return to that point—is that we need a negotiation to succeed. The hon. Gentleman asked why the opinions of Israel and the United States matter so much. It is because we will only alleviate these problems and help decisively the people to whose plight he rightly drew attention with a negotiated settlement with Israel. Of course, one has to allow for opinion in Israel as well, and the nation with the closest relationships with Israel and the biggest leverage over its foreign policy decisions is the United States. That is why we must have due regard for its opinions. That is the practical and diplomatic approach that foreign policy must allow for. As I said, we are exercising the vote of a country and exercising our foreign policy, not making gestures.

[Mr Philip Hollobone (Kettering) (Con)]

In 1947, His Majesty’s Government abstained on the admission of a Jewish national homeland into the United Nations. Sixty-five years later, it looks as though we will do the same again. Now, we are a constant friend of Israel, and in recognition of the fact that the resolution will be passed tomorrow whatever we do, should Her Majesty’s Government not change gear and work over the next few years with both Israelis and moderate Palestinians to bring about the real game-changing event in the middle east—Israeli sponsorship of eventual full Palestinian admission to the United Nations, with both states living in peace behind secure borders?

[Mr Hague]

Yes, my hon. Friend puts it very well. This has moved rapidly to the top of the list of international priorities, and this is the time to do so. Given that, as we discussed, it is the beginning of a second term in Washington and the Israeli election campaign concludes in January, it is an important moment to try to achieve exactly what he describes.

[Mark Durkan (Foyle) (SDLP)]

May I ask the Foreign Secretary to show a little less neck to the Palestinians and a little more backbone to the Israelis? He referred to the Northern Ireland peace process. One of the lessons of that is that when give and take is not happening between the parties immediately involved, responsible external weight can be used to establish necessary givens, even against the shrill opposition of key elements at the time. Has he no fear that an abstention tomorrow will only undermine President Abbas and underwrite an Israeli veto in terms that will be seen to underwrite the very Israeli violations that he himself has condemned?

[Mr Hague]

No, I do not think so. I gave the reasons earlier why I do not think that undermines President Abbas at all. Indeed, in his phone call last night with the Deputy Prime Minister, President Abbas was clear about the strong and continuing friendship between us, irrespective of the vote tomorrow. I defer to Northern Ireland Members on some of the lessons of the peace process, but here that requires external parties to say, “Above all, you are going to have to be pushed back into negotiations.” That means pressure on both sides. This is an example of us exerting that pressure on both sides, so the hon. Gentleman should welcome that.

[Robert Halfon (Harlow) (Con)]

I refer Members to my entry in the Register of Members’ Financial Interests. I thank my right hon. Friend for his reasoned statement and particularly for the work of the Minister with responsibility for the middle east. Inevitably, Hamas will see tomorrow’s vote as a victory for its missile attacks on Israel. The Palestinian Authority say that recognition will help bolster the moderate Palestinians. If the Palestinian state is voted for and Hamas is strengthened and resumes its missile attacks on Israel, what actions will the Government take?

[Mr Hague]

My hon. Friend paints a range of unwelcome events that could come about, and he knows many of the things that we do to discourage those things, including rocket attacks on Israel. Of course we will continue to advocate the revival of the peace process. Of course we stand by the security and legitimacy of Israel, as he knows, but we also want Israel to do what is necessary for the peace process to succeed and Palestinians to enter negotiations with them, so we will do our utmost to guard against the outcomes that he fears.

[Mr Andy Slaughter (Hammersmith) (Lab)]

The Secretary of State said that he had spoken to Mahmoud Abbas. I would be interested to know which Israelis he spoke to before putting together this miserable little offer that continues to treat the Palestinians as second-class citizens, if citizens at all. What, apart from the fact that Israel wants it, should lead the Palestinians to fetter their access to the Security Council and the International Criminal Court, and what in particular should make them enter negotiations for their own land when the colonisation of that land continues?

[Mr Hague]

The hon. Gentleman can make that case and it is very powerfully felt among Palestinians, but I remind the House again that their plight will be alleviated only if there is a successful negotiation between both parties—between Israel and the Palestinians—so it would not be wise to disregard all Israeli concerns. Those concerns have to be met as well. Israel has to know that it can reliably live in peace and security, just as Palestinians need to know that they can live in a viable sovereign state. So it is very important to understand both sides of the argument, and I do not think the hon. Gentleman’s question was a very good example of that.

[Guto Bebb (Aberconwy) (Con)]

A two-state solution demands, in my view, bilateral talks, not unilateral grandstanding. As such, does my right hon. Friend have any views on the numerous peace initiatives of the Israeli Government over the past three years, all of which have been rebuffed by the Palestinian Authority?

[Mr Hague]

It does require bilateral talks; my hon. Friend is absolutely right. There is, as I indicated a few moments ago, fault on both sides when it comes to efforts to have negotiations over the past few years. Israel has been, on the whole, readier to enter into negotiations, but Israel has not made the decisive offer, or the more decisive offer than anything seen in recent years, that I have called for. The Palestinians have not always been ready to enter into negotiations at all. Both those things will have to change if we are to see a successful peace process.

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

The Foreign Secretary said that he was worried about a backlash from Israel and others. Given the blockades, the illegal settlements, the wall, the destruction of Palestinian farms, the arrests, the imprisonment, the decades of ignoring UN resolutions, the refugee camps, the abject poverty and the rest, how much worse does he think it can get for the Palestinians?

[Mr Hague]

Unfortunately, the position could get worse. The Palestinian Authority is in a precarious financial position, although the United Kingdom, under Governments of all parties, has a very strong record in that regard, and we will maintain that strong record. But it is a difficult position. Given the nature of the west bank, the proximity of Israel and the obviously very difficult relations with Israel, yes, things could get worse. There are ways in which they could get even worse, so the hon. Gentleman is right to draw attention to all the factors to which he drew attention, but we still need the parties to be able to restart negotiations, taking into account the concerns of both sides.

[Kris Hopkins (Keighley) (Con)]

I welcome my right hon. Friend’s thoughtful and considered statement, which I know will be closely examined by many in my constituency. Will this country continue to pursue a two-state solution with every effort, if for no other reason than that we have an historical and moral responsibility to assist in ending that conflict?

[Mr Hague]

I am grateful to my hon. Friend. We will do that. I have referred many times today and on previous occasions to the vital importance of this issue over the coming months and to its urgency. That will be fully reflected in the way that we conduct our foreign policy over the coming weeks and months.

[Hywel Williams (Arfon) (PC)]

May I first express the regret of my right hon. and hon. Friends who sit on this Bench in respect of the conditions set out by the Foreign Secretary? May I ask him a genuine question? What assessment has he made of any change for good or ill in the stance of the Israeli Government with the forthcoming election and with the departure of Ehud Barak?

[Mr Hague]

This is a matter for the Israeli people. I will not intervene in their politics. We have always had close and good relations with Mr Barak. Indeed, he is one of the Israeli leaders I speak to most frequently, so in that sense we will regret his departure. But it is up to the Israelis who they choose to lead them in their elections in January. Whoever that is, we will make the case powerfully to them about the urgency of the issue and about the importance of it being in their own long-term strategic interests to tackle it decisively over the coming year. So we will not be shy of doing that, just as we are not shy of saying to Palestinians what we need from them.

[Mr Robin Walker (Worcester) (Con)]

I welcome the news that the UK will not oppose or veto greater recognition for Palestine. The House should support all those on both sides who strive for peace and lay aside violence. Although I hope that the Secretary of State’s conditions can be satisfied, does he agree that enhanced recognition would mark a step towards the sovereign Palestine and secure Israel that we all want to see and increase the accountability of Palestinian organisations to the UN?

[Mr Hague]

Whether that would mark a step towards that depends on what happens next. As I mentioned earlier, it is important that Palestinians can celebrate success not just for one day at the United Nations, but that then there is a sequence of events that they can celebrate and that will give them hope for the future. That is what we are trying to provide in the assurances that we have asked for, to maximise the chances of further progress being made after a vote at the UN tomorrow, rather than the peace process going backwards. So we can answer my hon. Friend’s question fully only when we see what happens next.

[Fiona Mactaggart (Slough) (Lab)]

The Foreign Secretary told us about the conditions that he put to the Palestinian Authority. What I am interested in is what he said to the Israeli Government about their threat to withhold the taxes that they owe the Palestinians. What is he doing to prevent that threat from being carried out?

[Mr Hague]

We have said what I said about that towards the end my statement—that we would not support any such action by Israel. Of course we are concerned. Among our concerns is that something like that could happen, but we are very clear, and we have been very clear with Israel already, that we hope that the Israeli Government will not take any such steps and that they will not react in an adverse way to the passing of the resolution. As I have explained in answer to other questions, we will apply our persuasion and pressure to Israel, just as we do to Palestinians.

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

Is this not all about the messages that we are sending out? The Foreign Secretary speaks in complimentary terms about President Abbas but urges him not to move his resolution because of the possible financial and political consequences for Palestinians. If the resolution is not moved, will that not simply show that bullying and threats work and send out completely the wrong message to all Israelis and Palestinians who seek a peaceful resolution to the divisions that they face?

[Mr Hague]

I have some differences with my hon. Friend on that, because I do not think that this is just about messages; it is about how we get these two parties, who have not had a successful negotiation for a long time, back together and negotiating. It is actually quite a practical question. It is not just the business of loud hailers; it is the business of painstaking negotiations. Our actions should therefore be guided by what maximises their chances. That is the guiding principle of our policy.

[Anas Sarwar (Glasgow Central) (Lab)]

I am sorry to say that the Foreign Secretary’s statement undermines the UK’s credibility as an honest and fair player in what remains of the peace process. It is clear that there is overwhelming global support for the resolution. Indeed, there is overwhelming public support for it in the UK. He said that President Abbas is a courageous man, but is the Foreign Secretary?

[Mr Hague]

I do not agree that this undermines our credibility in any way. On the contrary, I think that we will be in a strong position, after all the discussions that we have had with the Palestinians, the Israelis and the United States in recent days, to do our utmost to move the peace process forward with those countries and parties over the coming weeks. I think that the hon. Gentleman will find that his prediction is not borne out by events.

[David Mowat (Warrington South) (Con)]

We have heard a lot this afternoon about preconditions. Will the Foreign Secretary tell the House which preconditions he regards as most unreasonable, and does he not regard Israeli settlement activity as a different type of precondition?

[Mr Hague]

We condemn settlement activity on occupied land, but we differed with the Palestinians over the past year when they would not re-enter negotiations without a halt to such activity. Of course one can understand the rationale behind them not doing so, but the result, since that is a precondition, is that such activity goes on but no negotiations take place. It would be better to get stuck into negotiations, even while settlement activity continues. That is the sort of precondition that I am talking about.

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

Does the Foreign Secretary feel comfortable with the fact that what he is effectively suggesting is that a nation’s status at the UN should depend on its willingness to give up access to recognised mechanisms for implementing international law? How does that look consistent or fair?

[Mr Hague]

Because we want a negotiation to succeed. I do not think that any right hon. or hon. Member has successfully contradicted what I have said several times. Across the House, we all recognise that this conflict will be resolved and peace will come to the middle east only if there is a successful negotiation between the Israelis and the Palestinians. I have heard no one offer any alternative. There is much desire to express opinions, make gestures and so on, but no one has contradicted that. If that is the case and a successful negotiation is required, that requires us to encourage both parties into that negotiation and for each side to do what will allow it to be successful. That is the simple logic.

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

In his statement, the Foreign Secretary paid tribute to Egypt and its role in obtaining a ceasefire. Does he agree that Egypt has a role to play in reopening the peace negotiations and bringing some normality to that troubled region?

[Mr Hague]

Yes, absolutely. There is a major opportunity for the new Egypt to do that. Last week, I called the Egyptian Foreign Minister to congratulate him on the efforts Egypt has made, and the Under-Secretary of State for Foreign and Commonwealth Affairs, my hon. Friend the Member for North East Bedfordshire (Alistair Burt), called again last night to urge the Egyptians on with their efforts on further negotiations about Gaza, in trying to open up Gaza but prevent the smuggling of weapons. If that can be achieved, Egypt will be in a strong position to continue its efforts on broader issues.

[Grahame M. Morris (Easington) (Lab)]

No hon. Member doubts the Foreign Secretary’s integrity or honesty or the diligent way that his team has tried to bring about peace in the middle east with his usual good humour, but is he not concerned that we are on the wrong side of the argument? We should be on the side of the right, not the might. Opposition Members have referred to a major poll conducted by YouGov, showing that 76% of respondents were in favour of recognising the Palestinian state and only 6% were against it. Is it not rather perverse that he is saying that Palestinians should not place preconditions on negotiations when that is precisely what we are doing? I am afraid that we are putting ourselves on the wrong side of the argument.

[Mr Hague]

I am grateful to the hon. Gentleman for stating his arguments in such a measured way. I think that Members on both sides of the House are on the side of a successful settlement of the middle east peace process and a two-state solution. Our only disagreement is about how to encourage that. Our view is that when faced with such a vote at the UN we should use it in a way that maximises the chances of negotiations by removing preconditions. I know that there are strong feelings about that, as has been illustrated across the House. He will understand that we cannot determine our foreign policy week by week according to opinion polls. If we did, he might not agree with the conclusions that would be reached on many issues.

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

Given our country’s distinct history in the region and the legacy that was left behind, does the Foreign Secretary agree that Britain has a unique responsibility to take a stand, show international leadership and courage and generate some hope for both the Palestinians and the Israelis who want peace? Surely, the resolution would be one way to signal our role in showing that leadership. I ask him to think again before tomorrow.

[Mr Hague]

The hon. Lady is right about the history. We have a unique responsibility, although of course we do not have power in exactly the same way that we did in the 1940s, but we have it in many new and different forms. We have a great responsibility as a member of the UN Security Council to assist in these matters. The problem with her question was apparent when she referred to giving hope to Palestinians and to Israelis. That is an important point. It is important that we give hope to people on both sides of the divide, and that is what I am seeking to do.

[Jonathan Ashworth (Leicester South) (Lab)]

It would be churlish not to recognise that the Foreign Secretary has shifted his position to an extent, but I am sorry to say that I feel that, as my right hon. Friend the Member for Blackburn (Mr Straw) said, this manoeuvre is too clever by half. Given that countries around the world are shifting their position—I am thinking of France and Spain—is the right hon. Gentleman not worried that we risk losing influence on these matters? Given our history and standing in the region, would voting in favour of the resolution tomorrow not send a signal to both sides that only a political solution is viable?

[Mr Hague]

No, I think that our influence will be important whatever happens in the vote and, indeed, however we vote. As a member of the Security Council and given the good relations that we have with the Palestinian Authority and Israel and our special relationship with the United States, our influence will continue to be very important. That absolutely will be maintained. We will be using that influence from the moment after the vote is conducted to try to ensure that negotiations begin again.

[Katy Clark (North Ayrshire and Arran) (Lab)]

Surely, a vote for Palestinian statehood would give faith to many Palestinians that a political solution is possible, and surely the strengthening of such moderate Palestinian opinion must be key to progress.

[Mr Hague]

The thing that would most give those people hope and confidence that there is the future that they rightly desire would be to see their leadership sitting down with the Israeli leadership, both making the necessary concessions and talking about how they can help each other to achieve the goal of a settlement based on 1967 borders, with Jerusalem as a shared capital of both states and with a settlement for refugees. That would really give them hope, as it would have done at the time of the Oslo peace accords, so everything that we do should be calculated to encourage that, and that is what has dictated our policy.

[Jim Shannon (Strangford) (DUP)]

I thank the Foreign Secretary for his considered statement to the House. When the latest peace agreement was reached, Palestinian authorities stood by and allowed seven Palestinians to be killed after allegations were made that they had given information to Israel. One of them was under close arrest in a prison in Palestine at the time and so could have given no information whatsoever. Does the Foreign Secretary agree that it is obvious that Palestine has not moved away from Hamas terrorism and brutality and that he must stand firm and not agree to the enhanced recognition for Palestine at this time for those very reasons?

[Mr Hague]

That is the other side of the argument that we have heard. Certainly, Hamas is an organisation that has committed serious abuses of human rights. In response to the right hon. Member for Belfast North (Mr Dodds), I referred to what Hamas needs to do and how it needs to change. The hon. Gentleman has given a further illustration of the need for that.

Business of the House

Wednesday 28th November 2012 Commons Chamber

13:40

[The Leader of the House of Commons (Mr Andrew Lansley)]

With permission, Mr Speaker, I would like to make a short business statement.

As I announced last week, the Prime Minister will make a statement in response to the Leveson report. With your kind permission, Mr Speaker, I expect that statement to be made to the House at 3 pm tomorrow, at the conclusion of the Back-Bench debate on Scotland and the Union.

Given the extent of the interest in the Leveson report, I can tell the House that the scheduled Back-Bench debate on the 40th anniversary of the expulsion of Ugandan Asians will now take place at a later date.

I will set out the forthcoming business as usual tomorrow.

13:41

[Ms Angela Eagle (Wallasey) (Lab)]

I thank the Leader of the House for his statement and for making clear what will happen tomorrow after the publication of the Leveson report. Can he enlighten the House on whether, when the Prime Minister responds to the report, he will speak on behalf of the whole Government or merely of a part of the Conservative party?

[Mr Lansley]

As I said, the Prime Minister will make a statement on behalf of the Government.

[Jane Ellison (Battersea) (Con)]

May I say on behalf of the Backbench Business Committee that, although we are obviously disappointed, we understand the reason why business has been changed? The bid for the debate was extremely well supported by the Committee, so if there is anything that we can do to accommodate the debate in good order, we will do it.

[Mr Lansley]

I am grateful to my hon. Friend and, indeed, the Backbench Business Committee for their forbearance. One of the consequences of what I have announced is that, although less Back-Bench time has been allocated for tomorrow, more will be allocated at a later date. I hope that the Committee will find a ready opportunity to accommodate this important debate.

[Mr Shailesh Vara (North West Cambridgeshire) (Con)]

As the proposer of the debate that will now be postponed, I am clearly disappointed, but I fully appreciate the circumstances. Mindful of the subject’s topicality, I would be happy to reduce the time allowed for the debate from three hours to one and a half hours if that is of assistance to those who schedule things, so that we can have it sooner rather than later.

[Mr Lansley]

I am grateful to my hon. Friend. I share his disappointment and thank him for his forbearance, too. I am sure that the Backbench Business Committee, which considers the allocation of time, will have heard what he has said.

Consolidation of Housing Regulations

Wednesday 28th November 2012 Commons Chamber

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

13:43

[Mr Adrian Sanders (Torbay) (LD)]

I beg to move,

That leave be given to bring in a Bill to consolidate Regulations relating to tenancies in the social and private housing sectors; and for connected purposes.

I would like to draw the House’s attention to my declaration in the Register of Members’ Financial Interests.

The Bill would revamp the current framework for the private rented sector, seek to solve some systemic imbalances, make both tenants and landlords more aware of their rights and responsibilities, and provide a more robust foundation to encourage investment in new housing.

It is clear that, for a number of reasons, we face a housing crisis in the UK that will only get worse in the coming years. At root is the problem of supply. Household formation has been fast outstripping house building for many years. In addition, there is a massive problem with affordability. The inequalities of wealth and income that grew in the 1980s remain and in many cases are worse today. Housing costs in particular have risen phenomenally and a decade of harmful speculation in property prices sadly shows few signs of transforming into a more stable market, such as that in Germany. This is accompanied by inter-generational inequality, so people on low incomes and younger people have far less opportunity to own their own home.

As well as the distortions to the housing market that that set of circumstances creates, it is of direct financial cost to the Treasury. As we all know, the increase in the housing benefit bill has been relentless—it has increased by 50% since 2005. This diverts resources that otherwise could be spent on preventing the inequality in the first place. Demand is already increasing steeply and, if not managed properly, this will create yet more challenges for policy makers to fix retrospectively.

There will undoubtedly be many new landlords in the coming years, but they will act in a culture of uncertainty. As Sir Adrian Montague’s recent report highlighted, the sector has not yet encouraged significant extra institutional investment, despite clear potential. The introduction of universal credit produces uncertainty for landlords. The reduction of direct payments to landlords may well lead to private landlords no longer offering their properties to those in work and receiving universal credit.

Many landlords and tenants are, remarkably, unaware of their rights and responsibilities. There remains a section of landlords who are remiss or even criminal in their duties towards their tenants. We must not forget, either, that there are also some bad tenants, who willingly fail to uphold their responsibilities.

New builds are covered by a relatively comprehensive range of regulations, including for fire safety and energy conservation, but a consolidation of regulations would go some way to encouraging the improvement of older rented properties—the quarter of rented homes that do not currently meet the decent homes standard.

What, then, is the argument for simplification? The Law Commission’s 2006 report, “Renting Homes”, provided a blueprint for simplification consisting of deregulation, consolidation and rationalisation. This Bill will focus on the second of those, which the report defines as

“bringing together different regulations into a more manageable form and restating the law more clearly. By improving transparency and understanding, it should reduce compliance costs”.

At present, landlords are subject to regulation from the following sources: the Gas Safety (Installation and Use) Regulations 1998, the Furniture and Furnishings (Fire) (Safety) Regulations 1988, as amended in 1993, the Electrical Equipment (Safety) Regulations 1994, the Plugs and Sockets etc. (Safety) Regulations 1994, part P of the building regulations, selective licensing under the Housing Act 2004, the various provisions of the Landlord and Tenant Acts 1985 and 1987, the Taxation of Income from Land (Non-residents) Regulations 1995, the Protection from Eviction Act 1977, the Data Protection Act, energy performance certificate regulations, tenancy deposit regulations and equalities legislation. I could go on.

This range of rules creates confusion. Although the Department for Communities and Local Government and others have produced guides synthesizing this information, these are no substitute for a single piece of legislation. The confusion is not only for landlords and tenants, but for legislators and those discussing the future of the sector. Providing for all regulations to be approved by a single Department or agency would also add clarity.

Despite these difficulties, the majority of landlords comply with legislation and, indeed, go beyond it, because they know it makes financial sense to do so. The problem arises when unscrupulous landlords let properties, and it is exacerbated when tenants are vulnerable or on very low incomes. A consolidated regulatory regime would also benefit from a one-stop shop for complaints and redress. At the moment, tenancy deposit protection agencies, local authorities, the courts and a host of other agencies are able to intervene. In practice, far too many tenants are not able to get landlords to fulfil their responsibilities promptly and, indeed, many landlords are unhappy that there is not a better process for redress when tenants fall into arrears. We need a single ombudsman-type body to adjudicate and mediate when things go wrong between landlords and tenants, and ideally at an early stage, so that tenancies do not fall through and the inevitable costs to all involved are avoided.

We want to avoid situations—I am sure we have all heard of them in our surgeries—whereby families are evicted with one or two weeks’ notice, do not know their rights and do not have recourse to a speedy solution. As the “Renting Homes” reports states:

“Many landlord-tenant disputes currently arise from ignorance. Our recommended scheme, with its emphasis on written model contracts, drafted in plain language, enables both landlords and occupiers to discover easily their respective rights and responsibilities. This will reduce the need to seek legal advice and facilitate the resolution of problems and disputes. All parties gain from this approach which leads to significantly reduced compliance costs.”

Another aspect is the regularity of inspection or demonstration of compliance with regulatory duties for landlords. Landlords are required to perform an annual gas safety inspection, and there is no reason why this could not be converted, at very little extra cost, into a more robust assessment of other areas of the safety of the property, such as the presence of a working smoke alarm, or any of the other risk factors that local authorities will search for under the housing health and safety rating system. Such a check could be performed less frequently, at no danger to the tenant or property, than on the current annual basis—perhaps every two or three years.

A comprehensive rebundling of regulation would provide an opportunity to consider broader tenancy reform, as “Renting Homes” suggested, taking a more consumer protection-oriented approach. However, some aspects of regulation still need strengthening. The requirement to have a working smoke alarm, already present for houses in multiple occupation and new build, could save dozens of lives and prevent thousands of injuries a year if extended to all rented homes. Taking regulation in the round could allow such extra elements to be introduced without the massive regulatory cost that would arise from introducing piecemeal changes. Most importantly, providing a standardised and transparent approach to renting would give investors the confidence to pledge resources to the build-to-let sector.

The Montague report effectively covers some of the problems, including the pitfalls of the planning system, the need to release more public sector land, and the need for new business models for investment. Most importantly, Montague states in his fifth and final recommendation that

“the market would benefit from a clearer understanding of what tenants should have the right to expect.”

A clearer framework for how the sector operates would undoubtedly reassure many investors, who are bound to be wary in the current financial climate. Sadly, it is clear that poor standards are also present in the social sector, so there is plenty of scope for the Government to take a broad approach to reforming the rented sector overall.

Other jurisdictions are taking this action. The Welsh Government, for example, set out a comprehensive review of housing regulation in their recent “Homes for Wales” white paper. They propose a national accreditation scheme, which the deregulating zeal of the UK Government would clearly preclude, but also endorse flexible tenancy reform, which this Bill seeks to emulate. There are other, more subtle ways of improving housing quality by bringing in related industries such as insurance and banking, as the Rugg review outlined. As the review concluded, we would benefit from light-touch licensing with effective redress.

This Bill would allow for better regulation of the private rented sector, better enforcement of that regulation, a better deal for landlords and tenants, and a better incentive to invest in building the new homes that so many of our constituents desperately need.

Question put and agreed to.

Ordered,

That Mr Adrian Sanders, Annette Brooke, Paul Farrelly, Dan Rogerson, Andrew George, Mr David Ward, Caroline Lucas and Mark Durkan present the Bill.

Mr Adrian Sanders accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 18 January 2013 and to be printed (Bill 98).

Opposition Day

Wednesday 28th November 2012 Commons Chamber

[11th Allotted Day]

Income Tax

Wednesday 28th November 2012 Commons Chamber

[Mr Speaker]

I inform the House that I have selected the amendment in the name of the Prime Minister.

13:54

[Rachel Reeves (Leeds West) (Lab)]

I beg to move,

That this House notes that HM Revenue and Customs figures show that 8,000 people earning over £1 million will gain an average of £107,500 from the Government’s decision to cut the top rate of income tax from April 2013; further notes that figures from the Institute for Fiscal Studies show that the Government’s changes to tax allowances for pensioners will mean that 4.4 million existing pensioners will lose an average of £83 from 2013-14, while thousands of people turning 65 will lose £323; and calls on the Government to announce in the Autumn Statement that it will not go ahead with its proposal to cut the top rate of tax for the richest earners at a time when the economy is flatlining, millions of pensioners on middle and low incomes are paying more, and when wider tax and benefit changes being implemented in 2012-13 will result in families with children losing an average of £511.

In March this year the Chancellor of the Exchequer stood in this House to deliver his Budget. It was a revealing moment. Having previously said that we are all in it together and insisted that those with the broadest shoulders should bear the greatest burden, the Chancellor announced a tax cut worth, on average, £107,000 for those earning more than £1 million a year. It was the moment that the Government’s façade of fairness disappeared for good. In these tough times, against the backdrop of the biggest squeeze in living standards for a generation, and with the economy flatlining, the Chancellor prioritised millionaires above millions of working people. That is why we have called this debate: to question the priorities of the Government, to stand up for pensioners and families who are being hit hardest—

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

The hon. Lady said that she wants to prioritise ordinary people over millionaires, so would the Labour party, if it were to come into government in 2015, reintroduce the 50p rate?

[Rachel Reeves]

We are hoping that Government Members will see sense and vote for the motion, and that the Chancellor will rethink his decision in next week’s autumn statement. It is not too late to reverse this change. I am not going to write the manifesto for 2015 now, but every single Labour MP will be voting against this tax change, which has not yet come into effect, so the Government can still think again.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

Can the hon. Lady explain why only two Labour Members—the hon. Members for Newport West (Paul Flynn) and for Bolsover (Mr Skinner)—voted against the rise after the Budget statement in March?

[Rachel Reeves]

We have already debated this; when we debated the Finance Bill, Labour MPs voted against the cut in the top rate from 50p to 45p, as the hon. Gentleman is aware.

Let us look at the facts. There are 30 million taxpayers in the UK—30 million people who go out to work each day and pay their tax—yet the Chancellor’s tax cut helps only the richest 300,000, of whom 8,000 take home more than £1 million a year. According to table 2.5 on page 30 of Her Majesty’s Revenue and Customs’ income tax liabilities statistics of April this year, their total income in 2012-13 is expected to be £18.4 billion, and they will pay £8.6 billion of tax on that income at the 50p rate. From next April, when the additional rate is lowered to 45p, they will pay £7.7 billion of tax on that income. This represents £860 million of lost revenue because of a tax cut for people earning over £1 million, and an average tax giveaway of £107,000 to each and every one of them—not just in one year but in each year to come.

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

rose—

[Rachel Reeves]

I give way, and I look forward to hearing a justification for that.

[Andrew Bridgen]

Will not the hon. Lady be honest with this House and this country? This was a Trojan horse of a tax brought in at the very fag end of the Labour Government as part of a scorched-earth policy that has been shown to have cost the Exchequer almost £7 billion already—something else that the previous Government messed up and that this Government have to put right.

[Mr Speaker]

Order. In using the word “honest”, it should be taken as read that Members are always honest in the Chamber.

[Rachel Reeves]

Thank you, Mr Speaker.

The increase in the top rate of tax from 40p to 50p was introduced to help to reduce the deficit because the last Labour Government thought that it was right that those with the broadest shoulders paid a little bit more towards achieving that. The fact that this Chancellor has reversed that and is reducing the top rate of tax shows that he thinks exactly the opposite—that his priorities are not with ordinary working people but with the richest 1%. [Interruption.]

[Charlie Elphicke (Dover) (Con)]

Will the hon. Lady give way?

[Rachel Reeves]

I will—and if the hon. Member for Beverley and Holderness (Mr Stuart) has an intervention to make, then he can make it.

[Charlie Elphicke]

Does the hon. Lady accept the calculation by the Office for Budget Responsibility that this proposal would cost £100 million—yes or no?

[Rachel Reeves]

Let us look at what Robert Chote, the chair of the OBR, says about the cut in the 50p rate:

“This is a judgement based on not even a full year’s data based in terms of how people have responded to the 50p rate, in particular in terms of those self assessment tax-payers.”

Indeed, we know that a series of larger-than-usual dividends were paid in the days and weeks just before the introduction of the 50p rate. For example, the Prime Minister’s friend Emma Harrison, who is the Government’s adviser on their welfare-to-work programme—we know how successful that has been—was paid on 1 April 2010, before the new tax year, which meant that her dividend was taxed at the old 40% rate, saving her £800,000.

That is why the Government’s claims about the yield of the 50p rate do not stand up. People have had the opportunity to anticipate the introduction of the new taxation rate by bringing their income forward, as they did when the rate was reduced. As the Office for Budget Responsibility and the Institute for Fiscal Studies said, it is difficult to produce a definitive estimate for the long-term yield of a tax that has been in place for only a short period, and it is fiscally irresponsible and wholly misleading to use figures from the first year to justify the policy.

[Charlie Elphicke]

I thank the hon. Lady for giving way again, but let me press her a bit more on this point. The OBR said that its calculation was a “reasonable and central estimate.” Does she disagree with that?

[Rachel Reeves]

Robert Chote has said:

“This is a judgment based on not even a full year’s worth of data”

and the estimates are very uncertain. Another group of experts at the IFS stated that

“by giving out £3 billion to well-off people who pay 50p tax…the Government is banking on a very, very uncertain amount of people changing their behaviour and paying more tax as a result of the fact that you’re taxing them…There is a lot of uncertainty, a lot of risk on this estimate.”

If the Government think that lots of millionaires who were not paying the 50p rate of tax will start flooding to these shores to pay the 45p rate—well, we will see what happens when the numbers come out.

[Charlie Elphicke]

Let us talk about those millionaires. Today’s Daily Mail states that the number of millionaires slumped from 16,000 to 6,000 after the 50p rate of tax was introduced, and that revenues fell from £13.4 billion to £6.5 billion. Does that show that if the rate of tax is increased too much, it will have a negative impact on the public finances?

[Rachel Reeves]

I thank the hon. Gentleman for at least highlighting that thousands of people with declared incomes of more than £1 million who were paying the 50p rate will get a tax cut next year. His figures show that in 2010-11 there were 6,000 people with declared incomes of more than £1 million, and 10,000 in 2011-12. A written answer that I received from the Exchequer Secretary to the Treasury on 19 June stated that 70% of people earning more than £250,000 were paying more than 40% in tax, and 80% of those earning more than £500,000 were paying the 50p rate. In the new year, each and every one will get a large tax cut.

If the Government honestly want people to pay their fair share of tax, they should spend more time and resources on tackling tax avoidance, not compensate the wealthiest by cutting the headline rate of tax. No wonder they have cut staff numbers at Her Majesty’s Revenue and Customs by 11%—they have just given up.

I am happy to debate the Government’s record on raising revenue through taxation. Last autumn, as a result of the slowing economy, projected income tax revenues across the board had to be written down by £51.2 billion by the Office for Budget Responsibility because of the weakness of the economy and the double-dip recession. Only last week, the Office for National Statistics released statistics showing that public borrowing in October was £2.7 billion higher than for the same month last year.

Over the first seven months of financial year 2012-13, the Government have borrowed around £5 billion more than for the same period last year. Why are we seeing that increase in borrowing? It is not as if the Government have not put up taxes for ordinary people or cut public services. The Chancellor’s flatlining economy has forced a 10% slump in corporation tax revenues, and VAT revenues are expected to be down by 2.5%. The Government can spend all the time they like defending a tax cut for millionaires, and Ministers as much time as they like in Cabinet arguing among themselves about why there has been no growth, but it is time they changed course and adopted a plan for jobs and growth.

[Mark Pritchard (The Wrekin) (Con)]

Whether the rate is 45p or 50p, does the hon. Lady accept the principle that a low-tax economy is better for Britain and for businesses to do business in Britain?

[Rachel Reeves]

The hon. Gentleman says, “Whether the rate is 45p or 50p”, but the difference between those figures is £3 billion that could be used to pay down the deficit, help families who are struggling with the rising cost of living or get rid of the granny tax that the Chancellor is introducing next year. The principle of having lower taxes is fine, but we have a deficit to reduce. I thought the Government believed we should be cutting that deficit instead of giving tax cuts. The Chancellor said that in his first Budget, but he has thought again since then and is giving a tax cut to the wealthiest while asking ordinary families to pay more. That is not what my constituents want, and I doubt it is what those of the hon. Gentleman want either.

[Sheila Gilmore (Edinburgh East) (Lab)]

Does my hon. Friend agree that, strangely, because the cut in the rate of tax was announced and then postponed, a number of people will doubtless try to do in reverse what they appear to have done when the tax was introduced? The Government will then say, “Ah, but in this year, not enough was raised through that tax.” It will almost become a self-fulfilling prophecy.

[Rachel Reeves]

Exactly that point about income profiling and not being able to estimate the impact of the tax because it has not been in place long enough was made by the IFS and the OBR. It is a shocking indictment of the Government’s priorities that the Chancellor has chosen at this time to give a tax cut to the few at the top—a tax break for millionaires—while asking working people to pay more. They are the same, old, out-of-touch Tories, and not one of their accomplices—the Liberal Democrats—had the nerve to stand up to the Chancellor.

[Paul Flynn (Newport West) (Lab)]

Studies show that those countries in the world that are happiest and have highest levels of contentment and well-being are the Scandinavian nations that have relatively high taxes and high minimum wages. Is it not strange for the Government to believe that we make the rich work harder by giving them more money but the poor work harder by taking money from them?

[Rachel Reeves]

My hon. Friend makes an important point. The work of Wilkinson and Pickett in “The Spirit Level”, and other academic research, has shown exactly that. Some people will be a lot happier next year—the 8,000 millionaires who will have their taxes cut—but ordinary working people who see their taxes go up will be a lot worse off and, I expect, not very happy with either their finances or the Government who have inflicted that situation on them.

In the same Budget as the Chancellor’s giveaway to the richest, buried in the small print as a tax simplification, was the Chancellor’s granny tax. The freeze in the age-related allowance for the over-65s will see 4.4 million pensioners who pay income tax losing an average of £83 each per year. People who turn 65 next year will lose most of all—up to £322. Listening to the Chancellor was like watching Robin Hood in reverse. Most pensioners who will be hit by the granny tax live on incomes that put them in the bottom half of income tax distribution. Those with a small personal pension of £67 a week—£3,000 a year—will be in line to lose under this measure. How insulting to pensioners who have worked hard all their lives, who have not earned large salaries, but who have done the right thing and saved responsibly so they could provide for themselves in later life.

[Mr David Anderson (Blaydon) (Lab)]

Does my hon. Friend recognise figures from Hansard that show that in the north-east some 4,000 taxpayers will benefit from the changes, but more than 278,000 will be worse off and they will mainly be pensioners? Does that not show all we need to know about the Conservative party?

[Rachel Reeves]

My hon. Friend makes an important point. People on modest incomes such as pensioners will lose out, while those at the top get a little bit more—well, not a little bit more; they will get £107,000 more next year from the Government. How insulting for those pensioners to see their taxes go up on the same day that millionaires have their taxes cut. Families, pensioners and young people cannot escape the Chancellor’s austerity programme—only millionaires can do that.

Pensioners have already seen their winter fuel allowance cut and their pension indexed to a lower measure of inflation. The increase in the state pension age for women has been brought forward, and the rise in VAT has added £275 to the costs faced by an average pensioner couple. Services such as the national health service, social care and local transport have been cut, and the TUC estimates that a single pensioner will lose access to services worth 11% of his or her income. No wonder so many people have spoken out against what the Chancellor is doing.

Age UK has stated:

“We feel it is disappointing that the budget offered a tax break of at least £10,000 to the very wealthy while penalising many pensioners on fairly modest incomes who are already squeezed.”

The chief executive of Saga has said:

“Over the next five years, pensioners with an income of between £10,500 and £24,000 will be paying an extra £3 billion in tax while richer pensioners are left unaffected”.

The National Pensioners Convention has said:

“We have been inundated by pensioners who are disgusted that those on around £11,000 a year will no longer get additional reductions in their tax…whilst those earning £150,000 or more will see their tax bills reduced…This is seen by many as the last straw…Pensioners feel they are being asked to bail out the super rich…and it’s simply not fair.”

The Opposition could not agree more. It is the same old out-of-touch Tories.

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

To add to that litany of taxes on pensioners, annuity rates are in freefall; one cardinal fact of the past two and a half years is the collapse in annuity rates for pensioners. On top of those other attacks on their income, pensioners now find that their annuity rates are collapsing.

[Rachel Reeves]

I thank my hon. Friend, who is the shadow pensions Minister, for his intervention. I am sure he could add many other examples of pensioners being hard hit by the Government. The change in annuity rates is one example as the economy continues to flatline.

The rest of the taxpaying public look with disbelief on what the Government are doing, including the families with children, who are, on average, £450 a year worse off because of last year’s VAT rise, and another £511 a year worse off this year because of further cuts, freezes and reductions to benefits and tax credits; the couples with children who cannot increase their hours to the higher threshold introduced by the Government and who will have working tax credits withdrawn, which, in many cases will drop them below the poverty line; the families with incomes above £26,000, who are now losing all their child tax credit, contrary to the Prime Minister’s promises before the general election; and those on modest earnings with children at school, who will suffer cuts to services equivalent to 13% of their incomes.

The deterioration of the economic outlook on this Chancellor’s watch has led to the OBR revising projections on real disposable income per household down by £800 last year, by £1,100 this year and by £1,700 next year.

[Mr Jim Cunningham (Coventry South) (Lab)]

On tax credits, what does my hon. Friend think about a case I heard about two or three days ago, in which the application for tax credits was not even opened for three months?

[Rachel Reeves]

Given the cuts to departmental budgets, it is not surprising that some applications are not being processed and that, as a result, families are missing out on the tax credits to which they entitled, pushing them further into hardship.

How will households throughout the country feel next year, when those earning more than £1 million get a tax cut of £107,000? What is the Government’s message to people who work hard and want to get on in life? We remember when the Conservatives liked to think of themselves as the party of aspiration. Baroness Thatcher liked to claim she stood up for people who wanted to work their way up, and yet, under this Government, people who get a pay rise or promotion lose their child benefit. Imagine that! A person who earns £49,000 a year and has three children will lose thousands of pounds in child benefit if they take a pay rise or promotion. What a terrible position to put people in.

The truth about the Government is this: pensioners pay more, low-paid parents pay more, and a family working hard to get on in life and provide for their children pay more, but millionaires pay less. That tells us everything we need to know about the Government and their values. For many, 2012 will be remembered as the year the Chancellor’s drastic cuts began to hit home, but for the richest, 2013 will be remembered as the year they received their tax give-away from this Robin-Hood-in-reverse Chancellor.

Last week, the Prime Minister compared the economic situation we face to war. It is true that we are facing a period of national upheaval, but that is why it is crucial that the Government are a uniting force, not a dividing one. Is this really the time for a tax cut for the richest? During the second world war, the public queued to get their copy of the Beveridge report, because it set out the beginnings of a welfare state in which everyone had a stake. In the period of reconstruction after the war, that spirit and sense of national mission led to the creation of the national health service.

The Government do not understand the need for one nation politics, or the need to take people with them and share the burden of sacrifice fairly. Instead, they will be remembered as a Government who divided. Indeed, of the richest who are receiving the tax give-away, 85% are men, but around 70% of the revenue raised from direct tax and benefit changes will come from women. Fifty-two per cent. of those benefiting from the millionaires’ tax give-away are based in London and the south-east, but long-term unemployment is rising in the north. The poor are expected to work harder, because otherwise they will be made poorer, but the rich will work harder only if they are made richer. There is one rule for the very richest and another for everybody else. It is the same old out-of-touch Tories.

When the Chancellor came to the House to deliver his 2011 Budget, he said that

“now would not be the right time to remove it when we are asking others in our society on much lower incomes to make sacrifices”.—[Official Report, 23 March 2011; Vol. 525, c. 957.]

He was right then, and he is wrong now. He revealed his true colours in this year’s Budget.

[Andy Sawford (Corby) (Lab/Co-op)]

Does my hon. Friend recall the remarks of the parents whom she and I met at the Pen Green centre in Corby, who spoke about many local priorities, including vital local services such as our hospital? They did not believe the millionaires’ tax cut was the right priority for people in Corby and east Northamptonshire or for people throughout the country.

[Rachel Reeves]

Although my hon. Friend has been in the House for a lot less time than many Government Members, he speaks more sense than they do, on behalf of his constituents in Corby and east Northamptonshire, who sent a clear message to the Prime Minister two weeks ago when they elected my hon. Friend and booted out the Conservatives. He is right to stand up for their interests. They do not want the tax cut for millionaires; they want help for ordinary families, for pensioners and for young people getting back to work. That is what people in Corby and the rest of the country want.

The Chancellor waved goodbye to the pretence of being on the side of working people in this year’s Budget. He waved goodbye to saying, “We’re all in this together,” and, “Those with the broadest shoulders should bear the greatest burden.” The Budget was the U-turn that revealed his true motives and told people for whom he stands. People will not forget that, when times were tough and they needed support, the Government cared only for those who needed it least. The Tories are back to doing what they do best. It is the same old out-of-touch Tories.

[Several hon. Members]

rose—

[Mr Speaker]

Order. Just before I call the Minister from the Treasury Bench, I remind the House that, on account of the time available and the number of hon. Members wishing to speak, I have imposed a limit of 10 minutes on each Back-Bench contribution.

14:10

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

I beg to move an amendment, to leave out from “House” to the end of the Question and add:

“notes that the previous administration maintained the top rate of income tax at 40 per cent for 13 years, only increasing it to 50 per cent in April 2010, one month before the Government was formed, and that this new rate was damaging to UK competitiveness; further notes that the independent Office for Budget Responsibility certified the Government’s central estimate that reducing the 50 per cent rate to 45 per cent would have a cost to the Exchequer of £100 million per year and that measures introduced at the last Budget increased taxes on the wealthy by some £500 million; recognises that in contrast to the previous administration that abolished the 10 per cent rate of tax which increased taxes on more than five million low earners, the Government is cutting income tax for 25 million low and middle earners while taking two million low-paid people out of income tax altogether through increasing the tax free personal allowance; recognises that every Budget under this Government has increased taxes on the rich, including a new stamp duty land tax rate for properties over £2 million, an annual charge on these properties, introducing a cap on previously unlimited income tax reliefs and an extension to the capital gains tax regime, clamping down on tax evasion and aggressive tax avoidance, and bringing in a General Anti-Abuse Rule; and welcomes the introduction of the Triple Lock, which led this year to the biggest ever cash rise in the state pension.”

The amendment is in my name and those of my right hon. and hon. Friends. After all the anger and bluster the House has just heard, may I bring to its attention a few pertinent facts? Hon. Members have been told that the 45p rate for high earners is too low, which ignores the fact that there was a top rate of 40p for all but 36 of the 4,758 days of the Labour Government. We have been told that the rich should pay more. That ignores the fact that other changes in the tax system introduced in the Budget will raise five times the amount of tax from the wealthiest than the 50p rate raised in practice. We have heard that moving to 45p is wrong, but the Opposition will not commit to reversing it after the next general election.

[Sheila Gilmore]

Will the Minister confirm a report that I read in, I believe, The Sunday Times, which stated that the number of property sales above the level of increased stamp duty has fallen since the Budget? When will he produce figures on whether such so-called additional taxes raise any additional money?

[Mr Gauke]

I note with interest that the hon. Lady appears to be arguing that an increase in tax can sometimes lead to a loss of revenue. She is right—that can sometimes happen. As it happens, the revenue on stamp duty land tax is holding up all right, but she makes an important point, one that I hope is understood more widely in her party. I am pleased that the Opposition are keeping open the option of not increasing the 45p rate of income tax. Although it is right that those with the broadest shoulders bear the greatest burden—I will set out how the Government are making that happen—it is also necessary to ensure that the UK is competitive in attracting wealth creators to locate and stay in this country. A Government that are serious about the UK winning the global race for growth should be very careful about pursuing a policy that places a huge “closed for business” sign over our economy. That is exactly what the 50p rate of income tax was—a “closed for business” sign. I hope that at the next general election there will be a consensus that we do not want to re-erect that sign over our economy.

[Mark Pritchard]

The new growth guru in Europe is of course President Hollande of France, who is well known to the Opposition Front Bench. I wonder whether my hon. Friend thinks that the higher 75p rate of tax in France has helped entrepreneurs and business people to stay within France, or to flee to other shores, such as the low tax economy in Britain.

[Mr Gauke]

My hon. Friend raises an interesting point. Perhaps I should not be drawn too much into discussing the domestic policies of one of our close European allies, but it will be interesting to see the impact in France of a very high rate of income tax, and whether people will move out of that country and we see any additional revenue as a consequence.

[Mr Graham Stuart]

I appeal to my hon. Friend not to be too harsh on the Opposition. Does he not understand that the Labour party now gets 90% of its funding from the trade union movement? If the trade unions insist that there should be a 50p tax rate—even if it does not raise money and undermines public services—it may feel obliged to put it in its manifesto regardless.

[Mr Gauke]

My hon. Friend displays an unusual degree of cynicism. I am still hopeful that Labour Members will share with us a desire for the UK to be a competitive environment for business that attracts high net worth and high-earning individuals to locate and pay tax in the UK, and that we can raise more revenue from them. Perhaps, however, my hon. Friend will turn out to be right and they will be driven more by their trade union paymasters.

[Paul Flynn]

Did the hon. Gentleman see the filmed interview with the treasurer of the Conservative party who demanded £250,000 for an invitation to dinner with the Prime Minister? Does not that give us an idea of the source of the Tory party’s funds?

[Mr Gauke]

I suspect, Mr Speaker, that you would not want us to be drawn into a lengthy debate about party funding. All I can say is that the Conservative party and this coalition Government will make decisions on tax policy on the basis of ensuring that we have a fair and competitive tax system, and that is exactly what we are doing.

[Andrew Bridgen]

Does the Minister agree that when data show that the top 1% of earners already pay 28% of all income tax, we want to encourage them to stay, and, indeed, attract other high earners to our economy?

[Mr Gauke]

My hon. Friend makes an important point. Our income tax receipts are dependent on high earners, and that will continue to be the case. We will continue to raise substantial sums from those high earners, but we must ensure that the UK is an attractive place for them to be located. At a time when labour mobility is perhaps greater than it has ever been before, particularly for such individuals, we have to recognise that the UK is competing for talented individuals and business investment, and that a 50p rate of income tax does not help us do that. That is the essence of the reason why we reduced the rate to 45p.

It may be helpful to provide some background to the policy we are debating. As the House will be aware, the previous Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), announced in his 2009 Budget that the additional rate of income tax would come into effect in April 2010. It was accepted that there would be behavioural change as a consequence of that. The shadow Chief Secretary referred to the figure of £3 billion, which she alleged was the cost of cutting the 50p rate to 45p. She got that figure by looking at the static cost—not including any behavioural change whatsoever. It is worth pointing out that when the previous Government announced the increase from 40p to 50p, they assumed a behavioural change that would mean that rather than raising £6 billion, approximately only £2.5 billion would be raised. That was the assumption made by the previous Government. Such a substantial behavioural impact is inevitably bad for the economy. Not only were we left with an economy in a disastrous state and a huge budget deficit resulting in public sector debt growing very rapidly, we were left with a tax system that was highly uncompetitive and drove away big contributors to tax revenue.

[Andrew Bridgen]

I thank the Minister for giving way again—he is very generous. Does my hon. Friend agree that having a high income does not guarantee friends, happiness or health but does guarantee choice, and that one of the major choices is where one is domiciled for tax?

[Mr Gauke]

My hon. Friend is right, and harks back to what I was saying a moment ago. We have to bear in mind that the ability of high-earning individuals to be mobile has increased over time. It is striking, for example, that the number of UK citizens moving to Switzerland in 2010 increased by 29%. That demonstrates the fact that individuals will respond to fiscal incentives. They will respond to one of the highest rates of personal tax in the developed world, which was the position that the UK was in.

[Charlie Elphicke]

Is not the Minister’s point thrown into sharp relief by the fact that millionaires were paying approximately £13.4 billion before that measure was introduced, and that that went down to £6.5 billion? Is it not dangerous for our public finances to start jacking up the rate and driving people out of the country, as the previous Government did?

[Mr Gauke]

My hon. Friend sets out some dramatic numbers. They are the correct numbers, although it would be right to say that an element of that had to do with forestalling and people moving their income around. However, Opposition Members should not take great comfort from that. They demonstrate the enormous amount of behavioural change as a consequence of high rates. That level of forestalling is striking. What is also striking is that when the previous Government made their estimate of what would happen with income, no allowance was made for forestalling whatsoever, which again demonstrates flaws with the methodology that was in place.

[Lyn Brown (West Ham) (Lab)]

The hon. Gentleman makes an erudite argument, as always, and he sounds plausible, but can he not see that ordinary families, who are losing at least £500 per year, facing difficulties buying food and struggling with petrol costs, find it really hard to stomach why the Government are choosing to give £107,000 per year to people who are earning £1 million? It does not make sense to them. It does not make sense to us.

[Mr Gauke]

In the Office for Budget Responsibility assessment there is a tax cut of £100 million that goes to those who are paying the 50p rate.

In the same Budget package, however, there are measures to deal with stamp duty avoidance on properties over £2 million, a stamp duty increase on properties over £2 million, which is bringing in revenue, and caps on reliefs directed at high-earning individuals. So who is paying the stamp duty and not benefiting from the reliefs as before? They are high-earning individuals. They are paying for the cut in the 50p rate five times over as a consequence of the measures announced in the last Budget. That is the explanation to the hon. Lady’s constituents, and mine, of how the cut is being funded.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

Will the Exchequer Secretary confirm that the expectations in the OBR’s assessment in March on income tax and VAT receipts are not being met?

[Mr Gauke]

The hon. Gentleman tempts me down that route, but we have an autumn statement next week on that matter, when we will hear the OBR numbers.

[Jonathan Edwards]

Obviously, my party does not agree with this measure and voted against it following the Budget statement, but, if the Treasury intends to pursue this line of argument, when will it drop the rate to 40p?

[Mr Gauke]

I admire the hon. Gentleman’s ambition. To be fair, he did not make this point, but, when Labour voted on this matter in the Finance Bill debates, effectively they would have got us to a 40p rate—but there we go. It was HMRC’s assessment that a reduction from 50p to 45p would be relatively inexpensive, and, given the damage the 50p rate was doing to our competitiveness, we believed it would be well worth doing. Of course, all taxes are under review, but the 45p rate remains in place.

[Barry Gardiner (Brent North) (Lab)]

I understand the Exchequer Secretary’s point. He calculates that the reduction in the top rate of tax has been, in his eyes, more than compensated for—five times over, he said—by the other taxes. How, then, will the reduction in the top rate of tax provide the incentive to those taxpayers he wants to domicile here? How will this fivefold increase in tax not send them rushing abroad? I thought that was precisely his point.

[Mr Gauke]

Very simply, different taxes have different elasticities. It is perfectly simple: people are more likely to respond to high direct rates of income tax than to stamp duty. Of course, the OBR took into account the behavioural impacts when it assessed how much revenue would be raised on, for example, stamp duty land tax. As Tony Blair sets out in his memoirs, which I was flicking through last night, direct rates of income tax are not a good way of raising income.

[Charlie Elphicke]

I thank my hon. Friend for giving way once more; he is being incredibly generous.

On the point about elasticity, is income tax not notorious for raising more revenue, the more it is cut? We saw that throughout the ’80s, when it fell from the sky-high levels of Labour to 60% and then 40%. Each time, the take increased. Is it not the case that, if we cut the rate of income tax, broadly we end up increasing the take?

[Mr Gauke]

It depends where we are on the Laffer curve, but, if we have the highest rate of income tax of any of the G20 economies, we are clearly in a vulnerable position. That was the position we inherited and why we were right to remove it.

I want to touch on the HMRC report laid before the House of Commons at the time of the Budget. It contained the assessment of the 50p rate. It showed that the additional rate was distortive, inefficient, and damaging to our international competitiveness, and that the previous Government greatly understated its impact on the behaviour of those affected. High earners were able to bring forward about £18 billion before the new rate came in, which the previous Government did not account for in their revenue projections. The 50p rate has failed: it has been criticised by business, damaged the UK economy and raised much less for the Exchequer than the last Government had hoped. In fact, it could have generated a net loss. The HMRC report estimates that it raised at most only £1 billion, and, when indirect taxes are taken into account, could have raised less than nothing.

The Government have decided not to stifle the economy further and to show that we are open for business, which is why we will reduce the rate to 45p from April next year. This move to 45p, based on the central estimate of the taxable income elasticity, will cost only £100 million—a small price to pay to regain some of the international competitiveness we lost as a result of the previous Government’s decisions. In fact, when indirect taxes are taken into account, this move could even result in a positive yield.

The 50p rate not only harmed our economy and contributed little to the Exchequer, but placed us in the unwanted position of having the highest statutory rate of income tax in the G20. Our decision to lower the rate will see us drop below Australia, Germany, Japan and Canada. In 2011-12, the top 1% of taxpayers paid about 25% of income tax revenues, and for over a decade our dependence on them has grown. Owing to this considerable economic contribution to the UK, each highly mobile earner who is driven out by internationally high tax rates hits the Exchequer and results in less revenue for public services.

Opposition Members might not care when internationally mobile individuals leave, but, given our dependence on high earners, we want them working in the UK, creating wealth and paying taxes, not moving abroad or retiring early. A competitive tax environment is unambiguously in the UK’s interests, and failing to act decisively as we did would be to ignore our long-term interests, as the 50p rate continued to drive high earners out of the country.

[Mr Anderson]

Has any assessment been made of how many people have become highly mobile and left, how many will leave and how many will come back?

[Mr Gauke]

The HMRC assessment set out the impacts that had already emerged. I highlighted the number of people moving to Switzerland and so on. The assessment of the behavioural impact was that about one third to half was a consequence of reduced economic activity—either people retiring or moving outside the UK. That is a considerable impact. It is not good for the UK economy, and the sooner we take steps to address it and set out plans to get rid of the 50p rate, the better.

[Andrew Bridgen]

Following on from the Exchequer Secretary’s last point, has the Treasury assessed the impact that the top rate of tax was having on dissuading foreign people from coming here?

[Mr Gauke]

That is also included in the HMRC assessment of the consequences for economic activity. My hon. Friend raises an important point, however: it is not just about people leaving the UK, but the fact that people would not be moving to the UK, thus damaging our reputation as a business centre. I am pleased to say that under this Government we now have a competitive top rate and corporate tax system. That is why, just this week, UBM and Seadrill announced they were moving to the UK—because it is a good place to do business, and our tax system plays a part in that.

We have taken measures to ensure that high earners make a fair contribution without resorting to punitive and populist measures that damage the economy. We have raised revenues from the most well-off in society in every Budget since we came to power, creating a fairer tax system—one where those with the broadest shoulders bear the greatest burden. That has included increases in capital gains tax and stamp duty. We have also taken a tough stance on avoidance and evasion. For example, we introduced the disguised remuneration legislation in the 2011 Budget, raising £750 million a year, mainly from higher and additional rate tax payers. That is seven and a half times the amount that was being raised by 50p as compared with 45p—and by the way, the Opposition voted against it.

In the 2012 Budget we set out policies on tackling tax avoidance. All our Budgets have included firm measures to close loopholes and strengthen HMRC’s ability to deal with tax avoidance.

[Mr Michael Meacher (Oldham West and Royton) (Lab)]

Will the Minister give way?

[Mr Gauke]

I will give way to the right hon. Gentleman, who I know is interested in this issue.

[Mr Meacher]

If the Minister is trying to make a point about how tax loopholes are being closed, how can he possibly justify changing the controlled foreign company rules in 2013-14 to reduce the rate on multinationals with a finance company in a tax haven from the current 23% to just over 5%?

[Mr Gauke]

The CFC reforms are making the UK much more attractive for businesses headquartered here. The House will remember that in 2007 a number of businesses left the UK. Now some of them are returning, including UBM, which announced just two days ago that it was moving to the UK. Artificial diversion of profits is dealt with under the reformed CFC regime. The old CFC was past its sell-by date. It was unattractive and was driving businesses out of the UK. Indeed, there has been cross-party consensus on the need to reform the CFC legislation. Because of that, we are now seeing businesses moving to the UK, which I welcome.

We have taken steps to deal with tax avoidance. I would like briefly to touch on the issue of pensioners, as the shadow Chief Secretary raised it and it is touched on in the motion. The House should remember that we have seen a substantial increase in the state pension this year. Indeed, the increase has been £120 a year greater than it would have been had we stuck with the plans inherited from Labour. The abolition of the age-related allowances will not result in any cash losers. There are those who are affected by the withdrawal, but they will benefit from the largest ever cash increase in their personal allowance—a real-terms tax cut of £170. Since coming to power, we have taken steps to increase the personal allowance. That is the really big tax cut that dominated the last Budget and it is benefiting millions of people.

We have taken steps to cut fuel duty, with pump prices now 10p a litre lower than they would have been under the previous Government’s plans. We are supporting those on benefits by improving incentives to move into work and increase the number of hours they work. The introduction of universal credit will see the number of people losing more than 70% of their earnings when they move into 10 hours of work fall by 1.2 million. In addition, the single taper in universal credit will ensure that practically every household will face a marginal tax rate of less than 80% when they increase gross earnings, compared with 500,000 under the current system.

In all parts of this House we agree that those who can most afford to should contribute their fair share to the Exchequer, but those in opposition who insist that we should do that through a 50p rate that damaged our economy, sacrificed our international competitiveness and did not raise the revenues intended are making a big mistake. Those advocating a return to a 50p rate have to answer this question. Given that it will not raise any significant amount of revenue—it may even cost money—why do it? It is not about deficit reduction or economics, and it is not even about getting more from the wealthy, because there are better ways to do it; it is all about the politics. But at what cost? At a time when the UK must compete to prosper in a globalised world and when we have a choice to sink or swim, those who advocate a 50p rate are taking the easy choice—short-term populism triumphing over increased competitiveness; a traditional message of “bash the rich” prevailing over the need to attract and keep wealth creators in this country. This country’s route to success will not be through the lazy populism we have heard from Labour. Instead, we have taken steps to ensure that those with the most contribute the most, but also ensured that we have a tax system that enables us to compete on a global stage, creating a fairer tax system that still shows that the UK is open for business.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. There is a 10-minute limit on Back-Bench speeches. Please observe the convention of the maiden speech. Croeso, Stephen Doughty.

14:39

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

Diolch yn fawr, Mr Deputy Speaker. Thank you very much for giving me the liberty to make my maiden speech in this important debate today.

I can certainly say that at a time of great economic hardship and uncertainty for many hard-working families across my constituency of Cardiff South and Penarth, the actions of this Government—whether in giving tax cuts to millionaires, failing to invest in jobs or growth, or cutting front-line police officers—appear increasingly disconnected from the daily challenges that my constituents are facing. This Government often attempt to rewrite the history books to place blame for the current economic difficulties on the last Government, who in fact took crucial action at the 11th hour to prevent the collapse of our banks and financial system. What the recent crisis truly reveals is the global and interconnected nature of our financial and economic systems, and that the global is now truly the local.

I will return to those issues in due course, but I would be grateful for the House’s indulgence if I use this opportunity to follow one of the conventions of this House by paying tribute to my distinguished predecessor, the right honourable Alun Michael, who I am truly delighted to say is continuing his service to the people of south Wales as our newly elected police and crime commissioner. I cannot think of a more fitting role for a public servant who has dedicated a significant part of his life, both before entering Parliament and during his time here, to tackling crime, the causes of crime and reoffending, and in particular building a justice system that works for young offenders. Alun always had a much deeper understanding of the nature of our systems of law and order and, in particular, the words of another former Member of this House, the distinguished former Home Secretary and Prime Minister, the right honourable Sir Robert Peel, who argued that:

“The police are the public and the public are the police”.

I am confident that, as commissioner, Alun will be putting that vision of co-operation into practice.

Alun was well known for his influential career as a senior Minister at the Home Office, the Department of Trade and Industry and the Department for Environment, Food and Rural Affairs, as Secretary of State for Wales, as the first First Minister of Wales, as an influential member of the Select Committees on Justice and on Home Affairs, and as a great parliamentarian, in this House and the National Assembly for Wales. However, I know that he would view with equal pride his work as a local councillor, magistrate and youth and community worker, making a difference at the grass roots for many young people experiencing complex and turbulent lives. My father Barry remembers with affection his time working with Alun in Llanrumney and St Mellons as part of the Army youth team in the late 1970s, and later in Ely. Both of them truly understood the importance of investing in, and engaging, with some of the hardest-to-reach young people in our society.

Alun, like me, is also a great lover of our natural environment and of the hills, mountains and coastlines of Wales. He was a strong supporter of our national parks, of right to roam legislation, of the Youth Hostels Association and of protecting our wildlife. I am sure that he will still be climbing the slopes of Pen y Fan for many years to come and that many a fox will raise a paw to thank him for escaping the cruelty of the hunt.

Alun also truly understood the diversity of the remarkable constituency that is Cardiff South and Penarth, whether in his hugely significant work with the people, Parliament and the Government of Somaliland—I wish the people there the very best in their local elections, which take place today—or in his ability to reach out to people of all faiths and of none to find common ground. He sets a truly high bar to follow. In Alun’s tradition, I am also proud to retain my constituency’s strong links with campaigning trade unions, such as the GMB, Unison and the Union of Shop, Distributive and Allied Workers, particularly as I have already made clear my strong opposition to this Government’s plans on regional pay and my support for equality in both life and the workplace, regardless of gender, ethnicity, sexual orientation or disability. I am also deeply proud to sit in this House not only as a member of the Labour party, but as a member of the Co-operative party, in our largest ever group of Members in this House. I pledge to play my part in pushing for an economy and society that needs more than ever the values of co-operation and mutualism.

In paying tribute to Alun, I am also particularly conscious of the honour afforded to me in serving a constituency that has been represented by only two Members of Parliament since the second world war. Hon. Members will no doubt be aware that Alun’s predecessor was the late right honourable Lord Callaghan, a remarkable figure in British politics of the 20th century, remaining the only MP to have held all four great offices of state. Lord Callaghan’s rise to the premiership is a story of inspiration. The son of a petty officer who had to rely on the Ministry of Pensions to pay his school fees and who left school at 17 to enter the civil service at the lowest level became our Prime Minister. “Gentleman Jim” or “Sunny Jim”, as he remains known by many, made an indelible impression on me as a child. When I was 10-years-old, my family and I were invited up for a tour of these remarkable buildings and of this House by the former Member for the Vale of Glamorgan, Mr John Smith. As we were shown around the other place, we encountered Lord Callaghan in one of the Lobbies, and were introduced. But rather than speaking only to my parents and ignoring my brother and me, Lord Callaghan spoke to us for some time, without a hint of being patronising, as an equal, and explained how he always believed that it was vital that politicians should listen to children and young people—a lesson as true today as it was then.

Like Alun and I, Lord Callaghan also understood that our values and responsibilities did not end at our borders. Early on, as a Member of this House, it is written that

“he emphasised the fact that Britain’s African colonies belonged to the Africans”,

but also

“that Britain had a responsibility to those countries it had colonised, and could not simply walk away and leave the countries to sink or swim on their own”.

I believe firmly that it is not only our moral responsibility but in our common interest to tackle poverty and injustice and to promote sustainable economic development wherever it is needed—from the streets of Tremorfa and Stanwell to Lilongwe and Lashkar Gah.

The late Lord Callaghan and I had one other thing in common. After constituency business on Fridays and Saturdays, there could only be one other priority: popping down to Ninian Park to watch the Bluebirds fly. For the record, I remain as deeply attached to the traditional blue of my football team as I am to the red of the Labour rose.

It was particularly fascinating to read the maiden speech of the late Lord Callaghan, delivered as it was in this House after the 1945 general election but while conflict remained in the Pacific region. He urged hon. Members to

“lift their eyes for a few moments from the European scene to what is happening in Asia at the present time.”—[Official Report, 20 August 1945; Vol. 351, c. 413.]

Now, 67 years later, we would do well to heed that call, albeit in a very different context. While the House will no doubt enjoy further vigorous and important debates on the future of the European Union, and on our place in it over the months and years to come, I would contend that many of the vital stories that will drive the direction of humanity in the present and in the time to come are now being written on far shores, whether in China, India, Brazil or, indeed, Africa.

The challenges that I attempt to answer on the doorsteps of Cardiff South and Penarth are more intimately connected to global events and global dynamics than ever before. We live in a world where energy or food price hikes are being driven in part by the flaws in global energy and commodity markets and where the changing patterns of demand by the billions of new global citizens in China or India might affect the price of a loaf of bread on Splott road.

We live in a world where false myths of confrontation between peoples and religions has, sadly, drawn young men—thankfully only a few—from the streets of Cardiff towards false visions of how to change the world through conflict, rather than towards the university, although their communities have stepped up to challenge that situation head on. It is a world where rapidly shifting patterns of competitive advantage challenge us daily on how to best educate and equip our young women and men to be able to secure a job and make a difference, as the old employers of the Bute docks are replaced by the internet design studio or the green technology company in St Mellons.

The people of Cardiff and Penarth have coped well with dramatic changes before, and flourished. From a sleepy village, we became the largest coal-exporting port in the world at the turn of the last century. Welsh anthracite fired the ships, built in the yards of the Clyde, that took British manufacturer to the far-flung reaches of the empire and beyond. The terraces of Splott expanded to serve the steelworks and industry flanking the busy port. Penarth was fondly known as the garden by the sea, with thousands of Victorians flocking to enjoy its beautiful views. In 1897, Marconi, the pioneer of global radio communication, sent the first wireless message over open sea, from Lavernock point near Sully across the Bristol channel to the island of Flat Holm.

People came from all over the world to our great Welsh capital, many working on those same ships and in those docks that were the lifeblood of our communities. They included Somalis from the former protectorate of British Somaliland, Yemenis and Irish, and, later still, Bengalis, Pakistanis, Ugandan Asians fleeing the horrors of Idi Amin, and many others. The prominence of the beautiful St. Augustine’s church is matched by the quiet reverence of the Alice Street mosque, one of Britain’s oldest. New estates were built in the east of the city, on the supposed lands of the infamous pirate Sir Henry Morgan, to support the families of the post-war generation. They underpin the strong communities that remain there today.

How have things changed? Thanks to the vision and energy of many local people, including my predecessor, Cardiff and Penarth are re-energising and re-visioning for our new world. Our sky and shoreline are now marked by few ship masts and furnace chimneys; instead, we see the hubs of energy and enterprise in the St Mellons business park, the wind turbine powering new green businesses in Rumney, the wave-lined roof of the new BBC Wales Drama Village, where we might just spot the Tardis or a “Holby City” ambulance, the transparency of our Senedd building where our colleagues in the National Assembly meet, and the imposing forms of the Millennium stadium and of the Cardiff City stadium, home to my beloved Bluebirds. Finally, sweeping round the corner of Penarth headland, we can see our beautiful historic Victorian pier being restored. Those are sights that mark new directions in our economy, democracy and society as well as connections to our past and our traditions.

In his maiden speech to the House, Alun Michael described our constituency as a

“microcosm from which the Government could learn many lessons.”—[Official Report, 2 July 1987; Vol. 118, c. 709.]

That sentiment remains as true today as it was 25 years ago. There is much to cherish, but there are huge challenges, too. We might have the Tardis and “Torchwood”, but we also have working families in Trowbridge struggling to get by, young people in Grangetown struggling to find a job, and older people such as those who attend the Moorland day centre in Splott, of which I am proud to be a trustee. We also have people who are finding it hard to get by in retirement, and hospital workers in Llandough fearing regional pay. This Government would do well to listen to the real experiences of the people living in my constituency. I strongly support the motion today, and I am confident that the people of Cardiff South and Penarth will join me in supporting it, too.

14:55

[Charlie Elphicke (Dover) (Con)]

It is a real pleasure to follow a maiden speech, particularly that of the hon. Member for Cardiff South and Penarth (Stephen Doughty), whom I congratulate on his excellent speech. He has a hard act to follow, as he acknowledged, having had two illustrious predecessors: “Sunny” Jim Callaghan and Alun Michael, late of this House. We will all watch his career with interest to see whether the constituency can provide a trio of senior Cabinet Ministers in due course. I must warn him, however, that no one ever tells us before we come to this place how busy it is and how hard-worked we are. I hope that he will still find the time to go and see Cardiff City play, and to pursue his singing hobby, which I understand he is partial to.

Moving on to the matter of income tax, I believe that the right policy is one of fair taxes, not only in regard to the higher rates but across the piece. For me, that means taking the poorest out of tax altogether, as well as taking the middle classes out of the higher rate and not allowing them to be consumed by fiscal drag as they have been over the past decade. It also means avoiding punitive rates that drive people out of the United Kingdom altogether, and ensuring that multinationals pay their fair share of tax on their UK revenues. Putting all that together would create the system of fair taxes and tax justice that this country urgently requires.

Did Labour do any of those things when it was in office? It did not do much to take the poorest out of tax. Indeed, many of the comments from the Opposition today on our policy of increasing the personal rate to £10,000, which I hope to see, have been mealy-mouthed at best. They appear at times even to oppose it.

[Sheila Gilmore]

Does the hon. Gentleman accept that there are different ways of assisting those on lower wages? The Institute for Fiscal Studies has suggested that tax credits are more efficient than raising the tax threshold, which is very expensive. Furthermore, once people have fallen below the threshold and out of tax, they get no further help. It is at least arguable that the Government’s much-vaunted raising of the personal allowance will not help the poorest families, and that it will come at a very high price.

[Charlie Elphicke]

I prefer aspiration to the welfare dependency that Labour has offered over the past decade.

We have cut income tax for 25 million people in this country, and we are taking 2 million people out of tax altogether. I am proud that this Government have done that. We are increasing the personal allowance to £9,205 in April 2013, and I want to see it increased to £10,000 in due course. These are real achievements for the Government. It was wrong that the previous Government allowed so many people on middling incomes to get stuck in the 40p rate, where they should not have been. I hope that, as the public finances recover, we will be able to find more space to take middle-earning people out of the higher rate. They are not rich people; they are the people in the squeezed middle created by Labour when it was in power, and I hope that that situation will change over time.

The most important thing is to look at the effects of the punitive rates that Labour introduced. Let us face the facts. Today’s Daily Mail reports that about two thirds of Britain’s highest earners “deserted the UK” after the 50p top rate of tax was introduced. It found that in 2009-10 some 16,000 workers with an income of over a million quid paid tax, but that the number then dropped to 6,000 after the former Prime Minister brought in new tax rules.

I would like to congratulate my hon. Friend the Member for West Worcestershire (Harriett Baldwin) on asking the questions that drew forward these important figures. The tax paid by top earners fell from £13.4 billion to just £6.5 billion in 2010-11. That is the issue, is it not? If the rate is increased so much that it becomes punitive, people will leave the country, squirrel away their income, not declare their income, leave it in companies—personal service companies—or cash boxes where it is not subject to tax. When that happens, tax revenue is lost.

[Gregg McClymont]

rose—

[Charlie Elphicke]

I will give way to the hon. Gentleman if he can tell me whether the Labour party, if it formed a Government, would scrap this Government’s move?

[Gregg McClymont]

I thank the hon. Gentleman for giving way, although I am not sure that it is within his purview to specify what subject I should intervene upon. If what he says about the 50p tax rate is all true, why is it so popular with the electorate, as evidenced by poll after poll after poll?

[Charlie Elphicke]

I think the most important thing is to look at how we get the most money in. We have a massive deficit—a massive amount of debt caused by the Labour party when it was in government and overspent for years and years and years. It created a massive structural deficit in our public finances, shattered our public finances and maxed out on our country’s credit card, so we need to get the maximum amount of money in to repair that chaos, that mess, that economic mismanagement.

What we are doing today is ensuring that we say that the country is open for business, that we are interested in companies growing and doing really well and that we want to encourage aspiration, not envy. I think this is an important gulf that lies between the Government and the Opposition. As I say, the most important thing is how to get the most money in, and if we jack up the rate, as the Labour party did, we will not get more money; rather, people will leave the country and we will lose the wealth creators. That is why what Labour did with a little grenade just before it left office was so dangerous and so toxic. It did so through political opportunism, damaging the people of this country and damaging our economy—shame on it for doing so.

[Gregg McClymont]

I thank the hon. Gentleman for giving way again. I am listening to his speech. Is the issue one of a failure of communication on the Government’s part? If everything he says is true, one would think that the public would support the Government’s tax cut for millionaires, yet every single poll shows that the 50p rate is popular.

[Charlie Elphicke]

On that basis, I am sure that the hon. Gentleman will jump up next to say that he is in favour of hanging, along with most of the British people. I do not see him or his Labour colleagues supporting that particular measure—or, indeed, a measure to leave the European Union, which is what most people in this country say they want when they are polled. I urge the hon. Gentleman to be cautious when it comes to these issues; he needs to be careful about what he wishes for.

I think that the Treasury is right to cut the 50p rate to a more sustainable level. We know it will cost £100 million, but we also know that five times that amount has been raised by taxes that are less elastic. This measure is right for the public finances and it is the right economic policy to encourage growth and prosperity in this country. It is also the case that if we cut the rate, we up the take; and I suspect the Treasury figures might turn out to be a little bit better—or perhaps it has been a little more cautious—than we think. I suspect that we might well end up with more money in the bank as a result of these measures.

Broadly, what the Government have done is right. It is important to remember that if we encourage millionaires to stay in Britain and to set up and run businesses here, they will do so far more effectively. It is important, too, for the Government to look at multinationals and ensure that they pay a fair share. We should also note that in the past decade, the Labour Government allowed multinationals to flout our tax law and not pay a fair share of tax. The reason we are talking about the super-rich—Apple, Amazon, Google and all the rest of these large combines—today is that the Labour Government let them completely off the hook. They were so determined to be the pro-business party that they did not collect the revenue from these companies that they should have done. They did not keep our tax law up to date for the internet age.

The Opposition may well want to talk about millionaires and the people who earn amounts that lead to the 50p rate, but it is wrong for them to do so while they completely let off the hook the really large businesses that have substantial revenues that they could and should pay in the UK but do not. Shame on them for that. Let us face the fact that the working nation under Labour saw income taxes rise by about 80%, whereas non-oil corporation tax revenues went up by just 6%. I do not think that is a record of which the Labour party should be proud; it is not a good record or a justifiable record, and people are very angry about the fact that Labour was completely asleep at the wheel on that score.

I think the Government took the right measure in dealing with tax avoidance by the super-rich. It is not just about the 50p income tax rate, as it is also about tackling tax avoidance. An important consultation on tax avoidance is taking place, along with the introduction of the general anti-abuse rule. It is important, too, that we are raising more money from less elastic taxes as a result of getting rid of the 50p rate. We have a package of measures, such as stamp duty land tax, cracking down on tax avoidance and introducing a cap on uncapped income tax reliefs. Reducing the 50p rate for millionaires is not the right way to approach these things; the right thing to do is to look at the inelastic taxes.

It is very revealing that we have seen interventions by Labour Members today attacking the measures on stamp duty land tax, implying that they are almost the wrong thing to do. It is important to go for the less elastic taxes and use the elastic taxes to encourage entrepreneurs, wealth creators and those who will create jobs and money. It is important, too, that the figures in the Office for Budget Responsibility report and from Her Majesty’s Custom and Excise show that the 50p rate raised next to nothing. Analysis showed that the 50p rate meant £16 billion to £18 billion of income was deliberately shifted into the tax year before it was introduced.

[Sheila Gilmore]

Will the hon. Gentleman give way?

[Charlie Elphicke]

I have already given way.

Self-assessment receipts for 2011-12 are below the forecast by £3.6 billion and the increase from the 40p to the 50p rate raised only a third of the £3 billion that the Labour Government said it would raise. It is easy for Labour to say, “Ah, but eventually this money will pop up”—but not necessarily. The money could be kept in a personal service company, as so many Labour Members and, indeed, the former Labour Mayor of London have done, and lent to oneself with a beneficial loan, helping to avoid paying tax. People can take those sorts of measures, or they can capitalise their income and invest it in something else, meaning that the money never comes into charge. That is why super-high rates are unwise. It also means driving people abroad. That is exactly what happened: people were driven abroad by the Labour Government’s penal tax rates. Again, that is not the right thing to do. We need to look at how to repair our nation’s finances, not look at how to play politics with the politics of envy.

It is important to remember that the former Chancellor of the Exchequer said that the 50p rate was always meant to be temporary and that the Revenue has been very effective in cracking down on tax avoidance, which is where the really big numbers lie. The 50p rate does not raise a whole of lot of money and it discourages a whole load of people by sending out a negative message on the competitiveness of Britain, while the tax avoidance and evasion yield has jumped to a record £21 billion. It is important to crack down on all those tax avoiders and tax evaders, making sure that they pay a fair share.

Finally, I would like to quote what the OECD says about the effect of the 50p rate on our competitiveness and on our economy. Back in July 2010, it said:

“Consider reducing the top rate of PIT”—

personal income tax—

“which is substantially above the OECD average and likely adversely to affect work incentives and entrepreneurship, particularly of high skilled workers. Consideration should be given to reducing the top rate of personal income tax to close to 40 per cent”.

It is very telling that an international organisation is saying that a country’s tax system is going to drive people away, particularly the high skilled, highly able, highly job-creating, highly entrepreneurial people that a country most needs to have. The Government have been very brave in putting the economics before the politics in the last Budget. I commend them for what they have done and for taking the tough decisions that are right for our economy.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. The debate will finish at about 4 pm. So that as many speakers as possible can be accommodated, the time limit is being reduced to five minutes.

15:09

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

Let me make it clear that I am not against success. I believe that everyone should be rewarded with the fruit of their labours. However, it is becoming increasingly clear that the Government are in the grip of a failed economic theory—a theory which claims that tax cuts for those at the very top will somehow trickle down through society and that it is possible to go on cutting taxes and spending and that that will have absolutely no consequences.

I am someone who likes to look forward, but I think that in this instance we must look back to the last occasion on which we followed trickle-down economics. When the Thatcher Government followed that policy, they ran deficits in every year except 1988 and 1989. In 1990, we saw record business repossessions, unemployment above 3 million, record mortgage rates and record inflation, and I fear that we are going back there.

Let me tell hon. Members who say that the argument about cutting the top rate of tax is a “left versus right” argument that they are entirely wrong, because it is not a political argument. It is about something quite simple: mathematics. When we take £3 billion out of the economy, we will have to make up that shortfall somewhere, somehow. Judging by what I have heard from the Chancellor so far, I do not think that the Government are very long on detail.

The Chancellor and the Government talk about tax evasion, which has been mentioned today, including by the hon. Member for Dover (Charlie Elphicke), and they talk about going after all those people who avoid taxes. Well, I say this to the Chancellor: “Good luck to you.” Does he honestly believe that the last Government did not go after tax evaders? Does he honestly believe, when faced with people who have created byzantine systems to avoid the taxman, that it will suddenly be possible to close the loopholes? It is simply not going to happen.

People are working harder than they have ever worked before. Some are working 37 hours a week; some are doing two or three jobs just to make ends meet, and what do they see? They see food prices rising all the time. The worst effect is on their families; when they come home from work, they are too tired to involve themselves in their children’s lives. In my constituency, unemployment has risen by 429% in the past year. More people are struggling than ever before, and what do the Government do? They stand back and give tax cuts to the people who are riding in Bentleys and tax increases to those who drive vans for a living.

[John Glen (Salisbury) (Con)]

The hon. Gentleman is making a powerful speech, but if he is so committed to fairness in the tax system, can he tell me why, for 666 weeks under the Labour Government, the higher rate of tax was lower than it is now? How can he possibly stand up and make the case that he is making, given that his party, which was so recently in power, adopted a very different approach?

[Chris Evans]

I congratulate the hon. Gentleman on his factual recall. Yes, the top rate of tax was lower, but—I do not know whether he is aware of this—we experienced something called the financial crash and the rules changed somewhat. That is the truth: things have changed. We live in a different world now, and that should be accepted. My argument, which I shall maintain throughout my speech, is that the people at the bottom are feeling the pain.

The increase in VAT is a tax on the low-paid, because everyone has to pay it; everyone has to buy goods. When I walk down Blackwood high street, I see that every retail business there has been affected by the VAT increase. VAT on food is zero-rated, but the haulier who delivers the food will pass on the increase in VAT on his petrol to the food shop, just as the increased price of cotton is passed on to the clothes shop. Not a single person has been helped. People in this country are suffering, and what do we see? We see a tax cut for those at the very top.

We hear much talk about rebalancing the economy. We are told that the economy is being built, but what this tax cut shows us is an economy that is being built not on people and products, but on perks and promises. That is the wrong message for us to be sending.

[Ben Gummer (Ipswich) (Con)]

I am loth to interrupt the hon. Gentleman, who always speaks with such passion, but I wonder whether he is as angry with the Labour Front Benchers who put their names to the motion and who refuse to promise to restore the 50p tax rate and to cut VAT should they win the election in 2015, as he is with the Government. Surely he should be as cross with his Front Benchers as he is with ours.

[Chris Evans]

I have a lot of admiration for the hon. Gentleman. We served on the Justice Committee together, and I admire the bit of mischief that he is trying to cause me. However, he will be aware that, as I have said before, we do not know what is around the corner. We will make judgments—I am sure that our Front Benchers will make judgments—when we win the next election; and we will win the next election.

I am also struck by the Government’s sheer stupidity. It is all very well to talk about polls and people feeling good about things. When people hear about welfare reform, they support it because it sounds wonderful—66% supported it in the polls—but let us consider housing benefit, for instance. It annoys me that because seven out of eight people who claim it are in work, they are being labelled scroungers. A cap on housing benefit will create ghettoes outside the major cities because people cannot afford to live there and it will make more and more people homeless.

The one thing that the Government need to learn is that someone, somewhere, will have to pick up the bill, whether it is the taxpayer or the hard-pressed charity. We do not live in a consequence-free society. It is not possible to go on cutting taxes and cutting spending without something going wrong. I am deeply concerned, because people out there are crying out for change and the Government are in the way. It is time that we started building a society and an economy in which hard work is rewarded and people can flourish once again.

15:12

[Harriett Baldwin (West Worcestershire) (Con)]

It was a privilege to be present for the maiden speech of the hon. Member for Cardiff South and Penarth (Stephen Doughty), who spoke eloquently and passionately about his local area. The picture that he painted has made me eager to take the first possible opportunity to visit his constituency.

Let me begin with a small maths problem that I often pose to students in my constituency. If income tax rates were set at zero, how much income tax would the Chancellor raise? The students always get the answer right: it is zero. I then ask this question: if the Chancellor set the income tax rate at 100%, how much more income tax would he raise? Usually, someone will put his or her hand up and say, “He would raise a lot more.” I should welcome an intervention from any Opposition Member who has a view on how much income tax the Chancellor would raise if the rate was set at 100%.

[Sheila Gilmore]

Giving such an extreme and ridiculous example is unhelpful, as I think the hon. Lady is well aware. No Opposition Member is suggesting that the income tax rate should be 100%.

[Harriett Baldwin]

I seem to recall that in my lifetime—under the Government of, I think, the predecessor but one of the hon. Member for Cardiff South and Penarth—income tax was set at more than 90%. If it were set at 100%, we should have no income tax revenue, because no one would consider it worth while to work.

I then ask my students what would happen if we lowered the rate of income tax from 100% to 70%. Would we raise more or less revenue? Again, I should welcome interventions from Opposition Members. Everyone realises that we would raise more revenue, because if the rate was 70%, we would take home 30p in the pound. I notice that the new socialist Government across the channel recently introduced that income tax rate. We will see how that stacks up over time, but I expect that it will prove to be a deterrent to additional work, too.

The motion contains the seeds of its own mathematical inconsistency, because the Opposition are extrapolating a linear relationship between the income tax rate and the amount of income tax revenue raised. They are also extrapolating that those who can, in what is a global market, take their labour to any other country in the world will not take into account any difference in tax rates between the UK and other nations, yet all the evidence shows that that is not the case.

The Labour motion refers to 8,000 people paying income tax on income of £1 million or more. In 2009-10, which is the last tax year in which we had the 40p tax rate, some 16,000 people had an income of £1 million or more. Through raising the tax rate from 40p—a rate that was in place for all but one month of Labour’s entire 13 years in office—we can see that millionaires can do other things with their income. They can take their entire labour overseas, or they can decide to shelter their income or not to take a dividend that year, or they can use any of the other methods to ensure they do not pay that increase in income tax. There was a reduction of £7 billion in revenue after the income tax rate went up from 40p to 50p.

[Charlie Elphicke]

Will my hon. Friend give way?

[Harriett Baldwin]

I think that I have already taken two interventions, and I have only a minute and a half, unfortunately.

The Government have reduced the number of ways in which people on high incomes can reduce their taxable earnings. The Opposition opposed measures to reduce the amount people could put into their pension fund from more than £250,000 to £50,000. I also voted for the abolition of disguised remuneration, which was quite rampant under the previous Government. That also serves to limit the ways in which people on high incomes can reduce the amount of income tax that they pay.

The relationship between the rate of income tax and the amount of revenue raised by the Chancellor is non-linear. Between 0% and 100% there is a curve, and we need to agree about the optimal point on it—the point where the Treasury can get the most revenue from those at the highest end of the income spectrum. I suspect that 45p will be a lot closer to that optimal rate than 50p was.

The Government are focusing on tax cuts for those who are on the lowest incomes, lifting them out of income tax, and ending this tax cull on millionaires.

[Mr Deputy Speaker (Mr Nigel Evans)]

Order.

15:21

[Mr Michael Meacher (Oldham West and Royton) (Lab)]

First, I congratulate my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) on making such an extraordinarily good maiden speech. It was elegant, forceful, confident and amusing, and it had a global sweep, covering most of the current political agenda. I am sure that we will hear a great deal more from my hon. Friend, and I wish him well.

The basic reason why the 50p rate decision is so unfair is that the very rich caused the financial crash, yet those at the top of the banks have hardly suffered at all, while the rest of the population are having to fund the bail-out and are now paying the price in rising unemployment, shrinking incomes and reduced services. To cap it all, in those current circumstances of austerity, the Chancellor flagrantly and provocatively cut the 50p tax rate to give the 1% very richest in the country—those on more than £3,000 a week—an average £10,000 tax break, including giving 14,000 millionaires a gift of £40,000 each, which is an extra £800 a week.

The Exchequer Secretary gave two reasons for doing that, one of which was that not much money will be lost as a result, but Her Majesty’s Revenue and Customs report on the 50p rate reduction plainly states, in table A2, that the Treasury will forgo £3 billion as a result.

[Sheila Gilmore]

Does my right hon. Friend think the Government’s rush to judgment on the effect of the 50p rate decision will be as good as their rush to judgment on the value of the future jobs fund?

[Mr Meacher]

My hon. Friend makes her own point. It is very difficult to reach a final conclusion on this matter, because of forestalling and because this change is seen as temporary. The very rich will, therefore, ensure that most of their income is put forward until the rate is lowered.

[Charlie Elphicke]

On tax avoidance, would the right hon. Gentleman support a higher tax on second and third homes?

[Mr Meacher]

I believe that second or third homes—and all other non-primary homes—should incur a higher rate of tax. I never supported the discount given for second homes, which has now been raised to a level nearly equal to that for first homes, and there is a case for the rate for empty homes being raised above that.

As I was saying, HMRC’s report shows that the loss will be £3 billion a year, as opposed to the sum that the Exchequer Secretary kept on talking about today: the £100 million that Treasury Ministers signed off originally, on the basis of arcane taxable income elasticity calculations, about which the Government’s own Office for Budget Responsibility said there was huge uncertainty.

A table given in Hansard on 25 April this year, at column 898, is also interesting. It shows that 80% of those earning more than £1 million paid more than 40% in tax. In other words, tens of thousands of people were—and are—paying the 50p tax rate. They were unable to dodge it. That is an important point, because it serves to destroy the Government’s argument that the 50p rate is a very inefficient method of raising tax revenue and that its abolition will have a negligible effect. I think it will have a very significant effect.

The Exchequer Secretary’s other argument in support of cutting the 50p rate was the old Thatcherite canard—which he stated repeatedly in his speech—that we should not tax the wealthy more because we depend on them for our future. That is the old trickle-down theory. However, we know that the opposite is, in fact, the case. Over the past 30 years, there has been a steady trickle-up effect. There has been a ballooning of inequality, with most middle England incomes having stagnated. That would not be so bad if the trickle-up effect made us more competitive.

The fact is that since 1987, when the top rate went down from 83% to 40%, we have not had a surplus on our current account in the balance of payments for the past 35 years. Our share of world trade was 6.5% in 1970, but it has dropped by two thirds to just 2.3% and our deficit on traded goods last year was £100 billion. That is a monument of uncompetitiveness.

Not only did the Chancellor originally impose £18 billion cuts on the poorest families in the country, but he is now proposing a further £10 billion of cuts to fill the gap left by his failed deficit-cutting policies. The housing benefit cuts that are coming in next April will remove thousands of families across the country from their homes because they simply will not be able to pay the rent. The disability living allowance cuts will leave thousands of disabled people housebound. Atos is cutting a swathe through thousands on incapacity benefit who simply cannot get a job. The poor are being punished for what they did not do, and the rich, who have a great deal to answer for, are almost getting off unscathed.

The second reason for keeping the 50p rate is that the very rich are in a far better position at this time to contribute to meeting Britain’s needs. According to The Sunday Times rich list published this April, the richest 1,000 people—a tiny group who make up 0.003% of the adult population—racked up gains in the past three years of austerity of £155 billion. If those gains were charged to capital gains tax, about £40 billion would be raised. Perhaps the real figure would be less and only £20 billion or £30 billion would be raised, but if it were well invested, it would be enough to kick-start the economy and begin to reduce the deficit in a way that we need to do—by real growth.

The third reason for keeping the 50p rate is the real anger building up across the country about what rich individuals and rich multinationals are getting away with on tax avoidance. I return to the Exchequer Secretary’s table, because it shows that 9% of those earning more than £10 million, which is more than £200,000 a week, paid tax at a lower rate than their cleaning ladies—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order.

15:30

[Stephen Williams (Bristol West) (LD)]

I am glad to join others in saying how pleasant it was to listen to the new hon. Member for Cardiff South and Penarth (Stephen Doughty). I am well familiar with various parts of his constituency from family visits. It is nice to welcome another Welsh Stephen to the Chamber; I just wish our accents were as mellifluous as the hon. Member for Islwyn (Chris Evans).

We are discussing an Opposition motion, so let us examine the Labour party’s record when in office. In 1997, Tony Blair said that there would be no increase in the basic rate or the top rate of income tax while he was Prime Minister. As the Exchequer Secretary was saying, the Labour Government were in office for 13 years—for just over 4,700 days—and it was only in the last 35 days that the top rate of tax was increased to 50%. To put it another way, only one of the 156 pay slips that higher rate taxpayers would have received in that period would have shown an increase in their taxation. That suggests that the Labour party had no record of action and no philosophical appetite when it was in government and had the opportunity to do these things for higher taxes on high earners.

On tax relief for high earners Labour also had a lamentable record compared with its rhetoric today. It increased the relief for higher rate taxpayers to set against their pension contributions; people could put £215,000 into their pension fund and get higher rate tax relief in 2006, but that had been raised to £255,000 by 2010. The capital gains tax rate that Labour inherited in 1997 from the previous Government was 40%, but that was reduced steadily to 18% by the time Labour left office. On the lowest paid in society, the 10p rate of income tax was introduced in 1999, with the then Chancellor saying it was a measure to help the low-paid. I agree with that, but unfortunately he scrapped it in 2007, to loud cheers from his Labour colleagues—I well remember witnessing it from the Opposition Benches—because that tax rise for the lowest paid was financing tax cuts for those on higher earnings. Such is the record of the Labour party when it was in office.

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

Does my hon. Friend agree that it is really unusual that under a Labour Government in power for so long the rich became richer and the poor became poorer?

[Stephen Williams]

My hon. Friend says it is unusual, but I would say that it should not be surprising, given what Tony Blair said would be the intention of his party while it was in office. Of course, that gives us another opportunity to remind ourselves of Lord Mandelson’s comment that new Labour was

“intensely relaxed about people getting filthy rich”.

Let us compare the Labour Government’s record with what the coalition has done. Liberal Democrat priorities in the coalition are twofold: tax cuts for the lowest paid and effective taxes on the wealthy. We have seen the £10,000 tax-free threshold go from the front page of our manifesto and election leaflets through to the coalition agreement and it is on course for delivery within this Parliament. We will have raised the tax threshold from £6,475 steadily towards £10,000 possibly within four years and certainly within five. In the previous decade under the Labour Government, the tax threshold was raised by just £2,090. Under the coalition, more than 20 million people will have a tax cut of up to £700 and 3 million will have been raised out of income tax altogether. That disproportionately helps people who work part time, who are disproportionately women, and is particularly effective in helping the young. Indeed, a young person on the minimum wage can now work full time without paying any income tax. That is a huge difference from the position we inherited.

[Sheila Gilmore]

I am listening very carefully to what the hon. Gentleman is saying. Would he support urging the Government to change how they will approach universal credit? Under the new rules, people will be assessed on their post-tax income and as a result for every £1,000 increase in tax allowance people on tax credit will receive only £70. Would he support an amendment or a change to that?

[Stephen Williams]

I think that universal credit will be seen in time as a major piece of welfare reform, sitting with what the 1945 Labour Government and 1906 Liberal Government did, and will have huge significance in simplifying the benefit system. Surely the hon. Lady, like me, will have visitors in her surgeries who fall between the stools of council tax benefit, housing benefit, jobseeker’s allowance, employment and support allowance, and all the others and who ask her to sort that out for them. The Government are making progress on that. There are intricacies to sort out—I grant her that—but the reforms are yet to be brought in and I hope that there is still time to ensure that the system, when it starts, genuinely helps the most vulnerable in society, which we certainly want to see.

The top priority for the Liberal Democrats in this coalition is the £10,000 tax-free threshold. That is now the flagship policy of the coalition and both parties should be pleased that it is being delivered, but we also want to see effective taxes on the wealthy. The Government have already raised the rate of income tax from the 18% we inherited to 28%. We have raised stamp duty on properties worth more than £2 million from 5% to 7%. That is an extra £40,000 of stamp duty that someone will pay when acquiring a property worth £2 million or more. We have also imposed a 15% surcharge stamp duty to discourage the tax avoidance that was rife under the previous Labour Government, when people used corporate vehicles to acquire personal property. We have effectively put measures in place to block that. Of course, I now want the Government to go further and to see whether in our next couple of Budgets we can get an effective mansion tax and annual wealth tax in place.

When the announcement was made in this year’s Budget that the 50p top rate would be reduced next year to 45p, the Chancellor ensured that other measures put in place would raise five times as much revenue as was predicted to be lost as a result. I am interested in having an effective top rate of income tax and 45% compares well with the international situation. In Germany, the top rate of tax is 47.5%, but it bites only after about £208,000 of income. In the US, the rate is roughly 42% in the states that have the highest rates of taxation, but it bites only at £240,000. In France—I am surprised that Opposition Members have not mentioned President Hollande more often—the top rate of tax is 41%, lower than the 45% that ours will be next year, whereas the 75% that he talks of introducing will be only on incomes of more than €1 million if it is introduced in 2013.

Rates and thresholds are effective only if taxes are collected, which is why I am pleased that the Treasury has set up an affluence unit to target people who have assets and income of more than £1 million and why we are introducing a general anti-abuse and anti-avoidance rule, for which I have called for many years. That action has been taken by this Government and was dismissed by the two Chancellors of the previous Government.

When Labour was in office, it made a virtue of low taxes on the wealthy and high earners. The coalition has slashed tax for the poor, has effective taxes in place on the wealthy and is cracking down on tax avoidance. I know which record I prefer.

15:40

[Sammy Wilson (East Antrim) (DUP)]

I approach the debate from a different angle from some Opposition Members. I am sympathetic to the view that we ought to aim for a low-tax economy, which offers benefits. Only this week in Northern Ireland, we announced tax cuts for small businesses. Measures that we announced six months ago have had an impact in creating jobs. Fifty-two new businesses have started, and over 100 jobs have been created in return for a modest reduction in tax revenue. We are also seeking the devolution of corporation tax, so that we can introduce a lower corporation tax rate.

As I have pointed out to Members of the Northern Ireland Assembly, all of that means that there are certain things that we cannot do. We have to find efficiencies in public spending, and there are things on which we cannot spend money. The logic of the measure is accepted by Sinn Fein, which supports it, although some of its members are probably to the left of Labour Members.

However, I oppose the measure that the Government introduced to reduce the top rate of income tax for the best paid. I do not believe that the cost will be as low as the Government said. The Minister said that it will cost £100 million, but that figure is surrounded with lots of conditions and caveats, such as notions about how tax changes are sensitive to how people behave. As the Office for Budget Responsibility has pointed out, estimates of tax income elasticity vary from 0.35% to 0.48%, which is a difference of nearly 40%. Whatever the assumptions about behavioural consequences—whether people will move back to the United Kingdom or stop moving out; whether they will stop avoiding tax or keep using existing measures—given the cost of moving back or changing pension or retirement arrangements, it is unlikely that the impact will be as great as suggested.

Even if the measure were correct—the hon. Member for Dover (Charlie Elphicke) said that he was glad that the Government had divorced politics from economics in making that tax decision—we should not introduce it at a time when we are telling people across the United Kingdom that they have to tighten their belt, spend less and accept that they will have a lower income. We are saying that to pensioners, to lower-paid people and to people on middle incomes. We cannot send out a contradictory message that that is okay for people at the lower end of the income spectrum, but not for people at the higher end. If the Government really want to sell their message of austerity, that message must be clear so that people know that everyone will be equally affected. If a pensioner faces a £7 weekly decrease in their pension and a millionaire gains a £2,000 increase in their weekly income, people will not take the view that we are all in this together.

The politics of the measure is important. The Government might believe that low taxes can stimulate the economy because they will attract the rich to the UK, where they will create jobs, but it has been proven that other tax cuts costing an equal amount would provide a far greater stimulus to the economy. For the same price as reducing the top rate of income tax for the top 1%, we could reduce VAT on extensions on premises to provide jobs in small businesses in the building industry. There is much greater price elasticity in demand for that activity, as has been shown, so such a measure could provide a much greater stimulus.

The policy is wrong economically; it is wrong politically; and it is wrong on the basis on which the Government have tried to sell it. For that reason, I support the motion.

15:44

[Mr David Anderson (Blaydon) (Lab)]

I start by congratulating my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty). He has two hard acts to follow, but he made a great start today and long may he continue.

On a point of clarification, the hon. Member for Beverley and Holderness (Mr Stuart), who is no longer here, said that my party had chosen the debate today because of the way it is funded—by the trade union movement. Can we be very clear? The funding that goes to the Labour party is dictated by rules and laws that were written mainly by the Conservatives and the arrangements are transparent and open to scrutiny. Let us also be clear that none of the people who donate to the Labour party has been in jail, unlike Michael Brown or Asil Nadir. Those two people were given back the money that they stole by the Conservatives and Liberal Democrats. Those two parties can have no credibility at all when they talk about paymasters.

I have been paying income tax since 1969—I know it is hard to believe, Mr Deputy Speaker, but I have—and I am quite happy to pay my share, but everybody else should be paying their share as well. It took a long time coming, but the hon. Member for Dover (Charlie Elphicke) said it—that this debate is about the politics of envy. It is not about the politics of envy; it is about the politics of fairness, and what is right and what is wrong.

The parties in government have a raft of policies based on the so-called politics of fairness. They believe it is fair to cut benefits, fair to sack 750,000 public servants, and fair to move people out of homes that they had lived in for decades just because the children have moved out. They think it is fair to sign sick and disabled people off the sick list if the incentivised company that they have employed says that that is the right thing to do. They think it is fair to make people work longer, pay more and receive less for their pension. They think it is fair to slash people’s living standards, fair to force young people to go to work for nothing on workfare schemes, and fair to treble the cost of going to university.

But now the Government also think it is fair to do other things. They think it is fair to tell 4.5 million pensioners that in a year’s time they will be losing £83 a year. People who have contributed all their lives will be paying more because of the Government’s failure. The Government think it is fair to tell thousands of people who are just turning 65 that, despite promises that reinstating the pensions link would be good for them, they will lose more than the amount of the pension rise—they will be losing more than £300 a year. They think it is fair to tell hard-working families struggling to bring up kids that from next year they will be more than £500 a year worse off.

Why do they think all that is fair? Because they want to give their pals a 100-grand backhander. There are 8,000 of them, so that is an £860 million giveaway to their friends, people who are raking in at least £1 million a year. This is the face of the modern Tory party and it is no different from the old one, except for the back-up by the yellow-livered Liberal Democrats. This is their way of looking after themselves, their pals in the City and the millionaires of this country. They want to give themselves a nice little six-figure Easter egg from the public purse, from a public worn out by cuts and austerity, and they are being supported every step of the way by the so-called nice guys, the Liberal Democrats.

Fairness? The Conservatives do not know the meaning of the word. This is not the politics of fairness and it is not the politics of envy. It is the politics of greed. It is the politics of a party intent on dismantling the consensus that has existed in this country since the end of the war. They are intent on slash and burn, and on feathering their own nests in the name of the people who bankroll them. This is the action of members of a party who do not care who they hurt, as long as it is not their kind.

The real sadness is that this is not new. It is the same kind of attack as they carried out in the 1930s when they destroyed communities throughout the country where people were living in desperation, despair and depression. It is the same kind of attack as in the 1980s when towns such as the one I lived in were wiped off the face of the earth, with debt, drugs and depression replacing years of hard work and people living in good quality communities. We saw crime going through the roof. We in the north-east of England became the car crime capital of the world. Burglary was commonplace, while the Tories were lighting cigars with £5 notes, swapping their Quattros for Porsches, and having battles to see who could spend the most on a bottle of Bolly.

They believe in a two-tier country, in two-tier government and in a two-tier, class-ridden ideology. It is the same old story with the same old Tories, backed by the Liberal Democrats. In this together? Not a chance!

15:49

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

We have certainly had an interesting debate. The planned cut in the 50p rate of tax is still what this Government will be remembered for. At a time when families with children are being hit by cuts to tax credits, when VAT has been hiked and when pensioners are being hit by the granny tax, the Government have chosen to spend almost £3 billion on a tax cut for the richest 1% of the population.

As many of my hon. Friends have stated passionately in different ways today, the tax cut will be worth a staggering £107,500 on average for 8,000 people earning more than £1 million a year. It is staggering for members of the public. The decision to go ahead with the cut is even more staggering when we consider the fragile state of the economy. With growth at just 0.6% since the comprehensive spending review, rather than the 4.6% the Chancellor predicted, the Government’s economic plan is clearly failing. Prioritising the tax cut in these circumstances shows just how out of touch the Government are.

The Prime Minister and the Chancellor used to agree with us on that point. Before their omnishambles Budget of 2012, they repeated at every opportunity the view that a tax cut for the richest would not be fair in such difficult economic circumstances. The Chancellor said in November 2009:

“I cannot even consider lifting”

the 50p rate

“while I’m asking others in the economy to bear a burden.”

The Prime Minister said in November 2011:

“I have been very clear and we have all been clear, we have to try to do this in a way that is fair so that the broadest backs bear the biggest burden. That is why we haven’t changed… the 50p tax rate.”

The Deputy Prime Minister said in September 2011:

“At a time when millions of people who play by the rules, work hard, pay their taxes and try to look after their families, it would be incomprehensible to them to have a government which actually says our priority is to lower the tax burden on the top 1% of people who aren’t in the same position of distress.”

It has not been said for some time, but I agree with Nick. This move is indeed incomprehensible to those who are feeling the squeeze. They do not understand why the Government want to spend £3 billion at this time on a give-away for the very richest.

Labour Members have expressed clearly today that they do not understand why the Government have done this either, and we heard some powerful contributions that showed the strength of feeling. I want to pay particular tribute to my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty), who gave a real tour de force in his maiden speech, which took us from the shores of Wales to the far-flung parts of Africa but all the time emphasised the impact the Government’s policies are having on the constituents he is so proud to represent. My hon. Friend the Member for Islwyn (Chris Evans) made a characteristically passionate speech that expressed the voice of ordinary people who are concerned about this policy.

We also heard from Government Members. The hon. Member for Dover (Charlie Elphicke) brought up the politics of envy, although my hon. Friend the Member for Blaydon (Mr Anderson), rebutting that claim passionately, stated that this is about the politics of fairness. The hon. Member for West Worcestershire (Harriett Baldwin) subjected us to a rather dubious maths lesson, and I fear that she highlighted the dubious “back of an envelope” approach that the Government seem to be taking to their tax calculations. I pay tribute to all Members who have contributed to the debate, but particularly Opposition Members, who forcefully made clear the feelings of constituents up and down the country who are concerned about the choices the Government are making.

New figures released today show that just 27% of the public agree that the Chancellor has proved since 2010 that we are all in this together. Indeed, the Government have not even persuaded their own supporters, only 51% of whom are on board. Just 23% of women feel that we are all in this together, which is hardly surprising, given that 85% of the top rate taxpayers who will benefit from the tax cut are men. It is abundantly clear from the impact of the tax cut that we are not all in this together. The Government are planning to raise £3 billion, almost exactly the cost of the 50p tax cut, through the granny tax. Millions of pensioners are set to lose an average of £83 in 2013-14, while those just turning 65 will lose more than three times that amount.

Families with children are set to lose an average of £511 as a result of the Government’s policies, and that comes on top of the damaging VAT rise, which will cost them up to £450 a year and a pensioner couple £275 a year. Working couples with children earning less than £17,000 on average will lose their working tax credits, worth up to £3,870, if they have not been able to increase their working hours. It is clear that families are paying a much higher price than the banks. I think it was my hon. Friend the Member for Leeds West (Rachel Reeves) who pointed out that the Government seem to believe that the poor will work harder if we cut their incomes, but that millionaires will work harder only if we cut their tax. It does not stack up.

Where will this extra work come from? Welfare bills are going up, not down, because there is simply no plan for jobs and growth. We heard yesterday that the Work programme is performing worse than if it did not exist. Only two in every 100 participants are getting jobs through the programme. That is in stark contrast to the future jobs fund, which the Department for Work and Pensions itself confirmed gave a net gain to the taxpayer of more than £7,000 per participant. This Government scrapped the fund, left nothing in its place and then gave us a double-dip recession. There is also increased borrowing and rising long-term unemployment, yet the Chancellor’s priority is still to spend £3 billion on a tax cut for the richest 1% of the country. It is the wrong priority at the wrong time.

Government Members have tried to argue today that the 50p rate was not working, yet the Office for Budget Responsibility has said that the Government’s projected figures on the yield are “highly uncertain”. We have discussed that at length today. The Institute for Fiscal Studies stressed:

“If the future of the 50p rate is to be determined on the basis of evidence about its impact, then Budget 2012 will be too soon to form a robust judgement.”

Despite the Prime Minister’s claims that the top rate of tax has not raised any money, the Treasury’s own figures show that higher-rate taxpayers have been paying the tax.

In next week’s autumn statement, the Chancellor has a chance to change direction. He can scrap the tax cut for millionaires and focus on getting the economy—which is putting more people on the dole and seeing borrowing going up, not down—off its knees. Now is not the time to give handouts to the top 1%; it is time to give a real hand up to the hard-working majority of the people of Britain.

15:57

[The Financial Secretary to the Treasury (Greg Clark)]

It is a pleasure to respond to this debate, not least because of the maiden speech made with such distinction by the hon. Member for Cardiff South and Penarth (Stephen Doughty), whom I warmly welcome to the House. He spoke in a way that was assured and fluent and with a degree of geniality that I think will make him many friends throughout the House. I have one issue of contention with him. He outed himself as a fan of Cardiff City and, since they are locked in a promotion battle with my hometown club of Middlesbrough, that will be a point of disagreement between us during the weeks and months ahead.

Call me naive, but I had hoped that, during an Opposition day debate, we might have heard something—anything—about the Opposition’s policy, but sadly it was not to be. At the end of this debate, their economic policy is, if possible, even more obscure than it was at the beginning. There are four fundamental matters crucial to this debate that both shadow Ministers—the hon. Members for Leeds West (Rachel Reeves) and for Newcastle upon Tyne North (Catherine McKinnell)—failed to address.

The first could not be more basic. What do the Opposition believe to be the purpose of the 50p rate of income tax? Is it to raise revenue, to punish the rich, as the right hon. Member for Oldham West and Royton (Mr Meacher) has said, or to serve as a piece of rhetoric? We need to know, because if the Opposition are clear that its purpose is to raise money, will the hon. Member for Newcastle upon Tyne North say—she is welcome to intervene—whether they will drop their support for the 50p rate if the evidence continues to support our assessment and those of HMRC and the OBR that it raised very little indeed and would be likely to cost the public purse even more? Will she be clear—is the argument that the rate raises money the criterion for the Opposition’s support for it, or is it a price worth paying just to send a message that they want to soak the rich?

Secondly, do the Opposition accept, in the words of HMRC, that

“high tax rates in the UK make its tax system less competitive and make it a less attractive place to start, finance and grow a business”?

Do they accept HMRC’s assessment that high taxes are bad for the international standing of the country? I would be pleased to take an intervention from the hon. Lady. My hon. Friend the Member for The Wrekin (Mark Pritchard) asked the shadow Chief Secretary whether she subscribed to that view, and she could not answer. Is tax competitiveness important to the Opposition? We do not know. In their view, does it matter if the UK has the highest tax rate in the G20? Is that a concern or not? Does it make a difference to British competitiveness? The last time the hon. Member for Pontypridd (Owen Smith) was asked he said, “I don’t know.”

The third issue is whether the Opposition agree with the former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), who said that this measure should be only temporary. We have had no clarity on that from Opposition Front Benchers.

The fourth matter that the Opposition need to consider, given that they regard this tax as being so crucial—so totemic—that they wanted to call this debate about it, is whether they will send a clear message that they would restore it if they came to power. Again, we have silence. Let us bear in mind that we are now in the second half of the Parliament, and the time for posturing and procrastination is over. The time has come for the Opposition to tell the country what they would do in government—or do they simply not have the courage to face up to the need to be straight with the British people? I strongly suspect that this will be one of the last occasions when we debate the 50p tax rate as it gets shuffled off to the retirement home of meaningless gestures that the Opposition no longer have time and use for.

Labour is, to its core, the party of tax and spend, and, to be fair, it takes a very consistent view of both sides of the equation. With regard to spending, it is always a matter of “How much?” and not “To what end?”—of inputs, not outcomes; of the number in the headline on the press release, not what is achieved with the money. On taxation, too, for Labour it is all about the price tag—the headline rate, not the revenue actually raised, nor, indeed, the amount of tax that the wealthy actually pay. The top rate of tax paid by the rich in all but the last month of the previous Government was lower than what they pay now. The top 1% of earners now contribute over 27% of income tax revenue—far more than they did under Labour—and the effect of this year’s Budget is to take from the richest five times what they gave through the reduction of the 50% rate.

Of course, the tax system that we inherited from the previous Government was a mess—a typically socialist tangle of tripwires and loopholes which, as my hon. Friend the Exchequer Secretary made clear, we are taking action to close. Too much of the money made under the previous Government was in keeping with the ethos of the previous Government—short term, reckless and unsustainable; the boom before the bust. In future, if there is money to be made it will be done in the responsible way, through real enterprise and real innovation. As we seek to rebuild a productive economy on the ruins of Labour’s cardboard economy, this is the worst time to punish the producers, innovators and entrepreneurs on whom our future depends.

[Rachel Reeves]

If the Government are doing so well on the economy, why has it shrunk over the past year, and why is Government borrowing now rising, not falling?

[Greg Clark]

The hon. Lady will be aware that the record structural deficit in the G7 bequeathed by the previous Government has been paid down by a quarter.

As we seek to rebuild our productive economy, Labour Members know all about the power of the headline figure—that is why they have made such big play of the top rate of income tax. It is interesting that the shadow Minister was more familiar with the opinion polls than with the cost of this measure to the economy. If they think that it plays well to the gallery, then how do they think it plays to those who might or might not want to invest in this country, and who might create the new private sector jobs that a financially exhausted public sector can no longer pay for?

For our part, we want to create an economy in which those who prosper most are those who are best at creating wealth for all. That will require moderate tax rates, properly enforced, and the long, hard slog of tax reform and simplification. As in so much else, we have chosen the difficult path but the right one. Today’s debate provides further proof that Labour has made the opposite choice. As always, the politics are cheap but the consequences would cost our country dear.

Question put (Standing Order No. 31(2)), That the original words stand part of the Question.

16:04

Division 105

Ayes: 222

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Labour: 205
Democratic Unionist Party: 6
Scottish National Party: 4
Social Democratic & Labour Party: 3
Plaid Cymru: 3
Independent: 2
Alliance: 1
Green Party: 1

Noes: 291

---

Conservative: 252
Liberal Democrat: 38

Question put forthwith (Standing Order No. 31(2)), That the proposed words be there added.

Question agreed to.

The Deputy Speaker declared the main Question, as amended, to be agreed to (Standing Order No. 31(2)).

Resolved,

That this House notes that the previous administration maintained the top rate of income tax at 40 per cent for 13 years, only increasing it to 50 per cent in April 2010, one month before the Government was formed, and that this new rate was damaging to UK competitiveness; further notes that the independent Office for Budget Responsibility certified the Government’s central estimate that reducing the 50 per cent rate to 45 per cent would have a cost to the Exchequer of £100 million per year and that measures introduced at the last Budget increased taxes on the wealthy by some £500 million; recognises that in contrast to the previous administration that abolished the 10 per cent rate of tax which increased taxes on more than five million low earners, the Government is cutting income tax for 25 million low and middle earners while taking two million low-paid people out of income tax altogether through increasing the tax free personal allowance; recognises that every Budget under this Government has increased taxes on the rich, including a new stamp duty land tax rate for properties over £2 million, an annual charge on these properties, introducing a cap on previously unlimited income tax reliefs and an extension to the capital gains tax regime, clamping down on tax evasion and aggressive tax avoidance, and bringing in a General Anti-Abuse Rule; and welcomes the introduction of the Triple Lock, which led this year to the biggest ever cash rise in the state pension.

Jobs and Social Security

Wednesday 28th November 2012 Commons Chamber

16:19

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

I beg to move,

That this House notes that only just over two in every hundred people referred to the Work Programme in its first year have gone into work; further notes that it has delivered a worse outcome than no programme at all; recognises that long term unemployment is soaring and that the welfare bill is projected to be £20 billion higher than planned; notes with concern that the Government is cutting £14 billion from tax credits and is taking £6.7 billion from disability benefits to pay for this cost of failures; and calls on the Government to implement a bank bonus tax to fund a Real Jobs Guarantee for young people and commission a cumulative impact assessment of disability benefit changes.

Our debate takes place in the shadow of the Chancellor’s winter statement next week. It is clear that a winter of misery lies ahead. The Chancellor has already had to revise up the cost of welfare spending for this Parliament by an eye-watering £20 billion, and now, after yesterday’s brutal exposure of the Work programme, we know a great deal more about who is to blame.

We already knew that the Chancellor had done his level best to throttle the recovery. He has cut so far and so fast that we have now been landed with the longest double-dip recession since the war; and our economy is so fragile that the Governor of the Bank of England has warned that we might lapse into another recession this year; but what we did not know until yesterday was just how badly let down the Chancellor, the Cabinet and our constituents have been by the complete inability of the Department for Work and Pensions to get our country back to work. No wonder the Chancellor is tearing strips off the Secretary of State for Work and Pensions in Cabinet.

All over Britain, businesses and families are busting a gut to do anything and everything to find work. Some 60% of jobs created since the election have either been part-time or self-employed, and, amidst all that strain and effort, we might have expected a little more support and a little more of a helping hand from the DWP. Yesterday, however, we discovered that it has done worse than nothing. Ministers swept into office promising the biggest-ever scheme to help people back to work, but yesterday we heard, not the hype, but the reality. It has been trying to hide these figures for more than a year, and yesterday we found out why: the Work programme has proved precisely as useful as doing absolutely nothing—in fact, worse than nothing.

When the DWP went out to market to ask contractors to come forward and help with the task, it said, in its documents, that it could expect about 5% of people on long-term benefits to make it into work under their own steam each year. That is why it set itself a target of outperforming doing nothing by 10%—not a high bar—but somehow it managed to set a target as low as possible and miss it. It is right, therefore, that the House highlights, not just this failure, but the soaring cost of failure, which our constituents will now have to help pay down.

[Mr John Redwood (Wokingham) (Con)]

Will the right hon. Gentleman give us some positive ideas on what improvements could be made? I am sure that all people of good will in the House want more people to get back to work and will recognise that this large welfare spending needs to be used in a way that encourages them.

[Mr Byrne]

The right hon. Gentleman will be as concerned as I am about this question, because only 2.6% of people in his constituency on the Work programme got a sustainable job outcome. I will come directly to that very question, but I want to dwell first on the cost of failure.

Since the Work programme has been in place, the number of people out of work full-time for more than a year has risen by an extraordinary 210,000. This spiralling cost of long-term unemployment is now costing us, in the jobseeker’s allowance bill alone, £750 million. That is an enormous cost of failure. It is the cost, in fact, of 18,000 nurses, 16,000 teachers and 14,000 police officers.

[Bill Esterson (Sefton Central) (Lab)]

My right hon. Friend talks about the cost of the failure of this programme. Will he also mention the impact on our constituents? The message from mine is clear: when they go on Work programme activities, they are not given the sort of training or opportunities they are promised, by and large, and so there is little prospect, even from the start, of their getting a job, even if the jobs are there at the end. Does he agree that that is a common experience across the country?

[Mr Byrne]

I know this is of great concern to my hon. Friend. There are more than six people chasing every job in his constituency. What his constituents need is a back-to-work programme that actually works, pulling out all the stops to get people into jobs, but I am afraid the story he has told from his constituency has become all too common across the country.

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

I am sure the right hon. Gentleman wants to get the record straight. Will he now tell the House that in the last two years of his complacent Government, long-term unemployment rose by some 400,000?

[Mr Byrne]

I would be happy to trade arguments about our record with the Secretary of State, because while Labour was in office, the amount of money that we spent on out-of-work benefits fell by £7.5 billion. That is why his noble Friend Lord Freud described Labour’s record in getting people back to work as remarkable. It is a shame that he could not arrive at the same judgment about this Government’s programme, which is now in place.

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

I am sure that my constituents want a reflective debate today, not the sort of intervention they have just heard from the Secretary of State. As I remember, Lord Freud—or Mr Freud or Dr Freud, before he was ennobled—did a thorough piece of work for the former Prime Minister, Tony Blair. What went wrong? Was his analysis wrong or was the way the Conservative Government interpreted it wrong? Was Freud wrong and his analysis abused, or was he right and something has gone wrong with the Government?

[Mr Byrne]

The Work programme has got only just over 2% of the people in my hon. Friend’s constituency in the programme into sustainable jobs. It is becoming clear that there is simply not enough fuel in the tank.

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

Will the right hon. Gentleman give way?

[Mr Byrne]

In a moment.

The Government spent something like £63 million closing down the flexible new deal—a programme that was actually getting more people into sustainable jobs than the Work programme and was costing only something like 9.5% more per job outcome. The Government have, in effect, shut down a system that was working, spent an awful long time getting something back up and then overseen a programme that has dramatically failed to hit the target set for it in the first years. It is a catalogue of failure.

[Jessica Morden (Newport East) (Lab)]

Does my right hon. Friend agree that yesterday’s figures for young long-term unemployed people were especially tragic? Would he be interested to know that Jobs Growth Wales, which was introduced by the Labour Government in the Welsh Assembly in April, has proved to be seven times as effective in getting young people back into work and was based precisely on the future jobs fund?

[Mr Byrne]

My hon. Friend is absolutely right. The Work programme has been an abject failure in her constituency. Only 1.4% of people in her constituency who went into the programme were attached to any kind of sustainable job outcome. We know from Department for Work and Pensions research last week that the future jobs fund was a roaring success, delivering more than £7,500 of wider benefit to society. It was such a tragedy that the Government closed it down. Thank heavens that Labour is in power up and down the country, including in Wales, where we are building on the lessons of the future jobs fund, making it better and stronger, and now making a difference for young people across her constituency and beyond in Wales.

[Nick de Bois (Enfield North) (Con)]

Before we get too engrossed in bandying statistics around, is it not worth remembering that a job outcome is measured over a six-month period? The Work programme has been in place for a year; therefore, the early statistics will inevitably not reflect its success accurately. Indeed, we could actually discount almost half the 800,000, simply because getting a six-month job outcome is almost impossible.

[Mr Byrne]

I am afraid that prompts the question why the DWP set the target in the first place. Indeed, yesterday on the television news that I watched, the Secretary of State made great play of the fact that the Work programme was only in its first year. However, the fact that the targets were set by the DWP was somehow missing from what he said yesterday. Indeed, they were targets for the first year. The challenge only gets greater in the second year. If the hon. Gentleman looks at the tender documents that the DWP put out, he will see that in the second year the Work programme has to get 27.5% of those on jobseeker’s allowance into sustainable job outcomes. That is about 10 times what the Government have managed to deliver in the first year. So I am afraid the argument that the Work programme is just warming up simply will not do.

[Nick de Bois]

I think that the right hon. Gentleman would accept, on reflection, that in achieving the goal of helping people to secure full-time employment, it is inevitable in these difficult times that some of them will need to take jobs that might not last six months in order to help them to get back into the Work programme cycle. The inevitable consequence of that is that we will do far better in the next year. So be it: let us celebrate that.

[Mr Byrne]

There is an element of me that feels sorry for the Secretary of State. He is operating in an economy whose recovery has been throttled by the Chancellor, while another Cabinet colleague, the Secretary of State for Communities and Local Government, is implementing the biggest cuts to those local councils where there are the fewest jobs. So yes, the Secretary of State for Work and Pensions faces a difficult challenge, but it was his Department that set out the bald statistic—[Interruption.] I am sorry that the hon. Member for Enfield North (Nick de Bois) cannot hear me because of the chatter from those on his Front Bench. It was the Secretary of State’s Department that said that if the Government did nothing, 5% of people on long-term benefits could flow into work. The Work programme has delivered less than that, and the benchmarks will get stiffer next year.

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

My right hon. Friend has seen a successful job creation plan for the long-term unemployed in my city of Glasgow, run by the Labour administration on Glasgow city council. There are 1,320 long-term unemployed people in my constituency, but under the Work programme only 2.5% of them have found a lasting job. Does not that illustrate the difference between a Labour administration who know how to help to create jobs, and a Conservative-led coalition that is making an absolute hash of it?

[Mr Byrne]

My hon. Friend is absolutely right. Glasgow city council has lessons to teach all of us about what it takes to get young people back into work. Despite all the difficult decisions that the council has had to take, it has made it a priority to get young people back into work. The way in which it has built on the future jobs fund is a real lesson for everybody.

[Andrew Bridgen]

The right hon. Gentleman talks about the Labour Government’s record of getting people into work. Can he explain why the number of households in which no one had ever worked doubled to 350,000 during the 13 years of his Government?

[Mr Byrne]

The hon. Gentleman should check his facts. The number of people on out-of-work benefits came down by 1 million under Labour, and the out-of-work benefit bill came down by £7.5 billion. That is in sharp contrast to this Government, who have put up welfare spending by £20 billion more than they projected. To pay down that bill, they are now having to cut tax credits from constituents such as those of the hon. Gentleman.

[Andrew Bridgen]

The right hon. Gentleman did not answer the question. I asked why the number of households in which no one had ever worked doubled to 350,000 under the last Labour Government.

[Mr Byrne]

I am afraid the hon. Gentleman has to check his facts. The truth is that Labour delivered 1 million fewer people on out-of-work benefits and a £7.5 billion reduction in the out-of-work benefits bill. That is why his noble Friend Lord Freud described our record of getting people back to work as remarkable.

If this Government had built on those lessons rather than ignoring them, they would not be presiding over the sorry state of affairs that was announced yesterday, when the Secretary of State and the Minister for unemployment—the Minister of State, Department for Work and Pensions, the hon. Member for Fareham (Mr Hoban)—were forced to come out and tell us that the only virtue they could find in yesterday’s figures was that the Work programme was cheaper than the flexible new deal. The truth is that a payment-by-results system will always be cheaper if there are no results. It is the lack of results that is now costing this country a fortune. That is what is driving up the welfare bill by £20 billion more than was projected at the beginning of this Parliament.

We have to ask who is going to pick up the tab. We know that it will not be Britain’s richest citizens. They have been handed a tax cut of some £3 billion. They will not be asked to pay for this failure. Instead, it will be Britain’s strivers and battlers—those whom the Prime Minister promised to defend. Well, some defence! This Government are now taking £14 billion off tax credits over the course of this Parliament. I think I am right in saying that tax credits are the only benefit that is currently frozen.

The tragedy is that the cuts are so unfocused and so unwise that Britain’s part-time workers will now be better off on benefits than they will be in work. How on earth can that be right? A couple with two children and some child care costs on £40,000 a year are set to lose £1,900—5% of their income—in benefits over the course of this Parliament, while 8,000 millionaires will gain an average of £100,000 a year from the Government’s tax rate cut in April. If that is the Prime Minister’s defence of Britain’s battlers and strivers, I would hate to see what happens when he starts attacking them.

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

Is not the reality even worse than my right hon. Friend paints it? [Interruption.] He says that he has not finished yet! Many of the battlers and strivers are young people, and in my constituency, long-term youth unemployment is up by 1,150%. The other options available to them are going on to university or staying in education, yet tuition fees have trebled and the education maintenance allowance has been taken away.

[Mr Byrne]

My hon. Friend is absolutely right: there is a bleak future for many young people in his constituency, where the Work programme has delivered something like 1.3% of people into sustainable jobs, so it is one of the worst figures in the country. When young people in my hon. Friend’s constituency face tuition fees that have trebled, the cancellation of EMA and the shutdown of the future jobs programme, he is right to call in this place for a very different course of action.

Even more worrying for the future, the signs are that when universal credit is introduced, it will not get better for Britain’s strivers and battlers; it will actually get worse. We know that new rules for universal credit will mean taking in-work benefits away from anyone who has managed to squirrel away £16,000, and we know that it locks in cuts to tax credits. Now, in this morning’s Sun, we read that a couple working full time—over a million of them will be in the system—will lose something like £1,200 a year. That is, of course, if it ever happens.

[Andrew Bridgen]

rose—

[Mr Byrne]

Perhaps the hon. Gentleman will tell us what he thinks of that.

[Andrew Bridgen]

I thank the right hon. Gentleman for giving way again. I would like to tackle him on the last Government’s record on what he claims was getting people into work. If that were the case, will he explain why the working age welfare budget increased by 40% in real terms during the 13 years of the last Labour Government?

[Mr Byrne]

Let me give the hon. Gentleman some statistics. If he looked at the amount spent on benefits in 1996-97, he would find that it came to about £51 billion, excluding pensions. By the time we reach 2009-10, that had fallen to £44 billion, so I am afraid that no matter how he looks at it, the truth is that the amount spent on out-of-work benefits over the course of Labour’s period in office fell by £7.5 billion. The hon. Gentleman is a member of a party that has presided over an increase in the projected welfare spend by £20 billion, and there are something like 8,000 families in his constituency that are now seeing their tax credits either frozen or cut to pay for that cost of failure. I wonder how he is going to explain that to his constituents as we get closer to the next election.

It is not simply people in work who are paying the bill. We now know that about 6 million families are working, yet are still in poverty. There is another group of our constituents that we must worry about, too—those constituents who are disabled yet are set to lose something like £6.7 billion of help over the course of this Parliament to help pay for the failure to get Britain back to work. These benefits are being taken away, without any cumulative assessment of their combined impact, and these cuts total more than the Government are taking away from banks. That, I am afraid, is a sorry indictment of this Government’s values.

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

My right hon. Friend will know that growth is at a standstill because of the collapse in consumer demand. Given that poor people spend all their money while rich people can afford to save or hide it away, does he accept that focusing the cuts on the poorest—cutting disablement benefits, the working families tax credit and the like—is completely counter-productive for job growth as it deflates the whole economy?

[Mr Byrne]

My hon. Friend is right. The Work programme has delivered only about 1% of his constituents into sustainable work. What we will publish this afternoon is an analysis showing that the per capita cuts in councils across the country are biggest where jobs are fewest. Where there is something like £200 a head in cuts, it means two or three times the national average of people chasing every single job. It is not surprising that the Work programme, flawed as it is, is finding it hard work because the Chancellor has throttled the economy and the Secretary of State for Communities and Local Government is cutting back where jobs are fewest.

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

Does my right hon. Friend agree that the Government should be redoubling their efforts to invest in the areas that need investment most—the areas that have been hit hardest by the welfare reform cuts? The Prime Minister implied that Stoke-on-Trent would have a local enterprise zone, but that never happened. We need to benefit from the regional growth fund, and we need a Government emphasis on what needs to happen.

[Mr Byrne]

My hon. Friend has been a consistent champion of Stoke, and has consistently drawn attention to the need for greater economic development there. The Work programme is not helping, the cuts in council funds are not helping, and the Chancellor’s wider economic strategy is not helping. My hon. Friend is right: we must redouble our efforts, particularly in those poorer parts of the country, to get people back into work. There is very little sign that that is happening at present.

Once upon a time we were promised a welfare revolution, and I think that we are right to ask this afternoon what on earth has happened to it. Universal credit is descending into universal chaos, punishing the strivers and battlers whom it was supposed to help. A climate of fear is being created for disabled people, and the Work programme quite simply is not working. The Chancellor knows that it is going wrong, and No. 10 knows that it is going wrong. Only the Secretary of State thinks that it is all okay. There he was yesterday, running from studio to studio, saying to anyone and everyone who would listen that it was all fine—that it would be all right on the night—although, quite obviously, it is all wrong. I am now sure that the Secretary of State is competing for Channel 4’s Comical Ali award for those who ignore all the evidence around them. It is not delusions of grandeur from which he suffers; it is delusions of adequacy, and the tragedy is that there is an alternative.

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

Does my right hon. Friend agree that, although it would be bad enough if just one of the elements that he has mentioned affected any of his constituents, many of our constituents will be clobbered by a combination of them all? They will be hit by the bedroom tax, they will be hit by the changes in tax credits, they will be hit by the housing benefit changes, and they will be hit by the localisation of council tax relief.

[Mr Byrne]

My hon. Friend is exactly right. Many of our communities throughout Britain are being hit from all sides, and the Government simply do not seem to understand the combined impact of what is happening. We can only hope that next week’s autumn statement will contain a proper plan to get us back to growth and to get our country back to work.

[Mr Andy Slaughter (Hammersmith) (Lab)]

No group is being hit harder than the homeless, or the most recently homeless. I do not know whether my right hon. Friend has had a chance to read “The Programme’s Not Working”, a report published yesterday by Homeless Link, St Mungo’s and Crisis about the experience of homeless people on the Work programme. It states that 58% of them were not even asked whether homelessness contributed to their difficulty in obtaining a job, and that the same number said they were not treated with dignity or respect. People who are losing their benefits are also being victimised by this dreadful scheme.

[Mr Byrne]

I am grateful to my hon. Friend for bringing that report to the House’s attention. I have not seen it, but yesterday’s announcement made clear that for the groups who need extra help, the Work programme is failing particularly badly. I was extremely disappointed to learn, for example, that those receiving employment and support allowance were getting the toughest deal. Fewer than 1% of them were being helped into sustainable jobs. That is not a record of which any Member in the House can be proud.

[Hywel Williams (Arfon) (PC)]

I am grateful to the right hon. Gentleman for giving way. He is being very generous. To complete the picture, does he agree that the poorest areas often contain the largest public sectors? Would it not be a tragedy if regional pay in the public sector were introduced in those areas, including my own, and would not regional benefits compound the difficulty?

[Mr Byrne]

The hon. Gentleman is right. That is just one more element of the wider picture that we are presenting this afternoon. At a time when there is a huge combined impact on communities throughout the country, we do not have a plan to get Britain back to work. What we have is a welfare bill that is rising, and when it comes to paying that down, it is Britain’s working people—those in receipt of tax credits—who are bearing the brunt. The Government are taking £14 billion out of tax credits over the course of the present Parliament.

We are arguing for a different approach, and we hope that we will see it next week. We believe that that different approach starts with getting our young people back into work. They currently constitute some 40% of those who are out of work. That is one of the highest levels in any western country, and it is a badge of shame. Now, all over the country Labour councils are leading the charge to get young people back into jobs. In Leeds, Sheffield, Liverpool, Wales, Cardiff, Glasgow and Birmingham, it is now Labour councils that are rolling up their sleeves and leading the drive to get young people into jobs. We should help them, so let us put in place a bank bonus tax to create a fund that would help us get young people back into work.

This Saturday is the 70th anniversary of the Beveridge report. That report offered the blueprint for post-war social security. The truth is that 70 years later, working people in this country need new things from the welfare state. They need retraining when they lose their job. They need child care. They need better social care. They need help when they are disabled. Millions today pay in and get nothing back. They are short-changed Britain, when what we want is something-for-something Britain.

Those of us who want to modernise the system know we need to remember the most important lesson Beveridge taught us: social security is built on full employment. So let us get on with getting Britain back to work, and we should start with the young people, whom we will ask to pay for all of our futures—our young people who are hungry for work, yet are being let down by this shambolic Government.

I commend the motion to the House.

16:46

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

The Labour motion is one of the stupidest motions I have ever had to deal with. It says very little and nothing at all about what the Opposition would do if they were in office. It also lays yet more spending commitments on an Opposition whose programme is littered with huge cost increases.

I will take no lectures from the right hon. Member for Birmingham, Hodge Hill (Mr Byrne). I remind everyone again that he is the man who thought it was a joke to write a letter to the incoming Government saying there was no money left. [Interruption.] Opposition Members moan, but the reality is that the last Government bust this country, and we are having to pick up the mess. Furthermore, the right hon. Gentleman was hugely responsible for that mess, yet we have just got a lecture from him on the economy and on unemployment. The reality, however, is that unemployment is now lower than it was when he left office. We have higher employment. We have more women in work than ever before. We also have 1 million new private sector jobs. The reality is that he and his party left us with an utter mess, and we are having to take tough decisions to get ourselves out of it.

[Mr Byrne]

rose—

[Mr Duncan Smith]

I will take some interventions from the right hon. Gentleman after I have dealt with a few of the points that he made.

The right hon. Gentleman’s motion says that just

“two in every hundred people referred to the Work Programme in its first year have gone into work”.

That is complete nonsense. The Opposition have added, and then divided, the numbers in a very partial way, to come up with the worst possible figure, which is precisely what they wanted. They have added up all the total attachments, but taken into account only a small proportion of those for whom six-month job placements were found.

[Several hon. Members]

rose—

[Mr Duncan Smith]

As I have said, I will take some interventions after I have made a few rebuttal points.

If the Opposition had worked the figures out correctly, they would have noticed what my hon. Friend the Member for Enfield North (Nick de Bois) has pointed out: some 315,000 of the 837,000 people who were attached were not in a position to have a six-month outcome because they had not been on the programme for six months. The Opposition do not want to incorporate that fact into their figures, however. Those people will come through into the next set of figures that we produce.

[Mr Byrne]

rose—

[Mr Duncan Smith]

I will give way to the right hon. Gentleman after I have made this point. In fact, the total number in sustained job outcomes falls well within the target area that we were trying to achieve during the first year’s figures. If people want to gerrymander the figures, they should make sure that they gerrymander them all.

[Mr Byrne]

May I draw the Secretary of State’s attention back to the invitation to tender, which presumably he signed off? Under the heading of “Key Performance Measure”, which is in bold type and is the thing that we are interested in and debating, it says:

“Performance will be measured by comparing job outcomes…in the previous 12 months to referrals in the same period.”

The target for performance in the previous 12 months was 5%, and the Work programme statistics delivered yesterday showed that that target had been missed comprehensively.

[Mr Duncan Smith]

Yet again, the right hon. Gentleman has defeated the first point that he made. In other words, the figures that he has produced in the motion are wrong and he has just proved it. [Interruption.] If he wants to listen, he might learn something. No wonder he ended up as the man who told us there was no money left—with his kind of arithmetic, I am surprised that there was anything left at all. The reality is that in a year—if we want six-month referrals—a number of people will not have been in the programme for six months. So 315,000 people—[Interruption.] I am simply saying to him that the reality exists. This programme is on track; it is the best programme; and it will be putting some of the most difficult people back into work. Let me just deal with another point, which is the one about unemployment.

[Mr David Lammy (Tottenham) (Lab)]

rose—

[Mr Duncan Smith]

I said that I was going to make a few points and then give way.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. The right hon. Member for Tottenham (Mr Lammy)knows that he cannot keep standing. I am sure that the Secretary of State has made a note and is going to give way shortly.

[Mr Duncan Smith]

I just want to pick up on one point and then I will happily give way to the right hon. Gentleman.

The same scant regard for general facts is apparent throughout the motion. The Opposition claim that long-term unemployment is now soaring, yet long-term unemployment nearly doubled in the two years before Labour left office, going from 396,000 to 783,000 in 2010. By the way, just so that the record is absolutely straight, the right hon. Member for Birmingham, Hodge Hill says that Labour had got spending down, but welfare spending rose by 60% under the previous Government.

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

rose—

[Mr Duncan Smith]

I will give way in a moment, but I said that I was going to make these points.

Labour’s policies then went on to try to hide the true scale of the problem, by automatically moving people off jobseeker’s allowance into training allowances or short-term jobs, thus breaking their claim just before they reached the 12-month point. The Opposition claim today that long-term unemployment is up by more than 200,000 since the Work programme began, but in actual fact, comparing like for like, which means counting all those who were previously hidden on training allowances and other support, the total number on jobseeker’s allowance is about the same as it was at the start of the Work programme, so that point is complete nonsense.

[Mr Lammy]

Can the Secretary of State confirm that, on his figures, he is talking about 4.5%, which is still below the dead-weight of 5%—in other words, the situation if he did nothing—and his target of 5.5%? Is it 4.5% on his figures? If I am wrong, what is it?

[Mr Duncan Smith]

No, the figures we stand by are those we published yesterday. The point that I was making today to the right hon. Member for Birmingham, Hodge Hill—[Interruption.] No, actually the figure would be more than 5%, but I am not claiming that. What I am saying is that we stand by the figures that we published yesterday, and I believe we are on track. The point I was making, legitimately, is that the right hon. Gentleman spent his time deducting some numbers from one bit and adding them into another to create some bogus figure that two in every 100 people were found sustainable jobs. That is complete nonsense.

[Mr Byrne]

rose—

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

rose—

[Mr Duncan Smith]

I will give way to the right hon. Member for Birmingham, Hodge Hill in a moment, but some of his colleagues behind him want to intervene.

[Geraint Davies]

Today, at that Dispatch Box, the Prime Minister said that 19,000 people out of 800,000 had gone into full-time work. I make that 2.3%, so the Secretary of State is saying that the Prime Minister is talking complete rubbish.

[Mr Duncan Smith]

I stand by the figures that we published yesterday—3.5% is exactly correct. The reality is that what I have said today is what we said yesterday. The point that I want to make is that the thing that has gone missing in all this is that, without the Work programme, some 207,000 people who had been long-term unemployed would not be in work today—they are. Now, we work with those 207,000 people, many of whom have serious problems and difficulties, to make them longer-term employed, which is the key. The Work programme is all about resolving that.

[Mr Byrne]

I am grateful to the Secretary of State, who is being characteristically generous in giving way. Broadly speaking, about 800,000 people were referred to the Work programme in the 14 months to which he extended the reporting period to flatter the figures, and 5% of 800,000 is 40,000. According to his figures, only just over 30,000 got into sustained jobs, so 10,000 more people would have got into jobs if the Government had done nothing. That cannot be a record of which he is proud; surely, he can admit that to the House.

[Mr Duncan Smith]

That is simply not true. I do not want to spend any longer on this, but the point that I made earlier about the right hon. Gentleman’s figures was that, when he concocted the figure of 200,000, he stripped out of his achievement figures the numbers for those who had been on employment and support allowance and so on and divided the total that was left, but those figures were in the other total. The Opposition have made a mistake and need to reckon that their adding up is wrong. The truth is that we have a programme that is helping people who are long-term unemployed.

[Margot James (Stourbridge) (Con)]

I visited EOS, our local provider in the black country, which gave me data to show far in excess of 5% getting back into work. Those data were more recent than the statistics that are being publicised, and I am very encouraged by what the Work programme is doing for people in the black country. Before 2009, the number of people on JSA in my constituency rose by 205%, which was a scandal. That figure is much reduced now.

[Mr Duncan Smith]

The truth is that the previous Government did next to nothing for the seriously long-term unemployed, and as I have said, we saw the figure rise by nearly 400,000. I want to come to that point in a second, but let me first deal with another comment made by the right hon. Member for Birmingham, Hodge Hill during his speech. He said that Labour’s unemployment scheme was a roaring success. I noticed that in Prime Minister’s questions today—I do not know whether I have got this wrong—the Opposition quoted a report that they said had been done by the DWP.

Let us deal with that point now: both the future jobs fund and the flexible new deal were rushed through just before the election. After all the years for which Labour had been in government, it suddenly discovered an urgent need to start to spend money on some programmes. Let us deal with them one at a time, and with the future jobs fund first. The Leader of the Opposition quoted a DWP report earlier and said that that scheme had a net benefit to society of £7,750. What he did not say—I suspect that he needs to speak to the right hon. Member for Birmingham, Hodge Hill next time he gives him something to say at Prime Minister’s questions—was that the report goes on to state that

“these estimates exclude the cost of administering the programme and the cost of hiring and training participants.”

I wonder why he did not quote that.

Using any one of the more conservative estimates, as used in the report in table 5.3 on page 62, puts the benefits at £4,650, less than the £6,500 that it cost to place people in those jobs. So the right hon. Member for Birmingham, Hodge Hill and the Leader of the Opposition unwittingly misled the House and the future jobs fund lost money, rather than rescuing the situation. The report goes on to state that

“it is notable that under all of the scenarios considered in this analysis, the programme is estimated to result in a net cost to the Exchequer”

and

“depending on the rate of decay there might never be an estimated net benefit to the Exchequer.”

What the Opposition are saying is fundamentally wrong: their scheme cost money and did not as a net benefit get anything back to constituents.

[Bill Esterson]

The Secretary of State is talking about a completely different world that is divorced from the reality for my constituents. My constituents who were on the future jobs fund had real jobs at the end because the programme worked. They are now missing a programme that works, because the Work programme is designed wrong and because the jobs are not being created. He needs to talk to his friend the Chancellor and get the jobs created, as well as getting the Work programme right. Is that not the reality of what is needed?

[Mr Duncan Smith]

Of course it was a different world—it was a world in which the previous Government thought that every problem could be solved by chucking shed-loads of taxpayers’ money at it without caring what the outcomes were. That is exactly the point I am making. We have had to clear that mess up.

[Mr Byrne]

rose—

[Mr Duncan Smith]

I will give way, but I ought to deal with the other programme first, as the right hon. Gentleman might want to ask some questions about that, too. The other programme that the Opposition cited was the flexible new deal. If that was such a brilliant programme, surely it would have been rolled out nationally; it never was. When Labour left office, it was only just up to running across half of the UK.

Over an equivalent period and claimant cohort, the Work programme has got more people into work for six months or more—19,000—compared with 15,000 under FND, and it delivers better value for money. The £14,000 per outcome figure thrown around by Labour ignores the start-up costs of the Work programme, which covers five to seven years. An independent cost comparison by the Employment Related Services Association shows a figure of £2,000 per job under the Work programme, compared with £7,500 under FND which, just like other programmes, ultimately cost money and did not succeed in helping to get people into work.

[Mr Byrne]

This is an important point for us to debate. I do not know whether the Secretary of State has seen the analysis that was published yesterday by Inclusion, but it is pretty clear on this question. The proportion of people flowing into sustained jobs from the flexible new deal was 5%, which is much higher than the figures for the Work programme. The flexible new deal was more expensive. Inclusion calculates that the cost per job outcome under the Work programme is £14,000. The flexible new deal was 9.5% more expensive, but the Secretary of State is failing to be level with the House about the fact that doing nothing costs his Department less, but it costs the country more, because the welfare bill goes up. A payment-by-results programme is cheaper if there are no results. That is the problem that we have to fix, and that is why the Chancellor is so cross.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Many Members wish to speak in the debate, so we must have shorter interventions and replies.

[Mr Duncan Smith]

Guided by you, Mr Deputy Speaker, I shall simply tell the right hon. Member for Birmingham, Hodge Hill that he is wrong. I do not agree with his figures, and anyway, he served in government while the bill for welfare rose by 60% in real terms over the lifetime of that Government. Enough said: we took on a massive problem, and we have to deal with it.

[Kate Green]

rose—

[Mr Duncan Smith]

I shall make some progress, but I promise to give way to the hon. Lady.

Let us deal with the final point made by the right hon. Gentleman in the motion: that somehow all this could be solved if only we did not cut, change or reform anything and implemented a bank bonus tax to fund a real jobs guarantee. Such a one-off tax would be worth £3.5 million. However, we have introduced an annual bank levy, which raises much more money over the period. The Opposition did not introduce such a levy when they were in power.

Let us look at the bank bonus tax that they propose. I love the fact that that tax is wheeled out whenever they are in a corner. It has already been used to cover the spending of £13.5 billion that they committed to make when reversing the VAT increase. It has been used for more capital spending—£5.8 billion—and again to reverse tax credit savings of £5.5 billion. It was used to build 25,000 extra homes—£1.2 billion. It was used again to reverse child benefit savings of £1.7 billion, and more and more.

It is a joke to keep wheeling out that ridiculous programme as an excuse for what the Opposition should be doing, which, as my right hon. Friend the Member for Wokingham (Mr Redwood) said earlier, is telling us what they would do instead, where they would make the necessary savings and how they would reform welfare. That is the main issue.

[Kate Green]

The debate has moved on, but I wanted to say that the rise in social security spending under the Labour Administration was not all in relation to out-of-work benefits. A large proportion related to better payments for children and working tax credit, which subsidised low pay.

[Mr Duncan Smith]

I agree. The only way to look at these things is to consider the overall state of welfare spending. That is exactly how I look at it. As for the point about tax credit, much of it had nothing to do with going back to work, but it supported families for other reasons. The Opposition cannot separate what suits them from the other bits. We have a welfare budget, and they must own up to the fact that it rose by 60%.

Let me deal with what the Work programme really is. It supports 800,000 people—more than any previous programme—and data published yesterday show that it is successfully moving claimants off welfare rolls into jobs, so generating savings in the process. More than half those referred to the programme in June 2011 have since come off benefits, and about a third have spent the past three months off benefit, and a fifth have spent six months off benefit. Independent statistics published on Monday show that 207,000 people, as I have said, have been in work—a fifth of everyone on the programme. What is more, job entries are rising month on month. The figures that we published yesterday showed that in the past two months there was a 40% increase in attachments lasting six months.

We have rejected the old tendency that the right hon. Member for Birmingham, Hodge Hill keeps coming back to—chucking money at programmes in the hope that people will say we are doing something because we are spending money. With the FND, Labour paid out 40% of the fee up front just for signing up someone. Firms never had to do much at all. Under the flexible new deal, the average up-front attachment fee was more than £1,500. More than £500 million was paid out in total, without any assurance of success at all.

[Mr Bain]

In my constituency, just 70 people have been placed through the Work programme into sustainable employment, but the Employment Related Services Association says that providers of the Work programme have received £436 million in public money already, as at September 2012. Can the Secretary of State update the House with the most recent figures? Does he really believe that constitutes value for money?

[Mr Duncan Smith]

The figures have been published. This is about start-up costs and the money that is paid for every job. If the hon. Gentleman wants to do the mathematics, he will find that it adds up quite well.

Under the Work programme, companies are paid only if they keep people in work for six months for the most part, and for some 13 weeks. Under Labour’s programme, 40% of the total budget or about £500 million, as I said earlier, was paid just to sign up people. That is the difference. We save the taxpayer the money, and we will produce a programme that gets people into work. It transfers the risk. In future, we should be able to shift market share from those who do not succeed to those who succeed.

Many of the same companies are used as were used under the previous Government, but the difference is that they are now being examined to show how successful their programmes are. Whereas under the previous Government they could simply sign up people, now they have to get them into work and sustain them in work, or they do not get paid.

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

If I accept the Secretary of State’s proposition and that of the Minister of State, the hon. Member for Fareham (Mr Hoban) in his letter yesterday that it is a bit early to judge the programme, when is it reasonable to judge it? Can we expect to see a substantial improvement in the figures next year? If we do not, will the Secretary of State admit then that he has failed?

[Mr Duncan Smith]

I happen to believe that the people who will admit that they failed are the Opposition. I hope that within a few months they will be eating their words over all this. Over many years, while the hon. Gentleman’s party was in government, we saw welfare bills soaring. By the time that Labour left office, there were 5 million on out-of-work benefits, one in every five households had no one working, 2 million or so children were living in those workless households with no chance that they would ever see anyone go back to work, and youth unemployment was up by 40%. Unemployment was at 7.9% and inactivity at 23.5%.

What a contrast with the situation now. In recent months, there have been more women and more people overall in work than ever before, up 734,000 since the election. There are 1 million more jobs in the private sector. We have seen four consecutive quarters of rising jobs growth and three consecutive quarters of falling unemployment. Not one word about that from the Opposition; not one congratulation to those who have found jobs. Excluding students, youth unemployment is down 65,000 on the latest quarter and 15,000 since May 2010. There are now 190,000 fewer people claiming the main out-of-work benefit and the inactivity rate is close to the lowest in a generation.

Thirteen months after coming into office, this Government introduced the biggest payment-by-results programme that the UK has ever seen. It is succeeding. It will succeed. We have heard nothing from the Opposition today. It is a pathetic motion from a pathetic Front Bench team and I will oppose it tonight.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I remind hon. Members that there is a 10-minute time limit on Back-Bench speeches.

17:09

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

It is a pleasure to take part in this debate, although I must say that there were moments when I wondered whether some of the Members who have spoken had somewhat lost the plot. So few people seem to be interested in our parliamentary democracy these days, and sometimes I think that is because of how we shout across these Benches, which puts many people off. The truth of the matter is that all the mature industrial democracies are facing some deep-seated structural challenges. The previous Government struggled with those structural difficulties, as will this Government. If anyone expects the coalition Government’s policies, many aspects of which I am critical of, to solve the problems that the Labour Administration failed to solve, I think that they are being rather naive.

What do we all want for our economy and our democracy at the moment? I want us to have full democratic citizens, something we do not often talk about. I get sick of Governments, even my own, talking about taking people out of tax. I want everyone in our country to pay tax. I want a broad tax base and the people who pay tax to feel that they are real citizens and participants. They do not want to be non-taxpayers. They also want good pay that is fair and better than the lowest legal pay, the basic minimum wage. We want full citizens, good taxpayers, fair pay and, of course, high skills.

One of the real challenges our country faces, as exemplified by the Ofsted inspector’s annual review published yesterday, is that a significant percentage of people do not get a good deal out of education and skills. We have improved immensely. The previous Government expanded higher education, and much of our school education has been improved under the previous Government and this Government. However, the fact of the matter is that roughly 25% of kids—perhaps even 30%—in many constituencies across this country are not getting the opportunity to acquire the kinds of skills that would make them full, taxpaying, participatory citizens.

Indeed, evidence given to the Skills Commission, which I co-chair along with Dame Ruth Silver, by the chief executive of Hackney college—the Secretary of State does not seem to be interested in this, but he should listen—which takes in the whole of silicon roundabout, shows that around 30,000 jobs have been created there, but unemployment in the area has not fallen by so much as 0.5%. That gets to the heart of what the McKinsey report states, which is that there is a real problem across modern industrial democracies: those people whom we cannot skill-up, whatever age they are, and who cannot get jobs.

[Ann McKechin (Glasgow North) (Lab)]

My hon. Friend makes some good points about skills and training. Does he share my concern that the Department for Work and Pensions is still to reach agreement with the Scottish Government about who is responsible for the cost of training those who have entered the Work programme in Scotland and that, as a result, applicants in Scotland are actually less likely to get training under the Work programme than those south of the border?

[Mr Sheerman]

My hon. Friend will forgive me for knowing less about the situation in Scotland than I do about the situation in Yorkshire and England, but I am sure that she is right. There are many local differences, as I am finding in my area.

That is why I asked for the Freudian analysis earlier. Lord Freud, before he became a Member of the upper House, was asked by Tony Blair to evaluate which programmes worldwide had actually worked and addressed the structural problem of how to get people into work so that they can be full citizens. He looked right across the piece to identify which programmes had been successful. By requesting the Freudian analysis, I was asking whether it was good information. It was the whole basis of the policy that influenced our Labour Government’s policy and also that of the Conservative party. Freud is very important to these discussions, however he has been interpreted, and we should not forget that he was trying to look at that central problem we all face.

[Mr Duncan Smith]

Given that the hon. Gentleman has asked about my noble friend, who is an excellent addition to our team—whichever party he represented previously, he is a very good man and is doing very well—I may say that the Australian system, which is the basis of the Work programme, has shown some of the best results, which occur once companies are geared up and focused on getting people back into long-term, sustained employment. The system is working very well and says that it is on track.

[Mr Sheerman]

I thank the Secretary of State for that intervention, and I accept what he says. He knows that what I am getting at in this short contribution is that we play this game of blaming each other all the time, but the problem is international and global and we will have to sometimes forget party differences and work together on it. I want to make a couple of suggestions as to how we might do that.

Let us face it: all Governments throughout Europe, the United States and beyond have a long history of failure. Modern industrial democracies have this problem of skilling the work force. Indeed, I have never heard such castigation of our country’s further education system as that in yesterday’s annual report by the chief inspector of Ofsted, who said how poorly further education was performing in our country. All the evidence shows that further education is where young people get skills for the good life. It is where they get high skills to get good jobs to be the full citizens that I am after.

I have never heard of the chief inspector picking on one town in particular. I do not know what he has against Hastings, but he said that early years and primary schools are a failure for the children of Hastings and that they also fail when they go on to secondary school and further education. I was astonished. Thank God he was not talking about Huddersfield. It comes down to the fact that a significant percentage of people in our country have inadequate training and skills, and we need to work across parties to do something about that.

I want to share some of my experiences. One of my last reports when I chaired the Children, Schools and Families Committee looked at the problem of those not in education, employment or training. We found that intelligent programmes on the ground which represented a positive response from local authorities that understood their local communities, and which also had good local skills training and good employers, could make a significant difference to the number of people gaining skills and getting into work. There are good exemplars in this country, but some towns are more fortunate than others in retaining their manufacturing and employment base.

[Jane Ellison (Battersea) (Con)]

I rise merely to express agreement with the thrust of the hon. Gentleman’s argument on skills, and in particular to say that London is the classic case that supports it, because it has created hundreds of thousands of jobs over the past decade or so, yet large numbers of our young people have been left behind. That points to a much more deep-seated problem.

[Mr Sheerman]

That is why I spoke of our experience in the United Kingdom, which has good exemplars of significant improvement, but the best example that I found in Europe was in the Netherlands, which has a much tougher welfare policy than us. It is difficult for someone to get any welfare payment there until they are about 27. If they are not in work, they have to be in education or training, and if they are not in education or training, they do not get a welfare payment. We in this country seem to have accepted over a long period that significant numbers of young people, many of them with low skills, can be left in a shadow land—a marginal existence—on housing benefit and a little benefit for subsistence, and that they can live in this half world as half citizens for a very long time.

During one of my shadow ministerial jobs a long time ago—it was so long ago that I was a deputy to Roy Hattersley—I became something of an expert on crime and criminality. It is fascinating that if young people do not get into crime before they are 25, they do not at all; unless they bump off their partner for the usual reason later on, they do not get into criminality. The sensible policy on deterring young people from crime is to spend money on doing so early on. We can apply the same analysis of our society to unemployment. What we hate most is intergenerational worklessness, where three generations of a family have never known anyone work.

[Margot James]

Will the hon. Gentleman give way?

[Mr Sheerman]

No, I am sorry.

Intergenerational worklessness is a dreadful scourge. We all see it on some of the estates that we represent, and we hate it, so what are we going to do about it?

We have to say, on an all-party basis, that nobody under the age of 25 should be unemployed. We should not let them down in that way. Every young person under the age of 25 should be in work, in training, or participating in a programme; I do not care if we call it the new deal, the new new deal or the Work programme. They should be in a routine of getting up in the morning, going to work and doing something creative, whether it is in the community or helping in hospitals. We have got to the stage where we are moving very quickly towards the participation age rising to 17 or 18. Neither the former Government nor this Government have seriously tackled what young people with a lower level of skills are going to do in the extra year. That is a challenge for those on both sides of the House. I once said that to my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown), but he got very cross with me for pointing it out, and asked what I wanted for these young people. I said that I wanted for them what rich people have—a personal trainer and a life coach—and he thought I was mad, but never mind.

I want to abolish unemployment for those under 25 and to get people out of that routine. I want to get rid of intergenerational worklessness, with a fundamental change in how we allow people to live that half life. My plea is that across the parties we should agree on a programme that gives all our young people the opportunity to live a full, democratic life.

17:22

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to follow the hon. Member for Huddersfield (Mr Sheerman). I think that I agree with most of what he said. I certainly agree that on this issue we need cross-party consensus and not political point-scoring. It is a pity that his Front Benchers did not take note of that in drafting their motion and chose to play politics instead of dealing with the substance.

Whatever our concerns about the performance of the Work programme to date, it beggars belief to suggest that people would have been better off left to their own devices, with none of the support that it has been providing, and that more of them would have found work in the difficult economic climate we have seen over the past 18 months. That is a grave insult to the providers and their employees who have been working hard trying to help people who have been unemployed for a long time. We have to give the programme somewhat more time than its first year before we draw any real conclusions about its success. We can see from the data published by the trade association that its performance is improving, and that is consistent with what I have seen on the ground in my constituency.

[Sheila Gilmore (Edinburgh East) (Lab)]

The problem I have with quoting the additional figures that have emerged from the trade association is that for the past year and a half we have been lectured on the fact that we could not have any interim information about how the Work programme is going because the data had to be properly evaluated and reliable. Yet because the published data do not suit the Government, we are suddenly having all these unverified data thrown at us to tell us that things are not really how we think they are. Why was all this kept secret?

[Nigel Mills]

I am not sure that I am the best person to answer that question. However, when we have a programme that is running for seven years, with people being put on to it for two years, we cannot draw many conclusions from the data in the first few months of its operation. A decent period will have to elapse before we get some reliable data that will have some meaning and can be used to look at trends. I see why we have official data to the end of July this year, but data since then would have more relevance if we also had data from the first three months of the programme.

No Member of this House seriously disputes the need to provide those with most barriers in their way with the additional support that they need to get back to work. Many such people have been out of work for a long time and will need help with serious issues in order to build up confidence and have any chance of getting back to work. To be fair, the scheme of the previous Government towards the end of their time in office was not radically different from that introduced by the current Government. This Government have accelerated the change, introduced a more consistent programme over the whole country and brought the strands of different schemes into one programme, but the direction of travel is not entirely different. In fact, many providers involved with the previous scheme are also involved in the current one. It is not sensible to say that the Work programme is doing the wrong thing and is a terrible idea, and that its support is completely wrong. Where does that leave us? Surely it is not the Opposition’s policy to have no support at all for the long-term unemployed.

[Mr Byrne]

The hon. Gentleman is generous in giving way. Our point is that there is not enough fuel in the tank. I am sure he is as worried as I am that on current performance, the Work programme may not hit its second-year target to get 27.5% of those on the programme into a long-term job. The Opposition motion says that we should start putting more fuel in the tank by providing extra resources for young people.

[Nigel Mills]

One problem of the Work programme is that the year we are looking at contained the second part of the double-dip recession. We all accept that it is hard for anyone to find work in a recession, let alone those who have been out of work for a long time and have the most barriers to overcome. We hope that as the economy gathers strength in the coming year, that will give the Work programme even more chance of success in meeting its second-year targets.

[Margot James]

My hon. Friend draws attention to some of the similarities between the Work programme and what went before. Does he agree that one key difference is the remuneration paid to Work programme providers? They get a £300 attachment fee when someone is referred to them, but do not receive further remuneration until a candidate has been in work for six months. That provides a huge incentive—along with the fact that some applicants will have their benefits docked if they do not co-operate—and makes the Work programme a greater success than what preceded it.

[Nigel Mills]

I am grateful to my hon. Friend. The motion suggests that people would have been better off without the Work programme and with no extra support, but the support it provides is valuable and not entirely different from that provided in previous programmes. Payment by results, which I will come to, provides a far greater incentive to providers to get people back into work and, most importantly, not just to start a job but to find a sustainable position where they can remain for a long time. That is a key part of the programme.

The Work programme also fixed the problem of providers going for low-hanging fruit and getting back into work those who could do so most easily, while not placing quite the right focus on those who were more challenging. Remuneration for the Work programme means there are far more incentives to focus on the harder parts of the cohort.

Like my hon. Friend the Member for Stourbridge (Margot James), I have visited providers in my constituency—A4e and Ingeus—and I have seen their work and how they go about it. Importantly, somebody does not come through the door on the first day and start applying for jobs on the second; there is a long period of working out a person’s needs, what support they have, the training they need, and building their confidence, before they start applying for jobs. One does not expect providers to get people into work in the early months of their referral, which is why there is a problem with the statistics. We are looking at numbers of people who have been in work for six months of a programme that has existed for 13 months during a double-dip recession. The providers might not have even tried to get some of those people into work at the start of the programme—it is not a fair measure. Providers in my constituency are doing great work and the support they provide is valuable. I commend them on that, rather than saying that their work is worthless or worse than nothing.

No one would pretend that yesterday’s results were anything other than disappointing and concerning. We all wish that progress was quicker, and the whole House wants to get people back into work to improve the quality of their lives and for the sake of the taxpayer. However, the Work programme is a seven-year programme that gives individuals a two-year programme, and it is unfair to judge it on the basis of its first-year performance. We should look in a year’s time when the first cohort has spent two years in the programme. Let us look at the outcomes after the full two years, and see how many people are in work at that point.

[Ben Gummer (Ipswich) (Con)]

My hon. Friend is entirely right that the figures are disappointing. I am sure that he, like me, has had successful cases in his surgery. Two people who came to my surgery went through training schemes under the previous Administration—one of them had been unemployed for eight years—but found a job through the Work programme, so it is having an effect in individual cases. It is certainly making an impact in my constituency, as I am sure it is doing in his.

[Nigel Mills]

My hon. Friend reinforces the point that it is utterly unreasonable to say that the scheme is worse than doing nothing.

Providers who cover my constituency have told me that they had only a short time to prepare before they started work. They said they had not worked in the east midlands before, so had not only to find staff, but to build links and form relationships with employers to convince them to take people in more challenging situations. Expecting brilliant results at the start of the programme does not work.

The latest data show that 29% of first referrals from June 2011 have now had a job start, and that 37% of under-25s have had a job start. Those are not terrible results; they are encouraging. In Amber Valley, the results are better than average: 4.2% of those referred have met the target of spending six months in a job. I accept that that is less than the 5.5% target, but it is well ahead of the national average. Amber Valley is generally performing well. Total jobseeker’s allowance claimants are down 21% since the election, and JSA claimants under 25 are down 24%. Claimants per vacancy are down from 6.2 to 1.5. That is not a disastrous situation, but a sign that things are going in the right direction. I sincerely hope it continues—[Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I know a new Member will speak shortly, but could we just have a little quiet so we can hear Mr Mills?

[Nigel Mills]

Opposition Members clearly do not want to hear the truth of my argument.

The Select Committee on Work and Pensions report from last year, which was produced before I was a member of the Committee, gave the scheme a broad welcome, but one concern was the impact on smaller providers that are subcontractors to the main providers. I wholeheartedly endorse payment by results, but it can make things quite hard for organisations that are not large businesses with strong balance sheets, which can fund the gap. Given the delays in the system, some of the smaller providers have found their cash flow squeezed and are struggling to survive. All hon. Members value their innovative ideas and the extra local knowledge they can add to the scheme, so will the Government, after seeing the results, find a way of reviewing how small providers are funded and ensure they can survive the transition period and continue to provide their valuable work?

Overall, there are some concerns with how the Work programme has started. We would prefer the numbers to be a lot better, but there are encouraging signs. The programme can be a success and performance is going in the right direction. I hope that, in a year’s time, we are talking about the great successes of getting the most challenged people—those who have been out of work for a long time—back into jobs, which will improve their lives and the situation for the taxpayer.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Before I call the new hon. Member for Manchester Central (Lucy Powell), I remind Members that there will be no interventions because it is a maiden speech.

17:33

[Lucy Powell (Manchester Central) (Lab/Co-op)]

Thank you very much indeed, Mr Deputy Speaker, for the opportunity to speak in this important debate. It is a huge privilege, if a little daunting, to be making my maiden speech in the House today as the new Member for my home city of Manchester.

I should first like to pay tribute to Tony Lloyd, not just because it is the custom, but because he is a brilliant man and a very dear friend of mine. Tony was first elected to this House in 1983 as the hon. Member for Stretford, taking over as the Member for Manchester Central in 1997 following boundary changes. Through his 29 years’ service as an MP, he always remained absolutely rooted in his constituency and home city, providing a first-class service to his constituents and making a real impact on the quality of their lives by ensuring they got the support, services and investment they so badly needed.

Tony married that local commitment with a distinguished and long parliamentary career, particularly in the field of foreign affairs. He was also extremely popular among his colleagues, becoming the chair of the parliamentary Labour party for six years. It is a tricky position to hold at the best of times, but Tony managed to achieve it under three different party leaders.

Like me, Tony is a proud Mancunian, but I have to say that there was one area on which we disagreed. Thankfully, the passing of the baton from Tony also marks a new era in Manchester: the passing of the Championship from the red side to the blue, and long may City’s reign continue. I know Tony will be sorely missed in this place, but I am sure that the whole House will join me in wishing him well in his important new position.

In preparing for this speech, I also looked back at the maiden speech of Tony’s predecessor, Bob Litherland. Bob was another proud Mancunian and he was also elected in a by-election, just after the 1979 general election. In his maiden speech, like me he felt compelled to speak early on in a debate on the effects of the Tory Government’s Budget, as it had been a big issue in his campaign. He said:

“The people of Manchester Central will be hit hardest, because they are the people who need the facilities and who cannot afford any more cuts to their standard of living.”—[Official Report, 24 October 1979; Vol. 972, c. 471-4.]

His words would have been just as relevant in today’s debate.

As with by-elections today, turnout was relatively low in Bob’s election. However, the turnout in my election, Mr Deputy Speaker, I am sorry to say, was very low indeed. There were a number of difficult and complicated factors at play, but still, we in this House should not be satisfied with falling voter engagement and growing apathy. The previously lowest turnout in a by-election was in the Leeds Central by-election of 1999, a record that my right hon. Friend the Member for Leeds Central (Hilary Benn) was quick to relinquish when he phoned to congratulate me the next day.

As the granddaughter of Irish immigrants on one side and a mining family on the other, my family are hugely proud of my achievements here today. I was born on the day of the second general election of 1974. My dad would not take my mum to the hospital until after our local polling station in Moss Side had opened, where he duly declared that my mum was in labour and voting Labour. Some thought this marked my future destiny, but my beliefs and conviction were actually shaped by the fact that it would be nearly 23 years before Labour would next win a general election.

Growing up in Manchester in the ’80s, I was surrounded by social injustice and lost opportunity. At school, we shared old and poor resources, leaving many pupils behind. Our city was dying, and to succeed people needed to get out of there, and fast. Members of our families died prematurely, or suffered unnecessarily. Too many of my school friends lived in cramped and poor homes.

The Manchester of today is a very different place indeed. An urban renaissance, begun by my hon. Friend the Member for Blackley and Broughton (Graham Stringer) when he was the leader of the council and then realised by Sir Richard Leese, was accelerated by the investment and measures brought in by the previous Labour Government. Manchester Central now boasts one of the best hospitals in the country, the Manchester Royal infirmary; all our secondary schools are new or rebuilt, raising attainment significantly; we have a network of Sure Start centres, which we are keeping open; housing stock has been transformed with major redevelopments in Beswick, Ardwick, Ancoats and the city centre; areas formerly associated with gangland culture, such as Moss Side and Hulme, are unrecognisable and fast becoming highly desirable places to live; and, perhaps most importantly in the context of this debate, we have a city that is growing, attracting new businesses and residents, where public and private work together to generate jobs and growth.

Nowhere epitomises that partnership more than the Sharp project in Newton Heath. In the shell of an old factory now sits a buzzing and successful digital media hub, housing tens of digital start-ups. Sharp has recently announced a major expansion into West Gorton, creating 400 new jobs, as well as a new apprenticeship scheme for local young people. Cities around the world are trying to emulate this success. The private sector alone has not, and could not, ever spontaneously create such an environment. It was local political leadership, working in partnership with the private sector, that has delivered jobs and growth.

It is this vision and partnership that ensures Manchester pulls above its weight in other areas too. Manchester’s audacious bid for the Olympics, followed by a successful bid for the Commonwealth games in 2002, has left a lasting legacy for my constituency, and indeed for the rest of the country. The national cycling centre, a world-class aquatic centre, sports city and, now, the only indoor competition BMX track in the world are all in Manchester Central. They are all used by local young people and they all contributed to Britain’s recent success in the Olympics.

For all that transformation and recent achievement as a city, however, challenges remain and, I fear, might get worse over the coming years. A child born in Manchester Central is still likely to live five years less than the UK average; 50% of children in Manchester Central live in poverty; long-term youth unemployment is high and rising; too many families are in underemployment with not enough hours to make ends meet; wages are stagnant and bills getting higher; access to quality, affordable child care is getting harder; the vulnerable and disabled are seeing their services and support cut; and places such as Collyhurst, Clayton, Newton Heath and Openshaw are still in desperate need of regeneration.

In summary, Manchester Central has the third-highest level of child poverty in the country; the fourth-lowest life expectancy; and the 10th-highest level of unemployment in the UK. And yet Manchester received the fifth-worst local government settlement last year, resulting in £170 million of cuts over two years, compared with no cuts in other much more affluent authorities. It is this sort of unfairness that makes my constituents really angry. But, for all these depressing statistics, Manchester Central is a fantastic constituency with many diverse communities, all of which are united in their pride for the city and themselves. They do not want handouts or sympathy—just a fair shot and a fair playing field. Manchester has great culture, sport and history, too, and I am sure the whole House will agree that Manchester Central has the best conference venue in the country.

So, next time my hon. Friends are in Manchester, I recommend they venture out of the secure area to explore what Manchester has to offer: cafes and bars in the northern quarter, Chinatown, the gay village perhaps, museums, galleries, shops, music and much, much more. I am incredibly proud to be the Labour and Co-operative Member of Parliament for Manchester Central, the modern-day home of the co-operative movement, and I am proud to be Labour’s first-ever woman MP for my home city. I will do my very best to stand up for Manchester and all of its communities in the House and beyond. Thank you very much.

17:42

[Guto Bebb (Aberconwy) (Con)]

It is a great pleasure to follow the maiden speech from the hon. Member for Manchester Central (Lucy Powell). I agree with much of what she said about Manchester—I can certainly attest to the fact that the city has been renewed dramatically—but it is fair to say that my son would not support the same football team as she does, although the fact that he supports a team in Manchester, rather than Liverpool, would probably go down well with the Manchester electorate.

It is a great pleasure to contribute to this debate. This issue constantly comes back for debate and is rightly being scrutinised, because the Government’s investment in the Work programme is probably among the most important things the coalition is doing. It is right that the Opposition scrutinise how the Work programme operates, but this debate is premature and the motion is not based on any reality that I recognise. I certainly want to challenge some of the assumptions—lazy assumptions, I would argue—behind the debate.

As the Secretary of State made clear, the Labour Front-Bench spokesman provided no context for the debate. I reiterate that, despite the difficult economic circumstances that the coalition is dealing with, we have seen sustained employment growth. We have the highest number of people employed in this country ever, yet we get no recognition of that from the Opposition. I almost think they begrudge employment creation in the private sector under the coalition. Nothing typifies Labour’s behaviour better than the way it constantly dismisses some of the jobs being created by the private sector. As I have said before, if I ever hear another Labour Member talk about jobs that are “nothing more than shelf-stacking”, I will finally blow my top.

[Nick de Bois]

Is it not also worth highlighting the fact that Jobcentre Plus has a successful record of getting those who have been employed for less than one year into work? Not only is that an achievement that we should celebrate, but it has the effect of leaving a tough challenge for those in the Work programme who are finding it hardest to get placed.

[Guto Bebb]

That is an important point. I have visited Jobcentre Plus in my constituency to pay tribute to the work it is doing. Jobcentre Plus has been successful in getting people back into employment quickly, which means that the Work programme providers are not dealing with the low-hanging fruit, but with difficult-to-place individuals who need support and guidance over a longer period than Labour is willing to admit. It is also important to say that a job is not just a job, but an opportunity to change one’s lifestyle, gain respect in one’s family and community, and show that one can make a contribution.

[Jane Ellison]

The rather dismissive attitude towards jobs in retail that my hon. Friend has described drives me to distraction as well, particularly as I am co-chairman of the all-party retail group. Retail is an industry in which a great many people have started at the bottom and, from that chance on the shop floor, have risen to the very top through their application and talents. There can be no more meritocratic industry, so he is quite right to castigate the Opposition for being so dismissive.

[Guto Bebb]

Indeed. My experience of going around Tesco’s partnership stores, for example, has been quite inspiring. I found somebody who had been unemployed for eight years and was given an opportunity to work in the bakery section; 18 months later she was the manager, and famously said, “They’ll be carrying me out of here in a box, because I’ve been given an opportunity.” That is the reality of what creating a job and helping people into a job is all about.

[Sheila Gilmore]

The points the hon. Gentleman makes about the importance of employment are clearly correct. The reason I have any criticism of jobs in the retail sector, for example, is not because they are not important jobs, but because people are increasingly being offered short-hours jobs, on zero-hours contracts and with little security, which simply does not work for those trying to organise child care. That is the problem.

[Guto Bebb]

I disagree on the whole. Quite often the current restriction means that when people go over a certain number of hours, they are penalised. That will be dealt with when we introduce universal credit. What I have found is that there is a feeling out there that people are still being penalised for wanting to work more. Universal credit will certainly deal with that, which is an important change that is required.

We have heard a lot in this debate—from the Opposition Front-Bench spokesman and some Opposition Back Benchers too—about youth unemployment. Obviously it is absolutely problematic if too many young people are not working, but between 2004 and 2010, youth unemployment in my constituency of Aberconwy increased by 192%. If I recall it correctly, I think the Labour party was in government at that point.

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

Does my hon. Friend agree that a number of councils out there are working in partnership with Jobcentre Plus? They include Medway council, which reduced youth unemployment from 1,600 to 1,200 between April and October. That clearly shows that where there is the will, the Government’s policies, with local councils working in partnership with Jobcentre Plus, are reducing youth unemployment.

[Guto Bebb]

Indeed, and that example should be replicated in other parts of the country, where partnership working can make a difference.

Despite a 192% increase in youth unemployment in my constituency of Aberconwy during the last six years of the Labour Government, we have seen a 21% reduction in youth unemployment since this coalition came into play. Twenty-one per cent is not enough—the fact that I still have young people not working in my constituency is unacceptable—but we should recognise the success in getting young people back into employment. Every young person who is not claiming unemployment benefit or lying around doing nothing is a success story as far as I am concerned. When Labour Members talk about youth unemployment, it is important that they consider their performance in government.

However, I suspect that this debate is more about the Work programme than about the general context. I have talked about the general context, but it is important to bear in mind that the Work programme is the Department’s flagship programme, and a lot rests on its success. My concern is that this debate is premature, because it is difficult to look at a long-term programme—which is looking at paying people based on their performance over the long term, not the short term—and say after a year that it is failing. Even going on the figures that came out yesterday, it looks as though the programme is doing exactly as it was supposed to be doing. They show that 56% of Work programme starters in June 2011 are no longer on benefit, that 30% of them have been off benefit for 15 weeks and that 19% have been off benefit for 26 weeks.

[Paul Flynn (Newport West) (Lab)]

The results that we heard about yesterday cannot be compared with anything else that ever happened. It is probably true that if the Government did nothing at all, there would be a better outcome. Can we therefore conclude that the best we can expect from the Government for the next two and a half years of their miserable existence is a long period of inactivity?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. We have a lot of speakers to get in, and we need shorter interventions. Otherwise, Members are going to be disappointed.

[Guto Bebb]

The hon. Member for Newport West (Paul Flynn) seldom sees the bright side of life. The truth is that I am not willing to see 31,000 job outcomes so far as immaterial. That is something that we should be proud of. To be perfectly frank, if that is failure, give us more.

The Opposition seem unwilling to accept that we should be concerned about value for money for the taxpayer. Obviously, I am not going to mention the comment made by the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) about our financial position, but the Government should be aware of getting value for money for the taxpayer. The figures that I have here show that some of the previous employment support projects have not been particularly successful in that regard. The flexible new deal cost £7,500 per job created, and £770 million was spent. The employment zones cost £993 million, with an average spend of £7,800 per job. The new deal for young people—which was successful, it has to be said—cost £3,300 per job created. At the moment, the Work programme is coming in at about £2,000 per job created. I think that that is a sign of success. Even though it is still premature to look at the outcome figures, we should take a great deal of comfort from the fact that it is giving that level of value for money.

The proof of the pudding is in visiting the Work programme providers in our own constituencies and localities. I have visited the providers operating in the county of Conwy, and I was very encouraged by that visit. I found teams of dedicated members of staff, but an organisation that was taking a huge financial hit because of the performance-related concept that the Department for Work and Pensions insists that the Work programme providers deal with. Interestingly, however, none of the providers that I spoke to suggested that they had any intention of leaving the programme. That was because they could see that they were going to be successful as time moved on. Indeed, separate data published by the Employment Related Services Association, the trade association that speaks for the Work programme providers, show that job starts have increased in the months since yesterday’s figures were collated. That is reinforced by what I have been told in my constituency.

Nothing gives a feeling for the importance of the Work programme better than talking to the participants. They feel that they are finally being taken seriously. They are getting support in areas such as presenting themselves and putting together a CV. Even more impressively, they are getting support with transport to take them to job interviews and training opportunities.

On the visit that I made, I was also impressed by the flexibility of the Work programme to deal with the local issues affecting that particular part of the world. One of the key issues for the Work programme providers in rural north-west Wales is the need to be more flexible in supporting people into self-employment. The original contract that the provider signed included a comparatively low number of members of staff dealing with self-employment. However, it became apparent in no time at all that self-employment was going to be a key deliverer of outcomes in a constituency such as mine, and the contract was flexible enough to allow the provider to up the number of people being supported into self-employment.

A great example of partnership working in that context was the business support structure of the Labour Welsh Government giving its full support to the Work programme providers who were helping unemployed people who wanted to start their own businesses. So the flexibility is there, and the outcomes will potentially be there in due course. What I am seeing is work in progress and a programme that is aimed at ending our long-standing dependency culture. That needs to be targeted and dealt with.

When I visited these Work programme providers, the most impressive thing was that a number of the job outcomes highlighted on the whiteboards were job outcomes in local hotels and local restaurants. That is important in a constituency such as mine, which is heavily dependent on tourism, because previously over the past five or six years—and certainly from 2003-04 onwards—the jobs created in the leisure and hospitality sector in my constituency were being filled by hard-working individuals from eastern Europe. The wonderful thing about the Work programme is that we are seeing evidence that those jobs are now being filled by people living in my constituency and being willing to take the opportunity to work.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. We are going to have to reduce the time limit to seven minutes, as I want to allow all Members to participate. It would be helpful if we had fewer interventions.

17:55

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

It is a pleasure to follow the hon. Member for Aberconwy (Guto Bebb) and more especially to follow the newly elected Member, my hon. Friend the Member for Manchester Central (Lucy Powell), who made a magnificent speech, in sharp contrast to the ragbag of rubbish that we heard from the Secretary of State, who again painted the false picture that all the problems were inherited from the Labour party and that everything is hunky-dory now.

The reality is, of course, that under the previous Labour Administration we had sustained growth to 2008, after which there was a financial tsunami, yet we kept growth going through the fiscal stimulus. Two thirds of the deficit in 2010 was due to the banking community and only a third was due to pump priming, which kept us on the move.

What did we see then? The Conservatives arrived, deflating consumer demand by immediately announcing half a million job cuts—and we have seen virtually zero growth since. Growth is the prerequisite to getting the deficit down. It cannot be done simply by cutting and cutting, particularly by targeting the most savage cuts at the poorest, which is precisely the strategy of the Tories and their Liberal accomplices.

We have heard of figures purporting to show more people going into work, but when they are analysed, they show that the number of people in part-time work is going up. There is a transition from full-time to part-time work. The people with the least are getting less—again, deflating consumer demand—and people with less spend more of their income. In the time available, I want to answer the question how the measures for the restructuring of the welfare state impact on the effectiveness of the generation of jobs, growth and getting the deficit down, and how they impact on fairness, by hitting those who are least able to afford it.

Some of the most profound changes affect housing benefit. Particularly despicable, of course, is the reduction of housing benefit for people under 25, 45% of whom are with children. The question is whether this reduction in housing benefit, sometimes thrusting people into homelessness, helps or hinders them from getting a job, so that they can care for their family and provide tax for the Exchequer—or, rather, does it throw them into a situation from which they cannot get work again because they are, frankly, out on the street?

A couple in Wales were highlighted recently. The man had worked since he was 15 for nearly 10 years continuously, but he now faces six months of unemployment. His partner is now redundant, so under the new legislation, they face homelessness. What chance will they have to secure employment and what sort of springboard for life chances will their child have? Very little, I would suggest.

[Jim Shannon (Strangford) (DUP)]

Is the hon. Gentleman experiencing in his constituency, as I am in mine, a greater demand from constituents for applications for housing benefit at a time when there is less money to go round? Does that not highlight the issue for the Government? They must provide more money for benefits and for housing benefit in particular.

[Geraint Davies]

We are seeing the perverse irony that the welfare bill is going up and up, with more people going into dependency, because the environment for job creation is not there. Meanwhile, the Government’s one-string solution is simply to give people less and less, when the focus should be on how to create new jobs, so that we can help people to get and sustain a job.

Another example—other than the targeting of under-25s who tend to have children and the escalation of child poverty into intergenerational poverty—is the empty bedroom tax. This is another horrendous idea whereby poor people—they are poor by definition as they are on housing benefit—who have an empty bedroom will lose about £7.50 a week, or £15 if they have two empty bedrooms. For example, a couple with two children, one of whom wants to go to university or get a job, will clearly have an incentive to say, “Don’t go to university,” or “Don’t leave home to get a job”—“Don’t ‘get on your bike’”, as Lord Tebbit would have it—“because, if you do, we shall end up being taxed £7.50 a week.”

A man who came to my surgery a couple of weeks ago told me that he was receiving disability living allowance, that he had a second bedroom—he used it for painting, as it happens—and that he did not have a job. Indeed, he was not a person who could have got a job. After he had paid his utility bills and all the rest, his disposable income was £20 a week. He will now lose £7.50 as a result of the bedroom tax, and next April the Government will cut the council tax rebate by 20%, which amounts to about £5 a week. His disposable income will then be down to £8 a week, which will have to cover his food, clothing and leisure.

This despicable and, in my view, socially criminal activity generates very little money from those who can least afford it, and one of the by-products will be mass homelessness. I have been a leader of a local authority, and I know that local authorities usually build family-size housing. Someone living in a two-bedroom flat or a three-bedroom house that ceases to be full when the children leave home will lose housing benefit and will then be evicted if he or she goes into arrears. Where do such people go when a local authority has not built enough one-bedroom accommodation because it is supposed to cater for families?

What if a child wants to come back from university, or to visit the family? What if there is a split in the family and the child needs to move from one place to another? The bedroom tax will cause massive disruption to communities in areas like mine throughout the country and disfigure the opportunities for us to create new jobs and get back on a sound track towards economic recovery.

[Andrew Bridgen]

Will the hon. Gentleman not concede that better utilisation of the social housing stock and an increase in its capacity will give us an opportunity to reduce homelessness?

[Geraint Davies]

I have been the housing chair for London and for Croydon. I know that it is possible to devise strategies involving incentives to encourage people to move to smaller homes—and, of course, as people die over time, housing is recycled in any case—but the suggestion that a group of people in social housing should be evicted once their children have grown up and that, because suitable housing does not exist in their own communities, they should be moved around is not only despicable but completely counter-productive. It is economically insane as well as socially immoral.

[Sheila Gilmore]

I am sure my hon. Friend agrees that this is not an attempt to ensure that housing is distributed more evenly. It even applies to people with disabilities. Couples who have to sleep apart for medical reasons will be suddenly told that they have too big a house. It is a draconian measure.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. There is a danger that those who wish to make a speech later will not be able to do so. I am sure that the hon. Lady understands that if she does not have an opportunity to make a speech herself, it will be her own fault.

[Geraint Davies]

As has already been said, the tax affects those with particular problems such as disabilities. If one half of a couple is ill with flu and, because the couple are allowed only one bedroom, that person infects the other one, it will not help the other one to work. None of this has been thought through. The idea seems to be that such people live in council houses and receive benefit and that the Government will sort them out by cutting it, but what they are doing is preventing them from working and making their contribution.

The Government also say, “Let’s cut working tax credit.” Working tax credit was an ingenious device. If I were starting a small business—indeed, I have started and run small businesses—I might be able to give someone a job paying £12,000 a year because of the way in which the business worked, but that person might not be able to afford to work for less than £15,000 because of, for instance, child care costs. The Government stepped in and stumped up the difference. What did we end up with? A growing company and a job, instead of a company that was not growing and a person stuck at home. That is the economic logic of working tax credit, but it is being cut, so part-time workers are losing £3,750 a year if they do not work for 18 hours and go down to 16 hours, as there is not enough work to do. We need to evaluate keenly whether some of these nasty cuts deliver economic disincentives to working and are therefore counter-productive in getting the deficit down.

There are ways ahead, including targeted investment involving universities and various job programmes. Other Members have spoken of the effectiveness of the current scheme, but, as I mentioned earlier, the Prime Minister has confirmed the statistic in our motion, namely that only 19,000 people out of 800,000—2%—have gone into full-time work. That is in sharp contrast to what the Secretary of State said earlier, so someone must be wrong. We should refocus, by making sure that the changes do not disrupt job creation and that they are fair and put us back on track for a strong economy and a fair society.

18:03

[Priti Patel (Witham) (Con)]

I welcome this debate, as it gives us an opportunity to highlight the positive steps that the Government have taken to get people off benefits and back into work. It is extraordinary that the Opposition should want to hold this debate given that many of the problems that the Government face in tackling unemployment are due to the Labour party’s failings when it was last in power. Labour left a legacy of more than 3 million workless families, with youth unemployment of about 1 million—the figure rose by about 40% from 2004—and that was when the economy was growing. Millions of people had never worked as Labour confined people to the scrapheap and kept people on disability and incapacity benefits even though they were capable of working. Labour also imposed heavy tax and regulatory burdens on businesses, which stopped them employing people and creating jobs.

I am sure that we all remember the following remarkable statement by the previous Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). Once upon a time, he spoke about British jobs for British workers, but his policies—especially on open-door immigration in respect of eastern Europe and accession states—effectively left a generation of young people struggling to compete with their international competitors in our domestic labour market. That policy denied hundreds of thousands—if not millions—of British people jobs.

Labour also left that generation of young people struggling to compete with their international competitors because our school standards fell. In 2000, England was ranked 8th in the world for maths, 7th for literacy and 4th for science. By the time Labour left office, we had dropped down the international league tables to 24th for maths, 17th for reading and 14th for science. Education is very important for young people’s job prospects and this country’s ability to attract inward foreign investment and compete for jobs internationally, and Labour’s neglect of education has left Britain far behind in the global race for jobs, investment and growth. The current Government are trying to turn that around.

I applaud the Secretary of State for his commitment to changing the culture in this country. Ministers are putting an end to the “something for nothing” culture that blights our economy and saps our hunger to compete in the global race. It also undermines many of our communities and does so much to damage aspiration—the concept of social mobility and moving onwards and upwards in life. Over time, reforms to education and welfare will improve the prospects for young people who are currently trapped in challenging situations.

My constituency has some areas of substantial deprivation and poverty, yet youth unemployment has fallen by 6.6% in the last year—and it would be nice to hear a few positive words of congratulation from Opposition Members on such achievements. We should do whatever we can to support our young people to get into employment and to enhance their skills, and we should create opportunities for them not only in the labour market, but through apprenticeships and other innovative schemes with small businesses.

Many young people in my constituency are securing apprenticeship places, and the Government should be congratulated on doubling the number of adult apprenticeships to about 650,000 this year, from a figure of 300,000 inherited from the previous Government. If we include apprenticeships for 16 to 18-year-olds, there will be close to 900,000 apprentices in this country this year. Apprenticeships help people to learn new skills, to get a foothold in the labour market and to increase their confidence by having work experience.

Unemployment is, of course, still too high. No one likes the fact that it is high, but we should remember that the Government are also reducing the number of economically inactive people, by helping to get those who were left on the scrapheap by Labour into meaningful employment. Even in these challenging economic times, Britain is expanding its work force and businesses in my constituency are eager to grow and create more jobs, and they are doing so.

About 83% of jobs in my constituency are based in small and medium-sized enterprises—a figure considerably higher than the national average. Those firms are local wealth creators, and they will do their utmost to support local jobs. Many of them are opening their doors to young people, again giving them the opportunity to get off benefits, get work experience and increase their skills. That is why it is so important that the Government continue to focus on getting rid of business regulation, so that small businesses have a greater opportunity to invest and grow.

Unlike the Labour party, which tried to force small businesses to pay for the deficit by increasing all sorts of taxes and regulatory burdens on them, this Government understand small businesses and know exactly what needs to be done to cut red tape costs, which are still about £17 billion a year. That is equivalent to the cost of Crossrail or almost two Olympic games; it is 11 times the apprenticeships budget.

I urge the Government to continue with all the positive work that they are doing. I know that Ministers value the private sector and the role that it plays in supporting employment and will do more in the months ahead to support the sector. I welcome the steps that the Government are taking to create jobs and enable our young people and unemployed to move onwards, off benefits and back into work. The employment prospects of my constituents are far greater and higher now than they would have been under a Labour Government.

[Several hon. Members]

rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. To ensure that all Members can participate in this debate, I am reducing the time limit, with immediate effect, to six minutes.

18:11

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

As others have said, the Work programme builds on a direction of travel that those on both sides of the House have been pursuing for a number of years. As my right hon. Friend the Member for Birmingham, Hodge Hill (Mr Byrne) said, the difficulty is not particularly with the concept; it is that there simply is not enough investment in the programme to produce the outcomes we need. The problem is that a lot of over-simplification of the issues that long-term workless people face means that we are failing to address some of the real drivers of worklessness and are allowing ourselves to be carried away by some incorrect and pervasive myths.

The first myth, which I am sorry to say has been repeated again this afternoon, is about a culture of worklessness and three generations of households where nobody has ever worked. These households do not exist; researchers have gone out looking for them and they are not there. The hon. Member for Witham (Priti Patel) looks doubtful, but what is there are households that have experienced, over the generations, sporadic and insecure employment. As Joseph Rowntree Foundation research carried out in 2010 by Teesside university has shown, there is no evidence whatever of a pervasive culture of worklessness among these households. Actually, the opposite is the case; many of the people now accessing the Work programme are and have always been desperate to work, and they have a history of employment, although it has not been sustainable employment. It is really important that we address the true underlying causes of worklessness.

Secondly, we recognise that skills are important in enabling people to access employment and to progress at work, but it is important to recognise that when that low-income group of workless people move into work, skills are not particularly well correlated with a long-term improvement in their incomes and do not predict particularly strong labour market success for that group. A lot of difficulties remain in respect of how skills strategies do not improve people’s labour market prospects. Some of the initiatives being taken forward by the Government are going to miss the mark. Too many apprenticeships are being offered at level 2, and we need to increase access to apprenticeships at higher levels. We are seeing a reduction in employer levels of training—they are down to low levels not seen since 1996. Poor-quality jobs also inhibit the demand for skills. Even if we upskill our work force, the skills investment will be wasted if the skilled jobs are not there for them to do. So one thing we have to invest in is the leadership and entrepreneurial skills of those who start up businesses and create jobs.

It is also important to understand that different groups in the workplace and in the labour market experience different barriers and obstructions to progressing at work. The Work programme has proved uneven in how some groups have done better and some have fared worse; interestingly, women and lone parents are shown to be doing quite badly in these early Work programme figures. That contrasts with a very strong record of success on lone parent employment under the new deal for lone parents offered by the previous Government. It is also deeply concerning that we still have an alarmingly high rate of unemployment among young black men—twice the rate among young white people—yet the Government are determined that the Work programme will be, in the words of Ministers, “colour-blind”. No specific measures will be taken to address the particular characteristics that affect that hard-hit group.

Equally, it is of concern—the hon. Member for Aberconwy (Guto Bebb), who is no longer in his place, referred to this—that many of the new private sector jobs that are being created are part-time jobs. Some people prefer part-time work, but a large proportion are unable to access the full-time work that they want.

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

rose—

[Kate Green]

The Minister clearly has a figure that he wants to offer me and I will be interested to hear it. I have heard reports just this week that in one workplace, employers are refusing to extend hours of work and are holding people to part-time contracts because they know that they do not have the resources to pay more.

[Mr Hoban]

As the hon. Lady is so keen on evidence-based policy making, let me point out that the last unemployment figures demonstrated that 80% of the people working part time wanted part-time work, as it helps them get back into the labour market after years of caring for people and being off sick.

[Kate Green]

That might be the case, but the Minister must also recognise that 40% of the new private sector jobs that have been created have been part time. He needs to be confident that that part-time work will lift families out of poverty, because far too often the evidence suggests that it will not. It certainly will not do so under the newly structured universal credit, as the rewards for working will be for one full-time breadwinner earner, reducing the opportunities for a second member of the same household to undertake the part-time work that the Minister is suggesting is a stepping stone into more work. There will be very little incentive for people to take the part-time work that improves their labour market prospects and it is to be regretted that he is not grappling with that point.

We still have a real issue with pay in the labour market and gender segregation in the workplace. The apprenticeship figures over the past few months show that women are still going down the traditional routes of care, business administration and retail, where pay is lower, and that men are more likely to go into information and communications technology, construction or engineering, where pay is typically higher. We have heard very little today about how apprenticeship strategies will be developed to widen access at a higher level and to ensure much more diverse participation in industry sectors that offer the best prospects of work and pay.

Finally, we have all been guilty of focusing too much on what we might call the supply side of the worklessness problem, as if the difficulty was that individuals needed help to be got into work. We have not considered the demand side nearly sufficiently. The problem is not a lack of willingness to work, related to what the individual seeks to achieve; the problem is that the jobs are not available. They are not available at the rates of pay that enable people to support their families, in places that people can travel to and at the hours that match up with domestic and caring responsibilities. Also, frankly, they are often not permanent, which means that people repeatedly fall in and out of low-paid and insecure work. That is the labour market failure we ought to be tackling and that I am afraid the Work programme is so far failing to address.

18:18

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

I share the Secretary of State’s incredulity that the Opposition would choose to debate these issues on an Opposition day, since they have no credibility at all. They snipe from the political sidelines despite the fact that the Government have created more than 1 million private sector jobs in just three years—twice as many as the previous Labour Government produced in 13 years.

The Opposition seem also to have forgotten the terrible legacy that they left, and they should once again be reminded of a few of the facts. For instance, in their 13 years in government in arguably favourable economic conditions—the boom before the inevitable bust—the number of households in which no one has ever been in work doubled to 350,000. That legacy will take many years to rectify, as children in those households will have no working role model and will probably come to believe that not working is the norm and that it is normal to subsist on benefits. As a Member of Parliament, there is nothing more depressing than visiting a school and asking a young child what they want to do when they finish school, only to be told, “I’m going to sit at home and watch television with my dad.” I never want to hear that again; it makes me want to weep.

Almost 2 million children are growing up in homes where nobody works. The UK has one of the highest proportions of workless households in Europe, and as I have pointed out, the working age welfare budget increased by a shocking 40% in real terms in 13 years of Labour government. That is another area where the Opposition failed to fix the roof while the sun was shining. However, we now have a Government who are determined to tackle the welfare dependency that developed under the previous Government and oversee the creation of sustainable, private sector jobs as we work to rebalance our economy. The Opposition do not want to hear the good news about employment statistics, but despite their sniping, real progress has been made. Some 1.2 million jobs have been created; employment is up by a net 750,000; and there are more people in work than ever, including more women employed than at any time in our country’s history.

One statistic that the Government should be particularly proud of is the fact that more than half a million people started an apprenticeship in the past year. In my constituency of North West Leicestershire, there were 420 apprentice starts in 2009-10, but 940 in 2010-11—a growth rate of 124%. I would like to mention the excellent work undertaken by community groups and charities to boost apprentice numbers. In my constituency, Whitwick Community Enterprises has undertaken sterling work, reaching out to young people who are not even classified as not in employment, education or training—they have slipped under the radar altogether—giving them life skills in preparation for their return to full employment. I am delighted that that group has successfully applied for Government grants, which means that even more people in my constituency will be given the opportunity to learn skills for life. It should be extremely proud of that.

Opposition spokespeople have discussed the Work programme, and what they perceive as a lack of success. According to the Employment Related Services Association, the industry has helped 207,831 people back into work since the Work programme was introduced, and 29 in every 100 people who have gone on the programme since June 2011 have been supported into a job. Indeed, every month, more than 20,000 people are finding jobs through the Work programme, and the figures improve month on month, as many of my colleagues have said.

Many people would suggest that the Work programme is the biggest and most ambitious scheme of its type in the world. It is, and we should be positive about it. According to the Employment Related Services Association, the official statistics released by the Government yesterday represent a limited snapshot of performance in the early months of the programme, bearing in mind that it has been running for only a year. For someone to qualify as undertaking fixed employment they have to be on the programme for six months and employed for six months. Very few people fit those criteria, but I am assured by the providers that there is more good news in the pipeline.

The Work programme has helped 64,601 people into work. Over that period, unemployment fell by 49,000, so it is difficult to argue that it has not had an impact in reducing unemployment. I would have liked more time, but it was Labour that proposed the jobs tax—the increase in national insurance—which we reversed. It was under Labour that youth unemployment increased by 40%, and half a million people were left on benefit facing marginal tax rates of over 80% if they found work. The Opposition are as credible on welfare reform as they are on the economy: no apologies, no new ideas, and still nothing to say.

18:24

[Mr David Lammy (Tottenham) (Lab)]

I am grateful for the opportunity to speak in this debate and to follow my good friend, my hon. Friend the Member for Manchester Central (Lucy Powell). There are fewer and fewer Members of Parliament who come from their constituencies, and many people will look on her maiden speech with tremendous pride. You will be familiar with the St Pauls area of Bristol, Madam Deputy Speaker, so you will know that there is great affinity between areas such as Moss Side, St Pauls and, indeed, Tottenham.

Last week, together with my right hon. Friend the Member for South Shields (David Miliband), I held an event with chief executives from the voluntary sector in north London. It was a jobs summit in which the London boroughs of Waltham Forest, Haringey and Enfield came together to discuss the urgent issue of unemployment in our areas, what we could do and what the voluntary sector could do and is doing. We talked, for example, about the Haringey jobs fund, where Haringey council itself is providing apprenticeships and subsidising jobs in a similar way to the future jobs fund that we ran when we were in government.

We also got down to neighbourhood level and looked at what Waltham Forest is doing with its Going the Distance initiative with problem families in that borough, working with families whose young people are caught up in gang violence. The aim is not just to deal with former gang members, but to help parents into employment in such communities.

We were conscious when we got together that we were meeting in Tottenham town hall which, throughout the 1980s and 1990s, had emblazoned on the front the figures for unemployment in my constituency. It is important to recognise when we have these debates in the House that there are many constituencies around the country that have seen successive appalling levels of unemployment, particularly youth unemployment, over many generations. I recall the deep recessions of the early 1980s and the recessions of the early 1990s that scarred so many in the community in Tottenham and in many communities across London.

I do not want to doubt the sincerity of Members on the Government Benches, who must recognise the urgency of youth unemployment. I particularly do not want to doubt it because I have worked cross-party with the Secretary of State on these issues, but we must be very concerned that, since the Work programme began, the figure for long-term unemployment in London has risen by 30,000. If we look at young people in London, the figure has risen by 7,000. That is an increase of 420% since the Work programme began in our city. My constituency is one of those that still has high unemployment, fluctuating between eighth and ninth in the country. It is deeply unsatisfactory that the Work programme has benefited only 110 people in Tottenham, or 2.7%.

We cannot afford to have young people long-term unemployed, and often their parents long-term unemployed, in a constituency such as mine. We should take no great comfort from the zero-hour contracts that are being handed out, which do not allow people to budget for next week, for the future or for their benefits. That is causing chaos and hardship in our communities. We should not take comfort either from apprenticeship figures that are massaged by the number of people over 25 who are put on to apprenticeships.

When we look at the numbers, we see that a fifth of apprenticeships are in the retail sector, a third are in administration, and some do not last longer than 15 weeks or so. Are they really the apprenticeships that we understood them to be? The number of apprenticeships in London in construction is falling. The number in engineering is disappearing. Much of this goes to the heart of what growth is meant to be in our economy, and we should not take great comfort from the fact that we are, in effect, asking the retail sector to take up the slack because we are not doing the hard work to identify where growth is to come from in Britain.

We should also be deeply concerned about the number of people who are effectively the working poor—6 million at the last count, who are working, often on those zero-hour contracts, often in temporary or casual employment, who are not able to make their way and certainly do not have a living wage to provide for their family.

Two and a half years into this Government, we now have some data coming forward, and Opposition Members are genuinely concerned, because the scars are deep, and I say that as an MP who has seen those scars over successive generations. My hon. Friend the Member for Manchester Central, who made her maiden speech, will be all too aware of the repercussions in Moss Side if we do not get this right on this attempt.

[Several hon. Members]

rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. The winding-up speeches will start at 20 minutes to 7. I will divide the remaining time equally between the two Members who are yet to speak, which means they have five minutes each.

18:30

[Ian Lavery (Wansbeck) (Lab)]

I will obviously be very brief, Madam Deputy Speaker—I have no choice now.

Yesterday’s report on the Work programme was very revealing, and my constituents are absolutely horrified by the statistics on Wansbeck. The coalition’s flagship Work programme has created fewer jobs than would have been created had no programme been in place at all. Members across the House have scorned that finding, but it is an absolute reality. Only two people in every 100 who have been referred to the programme have actually gained employment. That is absolutely astonishing—astounding, in fact.

Yet the Secretary of State said yesterday and today that the results are excellent and that the scheme is on track. The Minister of State, Department for Work and Pensions, the hon. Member for Fareham (Mr Hoban), said yesterday that we should not worry because the information used in the report gave only a snapshot and that it is against the backdrop of growth that was much weaker than expected. Well, whose fault is that? It is the Government’s fault. We need a plan B, or C or D, whatever we want to call it.

In Northumberland, one of the biggest counties in the country, only 80 of the 4,570 people in the Work programme have found a job. That is 1.75%. And the Government say we are on track. Goodness me, what would happen if we were not on track? Perhaps the Minister will answer that simple question. In Wansbeck we have very few job opportunities, a lack of new business start-ups and increased levels of bankruptcy. In fact, the constituency has the highest rate of bankruptcies in the country. Many businesses are doing what they can and working very hard indeed, and I say well done to them, but we have huge problems. We are still reeling from the job losses at Rio Tinto Alcan and seeing 26 jobseekers apply for every job at the jobcentre. That means that 25 are absolutely disappointed because the jobs are not there.

My heart goes out to the unemployed, those who are searching for jobs; searching for dignity. The Deputy Prime Minister and the Prime Minister have talked time and again about “alarm clock Britain”. There are those in alarm clock Britain who peek from behind their curtains every morning to watch their neighbours getting into their cars and going to work, wishing that they had the same employment opportunities. The problem is that there are no jobs in the region. There are not many jobs for young people either, with 15.9% of 18 to 24-year-olds in Wansbeck unemployed.

I do not have much time left but I want to say something about social security, which is also mentioned in the motion. A huge problem up and down the country is the way the Government are casting disabled people aside and on to the scrap heap through their vicious work capability assessment. It is absolutely outdated and needs to be cast aside. We need to look at the situation and look after the elderly and disabled people who are suffering so much as a result of the Government’s attacks on benefits. Nothing short of getting rid of the WCA will do.

We need to look at enterprise zones and be more imaginative and creative on job creations. Why not invest the £435 million that has already been spent on the Work programme and the £725 million for the next five years on people who have a stake in their communities and who want to create employment for the right reasons, not for mass profit?

18:35

[Sheila Gilmore (Edinburgh East) (Lab)]

Whenever any Government Minister, from the Prime Minister down, is asked what they are doing to tackle unemployment, they always answer by setting out a litany of schemes, starting with the Work programme. The problem is that the Work programme does not create any jobs. Jobs are created by other aspects of the economy. In the past financial year, the number of affordable homes in Scotland has halved compared with the previous two years, so we can see where the problem lies. An awful lot of building jobs are not being done, because houses are not being started, because the funding is not in place. Since the start of the Work programme, one of our issues has been that it does not create jobs, and if the jobs are not there in the right areas for the right people, no amount of money put into the programme will resolve that. Perhaps the Government have just convinced themselves of their own propaganda. They have spent so long saying that the employment problem facing Britain is that people either will not or cannot work and that benefits are too generous that they have swallowed their own propaganda.

Another question about the Work programme is whether it is actually effective in doing what it sets out to do, namely training people, giving them confidence and skills, and helping them to meet employers to get jobs. We were told a lot about the black-box approach, the trouble with which is that we do not know and are not allowed to know what is happening.

The hon. Member for Aberconwy (Guto Bebb) spoke about visiting one of his Work programme providers, which I have also done. I heard a whole load of stuff—this was near the beginning of the programme—about how it would give people personalised programmes, have medical people on hand and give people counselling. It sounded wonderful, but the anecdotal evidence from my constituents—yes, it is anecdotal; we are not told much about what is happening because of the black box—is that all that is lacking.

I met one constituent last weekend whose view was that he could have done what his Work programme provider got him to do equally well at home. He went there once a fortnight—it was not an intensive programme—to do a job search on a computer, but he already knew how to do that and had been doing it himself. It was what he did with the jobcentre before he ever went on the Work programme. There did not seem to be a huge amount of value in what was happening.

The problem lies partly with the Government’s pride in cheapness. If we pay peanuts, we do not get very much. Gingerbread, an organisation that represents single parents, has told me of single parents on the Work programme who, because their provider does not provide child-care costs—it is not funded to do so—cannot necessarily take up any available training opportunities. Perhaps we are not investing enough in the programme to get the job outcomes. It may be cheap, but it is not producing the outcomes.

I have also visited in the past couple of weeks a social enterprise in my constituency that does employability services work, mainly with people with mental health problems. It gets some of its funding and a substantial number of referrals through Edinburgh’s health services, which is probably just as well, because that at least gives it some steady income. It is also a Work programme subcontractor. It carries out an intensive programme with people with mental health difficulties and understands the lack of confidence that they often have. The constituent I mentioned who had had the bad experience could have done with that, because he had suffered a nervous breakdown previously. The enterprise does 95% of its work with people who are got into work, and it is successful and involves less than half the contract price. Might it not be more efficient to contract directly with such organisations, which have been a proven success? That could be done locally through Jobcentre Plus or local councils. I offer that as a possible solution to the problems with the Work programme. I am not just criticising it but suggesting how to make it better.

18:40

[Stephen Timms (East Ham) (Lab)]

We have had a good debate to which the backdrop is yesterday’s publication of the first Work programme outcome data. One cannot help but admire the former employment Minister, the right hon. Member for Epsom and Ewell (Chris Grayling), who ensured that no data at all were published before the reshuffle and so secured his trouble-free ascent into the Cabinet, rather unfairly leaving the new Minister to face the music yesterday.

The hon. Member for Amber Valley (Nigel Mills), at least, recognised that the figures published yesterday were disappointing, and he is absolutely right. The Secretary of State did not recognise that; in fact, he claimed the opposite. It has been suggested that we have been unfair in evaluating the performance of this programme after only 12 months, but all we have done is to apply the measures and the criteria set out by the Department for Work and Pensions itself. The invitation to tender for the Work programme says:

“DWP will set a non-intervention performance…reflecting the number of job outcomes that would be expected to occur in the absence of the Work Programme.”

It goes on to say that the figure would be 5% based on historical job-entry rates—that is, that it would expect 5% of people referred to achieve a job outcome within 12 months. It then says that it would expect the situation to be better than that, and so makes the figure up to 5.5%, adding:

“DWP expects that Providers will significantly exceed these minimum levels.”

We discovered yesterday that they did not significantly exceed 5.5%; in fact, they got nowhere near it. The BBC reported yesterday that the figure was 3.5%, but for the first month’s cohort it is 2%. Oddly, despite the fact that the DWP refers to the “key performance measure”, that number does not appear in the data published yesterday. Strangely, it has been omitted and we have to work it out for ourselves. Given that the Minister’s Department describes it as the key performance measure, will he give us his calculation of it based on yesterday’s data?

The Secretary of State suggested that we were unfairly taking the employment and support allowance data out of the numbers and therefore reducing them. In fact, the reverse is the case. The ESA data are by far the worst. The key performance measure for the ESA data comes to 1%—a disgraceful level of performance. The Minister needs to tell us what he is going to do to address the lamentable failure of the programme to help new ESA applicants.

I congratulate my hon. Friend the Member for Manchester Central (Lucy Powell) on her excellent maiden speech. The depth of her roots in the community she represents was very clear, and I know that she will robustly defend her constituents from failures of the kind that we are debating.

Ministers need to sort out specific problems with the design of the Work programme. First, for over a year we have been pointing to the folly of the secrecy in which the programme has been cloaked. With previous programmes, providers have gladly published their performance data so that everybody could see how they were getting on and make comparisons between them—it was simply taken for granted that that was what they did—but the previous Minister banned them from doing that. I wonder whether he read the “Open Public Services” White Paper that was published by the Minister for the Cabinet Office and Paymaster General in the summer last year. It is worth a read. It asserts—rightly in my view—that:

“Open public services that are more accountable to the people they serve (both the users and the taxpayers who fund them) will be better services.”,

and that, importantly:

“Providers of public services from all sectors will need to publish information on performance and user satisfaction.”

Not only have Ministers not required providers to publish such information on the Work programme, they have actually banned them from doing so. Yesterday’s data were the first on job outcomes in almost 18 months since the programme began. If providers had published their own data, everyone would have seen quickly which approaches were working well—and which were not—and changes could have been made. As it is, we have had to wait almost 18 months, and that cloak of secrecy is one reason for the disappointing performance.

It would be useful to have data on Work programme user satisfaction, as the White Paper demanded, although I fear that after the drubbing yesterday, there is next to no chance of us getting it. Such data should be published because, as the Prime Minister argued in the foreword to the White Paper, that information would be a powerful lever for improvement. Will the Minister at least commit to lifting the ban on providers publishing their own performance data? The ban was imposed only to ensure no impediment to his predecessor’s appointment to the Cabinet, but since that has been accomplished, it should now be scrapped. Lift the veil and let the sun shine in!

I have a couple of other suggestions on how to salvage the programme and I want to pick up on a point made by my hon. Friend the Member for Huddersfield (Mr Sheerman) about skills. The Government have increased the number of apprenticeships—my right hon. Friend the Member for Tottenham (Mr Lammy) rightly expressed some concern about what those have amounted to, but nevertheless, numbers have increased. Hardly anybody on the Work programme ever gets on an apprenticeship, however, although many should be able to—most people think that apprenticeships exist to help unemployed people develop skills to get into work—and I urge the Minister to work with his opposite number to make that possible. My hon. Friend the Member for Stretford and Urmston (Kate Green) is right to say that we must address the current rate of unemployment among young black men, which is more than 50%, and the Work programme cannot be blind to the scale of the problem.

The Minister has spoken about what has gone wrong, and in an interview with The Daily Telegraph published on Saturday he made clear who he thought was to blame. He said it was “proving difficult” to return people to long-term work—he was getting his excuses in early—and the article stated that:

“He called on private firms…which have been given the task of retraining the long-term unemployed and placing them in jobs, to ‘get their act together’.”

So, it is their fault. Private firms are the reason the programme has not delivered—by the way, the Telegraph headline was:

“Just one in 20 aided by back to work scheme”.

Presumably that is what the Minister hinted at, but in fact the number was a great deal smaller. The Financial Times got the number right yesterday morning when it stated that

“the employment minister, will confirm the actual figure—which some believe could be as low as 3 per cent—when he publishes official statistics on Tuesday.”

The Minister reassures us that poor performance means the Government are saving money, but as my hon. Friend the Member for Edinburgh East (Sheila Gilmore) said, that is no comfort for the young unemployed parent who is worried about paying for Christmas but has been parked and is not getting the help they need to get back to work. They do not want to know that the Government are saving money; they want the help they were promised to get a job.

Why has it gone so badly wrong? The Minister says that providers need to get their act together, but it is Ministers, not providers, who have got this so badly wrong. Ministers assured providers bidding for the Work programme that their economic policies would lead to steady growth and falling unemployment. They did not say those policies would lead to a double-dip recession, although tragically they did.

My hon. Friend the Member for Wansbeck (Ian Lavery) is right: we need a plan B. It is not Work programme providers who must get their act together but Ministers who must come forward with policies to deliver jobs and growth. It is difficult to get people into jobs if there are no jobs. The lack of growth and jobs is hobbling the Work programme—no amount of providers getting their act together will change that.

The Work programme has fallen miles short. I hope the Minister comes clean on how far short. What is that key performance measure? It is not the providers’ fault. The Government promised steady growth and falling unemployment, but that has not happened. The providers are not to blame for the ludicrous ban on data, which has undermined the programme. I urge the Minister to announce tonight at least that that ban will be lifted.

I also ask the Minister to commit to address the truly appalling performance among applicants for employment and support allowance. Just 1% of those referred to the programme in the first three one-month cohorts were placed in a sustainable job. When will he sort those problems out?

18:50

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

This useful debate has exposed comprehensively the emptiness of the Opposition’s policies on welfare reform and their deeply patronising attitude to part-time work and apprenticeships. I shall come back to those points.

My hon. Friend the Member for Amber Valley (Nigel Mills) was right to point out the scale of the ambition of the programme. It meets a wide range of needs and provides tailored, personal support to some of the hardest-to-help and hardest-to-reach people to get back into work. It supports people who have been on incapacity benefit for 10 or 15 years. They had been condemned to a life on benefit, but the programme gives them the opportunity to get back into work.

My hon. Friend the Member for Aberconwy (Guto Bebb) was right to highlight the importance of self-employment as a route back into the labour market. We see many examples of people who are able to juggle self-employment with caring responsibilities and people who return to the labour market after ill health through self-employment. That is why we have extended eligibility for the new enterprise allowance. We have seen good examples—for instance, in Humberside—of people using the enterprise allowance to get back into work and creating businesses for themselves and their community.

My hon. Friend the Member for Witham (Priti Patel) will be pleased to know that 80% of the increase in employment in the past year was for UK nationals. That demonstrates progress compared with the empty slogans of the previous Government. My hon. Friend the Member for North West Leicestershire (Andrew Bridgen) was right to hold Labour Members to account for their record in government, the legacy that they left this country and the appalling economic mess that this Government must clear up.

The hon. Member for Huddersfield (Mr Sheerman) spoke of the deep-seated structural challenges that we face. He is right: we are in a global race, and we need to respond to threats from overseas. The model that we have set out to broaden the economic base and move away from Labour’s debt-fuelled model of consumption provides sure foundations for us to win that global race.

The hon. Member for Manchester Central (Lucy Powell) gave an accomplished speech. I particularly liked the bit when she said she was delighted that the baton had passed from red to blue, but perhaps she was talking about football. As the son of a former miner, I know just how much family pride there is in achievements such as hers and mine.

The hon. Members for Swansea West (Geraint Davies) and for Stretford and Urmston (Kate Green) were dismissive of people who have part-time jobs. For so many people, taking part-time work is the right thing to do. It gets them back into employment.

[Kate Green]

Will the Minister give way?

[Mr Hoban]

I will not give way; the hon. Lady had her chance earlier.

The last labour market survey showed that 80% of people in part-time work wanted part-time work—it is right for them to do so. It is the right route back into employment for many people.

The right hon. Member for Tottenham (Mr Lammy)—

[Geraint Davies]

rose—

[Mr Hoban]

Let me address the right hon. Member for Tottenham, who was critical of apprenticeships in retail. How many of our supermarket bosses started off on the shop floor? We should not close down any route to advancement. He also criticised apprenticeships in administration. For many people, a job in an office is a route out of poverty. He should welcome opportunities to broaden the range of skills that are available to people.

I should tell the hon. Member for Wansbeck (Ian Lavery) that I get fed up with people talking down the north-east. I was born and bred in the north-east, and I went there a couple of weeks ago. Let us look at what has happened there. Employment is up by 40,000. People are talking about the need for more skills. There are big challenges in the north-east, but he does his region no service by talking down its people. While I am at it, let me say that he talked about the work capability assessment. Let me remind him that his Government introduced it. This Government are reforming it to ensure that it is the right policy and that it gets people into work and off a lifetime condemned to inactivity.

[James Wharton (Stockton South) (Con)]

I welcomed the Minister to the north-east recently, and I am delighted to hear him say such positive things about the region. Is it not in places such as the north-east, where welfare dependency can be seen to do the most damage, that these sorts of programmes are so important?

[Mr Hoban]

My hon. Friend is absolutely right. We need to see programmes of reform to get people off benefit and into work. It is about making sure that we equip people with the skills they need in a 21st-century economy. Programmes such as the Work programme enable that to happen.

I was rather disappointed that we did not hear more from the shadow Minister about Labour’s bank bonus tax. This is a big feature of the motion before us today. Yet again, the Opposition trot out the bank payroll tax as the solution. The problem is that it is their solution for everything. How would they pay for a VAT cut? The bank payroll tax. Higher capital expenditure? The bank payroll tax. Reversing changes to child benefit? The bank payroll tax. At the last count, a tax that they think would raise £2 billion has been used 15 times over to fund tax cuts and spending increases.

[Stephen Timms]

rose—

[Mr Hoban]

I have three minutes left, so I am going to continue.

The other thing in the motion that neither the right hon. Gentleman nor the shadow Secretary of State referred to—[Interruption.] No, let me talk about something that they did not refer to in their motion. The right hon. Gentleman talked about the increased benefit bill—£20 billion. Is he actually saying, given that most of that relates to uprating, that he is opposed to uprating pensioners’ benefits? Is he opposed to the triple lock that we introduced? Does he want to see a return to the days when the previous Government increased the state pension by 75p? Is he really saying that that is what he is against? The reality is that that is part of the reason why we have seen the benefit bill rise, and that is also because we are seeing post-dated cheques left by the Opposition who, when they left government, told us there was no money left.

[Stephen Timms]

rose—

[Mr Hoban]

I am not going to give way. I want to try to address some of the points that have been raised in the debate.

It is clear that the Work programme is in place. What we saw yesterday was a snapshot—207,000 people have got into work as a consequence of the Work programme. The Opposition should be celebrating that achievement, not criticising it. In the same way that we heard nothing in their speeches to congratulate the private sector on creating 1 million net new jobs, they said nothing about falls in unemployment and nothing about the fact that the previous Government fiddled figures and that youth unemployment is now lower than when we came into office. They have no ideas. They complain about the welfare bill, but oppose measures to bring it down. They fail to acknowledge the doubling of long-term unemployment during the recession and the rise in youth unemployment even when the economy was growing. They fall back on the empty rhetoric of the bank payroll tax and hark back to schemes that were bad for the unemployed and bad for the taxpayer.

The truth is that more people are in work, fewer people are unemployed and youth unemployment is down. One million net new jobs have been created by the private sector since May 2010. We are making work pay by reforming the benefits system and introducing universal credit. There are 190,000 fewer people now on out-of-work benefits than there were in 2010. That is the scale of the welfare reform that we are introducing. Rather than condemning people to a lifetime on benefits, we are providing support to get them into work. We have provided more help for young people, through the £1 billion Youth Contract. The work experience element is cheaper and as effective as the future jobs fund jobs that the Opposition parade.

[Mr Alan Campbell (Tynemouth) (Lab)]

claimed to move the closure (Standing Order No. 36).

Question put forthwith, That the Question be now put.

Question agreed to.

Question put accordingly (Standing Order No. 31(2)), That the original words stand part of the Question.

The House proceeded to a Division.

[Madam Deputy Speaker (Dawn Primarolo)]

I ask the Serjeant at Arms to investigate the delay in the No Lobby.

18:59

Division 106

Ayes: 212

---

Labour: 199
Scottish National Party: 4
Democratic Unionist Party: 3
Plaid Cymru: 3
Social Democratic & Labour Party: 2
Independent: 1
Green Party: 1

Noes: 283

---

Conservative: 245
Liberal Democrat: 37

Business without Debate

Wednesday 28th November 2012 Commons Chamber

Delegated legislation

Wednesday 28th November 2012 Commons Chamber

[Madam Deputy Speaker (Dawn Primarolo)]

With the leave of the House, I will take motions 3 to 5 together.

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

Environmental Protection

That the draft Producer Responsibility Obligations (Packaging Waste) (Amendment) Regulations 2012, which were laid before this House on 16 October, be approved.

Electricity

That the draft Electricity and Gas (Energy Companies Obligation) Order 2012, which was laid before this House on 30 October, be approved.

Energy Conservation

That the draft Green Deal Framework (Disclosure, Acknowledgment, Redress etc.) (Amendment) Regulations 2012, which were laid before this House on 30 October, be approved.—(Joseph Johnson..)

Question agreed to.

Local Authority Funding (Derby)

Wednesday 28th November 2012 Commons Chamber

19:16

[Chris Williamson (Derby North) (Lab)]

I rise to present a petition that has united the whole of the city of Derby and the city council, because people are fed up with the unfair funding cuts to which Derby has been subjected. The level of cuts in Derby is far higher than in many other parts of the country. Only yesterday, 350 more staff were made redundant from the council, and all three party leaders have written to the Secretary of State, calling for a fair deal for Derby. The petition is headed “Fair Deal for Derby”. It states:

The Petition of citizens of the United Kingdom,

Declares that they believe there has been a disproportionate impact of the Government’s austerity programme on Derby compared to other local authority areas and that the cumulative impact of the cuts being forced on Derby City Council will amount to £75.77 per person compared to a few pounds in other more affluent parts of the country.

The Petitioners therefore request that the House of Commons urges the Secretary of State for Communities and Local Government to ensure a fair deal for Derby by reducing the amount of cuts made to Derby City Council.

And the Petitioners remain, etc.

[P001139]

Unsustainable Provider Regime (NHS)

Wednesday 28th November 2012 Commons Chamber

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

19:18

[Jim Dowd (Lewisham West and Penge) (Lab)]

I am delighted that Mr Speaker has seen fit to grant me this opportunity to raise a matter of considerable importance—in fact, the dominant issue—for my constituency and a large part of south-east London at the moment. The title on the Order Paper is “Unsustainable provider regime and special administration in the NHS”; and I will refer to all the special administrators appointed in the past, as there is only the one.

Last Saturday, along with thousands of other people, I was marching through the centre of Lewisham in the rain with my parliamentary colleagues, my right hon. Friend the Member for Lewisham, Deptford (Dame Joan Ruddock) and my hon. Friend the Member for Lewisham East (Heidi Alexander)—they would have liked to be here this evening, but are attending other events relating to the same issue—to Ladywell fields just behind Lewisham hospital.

My experience of marches goes back quite a long way—I have been on a fair number of them in my time—but three factors made this march strikingly different from the usual ones. First, the majority of the marchers were ordinary residents and their families. Secondly, the motorists who were being held up by the march were, more often than not, tooting their horns to show their support for it. Thirdly—I had rarely seen this before—people were joining the march along the way, some of them with young children.

That march took place under the auspices of the Save Lewisham Hospital campaign. The reason for it was that, last July, the then Secretary of State appointed a trust special administrator—to whom I shall refer from now on as the TSA—for the South London Healthcare NHS Trust, under the unsustainable provider regime provided for by the National Health Service Act 2006. The three principal hospitals in the trust are Queen Elizabeth hospital in Woolwich, Princess Royal University hospital in Farnborough, and Queen Mary’s hospital in Sidcup. You will have noted, Madam Deputy Speaker, that Lewisham hospital is not part of the trust for which the TSA was appointed. However, far the most damaging proposals are those that affect that hospital.

The proposals are to close the accident and emergency department, which currently sees more than 120,000 attendances a year, to remove the maternity unit altogether—last year there were 4,500 births there, and the number has been projected to rise to 5,000 in the coming year—and to remove all the medical beds. If these plans were to see the light of day, there would be only one fully functioning accident and emergency unit to serve the three quarters of a million people who live in Bexley, Greenwich and Lewisham. Although there is scope for Lewisham to merge with Queen Elizabeth at Woolwich, it should not be necessary to pay such an extortionate price in terms of services for the people of Lewisham. It is rather as if the administrator for Comet—who, sadly, is having to do his work at the moment—were to decide that the best thing to do for Comet was to shut Currys down. The problem does not lie in Lewisham; it lies in the South London Healthcare NHS Trust.

It is not just the proposals themselves that are making people so angry; it is also the devious and underhand way in which they are being enacted. The last Secretary of State made a written statement last July, when he appointed the TSA. Before that, however, one of the first acts that he had undertaken as Secretary of State, just after the general election in May 2010, was to stop changes that were already taking place for the revitalisation of the South London Healthcare NHS Trust. He had put them on hold, without offering any alternative to a plan that had already been in place for a number of years; the last time the Government reviewed the services was four years ago. Having stopped those changes in their tracks, he then had the temerity to say, when he came to appoint the TSA, that not enough progress was being made to rebalance the trust’s finances.

In his written statement in July, the then Secretary of State said:

“The trust special administrator’s regime is not a day-to-day performance management tool for the NHS or a back-door approach to reconfiguration.”—[Official Report, 12 July 2012; Vol. 548, c. 48WS.]

However, that is exactly how it feels and looks in south-east London. There is a widespread feeling, backed by legal opinions, that the TSA does not have the power under the 2006 Act—and the current Secretary of State confirmed during Health questions yesterday that that was the legislation involved—to enforce his recommendations. Yet a “chief executive designate”, whatever one of those might be, is already working for the putative but non-existent joint Queen Elizabeth and Lewisham hospital trust.

The ultimate agreement of the Secretary of State seems to have been taken for granted—unless, of course, his authority is so ill-regarded that it does not matter what he thinks. However, the problem is not with the link between the University Hospital in Lewisham and Queen Elizabeth in Woolwich; rather, it is the intolerable price that the people of Lewisham are being expected to pay in terms of poorer, less accessible and more inconvenient services.

Let us contrast how Lewisham is being treated with how the other hospitals in the group are being treated. The TSA has suggested Queen Mary’s Sidcup should do a deal with Oxleas NHS Foundation Trust, and that is apparently going through without any great problem. The TSA also recommends that King’s College Hospital NHS Foundation Trust should take over the Princess Royal in Farnborough, even though no details whatever have been seen on how King’s would manage the Princess Royal. The arrangements for Lewisham are, however, prescriptive and take up much of the TSA report—and we must, of course, bear in mind that Lewisham hospital is not even part of the same trust.

The most damaging recommendation is that the A and E department at Lewisham should close, followed closely by the proposal to close all maternity services. A little booklet that the trust special administrator has put out says:

“Clearly this recommendation proposes change for University Hospital Lewisham. However, this is less than some may initially think. Based on analysis done by the Trust, it is expected that nearly 80% of patients who currently visit University Hospital Lewisham’s A&E would still be treated at the urgent care centre there in the future. This recommendation is not about ‘closing’ an A&E department but rather making changes to it.”

That is not what happened just over the river at Guy’s when its A and E was closed a few years ago, and it is certainly not what happened when the A and E at Queen Mary’s Sidcup was closed four years ago.

It is also certainly not what the emergency department doctors at Lewisham had to say. Their submission to the trust special administrator states in respect of the

“assumption that 77% of our ED patients can still be seen in the UCC”—

urgent care centre—

“in future: patients in the UHL UCC are seen by combination of”

practice nurses

“GPs and ED doctors between 0800 and 2400hrs…This means patients are seen in our UCC department with problems far greater than those that can be handled in a typical UCC. A standalone UCC will not be able to handle the number or acuity of patient that we presently see…Quite clearly, the 77% figure you have employed is not representative of any realistic future modelling…On review of our case mix, by our estimation at most only 30% of the total attendances to the present-day combined ED and UCC could be safely managed in a standalone UCC.”

That is the view of professional doctors. The TSA’s view is that of a civil servant. We do not need to be terribly perceptive to work out which we should place the greater store by.

The conclusion of the emergency doctors’ statement encapsulates the issue. They state that the TSA suggests that 30% of current presentations will, by some completely magical and invisible formula, be treated in the community, but that has not been achieved anywhere else in the UK and there is no evidence to support the assertion. The TSA is not so foolish as to try to adduce any. Nothing in the report or any of its appendices show how this 30% figure, which represents almost 40,000 people presenting at Lewisham A and E, will be dealt with. Their conclusion is:

“Feedback from our patients, the public and colleagues such as the London Ambulance Service (LAS) tells us that this ED”—

emergency department—

“is incredibly well regarded, and that the public and LAS choose to come here. We believe the implications of this proposal are extremely serious and will detrimentally affect the care and service that is offered to our local community. Concerns over how our patients will be able to access acute services at QEH, and the inevitable impact on an overstretched LAS, have also not been adequately addressed.

It is our opinion that as the draft report has been based on demonstrably incorrect figures and assumptions, its findings cannot be relied upon. An issue as important as the acute care of patients in South-East London cannot be determined by a hasty and flawed process, which was never designed to be used to reconfigure NHS services.

We have no objections to change, and strongly support all moves that propose the safe and effective care of patients. Thus we strongly urge that the proposed merged trusts (QEH and UHL), the local GPs and the wider public be left to decide at a local level how our services should be reconfigured. This would not only be safer and more considered, but would also be in line with the Government’s ethos of greater local control with a patient-centred approach to healthcare.”

That is signed by the four emergency department consultants, including the clinical lead, the two emergency department matrons and the emergency department nurse consultant. Hon. Members would have to agree that that is a damning indictment of what the TSA has been proposing.

As I have just demonstrated, the report’s assumptions, such as they are, are inaccurate, and the figures—even the financial figures—are completely unreliable. The TSA suggests that there is a £1.7 million saving to the Beckenham Beacon, the former Beckenham hospital which is now an urgent care centre predominantly occupied by GPs, but with the support of secondary and ancillary services. The TSA states that £1.7 million can be saved on what the South London Healthcare NHS Trust currently rents at Beckenham Beacon. This is right on the boundary of my constituency and that of the hon. and gallant Member for Beckenham (Bob Stewart); his constituency is on one side of the Croydon road and mine is on the other. People in the area were clearly concerned about the effect on services, so I went to see the putative clinical commissioning group, which takes over next year. It said that it is determined to continue to provide a comparable range of services—it will not be exactly the same as what is there at the moment—that that £1.7 million was only provided to South London Healthcare NHS Trust by the primary care trust previously for commissioning services there and that the CCG will continue commissioning services there. I have asked for exactly what the services will be to be put in writing, but I was told that broadly the CCG will be spending the same. So there is no saving to be had.

All the TSA is saying is that as South London Healthcare NHS Trust will cease to exist, it cannot pay any bills—so far, so bloody obvious. I would have thought it was not worth making the effort, but including this in the financial calculations demonstrates just how unreliable this report is. It is all smoke and mirrors. Given that it was carried out in such a short time and given that this system—the unsustainable provider regime—is not designed to deal with this degree of complexity, it is hardly surprising that it is such a shoddy and unreliable piece of work.

Why then be so prescriptive about what happens at Lewisham, given that in the case of the Princess Royal and Queen Mary’s an altogether more relaxed view is to be taken? The answer can be found on page 41 of the report. I will not wave it at you, Madam Deputy Speaker, but take my word for it. It contains a map of the Lewisham hospital site and it shows that the TSA wants to sell more than two thirds of the whole site. That would leave one building for hospital purposes and one building currently used by South London and Maudsley NHS Foundation Trust, which deals with mental health, so that the rest of the site can be sold off. Doing that will only raise between £17 million and £20 million, but it will close off the options. Once that has been done, Lewisham hospital can never be resuscitated, resurrected or whatever other language we might care to use. To enable the rest of the site, which includes a £12 million redevelopment of accident and emergency and maternity services that was only completed in 2010, to be cleared the TSA suggests that an additional £55 million will need to be spent on extending the riverside block.

The whole riverside block to which the TSA refers was only built six years ago under the private finance initiative and is working pretty well. The whole building only cost £70 million, and the TSA is proposing that £55 million should be spent so that the rest of the site can be cleared and sold for less than £20 million. That is almost unbelievable—it does not make any sense whatsoever. I do not know what will come back from the consultation that is under way.

Right across south-east London there are huge issues with acute services. I know that colleagues raised the matter in Health questions yesterday. The right hon. Member for Bermondsey and Old Southwark (Simon Hughes) mentioned the concern about Guy’s and St Thomas’, King’s, South London and Maudsley and King’s college, London—that is the university college, not the hospital—joining together to construct one of the largest trusts in the country. There is deep concern in Southwark and Lambeth about the impact that that could have on services. There is further concern, as I mentioned, in Lewisham, Bexley, Bromley and Greenwich about what else is going on.

I suggest that the Secretary of State parks the consultation. He should note what it says but launch a proper and legal clinical review of services across south-east London, as was conducted just four short years ago, when it was decided that Lewisham could stand on its own and provide decent services for the people of that area. I am not against improving services in Greenwich, Bexley or Bromley. Indeed, I represent the north-west part of Bromley, which sees Lewisham as its local hospital. However, what I cannot see—the TSA cannot convince me of this—is how degrading the services for people in Lewisham benefits anybody. It will not improve the services in Greenwich, Bexley or Bromley, so what is the point?

On 31 October, my hon. Friend the Member for Lewisham East asked the Prime Minister to recall that in 2007 he said that he would be prepared to get into a “bare-knuckle fight” over 29 assorted hospitals, one of which was Lewisham, to protect their A and E. I can tell the Prime Minister that he is in a bare-knuckle fight now over the future of A and E at Lewisham. The fight for Lewisham goes on.

Lewisham hospital has been threatened before, but the people of Lewisham have always fought to save it and they always have. They will again. In his reply to my hon. Friend, the Prime Minister said—this gives me some hope—that

“there will be no changes to NHS configurations unless they have the support of local GPs, unless they have strong public and patient engagement, unless they are backed by sound clinical evidence and unless they provide support for patient choice.”—[Official Report, 31 October 2012; Vol. 552, c. 230.]

I am confident that Lewisham will survive this, because none of those factors is in place at the moment, nor does this process have any legitimacy.

19:38

[The Parliamentary Under-Secretary of State for Health (Anna Soubry)]

I congratulate the hon. Member for Lewisham West and Penge (Jim Dowd) on securing the debate and on speaking with such eloquence and passion. That is what one would expect from a Member of this place; we would expect Members to bring to Parliament the concerns and the anger of those whom they represent so that Ministers can hear all that is to be said. In this case, perhaps most importantly, even if the trust special administrator and his team did not hear the hon. Gentleman’s speech they will certainly read it and take it on board.

These matters are always difficult and, as I have mentioned, they make people angry. I hope that the hon. Gentleman’s speech will be reported in his local media and that my remarks might also be reported.

It is important to make it clear—and I hope that the hon. Gentleman will take this back to Lewisham and the people he represents—that this is not a question of cuts. Anyone on a march bearing a banner saying, “Stop the Government cuts” does not represent the situation fairly, and does their cause no great service. It is about how to make sure that people receive the finest health care that can be provided, and that that service is sustainable. As the hon. Gentleman said, it stems from a profound problem at South London Healthcare NHS Trust.

When changes to an NHS service are mooted, people become anxious and feelings run high. This is the first time that the trust special administration regime has been used, so people are anxious, and that has a knock-on effect on patients, staff and members of the public. This may sound like weasel words, but it is important. It would be wrong to comment on specific recommendations of the trust’s special administrator, because the matter is out for public consultation, which closes on 13 December. As the hon. Gentleman explained, the matter will go to the Secretary of State, who will consider the recommendations and the full report. He will make his decision at the beginning of February. At this stage, it is not for Ministers to comment. Our minds must remain completely open.

I want to explain the process. The previous Government created the trust special administration regime in the Health Act 2009. The regime creates a transparent, time-limited process to deal with trusts in failure. We have alluded to that timetable, and have given details of it. A trust special administrator appointed to an NHS trust must make recommendations to the Secretary of State about the future of the organisation and its services. Significantly, they must set out how high-quality services can be provided in a financially and clinically sustainable way. Before making final recommendations to the Secretary of State, the administrator must consult publicly on draft recommendations, and that process has been undertaken. A summary of all consultation responses must be included in the final report to the Secretary of State. I am sure that the hon. Gentleman will ensure that his response and the responses of other MPs representing Lewisham are included in that report.

South London Healthcare NHS Trust was formed in 2009, and it was the product of a merger of three trusts, each with long-standing financial issues. When the Secretary of State appointed the special administrator to the trust in July, it was losing over £1 million a week. Last year, the trust had a deficit of £65million—the largest in the country—which is £65 million a year being taken away from well-run trusts to subsidise one that is clearly failing. There are two private finance initiatives with which the trust is struggling. They are incredibly burdensome, with a cost of £60 million a year.

To be blunt, the situation cannot go on indefinitely. The NHS simply cannot afford to spend huge sums on keeping non-viable organisations afloat. Even if we had all the money in the world, it would not be right to have such a deficit and loss. In my opinion, the Government are to be commended on having the courage to tackle the long-running challenges facing South London Healthcare NHS Trust. Sometimes, tough decisions have to be made to make sure that NHS services are improved and are put on a clinically and financially sustainable footing.

I fully accept that the hon. Gentleman is concerned about the administrator’s recommendations in the draft report that impact on Lewisham Healthcare NHS Trust. The remit of the trust special administrator is to develop recommendations for the Secretary of State on the action that should be taken in relation to South London Healthcare NHS Trust. The aim is to secure the sustainable provision of health services which meet patients’ needs and deliver value for money. For those recommendations to be viable and credible, the trust special administrator must consider all relevant factors, including the intentions of NHS commissioners and the consequential impact on the local health system. This has required him to consider implications for other health care providers that are part of the local health care system. That is why his remit is so large and so broad.

As we all know, an NHS trust does not exist in a vacuum. All trusts are part of a complex, integrated health care system. In making recommendations about South London Healthcare NHS Trust, the trust special administrator must consider the consequences of those recommendations on neighbouring trusts, such as Lewisham, and patients in those neighbouring areas. I am aware that in developing his draft recommendations the trust special administrator has had continuing dialogue with patients and the public, staff, clinicians, local authorities and other partners, and so he should. That is continuing through his public consultation, which is now under way.

In addressing the long-standing challenges facing South London Healthcare NHS Trust, the administrator’s recommendations must take into account the objective of delivering safe, high quality, sustainable health care for the people of south-east London. That, of course, includes Lewisham. To ensure that this happens, he must have regard to the Secretary of State’s four tests for NHS service change when developing his recommendations. Perhaps this may give some comfort to the hon. Gentleman. Those four tests are: support from GP commissioners; the strength of public and patient engagement; clarity on the clinical evidence base; and support for patient choice. Those are four very important principles.

The hon. Gentleman touched on many of those principles. He spoke with passion and some anger. Much of that anger is understandable in all the circumstances. The draft report is out to the public, as I said. I hope that everybody will now engage and make sure that their voice is heard, as individuals or through their elected representatives. The recommendations will go to the Secretary of State, who will consider all of them. He will then make his decision.

Question put and agreed to.

19:47

House adjourned.

Westminster Hall

Wednesday 28th November 2012 Westminster Hall

Wednesday 28 November 2012

[Mr Andrew Turner in the Chair]

Transferable Tax Allowances

Wednesday 28th November 2012 Westminster Hall

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

09:30

[Mr Stewart Jackson (Peterborough) (Con)]

It is a pleasure, Mr Turner, to speak under your chairmanship for the first time, and it is a great honour to have the opportunity to put these important issues before the Chamber.

One of the key policy focuses in the run-up to the general election, and one of our key election manifesto commitments, was the introduction of a transferable allowance to recognise marriage in the tax system. The commitment to introduce the necessary legislation was included in the coalition agreement—for the avoidance of doubt it was on page 30—with provision also made for the Liberal Democrats to abstain.

The transferable allowance proposal was the main headline-grabbing recommendation among many other recommendations arising from the Conservative party’s social justice policy group and its two reports “Breakdown” and “Breakdown Britain”. Both reports highlighted the centrality of family breakdown to many of the social problems facing Britain today, which are a real issue, as I see in my constituency and as my hon. Friends will see in theirs. The reports recognised that the lack of policy support for marriage—the relationship at the heart of a stable family life—was not helping.

Britain is unusual in having a tax system that does not include any spousal allowance or credit. The group was very clear that addressing that shortcoming and recognising marriage in the tax system through a transferable tax allowance would help to bring us back into line with international best practice, and define the best way forward.

Before going into a more detailed presentation of the rationale for the transferable allowance policy, it is important to be clear from the outset about its importance to my party, as is reflected by the Prime Minister’s frequent references to it. When speaking as the Leader of the Opposition in response to the publication of “Broken Britain” in 2007, he said:

“I welcome this report’s emphasis on the family, and on marriage, as the basis for the social progress we all want to see…Britain is almost the only country in Europe that doesn’t recognise marriage in the tax system”.

He continued:

“Our support for families and for marriage puts us on the side of the mainstream majority, on the side of a progressive politics, on the side of change that says we can stop social decline, we can fix our broken society, we can and will make this a better place to live for everyone.”

In July 2008, in Glasgow, the Prime Minister continued to affirm that stance by saying that

“when it comes to perhaps the most important area of all, families, we will take action not just to support marriage and family stability”.

He told parents:

“your responsibility and your commitment matters, so we will give a tax break for marriage and end the couple penalty.”

Furthermore, in 2010, during the run-up to the general election, during a speech in Doncaster, my right hon. Friend seemed to become even more vociferous in his support for marriage, saying:

“I absolutely feel at my very core that recognising that relationships matter, that commitment matters and, yes, that marriage matters is something we should not say quietly but something we should say loudly and proudly.”

He continued:

“What is so backward looking in a country where we have social breakdown and social problems of saying that committed relationships, encouraging people to come together and stay together is a bad thing? Of course it isn’t, it’s not outdated”—

I hope that the Deputy Prime Minister is listening—

“if you look around the European Union, if you look around the OECD, we’re almost alone in not recognising marriage in the tax system. And why do we…think that with our appalling record of family breakdown that somehow we are in the right position and everyone else is in the wrong position; we’re not, they’ve got it right and we have got it wrong.”

[Mr David Burrowes (Enfield, Southgate) (Con)]

The Conservative party is standing up for marriage in the House. With the exception of the representative from the Democratic Unionist party, the hon. Member for Strangford (Jim Shannon), 14 Conservative Members account for all the Back Benchers in the Chamber, so we are clearly showing that the only party on the side of marriage is the Conservative party.

[Mr Jackson]

As usual, my hon. Friend makes an excellent point. It will be noted that family policy is low on the agenda for Her Majesty’s Loyal Opposition.

The Prime Minister has said during Prime Minister’s questions:

“I believe that we should bring forward proposals to recognise marriage in the tax system. Those in our happy coalition will have the right to abstain on them, I am happy to say, but I support marriage. We support so many other things in the tax system, including Christmas parties and parking bicycles at work, so why do we not recognise marriage?”—[Official Report, 2 June 2010; Vol. 510, c. 428.]

That was a seasonal reference. I could go on, but I hope that I have made the point that delivering transferable allowances, about which we have talked so much, is now of central importance if we are to be deemed to be reliable and trustworthy.

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

I thank my hon. Friend for leading this debate. Does he recognise the concern that many of us have—we will no doubt be feeling it in the months to come—that the changes to child benefit are another example of where the rhetoric about marriage will be undermined? A stay- at-home parent in a household earning only £60,000 will be deprived of all their child benefit if those proposals go through, yet two working parents earning £45,000 each, so with 50% more income, will not lose a single penny of their child benefit. That is one of the unforeseen circumstances of this ill-thought policy.

[Mr Jackson]

My hon. Friend makes an astute point and I hope that the Chancellor is listening. We will hear his autumn statement a week today. In fairness to the Government, they have sought to ameliorate the cliff-edge effect of the changes that were announced in October 2010, but uprating benefits by 5.2% while seeming to punish people who are aspirational and have done well for themselves sends a confused message, and the Chancellor should seriously think again about that policy. With respect to the Minister, I am not convinced that the infrastructure is even in place to enact that policy change to the maximum degree, but I must not meander on to child benefit.

Back in February 2007, the fact that Britain came bottom of the UNICEF league table for child well-being hit the headlines and rightly caused a stir. On 16 February 2007, that was picked up in an important speech by the then Leader of the Opposition entitled “Nothing matters more than children”. He gave a strong affirmation of the importance of marriage for child development and said,

“I want to see more couples stay together, and we know that the best way to ensure this is to support marriage. Not because it matters how adult men and women conduct their relationships. But because it matters how children are brought up. Nothing matters more than children.”

Who in this Chamber could disagree with that?

Why is marriage so central to child well-being? As “Breakthrough Britain” demonstrated, fewer than one in 10 married parents have split by the time a child is five, compared with more than one in three couples who were not married. That is hugely important because although most single parents do a fantastic job in very difficult circumstances, the evidence is clear that, on average, children brought up in married families do better than those brought up in single-parent families on every significant measure: educational attainment, health, likelihood of getting into trouble with the law, and alcohol and drug abuse.

As the Secretary of State for Work and Pensions said in February 2011:

“The Centre for Social Justice has found that those not growing up in a two-parent family are: 75% more likely to fail at school; 70% more likely to become addicted to drugs; and 50% more likely to have an alcohol problem…And the Joseph Rowntree Foundation has found that children from separated families have a higher probability of: living in poor housing; developing behavioural problems; and suffering from a host of other damaging outcomes, whose effects spill over to the rest of society.”

Some might be tempted to respond to that by suggesting that the principal cause for those different outcomes is not marriage, but wealth, and it just so happens that wealthier people are more likely to get married. However, that analysis does not add up. No one is trying to argue that marriage is the only important consideration or that wealth is not relevant. However, as the Under-Secretary of State for Education, Lord Hill of Oareford, has noted, research from the millennium cohort study suggests that the poorest 20% of married couples are more stable than all but the richest 20% of cohabiting couples.

In that context, the least we should do is to ensure that getting married in this country is no more difficult than in other developed countries. Given that Britain is unique among large, developed OECD economies in failing to provide any kind of spousal allowance or credit, the fact that it is relatively insensitive to couple and family responsibility must come as no surprise. In making that point, I am aware that when the recognition of marriage in the tax system is mentioned, it provokes in some quarters embarrassed smiles and sarcastic comments such as, “I got married for love.” I hope that we all did—those of us who are married—but such comments demonstrate a complete failure to understand the situation in which we find ourselves.

Let me be clear that people do not fall in love for fiscal reasons. However, when they fall in love and decide that they want to be together, they face a choice. Do they marry or cohabit? Do they make a public lifelong commitment to each other in front of families and friends that is recognised in law, or do they just move in together relatively casually and see how things go? The suggestion that that judgment is in no way impacted by financial considerations can be made only by people whose wealth is such that they are entirely insulated from the real-world considerations that impinge on the lives of most, and they are in danger of seeming very out of touch—I hope, again, that the Deputy Prime Minister is listening.

What of the pertinent financial considerations? The latest international comparison figures demonstrate that one-earner married couples on an average wage with two children face a tax burden that is 42% greater than the OECD average. Why should we make it so much more difficult for people to marry in the UK than in other OECD countries? That is a pressing question, especially when considered in the context of polling.

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

My hon. Friend makes a powerful case. Let me emphasise that what he is asking for is not a preserve of the middle classes, and nor would it undermine other forms of cohabitation that people are in, in many cases through no choice of their own—particularly when a husband has abandoned a wife. The reason why people go into marriage in the first place is also not based on money, but the empirical evidence that he has started to reel off absolutely shows that marriage is the most sturdy and stable form of bringing up children.

Does my hon. Friend agree that next week’s autumn statement by the Chancellor is absolutely the last opportunity for the Government to make clear the importance that they place on marriage? A commitment was made in the coalition agreement, but we need a full-blooded commitment, not one that only tinkers around the edges with a half-hearted endorsement of what we all believe in.

[Mr Jackson]

I could not have put it better myself. My hon. Friend’s intervention allows me to pay warm tribute to his fantastic work as children’s Minister. I look forward to the day that he is back in government, sharing his plethora of talents with the nation, but I know that he will do a fantastic job on the Back Benches for his constituents and the country.

I return to my argument about polling. My right hon. Friend the Secretary of State for Work and Pensions said during marriage week in February 2011:

“When asked about their aspirations, young people are very clear: three quarters of those under 35 who are currently in cohabiting relationships want to get married, and some 90% of young people aspire to marriage. So perhaps the question we should be asking ourselves is this: if people from the youngest age aspire to make such a commitment in their lives, what stops them doing so? Government cannot and should not try to lecture people or push them on this matter, but it is quite legitimate to ensure people have the opportunity to achieve their aspirations.”

I must, in addressing this point, congratulate the Secretary of State on bringing in the long-overdue reform that our benefits system requires and on introducing universal credit, which takes important steps to erode the couple penalty. However, the couple penalty remains such that, even with a fully transferable allowance, it would still be in place for all couples, apart from those without children. In other words, where one is dealing with one-earner married couples with children, the provision of a fully transferable allowance would not even create a level playing field, let alone any incentive to marry. It would simply erode the disincentive not to marry.

In the current context, where we make it harder for people to marry in this country than it is across the EU on average, the lack of support for marriage gives rise to family breakdown, not primarily through the breakdown of existing marriages, but by making marriage no more fiscally attractive than cohabitation, despite requiring a much higher and much more costly level of commitment than cohabitation. In such a context, cohabiting, which, as we have seen, is far less stable, inevitably becomes more attractive.

“Family breakdown in the UK”, a publication from December 2010, made the point that

“the problem is not divorce. While marriage accounts for 54% of births, the failure of marriages—i.e. divorce—accounts for only 20% of break-ups and 14% of the costs of family breakdown, amongst all families with children under five. Unmarried families account for 80% of the break-ups and 86% of the costs.”

It subsequently stated:

“These new statistics demonstrate dramatically that family breakdown is a huge and growing problem and that the main driver of family breakdown is the collapse of unmarried families. A failure to acknowledge these key points will lead to the inevitable failure of any government policy aimed at strengthening families. Witness the continued rise of lone parenthood since the 1980s at a time while divorce rates remained stable or declined.”

The arguments for a transferable allowance for married couples, defined narrowly in terms of the benefits of marriage, are more than enough to justify the change, but there are other compelling arguments for introducing transferable allowances: first, to make the tax system fairer by reducing the tax burden on one-earner families with modest incomes; and secondly, to make work pay, which is even more important.

In the first instance, it is not fair to place a tax burden on the income of one-earner families that is 42% greater than the OECD average. Crucially, most one-earner families who would benefit from a transferable allowance are in the poorer half of the population. The Institute for Fiscal Studies published figures shortly before the election showing that the transferable allowance proposals in our manifesto would have overwhelmingly benefited families in the poorer half of the population. In contrast, the IFS said that raising the tax threshold—the implementation of which has been prioritised to date in order to please the Liberal Democrats—would benefit mainly taxpayers in the top half of the population.

When independent taxation was introduced in 1990, it was realised that, unless special provision was made for families, they would lose out. As Nigel Lawson recognised at the time, the logical solution was to give a non-earner in a one-earner household the right to transfer their unused personal allowance to their spouse. He was not able to do that and as a compromise, the married couples allowance and the additional personal allowance were introduced. It is now clear that, without those allowances or transferable allowances, one-income married couples, most of whom are relatively poor, were bound to end up bearing an increasing share of the tax burden. That is what has happened, generating a completely unfair situation.

A few years ago, the Treasury published figures showing that, in 2009-10, a single taxpayer on three quarters of the median wage—approximately £20,000—was paying 21% less tax than in 1990. A single-earner married couple were paying 11% more tax. Under the coalition agreement, we are putting considerable resources into raising the tax threshold. For a single person under 65, the tax threshold this year is 170% higher than it was in 1990. However, the tax threshold for a one-earner married couple has risen by only 71%, so in real terms it is lower than it was in 1990. I urge the Minister to examine those figures carefully and to draw them to the Chancellor’s attention.

[Mr David Davis (Haltemprice and Howden) (Con)]

I commend my hon. Friend on his compelling analysis. Listening to him reminded me of something that my mother—my single mother—said about 40 years ago. She used an old phrase, “When money troubles come in the door, love goes out the window”, which is a good measure of the stresses that are put on families by financial pressures. Does he agree that there is no more important time than now for this issue, when the least well-off in our society are facing job and cost pressures as never before, which will put pressures on marriage as never before?

[Mr Jackson]

My right hon. Friend is bang on the money. Although such tax changes would be costly in the short term, the benefits for society would be incalculable, were we to enact them, which I hope we will in the Budget next March.

In considering the fairness arguments, it is also important to deal with the misguided claim made by some that, rather than helping one-earner families, the answer is to make them two-earner families. That logic is the occasion of great unfairness, because more often than not that option is not available. The latest DWP figures demonstrate that in 2.2 million households one member is in full-time work and the other is not earning; that 1.2 million, or 53%, of those households contain children; that in 700,000, or 58%, of those households with children there is a youngest child who is under five; and that a further 300,000, or 21%, have a youngest child between the ages of five and 10. Some 61% of all one-earner couple families have a young child under five, someone who is disabled or someone with caring responsibilities. Many of the remainder are likely to be doing voluntary work. It is clear that the majority of one-earner families are one-earners out of necessity rather than choice.

[Mr Marcus Jones (Nuneaton) (Con)]

I congratulate my hon. Friend on securing this important debate. He is making an important point about low-income families and the second person in the family having to obtain work. Does he agree that one of the biggest problems is that, for a second earner on a low wage, there is the massive impediment of child care costs, which usually take up most of that second income?

[Mr Jackson]

My hon. Friend makes a good point. We are fortunate that the ministerial teams in the Treasury and the Department for Education are thinking carefully about how important child care is. Balance is important. We must not send a message through the tax system that child rearing, caring for children and bringing up a family are less important than going out to work, but at the same time we must, as Conservatives, take a liberal approach, so we should not put disincentives in the tax system for those who want to work. One of the abiding negative legacies of the previous Government is the appalling, mismanaged tax credit system, which tied so many people up in knots and was a disincentive for them even to consider any form of work.

I will not detain hon. Members too much longer, because other colleagues wish to speak. In addition to the marriage and fairness argument, there is also the important “making work pay” argument. In his Conservative party conference speech this year, the Prime Minister placed great emphasis on the goal of building an aspiration nation. Realising that goal necessitates addressing the principal obstacle, namely that our marginal effective tax rate is currently a staggering 73% for many people in receipt of tax credits. This is hugely out of line with international best practice. The comparable OECD average is just 33%. I am afraid that the elusive right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) must bear that huge burden. Clearly, he has better things to do today than attend this debate and listen to descriptions of the mess he made of the tax credit system.

We have got ourselves into such a situation because we moved from placing the burden of recognising family responsibilities on both the tax and benefits systems, as in most large, developed economies, to placing it entirely on the benefits system. That necessarily inflates benefits and, in so doing, creates an inflated marginal effective tax rate and a huge disincentive to work one’s way out of poverty, wherein the person concerned only gains 27p in every additional pound earned. Across the OECD, comparable employees take home on average 67p for every additional pound earned. The introduction of a transferable tax allowance will restore to the tax system some responsibility for recognising family responsibility and thereby float some poorer families off benefits, releasing them from high marginal effective tax rates.

The transferable allowance policy is timely for those wanting the UK economy to grow, such that those trapped under the burden of crippling marginal effective tax rates are released—liberated into productive, constructive employment, wherein they can deliver the aspiration nation goal.

To date, Ministers pressed on the transferable allowance point have always reaffirmed the Government’s commitment to the policy and said that they will introduce it at the appropriate time. However, the truth is that if they do not act at the next Budget in March 2013 the appropriate time will have passed, because it will take at least 12 months from the passage of the legislation till the law can be implemented, because of information technology and other preparatory changes that Her Majesty’s Revenue and Customs will have to implement. We have now reached the crunch point, which is why I call on the Chancellor to announce in the autumn statement, a week today, that the 2013 Budget will introduce transferable allowances.

I am told that the cost of a transferable allowance restricted to married couples with a child under three would be less than £1 billion. If it were restricted to married couples with a child under six, the cost would be £1.4 billion. The cost would be £2.4 billion if it were restricted to married couples with dependent children or in receipt of carers’ allowance. These are not insignificant amounts, but they must be seen in context. At 2010 prices, £13 billion is being found to raise the threshold for everyone to £10,000, and some £3.3 billion is being found to increase the basic personal allowance by £1,100 next year.

[Mark Field]

For context, my hon. Friend will know that £2.4 billion is roughly eight days’ borrowing for this Government.

[Mr Jackson]

I am sure that the wise point made by my hon. Friend will be heard by the Minister, the Front-Bench spokesman for the Treasury.

In presenting these options, I hope that the Government do not opt to introduce the limited partially transferable allowance mooted in The Sunday Telegraph just published, which would be worth only £150, or £3 a week. If the limited funds available are such that we have to start with a limited transferable allowance proposal, it would be much better to focus a transferable allowance on those with young children, providing such families with a meaningful transferable allowance, rather than something minimal spread over all one-earner families.

[Jeremy Lefroy (Stafford) (Con)]

My hon. Friend is making a powerful argument. I agree with everything he said. Does he agree that tax allowances should be given by introduction of a transferable marriage allowance, rather than by substantial tax allowance given to higher-rate taxpayers on their pension contributions, even if they are earning six-figure salaries?

[Mr Jackson]

Exactly. My hon. Friend makes a good, important point. This is an opportunity to make real our commitment to fairness and equity.

It is worth noting that the Prime Minister himself seemed a bit bothered by the nature of the partial allowance proposal. On 10 April 2010, he told Sky News:

“Of course, I want to go further”

than just a partially transferable allowance

“and I’m sure over a Parliament we would be able to go further, but this is a good first step that says commitment is important, marriage is important. I want us to be the most family friendly country in Europe and this is one step along that road.”

For the reasons I have elucidated in the past 20-odd minutes, the transferable allowance policy is a win-win policy for this Government that will help us make our fiscal arrangement less hostile to marriage, deal with some current unfairnesses in our tax system and help to make work pay. I hope that the Chancellor does the right thing next Wednesday and brings in a transferable tax allowance, which will be good for our constituents and for the country.

09:58

[Jim Shannon (Strangford) (DUP)]

I am glad to have the opportunity to contribute to the debate on transferable tax allowances. I commend the hon. Member for Peterborough (Mr Jackson) for securing time for hon. Members to consider this important subject, on which, as the Member of Parliament for Strangford and a member of the Democratic Unionist party, I have received considerable correspondence. It is an important issue.

At Westminster, the DUP has been pushing the Chancellor to introduce recognition of marriage in the system. We are keen to support the Government on that policy, which the Conservative party advocated in opposition. That party’s proposal envisaged a system whereby married couples would be able to transfer part of their personal tax allowance to their spouse. An individual in the UK could earn £8,105 per year tax free under the Conservative party proposals, and if someone did not use their full personal allowances, up to £750 could be transferred to their spouse, which would amount to a tax cut of £150 for that family. Reports in the media have led us to believe that that might be on the way. The Minister will perhaps respond; he may not have Pandora’s box or all the answers today, but if the proposals are in the Budget or the autumn statement, we will give them our full support on the Floor of the House.

Until relatively recently, the UK recognised marriage in the tax system, but that changed as a consequence of decisions taken by the Labour Government. There is only one Labour Member here, and I usually support Labour on many issues in the House, but I am very much opposed to its position on this. The absence of Liberal Democrats from the debate tells a story in itself.

We find ourselves in the minority in the OECD. Only 20.1% of people in the OECD live in countries that do not recognise marriage or have a spousal allowance. In that context, it is not surprising that married couples get a bad deal. In “The Taxation of Families”, Pearson and Binder, using the latest figures from the OECD, illustrate that in 2011 a one-earner married couple on an average wage with two children faced a tax burden 42% greater than the OECD average. The hon. Member for Peterborough mentioned that in his contribution.

The UK tax system currently is intensely individualistic. Taxation gives single people with no family responsibilities a relatively easy ride, by comparison with married couples. That can be clearly seen in the fact that in 2011 the tax burden on a one-earner married couple on an average wage with two children was 73% as a percentage of that placed on a single person on the same wage, while the OECD average was just 5%.

The statistics illustrate that the UK makes things more financially difficult for married couples than our compatriots in the OECD do. To my mind, and the minds of most of us here, that is deeply concerning. I have always believed that marriage is a hugely important social institution, which provides significant benefits to the couple involved, the children born to the couple and society at large. We certainly should not make it more difficult for couples to marry in this country than it is in other developed countries, such as France, Germany and the USA. Why would we not want to recognise the importance of marriage and show our support for children being brought up by parents in the stable environment of marriage?

For the couple, marriage produces significant benefits, including public benefits that are not without consequence for the Exchequer. The figures have already been outlined. Research indicates that even the poorest 20% of married couples are more stable than all but the richest 20% of cohabiting couples. Marriage has a positive impact on the mental well-being of the couple. The health gain of marriage could be as large as the benefits of giving up smoking, for example. Such examples are only a small portion of the benefits that marriage can often bring to couples who enter into it.

The social science evidence on the impact of marriage on children demonstrates significant public benefit. The scale of the benefits to children raised in married families is striking. The hon. Member for Peterborough outlined the differences between the outcomes of children of married parents and of unmarried parents. I will not go over that again, owing to the lack of time, but the need for a change has been clearly illustrated.

It is important to stress that I am not so naive as to suggest that Governments have the capacity to make marriages happy and strong—they are not marriage guidance counsellors or Relate. The Government do however have a role in not making it more difficult for couples, who fall in love and want to be together, to marry in this country than in it would be in another country. The current policy position is misguided and we urgently need to change direction.

[Andrew Bingham (High Peak) (Con)]

As the hon. Gentleman said, it is not the Government’s role to be marriage guidance counsellors, but does he agree that introducing transferable allowances, as my hon. Friend the Member for Peterborough (Mr Jackson) outlined, would send a strong and clear message to the whole population that we support marriage? I have been married for 26 years—I hope I have got that right! It is a fantastic institution and has been for many years.

[Jim Shannon]

As someone who has been married for 25 years—just a year less than the hon. Gentleman—I wholeheartedly endorse what he says. Marriage is important for a great many of us.

The problem can be remedied in a positive way by introducing a transferable allowance for married couples, as the hon. Member for Peterborough suggested. The Prime Minister and the Conservative party have promoted the idea, but the main barrier has been the Liberal Democrats. The Deputy Prime Minister has said that

“we should not take a particular version of the family institution, such as the 1950s model of suit-wearing, breadwinning dad and aproned, homemaking mother, and try and preserve it in aspic.”

That statement clearly demonstrates immaturity and inconsistency on his part. The proposal is not about keeping women away from work and forcing them to stay at home, but about allowing the flexibility that we should have in the tax system, so that if either one of the couple does not use their full tax allowance, a portion of it can be passed to the other. At the same time, the Deputy Prime Minister has called for paternity leave to be increased from two to six weeks, but he does not want to make it easier for parents who already stay at home and do not use their full personal allowance. I suggest that that shows double standards.

Such an allowance would make the tax burden more sensitive to family responsibilities. It would also disproportionately benefit families in the poorer half of the income distribution. The Institute for Fiscal Studies, commonly referred to by all parties in the House, says that 70% of the benefit from a transferable allowance would go to those in the lower half of the income distribution. In other words, it would benefit those who need it most in a fair and balanced way, as it should.

We are all interested in reducing child poverty. The introduction of a transferable allowance would particularly help to address it by reducing the number of children living in households with an income below 60% of the median. In considering that point, it is important to remember that how materially wealthy individuals are depends not simply on income but on the size of their family.

A couple on £35,000 with two children is likely to be better off than only 37% of the population, even when tax credits and child benefit are taken into account, whereas a single person on £35,000 is in the top 20% of the population. We can blind people with figures, but they illustrate a clear trend—those in a marriage are disadvantaged under the current system. A two-earner couple with an income of £35,000—one working full-time and one part-time—is also in the poorer half of the population, but better off than the one-earner family. If the income were split equally, they would probably be in the fifth sector—better off than 44% of the population.

Some 2 million children are in one-earner couple households. Around 900,000 of them are in households with an income below 70% of the median. Of those, between 600,000 and 700,000 live in households with incomes below 60% of the median. A transferable allowance would reduce the number of households with incomes that fall below 60% of the median. It makes sense to make changes and to make them soon. A transferable allowance would reduce the number of households currently facing a 73% marginal tax rate. In so doing, it would particularly help the poorest one-earner families, whose efforts to earn their way out of poverty are jeopardised by the extraordinarily high tax rate.

The 73% marginal effective tax rate is a direct consequence of the UK tax system’s failure to recognise family responsibilities in any way. It places the burden entirely with the benefits system, rendering the withdrawal of benefits a more significant event for marginal effective tax rates. In the current tax year, a quarter of all families have an effective marginal tax rate of 73% or more: income tax accounts for 20%; national insurance contributions for another 12%; and the tax credits taper accounts for a further 41%. A family with two children and an income below £31,356 will pay 73% on any additional income. A family with four children will pay 73% on incomes below £43,838.

The figures do not take account of pension payments, so in many cases the 73% tax rate reaches even higher up the income scale. When pension contributions are taken into account, that 73% could apply to families earning £45,000. Around 2 million families are in that position, so one in four of all families in the United Kingdom of Great Britain and Northern Ireland faces a marginal rate of 73% or higher. That is deeply concerning and is an important reason for change.

Things will get even worse with the introduction of universal credit. The marginal effective tax rate of such families will actually increase from 73% to 76%—another three percentage points. Only 300,000 people have been affected by the top 50% rate, but, by contrast, 2 million will be locked into a system in which the Treasury will take back more than 76p of every extra pound earned. They are not “welfare spongers” but hard-working families, whom we are here to represent, which is why we are discussing this proposal today. I commend the hon. Member for Peterborough for securing the debate.

The economic and social costs of such a high marginal rate on such an important section of the community might be difficult to calculate, but they are considerable. The only way to reduce the number of families trapped by high marginal tax rates is to reduce the number who need to receive credits. The way to do that is to change income tax rates so that they become more sensitive to family responsibilities and place less of a burden on families, who will therefore not need to be compensated through credits. Transferable allowances are an obvious way of doing that.

The Government are right to place the economy at the top of their agenda—I support that—and to try to cut the deficit to reduce our debt burden. However, underlying problems in our country are contributing to the financial burden on the state. Strong marriage and strong families are key to fixing what the Prime Minister has called “broken Britain”, which is why I support them.

In parliamentary debates and questions, I have put it on the record that, as others have stated, it will take 12 months from the passing of legislation to make changes and implement them. If the Government introduce such changes in March 2014, they will be too late; it needs to be done in this autumn statement to come into effect next year.

Supporting the transferable tax allowance and addressing the double penalty of tax credits and the benefit system would send a significant message and signal the importance that this Government—our Government—are placing on marriage. The proposal will have the full support of the Democratic Unionist party. Today’s debate is exactly a week from the autumn statement, so I call on the Minister and the Chancellor to prioritise the announcement next week that the transferable tax allowance will be in the 2013 Budget. That is the best way forward.

[Several hon. Members]

rose—

[Mr Andrew Turner (in the Chair)]

Order. I think that Members wishing to speak will have about seven minutes each.

10:09

[Fiona Bruce (Congleton) (Con)]

I pay tribute to my hon. Friend the Member for Peterborough (Mr Jackson) not only for delivering an excellent speech, but for his dogged pursuance of the issue during this Parliament.

Supporting marriage in the tax system, certainly where children are involved, is a social justice issue. It is about supporting children to flourish, and helping them to get the best start in life and fulfil their potential. The Government support children, especially disadvantaged children, in many ways—providing nursery places, the pupil premium, school dinners and university funding—so why do they not support children in one of the best ways we can, by supporting a stable, secure environment in which they can grow up? We focus so much on ensuring that children have the best education within the school day, but a crucial factor in enabling them to take advantage of that education is if, at the end of the school day, they can go home not to a chaotic environment but to a stable and secure one, not least so as to do their home work, rest and prepare for the next school day.

My hon. Friend cited some excellent statistics from the Joseph Rowntree Foundation and the Centre for Social Justice on the better development outcomes of children from stable families. I do not want to repeat those, but I will mention others. The Centre for Social Justice, to which I pay tribute for its work, has informed me that children in families with transitional relationships are eight times more likely to be on a child protection register, and 50 times more likely to die of a deliberate injury in the home. There is no doubt that children living in families with transitional—indeed, sometimes chaotic relationships—suffer acutely; the converse is also true.

As the Joseph Rowntree Foundation has said, the effects of children suffering behavioural problems spill out to the rest of society. Relationship breakdown for children means that they suffer grief—often far into adulthood—and so fail to fulfil their aspirations. Therefore, not only for children during childhood but for wider society, we should support marriage in the tax system, which is about sending out a message that it is good for children, but it is also good for society, and about saying that we value the commitment, care and self-sacrifice of parents. Children are a blessing, but they are also a responsibility—they involve hard work—and many parents, when one is a non-earner, give up their earning capacity to help bring up the next generation in a positive way, from which we will all benefit as the years go by.

Marriage is a more secure environment, which is why we should support those who are married and not only those who cohabit. The Department for Work and Pensions recently announced that only 55% of children still live with both parents by the age of 15, but 97% of those families are headed by married couples. Another advantage is that a married couple’s tax allowance would effectively target the poorest with that benefit. The Institute for Fiscal Studies has said that such an allowance would have a disproportionately positive effect on those in the lower half of the income distribution, because 70% of the benefit would go to them. We all support an increase in the personal allowance. I would like that to be increased further, but an increase to £10,000 will benefit even those in the highest tax brackets. A married tax allowance is simply more targeted and therefore more effective for benefiting children in the poorest and least advantaged homes.

I therefore join my hon. Friend in calling for the Chancellor to bring in, as early as possible, a transferable tax allowance for married couples: yes, because it was in our manifesto; yes, because it was a coalition agreement commitment; yes, because it will recognise marriage in the tax system and, in so doing, bring us more closely into line with other OECD countries; yes, because it will rebalance the tax burden on married couples compared with single people; yes, because it will send out a signal from Government that they value marriage, and recognise and appreciate the contribution that married couples make to wider society—with elderly relatives or voluntary work—as so many non-earner married people do; yes, because the greatest benefit will accrue to the least well-off; yes, because it is worth making such an investment that will reap its benefits and rewards for society not only in the next few years and while today’s children are growing up, but potentially for generations to come as those children grow up to be responsible, positively contributing citizens; yes, because it will contribute to social mobility, helping children from the poorest households to achieve a better outcome in life and to achieve their aspirations; and yes, as I said at the outset, because it is a matter of social justice. It is simply the right thing to do.

10:09

[Andrew Selous (South West Bedfordshire) (Con)]

It is a pleasure to follow my hon. Friend the Member for Congleton (Fiona Bruce), and I congratulate my hon. Friend the Member for Peterborough (Mr Jackson) on securing this important debate.

My contention is that marriage is too important an issue for us to be neutral about. We need to be unashamedly positive about its benefits. In doing so, we are not in any way being negative about people who have any other lifestyle. As has already been said, the tax system sends a multitude of messages about things that we approve of and disapprove of. We send positive signals about bicycling to work and Christmas parties—this morning, there is talk about putting up the unit cost of alcohol—and that is all done through the tax system. It is perfectly logical and sensible to do the same on an issue as important as marriage, which has such profound effects on family life, on outcomes for children and on social justice in this country.

I shall briefly repeat the benefits of marriage. When parents split up, their children are 75% more likely to fail at school, 50% more likely to have alcohol problems and 40% more likely to have serious debt problems. It is a shocking fact that by the age of 15, a child is more likely to have a television in their bedroom than a father who still lives at home. As my hon. Friend the Member for Congleton said, for children aged 15 who still live with both parents, 97% of the couples in question are married.

In 1972, there were 426,000 marriages in England and Wales. By 2010, that number had declined by 43% to 241,000. We should not brush that aside, because it is a matter of great concern. We need to try to reverse the trend in order to achieve positive outcomes for children. If we look at other developed countries, we find that Britain is unusual in not having some form of transferable allowance. We have had a lot of statistics already, but the one that stands out for me is that single-earner couples in the United Kingdom are paying over a third more in tax than those in any other major developed country. It is Britain that is the odd one out. If we were to bring in the transferable tax allowance, which is in the coalition agreement, we would be getting the United Kingdom back in line with almost all of our major international competitors.

The Heritage Foundation in the United States has published some interesting data, based on US Census Bureau figures, which show that married school leavers have a lower poverty rate than that of single university graduates. That is a powerful figure. We rightly tell children in this country that it is good for their future to finish school; we would think it extraordinary if people said anything else. We know that people will have better life chances and higher incomes if they complete their schooling, but, as I said earlier, we need to be unashamedly positive about marriage and we need to send out the signal about the beneficial effects of marrying before having children. Bringing in the transferable tax allowance is just one part of sending that message to society.

I have already given the figures for the decline in marriages, which is steep and alarming and needs to be reversed. However, we need to measure such matters more carefully. I contacted Central Bedfordshire council before this debate to get the marriage figures in the two registry offices in my constituency. In 2011-12, in Leighton Buzzard and Dunstable, there were 183 marriages, which was slightly more than the year before and fewer than the figure in 2009-10. Those are the sort of figures that Members of Parliament should be aware of, because it is very true that we value what we measure and we measure what we value. I am proud to be here supporting my hon. Friend the Minister, and asking him to fulfil what was in our election manifesto, which he and I stood on, and which is in the coalition agreement. Publicly, the Government have said that they will do this; it is the right thing to do, and I am pleased that so many colleagues are here this morning to make this important case.

10:23

[Guto Bebb (Aberconwy) (Con)]

It is a pleasure to serve under your chairmanship, Mr Turner. I congratulate my hon. Friend the Member for Peterborough (Mr Jackson) on instigating this excellent debate. Most of the statistics and comments that I was planning to make have already been made by other Members, so I will not repeat them. It is important that we, as Members of Parliament, try to be true to the manifesto commitments upon which we stood. Certainly during the numerous campaign meetings that I had in my constituency, the transferable tax allowance was discussed, as was the Liberal Democrats’ policy of increasing the personal allowance. As a Government, we have invested hugely in increasing the personal allowance, but as yet there has been no move towards a transferable allowance. It is important that we get a signal, either next week or certainly before the next Budget, about such allowances.

The historical situation shows quite clearly that the situation for marriage within the tax system has changed quite dramatically over 40 years. We have gone from a situation in which the marital status of an individual was acknowledged by the tax system to a situation in which we have an individualistic tax system. We cannot complain that we have an individualistic society if we have a tax system that basically says that a stable family life has no value, and that is something that we must deal with. Historically, the figures show that the increase in taxation for a single person from the mid-1960s to 2011 has been very slight, moving from 23% to 25% of tax. Very low-income and high-income families have seen their tax burden fall, while the squeezed middle—one-earner families in particular—are penalised by the tax system, with their tax contribution doubling over a period of 40 years.

The signal being sent out by the tax system has been that stable families, or the old-fashioned 1950s family, as the Deputy Prime Minister described them, are the ones who are being penalised. Effectively, their choice is being penalised by the tax system, whereas every other choice seems to be applauded.

I wonder about the position of our Liberal Democrat colleagues, whom I defend on a regular basis because they have been very good at supporting the Conservative party on important changes on welfare reform and on dealing with the deficit. However, I have been surprised by their response to the issue of recognising marriage within the tax system. Of all parties, the Liberal Democrats look to Europe for a lead in so many areas. They should look at all the other countries in the European Union and ask themselves, “Why do they recognise marriage within the tax system and we do not?” We are alone with only Mexico in the OECD in not recognising marriage within the tax system, and I do wonder, even from the Conservative Benches, whether we should, on this occasion, take a lesson from our European partners. If they can recognise marriage within the tax system, we should try to do the same.

Again, on an international basis, it is the average-income family that is penalised in this country in comparison with other countries, and that is a message that is coming through strongly when we read the newspapers and the letters from constituents who are now seriously complaining about the impact of increased prices in the shops and the increased costs of family life. That frustration is increased by the fact that they also feel they are not being supported by the Government in any way, shape or form. Explanations for that will be given by the Treasury, but it is important to recognise that the pressures being faced by families also reflect the fact that they are not, in their view, being supported in the decisions they have made in trying to provide their families with a stable environment.

We should consider a transferable allowance. As for the costs involved, I recognise the fact that even a small contribution towards making a change would be comparatively low cost compared with the cost of increasing the personal allowance. I have supported an increase in the personal allowance, but some of the analysis that has been made of the costs involved indicates that a lot of the benefits being derived from that increase have actually gone towards those in the higher percentages of the income distribution scale. Those in the top half of the income distribution scale have benefited pro rata to a higher extent from the increase in the personal allowance than those in the lower part. Interestingly, the research being done by organisations such as CARE shows quite clearly that if we target a transferable allowance, most of the benefits would go to those in the bottom half of the income distribution scale, which is something that we should take into account. As my hon. Friend the Member for Congleton (Fiona Bruce) stated, this is a social justice issue; it is trying to ensure that if the Government are supporting people within society, then that support should be targeted at those most in need.

CARE has highlighted one big problem with our tax system, which is that we seem to view individuals in relation to their income without taking into account the costs that they face, which come from their responsibilities —whether they have dependants and whether they are a single-earner families. Again, while a transferable allowance would be a small step, it would show quite clearly that the Government value some of the choices that people make in society to ensure that their children have the best start in life. Certainly, there is some merit in the comments made by my hon. Friend the Member for Peterborough about targeting a transferable allowance initially at those with children under the age of three or those with children under the age of six. In that way, we could perhaps start the process of having a transferable tax allowance once again.

As I said, the case that has been made today is very strong. There is certainly agreement within Westminster Hall this morning that marriage is an institution that we value and that we, as a society, should put a premium on. That is in no way a condemnation of any other choice that people make, but the tax system that we have at this point in time is actually stating that it places less value on marriage than it does on other options. That is the key point. We are not asking here for marriage to have a special status; we are simply asking for marriage to be treated in a way that is appropriate and in keeping with the way that the tax system treats other options. That would send a very strong signal to society and to our constituents.

I will close by saying that I fully endorse the comments made by all the speakers so far, and I look forward to hearing the comments of the Treasury Minister.

10:30

[Mr David Burrowes (Enfield, Southgate) (Con)]

I congratulate my hon. Friend the Member for Peterborough (Mr Jackson) on securing this important and timely debate as we lead up to the 2013 Budget. It is timely in the sense that the clock is ticking in terms of our fulfilling our clear promise on this issue, which was made both in our manifesto and in the coalition agreement.

I am proud to champion marriage, as we all are. In addition, I am proud of the fact that the Prime Minister has also been a clear champion of marriage—consistently so—both before the election and as Prime Minister. His words in the run-up to the 2010 election were very clear. He said:

“I absolutely feel at my very core that recognising that…marriage matters is something we should not say quietly but something we should say loudly and proudly.”

What my hon. Friends have said loudly and clearly today is that marriage matters and that we need to show in the tax system that it matters. It matters not only because we say so but because it is a social institution that provides many benefits to the whole of society, although today we are particularly focusing on the poorest, who we consider will benefit from marriage being supported by the state.

Given the commitment in our manifesto and, indeed, in the coalition agreement, I recognise that I do not need to convince my hon. Friend the Minister of the principle of recognising marriage in the tax system. We will leave it to the Opposition—indeed, to the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), who is the lone Opposition Member here today and whom we will hear from shortly—to try to justify why we should continue where the previous Government left off, which is not only failing to recognise marriage but discriminating against married couples in the tax system. The issue facing the Government today is not “if” but “when and how”.

Given the opt-out for the Liberal Democrats under the coalition agreement, the Deputy Prime Minister—as he has always been referred to—last year decided freely to express his opposition to supporting marriage in the tax system. He is free to do so. We are a coalition. I am not sure that we would describe ourselves as a “marriage”, or a cohabitation. It is a relationship that certainly was not formed on the basis of love but on the basis of fiscal reasons, to tackle the huge deficit and the legacy left by the previous Government.

[Mr Stewart Jackson]

The sad thing is that we are heading for divorce. [Laughter.]

[Mr Burrowes]

I am grateful to my hon. Friend for that intervention. It is a time-limited contract, unlike other marriages, but the issue is that there are also good fiscal reasons why this partnership, or relationship, should seek to have as a priority the implementation of this promise, despite the differing views in the coalition.

We need to tackle the Deputy Prime Minister’s argument; he freely expressed his views in one way, so we are free to express our views in another. As has already been mentioned, he said in December 2011:

“we should not take a particular version of the family institution, such as the 1950s model of suit-wearing, breadwinning dad and aproned, homemaking mother, and try and preserve it in aspic.”

It is important for us to make the point very clearly and to emphasise, as hon. Friends do, that the Deputy Prime Minister and others, such as the Opposition, are wrong about the two-parent family and wrong about the motives of others. Indeed, their arguments are old and very much out of touch with the British public, and they are themselves increasingly preserved in aspic. We are not harking back to the outdated 1950s model, and it is very condescending to caricature not only our views in that way but the married people up and down the country and those who want very much to support marriage. Marriage is a popular institution—increasingly so—and it is one that the public welcome.

We simply believe that marriage is best for children and for society, and the evidence supports us. A review by the Institute for Fiscal Studies of the research in this area, which has already been mentioned, shows unequivocally that

“children raised by two happily and continuously married parents have the best chance of developing into competent and successful adults.”

The evidence provides clear support for implementing policies that encourage couples to stay together, and shows that married couples with children are far more likely to stay together than their unmarried counterparts.

It has already been quoted, but it is important to keep repeating the evidence of the “Breakthrough Britain” report, which was published by the Centre for Social Justice. It demonstrated that children born to unmarried parents have a nearly one in two chance of seeing their parents split up by the age of five, whereas for children whose parents are married the figure is only one in 12. That is a huge difference that the state cannot ignore; indeed, the state needs to recognise it properly.

We all recognise that stability clearly matters. Most single parents undoubtedly do a fantastic job raising their children in difficult circumstances. We are not here to judge or to make moral judgments on people’s relationships, but the evidence is very clear that on every significant measure children who are brought up in married families do better on average than those brought up in other relationships.

[Andrew Selous]

Does my hon. Friend agree that this is particularly an issue of social justice for poorer people? Wealthier people—if they are able to do so—can of course transfer their unearned income to their spouse in the form of dividends, rents, interest and income, and make use of a transferable allowance, whereas poor people cannot. This is therefore about doing the right thing by poor people, because wealthier people can already take advantage of what we want for everyone.

[Mr Burrowes]

I agree, and it is very important that we recognise the clear data that make that point. The Centre for Social Justice has said that the difference in family breakdown risk between married and cohabiting couples is such that even the poorest 20% of married couples are more stable than all but the richest 20% of cohabiting couples. It is very important to recognise that this issue is one of social justice.

We recognise that most of the serious social problems that face us have their roots in the breakdown of the family. It is important for Conservatives to recognise and to make the point clearly that we support marriage. Far from making the case for the 1950s model of supporting marriage that I referred to earlier, we want a thoroughly modern and progressive measure that is underpinned by social justice.

As my hon. Friends have said, we are out of step with the majority of other developed countries. Most of the individuals living in OECD countries who are in a system that does not recognise spousal obligations are in either the United Kingdom or Mexico—and that cannot be right. Among highly developed economies, the UK is on its own in operating a tax system that ignores spousal obligations.

As my hon. Friends and I have said, this is an issue of social justice. The Institute for Fiscal Studies and others have made it very clear that, if a transferable allowance were implemented, 70% of the benefit accrued would go to those who are currently in the lower half of the income distribution level. The introduction of a transferable allowance would also reduce the number of children living in households below 60% of the median income, and that is where we want to be.

It is important that we properly urge the Chancellor—my hon. Friends and I have clearly done that this morning—to make good our collective promise and introduce a transferable allowance for married couples with young children. That is where the focus is. We recognise that it is not adequate simply—in a minimalist way—to have a partial transferable allowance that would be worth—what?—£150 a year, or £3 a week. That would also open us up to some criticism. We need to focus on and target married couples with young children.

[Fiona Bruce]

Perhaps I could mention that some polling from the Centre for Social Justice has found that more than 80% of adults agree that more should be done to help parents who wish to stay at home to bring up their children in the early years. Does my hon. Friend agree that support for child care does not always mean that child care needs to be outsourced, and that some of the best support can be to help parents to stay at home to bring up their own children?

[Mr Burrowes]

I heartily agree with my hon. Friend. We need to look in the round at the benefits of child care—the social and economic benefits. Many of us know the value of well-supported care at home, which we sometimes do not properly quantify. That is a message that we need to amplify.

In conclusion, we are on the side of some of the poorest families in Britain, and we can help them by fulfilling the promise in our manifesto and in our coalition agreement. An unimplemented promise would not be a promise kept. We need to implement our promise properly and fully in the Budget of 2013.

10:39

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

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

I congratulate the hon. Member for Peterborough (Mr Jackson) on securing this debate. We have heard many sincere contributions. The previous speaker—the hon. Member for Enfield, Southgate (Mr Burrowes)—said that he was looking forward to hearing my response, but I think he should be looking forward instead to hearing the Minister’s response, because that is where the lack of clarity lies about what is actually going to be happening with this policy proposal that hon. Members have so vociferously supported this morning.

This is an important debate, given the lack of clarity and detail from the Government on what kind of scheme—if any—they plan to introduce. Conservative Members have repeated—I agree with their comments—that they intend to introduce some kind of recognition for marriage in the tax system; indeed, the Prime Minister himself repeated his commitment to such a plan at one of his first Prime Minister’s Question Times. Since that day, however, we have had no confirmation of what the policy might look like.

I want to tackle head on the allegation that families are a low priority for Labour Members. Quite the contrary: the Labour party stands up daily for hard-pressed families, who are feeling the squeeze in these tough economic times. However, we look to stand up for all families, not just couples who are married where one spouse stays at home and the other earns at the 20% rate of tax. It is those couples that the hon. Member for Peterborough and the Members supporting him propose to support.

It has been quite interesting to hear the number of comparisons made with our European neighbours and to hear them spoken of with such great admiration, with Members wanting to follow their lead. That is refreshing in many ways.

I understand the importance of marriage, but I am not convinced that recognising it through the tax system as proposed is the right way to go about this, and I will set out clearly the reasons why.

[Mr Stewart Jackson]

Perhaps the hon. Lady is feeling her way towards informing us of what the Labour party would do if this issue were brought to a Division in an indicative vote on the Floor of the House. However, I should remind her that the previous Labour Government established the precedent of recognising marriage in the tax system in 2007, through transferable allowances in respect of inheritance tax, so it is not as though the Labour party has never considered transferable tax allowances to support the family.

[Catherine McKinnell]

As I said, I am going to set out clearly why we do not agree that this policy is the right way to go about supporting the families Members believe it will support.

When the Minister without Portfolio told The Daily Telegraph that married couples should not count on getting a tax break before 2015, the party machine swung into action to correct it. A retraction was issued within 24 hours, and the Minister without Portfolio now completely accepts that a tax break will be introduced and that tax is a matter for the Chancellor. It is therefore good that we have the Exchequer Secretary with us to clarify what the Government plan to do, because it has been two and a half years, and Members on both sides of the House are waiting to hear the Government’s proposals. As Members have said, the Conservative party set out in its election manifesto its view of what a tax break for married couples might look like, but times have changed significantly. I therefore look forward to the Minister telling us what the policy might look like and whether it will be implemented, and I am sure other hon. Members look forward to his remarks in the same way.

The strength of feeling on this subject is clear from the number of Conservative Members who have contributed, and that is entirely appropriate. There are, however, serious concerns about the proposal, and Members have referred to the Liberal Democrat party.

[Jim Shannon]

I should say that the Democratic Unionist party is also on record as supporting the transferable tax allowance.

[Catherine McKinnell]

I apologise to the hon. Gentleman; I was going to pay tribute to his comments a little later. I am facing the Conservative Benches, and I take his point.

Many Members have mentioned the Liberal Democrat party, which was very ready to abandon its principles on tuition fees and the VAT bombshell, which it campaigned so hard against. However, Liberal Democrat Members have said clearly that they refuse to support this policy in principle, although no concrete proposals have come forward, so we still do not entirely know what they will do or whether they will support the proposal in its final form. We await clarification on that too.

At a time when families up and down the country are being hit hard by cuts to tax credits, a squeeze on their living standards, rising prices and frozen wages, with pensioners losing their tapered relief, and young people finding it harder than ever to get into work, many people will find it regrettable that Conservative Members’ focus today is on securing a tax break for a limited number of married couples. The previous Labour Government based their help for families on need and on a clear and targeted approach to alleviating child poverty, rather than on distinguishing between particular family structures.

If the policy the Government announce is the same as that set out in the Conservative party’s manifesto, it will, as Members have acknowledged, be worth just £2.88 a week. Furthermore, it has been targeted at an extremely narrow group: the only people who will be able to claim this tax benefit will be married couples where one partner earns above the income tax threshold and the other does not; whether the couple has children will be entirely irrelevant.

[Andrew Selous]

rose—

[Catherine McKinnell]

I know the hon. Gentleman has raised concerns about that matter.

[Andrew Selous]

The previous Labour Government recognised family breakdown as a cause of child poverty; indeed, the Treasury Minister and I were shadow Ministers when the Child Poverty Act 2010 went through the House. Would the hon. Lady like to confirm that now? Will she acknowledge that family breakdown is a significant cause of child poverty?

[Catherine McKinnell]

What is rather counter-intuitive about the arguments being put forward today is that this tax incentive, small though it is, would be targeted at the very families that are not in dire straits. Members seem to be turning their backs on children in families that are facing the difficulties they have described. Unmarried couples, including those with children, have lost out on tax credits—many have had their tax credits cut because they cannot find more hours of work—or have been hit with housing benefit cuts, but they will not benefit from these changes. If a marriage ends for circumstances entirely out of somebody’s control, or if they are widowed or have to flee the marriage because of violence, they will lose the proposed benefit, but it could still be available to the perpetrator of the domestic violence, who could get married again. Nor would this benefit be available to married couples where both partners are working, unemployed or low earners.

Hon. Members have mentioned analysis by the Institute for Fiscal Studies, but that analysis shows that this benefit will be available to only 32% of married couples. This policy is meant to recognise marriage in the tax system and to send an important signal that we value couples and the commitment people make when they are married. Do Members believe that only 32% of marriages should be valued, while the other 68% are of less value and less worthy?

[Guto Bebb]

Will the hon. Lady give way?

[Catherine McKinnell]

Unfortunately, I do not have much time. I appreciate this is an important subject, and I would like to give Members more time, but I want to finish my comments.

I strongly disagree with the hon. Member for Enfield, Southgate, who attempted to dismiss out of hand any notion that this policy recognises not marriage in general but just one type of marriage, where one partner is the breadwinner and the other stays at home. He dismissed the Deputy Prime Minister’s comments that such things are a throwback to the Edwardian era, but that is a sincere concern for many people.

I appreciate the comments of the hon. Member for Strangford (Jim Shannon) and the sincere manner in which he made them, but I disagree with him. Designing the system in a way that penalises all couples and families that do not fit in with one specific model, regardless of need, sends out a strong signal—intentionally, it would seem—that one type of family is worth more than another and that one type of parent is worth less than another. That is a very dangerous signal to send to children. It is unfair and out of touch, and is not the best way to support families in the tough times of 2012.

[Andrew Selous]

Will the hon. Lady give way?

[Catherine McKinnell]

I do not have much time, and I wanted to make a final point. The hon. Member for Cities of London and Westminster (Mark Field) made a powerful point, which I would make too: the Government, while talking about promoting or supporting marriage in the tax system, are removing valuable child benefit for many families and children.

Unfortunately I have run out of time, but I will be interested to hear what the Minister has to say in response to my concerns and those of other hon. Members.

10:50

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

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

I congratulate my hon. Friend the Member for Peterborough (Mr Jackson) on securing the debate, on making such a forceful, passionate and well-informed speech and on ensuring that there would be significant participation—at least among my hon. Friends. I congratulate all those who made speeches: the hon. Member for Strangford (Jim Shannon), and my hon. Friends the Members for Congleton (Fiona Bruce), for South West Bedfordshire (Andrew Selous), for Aberconwy (Guto Bebb) and for Enfield, Southgate (Mr Burrowes).

The debate has demonstrated the degree to which members of my party value commitment and how important we believe the institution of marriage to be to society. That point came across clearly, and, as has been pointed out on several occasions, the Conservative party said, in our 2010 manifesto, that we would recognise marriage and civil partnerships through the tax system. We want to send a clear message that marriage is important and commitment is valued, and that we want to encourage and support hard-working families.

In the past two and a half years, the Government have taken a lot of action to help hard-pressed families in difficult economic times, and I want to say a word or two about some of the steps we have taken before returning to the specific issue of marriage. The Chancellor has said, in his principles for good taxation, that our tax system should be fair, rewarding work and supporting aspiration, and that it should ask most from those who can most afford it. In the context that the Government inherited a difficult financial position in 2010, we have taken steps to bring Britain’s tax system into line with those principles. First and foremost, we chose to focus on tackling the deficit and promoting growth. Among other things, we have focused our efforts on reforms that are intended to ensure that work pays—that point was raised by several hon. Members—including through the introduction of universal credit and our successive increases in the personal allowance.

Given the current economic climate, it is more important than ever that we recognise the wide variety of pressures faced by working families, and we have taken action to help them. For a start, our policy on the personal allowance has helped low and middle earners by improving rewards for work and putting money in their pockets. We have said that raising the personal allowance to £10,000 is our priority for the income tax system, and we stand by that. In the June 2010 Budget, we announced a £1,000 increase in the personal allowance for those aged under 65. We talked about making real-terms steps through the rest of the Parliament to achieve our goal, and those were not idle words, because a further increase of £630 followed at the 2011 Budget. This time, the benefits were passed on to higher rate taxpayers, which meant that there was a real-terms increase of £42 for every taxpayer earning up to £115,970. We promised that we would raise the personal allowance by at least the equivalent of the retail prices index until our objective of £10,000 was reached, but both those increases were significantly above inflation, thus making a real-terms difference to hard-working people.

Those two announcements have taken the personal tax allowance from £6,475 in 2010-11 to £8,105 in 2012-13, and basic rate taxpayers have gained £210 a year in real terms. In the 2012 Budget, we went further and announced an increase of £1,100 from April 2013. That is both the largest real-terms increase in the past 30 years and the largest ever cash increase in the personal allowance. The increase will take the allowance to £9,205 from April 2013, which will provide a real-terms gain of £170 for most basic rate taxpayers in 2013-14. The £10,000 goal is now within touching distance.

Other policies, such as on cutting fuel duty, on council tax, and on keeping interest rates low, have of course helped hard-pressed families. We have provided extra funding to support family support services. The Department for Education set up a relationship support division worth £30 million over four years, which will encourage stability—the very thing that several hon. Members have raised in the debate—and provide support for couples who are experiencing difficulty in their relationship. We hope that that will help some couples to stay together, and that when that is not possible, for whatever reason, it will lessen the impact that the breakdown of parents’ relationships can have on children.

We have touched during the debate on child care. The Government have taken steps to help families with three and four-year-olds by increasing the child care support that they get in a week, as well as to extend support to 260,000 disadvantaged two-year-olds. Indeed, we are looking at what we can do to improve the affordability and accessibility of quality child care.

Universal credit has been touched on in the debate. We are reforming the benefit system to ensure that work pays. Entitlement to universal credit will be based on household income and a single payment will be made to the whole household. That will support family budgeting and ensure that there is no penalty for families, whether one parent chooses to stay at home or both choose to work. Families will be able to keep their benefits for longer before withdrawal at a single rate, which is a much needed improvement on the current system of multiple earnings disregards, as multiple withdrawal rates can leave families confused and trapped out of work.

[Mr Stewart Jackson]

Will the Minister disabuse the Opposition of the notion that the policy is about giving married couples an unfair tax break? It is about nudge behaviour, so that they can make a proper choice between cohabitation and marriage, which is a different thing.

[Mr Gauke]

My hon. Friend was right to point out that the previous Government recognised marriage in the context of inheritance tax, which is generally applicable to wealthier households, yet seemed resistant to any recognition of marriage in the tax and benefits system that would help poorer households.

Marriage and civil partnerships are about commitment and stability. They represent a firm promise to stick to something and keep working at it. We want to rectify the way our tax and benefits system relates to that. Studies have shown that married couples are less likely to split up than cohabiting couples, and stability is vital to children. An unstable home life can have a detrimental effect on their happiness and development, and that has been shown by numerous studies, some of which have been quoted today. A recent example is the “Understanding Society” survey by the Institute for Social and Economic Research, which found that parents’ happiness in their relationships had a quantifiable effect on the happiness and well-being of their children. Family is one of the most important influences on a child’s development. The family is where one learns a sense of responsibility. It is where people learn how to behave and how to treat others, and about the things that are important in life.

We are committed to finding ways to support marriage in the tax and benefits system. My hon. Friends will be aware that at the general election we set out a policy of allowing married couples and civil partners to transfer up to £750 of unused tax-free personal allowance when the recipient is a basic rate taxpayer. There is, as we have heard, a reference to that in the coalition agreement, with a statement that the Liberal Democrats can abstain on transferable allowances. None the less, the Government—from the Prime Minister downwards—have made it clear that we remain committed to recognising marriage in the tax and benefits system. I reassure hon. Members that considerable work has been done to examine ways of doing that, and we have heard various ideas about where we should focus our attention during the debate.

During difficult economic times, we want to provide real, tangible support to families. We remain committed to recognising marriage in the tax and benefits system, the case for which was powerfully made by several of my hon. Friends. Our policies have helped hard-working families. It is true that we are prioritising increasing the personal allowance, which increases the rewards for work for those on low and middle incomes, but we remain committed in the way that I have set out.

Transit Visas (UK Trawlers)

Wednesday 28th November 2012 Westminster Hall

11:00

[Oliver Colvile (Plymouth, Sutton and Devonport) (Con)]

It is a great pleasure and delight for me to make my speech under your chairmanship, Mr Turner. I pay tribute to the Backbench Business Committee, which selected the debate.

The aim of the debate is to draw to the attention of the Minister for Immigration, my hon. Friend the Member for Forest of Dean (Mr Harper), my concerns about the living and employment conditions of non-EU nationals on some UK trawlers and fishing boats. I pay tribute to the Catholic charity, Apostleship of the Sea, and to Martin Foley who came and briefed me. Following a problem in my constituency, which is one of the foremost fishing ports in the south-west, the charity drew my attention to the issue. I will not talk about that incident itself, as I understand it is now the subject of a police investigation. I will be careful to ensure that I do not in any way prejudice any investigation that might be taking place. I will talk in general terms about breaches of UK immigration law and the consequent abuse and exploitation of migrant workers, which is a stain on parts of the UK fishing fleet and needs urgently to be addressed.

The context is that the UK fishing fleet is the sixth largest in vessel numbers in the EU, and the second largest in capacity—more than 12,000 fishermen work in the UK. During 2010, the UK fleet landed 606,000 tonnes of sea fish into the UK and abroad with a value of £719 million, so it is no small industry. We should be proud of the UK fishing industry, and I, for one, am incredibly proud of my own Plymouth-based fishing fleet as well. Across many of our coastal towns and ports, the fishing industry is a mainstay of the local economy. It is an industry steeped in tradition. Deep-sea fishing remains one of the most demanding and dangerous occupations, not just in the UK but throughout the world.

In previous debates, I have talked about the physical dangers that many of our fishermen face every day. Those dangers were demonstrated last year when my hon. Friend the Member for South East Cornwall (Sheryll Murray) lost her husband in a tragic accident while he was going about his commercial activities as a fisherman. The dangers that our fishermen face cultivate a deep sense of togetherness and belonging in fishing communities.

The overwhelming majority of employers in UK fishing fleets are upright, honourable individuals, who take great care to ensure that their crews are properly trained and fairly remunerated.

[Jim Shannon (Strangford) (DUP)]

This issue is important to a great many constituencies across the United Kingdom, not least mine. I represent the fishing village of Portavogie in my constituency, and we also have the villages of Kilkeel and Ardglass in the South Down constituency. Many of the reasons for the problems that the hon. Gentleman outlines are related to EU bureaucracy—the quotas, and the reduction in the number of days at sea. The EU focuses on the financial position in deciding whether boats can go out and whether they can be staffed. Does the hon. Gentleman feel that when it comes to addressing the issue Europe has a lot to answer for as well?

[Oliver Colvile]

I have my own strong view about UK fishing waters, which is that they should be brought back under UK control, but that is not really what I want to talk about today. I want to talk about living and employment conditions. Migrant fishermen should be treated in the same way as we would expect people who are employed in the EU to be looked after. Great care is taken to ensure that conditions on board vessels meet the highest health and safety standards, and that is very much the issue.

The phenomenon of migrant workers travelling to the UK for employment is nothing new. Such workers make a vital contribution to our economy. Like most sectors of our economy, the UK fishing industry has in recent years employed increasing numbers of foreign nationals, many of them drawn from countries in the developing world that have a strong maritime or fishing tradition. Although the majority of migrant workers are well looked after by their employers, in recent months I have become aware of foreign nationals working in the UK fishing fleet, on vessels owned by UK citizens, being subjected to the most appalling abuse and exploitation. Incidents have occurred in my own constituency.

I am not talking about abuse in the overseas fishing sector. Many Members will be aware of the long-standing problems of abuse, including slavery, in the fishing sector in south-east Asia. Rather, I want to highlight what is happening on some UK-flagged vessels, albeit a minority. Foreign nationals have alleged serious physical and emotional abuse, including beatings and sleep deprivation, while working on UK-owned vessels. Fishermen have described appalling conditions, which would indicate that they may have been exploited and subjected to forced or compulsory labour. My understanding is that non-EEA—European economic area—fishermen are brought here on transit visas to work in the UK fishing fleet. They are not entitled to work in the UK, including in our territorial waters, but some of them end up working, often temporarily, in UK ports before joining a fishing vessel, which, I believe, is in breach of immigration rules.

The transit visas that the individuals have entitle them to transit the UK to work on vessels operating outside UK territorial waters. Whether the vessels are operating inside or outside UK territorial waters is, however, unclear, yet the distinction is important as far as the fishermen’s immigration status is concerned. In the cases I have been made aware of, individuals arriving in the UK on transit visas end up working in the UK, so although we are told that fewer foreign nationals are working in the UK fishing fleet compared with a few years ago, I fear the reality is somewhat different. Fishermen are working on UK-flagged vessels, their identity and whereabouts unknown to the police and the UK Border Agency.

For a small minority of UK fishing vessel owners, the foreign nationals are a source of cheap labour—expendable and to be exploited for maximum profit. I am aware of some foreign nationals living in cramped, filthy conditions on board UK fishing vessels, spending days and sometimes weeks effectively trapped in UK ports, unable to leave their vessels and out of sight of the UK immigration authorities. It is time a light was shone on what is happening in parts of our UK fishing fleet. For the sake of the vast majority of the fleet, it is vital that the breach of our immigration law and the consequent abuse and exploitation of foreign nationals by a small minority of vessel owners is stopped.

First, I invite the Government to review and report on the practice of employing non-EEA migrant fishermen on UK-flagged vessels. Such a review should include an analysis of the application regime and procedures for transit visas. Secondly, I urge the Government to work with the police and the Border Agency to identify and expose vessel owners and crewing agencies that are involved in the exploitation and humiliation of migrant workers, and who fail to comply with international human rights treaties and conventions. I would like to see the Government work with the maritime authorities to develop structures and mechanisms to provide and enforce appropriate health and safety requirements in the fishing industry, including fishing-crew training. That should help to identify and weed out the unscrupulous operators who use foreign labour to circumvent established safe working practices.

Where it is necessary and appropriate to employ non-EEA nationals as fishermen in the UK fleet, we must work to ensure they are protected against abuse and exploitation and that they are given the full rights, including those regarding wages and conditions, afforded to migrant workers under current immigration rules. I also invite the Government and my hon. Friend the Minister to explore and report on the labour supply and training difficulties faced by the UK fishing industry that lead to the apparent necessity to employ non-EEA migrant workers. Why is it that in fishing communities plagued by unemployment, particularly youth unemployment, UK fishing vessel owners are not employing more UK nationals? Are increasing numbers of UK nationals unwilling or unable to work in the UK fishing fleet, hence the need to recruit people from overseas?

Finally, when do the Government intend to ratify the International Labour Organisation work in fishing convention 188/2007 and implement it in national law? The convention, termed a bill of rights for fishermen, should make a significant difference to the living and working conditions of fishermen, particularly migrant workers.

11:09

[The Minister for Immigration (Mr Mark Harper)]

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

I congratulate my hon. Friend the Member for Plymouth, Sutton and Devonport (Oliver Colvile) on securing the debate, which I know is important to his constituents. I am, of course, looking forward to visiting his constituency some time in the new year, when I am sure we can discuss the matter further.

I am also pleased to see the hon. Member for Strangford (Jim Shannon) in the Chamber. I know he has a long-standing interest in this matter from a constituency and a wider Northern Ireland perspective. I listened carefully to what he said, and I will draw his remarks to the attention of the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Newbury (Richard Benyon), who has responsibility for fishing. He works closely with people from all parts of the United Kingdom when we set out our policy on fishing and fishing quotas, and when we have debates in the European Union. Thankfully, my job today is not to talk about wider fishing policy, but to talk about the specific issue of crewing and visas.

The use of non-European economic area crew on UK vessels has been an issue for several years, and I know that it is an ongoing concern for my hon. Friend the Member for Plymouth, Sutton and Devonport. The issue has also been raised in Northern Ireland and with colleagues who represent constituencies in Scotland, where fishing is also an important industry. The subject is complex and wide-ranging, and its scope goes beyond immigration. The concern raised by my hon. Friend’s constituent and the Catholic Church in his constituency is about the living and working conditions of people employed in the sector, and I know that that concerns my hon. Friend, too.

I will set out the background of the visa regime for those who work in the sector. Non-EEA migrants can come to the UK to join ships that are currently in the UK but operate outside UK territorial waters—those ships that mostly operate more than 12 nautical miles beyond UK territorial waters. Because those people are joining ships that operate outside the UK, they do not fall under the scope of normal immigration rules, which means they do not need permission to work. However, they do need permission to enter the UK to join the ship—effectively to transit, hence the title of my hon. Friend’s debate. To do so, they must obtain permission to join the ship, either by way of a visa issued overseas, or with the permission of an immigration officer at the UK border. Those provisions are necessary to allow international vessels to change crew, thus allowing fresh crews to arrive in the UK to join ships and outgoing crews to leave ships and return home.

Within the fishing industry, the arrangements mean the UK’s deep-sea fleet has been able to bring in non-EEA fishermen without prior permission to work because the fleet operates mainly outside territorial waters, which is a perfectly legitimate use of the immigration system. Migrants entering through that route are not migrant workers in the usual sense, so the system is not a loophole through which employers can bring in non-EEA workers to carry out work that is not deemed to be sufficiently skilled, as the work is largely taking place outside the UK. We recognise the need for migrant labour in some specific and highly skilled roles in the United Kingdom, but, as my hon. Friend said, businesses should be looking to the local labour market for opportunities to fill lower-skilled roles. That is why non-EEA nationals cannot come to work on vessels that operate within the 12-mile limit—the inshore fleet—under the “to join ship” provisions.

[Jim Shannon]

One of the problems in Plymouth and the area I represent is around incentivising local people to go out on the fishing boats. The danger is apparent, and there is also a skill level that has to be achieved. Those on the boats have great skill, because they also fillet the fish. As the hon. Member for Plymouth, Sutton and Devonport (Oliver Colvile) asked, how can local people be more incentivised to participate in the job opportunities on fishing fleets?

[Mr Harper]

The hon. Gentleman raises a good point. I chose my words with care. I did not say that the work was low-skilled, but that it was not sufficiently skilled to meet our criteria. The Migration Advisory Committee, which is the expert committee that the Government often commission to consider the appropriate skill level required for jobs before we allow people to come to the UK from outside the EEA, did not think the jobs were sufficiently skilled. He raises an important point, however, which I think was the nub of the question asked by my hon. Friend the Member for Plymouth, Sutton and Devonport: in an environment in which UK nationals are without work, what is the industry doing to ensure that we can train UK or EU nationals to the appropriate skill levels so that they can staff the inshore operations without needing to bring in people from outside? I will touch on that later.

Visas would not be issued for people to come to work on inshore vessels. People who work—or employ people to work—on vessels in the inshore fleet after they have come to the UK on a “to join ship” visa, or sought to enter at the border to join a ship, are breaking immigration law and behaving unlawfully.

Some years ago, it became apparent that some in the UK inshore fishing fleet were using non-EEA labour to crew their ships. The UK Border Agency made it clear that that was not acceptable and that immigration rules needed to be enforced in that area. However, genuine concerns were raised at the time, including by the Scottish and Northern Ireland Governments, that the UK fishing fleet relied on non-EEA labour and that immediate enforcement of the immigration rules would have a significant and negative impact on that fleet.

In light of those concerns, in March 2010, the previous Government introduced temporary—I stress the word “temporary”—concessions that allowed for up to 1,500 visas to be issued to non-EEA fishermen to work on the UK inshore fleet to give it sufficient time to transition to using local labour for such jobs. In other words, that was to give it time to identify the labour requirement and put in place the relevant training mechanisms so that people could gain the appropriate skills to staff our inshore fleet.

Those concessionary arrangements came with strict conditions. Permission was granted only after appropriate assurances were given that the workers would be paid the minimum wage and—this addresses the point raised by my hon. Friend—that they would be given suitable onshore accommodation when their ships were in port. The take-up of the concession was relatively low. The route was extended last year, and we closed it down for good this August. We will no longer grant permission for non-EEA migrants to work on inshore UK fishing vessels.

The point at the heart of my hon. Friend’s concerns was about how we enforce the rules and ensure that people are playing by them. I shall also address the living and working conditions on board the vessels, which clearly concern him and his constituent, because although the UK Border Agency is not responsible for enforcing that part of the law, and thus I will not go into incredible detail on this, our officials do some work in that area and we work closely with other agencies.

The “to join ship” visas for the fleet that operates outside our territorial waters are granted in the same way as any other visa. They are issued only when a UK Border Agency official overseas or on the border is satisfied that the applicant meets the requirements of the rules. The official therefore has to be satisfied that the applicant is genuinely joining a ship at a UK port and that that vessel will be leaving UK territorial waters in the near future.

The British Chamber of Shipping has expressed concerns that “to join ship” visas are increasingly difficult to come by, particularly for ships that are tied up awaiting cargo, sailing instructions or repair. Our officials rightly question whether crew are actually required in such circumstances, given that the ship will not depart port imminently. The individual circumstances of each application are examined by officers from the UK Border Agency and UK Border Force on a case-by-case basis. Our Border Force officers will always question fishermen and other crew seeking to enter the UK. If they have any doubts about the individual, the company or the vessel that they are joining, they will refuse entry to the United Kingdom.

UK Border Force also regularly undertakes enforcement action to ensure that those who employ non-EEA fishermen do so legally. Border Force cutters regularly patrol UK waters, monitoring vessels, gathering information and intervening when appropriate and necessary. The monitoring allows us to ensure that vessels using non-EEA crew who are here on “to join ship” visas are indeed operating outside UK territorial waters. Alongside that, regular enforcement visits are conducted to ensure that those working on board vessels have the right to do so.

If we find people working illegally on vessels, we treat them in the same way as any other immigration offender and they are liable to removal from the UK. If employers employ people illegally on inshore fleets, they are liable to fines of up to £10,000 for each illegal worker employed. As with all our enforcement activity, we do not accept people hiring outside the immigration rules, and we seek to deal with that in a tough manner.

During the course of enforcement activities on vessels, Border Agency officers may come across unsuitable living and working conditions. There have been tragic consequences of such conditions. My hon. Friend may be aware of the fire on a fishing boat in 2008 in which two Filipino and one Latvian crew member were tragically killed.

Border Force and UK Border Agency officers are concerned primarily with enforcement of the immigration rules and do not have enforcement powers in areas such as employment rights or health and safety, but we certainly do not close our eyes to those things. If, in the course of enforcing immigration rules, Border Force and Border Agency officers come across such conditions, they will draw them to the attention of the appropriate enforcement officials in other agencies, such as the Maritime and Coastguard Agency, with which we have close working relationships. Our enforcement activities are often multi-agency efforts involving the police, the MCA and other agencies, so not only do we enforce immigration rules, but our partners enforce rules on employment rights, the minimum wage and health and safety conditions.

We will continue to work to ensure that all those who do not have a right to work here cannot do so, that those who have a right to work on ships outside UK territorial waters can do so, and that any rogue employers who exploit vulnerable workers, as my hon. Friend suggests, face the full extent of the law. If the inshore fishing fleet requires people to work in the industry, it should look first to the domestic labour force and ensure that people there are appropriately trained.

My hon. Friend raised a point about the International Labour Organisation convention. That, of course, is a matter for the fisheries Minister, so I will draw my hon. Friend’s remarks to his attention and ensure that my hon. Friend receives a reply outlining the Government’s position on the ratification of the convention from officials in the Department for Environment, Food and Rural Affairs or the Minister.

The hon. Member for Strangford raised a point about training and skills, which are devolved issues. I know that the Scottish Government and the Northern Ireland Executive are working to provide training to the local work force. The Governments, as well as the industry in those parts of the United Kingdom, are engaged in efforts to ensure that the local work force is appropriately skilled for our inshore fishing fleet.

I think that I have covered all the issues raised by my hon. Friend the Member for Plymouth, Sutton and Devonport, and I say again that I look forward to visiting his constituency in the new year, when we can no doubt talk further about these matters.

[Oliver Colvile]

I look forward to welcoming my hon. Friend to Plymouth, when we will certainly want to talk about these issues with the organisation, and I take my hat off to the Apostleship of the Sea, which runs a good, effective operation in Plymouth for migrant workers who need help. Occasionally, the organisation finds that migrants do not have food and therefore has to provide them with some, and their living conditions can also be bad.

[Mr Harper]

I am grateful for that extra detail. When I visit my hon. Friend’s constituency to talk about a range of issues, if it will be at all possible to talk about that to people at first hand, it will be a valuable opportunity.

I am grateful to my hon. Friend for securing this debate and for the interest shown by the hon. Member for Strangford.

11:24

Sitting suspended.

UK-Listed Mining Companies

Wednesday 28th November 2012 Westminster Hall

[Mr Joe Benton in the Chair]

14:30

[Mr Joe Benton (in the Chair)]

I should like to draw hon. Members’ attention to the new clock displays in the Chamber. The top display is the current time, as before. When a speech is not being timed, the bottom display will show the time it started, also as before. If it becomes necessary to introduce a time limit, the bottom display will change to show the time remaining to the Member who currently has the Floor. As in the House, this display can award an extra minute for each of the first two interventions in a speech.

[Eric Joyce (Falkirk) (Ind)]

It is a privilege to speak under your chairmanship, Mr Benton, and in front of these magnificent new clock displays, as described.

I am interested in UK-listed mining companies—other hon. Members will be interested, because of the UK dimensions of these companies’ operations—primarily because I have spent a fair amount of time in developing countries and seen that the way mining companies operate can have a significant impact on all sorts of things locally.

I started going to the Democratic Republic of the Congo shortly after I was elected to the House a dozen years ago and I have been there a couple of dozen times. Each time I go to a country like that—particularly ones that are resource-rich and often without any meaningful extraction going on, although sometimes with some pretty good stuff going on—I am struck by how good companies, and countries, with proper governance can return substantial benefits, providing all the right environmental and social aspects are properly observed. Conversely, when that is not done, it can be disastrous.

People sometimes refer to the resource curse, meaning that a lot of countries have enormous potential wealth but no actual wealth, because they are not able to extract as their governance makes the country too much of a risk. The environment might be too physically risky, or, more to the point, the risk to reputation and capital—for example, if there were an expropriation of some sort—is too great. Shareholders will often not be prepared to put up with that. Back in the 1990s in Liberia, we saw the damage that was done with the diamonds to some companies that mined across Africa and which now, as a consequence of that shock, take great care to pay close attention not just to rules but to public perception. Some companies will not go near countries such as the DRC because of the risk to their capital, to some degree, but also to their reputation.

When looking at the mining industry as a whole, we begin to realise the importance of UK listing. Companies across the world with no particular links with the UK have mining operations in far-flung places such as Kazakhstan and Azerbaijan or, indeed, Australia, Canada and Brazil, but they choose to list in London for strong commercial reasons, partly to do with their reputation and partly because that is the best hub within which to get access to all the people they need to do business with, both in markets and banks and in all the other ways that benefit companies with a UK listing.

About 18 months or so ago—without mentioning particular companies; it is probably helpful if I do not now, although I did then—it became clear that some companies were coming to the UK and listing in London without wishing to accept the broader constraints and rules, which were often not written but were general understandings among the business community of things that people do and do not do when they have a listing.

A company can be listed, in some cases, with less than 25% of its total stock in the UK, which is normal, but it can be even less than that. That means that shareholders’ control over such a company can be quite limited and it can carry on as before, without changing its practice. I was worried about that. For a while last year, the Government mooted the possibility of relaxing the rules in respect of companies that were not really British, but eventually that was passed over and it did not happen, which was good news. There was a great deal of lobbying to that effect and the Government listened to it.

The principle is that a company listed in the UK is not an asset of that country, and that applies in the same way as it does to companies listed anywhere. Such a company has simply chosen to list in the UK. For example, we generally perceive BAE Systems—the best known of certain companies that tend to be known by acronyms—as a UK company, but that is no more a UK company in some respects than any other foreign-owned company. It is simply in the UK and has a British heritage, and that is about the size of it. It is important to see what is listed in the UK. We have some degree of control over companies that choose to list here through our voluntaristic methods and regulatory measures. It is important that they are all treated equally.

I noticed in the past year or so that some companies that were relatively new to the list had an ownership structure that was not what would normally be found in the UK, where one or two people own most of the shares. They have therefore had to take on shareholders, but they have perhaps felt that things do not need to change because they make such a lot of money that the shareholders will be happy. However, in a couple of cases they have taken an enormous hit—perhaps a 50% discount on shares—so now they are looking again at how they can work properly as a UK-listed company. That has to be good trend. That was essentially what drew me to this debate.

I have had some contact with companies that work and exploit in the UK and know that there are issues to do with planning presumptions for open cast, and so forth. Other hon. Members may wish to mention that. My primary message is about the impact of UK-listed companies on the developing world.

Public discourse in the UK on the subject has been dominated historically by industrial struggle, mainly to do with coal, the changing world, changing fuel and energy options, and changing working patterns and political assumptions. That has been the dominant theme in recent years and decades. If a Member of Parliament mentions mining to a constituent, that is what they are thinking. They are not thinking about this huge beast, which is the UK listed sector, or about the scale of the contribution that mining makes. Some of the largest companies in the FTSE 100 are miners and they are the ones that often move the figures across the board—just that one industry.

The companies from around the world that list in the UK are not British in the conventional sense. That is true of most commercial organisations across the world. These organisations transcend international borders, coming together to trade where it best suits them. London, of course, is pre-eminent in the world in respect of mining.

The UK is important in this regard and, on the whole, that is a good thing. We do not have a perfect system, but we subscribe to some important conventions. I will mention some important conventions in respect of other parts of the world—big parts, without naming names. Legislation will come into place shortly that enhances those conventions and takes them further, making them, to a large degree, legal requirements. London listing is therefore fundamentally a good thing.

London has justly developed a broadly good reputation, alongside the United States, for going some way to ensuring that corporate governance in the mining industry is respected. That is not to say that everything in the garden is rosy—often, it looks to be far from that—but the fact remains that if large international entities wish to trade in and from the UK, certain rules of decency apply. In the UK, the rules include the Bribery Act 2010 and a series of important regulator measures put in place by successive Governments. In the United States, the rules include the Cardin-Lugar amendment to the Dodd-Frank Act, which demands a considerable level of transparency from those doing business in the developing world.

In Europe, about which I will say more, legislation will be passed shortly. I will leave that to the Minister, because it is probably for her to speak about that, given her role. There will be some important legislation soon reflecting what has been going on in the US. The legislation in the US has been powerful, but not perfect. Interestingly, as I discovered from a position of some naivety a year or so ago, some of the entities that are most critical of the Dodd-Frank Act and the Cardin-Lugar amendment, which require that high degree of transparency, are highly commercial lenders or hedge funds. They are, however, critical in the opposite way to what we might expect: they are critical of the legislation for not driving enough transparency. We might think, “Well, that’s a surprise, I thought these guys would want less transparency”, but they want to know where the money is and where it is going—they want to chase the money up. The large hedge funds that are owed lots of money by countries and commercial entities want to drive greater transparency. That is an unusual but good alliance between, on the one hand, some good non-governmental organisations with their meagre resources, digging away and trying to root out graft in parts of the developing world, and, on the other hand, these guys with quite a lot of money who know their stuff and have good, strong commercial reasons for driving transparency and good governance. To some degree, that is what is happening in the US and with the European legislation to which the Minister will probably refer.

When it comes to the extractive industries and the developing world, it is essential for two things to happen. First, the activity must help to ensure that income generated by some of the world’s poorest states benefits their citizens, by reducing graft and helping difficult countries—if we can call them that—to reduce internal corruption. There is some corruption in many of those countries, although not in all of them and not even routinely in a lot of them, but there is a considerable amount and it is difficult to fix. Transparency can help the people running such countries to fix the considerable levels of graft that still exist.

Secondly, transparency helps UK-listed mining companies and companies in all sectors to do business in areas where they would otherwise be loth to risk their reputation and capital. Mining is affected more than most industries. Throughout the world, mining companies in geographically big, developed states such as Canada and Australia have been able to exploit their local geological assets. In recent years, people have become more aware of the environmental implications, but in those countries people have benefited from mining in a big way. The same is true in other parts of the world with huge natural resources and the industrial capacity to exploit it, such as Kazakhstan, South Africa and Brazil. As those companies have expanded and used up much of the stuff under their homelands, as it were, they have moved throughout the globe looking for new sources with which to satisfy the huge and growing demand for energy, for example.

We all know the debate about energy and our consumption of it, but as countries develop economically —China is the best example—they, too, demand more energy resources. That is simply an empirical fact. As the companies respond to that demand, they need to find another place to mine, and in many cases that other place—that other continent—is Africa. Those companies have also come together to trade in, and to the great benefit of, the City of London and its markets. The pattern, therefore, is one of productive exploitation of Africa’s geological riches and of greater transparency of the organisations doing the digging, through London and New York—London is significant, but not the only centre. Potentially, there is a neat symmetry about the whole process.

I have just noticed that I still have a lot of notes to get through, so although the structure of the debate has been perfect so far, I might extemporise a little to enable some other Members to speak.

In the meantime, in my experience—for a politician, I have had a fair amount recently—the great majority of operators are behind the symbiosis I outlined, which has historically been reflected in large listed companies that have been in the UK for years, or that have their origins here. It is also increasingly true of companies that want to trade out of the UK in spite of the fact that their ownership structures have traditionally led them into different practices before listing in the UK. They are learning as well, and to give them some credit—I have not always done so in the past—they are now beginning to learn that if they want to do business out of London, they have to change and, essentially, to modernise their practices and assumptions.

In the developing countries, the World Bank, the IMF and other bodies—organisations such as the Revenue Watch Institute or the Association for Geographic Information from the UK, or the worldwide George Soros Foundation and Open Society Foundations—have done a lot to get countries such as the DRC to move towards becoming a place where serious companies can operate. I mention the DRC because I am confident that governance is lacking there, but other places have no democratic elected Government at all, and in the west of Africa four or five countries currently have dictatorships and there is no governance. It is perhaps too easy to criticise only countries with flawed democracies when many in Africa are without any kind of democracy, so we need to keep such things in context.

About 18 months ago, as I mentioned, I got involved in a case in which an asset had been expropriated. The two companies eventually settled, but that took several years of no one being employed on the site. Some 5,000 people had been paying tax and the company had been the largest corporate taxpayer in the Congo, yet for that period, there was nothing at all. That was due to a wrangle that was not caused by corruption in the commercial sector, although perhaps it was because of a bit of nescience, in some respects; Government graft led to that terrible situation.

The companies have actually worked things out between themselves, and a large amount of money changed hands so, in a couple of years, that asset in the Congo might again start to produce some fruit with exports and—from my perspective—through earnings for the people on the ground, who were earning money there before. If that happens, it will be because one of the companies was listed in London; otherwise, it might simply have been cutting about the world and not necessarily paying heed to public opinion. The company was listed in London and wanted to be a proper, large, serious mining company based there, so it paid heed to the concerns of the international community, the NGOs and, of course, the other company, which was savvy about how to pursue its objectives. I am avoiding saying the names so as not to indentify the companies, which would not be fair at this point because they have behaved relatively well. My point is that the London listing made a profound difference to one important project. If that project gets off the ground again, which I think it will, it will show that even in a place such as the DRC, it is possible to get the standards right. I have some constructive scepticism about how long that might take to happen, but let us see.

Before I conclude, I will refer to a couple of important organisations. The International Council on Minerals and Metals, which has its origins in Canada, is now based in London. It has members from the industry, which funds it, and has a series of standards based on core principles and auditing—public reporting and assessment—to ensure that companies maintain certain standards for environmental imperatives and the local social imperatives of any particular operation, which is a new but important thing. There are 22 members and 34 national or regional mining associations and global commodity associations are affiliated.

I could mention other organisations, but I have been to visit the ICMM, and I am still learning about its regulation, which is voluntaristic and appears to have a correlation with strong, voluntaristic companies such as Rio Tinto, which has been based in the UK for a long time. That is not to say that there is not controversy about the mining industry and foreign operations, but some companies have been subjected to the rigours of the UK market for a long time, and that can have a considerable impact on the new ones.

I have noticed that NGOs, which are rightly looking for the best for the developing world, have deployed language that sometimes looks hostile to the principle of investment. That is not how they mean it, because they see the stuff that happens on the ground, but it is important to make it possible for companies to invest, providing that they come up to the standards expected of a London-listed company.

Despite that voluntaristic stuff, it remains true that international legislation is essential. I have mentioned the Dodd-Frank legislation and our Bribery Act, and I want to mention the efforts of organisations such as Publish What You Pay, the One campaign, the Open Society Foundation, which is funded by George Soros, Tearfund, and Global Witness. All are stressing the importance of legislation that is pending in Europe—the Minister may be able to say something about it—which the Prime Minister stressed last week in Brussels. There might be quibbles around the margins about exceptions, the definition of a project and so on. I am not an expert and I know that some people have raised what I consider to be finely tuned issues. However, the general principle of the legislation is certainly accepted by NGOs, and seems to be accepted by all the responsible operators.

The new accountancy and transparency directives will greatly enhance efforts to improve governance in developing nations. They will also make it easier for UK-listed companies to do business in such places. Big commercial companies are not altruistic organisations; they are there amorally, in the purest sense, to do business and to make money for their shareholders. We must appeal to that imperative in companies, rather than pretending that they simply want to be good guys. We must appeal to their ability to make money decently, subject to proper regulation, and in ways that return benefits to local communities in places such as the Congo and Guinea.

The extractive industries transparency initiative is led by Clare Short. The UK led the way with this worldwide initiative, and it has taken us several steps along the path to proper accountability. The initiative measures payments made to Governments by mining companies, for example, and the income declared by those Governments. It is not perfect, and it will not prevent graft elsewhere, so if there is expropriation, which is then passed on by a third party, and the money goes who knows where, it will not appear in the books. However, those are important steps down a path that is enhanced and augmented by legal measures such as those that will be forthcoming in the EU.

[Jeremy Corbyn (Islington North) (Lab)]

I apologise for only just arriving in the Chamber. I raised the extractive industries transparency agreement in the House last week. Is not one of the problems that the machinery of government in the DRC is so inefficient and ineffective, and there is so much corruption, that the effectiveness of the agreement is strictly limited, in that many of the mining companies can just ignore it?

[Eric Joyce]

My hon. Friend is absolutely correct. There is no argument—it is simply a fact that is part of the tragedy of the DRC. It has applied to join the extractive industries transparency initiative, but at this stage it could not possibly do so. There is eternal tension between wanting companies to come into something like the EITI, and saying that if it takes anyone, it will become a daft badge that means nothing.

Graft is widespread in the DRC. EITI reports show that pretty much all the income reported is accounted for, but that the level of income is tiny, so there is a neat diagram showing that 96% of the income is accounted for, yet the level of income is lower than it should be, so the question is what should be done about that great big chunk. However, I do not want to go into too many names or bang on about that kind of stuff at the moment.

There is an interesting situation in Guinea, which is not like the DRC. The President of Guinea is trying to do the right thing, but he is beset by all sorts of graft at a lower level. The context is difficult, and a large expropriation might be about to take place. I worry that that will make it impossible for other companies to go into Guinea.

I should also mention the all-party group on extractive industries, which was recently formed. That is good, and we have a website—“Investing in Development”. That reflects a growing awareness of the scale of the industry throughout the world and especially in London—among large companies at FTSE-100 level, as well as smaller companies. I could list them, as could many hon. Members with a background in the mining industry.

The trend in the House is that as some people have a background in the industry, we occasionally hear it mentioned, but this is never regarded as a huge issue that permeates other areas of debate, such as international development. I hope that this is a small gesture towards that and that, in time, the whole issue of extractive industries can be more fully developed in this place.

14:54

[Guy Opperman (Hexham) (Con)]

Mining is part of the north-east’s industrial heritage, and in my constituency alone there are more than 100 former mines. Lead, tin and coal mining shaped my local area. The hon. Member for Falkirk (Eric Joyce) made miners abroad the focus of his speech, and I should make it clear that I wholeheartedly back the extractive industries transparency initiative and the Financial Conduct Authority’s proposals. All efforts are being made to ensure that a vital trade is conducted ethically and transparently. It is entirely right to say that we have an obligation to support the poorest states in the world and to help countries in Africa, whether through our international aid commitment or by other means, and that effort should be supported. My focus, though, will be on the actions of UK mining companies in this country.

I want to focus on the more controversial issue of open-cast mining, which is relevant to my constituents for three reasons. I have three of the most significant open-cast sites in the country, including the huge site at Shotton, which is run by Banks. I should make two declarations. As a lawyer, I have previously represented individuals who have sued mining companies. I believe that I have some limited shares in BHP Billiton, a company that is obviously relevant to this debate.

From a constituency MP’s point of view, the way in which mining companies engage with the community is significant, whether they are local, national or international. We all know that people are inherently distrustful of significant change that they cannot control. For example, we resent all our decisions and power being taken away from us by large unitary authorities. Mine is based in Morpeth, which seems more interested in other parts of the county. The issue is particularly significant when we lack a local development plan or a local minerals plan to determine how our county is to approach mining development and management of the green belt.

UK Coal has proposed a significant, large open-cast site in Whittonstall. On Saturday I met the protest group who are campaigning vigorously against the proposal, which would blight their community tremendously. UK Coal has promised a £1.2 million sweetener for the local community if it gets planning permission. All well and good, one might think, but that money is not secured. As is well known, UK Coal, which is the largest miner in this country, had an emergency meeting just last week at which it voted through a range of measures in an attempt to rescue the company. It is already on the verge of closing mines such as Saw Mill and Maltby, and my constituents are worried that the £1.2 million sweetener will not be placed in a secure trust controlled by a third party, so that whatever happened to UK Coal that money would still be available to the community. The comparison between how international communities are treated and how local communities are treated is very relevant.

A development is proposed at Halton Lea Gate, a small village on the Cumbrian border. It has a tradition of mining, but my constituents face three and a half years of open-cast mining as HM Project Developments Ltd attempts to dig out 140,000 tonnes of coal. That open-casting will take place 57 metres from the nearest home. I have persistently campaigned against that, not least because the village is on the edge of the north Pennines area of outstanding natural beauty, and is within sight of the Pennine way.

We held a village hall meeting in August, when we were amazed that the decision of an inspector, who had decided that there was a national need for the mineral in question—coal—clashed with a decision at Bradley, a similar open-cast site in Durham. The latter decision was taken by a different inspector on 23 February 2012. Both decisions are being reviewed by a High Court judge, who must come to a view on the correct way ahead. That is particularly relevant in the context of our energy policy in this country, because we need to decide whether we are focused on gas, renewable, nuclear or shale gas and—with particular relevance to mining organisations—what role coal has in our future energy programme.

The third site that I am concerned about is the Shotton mine run by Banks, which is a traditional north-east company. I accept that companies wishing to get community support, whether internationally or locally, for mining projects must engage the local community. It can be done. By and large, Banks has been very successful with the significant mine at Shotton next to the A1. The company pays good wages; there are many local jobs, and the way in which it engages with the community is excellent. There is also a significant tourism benefit, which I recommend to all Members of the House and to the country, in the form of Northumberlandia, the largest earth sculpture in the country. It could well be the new Angel of the North, even if it is slightly more horizontal. However, Banks has chosen to diversify and move away from a traditional mining environment into property speculation, with proposals to build houses around the village of Ponteland. I cannot express enough my disappointment that a good mining company is attempting to form a cash cow of housing on the green belt. Frankly, it should be ashamed of itself.

Banks is not the only one. A company called Lugano is universally detested for the way that it is buying up huge swathes of land for green-belt development. Lugano is not registered in this country and appears to be owned by a private trust in Guernsey. I have no way of finding out who the real owners are, where the profits go or where it pays its taxes. Sources tell me that the beneficiary of the trust is a Jewish organisation based in Lugano, Switzerland, and clearly, as a result, it would not be liable for any taxation in this country. It certainly has no experience of the sort of development that it is proposing. Furthermore, Lugano seems to be employing former officers of the local county council. Those officers have failed to produce the mineral plans and local development plans that we all require under localism and, having been paid off £500,000 by the local authority, they are now being employed to advise developers how to get round the planning system that they so grievously failed to organise prior to their departure with the pay-off.

[Jeremy Corbyn]

It sounds a bit unsavoury.

[Guy Opperman]

I would go much further than that, and within the bounds of libel, say that it is outrageous. It is totally wrong and it takes the local community for fools. It will be resisted, and I am assured that the provisions on the green belt—these proposals all concern the green belt, whether they are for open-cast mining or for housing—are greatly supported, for example, by the comments of the Secretary of State for Communities and Local Government:

“The green belt is an important protection against urban sprawl, providing a green lung around towns and cities. The national planning policy framework delivers the coalition’s agreement to safeguard the green belt. Inappropriate development should not be approved in the green belt, and boundaries should be altered only in exceptional circumstances.”—[Official Report, 17 September 2012; Vol. 550, c. 619-620.]

I endorse that entirely.

I finish my brief contribution by assuring my constituents and colleagues that such actions are not what localism is about, nor is it what responsible mining companies are about. This kind of shady operator creates an atmosphere, frankly, of nimbyism, and I do not blame people in the slightest for being against such developments. I, for one, will be doing everything that I can to support them, as well as everything in my power to stop such companies.

15:04

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

I congratulate the hon. Member for Hexham (Guy Opperman) on his forthrightness in protecting his constituents, and my hon. Friend the hon. Member for Falkirk (Eric Joyce) on securing the debate. I want to return to the operation of London listed mining companies in the developing world. My hon. Friend has taken that matter up over the years and I congratulate him on that work.

Back in October, I launched a report with the London Mining Network and a number of non-governmental organisations. It was part of a campaign to try to persuade the Government at that stage, while the Financial Services Bill was going through the House, to ensure that a duty was placed on the Bank of England and the Financial Conduct Authority—the new architecture for regulation of the City—so that when companies were listed, there would be a commitment to monitoring their adherence to certain basic elements of corporate responsibility. That included ethical corporate responsibility, and in particular their operations in the developing world with regard to the protection of human rights, tackling climate change, and their adherence to international law and conventions—and, importantly, the convention on protecting indigenous peoples.

Unfortunately, we never secured those amendments to the legislation, but I hope that in dialogue with the FCA, we can move forward and at least ensure that there is not only openness and transparency but action by the FCA. Being listed on the London stock exchange is critical for such companies. It demonstrates—or should demonstrate—to the world that there is financial probity and good governance. It should also demonstrate a commitment to ethical corporate responsibility and behaviour standards, but at the moment I do not think that is the case.

I will name individual company names, because I think it is important that we know what has gone on, and part of our role in the House is to help people to bear witness to what has happened in recent years. When we launched the report, I said:

“We cannot stand by and witness these global mining companies brutally impoverishing and destroying the lives and environments of whole communities. We need not only to expose this exploitation but also to demand that a firm system of…regulation”—

both national and international—

“control and accountability is put in place that halts the destructive activities.”

Those activities are not just destructive in the developing world and of the long-term interests of those individual companies and their employees; they are destructive of London’s standing in international markets, because the reputational damage that such companies are doing to London will undermine the long-term future of our economy.

At the launch of the report, Peter Frankental from Amnesty International said:

“This report…presents a challenge to the Government to ensure that the proposed regulatory body has the powers to require mining companies to meet acceptable human rights and environmental standards as a condition for listing on the London Stock Exchange”.

That is exactly what we were arguing for. I pay tribute to people such as Richard Solly, who has co-ordinated the London Mining Network over the years, for the effective work that they have done.

Let us consider a few examples; I want to do a quick ABC of some companies and their impact. They have been outrageous in their behaviour—abroad and, in some instances, in this country.

[Jeremy Corbyn]

I thank my hon. Friend for giving way. He and I have sat through a number of meetings with groups from the Congo, Colombia and a number of other countries, where the most appalling damage has been suffered because of the irresponsible behaviour of mining companies. Many of the mining companies claim in their defence that the actual mining work is done by some mysterious subsidiary—another supplier, another contractor—in order to evade their corporate responsibilities and the law of the country. Does he agree that we need to frame responsibility in law that guarantees the whole supply chain and not just the convenient end-part of it, where the large profits are made?

[John McDonnell]

That is one of the important issues, and my hon. Friend has raised it before with regard to the extractive industries transparency initiative. It is important that we have full transparency, particularly with regard to subsidiaries.

Let me cite some examples that relate to my hon. Friend’s point. I shall start with Anglo American. At its AGM this year I met a number of people lobbying there. In particular, the company has come under fire for its involvement in the Cerrejon coal mine in northern Colombia. I met a number of local people who live near the mine and have been forced out of their communities. There has been forced relocation of farming communities, without any adequate compensation. It has taken years of campaigning just to get some dialogue going with the company. It was involved, with Rio Tinto, in the Pebble mine copper and gold project in Alaska, which has threatened vast swathes of the caribou calving grounds, the ecological integrity of Bristol bay, and the fisheries.

The company promised to create 100 jobs, but it has actually destroyed 600. Its Anglo American Platinum division continues to attract heavy criticism from farming communities in South Africa for its handling of community resettlement and for polluting water supplies. AngloGold Ashanti, which is also owned by Anglo American—as my hon. Friend the Member for Islington North (Jeremy Corbyn) said, these companies are subsidiaries—retains a standard listing on the London stock exchange, and it has been accused of profiteering from paramilitary intimidation of mining opponents in Colombia. De Beers, which Anglo American controls, has been criticised for potentially benefiting from the forced removal of indigenous bushmen from their ancestral territory in Botswana.

It goes on. BHP Billiton, in addition to its role in the Cerrejon mine, is in dispute with the Colombian Government over the derisory royalties it has paid at its Cerro Matoso nickel mine. It is under fire for toxic spills and health impacts at its Antamina copper, zinc and molybdenum mine in Peru. It is accused of providing poor conditions for workers at its Escondida mine in Chile, ignoring native American sacred sites at the Resolution Copper project in Arizona, and leaving a toxic legacy at the Ok Tedi mine in Papua New Guinea.

I will not go into Glencore, because my hon. Friend the Member for Falkirk has dealt with it in previous debates, but it is well known for its role, particularly in Africa. Let me come on instead to Global Coal Management Resources plc and its responsibility for the open-cast mine at Phulbari in Bangladesh. According to the Bank Information Centre in Washington, the project is acquiring almost 6,000 hectares of land and displacing anything between 50,000 and 200,000 people. It is destroying ponds, fruit and timber trees, businesses, homes, barns, boundary walls, schools, health facilities, mosques, temples, churches and archaeological sites. This displacement is taking place in one of the most densely populated countries in the world, and it is destroying a critical agricultural region, threatening Bangladesh’s food supply. More than 80% of the land that is being threatened is fertile agricultural land, which cannot be replaced. That leaves farmers and families with few options for employment, and it risks impoverishing a massive number of people, turning hundreds of thousands of farmers into landless wage earners who will be competing for jobs in entirely different sectors.

What is interesting is that the company is one of those that have been promoted by this Government, as it was by the previous Government. Despite receiving a series of freedom of information requests recently, the Government have refused to provide information about their relationship with the company and about the support they have given it and its operation in Bangladesh. In its response, the Foreign and Commonwealth Office explains it will not provide the information

“because we consider that the disclosure of this information would be likely to prejudice relations between the United Kingdom and Bangladesh”

and because it would

“prejudice the UK Government's internal relations with the Bangladesh Government”.

In other words, the Government would be ashamed of the support they have given this company if it came to light, and the Bangladeshi Government would be furious—understandably so, from the sound of the work that has been undertaken to promote the devastation of the region.

Monterrico Metals was originally linked to the Phulbari project through the company’s previous chairman. Monterrico has also received help from the British Government. In fact, the former British ambassador to Peru, Richard Ralph, spent part of his ambassadorial time talking up the advantages of Monterrico’s Rio Blanco copper project in the Andes. He tried to reassure local organic farmers, most of whom are vehemently opposed to the project, which threatens their livelihoods, that the production of large amounts of toxic waste and the pollution of local water supplies would be good for them. What an extraordinary coincidence it is that when the ambassador retired, he became chairman of Monterrico Metals. Later, he was prosecuted as a result of insider trading. Again, a huge majority of local people rejected the company’s proposals for the Rio Blanco mining project, and there were protests, during which people were killed.

Rio Tinto is also listed on the London stock exchange. It has been the subject of one of the longest running anti-corporate campaigns in the world by Partisans—People Against Rio Tinto and Subsidiaries. It is accused of anti-union activities and of ignoring aboriginal rights in Australia. Its nickel-copper mine on the Yellow Dog plains near Lake Superior has been criticised. I have met representatives from Mongolian organisations concerned about the Oyu Tolgoi copper and gold mine in the Gobi desert.

[Guy Opperman]

The hon. Gentleman mentioned the individual who was monitoring and then went to work as the chairman. I used the example of someone who worked for the local authority and turned from gamekeeper into poacher straightaway thereafter. Does the hon. Gentleman agree that, just as we require Members of the House not to do business connected to matters they have dealt with as a Minister, we should encourage companies set up in this country to ensure, through the shareholders’ action, that such persons, with whom the companies have dealt, are not then immediately hired on to their boards?

[John McDonnell]

I fully agree, but it needs more than shareholder action. I think it is the responsibility of the Financial Conduct Authority, under the auspices of the Bank of England, to introduce specific regulation to prevent some of these things from taking place. That will give confidence to those who want to invest in these companies and who want to look on London as a place where companies operate properly, legally, with probity and with a commitment to ethical corporate behaviour.

Let me give two last examples. I protested at the Vedanta annual general meeting this year because I was so angry about the company’s behaviour. Vedanta has been criticised for its behaviour in Armenia and Zambia, but it is in India where it has come in for the heaviest criticism, for the manner in which it ignored environmental legislation and literally bulldozed its way into tribal land in Orissa, in the hope of constructing a huge bauxite mine on land sacred to the Dongria Kondh people to feed its illegally constructed alumina refinery.

I have also been dealing with the company in Goa. I met representatives of the Save Goa Campaign recently. I congratulate the Indian Government on setting up the Shah commission, which ruled in September that all the mines in Goa were operating illegally because they were not abiding by environmental standards. All the mines were shut overnight, and a court case is going on this week to see which ones can reopen if they have abided by basic environmental standards. Vedanta and others have undermined the agricultural base of the Goan economy, polluted the water and threatened the tourism industry. I commend the Save Goa Campaign: local people and the Goan diaspora have exposed what has gone on. I also commend the Indian Government for taking decisive action. However, Vedanta, as the main company involved, has made fortunes from exploiting the Indian subcontinent.

Finally, there is Xstrata. It is involved with the Cerrejon mine in Colombia; it is involved in the hugely controversial Tintaya mine in Peru, which has been a focus of fierce conflict over the years as a result of the pollution; and it is involved in the Philippines, where its Tampakan project is strongly opposed by indigenous people. The Argentine federal appeals court has also upheld criminal charges against Xstrata general managers in the past.

My view is straightforward. I have read out that list of examples because they are shocking. These companies are all listed on the London stock exchange. We need to take responsibility in this country, and I wish this had been more decisively dealt with when the Financial Services Act 2012 was before us. If these companies wish to be listed on the London stock exchange, they must first show complete openness and transparency; they must ensure that there is financial probity; and, above all else, they must be prevented from doing London reputational damage. We will achieve that by making sure that they abide by corporate ethical standards, and that means ensuring that the FCA and the Bank of England have a role, including in delisting companies, if necessary, because of their behaviour in the developing world.

One day we will depend on the developing world for a whole range of relationships and for the distribution of a whole range of raw materials and national assets, which will benefit the whole globe. We are alienating people now we will want to co-operate with in the future, because we are not controlling these mining companies, which are doing so much damage to our reputation abroad. In addition, we are doing long-term damage to our economy. That is why I urge the Government to act.

In conclusion, it should not take freedom of information requests to this Government or any Government to get real information about the relationship between the Government, their Departments and individual companies. Even when freedom of information requests come back, they are heavily redacted to keep secret the malevolent role that Governments have played over the years in supporting these companies.

15:19

[Mr Robin Walker (Worcester) (Con)]

It is a pleasure to follow the hon. Member for Hayes and Harlington (John McDonnell), who raises some serious concerns about London-listed companies, and to speak in this debate. The hon. Member for Falkirk (Eric Joyce) gave an excellent introduction and spoke about the importance of overseas issues. Like my hon. Friend the Member for Hexham (Guy Opperman), I refer hon. Members to my entry in the Register of Members’ Financial Interests, and in particular to the fact that before I came to this House, I advised a number of international mining companies on their financial communications. I no longer have any such financial relationship although, like my hon. Friend, I own a very small number of shares in the company BHP Billiton. I also want to mention a constituency interest: a mining supplies and parts business called Joy Mining Machinery, which employs a number of people and supplies mining companies around the world, including UK Coal. I appreciate the concerns about that that my hon. Friend raised, and I shall point them out to the company in my constituency.

The hon. Member for Falkirk is, like me, a member of the all-party trade out of poverty group, and he pointed out that the work of London-listed mining companies in developing countries can help with that, as long as governance is good and clear regimes are in place to ensure that royalties are paid. There are several countries where that has happened, such as Chile, Botswana and, from time to time, Zambia, and there have been substantial benefits. Good governance and transparency are vital. The hon. Gentleman also brought up two initiatives, which, I think, started in London: the extractive industries transparency initiative, and the International Council on Mining and Metals. Both were supported in their beginnings by the UK, and UK-listed companies have played an important part in setting them up. It is a great shame that although the EITI is embraced by countries around the world—even the likes of the Democratic Republic of the Congo are looking to sign up to it—this country is not yet a signatory. I encourage the Minister to consider whether the UK can become a signatory to the EITI, because that would encourage every listed UK company to maintain the degree of transparency that we would expect about where payments go in the countries where they operate. It would also send a powerful message to other countries that we might wish to encourage to join. They would include countries such as Brazil that have arrived on the international economic scene and consider themselves as no longer developing countries but developed countries, as well as other developed countries. Norway has signed up, as the UK should.

Most of the mining companies that I dealt with in my career understood that corporate social responsibility was crucial to their licence to operate, and most would embrace improved UK listing requirements. Indeed, in my previous career, I heard concerns that the listing requirements in Hong Kong are, in theory, tighter than those in the UK. For the sake of our international competitiveness, we should ensure that ours are just as strong.

We have heard much about the amount of tax paid by international companies. Of course it is right that companies operating elsewhere in the world and listed in the UK should pay most of their tax in the jurisdictions where they operate, especially when that can help a developing country. However, I will be interested to know whether the UK Government or the Treasury have ever carried out an analysis of the benefits to the UK economy and taxpayer of having so many international companies listed in London, and therefore employing people at headquarters for investor relations and as consultants in the London market. Such a piece of work would be interesting.

Wherever mining companies operate, they need to balance the environmental and social concerns that are rightly raised by many UK NGOs with the benefit that can be brought through employment and investment in infrastructure. One aspect of the debate that we should consider is the fact that it is not only UK-listed mining companies that carry out work in developing parts of the world—with the potential to do good or damage. We have enormous competition, not just from other areas of the world where companies are publicly listed, but from the likes of China, which are investing huge amounts in projects and may not necessarily hold businesses to account as we would like on the way in which they benefit the economies in question. We should champion greater transparency and more listing of international companies in London so that we can ensure that they are held to account. A challenge for this country is to ensure that the whole industry understands the importance of acting responsibly and the benefits of greater transparency, and for the UK to show that the EITI, which we helped to launch, is not just for developing economies, but something to be embraced across the board by all economies.

The hon. Member for Falkirk pointed out that, in the developing world, mining can encourage development. We should examine the UK’s position as a leading destination for listings and see how we can take the most advantage from that to encourage best practice in the industry and responsible development around the world.

15:25

[Mr Iain Wright (Hartlepool) (Lab)]

It is always a pleasure to serve under your chairmanship, Mr Benton. I still have fond memories of the Committee that considered the Bill that became the Housing and Regeneration Act 2008, which we endured together.

I congratulate my hon. Friend the Member for Falkirk (Eric Joyce) on securing the debate, and my hon. Friends the Members for Islington North (Jeremy Corbyn) and for Hayes and Harlington (John McDonnell), and the hon. Members for Hexham (Guy Opperman) and for Worcester (Mr Walker), on speaking so eloquently on such an important matter.

Hon. Members have spoken with one voice in the debate. The hon. Member for Hexham mentioned UK open-cast mining—I shall come on to that in a moment—and also talked about the importance of increased transparency and better corporate governance, because that improves accountability. There is a strong argument that if mining companies disclosed their payments to Governments on a country-by-country and project-by-project basis, it would be easier to see which companies were paying tax—and in which countries they pay it—who was paying bribes, the circumstances in which local officials or representatives were accepting bribes, and which projects were being waved through. That, in many respects, is the most striking example of what has in the past few years been called responsible capitalism—ensuring that big companies do not pillage and exploit the developing world’s natural resources, but provide mutually acceptable terms of trade, in the interests of all, that can benefit all the populations of mineral-rich nations, rather than just a narrow, privileged elite.

[Jeremy Corbyn]

My hon. Friend must be aware that high-value rare earths and minerals—coltan, diamonds and so on—are often smuggled out of countries such as the Congo, which is possible because they are dealt with in relatively small volumes. Neighbouring countries re-export them and then they are bought by dealers around the world. We will find that the traceable line almost disappears unless we force the countries that host the headquarters of a number of the dealing companies, such as Switzerland, to be part of the transparency process.

[Mr Wright]

I agree with my hon. Friend. A balance needs to be struck, with the UK being the centre of the world’s financial operations through the City of London, between moving unilaterally and providing for a multilateral approach to ensure that we can adopt my hon. Friend’s suggestion.

My hon. Friend the Member for Falkirk mentioned something in which I am particularly interested: ensuring that valuable resources such as rare earths, or minerals in general, are not sold for a fraction of their real market value. There is an argument, as we heard, that if developing nations received the fair market share for those important and valuable resources, the international aid budget could be reduced, because those mineral and resource-rich nations could develop their own economies and societies, and make progress along the value-added chain.

When dealing with reporting and regulatory requirements, critics often say that any additional requirements would be too onerous and would impose additional costs. It is often argued that it would be wrong to increase costs for mining companies at a time when the long-term global boom in commodities is coming to an end. However, an interesting article in The Economist earlier in the year stated that, in 2011, Angola awarded several new deep-water oil concessions to firms covered by the Dodd-Frank requirements with no apparent difficulty. It said that no oil company had cited increased openness as a material risk in its Securities and Exchange Commission filings.

My hon. Friend the Member for Falkirk talked about how hedge funds want improved transparency and reporting requirements because they want, to use his vivid phrase, to know where the money is going. Paul Bugala, a senior analyst for extractive industries at Calvert Instruments, which manages a $13 billion fund, states that such improved disclosure and reporting requirements would help him and the market better to assess political and regulatory risk, and would therefore allow for better investment and stock selection, improving share prices in the sector in the long term.

Companies already collect such data for internal use, so there is a strong argument that such a process would merely make the data public. The additional costs that are often cited would therefore be minimal, if not non-existent. If all companies had to fulfil this additional requirement, no competitive advantage would be lost. The article in The Economist concluded by saying:

“'The expense has been minimal for the few, such as America’s Newmont Mining, that already provide country-level reporting.”

In July 2011, in a speech in Nigeria, the Prime Minister said:

“It is not enough to import labour, extract Africa’s resources and move on. It’s vital that when foreign companies invest in a country, the benefits of that investment reach the African people, so they become less reliant on aid.”

The Prime Minister complimented the United States for introducing legally binding measures to require oil, gas and mining companies to publish key financial information for each country and project they work on. He said in the same speech:

“I'm calling on Europe to do the same. We want to disclose the payments our companies make to your Governments so you can hold your Governments to account for the money they receive.”

Although the Prime Minister made that speech and that pledge 16 months ago, there has been slow progress at a domestic or European level. One of the first replies that the Minister gave in her new job, with her shiny red box, was to state in mid-October that the Government are engaged in EU-level negotiations on transparency laws. She added that the European presidency would soon begin discussions with the European Parliament and the Commission to try to achieve some agreement on improved transparency in the payments that extractive industries make to foreign Governments. I will support her in that.

I appreciate that the Minister is relatively new to her post and her response was made only six weeks ago. However, there had been some movement in the month prior to her appointment. I am not suggesting for one moment that the Minister’s appointment has stalled progress—I hope she will not take offence; it genuinely was not intended—but a Committee of the European Parliament passed a vote in September requiring a European version of the US system through which oil, gas, mining and timber companies should publish their payments to foreign Governments. Will the Minister outline any progress that has been made in the six weeks or so since she answered that parliamentary question, together with any time scales that she is pressing on her European counterparts to reach European-wide agreement?

It seemed to me that the Prime Minister’s speech in Nigeria suggested that he wanted country-by-country reporting. The Minister’s parliamentary answer of six weeks ago seemed to confirm that stance. When the International Development Committee investigated tax in developing countries, it recommended:

“The Government should enact legislation requiring each UK-based multinational corporation to report its financial information on a country-by-country basis.”

In their response to that recommendation, the Government dismissed the idea of unilateral positioning on this matter, stating that they merely support mandatory reporting requirements at the EU level. I can understand that approach but, as I said in response to an intervention from my hon. Friend the Member for Islington North, what is the correct balance between moving in a unilateral fashion—given our financial importance in the world with the City of London—and moving at a European level? Is there anything that the UK and the Minister can do outside the EU? I would be interested to hear her opinion of the appropriate policy balance.

One of the areas of today’s debate has been the extractive industries transparency initiative, about which my hon. Friend the Member for Falkirk and the hon. Member for Worcester spoke particularly eloquently. As we have heard, the EITI was established a decade ago by the UK Government with the clear and specific aim of addressing corruption in the extractive industries. As the hon. Member for Worcester said, the UK has never signed up to EITI, despite being at the forefront of founding the organisation, so that seems to be a mismatch.

When the then Under-Secretary of State for International Development, the hon. Member for Eddisbury (Mr O'Brien), gave evidence to the International Development Committee investigation that I mentioned, he said that the UK’s reason for not signing up to the EITI was that we as a country are not “resource-rich”. I have looked at statistics from the Office for National Statistics, and disregarding the City of London’s position in terms of UK-listed mining companies, 16.4% of the UK total economic production constitutes mining and quarrying. That seems fairly resource-rich to me, given that we also have North sea oil. Will the Minister comment on that? Does she agree with the then DFID Minister? Does she not agree with the suggestion made today that the UK, as the founder of EITI, should lead by example? Does she agree that the UK’s joining would encourage other countries to join? Does she also agree that as this country is the world’s acknowledged centre for financial services and accountancy standards, and at the forefront of world-class corporate governance, and given that the City of London is the headquarters for so many multinational mining corporations, the UK should and could send out a powerful message by joining the EITI?

In response to the investigation, the Government said that they welcomed the strategy review of the EITI, which is looking at developing a broader standard for consideration by the EITI board, with a view to possible introduction in 2014. Has the Minister any thoughts on the criteria that would need to be met as part of the strategy review that would satisfy her enough to recommend to her DFID counterparts that EITI membership should be sought?

My hon. Friend the Member for Hayes and Harlington mentioned the London Mining Network. Has the Minister seen the network’s report on UK-listed mining companies and the case for stricter oversight? It is incredibly interesting reading. Will she comment on whether the Government would be amenable to the eight recommendations put forward in the report on such matters as the reporting of non-compliance with IFC and OECD standards, as well as ensuring—we have heard about this many times in the debate—that the FCA has powers to enforce section 172 of the Companies Act 2006 with regard to corporate reporting requirements relating to environmental and social impacts?

That report also raises interesting points about the reporting requirements of companies listed on the alternative investment market. I fully accept the differing reporting and regulatory requirements between AIM-listed companies and those listed on the FTSE 100, but it would be interesting to hear the Minister’s thoughts on the Government’s policy on whether AIM requirements for mining companies should be changed.

The hon. Member for Hexham talked about open-cast mining in his constituency and made the important point that the north-east was at the centre of mining. It has a rich heritage and helped the industrial revolution to come about. He mentioned two important points that I hope the Minister will address, including about individuals who want to sue mining companies because of what might be happening in their communities. Is the Minister concerned about the effect of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, which makes it virtually impossible for any UK citizen to seek redress in such a respect?

The hon. Gentleman also mentioned planning and, quite rightly, the importance of the green belt in the planning system, and he cited what the Secretary of State for Communities and Local Government said in a speech in September. Will the Minister address the comments made by the Under-Secretary of State for Communities and Local Government, the hon. Member for Grantham and Stamford (Nick Boles), in the past 24 hours, when he said—I paraphrase—“Let’s just build over the green belt”?

[Guy Opperman]

I assure the hon. Gentleman that the planning Minister did not say, “Let’s build over the green belt.” He specifically said that we should not build on the green belt, but look at other land, which is a perfectly reasonable proposal.

May I briefly ask about one of the hon. Gentleman’s points? The legal aid changes would not have affected the several cases that I brought as a lawyer against such planning applications. Such action would still be available and, because of what we did, there is now a protective costs order to protect litigants bringing such actions. Does the hon. Gentleman accept that successive Governments have allowed applications for developments to be made by companies that are UK-based, but ultimately hiding behind a parent company? That cannot be right.

[Mr Wright]

The hon. Gentleman has brought to the debate his impressive forensic skills, which he has honed as a barrister. He is right that the planning Minister did not say, “Let’s build all over the green belt,” but, “Let’s build on green land.” I was a planning Minister, and green belt regulation is important. Brownfield development, as opposed to greenfield development, is always the most appropriate approach.

The hon. Gentleman gave us his experience of the importance of legal aid and asked an important question to which I hope the Minister will respond. In different areas of public policy in the past month, we have seen companies using their power and breadth of scope in a globalised world to make profits in the UK despite having no corporate responsibility whatsoever, particularly over paying tax. I am interested in the Minister’s comments on any proposals to make companies to pay tax where they earn their turnover, as opposed to allowing them to move their responsibilities elsewhere through transfer pricing.

This has been an important debate in which many serious points have been made. I am a big believer in the notion that improved transparency and reporting requirements, and better corporate governance, can benefit all society, and indeed the economy. I will be interested to hear the Minister’s response.

15:42

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson)]

Thank you for chairing the debate, Mr Benton, and for drawing our attention to the new clock regime, which is a very good innovation, particularly the advent of seconds. We can feel the anticipation of the countdown in the closing seconds of our speeches. I congratulate the hon. Member for Falkirk (Eric Joyce) on securing the debate. It has been an important opportunity to highlight what we are doing to increase transparency. I pay tribute to his hard work, particularly in his role on the all-party group on the African great lakes region.

I would also like to thank the hon. Gentleman for his kindness and understanding. When the debate was initially scheduled for a few weeks ago, I was suffering from the cold that was going round and had entirely lost my voice. It would not have been a particularly instructive debate in which to hear the Government’s view, because I would have been very much in listening mode only. I am glad we were able to reschedule. In doing so, it has changed from a half-hour to a 90-minute debate. I do not know whether that is pure good luck in the ballot or karma from the powers-that-be for the hon. Gentleman’s understanding. I am sure that we all appreciate having this opportunity, because we have been able to hear not only his views but contributions from other hon. Members.

In my summation, I shall outline the Government’s position and our commitment to transparency, in particular. I shall go through the latest developments on the EU rules and talk about corporate governance, with particular reference to reporting requirements and the composition of boards. I will also talk about the extractive industries transparency initiative, which several hon. Members mentioned. I will then deal with the impact of mining on the UK economy.

For far too long, the world’s poorest people have struggled to benefit from the vast natural resources in their countries. Millions of people in developing countries languish in poverty while their corrupt Governments squander or hide large payments from foreign companies. Strong EU action to create a new global standard for transparency in the extractive industries is vital to help those citizens to hold their Governments to account. I am determined that the UK will play a leading role within the EU to make the most of opportunities.

The Government are keen that the mining industry, as well as other extractive industries, provides more information on the payments it makes. Countries rich in natural resources—the minerals that industrialised nations need—can use that wealth to boost economic growth and improve social conditions for some of the poorest people in the world, who badly need that. International mining developments have the potential to boost economic growth dramatically and provide a route out of poverty for resource-rich developing countries. All too often, however, such resources act as a curse, owing to the temptations of corruption that tend to go with them.

To provide some context, the value of exports of oil, gas and minerals from sub-Saharan Africa in 2009 was five times greater than the aid it received, and prices have risen since then. There is huge potential to unlock positive development. Botswana, Zambia and the Democratic Republic of the Congo top the global chart of mineral-dependent countries—those that depend on minerals for more than a quarter of their tangible exports. Well managed extractive resources can provide a big economic jolt, but citizens of such countries are too often unable to find out how much their Governments are paid for access to the resources or how the payments are reinvested, so there is no way to hold them to account.

The Prime Minister has expressed his strong support for the transparency agenda. When he spoke in Lagos in July 2011, he made clear his support for EU action to improve the information available at both country and project level. More recently, he reaffirmed his commitment to the UK leading efforts in the EU to require oil, gas and mining companies to publish details of the payments they make to Governments. The Deputy Prime Minister has also been active in this regard, and last month he and I met campaigners, including that rather well known supporter, Bono. The Deputy Prime Minister has been a strong advocate of transparency and in particular of ensuring that the agenda is driven forward at the centre of Government with the important support of the Prime Minister.

The hon. Member for Falkirk and others talked about the accountancy and transparency directives and where we are with them, and I hope to update the House today. The Government are keen that the EU agrees strong reporting requirements—rules that could improve the lives of millions of people around the world. For the first time, the extractive industries will have to report the payments that they make in all countries in which they operate. It is proposed that such companies, whether listed or not, publish details of what they pay to each level of government—nationally, regionally and locally. Crucially, they will also have to report payments to state-owned organisations, such as energy providers. That will give citizens the information that they need on, for example, the taxes, royalties and other payments made in host countries. If we get the measures right, it will have a huge impact in helping to combat corruption in developing countries and ensure that natural resources benefit all the citizens of the countries where they are mined.

The hon. Member for Falkirk mentioned the action in the United States, which has already agreed new rules, as we know. The US Dodd-Frank Act requires listed companies to report to the Securities and Exchange Commission each year. That means giving details of the payments, whether in money or in kind, that they make to Governments. The new legislation, published in August, raised the bar on global transparency standards, which I warmly welcome. US-listed companies will have to comply with a set of strict rules that will considerably increase the amount of information available to citizens. Although the EU has been discussing the issue for a long time—things tend to take a long time with the EU—the publication of the US rules has given us an opportunity to go further than we had thought possible in the EU, because, on exemptions, project-level reporting and the threshold for reporting, the rules are more ambitious than many had expected.

In response to that bold move by the US, the coalition Government are pushing for the EU to match the US approach, on, in particular, project-level reporting and setting a low threshold above which payments must be disclosed. The threshold is $100,000 under the US rules, and it would be helpful if the EU agreed to a similar amount in negotiations. It is worth mentioning in passing that if standards in the EU and US were, as far as possible, shared, it would help companies complying with the transparency rules, because it would mean one set of requirements to comply with, rather than extra complexity and therefore extra cost. In America, there will be no exemptions from reporting, which has been a real bone of contention.

Concerns have been raised with my predecessors and me that the disclosure of payments made to a Government might be prohibited by the criminal law in some countries. I have yet to see the titles of specific Acts of Parliament in specific countries that would prohibit that type of transparency. I encourage anyone reading the debate in Hansard who strongly believes that exemptions are absolutely necessary to furnish me with the titles of the Acts that people would be unable to comply with, in whatever foreign country. I will happily receive and respond to such information, if it exists, as I expect it does not. When mining companies based in the United States and Europe have to provide the information, that will cover a large proportion of the extractive industries operating in the developing world.

The hon. Member for Hartlepool (Mr Wright) raised the challenge of the EU process. I am glad that he did not say it was my fault that things were taking a while in Europe; I assure him that it is not. I may have been in this role for only two and a half months, but my predecessors were very active, as am I, on the issue. Since January, there have been 16 meetings of the Department, campaigners and the industry, five of which included Ministers. Since I took on this role, I met members of the Publish What You Pay coalition and representatives from the extractive industries on 12 September, and I again met members of Publish What You Pay on 25 October. We are therefore in close contact on the issues, because it is important to make progress. My right hon. Friend the Secretary of State for Business, Innovation and Skills had an article in the weekend newspapers on this issue, and we are determined to keep up the pressure.

[John McDonnell]

It is impressive that the Minister has met such a range of organisations. Is she now willing to meet the London Mining Network?

[Jo Swinson]

The hon. Gentleman encourages me to fill my diary with more meetings—I am sure that my private office will be delighted. I will certainly look at whether it is possible to undertake that commitment. If he writes to me with more details, I will see what can be done.

[Mr Iain Wright]

Will the Minister give way?

[Jo Swinson]

I will. If it is another request for a meeting, the hon. Gentleman should note that I may be less minded to give way on other occasions.

[Mr Wright]

I, too, think it is impressive that, in such a short time, the Minister has met so many organisations, but the key point is action. What was the actual outcome of those 16 meetings?

[Jo Swinson]

The hon. Gentleman asks a genuinely interesting question. One thing that became clear to me at the first round table I held on this issue was that the industry and the campaigners started in quite contradictory positions. Getting people to a position where they have agreed to make progress has been a rather long and perhaps slightly tortuous process, which has required a great deal of engagement. Both sides have had concerns, but, to their credit, they have both recognised that tweaks to their proposals might be needed, and genuine points have been made that ultimately led to concessions. Certainly when I joined those discussions, we were getting to a much clearer position, particularly with the catalyst of the strong US rules, and that is very welcome. It is important to have strong rules on transparency, but the industry recognises that it must comply with the US rules, and it wants to make sure that it is not a bad neighbour, as it were, in the countries in which it operates. There is therefore a recognition that change is necessary.

The EU negotiations are in the trialogue process, the delights of which are not always as swift as we would like. We are keen to make sure that, if possible, that agreement is reached through the First Reading process, because that would allow us to implement the rules. I understand that there have been three sets of meetings so far. They are practically weekly at the moment, and I think the dates were 7, 9 and 14 November, but do not quote me on that. Things are prone to change in the EU—for example, there was due to be a meeting on Friday, but I heard it was off and then that it was possibly on again. None the less, whatever the specific dates, there are very regular meetings of COREPER—and other lovely EU acronyms—to ensure we get some progress.

On a range of issues, particularly the three I mentioned—exemptions, and threshold-level and project-level reporting—we are getting a greater degree of consensus. The European Parliament is still pushing some elements, in relation to the involvement of other parts of industry, on which it wants to go beyond what the US does. That runs the risk of just delaying or preventing the process, when there is a lot of consensus on extractives, so there will be further discussions.

As the hon. Member for Islington North (Jeremy Corbyn) explained, he has unfortunately had to leave for another engagement. He made a point about outsourcing parts of the mining industry to avoid transparency. It is worth putting it on the record that the project definition is likely to tie in contracts and licences in such a way that avoidance will not be straightforward and that subcontracting will still be captured. The hon. Member for Falkirk talked about how listing companies in London might be a positive step, even when they were not UK-based. The hon. Member for Hayes and Harlington (John McDonnell) was characteristically forthright and passionate about some of the failings that he has identified. I am sure that he appreciates why I cannot go into the individual cases that he mentioned.

On the overarching issue of corporate governance, it is important that investors have information to hold companies to account. The London stock exchange has four of the top five mining exploration and extraction companies by market capitalisation—BHP, Rio Tinto, Xstrata and Anglo American. There are 119 extractive and mining companies listed on the London exchanges, of which 12 are UK companies. We want to ensure that investors can hold boards to account and encourage responsible business behaviour. We have high standards of corporate governance, but it is important that we are not complacent. Further strengthening those standards will help London stock markets, because it will give major investors more confidence.

[John McDonnell]

It is important that companies are held to account, and it is also important that Governments are held to account. Will the Minister personally examine the information that has flowed between the Government—that is, the Foreign and Commonwealth Office—and other Government agencies with regard to GCM and its operation at the Phulbari project in Bangladesh? A freedom of information request for the release of that information has been denied.

[Jo Swinson]

I will endeavour to look at the issue the hon. Gentleman raises, and write to him. I want to conclude my remarks, as there are a couple of points I want to pick up.

The tax issue is one for the Treasury, but it is important that companies pay the tax that they owe. If some of that needs discussion with other OECD countries, to make sure we have a regime that works, we should do that.

We have recently published draft regulations for narrative reporting. It is important that we make sure that it is explicit that relevant social and community issues in such reports should include a consideration of human rights. It is absolutely appropriate that investors should want to assess that in making their decisions.

Diversity on boards is also relevant to the extractive and mining industries. In the FTSE 100, there are currently 12 mining companies, half of which have no women on their boards. That means that, of the only eight companies in the FTSE 100 that have no women on their boards, three quarters are mining companies. I hope that those companies look at that in detail, because the rest of the FTSE 100 companies seem to be taking significant action, so they are lagging significantly behind. [Interruption.] The hon. Member for Hartlepool mentions Cynthia Carroll, whose departure shortly from Anglo American, will leave only two female bosses in the FTSE 100.

Various hon. Members, including my hon. Friend the Member for Worcester (Mr Walker), raised the issue of the extractive industries transparency initiative, although, as the hon. Member for Islington North pointed out, it has limited effectiveness. There are 16 compliant countries so far, and another 20 are in the process. The rules that we want to agree in the EU will go much further, so it is important to get them right. However, with my colleagues in the Department for International Development, I will look at that issue. We are trying to assess the impact of any such additional burden on small UK companies that operate exclusively in the UK. However, I hear the views expressed.

Mining is, of course, important to the UK economy. My hon. Friend the Member for Hexham (Guy Opperman) spoke as a passionate advocate for his constituency. Some of the issues he raised relate to other Departments, but it is the responsibility of local authorities to establish local development and local mineral plans so that it is clear how their areas will be developed. The Secretary of State for Communities and Local Government has made it clear that the green belt will be protected. He recently said in the House:

“Inappropriate development should not be approved in the green belt”.—[Official Report, 17 September 2012; Vol. 550, c. 619-20.]

That is clear. It is up to local authorities to implement conditions that are put in place, including those from the Planning Inspectorate.

In conclusion, the issue is important, and the Government are very committed to transparency. I thank all hon. Members for their contributions to the debate.

Police Pensions

Wednesday 28th November 2012 Westminster Hall

14:30

[Keith Vaz (Leicester East) (Lab)]

Let me begin this important debate by paying tribute to the bravery and dedication of police officers across the United Kingdom. They do a unique job that is without parallel in the public sector. We are rightly proud that our police service is the best of the best. The Minister and I saw for ourselves very recently such acts of bravery when we attended the police bravery awards evening, organised by the Police Federation.

The whole country saw the danger that officers put themselves in every day to keep our community safe when two young unarmed and exceptionally courageous officers, Fiona Bone and Nicola Hughes, lost their lives in the line of duty. Thanks to the police and other stakeholders, there has been a 40% reduction in crime over the past 15 years. It was police officers who, along with the Army, were responsible for the safety and security of the magnificent Olympic games this summer after we were all let down by G4S. As we hold this debate in the warmth of Westminster Hall, police officers are out saving lives, helping people in towns and villages to escape the rising floodwaters.

As this is the first debate with the Minister since he has taken over his new portfolio, may I congratulate him on winning his asylum appeal and moving, after seven long years with the immigration brief, into policing? He must be missing the UK Border Agency terribly, but I can assure him that we will keep him very busy with policing issues.

I am also pleased to see so many right hon. and hon. Members from all parts of the House here today. They will forgive me if I take a limited number of interventions because time is short, but I promise that I will acknowledge their presence at the end of my speech.

The Government’s proposal to increase the pension age to 60 is wrong. The Winsor review found that the average age at which police officers currently retire is around 50 to 51. Some police officers may want to continue to serve and work beyond that age, but it is unfair and unjust to mandate them to serve until the age of 60.

[Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC)]

I thank the right hon. Gentleman for giving way and congratulate him on securing this important debate. May I make two brief points? First, is it not distasteful to change a contract of employment halfway through and, secondly, given the special nature of the work that these brave men and women do, should we not be careful about expecting them to defend us on the streets at the age of 60 plus?

[Keith Vaz]

I have a quick answer to both questions, which is yes and yes, and I cover them both in my speech. If we expect police officers to stay on until the age of 60, it is a matter of fact that some will find their roles harder as they become older, as people like me know. Those officers will have to be relocated to back-office positions, which are precisely the functions that the Government are urging forces to cut while maintaining front-line numbers. The consequence of these proposals for police officers and forces will be seriously damaging.

[Andy Sawford (Corby) (Lab/Co-op)]

I thank my right hon. Friend for allowing me to intervene and for the time he spent with me recently meeting people in Corby. He will know that this is an issue not just for police officers and their families, but for all of us who want to show our hard-working police officers that they are valued. Does he agree that, at a time when there are 20% policing cuts and, now, a steep rise in pension age, morale in the police force is really being undermined, and we must not let that happen?

[Keith Vaz]

I agree with my hon. Friend. May I welcome him most warmly to the House and congratulate him on his election? I will be turning to police morale later in my speech, but he is right—it is a crucial issue in respect of these proposals.

16:04

Sitting suspended for a Division in the House.

16:15

On resuming—

[Keith Vaz]

Among the Government’s proposals are changes to the contribution rate. At the moment, a contribution rate of 10.5% of gross pay secures a contribution with a value of 24.2%. Under the proposed changes, a much higher contribution rate of 13.7% of gross pay will secure a contribution with a value of just 14.3%.

Police officers have told me that the proposed rate of 13.7% is simply too high and is not even-handed when compared with other public service workers. In fact, the rate is so high that there is a significant risk of opt-outs, including by new recruits who will not be able to afford to join the pension scheme. The Winsor review, upon which these proposals are based, also proposed lower starting rates of pay. Taken together, the two elements will have a devastating effect on recruitment. In addition, current pension contribution rates are already increasing. They increased in April and future increases are expected in 2013-14 and 2014-15, to meet Lord Hutton’s recommendations of an average contribution increase of 3.2%, which effectively means a 3% pay cut for officers.

Every single police officer in the 134,000-strong force will be affected by these changes. I have spoken to many officers, both in my constituency and here at Westminster, who are extremely anxious about them. When this debate was announced, I asked officers to contact me with their stories. I expected one or two to reply. In just seven days, I have received upwards of 120 e-mails, phone calls and letters from concerned officers across the country. Not one of them agrees with what the Government have suggested.

[Mrs Anne Main (St Albans) (Con)]

I thank the right hon. Gentleman for giving way, because I know that this is a very short debate. My police officers have shared similar views with me, but a particular issue that has been raised is the disproportionate effect of these proposals on women police officers—the right hon. Gentleman named two brave women police officers earlier—who have had career breaks, and on coming back they will find that, under the new system, the years they have served will not add up to the pension that they hoped for when they started in the police.

[Keith Vaz]

The hon. Lady is absolutely right and she is also right to raise the specific issue of women police officers, which has not been raised in the debate so far. I agree with what she said.

Apart from all those representations that I have received, the e-petition for a debate on this issue was started by Sergeant Nigel Tompsett of the Suffolk force, and it now has more than 100,000 signatures. This debate today in Westminster Hall is not an alternative to a debate on the Floor of the House on this issue; I hope that it is a curtain-raiser for such a debate.

The pension reforms need to be seen in context. They are part of a wider picture of sweeping reforms to the landscape of policing. In comes the National Crime Agency and out goes the Serious Organised Crime Agency; in comes the college of policing and out go the police authorities; and then in come 41 newly elected police and crime commissioners as well. Those are, in my view, the most significant changes to be undertaken since Sir Robert Peel laid the foundations for modern policing nearly two centuries ago. At this moment of seismic change, it is clearly wrong to destabilise the very people we expect to implement the changes.

Morale in the police force, as we have heard, is at an all-time low. The Metropolitan Police Commissioner, Bernard Hogan-Howe, told the Home Affairs Committee yesterday that this was a very difficult time for many in the service. His predecessor, Lord Stevens, through a survey of 14,000 officers and superintendents conducted by the London School of Economics, found that 95% of police officers do not feel that they have the support of the Government, and that 56% of those surveyed had recently contemplated leaving the force. It is because of measures such as these that officers who risk their lives for our communities feel short-changed and undervalued. The proposals will drive gifted and experienced officers out of the service.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

Will the right hon. Gentleman give way?

[Keith Vaz]

I will give way for the last time.

[Mr MacNeil]

The right hon. Gentleman is very kind. Does he agree with the Scottish Police Federation, which feels that control over the pensions of police in Scotland should be given to the Scottish Government, rather than be under the control of Westminster? The police in Scotland fully fund their own pension anyway.

[Keith Vaz]

I have not spoken to any Scottish officers and none have made such representations to me, but the Minister has heard what the hon. Gentleman said and I am certainly happy to talk to them after the debate.

We have to recognise the unique role, responsibilities and restrictions that apply to police officers. Each sworn constable is an independent legal official, not an employee. Police officers are required to deploy force, put themselves in the way of harm and make discretionary ethical judgments. Failing to carry out their duties, whether on or off duty, leaves officers open to the charge of misconduct in public office. As Nathan McLean, a police officer in Greater Manchester, put it to me:

“Each day when I go to work I understand that I may not return—yet I, like thousands of other police officers across the country, wear the uniform with pride and just get on with it in order to protect the public.”

Regulations provide for restrictions on the private lives of police officers, and despite being faced with the most wide-ranging reforms to pay and conditions in 30 years, police officers, unlike other professionals, do not have the right to strike or take industrial action. Police officers joined the force, and accepted these unique restrictions and limitations, on the understanding that they would be fairly provided for in retirement.

All those who represent our police service need to be consulted on the changes, and listened to very carefully. We are fortunate in this country to have robust representative organisations in the form of the Police Federation, led by Paul McKeever, and the Police Superintendents Organisation, led by Derek Barnett, along with people of outstanding ability, such as Sir Hugh Orde, president of the Association of Chief Police Officers, and the recently retired chief inspector of constabulary, Sir Denis O’Connor. I urge the Minister to ask them questions, to talk to them, to listen to them and to act on their advice.

Before I conclude, I would like to leave the House with some of the individual concerns of ordinary policemen and women who have contacted me. PC Gareth Spargo of South Wales police said:

“I increased my mortgage to pay for treatment so my wife and I could have children. Now my pay has been frozen for 2 years and I am paying an extra £100 a month in contributions....I love being a police officer and I joined in the knowledge that I was never going to be a rich man. I did however expect the terms that I joined under to remain constant for the duration of my service”.

PC Jason Ford told me:

“I have been spat at, punched, kicked, beaten with a wooden bat, been confronted with knives, swords and guns...my police pension has kept me going through some very difficult times, it is a little bit of light at the end of a very long tunnel”.

PC Matthew Ransom, of Kent police, contacted me to say:

“My mortgage was to be paid off in the last month in the job, leaving my lump sum to be used for university fees, or assistance in getting my boys on the property ladder. I cannot do those things now I have to do another 10 years’ service, contributing more and receiving the same or less in pension. How can this be fair?”

In addition, PC Turnbull from Bolton has made representations to my hon. Friend the Member for Bolton South East (Yasmin Qureshi).

In conclusion, I want to acknowledge the colleagues who have come here today to participate in the debate. They include the hon. Members for Hexham (Guy Opperman) and for St Albans (Mrs Main). We have heard from the leader of the Welsh National party, the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd), and from my hon. Friend the Member for Corby (Andy Sawford). My hon. Friend the Member for Barnsley Central (Dan Jarvis) is here, as are my hon. Friends the Members for Bolton South East and for Ynys Môn (Albert Owen), the hon. Members for Worcester (Mr Walker) and for Falkirk (Eric Joyce), my hon. Friends the Members for Hayes and Harlington (John McDonnell) and for Oldham East and Saddleworth (Debbie Abrahams), the hon. Member for Nuneaton (Mr Jones), my own Member of Parliament the hon. Member for Hendon (Dr Offord), the hon. Member for Rossendale and Darwen (Jake Berry), my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith), the hon. Member for New Forest East (Dr Lewis) and my hon. Friend the Member for Coventry South (Mr Cunningham). If I have left anyone out I am sorry. I did leave out the two Parliamentary Private Secretaries because I did not know which side they were on and I would not want to drag them into my side of the argument. And, of course, there is the Scottish National Member, whose constituency I cannot pronounce, who also spoke.

These are, of course, times of austerity, and the police are not the only organisation being asked to deliver more for less, but the reforms are wholly disproportionate. There is an alternative lower contribution rate within the Government’s 28% cost ceiling but, very disappointingly, it was rejected not by the Home Office but by the Treasury. I ask the Minister to reconsider that decision.

Finally, the Government must honour the existing pension arrangements of serving police officers, under section 2 of the Police Pensions Act 1976, and any new pension scheme should be applicable only to those who join for the first time. It is time for action to back up the words of praise we lavish on the police service whenever our communities are under threat. We need to act now and change the proposals before it is too late.

16:26

[The Minister for Policing and Criminal Justice (Damian Green)]

I thank the right hon. Member for Leicester East (Keith Vaz) for initiating the debate and for the kind remarks he made about me at the start of his speech. I can confirm that I am already nostalgic for the UK Border Agency. I entirely echo his remarks about the tremendous service that police officers give to their communities and the whole country. As he said, he and I attended the police bravery awards a few weeks ago. It was the first time I had attended, and I was struck dumb by the courage and heroism shown by all the winners. Even more importantly, I know from my own experience as a constituency MP, as well as from other experiences I have had as police Minister, how that kind of service is provided on a daily basis across the country.

This afternoon, I would like to clarify the Government’s approach to public service pension reform as a whole, as well as what it means for police officers. As the right hon. Gentleman acknowledged, these are difficult economic times and we have to take difficult decisions, but we have equally made it clear that we are committed to reaching a fair outcome for police officers, and I hope to explain why I believe that that has been achieved. In the course of his speech, the right hon. Gentleman enjoined me to listen to the comments made by a number of organisations.

I should start by reminding the House of the context for pension reform. From the outset, we have been candid about the need for a fundamental review of public service pensions and of how they are funded and maintained. That is why my right hon. Friend the Chancellor invited Lord Hutton to chair the independent public service pensions commission. As a member of the previous Government and a former Secretary of State for Work and Pensions, Lord Hutton was well placed to undertake an independent and comprehensive review. He did a thorough job and made a compelling case for change. As he set out in his findings, the costs of public service pensions have increased over recent years, mainly because people are living longer, and the increasing costs have fallen largely to the taxpayer.

The Government are committed to providing good occupational pensions for public servants, but we must do so in a way that is affordable, sustainable and fair both to those workers and other taxpayers. That means, across the public services, moving to the career-average pension model in place of final-salary schemes. That also involves increasing the contributions that workers pay for their own pensions and raising the retirement age. The Public Service Pensions Bill, which is currently before the House, sets out the high-level framework for those reforms, with work force and scheme-specific details to be implemented through regulations in due course.

To put all that in context, the latest figures from police forces show that, in the 2011-12 financial year, across England and Wales more than £2.8 billion was paid out in police pensions. Such pensions are paid to retired officers who have a legal entitlement to receive them. I hope that gives Members a sense of the scale of the issues and finances involved.

The right hon. Gentleman raised a specific point about police pension contributions. It is true that police officers pay among the highest contributions in the public services. That is because the pension is significantly more valuable than most others, as it should be.

As part of his report, Lord Hutton commissioned a comparative analysis of the benefits that workers get out of pension schemes based on what they contribute themselves. He found that, aside from those in the armed forces, who do not contribute to their pensions, police pensions are more valuable than most, as they are generally drawn from an early age and paid for longer in retirement. That is even taking into account the relatively high contributions paid by police officers.

I was struck by the verdict of Police Mutual, an independent financial adviser that specialises in services for the police. Its assessment, in response to the increased contribution rate, states that

“the Police Pension Scheme remains one of the best financial investments you are ever likely to make.”

People should listen to Police Mutual, because it knows whereof it speaks.

While I am on that subject, I am happy to reassure my hon. Friend the Member for St Albans (Mrs Main) that the new scheme does not have a service requirement, so female officers will not be disadvantaged for taking career breaks.

[Keith Vaz]

I thank the Minister for bringing that information to the House’s attention. Police Mutual may have a vested interest, because it deals with such financial affairs and might benefit in some way. I do not know the organisation’s position, but the organisations that have spoken to us are clear that their members will be affected. The Minister is new to his position, and he is not responsible for this. He did not write the Winsor review. He has just become the Police Minister, and he has to work with the police for the two-and-a-half years at least that he has this job. Will he agree to meet the representatives—the Police Federation, the Police Superintendents Association, the Association of Chief Police Officers and others—again to discuss one more time the effects that the changes will have on their members? If he agrees to do that, he will get a better impression of what is going on.

[Damian Green]

I constantly meet not only police officers in my constituency who wish to discuss this but, as the right hon. Gentleman would expect, the fed and the supers. This item is clearly on that agenda, and I am happy to reassure him that I will continue to discuss it. I will come on to what the federation said in a second.

We have maintained throughout the process that police officers deserve to be treated with respect and even-handedness. We have worked hard with partners in policing to reach a fair outcome that recognises the particular nature of a police officer’s work. That is why we asked Tom Winsor to reflect on Lord Hutton’s findings and consider some of the issues in the context of his independent review.

[Mr MacNeil]

The Minister speaks about fairness and even-handedness, but does he agree that, to give fairness and even-handedness, full flexibility on pensions should be given to the Scottish Government, as the Scottish Police Federation wants?

[Damian Green]

I am not sure whether the hon. Gentleman is aware that the Scottish Government’s Cabinet Secretary for Finance, Employment and Sustainable Growth has this afternoon made a statement on his intention to take forward such issues in Scotland. I hope the hon. Gentleman will go away and reflect on what the Scottish Cabinet Secretary said.

[Mrs Main]

The Minister was helpfully explaining why female police officers will not be disadvantaged, but female police officers have told me that the career-average scheme will disadvantage them, and I am concerned about that. Will the Minister explain that point a little more fully?

[Damian Green]

There is no service requirement, but we could discuss that for the rest of the time available. I would more than happily have that conversation with my hon. Friend offline.

Tom Winsor agreed with Lord Hutton that a normal pension age of 60 is appropriate for police officers. Given the findings of the two independent reviews, the Government believe there is a strong and coherent case for the framework, which will be in place from April 2015.

The Police Federation has been mentioned a lot, and having engaged in the process that followed those reviews, it confirmed that it accepts the outcome as the “best deal possible” for police officers in the context of the reform across public service pensions. Paul McKeever, chair of the Police Federation and the staff side of the Police Negotiating Board said, and I will quote him in full for balance:

“Despite being disappointed with aspects of this announcement, Staff Side accepts it within the context of the Government’s wider public service pensions reform agenda. It is clear from our discussions with the Home Office that, compared to the reference scheme offered by the Home Secretary of 27 March, this was the best deal possible to protect the unique position of police officers.”

The right hon. Member for Leicester East asked me to listen to the Police Federation, and I do in that regard.

The right hon. Gentleman also asked me to listen to ACPO. The ACPO lead for reward and recognition, Chief Constable Simon Ash, said:

“The changes to the Police Pension Regulations by the Home Office are broadly supported by ACPO, who have worked constructively with other stakeholders since March to ensure that the best possible balance is achieved for longer term reform whilst providing sufficient transitional arrangements.”

The degree of consensus is often under-recognised. The right hon. Gentleman set out the general picture, but nevertheless both ACPO and the Police Federation have accepted the proposal. There is much of the detail still to arrange for new pension arrangements to be in place for 2015. Obviously, we will maintain the dialogue to make those arrangements work.

The deal means that the normal pension age for police officers will be 60. Aside from the armed forces and firefighters, other public service workers will have a higher normal pension age linked to the state pension age, which is 65 rising over time to 68. That means that police officers will continue to retire earlier than most others, reflecting the nature of the work they do.

We have heard today that some officers are concerned about the prospect of working to 60, but the evidence shows that the average age of those joining the police in recent years is 26. The current open pension scheme—the 2006 scheme—has a 35-year accrual period, so many officers will already be working beyond 60 to accrue a full pension. I recognise that that is a genuine concern for some officers. The framework, therefore, includes flexibility for officers to retire from 55 with an immediate pension and an actuarial reduction linked to the normal pension age of 60.

The increased flexibility of the career-average model also means that there is no cap on the amount of benefits that can be accrued. Under current arrangements for police officers, benefits are capped after 30 or 35 years, depending on the pension scheme. Under the reform framework, there is no cap, so years worked beyond age 60 would provide an enhanced pension.

We are protecting accrued rights for police officers for pension built up by 2015, as we are for all public servants. Most police officers are members of the 1987 scheme, which is a complex scheme that includes uneven periods of pension accrual, so we have developed tailored arrangements to reflect that, thus honouring the Government’s commitment to protect accrued rights and to give police officers a fair outcome.

The Government also made a commitment to give transitional protection to those who were within 10 years of their current normal pension age on 1 April 2012. That applies across the public services, recognising that those nearest to retirement are likely to have least time to plan for that retirement. Again, the complex design of the 1987 scheme has led us to create specific arrangements. As there is no set pension age under that scheme, we have decided to give protection based on age and length of service. All officers aged 45 at 1 April 2012 will be able to remain in their current scheme rather than moving to the new pension arrangements in 2015. We are also giving protection to those who, at 1 April 2012, were within 10 years of retiring on a full police pension. That will give full protection to a further group of officers, including some who were as young as 38 or 39 at 1 April this year. On top of all that, there is also further tapered protection for those who were within four years of qualifying for full protection, in order to smooth the cliff-edge effect that often happens with pension reforms. That tapering again demonstrates, I hope, that the Government have entered into the process in good faith with a view to finding a fair outcome.

I am conscious that going through the details of pension reform does not make for great parliamentary rhetoric, but it is such a serious issue that detailing it is important. I appreciate as well as anyone the degree of understandable emotion caused by the issue, but the underlying point is that, under the new arrangements, the police pension deal is still one of the best deals on offer. I do not underestimate the level of concern among police officers about pension reform, and it is right that they should have clarity at the earliest opportunity about what it means. Many details of how the reforms will be implemented have still to be decided. I repeat the commitment that the right hon. Gentleman wished me to make: the Government will continue to work with our partners in policing on the issue, including specifically those who represent rank-and-file officers.

Throughout the discussions, we have been committed to reaching a fair outcome for police officers. We have done all that we can to achieve a fair pensions package for police officers that reflects the front-line nature of policing work and protects those closest to retirement. Police officers will continue to retire earlier than most public servants, and will continue to benefit from significant employer contributions on top of their own.

I am grateful to the Police Federation for making it clear that they encourage their members to remain in the scheme and will continue to do so after the proposed reforms. I hope that police officers will be reassured by that eminently sensible advice. It is difficult to envisage another investment that would provide the same guaranteed level of income—

[Mr Joe Benton (in the Chair)]

Order. We must move on to the next debate.

National Park Authorities (Elections)

Wednesday 28th November 2012 Westminster Hall

16:43

[Tim Farron (Westmorland and Lonsdale) (LD)]

It is a pleasure to serve under your chairmanship again, Mr Benton. I am extremely grateful for the opportunity to raise the issue of accountability in relation to Britain’s national parks. The matter is raised with me almost daily by local businesses and residents of the Lake district and the Cumbrian part of the Yorkshire dales, not because local people are desperate for more elections or because we are constitutional obsessives but because decisions made by people who are not accountable to those affected tend to be bad decisions.

As a result, businesses are under unnecessary pressure because they cannot expand, farmers are struggling because they cannot diversify, and local people, especially young people, are leaving our communities never to return because of the lack of affordable housing. Meanwhile, the rise in second home ownership has gone unchecked in recent years. A conservative estimate is that one in six properties is now a second home owned by folks wealthy enough to have a property in a national park that they occasionally visit, while locals who are desperate to stay are forced to leave.

That said, Britain’s national parks are stunning countryside protected for the nation. The 1945 to 1951 Attlee Labour Government spent a good six years implementing Liberal policies, among which was the establishment in 1951 of the national parks, including both the Lakes and the Dales. That was good legislation; it was a wise and visionary move. The motivation behind the Act was to preserve Britain’s most spectacular landscape and its environment and to promote the heritage of our national parks for the benefit of all the people of Britain. There was a sense that the national parks were the lungs of Britain’s towns and cities, and that they therefore belonged to the whole country, not just to those who lived, worked or indeed owned property or land there.

Today, those of us who are blessed to call the Lakes or any other national park home are proud to live in such beautiful places. We embrace the fact that our area is cherished by the nation. We are determined to be stewards of our countryside and to share it with all comers. The Lake district has 16 million visitors a year, the tourism economy of Cumbria is worth roughly £3 billion a year and, outside London, the Lake district is Britain’s most important attack brand for overseas tourism, drawing in millions of tourists every year, many of whom then visit other, less famous parts of Britain, adding hugely to the economy of the whole country.

It is vital for our environment, for biodiversity, for our tourism economy and for our fight against climate change that our national parks are protected, and it is vital for our nation’s heritage and for our sense of collective ownership that that heritage is propagated and that decisions taken about our national parks should be taken on behalf of the UK-wide community well as the local community.

I contend that the evidence of recent years shows that the local community’s interests are most likely to be overlooked when the balance of considerations is made. We in Westmorland and Lonsdale are blessed with two national parks: within the constituency are the most populated part of the Yorkshire dales, including Sedbergh, Dent and Garsdale, and the most populated part of the Lake district, including Ambleside, Grasmere, Windermere, Bowness, Hawkshead, Coniston and the Langdales, to name a few. For those towns and villages, the national park acts in many ways like the local authority: it decides on planning, environmental matters, provision of housing, car parking prices, tourist information and a range of other services.

Although I am talking about beautiful countryside, I am not talking about empty spaces. The Lake District is Britain’s most populous national park: 45,000 people live within it, and thousands more who live near it make their living there. The national park boards act almost identically to local district or county councils. There are 22 members on the Lake District national park board and 22 on the Yorkshire Dales national park board. Of those, six are appointed by the Secretary of State and by local district or county councils. A further four are appointed by parish councils.

The idea is that local council appointments tick the box when it comes to demonstrating that local people have a voice, but it is worth pointing out that many local authority representatives see themselves, understandably, as there to represent their local authority’s institutional interests rather than the interests of residents. To underline that point, many of those local authority representatives do not actually live in or represent wards in the national parks. Also, many parish councils that nominate members of national park boards tend be made up of people who, although able, decent and committed, became members of their parish council without being elected, owing to a lack of demand to take up parish council places.

That prompts the question whether there would be any interest in or demand for elections to the national park boards. Hon. Members might be interested to know that South Lakeland had the highest electoral turnout in the country in the police and crime commissioner elections on 15 November, but even then we managed only 23%. Perhaps that underlines the public’s antipathy to those elections. I suspect that one reason why the turnout was so low is that people felt that the post should not be politicised, and that we already have too many elections.

Maybe this is not the best time to be asking the Government—or, more important, local residents—to consider holding more elections, but let us look at it this way: we would not tolerate a district or county council making decisions about housing, planning, economic development, environment and tourism without its members being elected by the residents who had to live with those decisions. In fact we would be outraged, yet to the people who live and work within them, our national parks are effectively unelected and unaccountable local authorities.

That does not mean, however, that the national parks do a dreadful job. In fact, they do a good job. They protect our world-class landscape and environmental heritage to the extent that the lakes are potentially a world heritage site. They have done outstanding work, enhancing biodiversity in the Howgills and the Yorkshire dales, for example. They have performed an almost miraculous clean-up operation in respect of water quality in many of our lakes. They have made massive strides in reducing carbon emissions through improved cycle routes and rail integration. But they make silly decisions—for example, about aggressive car park ticketing prices in Hawkshead and Ambleside, and they choose to develop their main visitor centre at Brockhole in ways that are almost designed to damage local hotels. They throw out exciting, completely appropriate commercial ventures, such as the Honister zip wire, but they put pressure on farmers to reduce their livestock numbers, forcing many of them to abandon farming altogether. I suspect that they do such things because too often they do not listen to what local businesses, residents and farmers want.

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

My hon. Friend sets out the importance of national parks and some of the failings. Does he agree that experience in the Scottish national parks, which have had elected members since their formation, proves that the elections can be well contested and of great interest to local people?

[Tim Farron]

I am grateful to my hon. Friend for making that point. That is true. I will mention the Scottish example in a moment. The elections in the Scottish national parks have engaged people and made them take the national parks seriously, providing a sense of ownership rather than a sense that this is a national thing deposited upon them.

It is important that our national park boards are chosen by local people, not simply chosen by others, so that a strand of legitimacy supports their decision making. Of course, that is not to say that people who are elected will make perfect decisions. We hon. Members present are proud to be elected to this place, but there are occasions when we do not get things perfectly right. Decisions made by people who are accountable will tend to be better, because those people have had to listen to those who have put them where they are.

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

I agree with the thrust of what the hon. Gentleman is saying. Is he proposing that all or most of the NPA members should be elected? There are a couple of pilot schemes under way, whereby a proportion—about half a dozen—members will stand for election. I am pleased to say that the New Forest national park authority volunteered to be one of the two authorities to go down this route. The NPA in the New Forest got off to a bad start, cutting across the grain of society, leading to protests, but after a complete reorganisation it now works with the community, which is why it is not afraid to volunteer to have at least some of its members elected.

[Tim Farron]

My hon. Friend makes a superb point and underlines the case. I envisage a minority of people, rather than a majority—these are national parks—being there as the local voice. It is commendable that the New Forest NPA has put itself forward and it is to be congratulated on that.

If our national park boards were in part elected, they would, as my hon. Friend said, be far more legitimate in the eyes of local communities, residents and businesses, because there would be a far greater sense of collective ownership of decisions. Local communities would be far more willing to accept even difficult decisions, if they felt that they had at least been arrived at with the local case having been made.

This is about the quality of decisions, not about the quality of the people. The Lake District and the Yorkshire Dales national parks are led by outstanding chief executives. Cumbria’s two national parks are led by Richard Leafe and David Butterworth, decent people with vision and immense competence. The Lake District national park is chaired by Bill Jefferson and the Yorkshire Dales national park by Carl Lis, both of whom are staggeringly hard-working servants of our local community and who are desperate to do the right thing, both by the nation as a whole and by local residents. All the board members I know—I know most of them—are good, decent people who are dedicated to their roles and selflessly give their time and service.

I return to what I said at the beginning. The national parks are there for the enjoyment of the whole nation. It is right that a proportion of the board membership should be selected nationally, but wrong that none of those members should be elected locally.

I welcome the proposed pilots in the Peak district and the New Forest. I note that Scotland has blazed a trail with national parks, with Loch Lomond and the Trossachs electing many of their board members for some years now. But why are all national parks not required to elect some of their members, and why was the nation’s biggest, highest-profile and most populated national park, the Lake District national park, not first on the list in the selection of the pilot project, whether it volunteered or not?

Is there not a special case for introducing democratic legitimacy in the Yorkshire Dales national park, given the genuinely mixed response received in some quarters to plans to extend its boundaries? Many residents and businesses in and around Barbon and Casterton retain deep concerns about proposals that would bring their communities within the boundaries of the Yorkshire dales, not least because these are Westmorland communities and have never been in Yorkshire. Their concerns mostly focus on their fears that, whereas planning and housing decisions affecting them at the moment are made by the democratically elected and accountable South Lakeland district council, in future they may be made by an unelected and unaccountable national park.

There are, of course, dangers in introducing elections to the national parks. Just as many of us do not want our police service party-politicised, we do not want our national parks to become arenas for party politics. I would advocate for party political labels not being allowed in the contest, for example, to ensure that there was no sense that national parks would simply ape local councils in that respect. Nor would we want vast amounts of public money to be spent on such elections. However, given that every year in Cumbria there are parish, district or county elections, it would be possible to ensure that national park elections coincided on the same day to ensure cost savings and, at the same time, to maximise turnout.

If we thought that electing a proportion of national park board members would ensure decisions that everyone was happy with, we would be deluding ourselves. However, life can be tough in our national parks, because incomes are often low, and housing and the cost of living are high. Businesses need to be able to thrive, communities must be able to hang on to their young people, and farmers must be able to continue to farm. What point is there in attempting to maintain a thriving tourism industry in the lakes and the dales, if the dead hand of restriction kills off expansion and innovation?

Do we really want national parks that can only be lived in by the wealthy few, or do we want our national parks to be open to people of all income backgrounds? lf we want thriving businesses and thriving communities for people from all income backgrounds in our national parks, we need to ensure that decisions are taken by people chosen by our local communities, who will be responsive to those communities and will answer to them for decisions that they make, both good and bad.

As Winston Churchill said, democracy is not much of a system, but it is infinitely better than all the alternatives. He was right. It is time that that applied to our national parks, too.

16:57

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Richard Benyon)]

I congratulate my hon. Friend the Member for Westmorland and Lonsdale (Tim Farron) on securing this debate. I do not know if any other hon. Members have two national parks in their constituency, but my hon. Friend certainly brings with him real authority on this subject. From contact that he has with me over the past two and a half years, both by letter and through parliamentary questions and other means, I know the extent of his interest in this important subject. I am grateful for this opportunity to respond to the debate.

The Government are committed to breaking down the perceived barriers between local communities and those making decisions on their behalf. As my hon. Friend mentioned, we have introduced directly elected police commissioners. There may be some doubt about the glee with which the electorate crammed themselves into the polling booths to elect them, but I feel sure that things will change over time. We also have directly elected mayors, and we have made other changes to increase local accountability. My hon. Friend is right to say that the issues we are debating today are political, as is the case with policing. They are matters of great concern to our constituents and they are vital to people in such areas who know and care about these landscapes.

Through the Localism Act 2011, the Secretary of State for Communities and Local Government made changes to give more power directly to communities and individuals so that they can challenge local authorities and take over and run the community services that are so vital. This is important to both parties in this coalition Government.

This is a timely debate, as my ministerial colleagues and I are actively considering the results of our consultations on the issue. That is why I should address the points in detail. I should say something about the importance of national parks to our country and this Government. As my hon. Friend rightly said, in 1936 the then Standing Committee on National Parks lobbied the Government for measures to protect and allow access to the countryside for the benefit of the nation. That pre-war world of 1936 might seem a long time ago, and many aspects of our world are unrecognisable from that time, but some constants remain, one of which is what the national parks can offer us. We need a sense of challenge in our lives just as much our forebears did, and we need the uplift that comes from contact with nature, as they did. The parks style themselves as Britain’s breathing spaces, which is exactly what they are for their more than 50 million visitors a year from home and abroad. That is of enormous benefit to our society. Those visitors help to support more than 22,000 businesses, the vast majority of which are small or medium-sized enterprises.

My hon. Friend the Member for Westmorland and Lonsdale is absolutely right to praise the leadership of his local national parks. Whether we are talking about a parish in our constituencies or a large area such as that covered by the national parks that he knows so well, there will be issues on which there is a divergence of opinion. What might seem good to one of us might not seem so good to another, especially when dealing with something such as planning. He was right to allude to the complexity of these issues at times and to the fact that many good things that are done are not always appreciated by everyone.

The national parks continue to deliver on their two core purposes: to conserve and enhance natural beauty, wildlife and cultural heritage; and to promote opportunities for the understanding and enjoyment of the special qualities of those national parks by the public. The means we use have, of course, changed over time, and they may change again. For the first 40 years of their lives, national parks were essentially managed by local government.

[Roger Williams]

The Minister sets out the two purposes of the national parks, but the legislation also includes a duty to take into account the economic and social needs of the communities that the parks serve. Surely at the heart of this demand for democracy is a better understanding of those issues.

[Richard Benyon]

I will come on to talk about that, but it is important that the three legs of the stool of sustainability are considered at every stage: environmental, yes; economic, absolutely; as well, of course, as the social dimension the parks give to their inhabitants and visitors. My hon. Friend is absolutely right.

To turn to the main issue of the debate, the coalition’s programme for government said:

“We will review the governance arrangements of National Parks in order to increase local accountability.”

That commitment was honoured with a public consultation that ran from 9 November 2010 until 1 February 2011. The question of accountability and transparency was central to the consultation. The Government take seriously the improvement of the transparency of decision making and an increase in the accountability of national park authorities. We have made it clear that variety between authorities is possible, which would allow that governance to reflect better the national parks’ individual circumstances and histories as part of our commitment to decentralisation and localism.

Since the original legislation was enacted in 1995, there have been calls for some members of park authorities to be directly elected, which now already happens in the Scottish national parks authorities, as my hon. Friends suggested. I said in September 2011 that I had concluded that the time had come for us to explore that option more thoroughly in England, so I consulted on legislation that would allow for the possibility of elections to the national park authorities and the Broads Authority. Initially, we proposed to apply new legislation on a pilot basis in two parks, namely the New Forest—as my hon. Friend the Member for New Forest East (Dr Lewis) mentioned—and the Peak District. They provide different contexts in which to assess the effect of directly elected members.

First, I should be clear that although national parks cover some 9% of the country, have a population of more than 320,000 people, encompass in excess of 700 local authorities and parish councils and handle some 9,500 planning cases each year, fewer than 170 responses were received on the question of direct elections, which is a staggeringly low figure. Fewer than 40 of those responses came from individual members of the public. While a majority of responses were generally in favour, there was no clear consensus, even between parks, that direct elections were the answer to improving local accountability. As the Deputy Prime Minister recently made clear, opinion is divided.

Secondly, while much is made of the possible benefits of introducing some elected members into the national park authorities, views are divided and some practicalities need to be taken into account. The legislation required to implement direct elections would be significant, so we would need to identify a suitable opportunity in the parliamentary timetable. I must share with hon. Members the fact that such legislation would not only create a significant call on the time of the House but, as we face the reality of the financial situation, we would be bound to ask if this would really be a good use of public money. Initial estimates indicate that the costs of the proposal could run into many hundreds of thousands or even millions of pounds, although obviously there would be a full cost assessment nearer the time.

Thirdly, the consultation proposed holding pilot elections in the New Forest and Peak District national parks during May 2013. Given that we have not yet secured the required legislation, those pilots obviously will not go ahead on time. It is also clear that we cannot and should not commit to any wider programme of direct elections without piloting so that we can fully understanding what impact, if any, the changes would have on the performance of the national parks in question.

Finally, direct elections are not the only mechanism for improving accountability and openness, and some of the suggestions from the governance review are already being taken forward by individual parks. Many avenues could be explored and, in conjunction with the park authorities, we will continue to look at what can be achieved. It is also worth making the point that local authority members of a national park authority are elected members of the local authority, so they are already held accountable through the ballot box, although not to the satisfaction of some. Similarly, parish council members are sometimes elected.

[Dr Julian Lewis]

I am not entirely happy with the thrust of what the Minister is saying. Are the pilot schemes therefore on hold indefinitely? With the greatest respect to the Government, the legislative pressure on the time of the House of Commons means that it should not be impossible for such relatively uncontentious legislation to be slotted into the timetable, especially if the past few weeks are anything to go by, when we have frequently finished our business earlier than scheduled.

[Richard Benyon]

I am happy to share with my hon. Friend the information that I have been given about the complexity involved. I can give him my absolute solemn commitment that I think that this is something that the Government should do. I do not believe, unlike some colleagues in both our parties, that everyone down to the dog warden should be elected, but I believe in localism and local accountability, so I have been progressing things in a meaningful way.

I was surprised by the complexity of something that initially, I agree, sounds like it should be simple. However, I have been concerned about conversations that we have had with the Boundary Commission about matching boundaries, which sometimes follow more ecologically-based routes than politically-based ones, as well as about the many measures that would need to be included in a Bill. I am happy to go into more detail, but I can absolutely give my hon. Friend my commitment that if the resources were there and if we could find the parliamentary means, we would take this forward, as it is something that the coalition is firmly united in wishing to achieve. I will give him more detail at a later date.

[Tim Farron]

I am a little concerned about the direction in which the Minister is going, but I am pleased that he thinks the Government should make progress. However, we already effectively have pilots in Scotland, so we have learned what to do constitutionally and about how the impact is felt in the national parks.

There is time to act in this Parliament. When I challenged one of the Minister’s predecessors in the previous Government about this, their view was that as the national park authorities had been asked whether they wanted to be elected, and they said no, they would not be elected. Turkeys do not vote for Christmas, even though I greatly respect the high quality turkeys in the New Forest.

[Richard Benyon]

I appreciate my hon. Friend’s point, and I can only give my commitment that although we remain in favour of direct elections, we must ensure that we achieve that in the necessary time scale and with the resources we have.

It is interesting that Scottish national parks have all-postal ballot elections. When I raise potential complications, it sounds as though I am being negative, but I assure my hon. Friends that I am not. However, we need to mention the fact that there is concern about such elections.

[Roger Williams]

When I had the pleasure and privilege of going over to monitor the US elections, I was surprised to find that some US states have wholly postal ballots to elect their President.

[Richard Benyon]

My hon. Friend may like to share his thoughts with colleagues in the Cabinet Office, who are looking at greater participation in elections. After what happened two weeks ago, I want more participation in local elections, and if we could get more people voting by post, that would be good.

I was delighted to hear that the Peak District magazine Park Life recently published the names, photographs and telephone numbers of all members of that authority. That is the start of real transparency. It does not happen in every national park authority, so we must press them to look at such innovations.

In an ideal world, I would like to devolve decisions to national parks if they can prove that there is local demand, and we can introduce enabling legislation that allows them to take that forward and let a thousand flowers bloom. I assure my hon. Friend the Member for Westmorland and Lonsdale that I will keep him in touch with any progress and ensure that what we are doing is affordable for the resources in my Department, feasible in terms of the primary legislation that I am convinced that we will have to introduce, and workable locally. I assure him that the Government remain in favour—

17:13

Sitting adjourned without Question put (Standing Order No. 10(13)).

Written Ministerial Statements

Wednesday 28th November 2012 Written Statements

Wednesday 28 November 2012

Higher Education

Wednesday 28th November 2012 Written Statements

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

Following our higher education White Paper commitment I can today announce that I am satisfied that 10 higher education institutions have now met the criteria for university title.

The higher education White Paper “Students at the Heart of the System” (CM8122) and the associated technical consultation set out the Government’s vision for a world-class higher education sector that is free to respond to the needs of students. It set out specifically our intention to stimulate further competition in the sector by widening access to university title for smaller, high-quality higher education institutions.

We therefore announced in June this year that we were reducing with immediate effect the student numbers criterion for university title from 4,000 to 1,000 full-time equivalent higher education students. We have specified in the new criterion that of those 1,000 at least 750 should be registered on degree courses, including foundation degree programmes, and the number of full-time equivalent higher education students must exceed 55% of the total number of full-time equivalent students.

To be eligible to become a university an institution must meet several criteria.

It must have been granted powers by the Privy Council to award taught degrees. It must meet the student numbers criterion set out above. It must also be able to demonstrate that it has regard to the principles of good governance as are relevant to its sector.

I am pleased to say that, following the change to the student numbers criterion, 10 institutions expressed an interest in obtaining university title.

I have now considered the information these institutions have submitted in support of their applications and taken advice from the Higher Education Funding Council for England. I am able to announce today that I am satisfied that all 10 have met the criteria for university title.

They are:

The Arts University College at Bournemouth

Bishop Grosseteste University College Lincoln

Harper Adams University College

Leeds Trinity University College

Newman University College, Birmingham

Norwich University College of the Arts

Royal Agricultural College

University College Birmingham

University College Falmouth

University College Plymouth St. Mark & St. John

They are now able to take their applications forward to the Privy Council who are responsible for the formal process to approve university names in these circumstances.

University title is prestigious, desirable and precious and the Government protect and will continue to protect its integrity. The criteria are stringent and the application process rigorous. However, the previous numbers criterion was an arbitrary barrier preventing high-quality institutions, and in particular smaller and specialist higher education providers, from being able to call themselves universities. We are confident that this reform will open up access to a diverse range of institutions without compromising the idea of what constitutes a university either in terms of the higher education offer itself or the student experience involved.

As for these institutions themselves, they are all well known and highly regarded university colleges with long and distinguished records and histories. I am delighted that they have taken up the opportunity offered by our reforms.

EU Energy Council

Wednesday 28th November 2012 Written Statements

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

In advance of the forthcoming Energy Council in Brussels on 3 December, I am writing to outline the agenda items to be discussed.

We are expecting progress reports on the proposal for a regulation on guidelines for trans-European energy infrastructure and on the proposal for legislation on safety of offshore oil and gas. The Cyprus presidency is optimistic that it can secure a first reading deal with the European Parliament on the regulation on guidelines for trans-European energy infrastructure by the end of the year and we are content that the negotiated text addresses all our concerns. Negotiations of the proposal on offshore safety are likely to continue into the Irish presidency. Our main concern with this proposal was that it should be reframed in the form of a directive and it now seems likely that there will be agreement on this.

The Council is then expected to agree conclusions on the Commission communication on a strategy for renewable energy, which was published on 6 June. We are content with the text of the conclusions. The conclusions will contribute to the debate about a post-2020 EU climate and energy framework, including the issue of 2030 targets. While we are still developing our view of the framework, we do not favour 2030 technology-specific targets. The Commission is aiming to publish proposals in the second half of next year and the debate is expected to be prominent in the EU for the next year or so.

The Commission will then present its communication on the internal energy market, published on 16 November. The communication assesses the progress being made by member states towards completing the internal energy market and considers what remains to be done. We strongly support the completion of the single energy market and welcome the Commission’s assessment of progress to date and its consultation on capacity mechanisms. The debate on the communication will be combined with a tour de table on progress in delivering the conclusions on energy agreed by the European Council in February 2011.

The presidency and Commission will present a report on a number of international energy relations items, including the energy charter, the energy community, EU-China, the southern corridor, EU-Russia, and the EU-US.

Finally, the Irish delegation will present the programme for their presidency.

Agriculture and Fisheries Council

Wednesday 28th November 2012 Written Statements

[The Secretary of State for Environment, Food and Rural Affairs (Mr Owen Paterson)]

The next Agriculture and Fisheries Council is on Wednesday 28 November and Thursday 29 November in Brussels. I will be representing the UK, accompanied by my hon. Friends the Under-Secretary of State for Environment, Food and Rural Affairs, responsible for the natural environment, water and rural affairs, the Member for Newbury (Richard Benyon), and the Minister of State, Department for Environment, Food and Rural Affairs, the Member for Somerton and Frome (Mr Heath). Richard Lochhead MSP, Alun Davies AM and Michelle O’Neill MLA will also attend.

The first day will cover agricultural issues. The discussion will cover common agricultural policy (CAP) reform. Specifically the proposals on direct payments, the single CMO regulation, and rural development. There is an any other business point regarding increased error rates in rural development and corrective/preventative actions.

The second day will be dedicated to fisheries issues. The Council will discuss a proposal on the fixing for 2013 and 2014 fishing opportunities for EU vessels for certain deep sea stocks, and the EU/Norway 2013 negotiations. There is an any other business point about the fixing of the total allowable catch (TAC) for Norway pout.

Balance of Competences Review

Wednesday 28th November 2012 Written Statements

[The Minister for Europe (Mr David Lidington)]

I wish to inform the House that, further to the Secretary of State for Foreign and Commonwealth Affairs’ oral statement launching the Balance of Competences Review—12 July 2012, Official Report, column 468 and written ministerial statement on 23 October 2012, Official Report, column 46W—the Foreign and Commonwealth Office is today publishing its call for evidence on the foreign policy aspects of the review.

The foreign policy report will be completed by June 2013 and will provide an analysis of the balance of competences between the EU and the UK in foreign affairs strategic defence issues and civil protection. The report will not produce specific recommendations and will not prejudge any future policy.

The call for evidence will be open until 28 February 2013. The Foreign and Commonwealth Office, working with other interested Departments, will take a rigorous approach to the collection and analysis of evidence. The call for evidence sets out the scope of the report and includes a series of questions on which contributors are asked to focus. Interested parties are invited to provide evidence, which will be published (subject to the provisions of the Data Protection Act) alongside the final report in June 2013.

As the review will be objective and evidence-based, it will be important to encourage a wide range of interested parties to contribute. The Department will therefore pursue an active engagement strategy, consulting widely across Parliament, the devolved Administrations, think-tanks, business and civil society in order to obtain evidence to inform our analysis. The EU institutions and our foreign partners will also be invited to contribute, as will members of the public.

I am placing this document and a copy of the call for evidence in the Library of the House. They will also be published on the Balance of Competences Review pages on the FCO website. If there are any further questions regarding the foreign policy report please consult the website or contact:

[e-mail] (020 7008 3936/1670);

deepali.kulkarni@.fco.gov.uk (020 7008 5740); or

[e-mail] (02072182594) on defence issues; or

[e-mail] (0207 276 0902) on civil protection matters.

Mr Alan McMenemy (Coroner's Verdict)

Wednesday 28th November 2012 Written Statements

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

I would like to update the House on the case of the five British hostages who were kidnapped from the Ministry of Finance in Baghdad in May 2007.

The House will recall that one of the hostages, Peter Moore, was released alive in December 2009. The bodies of Jason Creswell, Jason Swindlehurst and Alec Maclachlan were returned to the UK in 2009. In my statement of 22 June 2011, Official Report, column 16WS, I informed the House that HM coroner for Wiltshire and Swindon, who is responsible for determining the cause of death, had completed his inquest into the deaths of Mr Creswell, Mr Swindlehurst and Mr Maclachlan and recorded a verdict of unlawful killing. I called on those holding the last hostage, Alan McMenemy, to return Alan.

The House will be aware that the body of Alan McMenemy was returned to the UK in January this year. I can report to the House that HM coroner completed his inquest into the death of Mr McMenemy on 26 November and he has recorded a verdict of unlawful killing. The coroner concluded that Mr McMenemy had been brutally murdered by his captors.

I am sure that the House joins me in extending our deepest condolences to the family and friends of Alan McMenemy. They had to suffer uncertainty and pain after Alan was taken hostage and grief on news of his death. I am sure the House would also wish to join me in reiterating our sympathy to the family and friends of his three colleagues as well.

We call on the Iraqi Government to continue their investigations into these horrific crimes and to bring those responsible to justice.

Alcohol Consultation

Wednesday 28th November 2012 Written Statements

[The Secretary of State for the Home Department (Mrs Theresa May)]

Today I am publishing “A consultation on delivering the Government’s policies to cut alcohol-fuelled crime and antisocial behaviour”.

In the past few years the Government have already legislated for a wide set of reforms to tackle binge drinking and the corrosive effect it has on individuals and our communities. We have:

Rebalanced the Licensing Act in favour of local communities, for instance by removing the “vicinity test” to ensure that anyone—no matter where they live—can input into a decision to grant or revoke a licence;

Legislated to introduce a late night levy, empowering local authorities to make those businesses that sell alcohol late at night contribute towards the cost of policing and wider local authority action;

Introduced early-morning alcohol restriction orders, enabling local areas to restrict the sale of alcohol late at night in all or part of their area if there are problems.

However we need to continue the work to tackle the drink-fuelled antisocial behaviour and crime blighting our communities. So we are launching a 10-week consultation, seeking views on five new areas:

A ban on multi-buy promotions in shops and off-licences to reduce excessive alcohol consumption;

A review of the mandatory licensing conditions, to ensure that they are sufficiently targeting problems such as irresponsible promotions in pubs and clubs;

Health as a new alcohol licensing objective for cumulative impacts so that licensing authorities can consider alcohol-related health harms when managing the problems relating to the number of premises in their area;

Cutting red tape for responsible businesses to reduce the burden of regulation on responsible businesses while maintaining the integrity of the licensing system; and,

A minimum unit price of 45p per unit, ensuring for the first time that alcohol can only be sold at a sensible and appropriate price.

We are consulting on these measures because too many of our high streets and town centres have become no-go areas on a Friday and Saturday night. Just under half of all violent crimes involve alcohol and a great deal of antisocial behaviour is alcohol-fuelled.

It is responsible drinkers, businesses and the wider community who are paying the price in terms of crime and disorder on our streets, violent, alcohol-related injuries clogging up our accident and emergency rooms and significant long-term health problems. The Government will consult on a new approach to turn the tide against irresponsible drinking which costs the taxpayer £21 billion a year. It will help reverse a culture that led to almost 1 million alcohol-related violent crimes and 1.2 million alcohol-related hospital admissions last year alone.

The consultation is targeted explicitly at those harmful drinkers, problem pubs and irresponsible shops. It is not about stopping sensible, responsible drinking or penalising responsible shops, pubs and off-licences.

A copy of the consultation will be placed in the House Library.

Cycling Infrastructure

Wednesday 28th November 2012 Written Statements

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

The coalition Government has today made available an additional £20 million for our existing infrastructure projects to support cycling.

The funding will increase the total available for:

1. The community linking places fund (in addition to the £15 million announced on 7 February 2012)

2. Improving cycle safety at junctions (in addition to the £15 million announced on 26 June 2012)

This community linking places fund is primarily for improvements to cycling and walking infrastructure, facilities and links. This includes improving access to the rail network by bicycle. In addition the fund aims to support jobs, enhance access to employment and encourage greater use of more environmentally friendly transport. Projects currently being supported were announced on 6 March 2012.

The investment in junctions—for use by English local authorities outside London—will help to tackle accident hotspots where cyclists have been killed or seriously injured, or are deemed to be at greater risk. Local authorities are currently submitting bids for funding.

Demand from local authorities, Sustrans and train operating companies, who are delivering the infrastructure, has been high. An increase of £20 million to the total funding available will allow the Government to support more high-quality proposals.

Details of the projects to be supported under the additional funding will be published early next year.

Grand Committee

Wednesday 28th November 2012 Grand Committee

Wednesday, 28 November 2012

Arrangement of Business

Wednesday 28th November 2012 Grand Committee

Announcement

15:48

[The Deputy Chairman of Committees (Lord Skelmersdale)]

My Lords, I apologise for the late arrival of the Chair this afternoon. There was what is known as a mix-up.

That being said, if there is a Division in the House, the Committee will adjourn for 10 minutes and then return.

Plant Health (Forestry) (Amendment) Order 2012

Wednesday 28th November 2012 Grand Committee

Motion to Take Note

15:49

Moved By

[Lord Knight of Weymouth]

That the Grand Committee takes note of the Plant Health (Forestry) (Amendment) Order 2012 (SI 2012/2707).

[Lord Knight of Weymouth]

My Lords, I have taken the perhaps slightly unusual step of a Take Note debate on a negative instrument not because I oppose it—otherwise it would not be a take note debate; I want to make it extremely clear that we do not oppose this order—but because, when I read the Explanatory Memorandum to the Plant Health (Forestry) (Amendment) Order 2012, it raised a series of questions. Given the high level of public interest in the spread of ash dieback disease—Chalara fraxinea—I felt it appropriate for me to take a bit of the Committee’s time to ask some questions that arise from the Explanatory Memorandum.

Since I initiated this debate, I see that we now also have an additional instrument undergoing its passage: the Plant Health (England) (Amendment) Order 2012. I note the 16th report of the Joint Committee on Statutory Instruments, which was published yesterday and reports on that order. I may link the two slightly and I hope that the Minister can deal with that. No doubt, with the number of questions that I will ask, he will want to write to me. That is perfectly fine. There are questions I want to put on the record, and in time the answers can be on the record, too. That is entirely the purpose of this debate.

The first question is about this combination, now, of two orders. As the committee says, one order is in respect of the Forestry Commission as the competent authority while the other is for the Secretary of State to act as a competent authority in respect of specific emergency measures against Chalara fraxinea. In passing, it would be interesting if the Minister could confirm why this could not have all be dealt with in one piece of legislation for the ease of scrutiny and to help people understand what is going on. However, the principal questions I have probably focus around paragraph 3.1 of the Explanatory Memorandum, which is headed:

“Matters of special interest to the Joint Committee on Statutory Instruments”.

I start with the timings that are set out there in terms of the process and the sentence that,

“evidence that ash trees infected with Chalara fraxinea were supplied from Germany, the Netherlands and Belgium during 2011 and 2012”.

That leapt out at me because previously my understanding was that the first evidence of the disease in this country was in a nursery in Buckinghamshire in February 2012. The starter for 10, if you like, is: when did the evidence about 2011 first emerge? My assumption is that it emerged relatively recently but I would be interested to know the timing on that.

The countries also interest me. The suppliers were from Germany, the Netherlands and Belgium during 2011 and 2012. I gather from Forest Research that the first cases of this disease happened in Germany in 2002. The rapid risk assessment was, I believe, published by Forest Research on behalf of the department on 9 August 2012, and it shows that since 2002, we have imported 2.75 million ash trees from Germany alone in that time. The impact assessment elsewhere talks about half a million trees a year over 10 years, so 5 million imported in that 10-year period.

If a significant number were, as suggested, imported from countries that already had the infection, the significant question is raised as to why, when dealing with plant disease, we in this country have not learnt from dealing with animal disease. My understanding is that as soon as we know of an animal disease outbreak in a member state of the European Union, we would ban imports straightaway from that member state, without having to go through any kind of consultation. It would certainly be a matter of great public interest if the Minister could tell us why we have not been following that process in respect of plant diseases. Belgium suffered its first outbreak in 2009, the Netherlands in 2010 and, as I have said, Germany in 2002, and yet we continue to import from those countries. It appears to be probable that the disease found its way into this country as a result of that import activity. Were the sapling nursery trees that were imported kept indoors once the investigation started in February/March when the first case of the disease was found, so that the sporelation that takes place and which causes the disease to spread, was contained?

My second area of questioning is around the consultation period. Paragraph 8.1 of the Explanatory Memorandum to the order refers to a “shortened 8-week consultation”. In the circumstances of an emergency such as this, I have absolutely no problem with a shortened period of consultation, and indeed my question is: why was not an even shorter period for consultation set, given the scale of the threat to our ash tree population? Paragraph 4.2 of the Explanatory Memorandum to the November order states that:

“Article 16.2 of the Plant Health Directive provides for a Member State to take temporarily any additional measures which it deems necessary to prevent the introduction or spread of such harmful organisms in its territory, or the EU more generally”.

I assume that these are similar powers to those used in terms of animal health. They suggest that the UK had the powers, if it wanted to use them, to enforce an immediate ban on imports of ash trees if there was a fear that the disease would spread. Could the UK have imposed a ban straightaway, perhaps when the rapid risk assessment was published by Forest Research in August, and then consulted on how the ban was operating and what questions needed to be asked? Could we have had a four-week consultation, or perhaps even one for two weeks, after which the ban could have been put in place?

Paragraph 3.1 of the Explanatory Memorandum states that:

“Evidence from 2010 was that over 200,000 trees had been exported to the UK from other Member States during the 21 day period from 29 October to 19 November”.

What the department is arguing in the memorandum is that it did not need an earlier ban because a substantial amount of import activity takes place in the autumn. Does the Minister have any statistics on how many trees were imported during the preceding 21-day period in 2010 so that we can make a comparison? If the consultation had been shorter—of, say, four weeks’ duration—a similar amount of importation could have been stopped and perhaps some of the infection avoided.

My next series of questions are around surveillance. The process set out in paragraph 3 of the memorandum talks about,

“the investigation into the scale of the import trade … investigation into the level of infection in the nursery trade in Great Britain … investigation into the presence of the organism in the wider environment”

and a pest risk assessment, to which I have referred. So surveillance activity took place as part of the investigations and is continuing to take place. Is the Minister able to update us on whether there remain any clear, pest-free areas? Which are those pest-free areas? What is being done in terms of controls on those pest-free areas to try to prevent any further spread? It would be helpful to know that. To have some understanding of how many are sited at nurseries as opposed to trees infected in the wild would equally be helpful.

16:00

Any latest information he can give us on sporelation would also help us understand how this disease is spreading and how it arrived in this country. The rapid risk assessment from Forest Research states, in the second paragraph of section 8, that the best understanding it had in August was of,

“a potential dispersal rate of 20 to 30 km per year”.

Is that still the Government’s understanding as to the sort of distance spores will travel year by year? That would in turn give us an understanding as to how rapidly the disease will spread in this country. If it is understood that spores travel 20 to 30 kilometres per annum, is it still the Government’s view that they may have travelled over the Channel? The distance from Dover to Calais—about the shortest route—is 41 kilometres, which is clearly in excess of the 20 to 30 kilometres set out in the rapid risk assessment.

That risk assessment is mentioned in paragraph 3.1 of the Explanatory Memorandum. The risk assessment states at the end of section 5 that there is a high risk of infection. I also point noble Lords to section 16: the summary and conclusion. It says:

“This rapid assessment shows … Potential for entry is: Very high”—

those last two words are underlined—

“especially in association with plants for planting, with a moderate risk associated with movement of soil and timber … Potential for establishment is: Very high … Economic, environmental and social impacts are expected to be: Medium to large … Endangered area: All of the UK”.

This was known on 9 August this year. We therefore have to ask whether we acted quickly enough once we had that risk assessment to put the ban in place.

I note than in Section 3.1 of the Explanatory Memorandum the argument is made that if we had introduced legislation sooner, it would,

“have been based on poor technical evidence (in the absence of a risk assessment and surveillance data)”.

[The Deputy Chairman of Committees]

My Lords, there is a Division in the Chamber. I do not know how quickly the noble Lord can finish his remarks.

[Lord Knight of Weymouth]

I cannot guarantee to do it quickly enough that I would be comfortable.

[The Deputy Chairman of Committees]

In that case, we will adjourn for 10 minutes.

16:03

Sitting suspended for a Division in the House.

16:12

[The Deputy Chairman of Committees]

My Lords, we have had our 10 minutes, and so I ask the noble Lord, Lord Knight of Weymouth, to continue.

[Lord Knight of Weymouth]

Thank you. When the Division Bell rang I had read out the end of the rapid risk assessment published by Forestry Research on 9 August 2012 and referred to paragraph 3.1 of the Explanatory Memorandum, which says,

“Such legislation would have been based on poor technical evidence (in the absence of a risk assessment and surveillance data) if introduced earlier and would have had little practical impact because there is little movement of ash for planting during spring and summer”.

The question clearly then arises: given the nature of the risk assessment that had been done in early August, what if there had been a rapid consultation through August, let us say, until mid-September, and a ban introduced then? We are always a little vague in Government and elsewhere about when these seasons begin and end, especially when we are asked to make decisions, but I would define autumn as starting in September or possibly October. We could have had a ban in place at the beginning of October, and would that not have been a good idea?

I would be interested to know in what period the investigation into the wider environment and the presence of the organism in Great Britain took place. The perception we now have is that as a result of the surveillance activity that is now taking place, and which has taken place since the ban, we have discovered the widespread infection of the disease across the wild trees of this country—widespread, that is, not necessarily in terms of volume but in terms of various locations. I would like to know during what period those investigations prior to the ban took place, and why we did not discover more infections at that point.

16:15

The penultimate question relates to paragraph 8 of the Explanatory Memorandum. Paragraph 8.2 says:

“There were three policy options proposed in the consultation which were conditional on the outcome of official surveillance”.

I am interested to know which of the three the Minister thinks we are now in, in terms of the situation. The first says that,

“if the disease was not found to be widely established then maintain Great Britain free of chalara through an eradication strategy, supported by legal restrictions on ash imports and movements”.

That would suggest, because we are discussing these orders, that we think we are probably in option 1 of these policy options, although some of the other facts would put that into question. The second says that,

“if established with limited distribution then a suppression strategy was proposed without the burden of legal restrictions on ash imports and movements”.

It seems that there is certainly limited distribution of the disease, in which case, why are we not pursuing that option, of a suppression strategy without the import ban, which I support? The third says that,

“in the event of widespread distribution no official measures would be taken”.

Are we close to that point of widespread distribution, in which case we just have to let nature take its course? I would be very interested to hear the Minister’s comments on those three policy options.

Finally, the Secondary Legislation Scrutiny Committee raised a question in its 16th report, published yesterday. Its final paragraph—paragraph 5—discussing the Plant Health (England) (Amendment) Order 2012, concluded with the sentence:

“We have been told by the Department that an updated estimate of the financial impact should be published in December, and is likely to be higher”.

December starts on Saturday. Has the Minister any kind of updated estimate, beyond the £0.25 million, of the financial impact of these measures? With that, and with gratitude to the Committee, I take my seat.

[The Duke of Montrose]

My Lords, I thank the noble Lord, Lord Knight of Weymouth, for raising this topic, which is very pertinent and of much interest in the country as a whole. I declare my interest as an owner of sundry ash trees and bits of woodland in Scotland.

I have two questions in my mind. First, in the aftermath of the Phytophthora ramorum outbreak, an undertaking was given that phytosanitary measures for plants would be tightened. Is this the first time that there has been any change in the legislation since then? If not, how many changes have been made in terms of tightening up our regulations on looking after plant health?

Secondly, there is obviously a premium on the planting of native British trees. I gather that one of the practices that have been going on is that foresters in the UK collect seed from native British trees, send it to Holland, have it grown into small plants and then bring them back. If plants are to qualify as native trees, should they not have spent the whole of their lifetime in the UK and not been subject to export to other countries?

[Baroness Parminter]

My Lords, I add my thanks to the noble Lord, Lord Knight, for raising this issue. Given his extensive questions, I will limit mine to one and a half. Many of us in this Room did of course have the opportunity three weeks ago to debate the important issue of the future of the British ash tree and the impact of this disease, in the very timely debate initiated by the noble Earl, Lord Selborne.

My first question follows on from the final question from the noble Lord, Lord Knight, in relation to the final point made by the Secondary Legislation Scrutiny Committee, and the issue of the costs for this order. It highlighted, as he rightly said, that we are imminently expecting new figures, which are to be much higher. Can the Minister confirm who will undertake that work? It was the Forestry Commission in the first instance, and since the initial measures were laid out in October, where they referred principally to forestry trees, it has now moved to cover all trees, including those for amenity use and in garden centres. Therefore the remit covers a much broader field and I would like to be reassured. Although I have the highest regard for the Forestry Commission, if we are going to get a realistic figure on those costs, it has to be undertaken by an agency that has the competence to do so. As a supplementary to that question, what areas is it looking at? The Minister will know that I have previously raised with the Secretary of State my concern that we get an understanding as soon as possible of the full costs on the rural economy of the impacts of this disease. It strikes me that the outline in the Explanatory Memorandum that we have before us is quite a narrow definition of what those costs might be.

My second question relates to paragraph 12 of the Explanatory Memorandum on monitoring and review, which of course will be extremely important. It leads to the priority that the Government give to plant health. I would like to raise the point that yesterday, at the launch of the Nature Check report by the Wildlife and Countryside Link, which analysed the Government’s environmental commitments over the last 18 months, the Secretary of State referred to a radical reprioritisation within his department, which included a major new focus on animal and plant health. I believe that we would all welcome that, given the significant number of challenges that plants are facing, which we have recently seen and debated in this House.

Will the Minister give us any information about when there might be further clarity on what those plans might be, and when they will come forward? Will we get a chance to look at this radical reprioritisation of budgets within Defra to ensure that the focus on plant health is given the priority that this House believes it is due?

[The Earl of Mar and Kellie]

My Lords, I would like to apologise to the noble Lord, Lord Knight, that I was not here for the first few minutes of his opening remarks. I also declare an interest in that I am yet another woodland owner from Scotland. I would like to ask two questions. First, what is the advice likely to be about the use of infected and possibly infected timber, and what is to happen to the 80 million ash trees in Great Britain? I am certain that noble Lords will be familiar with the fact that ash is used in furniture, framing, in coach building, and by Morgan cars, among others. It certainly bends well in the steam box, and it is, of course, premium firewood. As a supplier of firewood, that is probably my real interest. Have the Government come up with advice on what we are to do with all these trees?

My second point is, with my noble friend the Duke of Montrose, to wonder why British tree nurseries have not been growing saplings. Why has it been uneconomic to do so, and why has it been economic to take them to Europe, to grow them further and then export them back? Finally, before we get too suicidal about this; I understand that there were 20 million elms. We do not have many elms in Scotland, but I noticed that I seem to have a lot of elm coppice, which seems to be working very well.

[Lord Grantchester]

I thank my noble friend for initiating a debate on this order. He has made an expansive analysis of the situation. I also praise the Parliamentary Office of Science and Technology on its very interesting exposition yesterday in the other place about the disease. Two points came out of that which I thought would be worth bringing to the attention of the Minister. The first is that it seems as if there is not yet a properly thought through control plan, which I would have thought was one of the first things we need to be on top of. Following on from that, we need a comprehensive communication plan of what the control plan means, including making clear the dos and don’ts to people up and down the land.

I should declare my interest as a farmer in Cheshire, and I want to add to the excellent exposition by my noble friend only a word on his first point, which concerned what I perceive to be the striking difference between the handling of animal disease threat and plant disease threat. I would not wish the point to be lost among all the other excellent points he made. It appears that we have not applied the lessons learnt from animal diseases to plant diseases. I think I am right in saying that when a dangerous animal disease is present or breaks out overseas, the importation of animals from the region in question is immediately banned. For example, we still ban imports from South America because of foot and mouth disease, imports from Canada out of the dormant fly season and so on. Imports have not been allowed to continue up to the point when disease is recognised as being present in the UK.

In regard to plant health issues, it seems that the same regime does not apply. Perhaps the Minister can say whether the import of ash trees has already been banned from countries such as Denmark, where the impact of Chalara fraxinea has been devastating. I ask this because the order before us seems to be the first reaction to the disease, which has only been to ban the importation after its presence in the UK has been detected. Had a regime similar to that which applies to animals been followed from the outset, not only could it have delayed the presence of Chalara fraxinea in the UK, it would have allowed this country to exploit its position as a disease-free area, in which cases exports could well have been made from this country back into Europe. However, there now seems to be no possibility of this sort of trade being undertaken.

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord De Mauley)]

My Lords, I thank all noble Lords who have contributed to this short debate. Like others, I should declare an interest as a grower of ash trees. On 15 November, I had the opportunity to see for myself the effects of Chalara fraxinea in Wayland Wood in Norfolk and to meet Forestry Commission staff working on the ground there to identify the disease. I am enormously grateful to those in the plant health authorities, the industry more widely and, indeed, the public, who have all contributed to the response to this harmful disease, including the many volunteers who have given of their time to help.

I was particularly reminded on my visit to Norfolk of the long-term nature of forestry. The foresters were already planning their felling for 2071, hoping that they had selected the right trees that will thrive over the coming 60 years, whatever those years might bring in terms of climate, pestilence and environmental change. In recognition of the scientific advice that it will not be possible to eradicate Chalara fraxinea and on the basis of the experience in Europe that there is no effective treatment, we are now focusing our efforts on minimising the impact of the disease on our economy, our environment and our society. The next step will be the publication of a control plan which will set out our approach to four key objectives. Those are: slowing the rate of spread; developing resistance in the United Kingdom ash population; encouraging citizen, landowner and industry engagement; and building resilience in UK woodland and associated industries. At the same time, the independent expert task force, convened by Defra’s chief scientific adviser, Professor Ian Boyd, will examine further ways to prevent pests and pathogens from entering the country and will publish an interim report. The work of the task force has been to look at the similarities and differences in dealing with animal and plant disease outbreaks and what each can learn from the other. The noble Lord, Lord Grantchester, referred to this, and I think he made a very important point.

16:30

What is the situation on the ground now? As your Lordships know, we carried out an unprecedented, rapid survey of ash trees across the country during the first week in November. More than 500 Forestry Commission staff worked with Fera and other organisations, including the CLA, the Woodland Trust, Natural England, the National Trust, and a number of others. In passing, I should say how grateful I am to all those who carried out this important work. More than 10,000 sites were visited. As of today, in response to the noble Lord, Lord Knight, there are 257 cases of ash dieback caused by Chalara confirmed across Great Britain; 17 of these are in nursery stock, 105 are in recently planted sites and 135 are in the wider environment. Further suspect cases remain under investigation and we will continue to provide updates on confirmed cases through the maps on the Forestry Commission website.

To take a quick reminder of the history, ash dieback caused by the fungal pathogen Chalara fraxinea has been present in Europe since 1992, and since then it has spread to much of central and northern Europe. Before 2010, the European scientific evidence indicated that the organism responsible for ash dieback was native and not causing harm in Great Britain. This belief meant that it would not have been appropriate to use import restrictions to control the organism responsible for the disease. The Forestry Commission explained this in a response to the Horticultural Trade Association in 2009, and also recommended that the industry should take care in sourcing stock and check for ill health in ash plants and trees.

In 2010, new scientific evidence correctly identified the pathogen that caused the disease, which was not known to be present in the UK. This meant that it was identified as a potential threat, alongside many other potentially harmful organisms. In the light of that evidence, the Forestry Commission inspected more than 15,000 ash trees located in 8,310 groups across Great Britain under the National Forest Inventory. Only 103 cases of dieback were identified, and none of these was identified as caused by Chalara. On the basis of the NFI inspections, the ash appeared to be one of the healthiest broadleaf trees in the country. However, our plant health authorities first discovered Chalara in the United Kingdom during a routine check at a nursery in Buckinghamshire in February 2012. This finding was confirmed by laboratory testing on 7 March. There followed an extensive tracing operation of ash trees known to have been supplied from infected nurseries and, over the summer, 100,000 young ash trees were traced and destroyed.

In parallel to the extensive tracing operation over the summer, plant health authorities developed a pest risk analysis which formed the basis of a fast-track consultation to strengthen the evidence and seek views on options for action. This consultation strongly supported protective measures against the disease and, as a result, we enacted the Plant Health (Forestry) (Amendment) Order 2012 on 29 October. That order prohibits the introduction and spread of Chalara in Great Britain by requiring that imports and movement of ash-planting material must be from designated pest-free areas. Official confirmation of compliance with these requirements must be provided if ash planting material is to be moved, which for imports from outside the EU would be through a phytosanitary certificate, while for movements from within the EU would be through a plant passport. There are no pest-free areas in place at present and they could only be established by plant health authorities in accordance with the relevant standard of the International Plant Protection Convention. So the order acts as a complete ban on movement and import. The order also permits the licensing of scientific work on organisms such as Chalara which are not listed in European plant health legislation.

In light of the consultation outcome, it was important to introduce these requirements quickly before the main planting season for ash, with measures applying across the country as a whole. This has been achieved. The HTA had also asked members to observe a voluntary moratorium on imports of ash-planting material prior to the order coming into effect, which was well observed.

During the consultation period, on 24 October Chalara was confirmed in the wider environment in East Anglia, in trees with no apparent connection to nurseries. Consequently, the Government undertook a rapid survey which has given us an initial picture of the distribution and extent of ash dieback caused by Chalara. The vast majority of cases of Chalara currently confirmed in mature trees in the wider environment are clustered in the east and south-east of England, in Norfolk, Suffolk and Kent, with a few cases further west and extending north up the east coast.

Defra’s chief scientific adviser, Professor Ian Boyd, has examined different hypotheses and concluded that the likelihood is that Chalara infected mature, native ash trees in Britain through spores blown on the wind from continental Europe and that it has been here for some time—at least two years. These conclusions are based on known sources of infection in France and Belgium, existing knowledge of how the spores are dispersed by wind, the distribution of the wider environment findings and modelling evidence which suggests that weather conditions in 2010 were appropriate for spores to have been transported by air to England. As we know, Chalara has also been imported on young ash trees. Professor Boyd’s expert science group has reviewed the evidence about Chalara to help us understand how it is spread, its impact on our ash trees and how we might tackle it. A summary of the group’s conclusions was published on 9 November. We have continued to build on this evidence and have adopted a risk-based approach to predict the spread of Chalara within the UK.

The Secretary of State set out in a Written Ministerial Statement on 9 November that the advice from the scientists is that it will not be possible to eradicate Chalara. However, that does not mean we should abandon hope for the British ash. While young trees usually succumb to the disease fairly quickly, mature trees with the infection can live for many years and are valuable to wildlife. We also know that the genetic diversity of ash offers good prospects of resistance being developed, with some evidence of this being seen in Denmark and elsewhere.

So what can be done? In recognition that government alone cannot tackle this threat, we convened a summit on 7 November which brought together over 100 representatives of the forestry and horticulture industries and environmental groups to advise us. There was broad consensus around the evidence and the nature of the action that should go into the control plan. The overarching message was that we should not panic or take drastic action which would be futile or counterproductive. The winter is a window of opportunity to develop the right approaches as the main pathways for the disease are not in operation. The fruiting spores are only produced in the summer and we have banned movement of ash plants.

Based on the advice of the summit and the endorsement of key organisations such as the Woodland Trust and National Trust, the Secretary of State set in train an immediate plan of action which is being taken now, while the longer-term control plan is developed and implemented. Newly planted diseased trees and diseased trees in nurseries are being traced and destroyed. Mature trees are not currently being removed, which can help us learn more about genetic strains that might be resistant to the disease. The search for the disease includes trees in towns and cities as well as the countryside, building partnerships with a range of organisations beyond government. Advice is provided to foresters, land managers, environmental groups and the public about how to identify diseased trees and those likely to be resistant to the disease, and what to do with that information. That is on the Forestry Commission website. There is no restriction on access to the countryside, so that rural businesses can continue to operate and the public are able to enjoy rural amenities.

The noble Lord, Lord Knight, asked a number of questions. Let me see how many of those I can answer. He asked, essentially, why there were two orders. The Forestry Commission legislation allowed the GB-wide measures to be introduced quickly and consistently across all territories. The amendment to the Plant Health (England) Order is a tidying-up exercise. Fera inspectors have been using general plant health powers but specific powers were considered helpful in response to the ongoing activity. The noble Lord asked about the reference in the Explanatory Memorandum to 2011. The import took place late in 2011 but the interception was made during a routine national inspection in February 2012.

In answer to another question—I cannot remember what the question was but will tell the noble Lord the answer—the international scientific advice before 2010 was clear. There was no indication then that any action was appropriate or justified. This was viewed as a largely technical issue. The noble Lord may remember the sequence of events rather better than me. Scientists in the plant health authorities did not seek a policy decision from Ministers. However, the Forestry Commission advised the horticultural industry at that time that they should consider the risk of Chalara when importing planting materials.

Both he and the noble Lord, Lord Grantchester, asked essentially whether one should treat this like an animal disease. They had a good point. That is why the Secretary of State asked Professor Ian Boyd to convene an expert, independent taskforce to review our strategic approach to plant health. This group met on 13 and 14 November and will publish its interim report shortly. Therefore, we are treating this with the same urgency as we would an animal disease outbreak.

There is another answer where I cannot remember what the question was. In answer to the noble Lord, Lord Knight, as the previous planting season was over and the risk was therefore low, we wanted to get views on the best measures and ways to implement them. This led to a well observed, voluntary and industry-led moratorium prior to the introduction of a statutory ban, which was widely implemented. It is important that industry is consulted on any decisions that will have implications for it.

The noble Lord asked if there are any pest-free areas. The answer is no. Essentially, the ban is a ban. He asked, given that he had read that the disease moves at about 20 to 30 kilometres per year, how it could have come across the channel. The 20 to 30 kilometres is an illustrative figure, based on the movement of a broad front. Scientific modelling suggests that individual spores can travel a great deal further than that.

He asked why a ban could not be put in place earlier. The consultation was launched to establish the scale of the problem and to ensure that we sought the views of and information from those in the forestry and horticultural industries before we took any final decisions. This was done outside the planting season and finished well before the planting season would have got under way. The consultation closed on 26 October but the Government acted immediately once it became clear that a ban on ash imports was necessary. We simply could not have imposed a ban without speaking to those involved and assessing the current situation. However, as I said, they put in place a voluntary moratorium prior to that.

He asked about the impacts referred to in the Explanatory Memorandum. These were based on an initial assessment by the Forestry Commission of the costs of authorising nurseries to issue plant passports. There are £100,000 of inspection costs and £50,000 of administration costs, with an estimate of the loss of trade of £100,000. Ongoing general surveillance of the environment will also be needed at an estimated cost of about £40,000. These costs were very much based on a provisional assessment at the time and do not account for all activities such as ongoing tracing of diseased plants or wider socioeconomic impacts. They also need to be revised to take account of subsequent developments as regards the disease situation. More detailed work is being carried out in this area as a contribution to the control strategy to be finalised shortly.

My noble friend the Duke of Montrose said that a couple of years ago Defra undertook to tighten up on plant pathology regulations and asked whether this is the first time since then that legislation has been amended. Plant health legislation is reviewed constantly in response to new and emerging threats. The legislation is updated on a regular basis where new risks are identified and many of these changes are introduced in the context of EU plant health legislation. We are actively pursuing improvements to that regime.

My noble friend Lady Parminter asked about the assessing of costs. Defra will calculate costs incurred by all government agencies and is looking at impacts including on rural growth.

My noble friend Lord Mar and Kellie asked why we are sending ash seedlings to the Continent to be grown then bringing them back again. That is indeed a good question. That was not a prohibited practice while ash was unregulated but all movements have now been banned unless they come from a pest-free area. As I said, there is no such designated pest-free area at the moment. He also asked about firewood. My advice is that the burning of ash firewood is safe. However, it will not be possible to move logs from affected areas in the United Kingdom where a notice has been served.

As we prepare our control plan and consider future approaches to tree health and plant biosecurity, informed by the work of the expert taskforce, I am reminded of the foresters in Wayland Wood. I am sure that noble Lords will join me in expressing the hope that in the near future they will once again plant ash that will prove resistant to Chalara and other pests, and live long for successive generations to enjoy.

16:45

[Lord Knight of Weymouth]

My Lords, I am grateful to all noble Lords for contributing to a useful debate. I join the Minister in showing gratitude to those who are working, including volunteers, to battle this disease. I am particularly grateful to the Minister for his updates, which I am sure will be examined carefully. He was, as ever, assiduous in trying to answer my many questions. I know that he is equally assiduous in reviewing the debate and writing with answers to questions that he was not able to cover; I am grateful to him, in advance, for that.

I see noble Lords queuing up for the interesting debate being introduced by the noble Lord, Lord Renfrew of Kaimsthorn. We are all looking forward to that.

Motion agreed.

HMS “Victory”

Wednesday 28th November 2012 Grand Committee

Question for Short Debate

16:47

Tabled By

[Lord Renfrew of Kaimsthorn]

To ask Her Majesty’s Government how they will ensure that the wreck of HMS “Victory”, sunk in 1744, is not subjected to inappropriate commercial exploitation.

[Lord Renfrew of Kaimsthorn]

My Lords, the world’s underwater cultural heritage is today at great risk. Improved deep-water recovery is leading to the discovery and sometimes, I am afraid, to the looting of historic shipwrecks on a wide scale, internationally. The fate of HMS “Victory”, sunk in 1744, then the finest warship in the world, is a test case. Its wreck was discovered in the English Channel in 2008 by an American salvage company. It is one of the first British deep-water wrecks which might now risk commercial exploitation, hence this Question for Short Debate. There are fears that the material recovered will be sold to pay off the salvage costs, with the apparent complicity of the British Government.

It is a significant test case because the UNESCO Convention on the Protection of Underwater Cultural Heritage makes clear that the excavation of historic wrecks should not be financed by selling off the finds recovered, but that may be just what is now being planned for HMS “Victory”. If the Government were to countenance such a practice, it would set a terrible example. It would give the wrong encouragement to other nations faced with similar responsibilities. It would be a tawdry thing to do with this great historic flagship of the Royal Navy.

After consultations in 2010, the Ministry of Defence took the unusual step of gifting the wreck of HMS “Victory” to a newly formed organisation, the Maritime Heritage Foundation. Its qualifications for receiving such a gift are not yet clear to me. How could it pay the salvage costs involved unless by selling the artefacts recovered, including coins and perhaps cannon, which would be in contravention of international standards?

Will the Minister confirm that this is the first time that the Government have ever “gifted” the wreck of a Royal Navy warship to an outside body? Will he indicate what steps the Government took to establish that this foundation had available to it the resources to finance recovery operations in a proper manner, without resorting to the sale of the coins and other artefacts recovered?

The Minister for Culture, Mr Ed Vaizey, when the All-Party Parliamentary Archaeology Group queried this gift, kindly wrote to me on 7 November with encouraging words:

“The Maritime Heritage Foundation is charged with preserving the Victory site in accordance with the archaeological principles set out in the Annex to the UNESCO Convention on the Protection of Underwater Cultural Heritage; and the Museum Code of Ethics will be applied to any artefacts that are recovered. I am very confident therefore that we have robust mechanisms in place to ensure the preservation of this important wreck and its artefacts”.

I wish I could share his confidence.

Odyssey Marine Exploration, an American salvage company, announced in February that it has entered into contract with the Maritime Heritage Foundation for the salvage of HMS “Victory”. The disquieting speech by Odyssey president Mark Gordon is available as a webcast at: http://wsw.com/webcast/ch2/omex/. He made the shocking statement that Odyssey’s contract with the Maritime Heritage Foundation would bring to Odyssey 80% of the value of coins and bullion recovered and, on “monetisation”, 50% of the value of cultural artefacts. Final authorisation, he said, was now expected since the Government’s Scientific Advisory Committee had approved the archaeological project plan. He referred to an estimate in the New York Times that the values involved were of the order of $250 million.

I ask the Minister, are the Government aware of this contract? Surely the foundation should not be signing contracts without the knowledge of the Government? But if the Government are aware, how could this “monetisation” process possibly tally with the Minister’s assurances?

Perhaps significantly, the president of Odyssey also disclosed progress with two other ongoing salvage projects: the SS “Gairsoppa” and the SS “Montola”. These 20th century wrecks are not regarded as historic, and Odyssey Marine Exploration apparently already has contracts for their salvage with the UK Department for Transport. The “monetisation” of the silver recovered has already yielded $26 million in 2012. Will the Minister confirm that under the existing contract for SS “Gairsoppa”, Odyssey retains 90% of the cash received on “monetisation” and the Ministry of Transport just 10%? The “monetisation” process applied to these wrecks is highly interesting.

I fear that this commercial salvage recovery model has been applied by naval officers and officials in Portsmouth to the wreck of HMS “Victory”; by officials who deal with wrecks but who seem not be conversant either with the standards of modern ethical underwater archaeology or with the UNESCO convention. Will the Minister again confirm that the Royal Navy and the Government will apply the highest international ethical standards, as formulated by UNESCO, to this historic flagship of the Channel Fleet, in which Admiral Sir John Balchen and a thousand sailors of the Royal Navy lost their lives on 8 October 1744? Is it not now time that the responsibility for historic wrecks of vessels of the Royal Navy be transferred from the Ministry of Defence to the Department for Culture, Media and Sport, like other heritage concerns?

Will the Minister reveal how the Maritime Heritage Foundation will pay for the proposed recovery operations? English Heritage has been unable to cast any light on these matters. The Scientific Advisory Committee’s advice is not made available, even after freedom of information requests. Can the Minister explain to this Grand Committee what on earth is going on? How do the Government imagine that the salvage of historic materials, including coins and bronze cannons, from the wreck of HMS “Victory” can be funded without their “monetisation”, in direct contravention of the assurances that Ministers have given? Can he also confirm the rumour that 17 cannons from HMS “Victory” have already been moved on the wreck site in preparation for recovery, in apparent contravention of the assurances that Ministers have given? It is my personal impression that the Government have not consulted the commissioners of English Heritage about these matters, and I wonder if the Minister can confirm this.

In conclusion, it is possible that in some circumstances a case can be made for selling bullion from an historic wreck, but it would be against the terms of the UNESCO annex to which the Government have announced their adherence. These matters should not be dealt with clandestinely on the basis of confidential and supposedly “scientific” advice to the Ministry of Defence. There are major ethical issues involved here, and it is difficult to avoid the impression that the Government are giving a poor and ill-informed lead internationally in their dealings with Britain’s underwater heritage and with this historic warship of the Royal Navy. I wish that my noble friend might give us some reassurance.

16:56

[Baroness Andrews]

My Lords, I welcome the opportunity to contribute to this debate and I am very grateful to the noble Lord for allowing us to debate a matter of such importance. I should declare an interest as the chair of English Heritage, and I should say that while I have been in the post, I have been become increasingly aware that, as an island nation with an extraordinary maritime history, the appropriate protection of our shipwreck heritage must be an issue of serious concern to us all. That concern should apply as much to wrecks, whether military or mercantile, situated outside our territorial waters as to those that lie close to our shores. Indeed, the fact that the remains of many historically important British ships lie in international waters, or in the waters of other countries, is in itself a graphic illustration of the history of our navy and the extent, intensity and influence of our national maritime inheritance. It is of global significance.

The safeguarding of this heritage outside the waters that the UK controls is complex, so I welcome this debate not only for the chance to consider the future of Admiral Sir John Balchen’s flagship, HMS “Victory”, so well described by the noble Lord, but also to address the wider role of the UK in the discovery and investigation of historic British wrecks which are situated in waters that we do not control. I must remind noble Lords that English Heritage has no remit to operate outside England’s territorial waters. In matters international, therefore, we can only advise Ministers.

In the case of HMS “Victory”, we have offered advice both to our parent ministry, the DCMS, and to the MoD, which is responsible for decision-taking on the future of HMS “Victory”. We understand that Ministers are still considering the way forward and we trust that our advice in this case will be given proper weight. I should say in response to a question: English Heritage commissioners have not been consulted. However, I will go on to explain that English Heritage has been very much a part of the process of advising the Government in different ways. English Heritage was not involved in the selection of the Maritime Heritage Foundation as a recipient for the wreck of HMS “Victory”. In February 2012, however, we accepted an invitation to join an MoD advisory group . The DCMS is also represented on that group, but as an observer. In addition, the MoD has set up an expert panel to support the work of the advisory group, but we are not members of that.

Our advice to the advisory group has not only confirmed the unique historical importance of HMS “Victory” but also consistently advocated the fundamental need in all such cases to adhere to national and international heritage management standards and guidance. Indeed, it goes without saying that we would recommend a consistent approach to the management of all heritage assets owned by government, wherever they are situated—on land or at sea.

However, since joining the advisory group, English Heritage has become concerned by a number of matters. Regrettably, we do not consider that the current arrangements set up to manage the site are fully aligned with the rules annexed to the 2001 UNESCO Convention on the Protection of the Underwater Cultural Heritage. It is both government policy to follow these rules and a requirement for the disposal of the wreck to the Maritime Heritage Foundation.

We do not consider that arrangements for the advisory group and expert panel structures are working effectively and advice is not adequately reflected in subsequent discussions. In our view, the Maritime Heritage Foundation has not provided evidence of adequate policies, strategies and project designs to support the project, including proposed intrusive works and the recovery of historic material from the surface of the seabed.

We do not believe that the proposals for the wreck are based on an adequate and authoritative assessment of its historical significance, nor a full understanding of the threats to and vulnerabilities of the site. We are concerned that options to conserve the site undisturbed, in line with best practice, have not been fully assessed or considered, and that the case has not yet been made that any threats to the wreck are so extreme that they warrant the large-scale emergency recovery of historical material.

We are concerned that the lead in the management of this case is apparently being taken by the foundation's contractor, a United States-based international commercial company, rather than by the foundation itself or by the Government. Finally, we are bound to ask whether the funding basis for the new arrangements is sufficiently transparent.

I raise these grave questions in light of the fact that the UK has over 40 years of experience in managing historic shipwrecks, with close involvement by its heritage agencies and well developed academic, consultancy and contracting institutions for maritime archaeology. This is backed up by agreed principles and guidance. Our expertise and practice within territorial waters, without modesty, is the envy of the world. We see no reason why an historically important wreck outside territorial waters but in the ownership of the UK Government should not be treated in accordance with these standards and approaches.

We would like to see the treatment of HMS “Victory” reappraised and we would recommend that the DCMS, as the lead government department in the management of cultural heritage, assume the chairmanship of the advisory group rather than acting solely as an observer; that the expert panel and advisory group be amalgamated to ensure that advice to the Government is the best, most consistent and fully co-ordinated; and that the foundation develop a clear management plan which meets UK standards of best practice, keeps options for the future under review, involves a staged investigation and is realistic about the foundation's future capacity in terms of funding, archiving, object curation and public presentation.

Of equal or greater importance to us is that lessons are now learnt about the future protection of British wrecks outside UK waters. We believe there is a good case for the DCMS becoming the lead UK government department for the future management of historically important wrecks outside the UK territorial sea. In the future, such wreck sites should be the subject of an agreed cross-government policy, based on accepted principles of heritage management, led by DCMS, with appropriate support from its statutory professional advisers drawn from across the devolved Administrations. We urge the Government to think hard about this, to recognise that our maritime heritage is an exceptional national asset, not an overseas commodity, and to act with resolve.

17:04

[Lord Addington]

My Lords, I first declare an interest that I never thought I would have to make. Apparently I am a descendant of Admiral Balchen. This was news to me about a year ago. I am afraid that the rumour mill had started to grind; there was gold buried treasure to be had and everybody would be rich. I did not believe it at the time; I am not that lucky. My lottery numbers have not come up. I believed it even less when I discovered that this was not some fast-raiding frigate that would hunt down big prizes but a great big slab of a battleship designed for blowing holes in other battleships, and sitting in front and blockading places, as was done in 18th-century warfare.

My history on this is quite good but I am always aware that CS Forester and Patrick O’Brian have got in there and distorted the picture slightly, but that is what it was. It was a warship famous for not sailing very well—in some of the stuff I read, that is probably why it sank. Apparently it had a drift to leeward—I am still not quite sure what that means. The noble Lord, Lord Greenway, is in the Room and he will probably correct me on it later. It was famously one of the last ships to have bronze cannon. I suspect that those bronze cannon are the bits that everybody is mainly interested in. There is a real market in old artillery pieces. Bronze guns of that cut-off period would have real collectors’ value. Whether there were large stores of money onboard, I do not know; as a flagship it may well have carried money onboard. If it went down with all hands as everybody seems to suspect, 11,000 serving men are down there with it.

We need some guidance about what to do about this situation and why we should disturb the last resting place of that number of servicemen. There was some talk about gathering up the bodies and bringing them home but I am pretty sure that it was normal at that time to bury at sea. Why are we doing it? Is it for historical reasons? If we are doing something for knowledge and history, there might be a case but it is a fairly well documented ship. The Royal Navy at this time was one of the world’s best record keepers. I am sure that we could find out from Admiralty House exactly who was on that ship. Also, if we are taking up those guns, the incidental archaeology will be damaged, which may be of greater interest. I should like some assurances that if any guns or any other artefacts of high value are removed, an archaeological study of absolutely the highest level is the cost that we must extract from that. Is this the number one target for that type of expenditure? It is not the “Mary Rose”, which is a well documented case that we know something about, so we must justify the expenditure.

I shall leave my comments there. The big society was mentioned in the briefing but I do not think that this is a good example of the big society. That has been taken out of context. If we are to allow commercial exploitation, the academic, scholarly knowledge and the payback must be very big. It may be that that academic, scholarly prize on this vessel is simply not there.

17:08

[Lord Greenway]

My Lords, I declare an interest as chairman for the past 10 years of the World Ship Trust, an organisation given over to encouraging the preservation of old vessels around the world. What we are discussing today is slightly different because we do not normally get involved in wrecks. I am delighted to add an independent voice in support of the question asked by the noble Lord, Lord Renfrew.

The area where HMS “Victory” sank is a particularly deep part of the channel. It is subject to very strong tides. The wreck, as such, no longer exists, and the contents of the ships are dispersed over a fairly wide area. I believe that an element of haste came into this because the area is heavily fished and there was a danger of the artefacts being damaged by bottom-trawling.

I certainly share the concerns of all those who have spoken. The American company Odyssey, which discovered the wreck in international waters, leaves us with a bit of a conundrum here. It was a British ship but, as the noble Lord, Lord Renfrew, says, we have to treat this as a test case, because there are many other wrecks. If you look at a chart of the English Channel between where the remains of this vessel lie and, say, the Scilly Isles, you will see that there are dozens and dozens of wrecks. We do not want to set a precedent for this sort of action. I am also slightly worried because we have a lot of technical expertise in undersea work, a lot of it coming out of North Sea oil exploration. I recall, only a few years ago, when the Russians were having trouble with a sunken submarine in the Pacific, it was a British submarine that was flown out there and managed to rescue the sailors from under the sea. We do not lack this technology. Why could this not have been done by a British company? That would have been so much better, in my opinion, in this instance.

By pure chance, I was lunching today with the director of what used to be the National Maritime Museum at Greenwich, which is now part of Royal Museums Greenwich. He, like me, was absolutely appalled with what was going on, as was a former First Sea Lord, who was also lunching. Before lunch, I had another meeting with the director of National Historic Ships UK, who was equally appalled. We could not think what the Ministry of Defence was up to in the first instance here.

I add my support and will be very interested to hear what the Minister has to say. However, before I sit down, I will answer the noble Lord, Lord Addington, who asked me what “leeward” means. When a ship drifts to leeward, it basically drifts downwind. On that note, I will sit down.

17:12

[Lord Lingfield]

My Lords, I must at once declare an interest as the chairman of the Maritime Heritage Foundation, the owners of the wreck of HMS “Victory”. I hasten to add that neither I, nor any of the charity’s trustees or their families, have any pecuniary interest in HMS “Victory” or in Odyssey Marine Exploration, which, as we have heard, discovered the wreck site in 2008.

As a result of a lengthy government consultation ending in 2010, the MoD gifted the wreck to the foundation. The foundation’s was the only offer made archaeologically to recover the artefacts. It is important to realise that the MoD could gift only such items on the site that clearly belonged to the state in 1744; any private goods there could not be so gifted, and should any be found they must be by law declared to the Receiver of Wreck.

I first heard of this ship—the HMS “Victory” before Nelson’s—when I was a small boy and my grandfather took me to Westminster Abbey to see the large memorial to Admiral Sir John Balchen, who we have heard went down with her. Sir John had no Balchen descendants, and I am delighted to meet today my noble kinsman, undiscovered previously. As the head of the remaining branch of the family, I paid personally for the considerable repair needed to his monument, which features HMS “Victory”, in the 1970s.

Odyssey has, without doubt, the world’s most experienced deep-ocean archaeology team and an exceptional record of research publications. My foundation had no hesitation in contracting with it for archaeological services for the HMS “Victory” site. Indeed, I made it clear in my submission to the government consultation that we were minded to do so. Odyssey is an entirely reputable company, which is currently contracted, after due diligence, with the Department for Transport to remove silver from two merchant ships that were sunk by enemy action in the two world wars. Odyssey is likely to pay some £10 million to the department, of which a quarter has already been passed over, within the next 12 months, and is likely to make a profit itself of approaching £100 million, so I am told. However, it has undertaken to do HMS “Victory” work ultimately at its own risk. The wreck was gifted to the Maritime Heritage Foundation by the MoD on the strict condition that no artefacts that have been state property would be deaccessioned without the permission of the Secretary of State for Defence—that permission not to be unreasonably denied.

The foundation has been fortunate to appoint as chairman of its scientific advisory committee perhaps the greatest of UK marine archaeologists, Dr Margaret Rule CBE, who supervised the recovery of the “Mary Rose” and who approves, with a group of eminent marine archaeologists, our every step. We and our contractors, Odyssey, can take no action without the permission of the MoD, which—as we have heard—has its own advisory panel.

There are three other important aspects to this. First, as we have heard, at only 300 feet down, the wreck is not preserved in some watery aspic. It is constantly shifting with the tides and changing daily. Secondly, this is one of the most trawled over sites in the English Channel and artefacts on the site show the most clear drag damage from heavy trawler bottom gear, as the noble Lord, Lord Greenway, said. Thirdly, and most worrying of all, is theft. Clearly visible on the site are dozens of bronze cannon bearing the arms of King George II. The 42-pounders are quite unique. Already, at least one cannon has been confirmed as stolen and is in the hands of the Dutch police. It has already suffered damage from lack of any preservation care. Another is missing, probably lifted with a simple crane.

While we are speaking of inappropriate exploitation, I have no need to remind your Lordships that hundreds of this country’s bronze war memorials have been stolen for melting recently. A Tudor bell in the church of St Lawrence, Faversham, was stolen last week. On the wreck are hundreds of tonnes of bronze, there for the taking. The wreck is no longer sovereign immune. As the noble Baroness, Lady Andrews, pointed out, being in international waters there is no legal mechanism by which it can now be protected. Only Odyssey’s regular presence on and monitoring of the site, at its own expense, has so far protected it.

In May this year, the MoD’s advisory panel, on which sits an English Heritage representative, unanimously agreed that there was a serious threat to many of the artefacts and requested that the foundation produce an urgent archaeological project design to lift those items that are visibly in danger of theft or damage. After consultation with Dr Margaret Rule and her team, the foundation submitted that design in June and pledged itself to do this work using the highest quality archaeological techniques, recording, and research.

The foundation’s aim is to recover, conserve and exhibit all cultural artefacts from the site in UK museums, if that proves possible. The foundation has a deaccession protocol similar to that of the British Museum but I repeat that no items may be deaccessioned without the permission of the Defence Secretary. No trenching has begun and no artefacts have so far been removed from the sea’s bottom, nor will be until the project design is approved. These are the protections that my foundation and the MoD have built in and I trust that your Lordships will be reassured by them. These important and highly valuable artefacts have much to tell us about HMS “Victory” and why it sank, and the history of the Royal Navy in the mid-18th century. This is why we shall recover and conserve them as soon as possible.

[Lord Renfrew of Kaimsthorn]

How does the Maritime Heritage Foundation propose to pay for the recovery of artefacts without selling them?

[Lord Lingfield]

The Maritime Heritage Foundation is a charity and it will make an appropriate report about its finances to the Charity Commission at the end of its financial year and then, presumably, such things will be revealed.

17:20

[Lord Faulkner of Worcester]

My Lords, with the leave of the Committee, I will speak briefly in the gap. I had not expected to be here as I was taking part in a parliamentary visit to Bedfordshire earlier today, but we were back early and I was pleased to be able to come in and listen to this interesting debate initiated by the noble Lord, Lord Renfrew.

I speak as chairman of the All-Party Parliamentary Group on War Heritage. I will refer in my three minutes to an issue that was brought to my attention earlier this year: the looting of three Royal Navy cruisers that were sunk in the North Sea off the coast of the Netherlands in September 1914. HMS “Hogue”, HMS “Cressy” and HMS “Aboukir” were torpedoed by the Imperial German submarine “U-9” while on active service and lie at a depth of 33 metres. The majority of the crew of the three ships, around 1,500 naval personnel, lost their lives in the action; therefore, the wrecks are their war graves.

I wrote on behalf of the group to express our concern to the Dutch ambassador, Mr Pim Waldeck, and got a very sensible and helpful reply from him—but it contained a bit of alarming information. First, he reassured us that the Dutch Government take seriously the issue of illegal salvage or theft from shipwrecks around the Dutch coast. He said that approximately 1,500 shipwrecks were reviewable by the Netherlands alone; not all of them are warships or war graves, but obviously a significant number are. In the case of these three particular ships, he was unable to be too helpful because it was his impression that they had been sold by the British Government at some point in the 1950s. I sent his letter to the noble Lord, Lord Astor of Hever, with details of my concern and that of the group, and what he said indeed turned out to be the case. The noble Lord said that they were sold to a salvage company in 1954. The consequence of that was that all the protection that they would have had as war graves and heritage items was lost.

The purpose of my brief intervention is to draw the Committee’s attention to this disturbing situation that, where a wreck is sold for salvage, all protection for it is lost and, obviously, to express the hope that nothing similar happens in future.

17:19

[Lord Stevenson of Balmacara]

My Lords, I add my thanks to the noble Lord, Lord Renfrew, for securing this debate and to all noble Lords who have contributed. It is hard not to feel very uncomfortable about what is happening here. Most of what we have heard has focused on fears about how decisions have been made about the future of one of the most important 18th century shipwrecks discovered in recent years, and it all raises serious concerns as to how the UK Government will manage the protection of historic wreck sites, whether or not in international waters, in the future.

I will start with two of the points made by the noble Lord, Lord Addington. First, on archaeological merit, is this site of sufficient merit and historical value to justify the work which is being considered? As we have heard, at the time of her loss, HMS “Victory” was the most powerful ship in the world, and her loss had far-reaching consequences on the war, the Royal Navy and the public. It will also answer questions of why she foundered, whose fault it was, how she was constructed and also, I suspect, let us examine properly the fine cannons she was carrying when she went down.

Are the Government really convinced that a full-scale excavation is appropriate for this wreck, given that, as we have also heard, HMS “Victory” was carrying perhaps 1,000 men when she went down and there is photographic evidence of human remains? So there is the important question of how to treat the remains, and the memory of those who gave their lives. What steps will the Government be taking in this respect?

The noble Lord, Lord Renfrew, suggested that the DCMS should be taking the lead for historic wrecks. Can the Minister comment on that suggestion? The noble Lord, Lord Lingfield, confirmed when he spoke that any deaccessioning had to be approved by the Secretary of State for Defence. What role does this leave for the DCMS?

As we have heard, the UK has not yet signed up in full to the UNESCO Convention on the Protection of the Underwater Cultural Heritage. Will the Minister explain exactly why that is the case, whether discussions are ongoing on these concerns, and whether there is a timetable for the UK to sign up to? We also understand that the Government have agreed that all work must comply with Annex A to the UNESCO convention. Given that rule 17 of the annex makes it clear that adequate funding must be in place before work starts, what steps have the Government taken to establish that the Maritime Heritage Foundation has adequate independent funding in place in order to finance the work that it proposes to carry out? Does the Minister agree that by entering into what is effectively a commercial salvage contract with Odyssey Marine Exploration, the Maritime Heritage Foundation lays the Government open to the charge that they have not fulfilled their proper obligations to ensure that this internationally important cultural site is protected from commercial exploitation?

If, as we have heard, Odyssey has offered to excavate the wreck at its own risk, and if it is true that the Maritime Heritage Foundation has no substantial funds, it must follow that the £20 million or so that will have to be found must come from somewhere. According to the Odyssey website, their agreement with the MHF calls for,

“Odyssey’s project costs to be reimbursed and for Odyssey to be paid a percentage of the recovered artefacts’ fair value”.

There is provision for the payment to be made either in cash or in deaccessioned artefacts. The agreement goes on to say:

“Odyssey will receive the equivalent of 80% of the fair value of artefacts which were primarily used in trade or commerce … and 50% of the fair value of all other objects”,

including objects associated,

“with the construction, crewing and sailing of ships”—

which to my mind includes the cannons.

At present, the only known items of potential value are the bronze cannons, but even at the most inflated prices that would cover a small proportion of the cost. There are absolutely no guarantees that there will be gold coins or bullion on board, and most people take the view that there will not be.

Put simply, the sums do not add up. What assessment have the Government made of the Maritime Heritage Foundation’s plan, and what is the current state of play? What plans have the Government or the Maritime Heritage Foundation to display the excavated materials, and can the Minister explain where and at whose cost this would happen? What about the cost of preparation for display, and where will the ongoing revenue costs come from?

In a recent article in the Sunday Times, Greg Stemm, the CEO of Odyssey, was quoted as saying:

“On this shipwreck a model has been proposed that will see great archaeological resources utilised to bring it back to life at no cost to taxpayers. Shouldn’t we allow that model to play out and see how it works?”

This seems a rather unsafe way to treat our heritage, and I suggest that the answer to that question is no.

As I said earlier, this whole issue does not seem right. The Government have not followed their own stated policy guidelines, and there is so much doubt about what is happening on the site, that I invite the Minister to consider whether he thinks that there is now sufficient concern to warrant suspending work on the wreck site until all this is sorted out.

17:27

[Viscount Younger of Leckie]

My Lords, I am grateful to my noble friend Lord Renfrew for raising this important matter. We all recognise his considerable experience and passionate interest in archaeology and maritime heritage.

Both the Ministry of Defence and the Department for Culture, Media and Sport have recognised for some time that the wreck of HMS “Victory”, which sank in 1744, and which was found in 2008, raises a number of important policy questions. HMS “Victory” was a hundred-gun first-rate ship of the line, launched in 1738, and was the fifth ship to carry the name. Her successor, launched in 1765, which was to be Nelson’s flagship, which we know so well, was the final ship to carry the name, and she remains a commissioned warship to this day. Therefore, the wreck of the ship with which we are concerned this evening has an important pedigree.

HMS “Victory” was the flagship of the Channel Fleet, under the command of Admiral Sir John Balchen, who led a strong force to relieve a French blockade of the River Tagus in Portugal, where a British convoy with stores for Gibraltar had been incarcerated. The blockade was lifted, the French retreated to Cadiz, and Admiral Balchen escorted the convoy to Gibraltar. On the fleet’s return journey it was caught in a terrible storm and HMS “Victory” was separated from the rest of the fleet. The ship, with her crew of over 1,000, was never seen again. I note at this stage the comment that my noble friend Lord Addington made about his claim to the Balchen line, which I am sure is genuine; I presume that the list of claimants will increase in direct proportion to the presumed treasures that lie on the sea bed. Given the importance of the wreck—

[Lord Addington]

Of that I have absolutely no doubt.

[Viscount Younger of Leckie]

I thank my noble friend for that confirmation.

Given the importance of the wreck and the grave site, the previous Government initiated a public consultation on the options available. We received a good response to the consultation exercise and the Government announced their response in May 2011. As part of that, we made clear that we intended to adopt a phased approach to the management of the site. In line with the provisions of the annex to the UNESCO Convention on the Protection of the Underwater Cultural Heritage, in situ management would be adopted as a first option pending further study of the site and before deciding on any further physical intervention. In addition, in the absence of public funds being available for work on the wreck site, we decided to explore the option of transferring responsibility for the management of the site to a charitable trust.

This decision was then followed through with negotiations with my noble friend Lord Lingfield as chairman of the Maritime Heritage Foundation, and the deed of gift for the transfer of the wreck to the foundation was signed in January this year. The noble Baroness, Lady Andrews, and my noble friend Lord Renfrew questioned whether the Department for Culture, Media and Sport should lead government decisions on the management of wreck sites such as that of HMS “Victory” which lie outside the UK territorial limit. Perhaps I may say first to the noble Baroness that the Government welcome the constructive and active engagement of English Heritage in support of their decision-making in the case, and I am pleased that she has acknowledged the role that English Heritage has played.

There is a specific legal point in respect of military wrecks. The noble Baroness will understand that they are owned by the Secretary of State for Defence and thus formally it is for that department to decide what action should be taken in respect of a wreck. This is why the deed of gift was in the name of the Secretary of State for Defence, as was the deed of gift in respect, for example, of the “Mary Rose” when she was transferred to a charitable trust in 1983. So the answer to one of the questions posed by my noble friend Lord Renfrew is that this is not the first time that we have gifted the wreck of a Royal Navy warship to a charitable trust established for that purpose. But I can assure the noble Baroness that the Government accept that there are important issues of heritage policy involved in this case, and that such decisions are a matter for collective government decision-making and are not driven by one department or another.

The Government remain of the view we reached in response to the consultation exercise. Management of the wreck site is not something to which we can allocate government resources, and thus we welcome the commitment by the Maritime Heritage Foundation to work closely with government in the management of the wreck site. The deed of gift imposes important and significant conditions on the actions that the foundation can take, requiring it to seek the agreement of my right honourable friend the Secretary of State for Defence should it wish to undertake any work on the wreck site. I have to say to noble Lords that it would be wrong for the Government to dictate which contractor the foundation chooses to use, as long as it follows the principles and conditions set by the Government.

The current position is that my noble friend Lord Lingfield, as chairman of the Maritime Heritage Foundation, has put forward a couple of proposals for works to be undertaken on the wreck site. These are currently being considered collectively by ministerial colleagues in the Ministry of Defence and the Department for Culture, Media and Sport. This consideration has been informed by advice from an independent advisory group which includes a representative of the National Museum of the Royal Navy and, indeed, English Heritage. I can confirm that no decisions have yet been taken on the proposals put forward by the Maritime Heritage Foundation, although I hope that we will be in a position to report shortly. The Committee will understand, therefore, that I am not in a position to provide substantive responses to the questions that have been posed or the assurances that I know noble Lords would have liked. However, I can assure noble Lords that the Government well understand the concerns that have been expressed, and in reaching a decision on the way forward with the wreck site, we will seek to ensure that the actions agreed are consistent with the principles in the annex to the UNESCO Convention on the Protection of the Underwater Cultural Heritage.

Specifically, I would like to reassure my noble friend Lord Renfrew—and I hope that this goes some way towards answering some of his questions—that the Government agree that the commercial exploitation of underwater cultural heritage for trade or speculation, or its irretrievable dispersal, is fundamentally incompatible with the protection and proper management of underwater cultural heritage, to which the Government are committed. I hope, therefore, that when the noble Baroness, Lady Andrews, sees the Government’s decision in this matter she will have greater confidence that we have taken account of the advice that English Heritage has provided.

My noble friend Lord Renfrew asked whether I can confirm a rumour that 17 cannon from the ship have been moved in preparation for recovery. There have been a number of rumours in respect of this wreck, many of them contradictory. However, there is no evidence that cannon or other artefacts from the wreck site have been recovered or moved by the foundation or on its behalf since two cannon were recovered, with our agreement, for identification purposes in 2009—although it is true that one has been taken from the site and has turned up in the Netherlands, as my noble friend Lord Lingfield mentioned today.

The noble Lord, Lord Greenway, highlighted a concern, quite rightly, over the accidental recovery of cannon—for example, by trawlers. As was pointed out today, this is an area where trawlers trawl.

Before I conclude, I wish to pick up on two issues. My noble friend Lord Addington and the noble Lord, Lord Stevenson, raised the important question of the disturbance of human remains. I can reassure them both that in all the discussions that we have had with the Maritime Heritage Foundation, which I am sure my noble friend Lord Lingfield will confirm, we have been clear of the importance of avoiding the disturbance of human remains as far as possible and they will be treated with due respect.

I was delighted to see the noble Lord, Lord Faulkner, rise to speak in the gap. He raised the issue of lessons learnt from sale for salvage in the past. As I have made clear, the decisions we have taken and are considering in this case are very different from the examples that the noble Lord gave relating back to the 1950s. We are not talking here about sale for salvage, although I was interested to hear what he had to say.

In conclusion, I recognise that there are some concerns about the proposed arrangements for this important military wreck. The Government recognise these concerns and will, I am sure, take full account of the points that have been made this evening in reaching a decision on the proposals brought forward by the Maritime Heritage Foundation. I ask your Lordships to wait for that decision. I note the comments made by the noble Lord, Lord Stevenson, who asked for a timetable, but I am confident that news should arrive early in the new year, which I hope will give some comfort. This will address the substance of the concerns that have been raised once the news comes out.

Committee adjourned at 5.38 pm.

House of Lords

Wednesday 28th November 2012 Lords Chamber

Wednesday, 28 November 2012.

15:00

Prayers—read by the Lord Bishop of Liverpool.

Israel and Palestine: Balfour Declaration

Wednesday 28th November 2012 Lords Chamber

Question

15:06

Asked By

[Baroness Tonge]

To ask Her Majesty’s Government how they marked the 95th anniversary of the Balfour Declaration; and what is their current assessment of the welfare of Israelis and Palestinians.

[Lord Wallace of Saltaire]

My Lords, I should perhaps explain that the noble Baroness, Lady Warsi, was taken unwell this morning and I am therefore standing in her stead at short notice. The British Government have not organised any events to mark the 95th anniversary of the Balfour Declaration. However, the Attorney-General and the British ambassador in Tel Aviv attended a dinner event on 12 November in Tel Aviv, organised by the Israel, British and the Commonwealth Association. We were deeply concerned about the welfare of both the Israelis and the Palestinians during the recent Gaza conflict. That violence only reinforces the need for urgent progress towards achieving a two-state solution to secure the long-term welfare and security of both Israelis and Palestinians.

[Baroness Tonge]

My Lords, I thank the Minister for that Answer. Is he aware that the Palestinians feel totally betrayed by successive British Governments since the Balfour Declaration? By making our Government’s support for tomorrow’s United Nations bid conditional on Palestine not pursuing Israel through the International Criminal Court, are the Government not admitting that Israel has committed war crimes in Gaza and the West Bank and that they are seeking impunity for that country?

[Lord Wallace of Saltaire]

My Lords, the Government are concerned, as far as is possible in an extremely difficult situation, to restart the process towards negotiations on a two-state solution. We recognise that this is becoming increasingly difficult; the Foreign Secretary said in his Statement in the other place only a couple of hours ago that time is running out and if we do not manage to achieve a two-state solution within the next year or two, we may find ourselves looking at some very unpalatable alternatives. That is what the Government are fixed on.

[Lord Turnberg]

My Lords, it is easy for supporters of Israel or the Palestinians to criticise the other side, so I will not trade missiles with the noble Baroness, Lady Tonge. Does not the noble Lord agree, however, that the important objective now is to look forward and bring the two sides to the negotiating table, and that efforts by the Palestinian Authority to gain recognition at the UN are more of a distraction than a help?

[Lord Wallace of Saltaire]

My Lords, it is very important to give some support to the Palestinian Authority. If Israeli illegal settlements continue to expand, the position of the Palestinian Authority will become impossible. Therefore, although we have done our best as a Government to dissuade the Palestinian Authority from taking this resolution to the UN General Assembly at this point, we understand why it feels it necessary to do so.

[Lord Wright of Richmond]

My Lords, does the Minister agree that the anniversary of the Balfour Declaration makes this an appropriate moment to recall the understanding in Mr Balfour’s letter to Lord Rothschild that,

“nothing shall be done which may prejudice the civil and religious rights of existing non-Jewish communities in Palestine”—

a tragic contrast to the continuing breach of Palestinian human rights caused by illegal settlements on the West Bank and by ethnic cleansing in east Jerusalem? Does the Minister also accept that, given the almost unanimous consensus to which he has himself referred, a two-state solution is the only way to resolve this long-running dispute in the interests of both Israel and Palestine? It is entirely logical and right that we should not only give unconditional support to the very modest Palestinian hopes for enhanced membership of the United Nations but encourage our friends and partners to do likewise. Finally, I understand that the Foreign Secretary made a Statement in the House of Commons this morning on this subject. I express some regret that it was not thought appropriate to repeat it here this afternoon.

[Lord Wallace of Saltaire]

My Lords, I reread the Balfour Declaration before I came in and it is a masterpiece of diplomatic drafting. It is not entirely clear and has a number of deliberate ambiguities within it. Her Majesty’s Government are very concerned to bring pressure to bear on all those who have a stake in the negotiations, including the Governments of Israel and the United States, to exert all their efforts now to restart the negotiations. I stress again that time is not entirely with us. We wish to avoid a situation in which opinion in the US Congress, or perhaps right-wing opinion in Israel in an election campaign, might lead to a demand for retaliation for recognition of Palestinian statehood. We are therefore doing our best to promote the two sides being brought together rather than have them score points against each other.

[The Lord Bishop of Exeter]

My Lords, does the Minister not recognise that, in the interests of peace in the Middle East, Palestinians need to be supported in finding legitimate, non-violent alternatives to the rockets that have been raining in from Hamas on southern Israel? Does he not see that tomorrow’s seeking of some formal recognition falls into that category? Does he not recognise that, if we are not to see Palestinians sign up to a cause to die for, we have to give them hope to live for?

[Lord Wallace of Saltaire]

My Lords, we entirely understand that. We have been in active discussion with the Palestinian Authority and with other Governments over the past week about the exact text of the resolution and we are continuing those discussions. If we gain from the Palestinians the assurances that we are looking for, we will be able to vote in favour of the resolution.

[Lord Triesman]

My Lords, the argument for a two-state solution is one with which we are in entire agreement and continue to be so. We have also urged, and continue to urge, both sides to behave with legality, because that is a precondition for any kind of stability in the region. However, does the Minister agree that, in order to change what is going on and achieve an enhanced status for the Palestinian people, support at this time would be a very valuable step? Does he also agree that it is extremely unlikely that it would set back any part of the peace process—an argument that has been advanced in this House and which, candidly, few of us understand?

[Lord Wallace of Saltaire]

My Lords, we are providing very active support. My honourable friend Alistair Burt was in Gaza and the Middle East last week and we are providing a great deal of financial support both in Gaza and in the West Bank.

[Baroness Falkner of Margravine]

Given that the vote at the United Nations is merely symbolic and observer status, exactly like that of the Holy See—the Vatican—should not threaten anyone, will Her Majesty’s Government have conversations with the Americans to remind them of their obligations under the Oslo accords? One of three preconditions from Oslo was that the Americans had to engage positively and proactively in bringing out a two-stage solution.

[Lord Wallace of Saltaire]

My Lords, my noble friend knows the complexities of American politics as well as I do, and knows that the United States is in a very different position in terms of congressional politics from us in either of the two Houses here. We have actively to engage with the United States to get it to turn back and towards negotiating a peace process.

Roads: Roadworks

Wednesday 28th November 2012 Lords Chamber

Question

15:15

Asked By

[Lord Sheldon]

To ask Her Majesty’s Government whether they intend to introduce legislation to give local authorities control over the digging up of streets so as to minimise disruption to both residents and traffic.

[Earl Attlee]

My Lords, the New Roads and Street Works Act 1991 places a duty on local authorities to co-ordinate works and on utility companies to co-operate. In addition, the Traffic Management Act 2004 allows authorities to introduce permit schemes, which better enable authorities to manage works for the benefit of all road users. The Government support permit schemes, which are currently in place in around a third of English authorities.

[Lord Sheldon]

My Lords, I will answer the Question that has been put: except in an emergency, all programmes must be approved by the council before they are undertaken and the council must ensure that congestion on the roads is kept to a minimum.

[Earl Attlee]

The noble Lord is quite right. At the lowest level, there are notification schemes where the contractor has to notify the local authority. Where necessary, rules are put in place. If a local authority has a permit scheme, the contractor has to have a permit before he can start work, and if he overruns he is liable for penalty charges.

[Baroness Gardner of Parkes]

My Lords, does the Minister remember Lord Peyton and the very effective campaigns that he ran over many years on this exact issue of work going on in the streets? Is it not a fact that over the years councils have developed many more rights; for example, charging if local people are going to be held up by these schemes?

[Earl Attlee]

My noble friend is quite right. The main tool for local authorities is the permit system which, as I say, has been taken up by about a third of local authorities. Some local authorities do not need to use a permit scheme because they do not have congestion problems; others are developing their schemes. In addition, we are looking at lane rental, which has been piloted in London, and at one or two other lane rental schemes as well.

[Lord Lea of Crondall]

My Lords, would the noble Lord like to express his condolences to Hampshire County Council for every time that it has done a major job—

[Lord Barnett]

My Lords—

[Lord Lea of Crondall]

I started first; he is a Privy Counsellor—okay.

[Lord Barnett]

Is the noble Earl aware that the disruption outside this House over the past couple of days has caused great difficulty for Members who have to come and go by car or taxi? I declare an interest as one of those. That disruption is as nothing compared with what Black Rod has done to Members of this House with the system that is now in place. Will the Minister ask the Leader of the House to have a word with Black Rod to revert to the previous position where Members could come and go rather more easily?

[Earl Attlee]

My Lords, I am sure that my noble friend the Leader of the House heard exactly what the noble Lord said. Fortunately, I am responsible for Her Majesty’s Government, not for Black Rod.

[Lord Bradshaw]

The matter that causes most trouble on the roads is the fact that utility companies do not seal up the work that they do, so there is an ingress of moisture that in turn bursts the road surface. Will the Minister ask his right honourable friend in another place to see whether the agreements with the utility companies can be tightened up to ensure that they reinstate the roads properly after they do their work?

[Earl Attlee]

My noble friend makes an important point: reinstatement is an important issue. There are guidelines and local authorities should normally check that the whole reinstatement process is being done correctly.

[Lord Lea of Crondall]

My Lords, will the Minister express his condolences to Hampshire County Council, because every time it does a wonderful job in resurfacing a major road, either gas, electricity, water or telephone companies dig it up again? Are there any statistics that suggest that the Government have any reason to be complacent that we are making improvements in co-ordination rather than going backwards?

[Earl Attlee]

My Lords, I am sure that we are making improvements. The previous Government introduced a permit system that allows local authorities to co-ordinate roadworks as much as possible to ensure that they do not interfere with each other and that we do not have more works than are necessary. However, noble Lords have to understand that that is quite difficult when you have got telecoms going alongside water pipes and gas pipes.

[Lord Wills]

In pursuit of the earlier question about reinstatement, does the Minister accept that one problem is that the utility companies that do the work often do not notify the local authorities when they have finished and therefore it can take weeks for the local authorities to put right the damage that some of these utility companies have done? Can the Minister offer any reassurance about the process of notification of when works are completed?

[Earl Attlee]

My Lords, I am not convinced that there is the problem that the noble Lord describes. With the permit system, the contractor has to tell the local authority when the work should be completed. If it is not completed on time, the local authority can impose overrun charges. However, I will take this up with my officials and make sure that there is not an unresolved problem.

[Lord Davies of Oldham]

My Lords, something is wrong in the state of Denmark and on the roads of Britain, too. The noble Earl has identified the virtues of the legislation passed in 1999 and 2004. Utilities are meant to notify, and to be subject to penalties, if they do not complete the work in time. However, statistics show that road congestion due to roadworks is costing £2 billion a year. What on earth is going wrong with enforcement in this area?

[Earl Attlee]

My Lords, unfortunately, my brief says that congestion costs the economy an estimated £4.2 billion a year, so we are fully aware of the problems. The permit schemes have not been adopted by all local authorities that would want to. We need to understand that we have got conflicting priorities: on the one hand we want to reduce congestion on the roads; on the other hand we want to introduce super-fast broadband—and that will require works on the roads. So we have got a problem to deal with.

EU: Scottish Independence

Wednesday 28th November 2012 Lords Chamber

Question

15:22

Asked By

[Baroness Liddell of Coatdyke]

To ask Her Majesty’s Government what advice they have received on the consequences for the European Union membership of the remainder of the United Kingdom should Scotland secede.

[Lord Wallace of Saltaire]

My Lords, the UK Government have already confirmed that they hold legal advice on this issue. The overwhelming weight of international precedent suggests that, in the event of Scottish independence, the remainder of the UK would continue to exercise the existing UK’s international rights and obligations and that an independent Scotland would constitute a new state. The UK Government judge that this situation will be recognised by the wider international community.

[Baroness Liddell of Coatdyke]

I thank the Minister for that Answer. However, in view of the events over the weekend in Catalonia, it is inconceivable that the European Commission would not be looking at the consequences for member states of the secession of one member state. In Scotland we have had enormous difficulty getting straight answers as to what the consequences will be for the citizens, so we need every citizen of this country to be confident that we have genuine advice and information on what will happen. Will the Government consider the establishment of an expert panel to look at the issues around the separation of Scotland from the rest of the UK to make sure that all British citizens do not suffer as a consequence of the break-up of Britain?

[Lord Wallace of Saltaire]

My Lords, my noble and learned friend and colleague—and perhaps even noble kinsman—the Advocate General for Scotland has a legal forum, which met last Friday, which is considering these issues. In the course of 2013 the UK Government will publish a number of studies on some of the issues engaged. On the question of Catalonia and Spain, it is entirely clear that the Spanish Government are opposed to any idea of secession and would be likely to veto a Scottish application to join the European Union under current circumstances. There have been exchanges between the Spanish Government and the European Commission on this exact issue.

[Lord Steel of Aikwood]

My Lords, does my noble friend agree that it would be quite a tall order for an independent Scotland to seek to negotiate opt-outs of both the eurozone and the Schengen agreement? While I am always very keen to see employment in the Scottish Borders, border posts were not something I ever had in mind.

[Lord Wallace of Saltaire]

It opens up all sorts of questions about the future of Gretna Green. There would also be a number of questions about Scotland having to negotiate for fishery quotas and for the financial contributions that Scotland would wish to make. Those who argue that it is Scotland’s oil would recognise, perhaps, that it would also be Scotland’s financial contribution.

[Lord Foulkes of Cumnock]

My Lords, will the Minister confirm that the corollary of his first answer—that the rest of the United Kingdom would inherit the current UK membership of the European Union and that Scotland would have to apply separately for new membership—is that Scotland would then go to the back of the queue behind Croatia, Turkey and all the other countries that are seeking membership? It would have to satisfy, in its own right, all the acquis and conditions of membership. It could take many, many years and that is yet one more really good reason why Scotland is better off as part of the United Kingdom.

[Lord Wallace of Saltaire]

My Lords, there is not an orderly queue for EU membership. There is a list of criteria for EU membership which applicant countries have to fulfil. Turkey applied during the 1980s, rather ahead of some of those countries that have since joined. Of course, Scotland would have to meet a whole range of criteria and there would be, no doubt, some careful and detailed negotiations. Whether or not Scotland would be allowed—as the noble Lord, Lord Steel, has already posed—to opt out of Schengen or to opt out of the euro and keep the pound is something we would have to consider.

[The Duke of Montrose]

My Lords, does my noble friend agree that, if Scotland is separated from the United Kingdom, the contribution the UK makes to Europe will be reduced and that any rebate that is payable to the UK at the moment would also be reduced?

[Lord Wallace of Saltaire]

That is a question that Her Majesty’s Government have not entirely considered yet, since we have every confidence that when it comes to a referendum the people of Scotland will vote to stay in the United Kingdom. The question of the rebate and of the United Kingdom’s financial contribution is, as Members may have noted, itself under negotiation.

[Lord Soley]

My Lords, do the Government also realise that it is not just Spain that is concerned about the break-up of the country, but a whole range of other countries, including France with regard to Corsica? Automatic admission as the consequence of the disintegration of an individual state would not be looked at happily by the European Union. My noble friend Lady Liddell made a very important point when she spoke about the importance of informing the Scottish electorate of the consequences of a division that might not be recognised by the European Union and also, if it was recognised, could still result in major differences in what it opted out of, in the way that the noble Lord, Lord Steel, mentioned. It is a profoundly important issue, not just for the rest of the United Kingdom but for the Scottish people.

[Lord Wallace of Saltaire]

My Lords, I can confirm all of that. It is a recognised, long established principle of public international law that when a part of a state secedes it inherits obligations under treaties but it has to apply to join international organisations. When the Soviet Union broke up, that applied to Ukraine, Belarus and others. When India broke up, it applied to Pakistan and then to Bangladesh, so this is a well established principle.

[Lord Cormack]

My Lords, do we know yet precisely what legal advice the Scottish Government took on this issue?

[Lord Wallace of Saltaire]

My Lords, we do not know. That is one of the things that everyone is longing to discover.

[Lord Low of Dalston]

My Lords, would the UK have a veto on a Scottish application for membership such as General de Gaulle exercised in respect of British membership in former times?

[Lord Wallace of Saltaire]

My Lords, we are all mongrels. My father was a Scot; there are many of us here who have mixed Scottish, English, Irish and Welsh antecedents so we all hope that this question will not come up. If it did ever lead to separation, we would, of course, have to consider it. The Irish Free State seceded from the United Kingdom in 1922. Incidentally, that was relatively peaceful—although not within Ireland itself—and Ireland had to reapply to join international organisations.

Arts Funding in North-East England

Wednesday 28th November 2012 Lords Chamber

Question

15:29

Asked By

[The Earl of Clancarty]

To ask Her Majesty’s Government, in the light of Newcastle City Council’s plans to remove funding for the arts, what plans they have to safeguard arts funding in north-east England.

[Viscount Younger of Leckie]

Local authorities have to make difficult decisions on behalf of local taxpayers about how to deploy their budget. Sustained investment in culture has made Newcastle a centre of culture, contributing to the regional economy and quality of life. This Government are working hard to safeguard our arts infrastructure in a difficult spending review settlement where we have limited cuts to protect front-line organisations. We have increased the arts’ share of lottery proceeds from 16% to 20% and invested £100 million in helping arts organisations increase their fundraising capability, including organisations in the north-east.

[The Earl of Clancarty]

My Lords, do the Government accept that local authority funding of the arts, which has no statutory provision and is irreplaceable, is at best a hugely effective, proven means of providing arts services throughout the country and a significant factor in regional regeneration and the national economy? Witness the support given to Tyneside’s Live Theatre, which premiered “The Pitmen Painters” which went on to international success. When will the Government understand that such funding of the arts is not an add-on to be then easily removed at a stroke, but an important and necessary stimulus to the nation’s financial as well as creative growth?

[Viscount Younger of Leckie]

I applaud the noble Earl’s tenacity in again raising protection of the arts. He is right to do so, against continuing challenging economic conditions and particularly with his focus on Newcastle. Newcastle City Council’s plans are still consultative, and it will be up to local taxpayers to give a response. The Arts Council, which already supports 42 out of the 700 national portfolio organisations in the north-east, is working closely with Newcastle City Council to achieve a positive outcome. Finally, it is encouraging to report from the recent annual local authority arts survey that, contrary to adverse publicity, there is some stabilisation of local arts spending. For the 2012-13 year, the budgets reflect an average of £384,900 per local authority compared with £381,600 for 2011-12.

[Lord Beecham]

My Lords, I declare an interest as a member of Newcastle City Council and director of Newcastle’s Theatre Royal. Is not the best way to safeguard arts funding in Newcastle for the Government to reduce the requirement on the city council to cut its budget by more than a third, or £90 million a year, with devastating consequences for vital services such as adult social care and children’s services? Will the Minister use his best endeavours to persuade the Secretary of State for Communities and Local Government to ensure that the forthcoming local government finance settlement allows for a significant abatement in the expected cut?

[Viscount Younger of Leckie]

The point that the noble Lord makes is noted. The funding settlement for councils, as has been mentioned, will be announced later this year, but, given that councils account for a quarter of all public spending, it is vital that they continue to play their part in tackling the inherited budget deficit by making sensible savings through better procurement, greater transparency and sharing back offices. The main general grant from the Government to local authorities was on average £300 per head more in the north-east than in the south-east, with Newcastle receiving £653 per head compared to, for example, £150 per head in Windsor and Maidenhead.

[Lord Shipley]

My Lords, can I draw the attention of the Minister to the latest annual report from Arts Council England, which confirms that just over half of its support to regularly funded organisations went to organisations in London? Does he agree that just a small percentage switch in the balance of funding could have a profoundly beneficial effect on the English regions and should therefore be made?

[Viscount Younger of Leckie]

My noble friend makes a good point, and much is being done to encourage funding in the arts outside London. I am delighted to report today that a report has been produced called Philanthropy Beyond London, written by the chair of the Birmingham Opera Company. The report makes 19 recommendations to regional cultural organisations, the Government and Arts Council England to take matters forward.

[Lord Howarth of Newport]

My Lords, will the Minister accept that not only culture but the economy and democracy in the north-east and all across England would flourish more if Whitehall would abandon its jealous and rigid controls over what local authorities are permitted to raise, spend and do? I encourage him to have a conversation on the subject with his noble friend Lord Heseltine.

[Viscount Younger of Leckie]

As mentioned before, it is not our business to interfere with how local authorities spend their funds. Arts Council England is working extremely closely with Newcastle City Council at the moment to find a way forward through the problems highlighted today by the noble Earl. The Government have a number of initiatives on the go, including the Catalyst programme which is designed to release endowments and to encourage legacy giving. There are many initiatives afoot to help the arts and culture sector.

[Baroness Farrington of Ribbleton]

My Lords, the Minister chose very different areas for his comparison in Maidenhead and Windsor and Newcastle upon Tyne. Will he go back and look at the disproportionate cuts for areas in the north of England as opposed to the south of England? Will he look at the apparent reported failure of many of those seeking to get young people into work, particularly in areas where the Government, contrary to the Minister’s statement, are telling local authorities what to spend, and where? If local authorities would take on, particularly, young unemployed people from an arts background, in the parks and gardens, in housing and a lot of other areas, the Government would be able to let their right hand know what their left hand was undoing.

[Viscount Younger of Leckie]

Funding for the arts sector is still dependent on a growing economy and while we have some way to go, we are on the right track. The economy shows signs of healing and in two years the Government have cut the deficit by a quarter. To take up the noble Baroness point, more than a million new jobs have been created in the private sector, the economy is growing and this can only be beneficial to the arts sector.

European Union (Croatian Accession and Irish Protocol) Bill

Wednesday 28th November 2012 Lords Chamber

First Reading

15:37

The Bill was brought from the Commons, read a first time and ordered to be printed.

Housing Act 1996 (Additional Preference for Armed Forces) (England) Regulations 2012

Wednesday 28th November 2012 Lords Chamber

Motion to Approve

15:37

Moved By

[Baroness Hanham]

That the draft regulations laid before the House on 18 October be approved.

Relevant documents: 9th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 20 November.

Motion agreed.

Contracting Out (Local Authorities Social Services Functions) (England) (Amendment) Order 2012

Wednesday 28th November 2012 Lords Chamber

Motion to Approve

15:38

Moved By

[Earl Howe]

That the draft order laid before the House on 15 October be approved.

Relevant document: 8th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 20 November.

Motion agreed.

Producer Responsibility Obligations (Packaging Waste) (Amendment) Regulations 2012

Wednesday 28th November 2012 Lords Chamber

Motion to Approve

15:38

Moved By

[Lord De Mauley]

That the draft regulations laid before the House on 16 October be approved.

Relevant document: 9th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 20 November.

Motion agreed.

Protection of Freedoms Act 2012 (Disclosure and Barring Service Transfer of Functions) Order 2012

Wednesday 28th November 2012 Lords Chamber

Motion to Approve

15:38

Moved By

[Lord Taylor of Holbeach]

That the draft order laid before the House on 15 October be approved.

Relevant document: 8th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 26 November.

Motion agreed.

Justice and Security Bill [HL]

Wednesday 28th November 2012 Lords Chamber

Third Reading

15:40

[The Advocate-General for Scotland (Lord Wallace of Tankerness)]

My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Justice and Security Bill, has consented to place her prerogative and interest, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

A privilege amendment was made.

Motion

Moved by

[Lord Wallace of Tankerness]

That the Bill do now pass.

[Lord Beecham]

My Lords, I apologise for my rush to the Dispatch Box. Have the Government reached any conclusions about the amendments passed by your Lordships’ House last week in respect of which the Deputy Prime Minister and the noble and learned Lord expressed a good deal of sympathy? Is that sympathy now to be translated into an acceptance of the amendments passed—or, indeed, in the form of fresh amendments to be moved by the Government in the House of Commons; and, if so, on what lines will they be?

[Lord Wallace of Tankerness]

My Lords, I think that I indicated last week that the Government want to give very careful consideration to amendments that were passed by considerable majorities in your Lordships’ House on Report. The Government will address them, give them serious consideration and no doubt make their position plain in the other place, bearing in mind that the amendments were based on the recommendations of the report of the Joint Committee on Human Rights. It is certainly the Government’s intention to respond to that report in a timely way.

Bill passed and sent to the Commons.

Financial Services Bill

Wednesday 28th November 2012 Lords Chamber

Report (5th Day)

15:41

Amendment 107AA

Moved by

[Lord Eatwell]

107AA: Clause 57, page 141, line 8, at end insert—
“( ) The first case requires the Bank of England, FPC, FCA or PRA to provide the Treasury or the Secretary of State with an early warning of the possibility that a notification of a material risk to public funds may be given, and full information about the circumstance.”

[Lord Eatwell]

My Lords, this set of amendments is inspired by the words of the noble Lord, Lord Sassoon, in Committee. He said:

“It is clear that the success of the new regulatory structure, which, rightly, we are spending so much time debating, relies heavily on the relationship between the Treasury and the Bank of England, and I believe that the Bill provides the necessary clarity of responsibilities. However, it also depends on the personal relationships at play here, particularly between the most senior leaders of the two bodies—the Chancellor of the Exchequer and the Governor of the Bank of England. One of the major problems leading up to the financial crisis was that the tripartite committee did not meet at principals level during the previous decade”.—[Official Report, 10/7/12; cols.1051-2.]

The noble Lord’s words are an important warning to us all, in considering this part of the Bill, on the relationship between the Treasury and the Bank of England at times of crisis. That relationship will depend not only on the personalities involved, but on the statutory responsibilities which the Bill places on those personalities. This group of amendments is intended, in some parts, to extend the statutory responsibilities of the Bank and the Treasury; but, most especially, to clarify those responsibilities, so that the failures which we saw under the previous arrangements, which were due to the principals in the tripartite structure not actually meeting for a decade, will not recur.

Amendment 107AA requires the Bank to give early warnings to the Treasury of a threat to public funds. At the moment, the Bill refers to the possibility of a threat to public funds, which must be immediately notified. However, I think that this notion of possibility is far too vague. Suppose that the Bank thinks there may be a catastrophic event, with a probability of 5%. Is that a possibility? But then, what if the probability is 1%—is that a possibility? What if the probability is only 0.5%—is that a possibility? In our view, a full, continuous exchange of information between the Bank and the Treasury, and the addition of a requirement of an early warning, does just what is needed. It ensures that the Bank is required to convey the information when it first has any indication of a threat—let alone any notion of possibility, whatever “possibility” might mean. If we incorporate the idea that the Bank must give early warning to the Treasury as soon as it knows what is going on, or has some inclination of a threat, without fussing about whether it is “possible” or not, then information will flow in an appropriate way.

15:45

Amendment 107AB is consequential but Amendment 107AC is substantial. It adds new triggers to the warning process. A peculiarity of this section of the Bill on Bank and Treasury co-operation is the limitation on the requirements on the Bank to give warnings. That is, the Bank is required to give a warning when there is a possible need for public funds. This is excessively constrained. What if the Bank detects a set of circumstances that poses a serious and likely threat to the financial system, but not to public funds? Should it then keep quiet? Does it then have a statutory responsibility to convey information? Surely the Bank should convey that information in the public interest. It might be argued that any major economic disruption would result in some threat to public finances. For example, if there was a major failure within some payment system, that might result in a fall in tax revenues, or some other impact on public finances. However, that would be a rather strained interpretation to place on “need for public funds”. It certainly does not accord with the common-sense use of language, which should refer to the impact on markets and regulated persons, as set out in the amendment. Noble Lords will have already noticed that our amendment derives its new triggers for the Bank to inform the Treasury from the objectives of the various regulators; it is hence in accord with the rest of the Bill.

I shall jump over the consequential amendments to Amendment 107AF, which is an extension of the same logic. It strengthens the triggers to be included in the memorandum of understanding. The triggers are not just the need for public funds; they are the threat to financial markets.

Amendment 107AG has a rather different provenance. In addition to the insights provided back in July by the noble Lord, Lord Sassoon, which I cited earlier, it is stimulated by a Written Statement by the Treasury, quoted in the Financial Times on 31 October this year. Note that it was not written by a reporter; it was a Written Statement by the Treasury. Referring to the Bank’s work on economic forecasting, and specifically dealing with the forecast of February 2012—that is, with a past event—the official wrote,

“There is no statutory requirement on the BoE to provide this information”—

that is, information to the Treasury—

“and disclosure would discourage the BoE from sharing information with the UK government”.

A Treasury official is saying that the Bank of England does not need to share information with an organisation called the UK Government. This is simply outrageous. The Bank and the Treasury are both public institutions; their staff are employed by the public. The fact that one of these institutions should conceal data from the other is totally unacceptable. The insertion of “comprehensive”, as this amendment would require, will put a stop to that sort of nonsense for good.

Amendment 107AH is, again, slightly different but still fits into the general issue of information sharing. It deals with the accountability to Parliament of that crucial document, the memorandum of understanding between the Treasury and the Bank. Given the important observations about the lack of communication so clearly set out by the noble Lord, Lord Sassoon, it is surely appropriate that Parliament does not simply have sight of the memorandum of understanding but the opportunity to opine upon it.

This set of amendments, as I said in my introductory remarks, both strengthens the statutory requirement for communication between the Bank of England and the Treasury and clarifies the circumstances in which communication must take place. I beg to move.

[Lord Newby]

My Lords, this group of amendments was debated at length in Committee. I am sure that, like the noble Lord, Lord Eatwell, many of us were indeed inspired by the way that my noble friend Lord Sassoon sought to reject them. Amendments 107AA and 107AB, and Amendments 107AD and 107AE, attempt to create an early warning system for public funds notifications. I understand that this reflects a concern on the Benches opposite that the drafting of the Bill—specifically, the legal effect of the term “material risk”—does not require the Bank to notify the Treasury in enough cases, even those in which there is a very low probability of public funds interventions being required.

After our debate in Committee, my noble friend Lord Sassoon asked Treasury officials and legal advisers to look again at the material risk wording to make absolutely clear that it delivers the low bar that we are looking for: a possibility test rather than a probability test. Our officials have concluded that the legal effect of the existing wording is indeed to require the Bank to notify the Treasury where there is a realistic possibility of circumstances arising in the future in which public funds could be put at risk. I do not think it would be appropriate to lower the bar even further from “material risk”. The result of doing so would be to require the Bank to notify relatively trivial and implausible risks, which could mean the Treasury receiving a large number of notifications of far-fetched risks that require no action or engagement from the Treasury whatever. I am satisfied that the material risk terminology will give us the right result.

Let me reassure the House that I agree entirely that the Treasury must be informed well in advance of a risk to public funds crystallising in order fully to consider and evaluate different options for managing or mitigating the risk and, ultimately, with a view to avoiding entirely any recourse to public funds. As my noble friend Lord Sassoon said in Committee, no one would be keener than us to have an early notification mechanism in place if we believed it necessary to achieve this aim. However, I am confident that the existing trigger in Clause 57 already sets the very low bar that we need.

The other aspect of these amendments is to extend the duty to notify to the PRA, FCA and FPC. I feel strongly that diluting accountability in this way would be a mistake. As we saw with the failed tripartite system, the clear disadvantage of spreading responsibility across several different organisations is that each can blame the others when things go wrong and risks can fall between the gaps. I believe that the system set out in the Bill, which makes the Bank the single point of responsibility for financial stability and crisis management, is the correct approach to eliminate confusion and overlap and ensure that the Treasury is always informed of risks to public funds.

In a similar vein, Amendments 107AC and 107AF seek to add references to risks to the objectives of the PRA and FCA into the notification duty. I can reassure the noble Lord that any risks that arise in the spheres of responsibility of the PRA and FCA that could potentially pose a threat to public funds must be notified to the Treasury by the Bank in the normal way. As was made clear in Committee, the duty to notify the Treasury of risks to public funds will require the Bank and its senior management to identify and evaluate risks emanating from all parts of the financial sector, working closely with the PRA and the FCA. The Bill itself places duties on the PRA and the FCA to co-ordinate with the Bank in this work. New Section 3P(1)(b) of FiSMA, as inserted by Clause 6 of the Bill, requires the regulators to take steps to co-operate with the Bank in connection with its duty to notify the Treasury of risks to public funds. We believe that that is an adequate provision.

Amendment 107AG would add “comprehensive” to the requirement that the crisis management MoU make provision regarding the obtaining and sharing of information. I do not quite see what “comprehensive” would add. Surely the most sensible approach here is for the Treasury and the Bank to agree between themselves what information the Treasury would find useful, including the format of the information and its frequency. That is exactly the approach taken in the MoU. Paragraph 18 makes it clear that the Treasury and the Bank will determine between themselves a suitable frequency for updates on each different risk, reflecting the severity and immediacy of the risk to public funds. Paragraph 21 states:

“The Bank will provide the Treasury with information needed on the options for managing the situation, including on options commissioned by the Treasury”.

I therefore do not think that Amendment 107AG is necessary.

Amendment 107AH attempts to turn the MoU into a piece of secondary legislation, subject to parliamentary approval via the affirmative process. I agree with the noble Lord that the MoU is a very important document, which sets out how the Bank and Treasury will interact in a crisis, to a level of detail and in a style that simply would not be possible in legislation, either primary or secondary. Having looked again at the MoU, I continue to believe that its content and style make it unsuitable for inclusion in secondary legislation. I would be loath to lose the level of nuance and detail that is currently included in the draft MoU but which is not legislative in nature. It would also make the MoU less flexible and make it more difficult for the Bank and Treasury to adapt or change the MoU to reflect changing circumstances. On the basis of these explanations, I hope that the noble Lord will feel able to withdraw his amendment.

[Lord Eatwell]

Will the Minister explain why he always qualified the notion of “threat” as a threat to public funds and failed to accept the argument of serious threats to the financial system that do not necessarily pose a direct threat to public funds?

[Lord Newby]

The reference in the Bill to public funds goes to the heart of the Treasury’s responsibility vis-à-vis the regulators in managing the financial services sector, and we have been very clear that we want to do that. On the more general issues that the Bank may want to raise with the Treasury, which go beyond a risk to public funds, the Bank and the Treasury are in regular contact via non-statutory routes, as it were, which give ample opportunity for the two to discuss at great length and with great frequency any emerging issues that they feel the other should be aware of.

16:00

[Lord Eatwell]

My Lords, we have seen a display of remarkable complacency from the Minister, even in his final remark suggesting that the Bank and the Treasury can informally arrange regular contact. I remind him that the head of the FSA and the head of the Bank did not meet for a decade within the tripartite structure. Now we are going to have a structure of not just three regulators but five or six regulators and he is not even willing to contemplate ensuring a statutory requirement for them to provide a suitable exchange of information.

I am sure that the noble Lord’s officials assured him that the term “material risk” was satisfactory. It would not be surprising as they drafted the legislation. It would be nice to hear that some independent opinion had been taken. He said that our amendments would lead to the Bank notifying “trivial and implausible risks”. Yes, trivial and implausible risks, such as credit default swaps, might fail to transfer risk. Those were trivial and implausible. There was the trivial and implausible risk that an economy of just 2% of the eurozone—the Greek economy—would lead to stagnation in the whole zone. There is another trivial and implausible risk.

The extreme complacency being displayed by the Government over these arrangements really beggars belief. With respect to the amendment which would insert the word “comprehensive” before “sharing of information”, “Oh, it’s unnecessary. We know that they will exchange all the necessary information”—just like they did not do in the past. Why can we not create a proper statutory requirement when there has clearly been such a deficiency in these procedures in the past? That, after all, is what this Bill should be for.

Having said that, and I hope having established some matters for discussion at Third Reading, I beg leave to withdraw the amendment.

Amendment 107AA withdrawn.

Amendments 107AB to 107AE not moved.

Clause 64 : Memorandum of understanding: crisis management

Amendment 107F not moved.

Amendment 107AG

Moved by

[Lord Eatwell]

107AG: Clause 64, page 145, line 3, after “and” insert “comprehensive”

[Lord Eatwell]

My Lords, Amendment 107AG is very simple. It seeks to insert the word “comprehensive” before “sharing of information”. The very least we can do to ensure that there is proper exchange of information between the Bank and the Treasury, particularly given the comments by the Treasury official that such information exchange does not take place, is to take this amendment seriously. I should like to test the opinion of the House.

16:02

Division 1

Ayes: 201

---

Labour: 160
Crossbench: 26
Independent: 3
Democratic Unionist Party: 2
Plaid Cymru: 2

Noes: 242

---

Conservative: 138
Liberal Democrat: 58
Crossbench: 39
Bishops: 2
Ulster Unionist Party: 2
Independent: 1

16:15

Amendment 107AH not moved.

Clause 76 : Power of Treasury to require FCA or PRA to undertake investigation

Amendment 107B

Moved by

[Lord Sassoon]

107B: Clause 76, page 152, line 6, leave out from beginning to “give” in line 7 and insert—
“(1) This section applies where—
(a) the Treasury consider that it is in the public interest that either regulator should undertake an investigation into any relevant events, and(b) it does not appear to the Treasury that the regulator has undertaken or is undertaking an investigation (under this Part or otherwise) into those events.(1A) The Treasury must”

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, this group of amendments concerns Part 5, which is concerned with inquiries and investigations. It carries forward provisions relating to independent inquiries called by the Treasury and applies these powers to both the PRA and the FCA, also introducing a number of new provisions for the regulators to carry out investigations when regulatory failure has occurred, or may have occurred. As such, Part 5 is a very important part of the Bill, as indeed my noble friend Lady Noakes noted when she described the provisions in it as “crucial to the Bill” when we last discussed these matters on 25 October. During our discussions on that day, I indicated that I would go away and consider carefully the important points made by my noble friend and the noble Lord, Lord Davies of Oldham. I also promised to reflect further on a topic on which we have spent many a happy hour—namely, the uses of “may” and “must” in the Bill.

I hope that noble Lords will be pleased to note that the Government are bringing forward a number of amendments informed by our previous discussion of Part 5. Amendments 107B and 107C amend Clause 76, which provides the Treasury with a power to require either regulator to carry out an investigation when the Treasury considers it in the public interest for the regulator to do so. The current drafting of Clause 76 provides that in such circumstances the Treasury may order an investigation. Amendment 107B changes this discretion to a duty by changing “may” to “must”, and Amendment 107C is consequential on Amendment 107B. The Government agree with the points made that when the public interest test is met, surely the Treasury must require an investigation. Changing “may” to “must” is the right course of action. If an investigation by the regulator is in the public interest, and the regulator is not already carrying one out, then it is right that the Treasury should be required to order an investigation.

Amendment 107D responds to issues raised by the noble Lord, Lord Davies of Oldham, in Committee. The amendment provides that where the Treasury directs either regulator not to carry out an investigation into possible regulatory failure or otherwise gives a direction to the regulator as to how it should carry out such an investigation, then such a direction should be laid before Parliament. The amendment also provides that the Treasury should do so as soon as is practicable after issuing the direction. I share the view of those contributing to debate in Committee that this will increase transparency and therefore confidence in the regulatory regime. However, in recognition of the fact that there may sometimes be circumstances where laying the direction before Parliament could have negative and unintended consequences, the amendment provides that the Treasury need not lay the direction before Parliament if doing so would be against the public interest. I beg to move.

[Lord Barnett]

It behoves me to say thank you to the noble Lord. It is hard to believe that the amendment that my noble friend and I tabled has now been accepted. I do not know what to say. Thank you is the only thing I can say.

[Lord Davies of Oldham]

My Lords, given the persistence of my noble friends in debates throughout the Bill as regards “may” and “must”, I imagined that their efforts would result in one signal victory, and this is it. We appreciate the Government’s movement on this point.

I accept what the noble Lord, Lord Sassoon, said about the public interest being considered before a matter is laid before Parliament, but that in normal circumstances Parliament should be informed. I am very grateful to him for the fact that the assurances which he gave in Committee have been amply fulfilled with these amendments.

[Lord Peston]

My Lords, my remarks will change the atmosphere of “love fest” between the two Front Benches with regard to the “may/must” question. There seems to be a semantic problem here in that “must” appears in new Section (2) proposed by Amendment 107D, which one could interpret to mean must. Unfortunately, however, new Section (3) proposed by the same amendment converts “must” into “may”, because it says that if the measure is not in the public interest the “must” does not apply. That shows how difficult it is to draft Bills, particularly in circumstances such as these. I assume that lawyers will flourish when they read “must” in proposed new Section (2) and then discover that the Treasury has decided that it is not in the public interest to publish a direction, and therefore “must” no longer applies. I thought that I ought to add that to the otherwise very pleasant interchange to which I have been listening.

Amendment 107B agreed.

Amendments 107C to 114

Moved by

[Lord Sassoon]

107C: Clause 76, page 152, line 18, leave out “(1)” and insert “(1A)”

107D: After Clause 79, insert the following new Clause—
“Publication of directions
(1) This section applies to a direction given by the Treasury under any of the following provisions—
(a) section 72(4);(b) section 73(5);(c) section 77(5).(2) As soon as practicable after giving the direction, the Treasury must—
(a) lay before Parliament a copy of the direction, and(b) publish the direction in such manner as the Treasury think fit.(3) Subsection (2) does not apply where the Treasury consider that publication of the direction would be against the public interest.”

108: After Clause 86, insert the following new Clause—
“PART 6AOffences relating to financial servicesMisleading statements
(1) Subsection (2) applies to a person (“P”) who—
(a) makes a statement which P knows to be false or misleading in a material respect,(b) makes a statement which is false or misleading in a material respect, being reckless as to whether it is, or(c) dishonestly conceals any material facts whether in connection with a statement made by P or otherwise.(2) P commits an offence if P makes the statement or conceals the facts with the intention of inducing, or is reckless as to whether making it or concealing them may induce, another person (whether or not the person to whom the statement is made)—
(a) to enter into or offer to enter into, or to refrain from entering or offering to enter into, a relevant agreement, or(b) to exercise, or refrain from exercising, any rights conferred by a relevant investment.(3) In proceedings for an offence under subsection (2) brought against a person to whom that subsection applies as a result of paragraph (a) of subsection (1), it is a defence for the person charged (“D”) to show that the statement was made in conformity with—
(a) price stabilising rules,(b) control of information rules, or(c) the relevant provisions of Commission Regulation (EC) No 2273/2003 of 22 December 2003 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards exemptions for buy-back programmes and stabilisation of financial instruments. (4) Subsections (1) and (2) do not apply unless—
(a) the statement is made in or from, or the facts are concealed in or from, the United Kingdom or arrangements are made in or from the United Kingdom for the statement to be made or the facts to be concealed,(b) the person on whom the inducement is intended to or may have effect is in the United Kingdom, or(c) the agreement is or would be entered into or the rights are or would be exercised in the United Kingdom.”

109: After Clause 86, insert the following new Clause—
“Misleading impressions
(1) A person (“P”) who does any act or engages in any course of conduct which creates a false or misleading impression as to the market in or the price or value of any relevant investments commits an offence if—
(a) P intends to create the impression, and(b) the case falls within subsection (2) or (3) (or both).(2) The case falls within this subsection if P intends, by creating the impression, to induce another person to acquire, dispose of, subscribe for or underwrite the investments or to refrain from doing so or to exercise or refrain from exercising any rights conferred by the investments.
(3) The case falls within this subsection if—
(a) P knows that the impression is false or misleading or is reckless as to whether it is, and(b) P intends by creating the impression to produce any of the results in subsection (4) or is aware that creating the impression is likely to produce any of the results in that subsection.(4) Those results are—
(a) the making of a gain for P or another, or(b) the causing of loss to another person or the exposing of another person to the risk of loss.(5) References in subsection (4) to gain or loss are to be read in accordance with subsections (6) to (8).
(6) “Gain” and “loss”—
(a) extend only to gain or loss in money or other property of any kind;(b) include such gain or loss whether temporary or permanent.(7) “Gain” includes a gain by keeping what one has, as well as a gain by getting what one does not have.
(8) “Loss” includes a loss by not getting what one might get, as well as a loss by parting with what one has.
(9) In proceedings brought against any person (“D”) for an offence under subsection (1) it is a defence for D to show—
(a) to the extent that the offence results from subsection (2), that D reasonably believed that D’s conduct would not create an impression that was false or misleading as to the matters mentioned in subsection (1),(b) that D acted or engaged in the conduct—(i) for the purpose of stabilising the price of investments, and(ii) in conformity with price stabilising rules,(c) that D acted or engaged in the conduct in conformity with control of information rules, or(d) that D acted or engaged in the conduct in conformity with the relevant provisions of Commission Regulation (EC) No 2273/2003 of 22 December 2003 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards exemptions for buy-back programmes and stabilisation of financial instruments.(10) This section does not apply unless—
(a) the act is done, or the course of conduct is engaged in, in the United Kingdom, or(b) the false or misleading impression is created there.”

110: After Clause 86, insert the following new Clause—
“Misleading statements etc in relation to benchmarks
(1) A person (“A”) who makes to another person (“B”) a false or misleading statement commits an offence if—
(a) A makes the statement in the course of arrangements for the setting of a relevant benchmark,(b) A intends that the statement should be used by B for the purpose of the setting of a relevant benchmark, and(c) A knows that the statement is false or misleading or is reckless as to whether it is. (2) A person (“C”) who does any act or engages in any course of conduct which creates a false or misleading impression as to the price or value of any investment or as to the interest rate appropriate to any transaction commits an offence if—
(a) C intends to create the impression,(b) the impression may affect the setting of a relevant benchmark,(c) C knows that the impression is false or misleading or is reckless as to whether it is, and(d) C knows that the impression may affect the setting of a relevant benchmark.(3) In proceedings for an offence under subsection (1), it is a defence for the person charged (“D”) to show that the statement was made in conformity with—
(a) price stabilising rules,(b) control of information rules, or(c) the relevant provisions of Commission Regulation (EC) No 2273/2003 of 22 December 2003 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards exemptions for buy-back programmes and stabilisation of financial instruments.(4) In proceedings brought against any person (“D”) for an offence under subsection (2) it is a defence for D to show—
(a) that D acted or engaged in the conduct—(i) for the purpose of stabilising the price of investments, and(ii) in conformity with price stabilising rules,(b) that D acted or engaged in the conduct in conformity with control of information rules, or(c) that D acted or engaged in the conduct in conformity with the relevant provisions of Commission Regulation (EC) No 2273/2003 of 22 December 2003 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards exemptions for buy-back programmes and stabilisation of financial instruments.(5) Subsection (1) does not apply unless the statement is made in or from the United Kingdom or to a person in the United Kingdom.
(6) Subsection (2) does not apply unless—
(a) the act is done, or the course of conduct is engaged in, in the United Kingdom, or(b) the false or misleading impression is created there.”

111: After Clause 86, insert the following new Clause—
“Penalties
(1) A person guilty of an offence under this Part is liable—
(a) on summary conviction, to imprisonment for a term not exceeding the applicable maximum term or a fine not exceeding the statutory maximum, or both;(b) on conviction on indictment, to imprisonment for a term not exceeding 7 years or a fine, or both.(2) For the purpose of subsection (1)(a) “the applicable maximum term” is—
(a) in England and Wales, 12 months (or 6 months, if the offence was committed before the commencement of section 154(1) of the Criminal Justice Act 2003);(b) in Scotland, 12 months; (c) in Northern Ireland, 6 months.”

112: After Clause 86, insert the following new Clause—
“Interpretation of Part 6A
(1) This section has effect for the interpretation of this Part.
(2) “Investment” includes any asset, right or interest.
(3) “Relevant agreement” means an agreement—
(a) the entering into or performance of which by either party constitutes an activity of a kind specified in an order made by the Treasury, and(b) which relates to a relevant investment.(4) “Relevant benchmark” means a benchmark of a kind specified in an order made by the Treasury.
(5) “Relevant investment” means an investment of a kind specified in an order made by the Treasury.
(6) Schedule 2 to FSMA 2000 (except paragraphs 25 and 26) applies for the purposes of subsections (3) and (5) with references to section 22 of that Act being read as references to each of those subsections.
(7) Nothing in Schedule 2 to FSMA 2000, as applied by subsection (6), limits the power conferred by subsection (3) or (5).
(8) “Price stabilising rules” and “control of information rules” have the same meaning as in FSMA 2000.
(9) In this section “benchmark” has the meaning given in section 22(6) of FSMA 2000.”

113: After Clause 86, insert the following new Clause—
“Affirmative procedure for certain orders
(1) This section applies to the first order made under section (“Interpretation of Part 6A”).
(2) This section also applies to any subsequent order made under that section which contains a statement by the Treasury that the effect of the proposed order would include one or more of the following—
(a) that an activity which is not specified for the purposes of subsection (2)(a) of that section would become one so specified,(b) that an investment which is not a relevant investment would become a relevant investment;(c) that a benchmark which is not a relevant benchmark would become a relevant benchmark.(3) A statutory instrument containing (alone or with other provisions) an order to which this section applies may not be made unless a draft of the instrument has been laid before Parliament and approved by a resolution of each House.”

114: After Clause 86, insert the following new Clause—
“Consequential repeal
Section 397 of FSMA 2000 (which relates to misleading statements and practices and is superseded by the provisions of this Part) is repealed.”

Amendments 107C to 114 agreed.

Clause 98 : Power to make further provision about regulation of consumer credit

Amendments 114A to 114C

Moved by

[Lord Sassoon]

114A: Clause 98, page 186, line 37, at end insert—
“(fa) provide for any provision of sections 162 to 165 and 174A of CCA 1974 which relates to—(i) the powers of a local weights and measures authority in Great Britain or the Department of Enterprise, Trade and Investment in Northern Ireland in relation to compliance with any provision made by or under CCA 1974, (ii) the powers of such an authority or that Department in relation to the commission or suspected commission of offences under any provision made by or under CCA 1974, (iii) the powers that may be conferred by warrant on an officer of such an authority or that Department, or(iv) things done in the exercise of any of those powers,to apply in relation to compliance with FSMA 2000 so far as relating to relevant regulated activities, in relation to the commission or suspected commission of a relevant offence or in relation to things done in the exercise of any of those powers as applied by the order;”

114B: Clause 98, page 187, line 8, leave out from “subsection” to “by” in line 10 and insert “(2)(fa) to (h)—
(a) “relevant regulated activity” means an activity that is a regulated activity for the purposes of FSMA 2000”

114C: Clause 98, page 187, line 14, at end insert—
“(b) “relevant offence” means an offence under FSMA 2000 committed in relation to such an activity.”

Amendments 114A to 114C agreed.

Amendment 114D

Moved by

[Lord Mitchell]

114D: After Clause 98, insert the following new Clause—
“Power of the FCA to make further provision about regulation of consumer credit
(1) The FCA may make rules or apply a sanction to authorised persons who offer credit on terms that the FCA judge to cause consumer detriment.
(2) This may include rules that determine a maximum total cost for consumers of a product and determine the maximum duration of a supply of a product or service to an individual consumer.”

[Lord Mitchell]

My Lords, yesterday I had tea with a dear friend here in your Lordships’ House. Unsurprisingly, the subject of payday loans came into the conversation. He told me about his son, who has mild attention deficit disorder, is frequently unemployed and had taken out two payday loans. The loans were for £800. His son could not pay them back and, to cover his embarrassment, rolled them over several times. In a few months, the amount due to be repaid had escalated to £5,000. My friend reluctantly had to settle the bill. That is the essence of the amendment that I put down at Committee stage, and which I have put down today. It is this that we are seeking to control.

Ten years ago, this amendment probably would not have been tabled, but today it is very much of the hour. The fact is that legalised loan-sharking, or payday lending—call it what you will—has gone viral. It is out of control, dangerous and is causing great distress to many vulnerable people. Two developments have come together to cause the rapid growth of this lending industry. The first is the dreadful state of the economy. People are desperate for money and they will take it from whatever source they can, whatever the price. Take a walk down any high street, particularly in deprived areas—payday loan shops are abundant. Recently, I went to Walthamstow with my honourable friend Stella Creasy MP and my right honourable friend Ed Miliband. There, on the high street, we saw more than 15 money shops of one form or another. Business was brisk.

The second development has been the astronomic growth of online lending. As I said in Committee, I went on to one of the most successful websites and what struck me was the slickness of the process: just some cursory information to fill in and the money would have been in my bank in 15 minutes. It is simply too easy. A straitened economy and the ease of usage of online lending have combined to create this booming business sector.

One online company—Wonga—is projected to be making more than £70 million profit this year, probably valuing the company well in excess of £1 billion if it were to go public. The annual size of the payday lending industry is at least £2 billion; it is growing at a fast clip and in time will become a major source of consumer credit in this country. I do not understand why this Government—who are determined to reduce personal indebtedness at the macro level—are at the same time allowing this sector to grow unchecked. I would have thought that both parties opposite would be encouraging me on this amendment, rather than opposing this very important piece of legislation. Perhaps the Minister will have some good news for me when he replies.

Payday loan customers, by their very nature, are people with very low credit ratings, who have no other options open to them. They borrow money on an unsecured basis at extortionate rates of interest. Does this not strike a familiar chord? Uncontrolled lending to people who are barely able to meet their repayments in a marketplace that is expanding at a massive rate: does that not sound like what happened in the United States with sub-prime lending? Sub-prime was off everybody’s radar screen until it hit the US and world economy like a hurricane. It was the initial cause of the financial crash of 2007 and few saw it coming. If Her Majesty’s Treasury does not buy into the moral repugnance that most of us feel about the dangers of payday lending, at least it should be on its guard about the economic consequences of this ticking bomb.

However, it is the moral argument that concerns us this afternoon. I am delighted that the right reverend Prelate the Bishop of Durham has added his name to this amendment. He has spoken previously on this subject and I am sure he will be making his views very clear. I am pleased that the noble Baronesses, Lady Howe of Idlicote and Lady Grey-Thompson, have also added their names to this amendment. Both have long records of standing up for the vulnerable and I await their speeches with anticipation.

I want to make one point very clear. This amendment does not seek to ban payday lending; it seeks to give the FCA the power to cap interest rates when they are causing consumer detriment. It is a “may”, not a “must”. It puts the responsibility squarely into the hands of the FCA. I will go further: we need payday lenders; they fulfil a vital role. There are many people who cannot get credit from traditional sources, and without legalised payday lenders, their alternative is the backstreet loan sharks whose penalty for non-payment is often pretty brutal.

Payday lenders fill a vital gap, but they need to be controlled. Interest rates charged by many payday lenders go well beyond the obscene. Any lender is bound by law to display the annual percentage rate—the APR—that it is charging. In many cases, payday lenders are charging an APR in excess of 4,000%. These lenders avoid the use of the term APR whenever they can; they say it is not appropriate for a short-term loan. I have heard them say to me that quoting APR on a payday loan is as relevant as quoting APR if you hire a car for a week or stay in a hotel for a similar period. We must not buy this argument and we must not let them get off the hook. Hiring a car or staying in a hotel is a rental of an asset and its associated services. It incurs no repayment of principal and is not a loan.

Payday lenders say that quoting APR on a short-term loan is inappropriate—how can you use the word “annualised” to measure something that lasts just a few weeks? That is exactly what the finance industry does every day. If one bank borrows £100 million from the money market on an overnight basis, the charge is quoted as an annualised interest rate. Stating that APR is the wrong measure is simply disingenuous. APR is there for an express purpose and in my opinion it should be included in all advertising, but that is a debate for another time.

Last Sunday, we saw an interesting development. In an article in the Sunday Telegraph, Wonga was reported as saying that its rate of interest is equal to 1% per day. This is a big change from a company which has previously refused to admit that its repayments should be quoted as a rate of interest. What it says is true—it does charge 1% per day, or thereabouts—but it is playing games. If you borrow £100 from Wonga for seven days, the simple interest that you pay will be 1.82% per day. If you borrow £100 for a month, the simple interest will be 1.21% per day. For its maximum of 43 days, it will be 1.16% per day. The game it is playing is that this is calculated on the basis of simple interest, but interest is seldom calculated on a simple basis. The accepted measure is of course compound interest. A loan that costs just 1% per day becomes 4,000% per annum when aggregated in compound interest terms, which is exactly what APR is all about.

16:30

Other countries do not have the payday loan free-for-all that we do. In the United States, rules on payday lending vary state by state. By and large, they restrict the permitted interest component to 15% and the rollovers are very tightly controlled. Many UK lenders exceed 22%. The state with the best record is Florida. There, the maximum amount of interest is 10% of the loan amount, plus a $5 verification fee. The maximum number of loans that a customer can have outstanding is one, and the verification fee is used to pay for the computer systems that monitor all payday loans state-wide. Loan terms are between seven and 31 days, and all this prevents long-term dependency on credit.

The results in Florida are staggering. Of 6.8 million loans in 2009-10, not a single one was extended beyond the contract for additional fees. Ninety per cent of borrowers repaid these loans within 30 days of the due dates, and 70% of customers repaid the loans on the contract end date. Complaints about interest rates have all but disappeared and, most impressive of all, in the whole state not one borrower was indebted by more than $500 at any time. It has been a huge success and, in my personal view, a pointer to how we should proceed in our country.

Last week, the Office of Fair Trading published its interim report into payday lending. Its investigation was not directed at interest caps but it highlights aspects of payday lending behaviour which are disturbing. It found the following. Lenders have a higher level of compliance where statutory requirements are more prescriptive—for example, in advertising—but where obligations are set out in guidance only, compliance is much lower. Examples are credit checks made on lenders, loans not repaid on time, frequency of rollover and lack of forbearance when borrowers get into difficulty.

The OFT recommends that lenders do more to comply with the letter and spirit of the law. In several cases, it questions the fitness of lenders to hold a consumer credit licence. The action it is taking includes warning the majority of the firms inspected that they must improve how they treat customers, and conducting formal investigations into firms where it has concluded that, based on the evidence, their fitness to hold a licence may be called into question. However, most damning of all, the OFT has said that the relevant trade associations need to improve standards of compliance with the law, as well as guidance on advertising. The OFT is too polite to say so but it seems that it is really saying that this is an industry run by cowboys who are constantly operating on the fringes of legality.

Another report has come from Which?, which states the following, based on a survey it conducted: half of payday loan users have taken out credit that it turned out they could not afford to repay; 29% of payday loan users have taken out credit that they absolutely knew they could not repay; 43% of payday loan users said it was too easy to get credit; 20% have been hit by unexpected charges; 24% spent their loans to repay other debts; and most worrying of all, 38% spent their loans on essentials such as food and fuel.

Mr Richard Lloyd, the executive director of Which? stated:

“It’s shocking that half of all people taking out payday loans have been unable to repay debts and it’s a depressing sign of the times that almost a third were hassled by debt collectors in the past year. Payday loans are leaving many people caught in a spiral of debt and taking out more loans just to get by. That’s when they’re hit by excessive penalty charges and roll over fees”.

We have an industry flying by the seat of its pants, observing at best the flimsiest requirements of the law and its own pathetic codes of conduct. It needs to be much more closely controlled. In my opinion we could do a lot worse than emulate the success story that we have seen in Florida. We can start this afternoon by supporting my amendment. As I have said, payday lenders need to exist. The FCA will need to strike a difficult balance between capping the interest rates that these companies can charge, while allowing them to earn enough profit so that they can still produce a proportionate return. It will not be easy, but the FCA requires the tools to start the process and this amendment will provide it with what it needs. I beg to move.

[Lord Sassoon]

My Lords, it may be helpful to the House if I speak early in this debate. The amendment explores how the FCA will regulate the payday lending sector. The Government have been clear from the outset that the FCA should be able to take action to address the problems that are rife in the payday loans sector and, indeed, in the consumer credit sector more widely. That is why the Bill in its current form already empowers the FCA to make rules regarding the regulation of payday loans when credit regulation is transferred to the FCA in 2014.

I welcome the opportunity to debate this important issue. The Government are, like all of us, concerned about the appalling behaviour of some firms in this sector and the harm that vulnerable consumers suffer as a result. I shall say up front that, if the noble Lord agrees to withdraw this amendment, I will table a government amendment for debate at Third Reading that will address the issues raised by the noble Lord. The Government will go further, not only embedding stronger payday loan regulation in primary legislation but ironing out the potential weaknesses that they see in today’s amendment.

I cannot accept the noble Lord’s amendment as I think that the Government can, with the additional resources provided by officials and parliamentary counsel, improve on it in a number of ways. But, first, allow me to put on record three important points about the problems in the payday loans sector and how the Government will ensure that the FCA will be able to address these problems. Just last week, the OFT set out a wide range of concerns about detrimental practices in the payday loans sector, from firms failing to perform adequate checks that customers can afford a loan to a lack of forbearance when consumers are in financial difficulty. While restrictions imposed on the cost and duration of credit may address some of these problems, it is clear that regulation of the high-cost credit market as a whole needs to improve. Compared to the current regulatory regime under the OFT, the FCA will have a broader and more effective toolkit to monitor and tackle developments in the market and to supervise practice among firms. Its consumer protection objective provides the FCA with the mandate to use those powers and tools.

Secondly, capping the cost of credit and the number of times the loan can be rolled over is a major market intervention. It could bring huge benefits for consumers, as a recent study in Japan has indicated, but experience in Germany and France has shown that there can be equally momentous unintended consequences, including reduced access to credit for the poorest and most vulnerable consumers, even driving them to illegal loan sharks. These international lessons demonstrate that we need robust evidence to support any decision to introduce such a cap.

As noble Lords may be aware, the Department for Business, Innovation and Skills has commissioned research from Bristol University into the impact of a cap on the total cost of credit. This is one of the most comprehensive pieces of research undertaken into the UK high-cost credit market. I am pleased to confirm that the research will be published in the next few weeks and will enable the Government and, in future, the FCA to take an evidence-based approach to regulating the high-cost credit market and, in particular, to assess the pros and cons of a cap on the cost of credit.

However, we need to ensure that the FCA grasps the nettle when it comes to payday lending and has specific powers to impose a cap on the cost of credit and to ensure that the loan cannot be rolled over indefinitely should it decide, having considered the evidence, that this is the right solution. In this, I am entirely in agreement with the noble Lord. So, while I support the spirit of the amendment, I cannot accept it as it is framed as it may have unintended consequences and introduce loopholes which could be exploited by unscrupulous firms. For example, the amendment refers to the,

“maximum duration of a supply of a product or service”.

Firms might offer an ostensibly new product or agreement in order to circumvent the cap on the duration of the agreement. The amendment also focuses on the terms of the credit agreement and does not pick up charges imposed under connected agreements, which may often be significant. Again, this would open up a potential loophole for firms to exploit.

However, the Government believe that there is scope to go further than this amendment and to put in place stronger, automatic consumer protections and make the deterrent effect more robust by providing that a breach of these rules would make the agreement unenforceable by the lender. I will draft an amendment and discuss it with the noble Lord, Lord Mitchell, to ensure that it fully meets his concerns, as I believe it will—I believe it will go further—and I can confirm explicitly that it will cover both the total cost and total duration of credit.

[Lord Peston]

My Lords—

[Lord Sassoon]

If the noble Lord will permit me, I will allow him to intervene in a moment, but let me conclude my argument.

Our objectives here are the same: they are to ensure that consumers of financial services have access to credit when they need it and at a price they can afford; and to ensure that the regulator is under a clear obligation, and fully empowered, to ensure that consumers are protected. I hope and expect, therefore, that when the noble Lord, Lord Mitchell, sees the draft amendment he will feel able to add his name to what the Government propose.

[Lord Peston]

What the noble Lord said is extremely welcome and conciliatory to all of us. However, he left out one part: when will the rest of us get to see this draft amendment—I believe it is proposed that Third Reading should be next Wednesday—so that we, too, can scrutinise it to see whether it meets the requirement? One of the most compelling parts of the noble Lord’s argument was how difficult this area is—I thought it was all very simple—and he outlined a series of problems which he claims that he and his officials will solve. Has he actually solved them? Does the draft amendment exist and will we see it no later than, say, this Friday?

[Lord Sassoon]

I assure the House that I will get the amendment drafted as soon as we possibly can. I have given as clear a commitment as I can give to the House that the amendment will cover the two specific points that the noble Lord, Lord Mitchell, and the other noble Lords who have put their names to the amendment are looking for. However, we want to go further. If we are going to do this, we should get it right. This is a critical area which needs cleaning up and I am fully confident that when your Lordships see the draft amendment it will command the acceptance of the House.

In conclusion, I hope that the noble Lord will feel able to withdraw his amendment. I look forward to further debate on this important issue at Third Reading and on the stronger and more effective amendment that we will bring forward.

16:45

[Lord Kirkwood of Kirkhope]

My Lords, if I may interrupt the exchanges between the two Front Benches, this is a very welcome development from the Government. I absolutely support the course of action that is being taken and I can assure the noble Lord, Lord Mitchell, that I have the same concerns as him in terms of the argument he mounted, but this is a more sensible way to proceed.

I was pleased that the noble Lord, Lord Mitchell emphasised the fact that access to credit for low-income households is an important part of some of the changes we are introducing to the benefit system over the next five to 10 years. As we know, because colleagues have had important discussions about this matter, one of the changes brought into being by universal credit is that credit for all benefits taken together is paid, not weekly or fortnightly—as we have been used to in the past—but monthly. It will be a dramatic change for many low-income households that are used to weekly or fortnightly management of cash budgets in order to get through payment of their weekly responsibilities without getting into debt. When universal credit is fully rolled out in 2018—so we have a little time to get this right—I am absolutely certain that families will need access to small amounts of money to see them through when benefits either run out or, as I think is inevitable, fail to be paid. At the moment, if you do not get your housing benefit, your jobseeker’s allowance can tide you through. If you do not get your universal credit, you get nothing. If you get nothing for one month it is really serious; if you do not get the benefit paid for two months, you are in penury. Controlled access to this kind of loan is an important part of the process and we must not throw the baby out with the bathwater.

I know, as well as anybody in this House, the effect of loan sharks and the many sharp practices which must be controlled. What I cannot understand—this is the reason why I rose at this moment, to say to my noble friend that his suggestion is very welcome—is why we do not have a statutory code of conduct for licensed practitioners who are members of the Consumer Finance Association. If they had licences and they breached the code of conduct, whether it was about inappropriate, usurious rates of interest or criminal methods of collecting outstanding amounts of money, their licence would be withdrawn. I am just about to finish a period as a lay member of the General Medical Council so I know what a regulator can do and what fitness to practise means to a medical practitioner who is on the shady end of clinical practice, and it works.

In taking away this amendment, I hope the noble Lord, Lord Mitchell, will look at the Bristol work, which is a serious piece of work—I know because I have checked—that will contribute a lot to the debate and which many colleagues in this House might like to get access to before they make a final decision on this matter. I hope that he will weigh that in the balance. I hope the Minister, when he comes to recast the amendment—bilaterally, I trust—will think seriously about whether there could be some way of at least not ruling out the FCA adopting a statutory code of practice which would meet all the legitimate concerns that are coming from all sides of the House. I hope common sense will prevail and I hope that the noble Lord, Lord Mitchell, feels able, in all conscience, to withdraw the amendment. I can assure him that there will be as much pressure put on from this side of the House as is coming from that side to get this thing right before the Bill is passed.

[The Lord Bishop of Durham]

My Lords, I welcome with other Members of the House the statement made by the noble Lord, Lord Sassoon. One of the points made by the noble Lord, Lord Mitchell, in his excellent speech was about the dysfunctionality of the market. As was said, interference and capping of interest rates normally drive people towards loan sharks with unintended consequences of a very serious order, as we see in many parts of the country at the moment. However, if you look at the profits being earned in this market, it is clear that the barriers to entry are so high that there is absolutely no way in which people can come in and start shaving off the abnormal rates being achieved through participation in this market. If it was working, the interest rates would drop—it is as simple as that. The rates are clearly usurious—to use an old-fashioned expression. It used to be said in the old days that you could not take away people’s beds and cloaks because they were essential for life—that is the Hebrew Scriptures; today, equivalent things are being taken away as a result of those very high rates of interest. It is a moral case, and it is bad for the clients and bad for all of us in this country when it is permitted to happen.

I hope that over the next few years, thanks to two other amendments that have been agreed by the Government over the past few weeks during the Report stage—one puts an obligation on the FCA to look at access to finance in areas of deprivation and the other, through other means, will enable the FCA to know exactly what is happening in terms of lending in areas of deprivation—we will put together in this House a package of measures that will enable this market to be effective. But that will take time. The proposed amendment that will come next week will be permissive, not obligatory, and will enable regulatory authorities to ensure that, in the interim, there is not this abnormal rate seeking which has been so damaging in so many of our areas, including many in my own diocese.

[Baroness Howe of Idlicote]

My Lords, I thank the noble Lord, Lord Sassoon, for what he has said; it sounds like an interesting and potentially successful solution, but I am still quite confused as to whether we will get to the right conclusion on time. I thank the noble Lord, Lord Mitchell, and congratulate him on tabling his amendment, to which several of us have added our name. I am glad to have been able to hear the comments of the right reverend Prelate the Bishop of Durham, because he gained great expertise in financial matters in his career before he joined the Church.

There has been plenty of support for the amendment of the noble Lord, Lord Mitchell, from other areas around the country, from councillors and from MPs. For my own part, having sat through the Welfare Reform Bill, with its drastic consequences for the poor and disabled, and subsequently witnessed for the same group the extent to which voluntary legal aid and advice services were being curtailed so that they were not getting the help that they had had in the past, my first reaction to the amendment was that it was far too weak. However, I have listened to what people have said and accept that consumers without bank accounts or with no credit history—that is some 25% of credit users and 23% of payday loan users, I was amazed to find—have no choice when facing a financial crisis but to resort to these loans. Nor should we forget, as has been pointed out by the noble Lord, Lord Mitchell, and by Which? reports, that some 78% of payday loans are used for basic essentials such as food or household bills. So if these organisations—I am tempted to call them by less pleasant names—are to stay, undoubtedly the amendment of the noble Lord, Lord Mitchell, will be a huge help. It may be that it will be a reserve weapon, as it were, but it will nevertheless be a very important weapon. I hope that I can feel confident at the end of our discussions. I want reassurance from the noble Lord, Lord Mitchell, that he is sufficiently satisfied with what he has heard, that otherwise he will bring back further amendments at a later stage, and that that will be acceptable to the whole House.

[Lord Davies of Stamford]

My Lords, it is a pleasure to speak after the noble Baroness, Lady Howe. Like her, I felt that the amendment of the noble Lord, Lord Mitchell, was the very least that we should be doing in this area and I would have been happy with something even stronger. I congratulate her, my noble friend Lord Mitchell and the right reverend Prelate on their initiative in bringing this matter before the House and, indeed, before the country.

I am going to say something which I think needs to be said this afternoon and is probably best said from the Back Benches—that is, I think the Government should be hanging their head in shame. They have had many months to prepare the Bill and bring it forward and have not brought forward the clause that they are now promising, although they had every opportunity to do so. It is only because of the determination and initiative of my noble friend and his colleagues and the great moral force brought to this matter by the right reverend Prelate that, at the last minute, the Government have decided that they have no alternative but to do the right thing for once. That needed to be said; this has been a very dramatic afternoon when we have seen a U-turn.

This evil we have been talking about—and it is an evil—has, of course, got worse, for the reasons given by my noble friend, over the past two years, but it has been with us for a long time. It is an evil that I was well aware of when I was a Member of the House of Commons; most people with constituency experience came across it. The normal trick of loan sharks is to persuade people to borrow so much money at such a high rate of interest that they can never get around to repaying the principal because any cash they happen to have simply goes to servicing the debt by paying the interest. Essentially, they lend someone £500 and have their thugs go around every week, or every two weeks, collecting at their door whatever the poor family concerned can pay—£20 here, £30 there—which all goes towards the interest. The interest piles up and the principal is never going to be repaid but the lender makes a return on his capital of hundreds, maybe thousands of per cent every year.

I remember coming across a particularly nasty scam in my constituency, which I fear may still be going on. It is the targeting of people who have some equity in their house but very low cash flow in relation to their debts and persuading them to consolidate their unsecured debt into a secured loan, something one should never do, in principle, except in very exceptional circumstances. These people are, generally, financially very naive and agree to do it; they take out a secured loan of whatever amount, but they can never afford to service it at an APR of, perhaps, 20%. The lender knows perfectly well that they will default, that they do not have the cash flow to service the loan, but he has security of several thousand pounds of equity in the house and he puts into the loan agreement enormously expensive penal clauses, so that, in the event of default, thousands of pounds will be paid by way of compensation or penalty interest. He knows, of course, that the borrower is going to default; he hopes that the borrower will default at the first interest payment date, not the second or the third, because that way he turns his capital over more quickly. As soon as the borrower defaults the lender forecloses on the loan and takes all his additional thousands of pounds in penalty interest, a very large slice of the remaining equity in the house. It is extraordinarily cynical, extraordinarily cruel, and this kind of scam and others like it thrive in what we like to think of as our civilised and humane society.

We need to do something about this very rapidly indeed. What has been put forward this afternoon is an absolute minimum; I would have been much happier with something along the lines of the anti-usury laws. I am so glad that the right reverend Prelate is a churchman and not afraid to use old-fashioned but eternal concepts such as usury. I would have been happy with the sort of anti-usury laws that some American states have. We are not going to go that far this afternoon. I hope that the government amendment lives up to the promises that have been made this afternoon by the Minister.

17:00

[Lord Flight]

My Lords, first, I congratulate the noble Lord, Lord Mitchell, on raising this issue and, as a result, getting something done about it, and on his research in the territory. Also, I greatly welcome the Minister’s response and I look forward to government proposals that address the problem.

I shall make one or two focused points. The right reverend Prelate the Bishop of Durham made the point that we used to have anti-usury laws. We used to have a money-lending licence. When I started my career, there were rules about the maximum rate of interest that you could charge. All that had been in place going back more than 100 years. I assume that it all disappeared with the big bang, but it is a failure of regulation that the problem has been growing and getting worse with technology, but no regulator, as far as I am aware, has been suggesting to this Government or the previous Government that it needed addressing.

It is in part for that reason that I have reservations about letting the regulator just get on with running it. There need to be written in law caps on the maximum rate of interest. They could be related to the rate of inflation, to deal with that obvious problem. I do not trust the regulator to get to grips with the problem by itself.

My next point is that it illustrates the shame that we go on turning generation after generation out of schools who are financially illiterate, who do not understand what they are taking on. I remember talking to a young lady at university and asking how she was going to fund herself. She said that she had so much by way of a student loan and the rest on a credit card. I said, “How on earth are you going to pay back the credit card?”. She said, “Oh, do you have to do that?”. It is astonishing that people simply do not understand finance. Until we get financial literacy into the national curriculum, people will go on being ignorant and unable to look after themselves adequately.

It is a moral issue. I object to usury. I am sure that if my noble friend Lady Thatcher were in the Chamber, she would speak more strongly than anyone in objection to usury. We dealt with it in the past; let us get on with dealing with it again.

[Baroness Coussins]

My Lords, I add my support to the amendment introduced by the noble Lord, Lord Mitchell. I declare an interest as president of the Money Advice Trust, which is a charity that helps people across the UK to manage their debts. It does that by offering free advice through the National Debtline and by supporting advisers in the free advice sector.

So far this year, the National Debtline has taken more than 15,000 calls already from people struggling to repay payday loans. In the whole of 2011, it took 10,000 calls for help with payday loans, so that represents a staggering growth rate. Indeed, over the past two years, there has been an increase of 268% in the number of callers asking for help on payday loans. A telephone survey conducted by National Debtline also showed that the OFT guidance is not being followed, notably the part that states that creditors should make a reasonable assessment of whether a borrower can afford to meet repayments in a sustainable manner. The same survey showed that 66% of clients said that their lender had not conducted an affordability assessment.

This is not the right time to go into detail about what the FCA rules should be, but I suggest that they should certainly include a mandatory breathing space, with a freeze on interest and charges, if people are experiencing financial difficulty and have notified their payday lender that they are seeking support from a debt advice agency. In practice, by contrast, there is evidence of letters and requests to cancel CPAs or to freeze interest and charges being ignored, and debt advice agencies bypassed. The recent Citizens Advice conference highlighted examples where payday lenders had routinely refused to engage with advice agencies, had not answered letters, had refused to freeze charges and had not stopped CPAs even when requested to do so. I have sat in as an observer on calls to the National Debtline and witnessed the distress of people in debt as a result of payday loans. The powers for the FSA being sought by this amendment would be a small but very important contribution to the prevention of yet more unaffordable debt that ruins lives.

[Baroness Kramer]

My Lords, almost without exception this House has spoken and is speaking with one voice on this issue. In the United States it is quite common, when an important piece of legislation goes through, to name it after its sponsors. Whether this is the Mitchell-Sassoon amendment or the Sassoon-Mitchell amendment, it will have a very big impact on people’s lives.

However, it is important that the FCA, in the language that is already in the Bill, has the powers to do the acts for which the amendment calls. An amendment such as this ensures that the point is highlighted—that it is understood and not lost—because the FCA will have a wide range of areas to address. In the Bristol study that was commissioned and which we will be reporting in the next few weeks, the FCA and the Government demonstrated a very high level of concern around this issue, and the need to get underneath it to really understand the dynamics.

The importance of ensuring that the clause is an enabling one was well illustrated by the noble Baroness, Lady Coussins, a moment ago. There are many very complex issues around this that will need very direct attention. The devil will be in the detail to ensure that the amendment is effective in the way that the House desires, and that it does not create the opportunity for loopholes. We are talking about an industry that will game legislation if it has the opportunity.

I will pick up the issue that was addressed by the right reverend Prelate the Bishop of Durham, because it is hugely important. Almost all of this will be for naught if we do not ensure that there are appropriate sources of credit for those who need it at a reasonable price. The issue that the House is facing today has been neglected over decades; it is a challenge that the Government are picking up. It means that the clauses have to stand together with those that lower barriers to entry and which enable the community—whether social enterprises, charities, businesses, local authorities or whatever—to come together and take the initiative to build up the sources of finance that exist in many other countries.

The noble Lord, Lord Mitchell, talked about the constraints on payday lenders in the United States. One of the most powerful constraints is that there are community banks where individuals can get credit on reasonable terms. That is a far stronger constraint on any payday lenders in the United States than legislation could be. That is what we need here: the opportunity for market constraint. However, I congratulate all sides on coming together to be effective for some of the most vulnerable people in our community.

[Lord Kennedy of Southwark]

My Lords, I, too, congratulate my noble friend Lord Mitchell, the right reverend Prelate and other noble Lords for bringing forward this amendment today. I also pay tribute to the Member for Walthamstow in the other place, who has done more than anybody else to bring forward this issue. I would like clarification from the Government on the amendment that they will bring forward at Third Reading. Will it enable interest rates to be capped? That is key here; the cost of the charges and the interest rates levied are the nub of the issue. If that matter is not dealt with, we will unfortunately be back here at Third Reading and all sides will be very cross about it. Will the Minister clarify that?

[Lord Sassoon]

Yes, it will be dealt with.

[The Lord Bishop of Ripon and Leeds]

My Lords, I share the gratitude of the House to the noble Lord, Lord Mitchell, to my right reverend friend the Bishop of Durham and to others for bringing forward the amendment, and to the Minister for his response. I could talk about examples in Leeds very similar to those which people have raised. However, I will raise two particular points. The one point at which I was concerned at the Minister’s response was when he talked about the danger—which I acknowledge—of driving people into the murky world of illegal loan sharks. That is true and it can happen, but it is very important that we do not allow it to dominate the way in which we establish these provisions.

Where illegal lending is taking place, it needs to be dealt with by prosecution. We need to encourage the police to take action. That should not prevent us from being very firm in the way in which we—the law—control the debt industry. The Minister cited Japan as a good example of a society where that control appears to have worked. It would be interesting to see what contrasts there are between Japan, France and Germany, to ensure that we provide proper control and do not give in to illegal loan sharks because of their power.

I am grateful to the noble Baroness, Lady Kramer, for raising the point that there needs to be credit available. One thing that I have not heard very much about in these debates, although we talked about it often in the past, is the role of credit unions. Those unions seek to tackle debt but their growth has been sadly limited in this country and they appear to be unable to provide the necessary cover to give security to those struggling in our society, although the work that they do is excellent. I hope that as we go forward in discussing the issue of debt, we shall encourage credit unions to play a much greater part in providing a way forward and one answer to the major issues that we face.

[Baroness Grey-Thompson]

My Lords, I very much welcome the words of the Minister as I, too, put my name to the amendment. It is essential that we get this right because it is about people who are already in very difficult financial situations. The UK has one of the largest consumer lending markets in Europe, alongside those of France and Germany, but they have their rates capped. I will say a few words on the scale of the issue, which is important. There are 1.75 million people without transactional bank accounts and 7.7 million accounts without credit facilities, so it is very easy to see why people resort to payday loans.

One of the starkest things I read was that between April and May 2011 there was a 58% rise in people applying for payday loans via moneysupermarket.com, which means that an estimated 4 million people are using these loans, with the amount advanced exceeding £2 billion per year. In 2004, that amount was £100 million. Nobody wants to see more people in poverty. The noble Baroness, Lady Kramer, is absolutely right that the devil is in the detail. I look forward to the response of the noble Lord, Lord Mitchell.

[Lord Glasman]

My Lords, I will declare an interest. I was involved in the anti-usury campaign with London Citizens after the crash of 2008. I very much want to acknowledge the work of Stella Creasy in intensifying and continuing the campaign, which was based on the common good—on an alliance between the secular and those of faith to talk about a basic issue. Before we get too carried away, I will say that not since 1854 have there been any statutory constraints on interest rates. Everything else was voluntary but, in 1854, Bentham’s influence led to that. It followed the changes in abolishing usury laws in the Long Parliament in the 1630s, so we have to say that we are at an absolutely exceptional moment. There is a consensus on a cap on interest rates, which has not existed in our country for 400 years.

What it brings to our attention, and what I wish to share in honouring my noble friend Lord Mitchell for raising this historic amendment and the Government for responding to it, is the terrible condition of the poor. To quote someone who has not always been popular in this House, the Pope, usury is a way in which the rich prey upon the misfortune and troubles of the poor. I want to share with your Lordships that this is urgent; it is happening again and Christmas is coming. Overwhelmingly, it is not the unemployed but the working poor who are taking these loans.

I will raise two issues for future discussion, as we have reached such a fantastic moment of consensus. The first is in relation to credit unions, which the right reverend Prelate the Bishop of Durham mentioned, and regional banking. The proposal that London Citizens put forward, which I do not think sounds outlandish now, is that 5% of the bailout should be used to endow local, non-usurious lending institutions. The way in which the burdens of the crash have fallen on the poor is indecent, and we have to look at credit arrangements. I acknowledge what the Government have done in freeing up credit unions, but they do not have adequate resources or reach, and the establishment of new, non-usurious lending institutions in the regions of our country is the only way forward.

The other important issue—if I might interrupt the Minister’s conversation—is that data show that there is more illegal lending in Britain than in Germany. There is a 20% cap in Germany. I am not going to be bounced into any position, but it is still the case that if you put any constraints on the power of money, it automatically leads to illegal lending.

The other thing that we need to address is a living wage. When people work, they should be paid enough not to have to go into poverty. We have to build on this and intensify the conversation and the common good between secular and faith institutions. I commend the lead taken on this because the fundamental issue of our time is that the biggest growth area in our economy is debt, and overwhelmingly it falls on poor families. We need to address it as a matter of intensity and urgency.

17:15

[Lord Ramsbotham]

My Lords, I support the noble Lord, Lord Mitchell, and all those who put their names to the amendment. I hope very much that another government ministry will support this amendment—the Ministry of Justice. Nowhere is the misery caused by these loan sharks felt more keenly than by the prison population and their families. The damage done to potential rehabilitation suggests to me that if the MoJ is serious about the “rehabilitation revolution” that it commends, it should support the amendment to the hilt.

[Lord Hodgson of Astley Abbotts]

My Lords, it is greatly to the credit of the noble Lord, Lord Mitchell, that he has not ducked the challenge of balancing the accessibility and availability of credit with its affordability and the terms on which it is made available. A number of noble Lords have made it clear, as indeed has the noble Baroness, that the availability and accessibility of credit is important. My noble friend on the Front Bench made a powerful intervention; he indicated a number of ways in which the amendment could be got around because of the gaps in it. It is important that we get this right and make it bullet-proof. For example, some of his thoughts about—if I heard him right—making a contract unenforceable under certain circumstances would add a great deal of power to this. I hope very much that we will be able to have a period of reflection and ensure that the unintended consequences that could come about, as evidenced by my noble friend’s speech, are avoided and we get something that stands the test of time.

[Lord Barnett]

My Lords, I have a couple of points. Throughout the Bill, my noble friend Lord Peston and I have constantly raised the question of “may” and “must”. That question arises in this amendment, too. The amendment, moved so wonderfully by my noble friend, states:

“The FCA may make rules”.

That could be “must” because the amendment is already constrained by the end of that sentence,

“on terms that the FCA judge to cause consumer detriment”.

That is why it is so important, as my noble friend Lord Peston said, that we see the Minister’s amendment as soon as possible. I am not a lawyer but I do not distrust them; however, the lawyers who advise Governments can make mistakes, which are usually resolved by lawyers on both sides eventually having an argument, at great cost to everyone including the courts, until someone decides in court who was right. On this occasion we have to try to get it absolutely right. I regard what the Minister said as very helpful.

My noble friend said that we must see the amendments as soon as possible. However, nothing is built in stone. No law states that we have to have Third Reading next Wednesday. If necessary it could be delayed a little. The important thing is to get it right. I hope that the noble Lord, Lord Sassoon, will consider having a discussion with the authorities, or with the Leader of the House or whoever, about whether, if we do not get sight of the amendments as soon as possible, we should delay Third Reading until we are sure that we have got it right. That is crucial. I hope that the noble Lord, Lord Sassoon, can inform us that he will do that.

[Lord Mitchell]

My Lords, I thank all noble Lords who took part in this discussion, particularly those who are co-signees of the amendment. It has been a powerful and focused debate and I hope that the payday lending companies are listening. My guess is that they are glued to their screens.

The Minister has made a welcome statement of intent and to be honest that is as much as we could have hoped for. With the Government’s cast-iron acceptance of the principle of my amendments, as well as the effective force of veto that the three other signatories to the amendment will have over the revised amendment at Third Reading, this issue is now where it should be: beyond party politics. The winners are those who have tirelessly campaigned for this change in the law. I must mention my honourable friend Stella Creasy MP, who has been relentless in her pursuit of justice.

The other most welcome winners are those who live in the hellhole of grinding debt. Their lives will become a little easier. The losers are clearly the loan sharks and the payday lending companies. They have tried every trick in the book to keep this legislation from being approved and they have failed. Their failure is our victory. On the basis of the Government’s assurances, I beg leave to withdraw the amendment.

Amendment 114D withdrawn.

Amendments 115 and 116

Moved by

[Lord Sassoon]

115: After Clause 99, insert the following new Clause—
“Payment to Treasury of penalties received by Financial Services Authority
(1) The Financial Services Authority (“the FSA”) must in respect of its financial year beginning with 1 April 2012 and each subsequent financial year pay to the Treasury its penalty receipts after deducting its enforcement costs.
(2) The FSA’s “penalty receipts” in respect of a financial year are any amounts received by it during the year by way of penalties imposed under FSMA 2000.
(3) The FSA’s “enforcement costs” in respect of a financial year are the expenses incurred by it during the year in connection with—
(a) the exercise, or consideration of the possible exercise, of any of its enforcement powers in particular cases, or (b) the recovery of penalties imposed under FSMA 2000.(4) For this purpose the FSA’s enforcement powers are—
(a) its powers under any of the provisions mentioned in subsection (5),(b) its powers under any other enactment specified by the Treasury by order,(c) its powers in relation to the investigation of relevant offences, and(d) its powers in England and Wales or Northern Ireland in relation to the prosecution of relevant offences.(5) The provisions referred to in subsection (4)(a) are the following provisions of FSMA 2000—
(a) section 56 (prohibition orders),(b) section 63A (penalties relating to performance of controlled functions without approval),(c) section 66 (disciplinary powers in relation to approved persons),(d) section 87M (public censure of issuer),(e) section 89 (public censure of sponsor),(f) section 89K (public censure of issuer),(g) section 91 (penalties for breach of Part 6 rules),(h) section 123 (penalties in case of market abuse),(i) section 131G (short selling etc: power to impose penalty or issue censure),(j) sections 205, 206 and 206A (disciplinary measures),(k) section 249 (disqualification of auditor for breach of trust scheme rules),(l) section 345 (disqualification of auditor or actuary), and(m) Part 25 (injunctions and restitution).(6) “Relevant offences” are—
(a) offences under FSMA 2000,(b) offences under subordinate legislation made under that Act,(c) offences falling within section 402(1) of that Act, and(d) any other offences specified by the Treasury by order.(7) The Treasury may give directions to the FSA as to how the FSA is to comply with its duty under subsection (1).
(8) The directions may in particular—
(a) specify descriptions of expenditure that are, or are not, to be regarded as incurred in connection with either of the matters mentioned in subsection (3),(b) relate to the calculation and timing of the deduction in respect of the FSA’s enforcement costs, and(c) specify the time when any payment is required to be made to the Treasury.(9) The directions may also require the FSA to provide the Treasury at specified times with information relating to—
(a) penalties that the FSA has imposed under FSMA 2000, or(b) the FSA’s enforcement costs.(10) The Treasury must pay into the Consolidated Fund any sums received by them under this section.
(11) The scheme operated by the FSA under paragraph 16 of Schedule 1 to FSMA 2000 is, in the case of penalties received by the FSA on or after 1 April 2012, to apply only in relation to sums retained by the FSA as a result of the deduction for which subsection (1) provides.
(12) When section 6(2) is fully in force, the Treasury may by order repeal this section.”

116: After Clause 99, insert the following new Clause—
“Payment to Treasury of penalties received by Bank of England
(1) The Bank of England (“the Bank”) must in respect of each of its financial years pay to the Treasury its penalty receipts after deducting its enforcement costs.
(2) The Bank’s “penalty receipts” in respect of a financial year are any amounts received by the Bank during the year by way of penalties imposed under any of the following provisions—
(a) sections 192K and 312F of FSMA 2000, and(b) section 198 of the Banking Act 2009.(3) The Bank’s “enforcement costs” in respect of a financial year are the expenses incurred by it during the year in connection with—
(a) the exercise, or consideration of the possible exercise, of any of its enforcement powers in particular cases, or(b) the recovery of penalties imposed under any of the provisions mentioned in subsection (2).(4) For this purpose the Bank’s enforcement powers are—
(a) its powers under any of the provisions mentioned in subsection (5),(b) its powers under any other enactment specified by the Treasury by order,(c) its powers in relation to the investigation of offences under FSMA 2000 or of any other offences specified by the Treasury by order, and(d) its powers in England and Wales or Northern Ireland in relation to the prosecution of offences under FSMA 2000 or of any other offences specified by the Treasury by order.(5) The provisions referred to in subsection (4)(a) are as follows—
(a) sections 192K to 192N of FSMA 2000 (parent undertakings), as applied to the Bank by Schedule 17A to that Act,(b) sections 312E and 312F of that Act (disciplinary measures in relation to clearing houses),(c) sections 380, 382 and 384 of that Act (injunctions and restitution), as applied to the Bank by Schedule 17A to that Act, and(d) sections 197 to 200 and 202A of the Banking Act 2009 (inter-bank payment systems).(6) The Treasury may give directions to the Bank as to how the Bank is to comply with its duty under subsection (1).
(7) The directions may in particular—
(a) specify descriptions of expenditure that are, or are not, to be regarded as incurred in connection with either of the matters mentioned in subsection (3),(b) relate to the calculation and timing of the deduction in respect of the Bank’s enforcement costs, and(c) specify the time when any payment is required to be made to the Treasury.(8) The directions may also require the Bank to provide the Treasury at specified times with specified information relating to—
(a) penalties that the Bank has imposed under the provisions mentioned in subsection (2), or(b) the Bank’s enforcement costs.(9) The Treasury must pay into the Consolidated Fund any sums received by them under this section.”

Amendments 115 and 116 agreed.

Amendment 116ZA

Moved by

[Lord Tunnicliffe]

116ZA: After Clause 99, insert the following new Clause—
“Power of the FCA to make provision about regulation of commercial debt management
The FCA may make rules or apply a sanction to authorised persons who offer debt management services on commercial terms, or on terms that the FCA judge to cause consumer detriment.”

[Lord Tunnicliffe]

My Lords, I rise to move Amendment 116ZA on behalf of my noble friend Lord Stevenson, and I hope for a response from the government Benches which produces as much happiness as we have just enjoyed.

We considered the question of regulating debt management companies in Committee, but I make no apology for returning to this issue. We estimate that there are some 6.2 million families in this country in financial jeopardy and all the signs are that increasing numbers will need help, advice and solutions to their unmanageable debts over the next period.

At present there are a variety of providers. A number of companies operating on a strictly commercial basis compete for business with the free services provided by the charitable sector. While it is right that consumers have choice, it is important that those who need independent debt advice get it in a timely way; that it is transparent, with no hidden fees or payments; and all within a regulatory environment that ensures that all providers are working to the same high standards. The Money Advice Service has a great deal to do in this area, working with the existing major players.

This amendment calls on the FCA to ensure that our regulatory structures in this area are ready as soon as responsibility for this area transfers from the OFT; that they look forward as well as back; and that we do not miss the opportunity to protect consumers from the new problems as well as learning lessons from the past.

The Bill now contains good provisions for the transfer of consumer credit regulation from the OFT to the FCA. Despite the excellent work done to date by the OFT, the current licensing regime has arguably not provided consumers with enough protection, not least because the OFT has not been given the resources properly to police the industry. It has been argued that powers already exist in primary legislation, but that does not mean that the FCA will be ready and willing to move into these areas with the speed that may be required.

We are looking for a firm commitment in the Bill that the FCA will regulate commercial debt management companies along the following lines. The Money Advice Service needs to co-operate with stakeholders, where they share joint aims, forming partnerships to improve the long-term availability, quality, consistency, efficiency and effectiveness of the advice available. The FCA must ensure that the MAS is providing clear and directly enforceable standards for business conduct and the design of products. The FCA needs to set threshold conditions that will keep rogue firms and harmful business models out of the market. There need to be tougher sanctions, including unlimited financial penalties, enabling the FCA to build a credible deterrence strategy against bad practice. There needs to be more effective supervision and enforcement. The FCA needs the power to order firms directly to compensate their customers for losses arising from business conduct that falls below required standards and to ban misleading advertising, which the OFT has found is one of the main areas of concern in this market. We think that good commercial debt management firms would welcome such an approach. I beg to move.

[Lord Borrie]

My Lords, I congratulate my noble friend Lord Stevenson on putting forward this amendment —and, indeed, my noble friend Lord Tunnicliffe, who has taken his place today. As we discussed at some length on the previous amendment, self-regulation has been attempted in the field of debt management, but with only questionable effect. Multiple debtors can, of course, be tremendously assisted by debt management companies arranging how the debts can be paid off over a period in amounts that the debtor can afford. The debtor often cannot manage their cycle of debt sufficiently, so needs assistance. Some commercial operators have sought as best they can to raise their game, but only last week, the Office of Fair Trading decided to revoke the licence of First Step Finance, a member of the Debt Resolution Forum, which runs one of these debt management self-regulation schemes. I expect that responsible operators—they do exist—and consumers would benefit a great deal from a regulatory structure under the aegis of the Financial Conduct Authority in the new legislation.

In Committee, I made an intervention about debt management that I followed up with a letter to the Minister setting out my concerns. I had an extremely helpful response from him. He pointed to the powers that the FCA will have in 2014 to make rules of conduct on matters falling under its remit. In his letter, the Minister said:

“The FCA could, for example, impose restrictions or requirements on debt management plans where it considers that such rules are necessary or expedient to advance the consumer protection or competition objectives … Under the new regulatory regime, the Government will look in the first instance to the FCA as an independent and expert regulator able to put in place the right framework for debt management plans”.

17:30

As I understand it, the Minister would like us to leave it at that at this point. I can understand, but not necessarily agree with, the Government’s reluctance to put anything in this area in the Bill. However, the Minister could take advantage of this debate to put on the parliamentary record a useful clarification that FCA rules should require, for example, that fees charged by debt management companies must be reasonable and not excessive, as currently is seen in the marketplace, and that they should not be front-loaded. I would also argue that FCA rules in this area should specify that any advice given by debt management companies to vulnerable consumers should be subject to rigorous, independent and regular audit.

Anything that the Minister feels able to say today would give an important steer to those who in due course will have to draft the product rules that the FCA will produce. I think the points that I have suggested merit such inclusion.

[Lord Sassoon]

My Lords, this amendment is concerned with the regulation of commercial debt management services. It explores the extent to which firms that supply debt management services on commercial terms, or on terms that otherwise might cause consumer detriment, can be subject to specific rules or sanctions.

I am sorry that the noble Lord, Lord Stevenson of Balmacara, cannot be here but I well understand his concerns about the commercial debt management sector. However, it is worth saying in his absence, because we have touched on these things with him before, that he does an excellent job as chairman of StepChange, the debt advice charity which also provides not-for-profit debt management services. I share many of his concerns as they are reflected in the presentation of the amendment by the noble Lord, Lord Tunnicliffe.

Unscrupulous practices in the sector can cause real harm to vulnerable consumers struggling with debt problems—precisely those who desperately need help. However, I do not agree that the FCA should take action against commercial debt management companies just because they are offering these services on a commercial basis. The Government believe that it is important that consumers have access to debt management services to help them manage their debts where this is the right solution for them. But the Government also hold firm to the principle that consumers should have the choice to pay for these services if they wish to. They also acknowledge that there is a risk that not-for-profit debt advice and debt management providers may not be able to satisfy all the demand in the market.

In that context, I would like to highlight the important role of the Money Advice Service in signposting consumers to high quality, free-to-client debt advice services and in taking a strong strategic role in working with other organisations that provide debt advice to ensure that the market works effectively to help consumers struggling with debts. In April this year, the Money Advice Service took responsibility for the funding and management of face-to-face debt advice projects from the Department for Business, Innovation and Skills, and thus ensured the continuation of an important service which is currently on target to help around 150,000 people with debt problems this year.

Money advice and debt advice are, of course, two sides of the same coin. Promotion of financial capability and better money management will prevent people from getting into problem debt, while high-quality debt advice will ensure that those who find themselves with unmanageable debt are able to access appropriate specialist debt advice. In addition to funding and managing face-to-face services, the Money Advice Service has an important role in working with other organisations that provide debt services, in order to improve the availability, quality and consistency of the service available. The expectation is therefore that the Money Advice Service will continue to work with stakeholders such as StepChange, Citizens Advice, the Money Advice Trust and others to improve the long-term quality and effectiveness of the advice available. This will result in a more consistent sector, where there is agreement on what constitutes a full and effective debt advice service. This is clearly a challenging role for the Money Advice Service to undertake, and effective dialogue with its stakeholders and proper accountability will be key. So I encourage stakeholders in the sector to work with the service and to engage with its debt advice forum and the consultation on its business plan in the new year.

I, and the Government, entirely support the intent behind the amendment to ensure that the commercial debt management sector is subject to stronger supervision, more robust requirements and more stringent sanctions than is currently the case. The transfer of debt management company regulation from the OFT to the FCA will mark a significant shift in approach and powers. The FCA’s consumer protection objective will give it a strong mandate to take effective action to ensure that vulnerable consumers are protected from rogue debt management firms. That enables it to take action in the area of fees, if it believes that that is necessary and appropriate. With that, I hope that the noble Lord has the reassurances he seeks and feels able to withdraw the amendment.

[Lord Tunnicliffe]

I thank the noble Lord, Lord Borrie, for his remarks. I, too, am very sorry that the noble Lord, Lord Stevenson of Balmacara, is not here; he is not only our expert on debt advice services but, apparently, our expert on the wreck of the “HMS Victory”, sunk in 1744, and he is participating in a debate in the Moses Room.

I hear what the Minister says. He goes quite a long way towards what we are seeking to achieve with the amendment. Ideally, we would like it in the Bill, but with his assurances I beg leave to withdraw the amendment.

Amendment 116ZA withdrawn.

Amendment 116ZB

Moved by

[Lord McFall of Alcluith]

116ZB: After Clause 99, insert the following new Clause—
“Continuous Payment Authorities: debtor’s rights
(1) This section applies where a debtor has granted to a creditor a continuous payment authority for payment of any debt arising under a regulated agreement.
(2) Prior to the debtor granting the continuous payment authority, a creditor must give the debtor a statement of the debtor’s rights in relation to the continuous payment authority.
(3) A debtor may at any time cancel or vary a continuous payment authority.
(4) A cancellation or variation of a continuous payment authority must be signed by the debtor and bear the date of the signature.
(5) A bank is obliged to comply with immediate effect to a cancellation or variation of a continuous payment authority signed by the debtor.
(6) A debtor must inform the creditor within 24 hours of signing the cancellation or variation that the continuous payment authority has been cancelled or varied.
(7) In this section “continuous payment authority” means an instruction or mandate given by a debtor to a bank to pay a fixed or variable sum to a creditor.”

[Lord McFall of Alcluith]

This proposed new clause seeks to make the law on continuous payment authorities, sometimes referred to as CPAs, clearer and more weighted in favour of the debtor. As noble Lords know, these are harsh times for many working families under pressure from rising food and fuel costs and living in fear at the prospect of job loss and insecurity. They know only too well how difficult it is to stretch a wage from month to month, week to week, and even day to day. It is no wonder, then, that frequently these hard-pressed families and wage earners find that their money is simply not enough to stretch to all their needs from payday to payday, and that many of them have recourse to what are euphemistically called short-term lenders, more popularly known as payday lenders.

Consumer Focus research published in May this year showed that many banks’ customer service advisers were unclear about the rules concerning continuous payment authorities and could be giving customers incorrect advice as a result. A continuous payment authority is a type of regular, automatic payment arrangement set up by using a debit or credit card. It is like a direct debit. Under a CPA, consumers give a supplier or retailer permission to take payments on their cards. However, unlike direct debit, there is no written communication between the individual and the bank. Although CPAs are used by many businesses, including insurance companies, magazine companies and gyms, my concern is about how they are used by payday lenders. CPAs are sometimes known as recurring payments and are often used in the short term or payday loan market. Many payday loan companies use CPAs to retrieve loan payments from customers. This involves the debtor giving the company his or her card details and authorising the lender to take regular payments from the account.

Various reports suggest that customers are generally not aware of the right to withdraw from CPA schemes. For example, a report in the Guardian of 2 May this year stated:

“Consumer Focus raised particular concerns about continuous payments to payday lenders set up on the accounts of people with debt problems … cash-strapped consumers are having an even tougher time paying priority bills such as their rent, mortgage or heating costs due to some payday lenders ‘dipping’ into their account”.

The Consumer Focus research raised particular concerns about continuous payments to payday lenders set up on accounts of people who already have debt problems and recommended that clear and accurate information be provided to these customers from banks and loan companies, particularly regarding the right to cancel.

All that is fair enough and I know that the Department for Business, Innovation and Skills and the OFT have been doing work on this. Indeed, the Office of Fair Trading issued a warning to payday lenders on 20 November by opening formal investigations into several payday lenders over aggressive debt collection practices. It published a progress report last week as part of its compliance review of the payday lending sector and highlighted concerns about the adequacy of checks made by some lenders as to whether loans will be affordable for borrowers, the proportion of loans which are not repaid in time, the frequency with which some lenders roll over or refinance loans, the lack of forbearance shown by some lenders when borrowers get into financial difficulty, and debt collection practices. It also published revised debt collection guidance last week, focusing on continuous payment authorities. Under the heading “Deceptive and/or unfair methods”, paragraph 3.7 of the guidance states:

“Dealings with debtors and others are not to be deceitful and/or unfair”.

The OFT then gives examples of unfair or improper practices. I realised that the concept of misusing a continuous payment authority covers no fewer than five pages in the OFT report. Some of the examples made me fearful for the people who enter into these loans and give a CPA authority to their lender.

I shall give the House a number of examples of bad practice to be avoided, as mentioned in the OFT report. The report states:

“Using the CPA other than as set out in the credit agreement or without the informed consent of the debtor”.

It also refers to debiting a higher or lesser amount than agreed and debiting an account before or after the due date. The report also states:

“Using the CPA in a manner which is unreasonable or disproportionate or excessive in failing to have proper regard to the possibility that a debtor is in financial difficulties”.

The last example includes seeking payment before income or other funds may be reasonably expected to have reached an account, seeking payment where there is reason to believe that there are insufficient funds, or using the CPA after the debtor has informed the creditor that he or she is in financial difficulties and cannot afford to repay.

Further, the OFT identifies as a problem:

“Failing to document the CPA appropriately or to explain it adequately before entering into the credit agreement”.

Sometimes a credit agreement is not complete because relevant terms are missing; or it is written in unclear, unintelligible language; or it is confusing, unfair and misleading. The OFT guidance expects the agreement to identify that the CPA can be cancelled by the debtor or that alternative repayment options may be available.

It is all very well to issue guidance and I sincerely hope that guidance will be followed. However, my reading of this report convinces me that much more than guidance is required in this case. Such blatantly unfair treatment of consumers should not be restricted to a matter of guidance. This proposed new clause ensures that debtors are informed about their rights and that only the debtor may cancel or vary a CPA. Furthermore, the debtor’s bank is obliged to comply with the debtor’s instructions. We ought to legislate to protect debtors in straitened times.

We abolished imprisonment for debt in the Debtors Act 1860. However, debt itself can create a prison and the misuse of power by creditors can be as hard a punishment as being jailed for debt. I hope the Government will accept this amendment, realising that the balance of power between debtor and creditor must be redressed in favour of the customer. I beg to move.

17:45

[Lord Stevenson of Balmacara]

My Lords, I support the excellent amendment moved by my noble friend Lord McFall of Alcluith. He ended with a rhetorical flourish about the way in which debt imprisons many people. I want to support him in that, because he made the point very well. He also explained in some detail the recent OFT guidance note which, as he says, is all very well and then he made some important points about timing and language and about the fact that the basic relationship between those who have debts and those who take out a CPA in order to resolve them is, in fact, wrong.

I would like to add a couple of points. It is interesting that the last Financial Ombudsman Service annual review picked up on this issue. It says:

“During the year, we also began to see a rise in the number of complaints involving short-term finance—often called ‘payday loans’. We had previously received relatively few complaints about this type of lending—59 cases in 2010/211, rising to 296 in 2011/2012. In many of the cases we saw during the year, the complaints involved the way in which the lender had operated the payment authority given to them by the consumer”.

I checked back with the FOS earlier today and I gather there has been a considerable rise in the number of payday lending complaints brought to the ombudsman so far this year; they are now running at about 50 new cases a month. This amendment ensures that debtors are informed about their rights; that only the debtor may cancel or vary a CPA and, furthermore, that the debtor’s bank is obliged to comply with the debtor’s instructions. We support the amendment.

[Lord Newby]

My Lords, this amendment puts on the face of the Bill a number of requirements on firms and consumers in relation to the use of the continuous payment authority. I am grateful to the noble Lord, Lord McFall, for raising the issue. It brings us back, of course, to the very important issue of payday loans, which we were discussing earlier this afternoon. Abuse of the CPA is one of the most concerning practices of payday lenders. It does not mean that the CPA is universally the wrong method to use; it can help consumers administer their financial affairs with the minimum of fuss. However, there is clearly a problem.

As the noble Lord, Lord McFall, said, CPA is a recurring payment mechanism involving a debit or credit card; it allows a firm to take regular payments from a customer’s bank account without having to seek express authorisation for each payment. The OFT, as he set out in some detail, has highlighted its concerns in this area, particularly concerns that payday lenders are not explaining CPAs to consumers adequately and are using them in ways which do not take account of the possibility that the borrower is in financial difficulty and unable to repay. It is also concerned that lenders are, in effect, using CPA to securitise the loan and so may not make adequate checks on affordability. There is also evidence that some lenders mislead consumers about their right to cancel a CPA or put obstacles in the way of cancelling.

As the noble Lord explained, last week the OFT published revised guidance with the aim of ensuring that firms with a consumer credit licence do not misuse CPAs. The guidance makes it clear that the OFT expects lenders’ use of CPAs to be reasonable and proportionate, and that lenders must have regard to a borrower’s financial position when exercising a CPA. If a firm breaches this guidance and the OFT believes that this compromises the firm’s fitness to hold a credit licence, it can take enforcement action. The Bill gives the OFT the power to suspend consumer credit licences with immediate effect. Therefore, to that extent, there is a new power here which can be used to address the problem. We believe it is right that the OFT is taking action on this now and the Government welcome the new guidance.

However, like the noble Lord, I think that regulatory powers to address the abuse of CPAs and to ensure that consumers are protected need to be strengthened. The FSA has already made binding rules covering the use of CPAs by firms that it regulates. Once the regulation of consumer credit moves to the FCA in 2014, it will be able to extend those rules to payday lenders, which will be a major step-change in regulation of the payday loans market. I am pleased to inform the noble Lord that the FSA has confirmed its intention to carry across OFT standards on the use of CPAs when the transfer takes place to ensure that these consumer protections remain.

However, I do not agree that these requirements should be set out in statute, as the noble Lord’s amendment proposes, rather than in FCA rules. Overreliance on statute is exactly the problem that we have faced in the current regulatory regime, which relies on powers set out in the Consumer Credit Act and has resulted in an inflexible regulatory regime which cannot respond quickly to all the developments in the market and risks leaving consumers exposed to detrimental practices. Addressing this through rules will allow the FCA to impose requirements to address issues relating to the misuse of CPAs that might emerge in the future.

I hope that the noble Lord is able to take some comfort from the commitments made by the Government earlier in this debate on introducing new explicit powers for the FCA and giving the FCA a strong mandate to step in to tackle detriment caused by firms in the payday loans sector. I hope he is also assured that the FCA will have a strong and flexible toolkit at its disposal to ensure that CPAs are not abused by payday lenders. In the light of those comments, I hope that the noble Lord feels able to withdraw his amendment.

[Lord Mackay of Clashfern]

Before the noble Lord sits down, I should like to ask two questions. First, is there anything in the nature of a direct debit guarantee for the CPA system? Secondly, is it only people with credit licences who go in for being recipients of these payments?

[Lord Newby]

My Lords, I do not believe that there is a guarantee. I think that the vast bulk of people who use this system will fall into the category that the noble and learned Lord asked about. However, I will check and will write to him if there is any further information that I can give him to explain those points more fully.

[Lord McFall of Alcluith]

My Lords, CPAs are different from direct debits, as I made clear. Given the legislative complacency in the consumer credit field, I am very unhappy with the notion of guidance. I think that we sent out a message from the Lords today on an earlier amendment, and it was good to have cross-party consensus on that. There are glaring injustices and it is very important that we reinforce that message in the House today. I should therefore like to test the opinion of the House.

17:53

Division 2

Ayes: 175

---

Labour: 147
Crossbench: 18
Independent: 3
Democratic Unionist Party: 1
Plaid Cymru: 1

Noes: 229

---

Conservative: 143
Liberal Democrat: 62
Crossbench: 18
Ulster Unionist Party: 3
Independent: 2

18:05

Amendment 116A not moved.

Amendment 116AA

Moved by

[Lord Whitty]

116AA: After Clause 102, insert the following new Clause—
“The levy
(1) Section 173 of the Legal Services Act 2007 (the levy) is amended as follows.
(2) In subsection (7)(a) at the end insert “except for the purposes of section 161 (in relation to claims management services) which is to be deducted from its expenditure incurred under or for the purposes of the Act (section 173(7)(a), as with the amounts paid into the Consolidated Fund pursuant to 173(7)(b)), and”.”

[Lord Whitty]

My Lords, this is a technical amendment to cover a gap which I would have hoped the Government would have covered by now. It is an amendment to the Legal Services Act 2007 and it deals with complaints from consumers about the activities of claims management companies, about which we have heard a fair amount in this House, particularly at the initiative of my noble friend Lord Kennedy of Southwark.

The purpose of the amendment is to enable the Office for Legal Complaints, that is to say the Legal Ombudsman, to receive payments from the Lord Chancellor under Section 172 of that Act for its costs in relation to handling complaints against those claims management companies.

There has been a pretty widespread air of complaint in this House and in wider society about the activities of claims management companies. Citizens Advice has identified a whole range of problems in this area, from the time and resources wasted on invalid claims through to the aggressive, intrusive and often offensive methods of marketing. I suspect most noble Lords have received an odd text within the past few days, offering them untold riches under the PPI arrangements. It is not just consumer groups that want action on this front. The FLA—the Finance and Leasing Association—would look for an improvement to CMC regulation and, in particular, the tens of thousands of unfounded claims received from CMCs in respect of products which, as we all know, were never sold in the first place. This is a huge irritation which is misleading for consumers and diverts activity for providers, so we need a complaints system which is recognised as robust by consumers and providers alike. We want the Legal Ombudsman service to be able to accept complaints against claims management companies that breach the regulation.

Following discussion on several occasions in this House, the Minister has assured us that regulation is being tightened up to stamp out some of the more horrendous practices that we have heard about and, indeed, been subject to. One of these assurances was in relation to access to redress for consumers. The Government announced on 28 August that complaints handling companies would be handled by the Legal Ombudsman, using the powers under the Act to which this is an amendment. That was repeated by the Minister on 20 November in response to a debate introduced by my noble friend Lord Kennedy. However, I now understand that, due to the Government’s decision to leave claims management regulation within the department —as distinct from an outside regulator—the provisions that would have allowed the Legal Services Board to levy the claims management regulator for Legal Ombudsman expenditure are now deemed unworkable.

The amendment therefore seeks to remedy that position. It allows the Lord Chancellor—in other words the Ministry of Justice, which is, effectively, the claims management regulator—to make payments direct to the Legal Ombudsman without any subsidy by existing ombudsman levy-payers, who are lawyers and are not, of course, party to these complaints.

My understanding is that such money would need to come from a levy on claims management companies rather than the general taxpayer—quite right, too—and that the only effect of the amendment would be to allow the only body with authority to levy them, the Ministry of Justice, to pass such funds to the Legal Ombudsman. Despite this being a levy on these firms, the Treasury has stated that, under the Legal Services Act as currently drafted, the Secretary of State as the regulator of claims management services cannot be designated a leviable body for Legal Ombudsman purposes. The levy is technically considered a tax, and thus a public body, the Legal Services Board as the collector of the levy, cannot impose a tax on government.

It is for this reason that primary legislation to amend the Act is needed. I hope that the Minister, who is supportive of action on this front, can support the amendment. The legislative change that is needed to facilitate it must happen immediately, so that consumers are not left without a course of redress. This is necessary so that the ombudsman can handle complaints as well as provide better intelligence to the regulator and the industry to drive better practice.

Amendment 120, which complements the first amendment, would allow the technicalities to come into force immediately on Royal Assent without further, secondary legislation being required. It seeks to cover a gap in the present arrangements. The Minister may have a better way of so doing. If so, it is a pity that he has not come forward with it already. Nevertheless, I am prepared to hear what he says. If he is prepared to bring forward an alternative amendment which covers the same points at Third Reading or ensures that there is provision for the Legal Ombudsman to be financed in this way, I will probably be prepared to withdraw the amendment. However, it is a gap that needs covering. At this relatively late stage of the Bill, a commitment from the Government to do so is necessary. I beg to move.

[Lord Newby]

My Lords, as the noble Lord, Lord Whitty, said, the amendment seeks to amend the Legal Services Act 2007 to facilitate the expansion of the Office for Legal Complaints ombudsman scheme to encompass the handling of complaints about claims management companies, on which we have spent considerable time while discussing the Bill in your Lordships’ House. I understand that its specific aim is to prevent any costs incurred by the OLC in respect of claims management companies being passed on to the wider legal services profession.

The Government have announced that the OLC will assume responsibility for the handling of claims management companies next year. They stand by that commitment. I agree with the noble Lord that it is important for consumers of claims management companies to have greater access to redress when things go wrong. As a result of the Government’s policy, the OLC will be in a position to provide more meaningful forms of redress, including compensation up to £30,000 if appropriate. This compares with the current arrangements, under which the regulator can only direct businesses to apologise, redo work and, in limited circumstances, provide a full or partial refund of fees. In addition, the OLC will be able to use the feedback from complaints that it receives to assist the claims management regulator in driving up standards within the sector.

I understand the desire to implement this change as soon as possible given the proliferation of complaints about the conduct of this sector, but we are very concerned to get it right. That means ensuring that the necessary funding, regulatory and operational arrangements are in place before we commence the provisions in the Legal Services Act 2007. This amendment would not achieve that outcome. For example, it is right that the wider legal profession should not cross-subsidise claims management companies. Conversely, we need to ensure that legal firms do not gain any unintended benefit when the Legal Ombudsman assumes its new powers. Under this amendment, the wider legal profession would benefit because case-fee income generated by the ombudsman in respect of claims management companies would be deducted from the levy they have to pay.

The Government’s position, then, is absolutely clear: the wider legal profession should not bear the cost of dealing with complaints about that sector. On this we are in agreement with the noble Lord and the arrangements we put in place will be consistent with that principle. I reiterate our commitment to implementing the changes in 2013 and I hope, therefore, that the noble Lord will feel able to withdraw his amendment.

18:15

[Lord Whitty]

My Lords, I appreciate what the Minister said, but I am not quite clear how this then operates. We are at one in believing that the broader legal profession should not be levied for instances which relate to claims management companies—that is clearly a red line and it should be avoided—but in order to avoid it, the Legal Ombudsman, the OLC, will need to have some resources from a levy, or quasi-levy, from the CMC, unless this is to be a matter for general taxation, which would not seem to be appropriate and I do not think is the Government’s intention. Therefore, the Government need powers rapidly in order to have a levy system there, which presumably, as I said in my opening remarks, would have to be via the Ministry of Justice, even though the money would then be passed over to the OLC.

I am not sure what the Minister means when he says that we will sort this out in 2013. Does he mean that, while the other provisions of the Bill will apply, we will need further primary legislation; or does he mean that there will be almost instant secondary legislation under the Bill to ensure that that happens? Because one way or another, for that to be achieved by 2013, which is only about four weeks off—although I guess that he has the whole 12 months to fulfil his intention—a whole pile of complaints that are manifold at the moment will be held up for some months before they can go into the system and the Office for Legal Complaints will be able to deal with them.

I accept the Government’s good will and good intent in this respect, but I still think that the precise system on which it operates needs to be spelled out and that we need to be assured that it will be in place pretty much at the same time as the Bill is passed. I hope that the Minister can give that assurance; alternatively, he could come back with something else at Third Reading. I did not think that he went as far as that in his remarks.

[Lord Newby]

My Lords, I did not go as far as that, in terms of amendments at Third Reading, and I am not going to go as far as that now. As I said, the new system will not come into force immediately, but it will come into force during the course of 2013. I will write to the noble Lord if I am wrong about this, but my understanding is that the funding that is required from the claims management company sector, as it were, will come from the levy, which is being increased at the moment. If I am wrong in that, I will write to the noble Lord.

[Lord Whitty]

I appreciate that having it exactly at the point of Royal Assent is not necessarily the point; the point is that when these provisions come into play there will be resources to cover it. I would be grateful to receive a letter from the Minister and, with that, I beg leave to withdraw the amendment.

Amendment 116AA withdrawn.

Amendment 116B

Moved by

[Lord Flight]

116B: After Clause 102, insert the following new Clause—
“Bank account transferability
(1) If an individual customer gives notice in writing to a bank at which he holds a personal current account (Bank A) that he wishes to transfer the balance standing to the credit of that account (Account A) to a personal current account established or to be established at another bank (Bank B) and thereafter to close Account A—
(a) Bank A shall without charge within a period of 10 working days pass to Bank B a copy of all material that it holds in relation to the customer as a result of having performed checks on his identity, the source of his funds or otherwise with regard to its regulatory obligations to counter financial crime;(b) Bank B shall without charge, save where it has grounds for suspicion, accept the material provided under paragraph (a) in lieu of performing fresh checks on the identity of the customer, the source of his funds or otherwise in relation to its regulatory obligations to counter financial crime.(2) In this section a bank shall mean any person authorised under this Act and holding permission for deposit taking granted by the PRA.”

[Lord Flight]

My Lords, I think that there is broad agreement across the House that an ingredient part of a more stable banking system is that we should have healthy competition and, indeed, that a number of the problems that have developed over the past few years have been the result of a banking system that was not competitive enough, that was described as oligopolistic or cartelised. One important issue in terms of banking competition is the ease with which individuals can move their bank accounts.

I moved an amendment in Committee that largely covered all the practical things about transferring direct debits and standing orders. As many will be aware, the Payments Council has spent a lot of money on sorting that out and next September will implement its proposals to address the mechanistic aspects of changing a bank account.

My amendment in Committee raised the possibility of the Bill being used to enforce that. It is being done on a voluntary basis, and I am aware that most banks have signed up to the Payments Council arrangements. The one aspect that is not covered is the grandfathering of anti-money laundering information. I declare an interest as a senior non-executive director of Metrobank. Metrobank has pioneered removing a lot of the unnecessary—indeed, uncompetitive—measures that banks have typically used, such as requiring you to have your passport signed by a lawyer and to produce an original bill. Metrobank is able to get all the information it needs from your driving licence, so it can open an account pretty quickly. However, that cannot cover all circumstances, and as any existing bank has to have done all the necessary “know your customer” and anti-money laundering checking, it seems only sensible if, when an individual moves an account, the existing bank is obliged to pass on—to grandfather, to hand over—that anti-money laundering information to make it easier for individuals to move their accounts. Amendment 116B provides for banks to do that without charge.

I would obviously be lucky to get the Government’s agreement to include that in the Bill, but in thinking how it might be dealt with practically, this is an issue where the FCA, if not the PRA, could reasonably direct the banking system. One way or other, anti-money laundering is being used as a deliberate barrier to competition, a deliberate discouragement to people to move from one bank to another if they are unhappy with their existing bank’s service. That needs addressing and I hope that the Minister may have some clever idea as to how the point can be grasped.

[Viscount Trenchard]

My Lords, I support the amendment moved by my noble friend Lord Flight. Since the disappearance of the traditional bank manager from the high street, customers have increased difficulty in communicating with their banks at all, let alone to request a transfer to another bank.

What particularly irks me is that when you seek to engage with the successor to a bank manager by telephone—or when you respond to a text message requiring you to telephone the bank—you first have to go through a long process of answering questions put to you by a machine to establish your identity. If you successfully pass such questions, you may eventually be able to speak to a human being, who will then proceed to put you through an identical process of security checking. I wonder why you cannot be put straight through to a human being, rather than wasting time on your telephone, usually on an 0845 number or something like that, answering questions put to you by a computer, because it does not make any difference. When you speak to the person, the person requires you to do the security again. It is then very often the wrong person and you are transferred to another department and you have to go through the process again, probably in duplicate, first with a computer and then with another human being. Therefore, you have to allow at least 30 minutes if you are going to attempt to engage with a bank to do something that ought to take five minutes.

I welcome my noble friend’s amendment. It should be made much easier to transfer your bank account to another bank. For a long time the mobile telephone companies resisted a similar facility to change supplier; I understand that it is now much easier to change from one company to another. I see no reason why it should not be so in the case of banks.

However, in order to permit the customer to do this, banks should be required to provide forms for this purpose on request—and the request should be able to be given in writing or orally—making clear what information is needed. Otherwise, people writing in may not give the correct address or branch of the bank, and the banks will have reason not to act on the request. So the forms should be standardised and make clear what information should be given.

At the same time, the individual should be required to grant permission to bank A that it may release on behalf of the customer what my noble friend calls the anti-money laundering information—the material that it holds in that connection—because otherwise bank A will surely be prevented from releasing such information to a third party under data protection legislation. It would be necessary to agree a prescribed time limit for the transfer of such information, because in the case of somebody who has banked with a certain bank for 40 or 50 years, material that bank may hold dating many years back may be irrelevant to bank B. Does my noble friend have any comment on that?

[Baroness Hayter of Kentish Town]

My Lords, my noble friends Lord Mitchell, Lord Peston, Lord Barnett and Lord Davies of Oldham have all had the opportunity to thank the Minister today for hearing their arguments and meeting them. Perhaps it is now time for the Minister to do the same for one of his own side, and accept these arguments from his noble friend Lord Flight. The noble Lord, Lord Flight, is right on this: consumers will only be able to drive competition if they can swiftly, easily and cheaply change bank accounts. Without that, there really will be no way to drive up standards.

It was interesting to hear the noble Viscount, Lord Trenchard, talk about phone calls and automatic voice recognition. It reminds me of a wonderful publication produced by the National Consumer Council called The Stupid Company. This asked a whole lot of consumers, not just in financial services, “What are the things you most hate about companies?” In the top three was automatic voice recognition. It was really interesting that when that was played back to companies, they continued to use it although they knew that it was the thing their consumers most hated. Banks are like that. Until people can change banks easily, I fear that they will continue to do things that none of us likes. I hope very much, therefore, that the Minister can send Lord Flight home happy this evening by having accepted his amendment.

[Lord Hodgson of Astley Abbotts]

The noble Baroness leapt to her feet very quickly. I know that the House is like a horse running for the stables, and I will not detain the House long. I support my noble friend’s amendment. As regards money-laundering and transferability, I would like to pick up a point made by the noble Lord, Lord Newby, in replying to the debate on 24 October, when he talked about the transferability of direct debits and how that works as regards the Payments Council initiative.

I am afraid that this again involves the charity sector. There is general agreement that there are far too many charities and that many ought to be closed down. There are many thousands of shell charities, which are the result of mergers. There has been a perfectly proper merger and there was no problem as the Charity Commission, the trustees and the lawyers were all happy with it. However, when you ask why this shell charity remains, it is because the banks will not accept the transfer of standing orders and direct debits to the new, enlarged charity. The charity then has to go through the process of asking every single direct debit and standing order signatory to re-sign. Administratively, that is an extremely complicated process and many of course decline to do so.

I am not asking my noble friend to reply tonight but I say this in the hope—it is probably a forlorn hope—that the Payments Council is listening to this debate and might therefore see whether it can find some way to enable this administrative inefficiency to be dealt with. That would enable some of these shell charities, which no longer need to exist and exist only to collect direct debits and standing orders, somehow to be subsumed into the new charity of which they are now a part.

[Baroness Kramer]

My Lords, I will intervene only for a moment but in case the Government are unable to meet the hopes of the noble Lord, Lord Flight, and others today perhaps I might say that I chair the sub-panel of the Parliamentary Commission on Banking Standards which is looking at competition in retail banking. Account portability is a significant part of that and the staff are now on the alert to take the report of the comments made today in Hansard and make sure that it and the amendments are put before the panel’s next meeting

[The Earl of Erroll]

My Lords, this is a very sensible amendment and it should be accepted. I also agree with the comments of the noble Lord, Lord Hodgson, that it ought to be applied to all accounts. We have had to leave some family accounts open just to receive some old shares and such things coming in because we cannot really get around to changing them. If we could change them at the bank end, it would make a lot of sense.

[Lord Sassoon]

My Lords, I am very tempted to get a few things off my chest as well about some personal experiences of the sort that we have all had, but the horse may well have long gone if I do. However, I am sure that the banks and the Payment Council are indeed listening. My noble friend has again raised an important point. Let me address two things: first, what we can or cannot do through legislation in this area and, secondly, what to do in practical terms given that I think my noble friend was accepting that it was unlikely that the Government would accept this amendment, which indeed we will not and cannot. I will explain why but let me go on to say how, prompted by his useful thoughts on this subject, I propose to take things further forward.

The essential reason why this amendment does not work comes back to the money-laundering regulations that implement the EU’s third money-laundering directive. Rightly or wrongly, it is just a fact of life that it is not compatible with the directive to require the new bank to rely on the checks carried out by the old bank in all cases. Neither is it compatible with the directive to provide that the new bank is not legally liable where it relies on checks carried out by the old bank, because under the directive each bank is responsible for ensuring that adequate checks have been carried out on all its customers.

I know my noble friend may say that moving the information across does not necessarily take one all the way down that path, but this is getting pretty close to encouraging the banks to do something that is not compatible with the directive by suggesting pretty strongly, if not requiring it, that they rely on the checks of the old bank. We must remember that switching can be between two accounts that are already open and we should distinguish, as I am sure my noble friend does, between switching and account opening. They are not the same thing because we could be talking about switching between existing accounts that an individual has opened.

Having said that I cannot accept the amendment, I shall talk about what I am trying to push forward. I was very struck by the example of Metro Bank and driving licences, because I was not aware of it. I have asked my officials to conduct an exercise with the banks to find out who is doing what, and I have already discovered that Metro Bank is not unique and one or two others are using driving licences.

I, as the Treasury, cannot tell banks how to do their “know your customer” due diligence, and neither can the FSA. However, I am initiating a dialogue with the banks to encourage them to think constructively that a driving licence is already good enough for a number of banks, and plainly it could make things a lot easier for their banks. Because the majority of banks have done it in different ways for a number of years, at the very least I want to ensure, either directly with the banks or through the BBA, that they revisit the practices of the past few years and consider whether there is something more that they can do.

My noble friend Lord Flight has served a very useful purpose in raising this topic during the passage of the Bill, and I intend to continue to press the banks to think harder about the burdens that they are putting on their new and existing customers in relation to the responsibilities that the banks themselves have under the money-laundering regulations. I hope that with that explanation my noble friend might consider withdrawing his amendment.

[Lord Flight]

My Lords, I thank the Minister for his supportive response and my noble friends Lord Trenchard and Lady Kramer for their support. I am delighted to hear that my noble friend Lady Kramer will be pursuing this aspect as part of the banking review; I make the simple point that it is obvious that it should be easy to move accounts. I also thank the noble Baroness, Lady Hayter, for her support.

I would not say that I was surprised but I am interested to note that the Minister cited yet another example of protectionist practices in the EU. To the extent that what he described is there to stop the transfer of such information or to make it unacceptable, it is clearly a barrier to trade. Anyone in the financial services industry who thinks that the single market means a free and competitive one has another thought coming, because the practical barriers to trade and financial services in the EU are substantial at a retail level. I am not sure if the Minister is right, however, because the law as it stands is that it is up to each bank to do what it wants to or feels is necessary and adequate to comply with its “know your customer” due diligence, and I would have thought that if the new bank got all this information it could make it a decision that it thought was sufficient.

I say to my noble friend Lord Trenchard that my amendment provided 10 working days for the information to be transferred once you had given notice that you were going to move your account.

[Viscount Trenchard]

I am sorry, I did not explain my question clearly. It was how old the information should be that must be transferred—10, 20, 30 years or what?

[Lord Flight]

The answer is that it is the current information that the existing bank has which satisfies its “know your customer” credentials. Maybe there could be a time period of two years or something, but it is the current information that is relevant.

On the basis of the Minister’s reply I am happy to withdraw the amendment, but I would like to think that somehow, through the banking committee, the FSA and the work that the Treasury is doing, a sort of code of practice among banks could be accepted and evolved. Just as the mechanistic aspects of moving bank accounts are being signed up to on a voluntary basis by the banks at the initiation of the Payments Council, I hope that practice in this area to go along with it might be brought into a code of conduct by banks. I beg leave to withdraw the amendment.

Amendment 116B withdrawn.

Amendment 116C had been withdrawn from the Marshalled List.

Schedule 19 : Repeals

Amendment 117

Moved by

[Lord Sassoon]

117: Schedule 19, page 346, line 3, at end insert—

“Bank of England Act 1998

Section 1(3).”

Amendment 117 agreed.

Clause 105 : Orders: Parliamentary control

Amendments 117A and 118

Moved by

[Lord Sassoon]

117A: Clause 105, page 193, line 20, at end insert—
“( ) an order under section 36(2) (power to amend sections 391 and 395 of FSMA 2000);”

118: Clause 105, page 193, line 27, after “which” insert “section (Affirmative procedure for certain orders) or”

Amendments 117A and 118 agreed.

Schedule 20 : Transitional provisions

Amendment 118A

Moved by

[Lord Sassoon]

118A: Schedule 20, page 349, line 6, at end insert—
“(1A) The FSA may disclose to the Bank of England any information which the FSA considers that it is necessary or expedient to disclose to the Bank in preparation for the commencement of any provision of this Act conferring functions on the Bank.”

[Lord Sassoon]

I will not take up much time. It would be nice to end this mini-marathon of a Report stage with a flourish, but this is not going to be terribly exciting and will not detain us for very long.

Amendments 118A and 118B are minor technical amendments to the transitional provisions in Schedule 20. They enable the FSA to disclose information to the Bank of England in advance of the new regime coming into force to allow the Bank to prepare for the functions conferred on it by the Bill—for example, the regulation of clearing houses. Paragraph 9 of Schedule 20 already makes provision for the FSA to disclose information to the PRA to assist in its preparations for undertaking its new functions. These amendments make similar provision in respect of the Bank. I beg to move.

Amendment 118A agreed.

Amendment 118B

Moved by

[Lord Sassoon]

118B: Schedule 20, page 349, line 8, leave out “sub-paragraph (1)” and insert “sub-paragraphs (1) and (1A)”

Amendment 118B agreed.

Clause 111 : Commencement

Amendment 119

Moved by

[Lord Sassoon]

119: Clause 111, page 196, line 9, at end insert—
“section (Payment to Treasury of penalties received by Financial Services Authority);”

Amendment 119 agreed.

Amendment 120 not moved.

House adjourned at 6.43 pm.