House of Commons

Wednesday 19th December 2012 Commons Chamber

Wednesday 19 December 2012

The House met at half-past Eleven o’clock

Prayers

Wednesday 19th December 2012 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Wednesday 19th December 2012 Commons Chamber

The Minister for the Cabinet Office was asked—

[Hugh Bayley (York Central) (Lab)]

1. How many full-time equivalent civil servants were employed in York in May (a) 2010 and (b) 2012.

[The Minister for the Cabinet Office and Paymaster General (Mr Francis Maude)]

The number of full-time equivalent civil servants employed in York on 31 March 2010 was 2,390 and on 31 March 2012 it had reduced to 1,980.

[Hugh Bayley]

With electronic communications improving all the time, it is hard to justify having so many civil servants in London and so few in other parts of the country, such as my constituency, where rents and overheads are so much cheaper. Will the Cabinet Office carry out a strategic review of the number of civil service posts in London that could be relocated to cities such as York?

[Mr Maude]

There have been endless such studies, including under the last Conservative Government and the Government of whom the hon. Gentleman was a member. The truth is that the number of civil servants in central London is much higher than it needs to be, and it is already falling. We are concentrating the numbers into the central London freehold estate, which is significantly reducing our costs, but there is further to go.

[Julian Sturdy (York Outer) (Con)]

Does my right hon. Friend agree that, given the country’s huge deficit, it is only right that the civil service should contribute to savings, and that it is important that we ensure the creation of more private sector jobs, which are, indeed, being created across York and the wider region?

[Mr Maude]

The civil service certainly must reduce in size, and it is doing so: it is at its smallest since the second world war. Private sector jobs are being created at quite a rate, and in the two years after the formation of the coalition Government 11,000 jobs were created in the private sector in York, while 4,400 were lost in the public sector.

[Jon Trickett (Hemsworth) (Lab)]

Consensual civil service relocation to cities such as York is good, cost-effective one-nation politics, as it can help to overcome chronic regional economic disparities, but if the right hon. Gentleman insists on regionalising public sector pay such relocations will simply further retrench existing regional disparities. People in York doing exactly the same job as their colleagues elsewhere in the country will be paid less. The Cabinet is reportedly divided on the subject. In this festive season, may I encourage the right hon. Gentleman to say goodbye to his inner Scrooge and abandon the ill-conceived regional public pay proposals he has been hawking around Government?

[Mr Maude]

My inner Scrooge is the taxpayer’s outer friend, and I should, perhaps, point out to the hon. Gentleman that in only one part of the civil service—Her Majesty’s Courts and Tribunals Service—have regional pay scales been abandoned and the move to regional or local market-facing pay been made, and the Government of whom he was a member introduced that.

[Nick Smith (Blaenau Gwent) (Lab)]

2. What recent assessment he has made of the implementation of the Government’s procurement reforms.

[The Parliamentary Secretary, Cabinet Office (Miss Chloe Smith)]

As a result of this Government’s procurement reforms, we have made the way we do business more competitive, more transparent, better value and far simpler than ever before.

[Nick Smith]

Procurement reform is essential from the Government who brought us aircraft carriers without any aircraft and German trains. Last February the Prime Minister pledged that small and medium-sized enterprises would get 25% of Government contracts. What proportion of contracts is currently awarded to SMEs?

[Miss Smith]

The short answer is: a lot more than under the Government of the hon. Gentleman’s party. Direct spend on SMEs across Government continues to increase quarter by quarter, and we are planning, Department by Department, to reach that 25% target, and in doing so achieve far more than he and the last Labour Government ever did.

[Mr Julian Brazier (Canterbury) (Con)]

I welcome my hon. Friend’s answer, but may I suggest that at the top of the list of items for renegotiation with the EU—or near the top—should be a reversal of the previous Government’s absurd decision to extend European procurement rules to a large part of our defence programme?

[Miss Smith]

I welcome my hon. Friend’s support. The Government agree that EU procurement rules must be fundamentally reformed, and we are making strong progress on that. I am delighted to say that most of the UK’s specific requests in this year of negotiations have been included in the latest work and that that work continues.

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

3. What plans he has to promote volunteering opportunities for recently retired people to work with young people.

[The Parliamentary Secretary, Cabinet Office (Mr Nick Hurd)]

Through the innovation fund and the social action fund we are supporting a range of opportunities for retired people to share their skills and experience in their communities, including with young people.

[Tim Loughton]

I wish you, Mr Speaker, and my hon. Friend the Minister the compliments of the season.

Are we not missing a trick, with a vast army of recently retired people, particularly men, who are not yet ready for their cocoa and slippers and have a lot to offer through volunteering, particularly to young teenage boys in “dadless” households? Will he agree to meet me and a number and businesses and youth charities to see how we can scale up some of the best practice?

[Mr Hurd]

My hon. Friend is hugely respected across the House and outside it for his splendid work on behalf of young people over many years. The short answer to his question is yes, I would be delighted to meet him.

[Jim Shannon (Strangford) (DUP)]

Retired people can work and volunteer with young people in many projects in my constituency, including the intergenerational project in Newtownards in Strangford. One regular problem is the cost of insurance. What help can the Minister give towards insurance costs for those projects?

[Mr Hurd]

The hon. Gentleman raises an important point. We are actively looking at the burden of regulation on volunteers. I am sure he will join me in welcoming the reform of the Criminal Records Bureau process to reduce the number of people who need checks and to make checks more portable. We are actively working with the insurance industry to see what we can do to reduce the liabilities and insurance requirements on volunteers.

[Richard Graham (Gloucester) (Con)]

4. What progress he has made on his plans for the National Citizen Service.

[Amber Rudd (Hastings and Rye) (Con)]

10. What progress he has made on his plans for the National Citizen Service.

[The Minister for the Cabinet Office and Paymaster General (Mr Francis Maude)]

Our ambition is to make National Citizen Service a rite of passage available to every 16 or 17-year-old. In 2011, more than 8,400 young people took part in it. This year we made the programmes available to a much larger number of people. The programmes finished recently and we await final data on the numbers. In 2014, we will ensure that 90,000 places are on offer.

[Richard Graham]

All those involved in the NCS programme in 2012 in my constituency of Gloucester will welcome the Minister’s news of expansion in 2013. Excellent local partner, Gloucestershire college, has suggested to me that if it was possible for the organisations that pledge support to provide more detail it could provide even more opportunities to young people in my constituency and across the county. Does my right hon. Friend agree that more could be done from the Cabinet Office to facilitate that?

[Mr Maude]

I know that my hon. Friend has taken a very close interest in the NCS, which is fast-growing and immensely popular with those who take part. Satisfaction is expressed by more than 90% of its participants. I hear what my hon. Friend says and will discuss further with him how we can take that forward.

[Amber Rudd]

The NCS designated Catch22, the provider of this programme in the south-east, with more than 2,500 places for 16 to 17-year-olds in the summer of 2012, but only 30 places were allocated to the young people of East Sussex. Will my right hon. Friend assure me that more places will be available in 2013, particularly for the young people of Hastings and Rye?

[Mr Maude]

I am very sympathetic to that indeed. Of course, the first two years were pilot years in which the programme was not available throughout England. We are now rolling it out on a much wider scale and the whole country will be covered by the NCS in 2013 and 2014. I am confident that there will be significantly more places available in East Sussex, and I shall look particularly at the position in Hastings and Rye.

[Susan Elan Jones (Clwyd South) (Lab)]

12. The NCS is the Prime Minister’s flagship policy for volunteering and the big society. Is it not therefore a bit ironic that it is primarily being run by Serco, a private company?

[Mr Maude]

The hon. Lady is quite simply wrong. Serco has had no involvement whatsoever. It will be involved in some of the regions in the forthcoming—[Interruption.] There seems to be a certain amount of interest in this. Serco is in a partnership with voluntary organisations and it is the lead organisation in a minority. Most of the regions are being led by voluntary and community sector organisations, two of them by consortia of further education colleges. I hope the hon. Lady will welcome that.

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

5. What his policy is on streamlining the procurement process to enable more small and medium-sized enterprises to secure Government contracts.

[The Parliamentary Secretary, Cabinet Office (Miss Chloe Smith)]

It is this Government’s policy to dismantle the barriers facing small companies, charities and voluntary organisations to ensure they can compete for contracts on a level playing field. This helps to deliver economic growth through public procurement. As I have mentioned before, it is an ongoing process to reach our aspiration in this Parliament of 25% of central Government procurement spend being with SMEs.

[Nick de Bois]

I am grateful to the Minister for that answer. If bad practice continues, will she explain how my constituent SMEs can complain, and will her office undertake to ensure that investigation follows if bad practice exists?

[Miss Smith]

My hon. Friend is absolutely right to point to the need for organisations to make complaints about poor procurement practice. That is why we have provided a right to challenge such practice through the mystery shopper service and I confirm that today we are publishing the next batch of its results, which I think my hon. Friend will find very interesting indeed, and we shall continue doing so.

[Bill Esterson (Sefton Central) (Lab)]

The Federation of Small Businesses told me yesterday that most of its members had given up trying to do business with Departments. According to the Government’s figures, public sector procurement from small businesses has fallen in most Departments since the election. Why has that happened?

[Miss Smith]

I am afraid the hon. Gentleman is rather mixed up. As I mentioned in my answer, spend with SMEs is rising and we are on track for that 25% target. I am also conscious that the chairman of the FSB said this year that

“central government has raised its game…But more must be done”.

The question is: why did the previous Government do so little?

[Mr Crispin Blunt (Reigate) (Con)]

ONE3ONE Solutions, a recent start-up, is the commercial arm of prison industries. In the interests of us all, the business needs to grow to get prisoners working effectively. What progress is the Minister making to put the organisation on the preferred supplier list for Government contracts, for which it has suitable products and services?

[Miss Smith]

As Members would expect, our prime objective in procurement is value for money for the taxpayer, but I am sympathetic to what my hon. Friend articulates and I will be happy to discuss it further with him and appropriate colleagues.

[Andy McDonald (Middlesbrough) (Lab)]

6. What steps he is taking to support smaller charities.

[The Parliamentary Secretary, Cabinet Office (Mr Nick Hurd)]

We are cutting red tape. We are investing in giving and making it easier to claim gift aid. We are investing in supporting volunteering and social investment, and we are gradually making it easier for charities to help us deliver better public services.

[Andy McDonald]

An analysis by the Charities Aid Foundation found that small and medium-sized charities reported deficits of more than £300 million in 2011, and that the situation had markedly deteriorated since 2010. Does the Minister agree that the finances of the voluntary sector, like the economy as a whole, have indeed markedly deteriorated since 2010?

[Mr Hurd]

Official figures from the Charity Commission show that over the last three years the number of charities has grown, and the income for the sector has grown to more than £50 billion, but we all know from our constituencies that there is intense pressure on charities at the moment, particularly small charities, which requires a whole-society response. The Government are doing their bit, as I described in my first answer.

[John Glen (Salisbury) (Con)]

I am delighted to hear of the Government’s moves to support smaller charities. One charity that really needs the Government’s support is the Plymouth Brethren, who do so much good and who are facing a despicable attack on their charitable status. What can the Minister say in support for the Plymouth Brethren and their legitimate claims to retain their charitable status?

[Mr Hurd]

I know that feelings run strongly on the issue across the House. The bottom line is that charitable status is decided by the Charity Commission and by the courts in the event of an appeal, which is what is happening in this case. I am sure my hon. Friend supports me in wishing for the process to be resolved as quickly as possible.

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

14. In Luton, the local authority’s budget is being cut by approximately half over the period of the comprehensive spending review. In turn, funding is being cut for many local charities, such as LAMP—the Luton accommodation and move-on project—a brilliant charity based in my constituency that works with youth homelessness. Is that not the reality of the big society?

[Mr Hurd]

The reality of the big society is that the public are enormously supportive of charities. Seventy-five per cent. of charities receive no funding at all from the state. Where they do, it is incumbent on us all—Members on both sides of the House—to send a very clear message to local authorities, as the Prime Minister has done, that we do not expect to see disproportionate cuts to the sector, and that we need to see the process being delivered in accordance with the compact.

[Richard Fuller (Bedford) (Con)]

One excellent way to support smaller charities is via the Public Services (Social Value) Act 2012, proposed by my hon. Friend the Member for Warwick and Leamington (Chris White) and strongly supported by the Government. Will the Minister update the House on progress with implementation of that radical change in procurement?

[Mr Hurd]

I join my hon. Friend in congratulating our hon. Friend on doing an extraordinary job in taking that private Member’s Bill through Parliament. I can assure him that we are about to issue the necessary guidance to local authorities.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

With one in six charities fearing that they will face closure next year, after huge cuts in Government funding, and after the promised bonanza of new income from Whitehall contracts failed to materialise, how does the Minister hope that his performance will improve next year?

[Mr Hurd]

I put it to the hon. Gentleman that just as Labour Members talked down the economy for three years, now they are talking down the voluntary sector, which has grown over the past three years. I set him a test of seriousness: will he send a stronger message to Labour local authorities, as the Prime Minister has done, about the need to avoid disproportionate cuts on the sector, starting with Derby?

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

7. What recent progress he has made on the Government’s cyber-security strategy and establishing a centre for global cyber-security capacity building.

[The Parliamentary Secretary, Cabinet Office (Miss Chloe Smith)]

As my right hon. Friend the Minister for the Cabinet Office recently informed the House, we have made real progress on improving the UK’s cyber-security capability.

In October, my right hon. Friend the Foreign Secretary announced plans to establish a new global cyber-security capacity building centre. We expect to make a further announcement on that next year.

[Eric Ollerenshaw]

I thank my hon. Friend for that answer. Lancaster university is a centre for excellence on cyber-security in the excellent county of Lancashire, which of course she is very welcome to visit. I wonder whether she recently saw a report that the university produced on the impact of cybercrime on small businesses; does she agree that that issue is no longer just for Government and big business, but now concerns every business?

[Miss Smith]

I thank my hon. Friend for his reminder. I am aware of the excellent work that Lancaster does. I will gladly look into an opportunity to visit. I fully agree that cyber-security is an issue that affects everybody in society—businesses large and small. We are increasing our work with small and medium-sized enterprises to raise awareness of cyber-threats and what we can all do to protect ourselves.

[Andrew Miller (Ellesmere Port and Nelson)]

The hon. Lady is right that cyber-security affects everyone in society. Will she therefore put her support behind the annual PICTFOR—the Parliamentary Internet Communications Technology Forum—competition, “Make it Happy”, which is targeted at primary schools and in 2013 will be focused on cyber-security, building on the forthcoming programme for secondary schools?

[Miss Smith]

I welcome the hon. Gentleman’s scheme, and I welcome PICTFOR’s support. I look forward to working with him on the scheme because it is important that we get that message out, even to children at a young age, and I am sure that we can all have a happy new year with that scheme.

[Graham Jones (Hyndburn) (Lab)]

8. What assessment he has made of the merits of establishing an independent body to investigate complaints against charities.

[The Parliamentary Secretary, Cabinet Office (Mr Nick Hurd)]

The Charity Commission investigates complaints where serious mismanagement or maladministration puts the charity’s assets or beneficiaries at significant risk.

Complaints about the services a charity provides should be directed to the charity itself. Lord Hodgson concluded in his review of the Charities Act 2006 that a new body would be inappropriate and unaffordable. I agree with his assessment.

[Graham Jones]

Agapao International, a charity in Haslingden in my constituency, took control of a property that was gifted to it by the community in 1999 through various charitable grants. It is now attempting to sell the property for its own financial gain in order to put right financial mismanagement, and there have been dozens of complaints against the charity. The Charity Commission does not seem to have the powers to investigate. Will the Minister meet me to see what can be done to resolve the issue?

[Mr Hurd]

I am happy to meet the hon. Gentleman, but I understand that the Charity Commission has engaged with the charity, and the bottom line is that its role is to deal with serious misconduct or mismanagement, not to deal with complaints where people are just unhappy with decisions that are taken within the law and within the governance arrangements of the charity.

[Dan Rogerson (North Cornwall) (LD)]

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

[The Minister for the Cabinet Office and Paymaster General (Mr Francis Maude)]

My responsibilities are for the public sector efficiency and reform group, civil service issues, industrial relations, strategy in the public sector, government transparency, civil contingencies, civil society and cyber-security.

[Dan Rogerson]

I welcome the fact that the Government are increasing the range of services that they provide online to our constituents. However, digital by default is a cause for concern as some constituents who do not have access to broadband or for whatever reason choose to use a paper option are worried that that may not continue. Will the Minister reassure the House that that option will remain for all those constituents who do not wish to use the computer option?

[Mr Maude]

Transacting with the Government online costs about one twentieth of the cost of doing so by phone, one thirtieth of doing it by post, and one fiftieth, on average, of doing it face to face, so there are massive savings as well as increased convenience from moving public services online. But we recognise that there are of course people who cannot access services online and we will make sure that proper provision is made for them. We will publish our assisted digital strategy before the end of the year.

[Michael Dugher (Barnsley East) (Lab)]

In July 2010 the Minister for the Cabinet Office said that

“it is essential that we take radical steps to increase efficiency and reduce energy use. . .This Government is determined to tackle waste wherever it exists, and that includes energy”,

yet according to figures updated last week on data.gov.uk, energy use in the Minister’s own Department at 70 Whitehall has increased by 9% this year compared with last year. Why is the Minister not practising what he preaches?

[Mr Maude]

The Government are more than meeting their target to cut energy. It would be very good to hear the hon. Gentleman supporting our energy for growth project, which will mean cheaper energy for government and will unlock blocked renewable energy projects throughout the country. It would be very good to hear him supporting that.

[Mr Robert Buckland (South Swindon) (Con)]

T3. I am encouraged to see that the Government are firmly committed to reducing the extent of their bloated property portfolio. Will my right hon. Friend please update the House on progress that has been made in this area this year?

[Mr Maude]

We have hugely reduced the amount of property that the Government occupy. The overall size of the central estate in 2011 alone fell by nearly 6%; the number of our property holdings fell by 11%; and we sold Admiralty Arch, which is an unsatisfactory office building but will be a very good hotel building. We are making enormous savings. We have achieved total savings of £360 million in annual running costs. If this had started when the Leader of the Opposition had my job, the country would not have been in the mess that we inherited in 2010. [Interruption.]

[Mr Speaker]

Order. There are far too many noisy private conversations taking place in the Chamber. As a result, Members are not attending to the answers that are being given by Minister Maude, and that is unsatisfactory.

[Ann McKechin (Glasgow North) (Lab)]

T2. May I encourage Ministers to work across parties to achieve a strong and robust register of lobbyists, rather than proceed with the proposal which the chair of the National Council for Voluntary Organisations has described as so weak that it is not worth joining?

[The Parliamentary Secretary, Cabinet Office (Miss Chloe Smith)]

I thank the hon. Lady for her question. We are continuing to analyse the responses received from the consultation on that matter.

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

T4. My hon. Friend the Member for Salisbury (John Glen) has already raised the plight of the Plymouth Brethren, who are subject to a disgraceful attack by the Charity Commission on their charitable status. During the passage of the Charities Act 2011 through the House, the current Leader of the Opposition gave undertakings that no religious body would lose its charitable status. If the Plymouth Brethren lose the litigation, will my hon. Friend undertake to ensure that the law will be changed?

[The Parliamentary Secretary, Cabinet Office (Mr Nick Hurd)]

I am sure we all want to see the Plymouth Brethren issue resolved as quickly and cheaply as possible by the Charity Commission and the tribunal. My hon. and learned Friend will be aware that we are reviewing all charity law in co-operation with Lord Hodgson, including whether we should revisit a statutory definition of public benefit.

[Lilian Greenwood (Nottingham South) (Lab)]

T6. Nottingham community and voluntary service’s state of the sector report found that although demand for services is increasing, 69% of voluntary groups are facing reduced income, 52% have been forced to cut staff this year, 76% say they may have to close a service and 36% may close altogether. Is this not a terrible indictment of this Government’s support for the voluntary sector?

[Mr Hurd]

The Labour party has been predicting the collapse of the voluntary sector for three years. In fact it has grown, but it is under huge pressure, which is why we are doing so much to cut red tape, invest in giving, invest in social investment, support volunteering and make it easier for charities to help us to deliver better public services.

[Jessica Lee (Erewash) (Con)]

T5. With the festive season upon us, will my hon. Friend join me in thanking all those at the Erewash council for voluntary service and other voluntary organisations in my constituency who do so much at this time of year to give those in need and those on their own the extra support they need?

[Mr Hurd]

I thank my hon. Friend for giving us all the opportunity to thank the volunteers in our constituencies who do so much to keep things going, who bring people together and make things happen that otherwise would not happen. They deserve all our support and thanks, which is what this Government give.

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

T7. Does the Minister think that abolishing the Advisory Committee on Hazardous Substances in the morning and establishing the Hazardous Substances Advisory Committee in the afternoon was a sensible use of taxpayers’ money and time?

[Mr Maude]

I have no idea about the issue the hon. Gentleman is talking about, but I will look into it and give him an answer.

The Prime Minister was asked—

[Oliver Colvile (Plymouth, Sutton and Devonport) (Con)]

Q1. If he will list his official engagements for Wednesday 19 December.

[The Prime Minister (Mr David Cameron)]

Before listing my engagements, I am sure that the whole House will wish to join me in sending our best wishes for Christmas to our brave armed forces in Afghanistan and elsewhere. To their families, who will be missing them, and to the servicemen and women around the world, you are always in our thoughts, we owe you a deep debt of gratitude, and we send our heartfelt thanks at Christmas time.

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

[Oliver Colvile]

I thank my right hon. Friend for wishing a merry Christmas to our servicemen and women on deployment and to their families. Will he tell us what progress Sir John Holmes has made in his review of medals, especially for those who served on the Arctic convoys with bravery and endeavour?

[The Prime Minister]

I thank my hon. Friend for his remarks about our troops. On the issue of medals, which has gone on for a very long time, I am delighted to be able to tell the House that we have reached a resolution. I asked Sir John to conduct a review not just of medals in general but specifically of one of the most important cases. He has completed his work and I thank him for what he has done. More details will come from the Ministry of Defence in the new year, including how veterans can apply, but I am very pleased to tell the House the following. On the Arctic convoys, Sir John has recommended, and I fully agree, that there should be an Arctic Convoy Star medal. I am very pleased that some of the brave men of the Arctic convoys will get the recognition they so richly deserve for the very dangerous work they did.

On Bomber Command, Sir John concluded that they had been treated inconsistently with those who served in Fighter Command and has therefore recommended, and I agree, that the heroic aircrews of Bomber Command should be awarded a Bomber Command clasp. I know that these announcements will be widely welcomed across the House. I pay tribute to my hon. Friends the Members for Portsmouth North (Penny Mordaunt) and for Gosport (Caroline Dinenage) and Members on both sides of the House who have campaigned hard on these issues. I am glad that we have reached a resolution, and one that is popular and right.

[Edward Miliband (Doncaster North) (Lab)]

I start by joining the Prime Minister in paying tribute to our troops in Afghanistan, who continue to show such huge courage and bravery. It is particularly important at this time of year to remember them and their families, many of whom will be separated from them. Their families, too, are in all our thoughts.

I also welcome the Government’s expected announcement today on reducing the number of troops in Afghanistan during 2013; we await the Defence Secretary’s statement. Can the Prime Minister tell the House how many British troops and civilian staff will be left in Afghanistan after the 2014 deadline, and can he confirm whether they will be there under Afghan-led command?

[The Prime Minister]

I join the Leader of the Opposition in welcoming what our troops do. Specifically on Afghanistan, we have two decisions to make. The first is about the draw-down of troops between now and the end of 2014. The Defence Secretary will announce that because of the success of our forces and Afghan national security forces and the fact that we are moving from mentoring at battalion level to mentoring at brigade level by the end of 2013, we will be able to see troops come home in two relatively even steps—2013 and 2014—probably leaving around 5,200 troops after the end of 2013, compared with the 9,000 we have there now. It is a good moment to pay tribute again to the incredible work they have done, many of them going back for tour after tour, and those I have spoken to recently have been particularly impressed by the capacity of the Afghan national forces.

In terms of post-2014, we have not made final decisions yet. We have said very clearly that no one will be in a combat role and that there will be nothing like the number of troops there are now. We have promised the Afghans that we will provide the officer training academy that they have specifically asked for. We are prepared to look at other issues above and beyond that, but that is the starting baseline.

[Edward Miliband]

I thank the Prime Minister for that answer. Given that thousands of British troops are still going to be in harm’s way in Afghanistan, can the Prime Minister update the House and say what specific effort the Government are making, with the international community, to match the continuing military efforts with the greater diplomatic efforts that both he and I think are important? After all, that will leave behind, or give us our best chance of leaving behind, an inclusive and durable political settlement in Afghanistan, which is so important.

[The Prime Minister]

The right hon. Gentleman is entirely right. As well as a military track, there has always been a political and diplomatic track.

Let me be clear. After December 2014, some troops will still be involved in returning equipment and dealing with logistics. Exact announcements will be made about that at a later stage. In terms of the work that we will go on doing, because we will not be leaving Afghanistan in terms of our support and help for the Afghans, we will be contributing £70 million a year to help to pay for the Afghan national security forces and we will have an aid programme in excess of £170 million a year for Afghanistan.

In terms of the diplomatic track, the thing that we are most focused on is bringing Afghanistan and Pakistan together. I have personally hosted two meetings between the two Presidents and I hope to host further meetings, including early in the new year. I spoke to President Karzai this morning to encourage him to keep working on that vital relationship, so that Pakistan and Afghanistan can both see that they have a shared interest in a stable future.

[Edward Miliband]

I am grateful to the Prime Minister for that answer.

I want to turn to another issue. I want to recognise the work of thousands of volunteers who are helping out in our nation’s food banks and the millions of people who are donating food to them. Is the Prime Minister as concerned as I am that there has been a sixfold increase in the last three years in the number of people relying on food banks?

[The Prime Minister]

First of all, let me echo what the right hon. Gentleman said about volunteers and people who work hard in our communities, part of what I call the big society, to help those in need. It is a good time of year to thank our volunteers for what they do, but I do share the right hon. Gentleman’s concern about people who are struggling to pay the bills and to deal with their budgets.

Of course, the most important thing is to get on top of inflation, and inflation is coming down. The most important thing is to get more people into work and out of poverty, and we see 600,000 more private sector jobs this year. We are helping those families by freezing the council tax and making sure that we help families with the cost of living.

[Edward Miliband]

We both pay tribute to the work of the volunteers, but I never thought that the big society was about feeding hungry children in Britain.

The problem is that it is working people who are turning to food banks. One head teacher of a school rated “outstanding” by Ofsted, Vic Goddard, says that even children with a parent or parents in work are often struggling with the choice of heating their homes, buying their children clothes or buying them food. A report last week from the Children’s Society said that two thirds of teachers knew of staff providing pupils with food or money to prevent them from going hungry. Why does the Prime Minister think that is happening, and why does it appear to be getting worse on his watch?

[The Prime Minister]

I agree with the right hon. Gentleman that we need to do more to help the poorest in our country. That is why we have lifted the personal tax allowance and taken 2 million of the lowest paid people out of tax altogether. Let us take someone who is on the minimum wage and works full time—because of the tax changes that we have made, their income tax bill has been cut in half. I would also make this point: because of the decisions that we made in this Government to increase the child tax credit by £390 ahead of inflation, we have helped those families with their bills and we will continue to do more in the future.

[Edward Miliband]

I am afraid that that answer will have seemed very out of touch with families up and down the country. The problem is that what the Chancellor did not tell us in the autumn statement was that his tax on strivers will be hitting working families who rely on tax credits up and down the country.

The reality is that in the third year of the Prime Minister’s Government, more children are going hungry and more families are relying on food banks. Is it not the clearest indictment of his Government’s values that while lower and middle-income families are being hit, at the same time he is giving an average of a £107,000 tax cut to people earning over £1 million a year?

[The Prime Minister]

What is out of touch is denying the fact that we had a deficit left by the right hon. Gentleman’s Government that we had to deal with. That is what we have had to do, but we have been able to do it at the same time as cutting taxes for the poorest in our country, increasing child tax credits, and freezing the council tax to help those families. When it comes to the top rate of tax, let me tell him this: the richest in our country will pay more in tax under every year of this Government than any year of his Government. Those are the facts; he may not like them but he cannot deny them.

[Edward Miliband]

The problem is that nobody believes him any more. We know who this Prime Minister stands up for, because where was he last weekend? Back to his old ways partying with Rebekah Brooks, no doubt both looking forward to the Boxing day hunt. Before he was elected, the Prime Minister said: “Unless you can represent everyone in our country you cannot be a one nation party.” That was then; this is now. Everyone now knows he cannot be a one nation Prime Minister.

[The Prime Minister]

It would not be Christmas without the repeats, and that is all we ever get from the right hon. Gentleman. I will tell him what we have done this year. We said we would take action on jobs; we have 600,000 more private sector jobs. We said we would help with the cost of living; we have frozen the council tax for the third year in a row. We said we would deal with the deficit; we have cut the deficit by a quarter. And what have we heard from him this year? What has he told us about the deficit? Nothing. What has he told us about welfare? Nothing. What has he told us about his education plans? Nothing. The fact is that he has got absolutely nothing to offer except for the same old something-for-nothing culture that got us in this mess in the first place.

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

Trust in the police is an essential part of a just and democratic society. Will the Prime Minister therefore seek—[Interruption.]

[Mr Speaker]

Order. I apologise for interrupting the hon. Gentleman, but Members must now calm down. Both the questions and the answers must be heard.

[Mr Wilson]

Will the Prime Minister therefore seek personal assurances from the Commissioner of the Metropolitan Police that no stone will be left unturned in getting to the full truth about allegations that a serving police officer fabricated evidence against a member of the Cabinet?

[The Prime Minister]

First of all, let me say again that at Christmas time it is right to pay tribute to our brave police officers—men and women who look after us round the clock and do an extremely good job. But the point that my hon. Friend has made is important. A police officer posing as a member of the public and sending an e-mail potentially to blacken the name of a Cabinet Minister is a very serious issue, and it does need to be seriously investigated. The Metropolitan Police Service is conducting a thorough and well resourced investigation to get to the truth of this matter as quickly as possible. The Independent Police Complaints Commission will be supervising the investigation, and I think we should allow it to get to the truth.

[Mr David Anderson (Blaydon) (Lab)]

Q2. Despite what the Prime Minister has just said in response to our leader, the facts on the ground are these: the classic poverty-related diseases of rickets and tuberculosis are on the increase in this country, the number of food banks is increasing, kids are going to school hungry, and we have a stagnant economy. Is the Prime Minister proud that his policies are taking this country back to the 1930s?

[The Prime Minister]

I would hope that the hon. Gentleman, with the constituency that he represents, would today be celebrating the fact that Nissan has announced another £125 million investment in our country. This is now one of the biggest and most successful car plants anywhere in Britain. Yes, we face tough economic times, but the fact is that we have over 1 million new private sector jobs, and last year and this year saw some of the fastest rates of new business creation. That is what is happening in our country. Yes, there are tough times and tough choices, but our economy is rebalancing and we should recognise that.

[Martin Horwood (Cheltenham) (LD)]

Q3. In March we introduced a new local green space designation to protect green spaces not just for great crested newts and landscape painters but for urban and suburban communities such as Leckhampton, Warden Hill and Whaddon in my constituency. Can the Prime Minister reassure local councils that they can and should use this new designation and that it has not been undermined by any recent pronouncements?

[The Prime Minister]

I reassure my hon. Friend that the national planning policy framework that we have put in place—it was 1,000 pages long, but is now just 50 pages long—is our planning policy and framework. We are giving local authorities greater power and greater ability—and also neighbourhood plans—so that these decisions can be made where they should be: more locally.

[Ian Lavery (Wansbeck) (Lab)]

Q4. I have in my hand a genuine suicide note from a constituent of mine who, sadly, took his own life after he was informed that he was no longer entitled to employment and support allowance and disability benefits. Across the UK, more than 1,000 people have died only months after being told to find work. This is 2012—we are supposed to be a civilised society. We should be looking after disabled citizens in the UK. Will the Prime Minister listen to the 62,000 people who have signed Pat’s petition and please finally order an assessment of all changes hitting disabled people in this country?

[The Prime Minister]

I will look very carefully at the very tragic case that the hon. Gentleman has brought to the House. Everyone’s thoughts will go out to that person’s family because of what has happened to them.

What I would say to the hon. Gentleman is that the actual money that we are putting into disability benefits over the coming years is going up, not down. I think that everybody knows and accepts that we need to have a review of disability benefits. Some people have been stuck on these benefits and not been reviewed for year after year after year. That is the view of the disability charities and it is the view of the Government as well.

[Harriett Baldwin (West Worcestershire) (Con)]

As we approach Christmas, will the Prime Minister join me in celebrating the fact that there are more people in employment this Christmas than ever before in this nation’s great history?

[The Prime Minister]

My hon. Friend makes an important point. After all, the Leader of the Opposition said back in January that unemployment would go up. That was his prediction—he stood at the Dispatch Box and said that. The fact is that unemployment has come down, employment has gone up and we have seen a record fall in youth unemployment in the last quarter. All of those things are welcome, particularly as we are seeing growth in the private sector, because everyone knows that we have to have a rebalancing of our economy whereby we shed some jobs in the public sector but grow the private sector, and that is what is happening.

[Robert Flello (Stoke-on-Trent South) (Lab)]

Q5. Merry Christmas, Mr Speaker. [Interruption.]People realise, now, that the Prime Minister has a Dickensian vision for the UK: grandeur for the few, workhouse for the many. Why is he limiting welfare benefits for parents caring for adults with disabilities? Could we have an explanation from Ebenezer?

[The Prime Minister]

I say to the hon. Gentleman that it is probably a case of merry Christmas and happy speaking opportunities in the new year.

We have not restricted disability benefits; what we have done is put more money into disability benefits. That is what this Government are doing. We have taken difficult decisions to increase tax credits by 1%, to increase public sector pay by 1% and to increase out-of-work benefits by 1%. Those were tough decisions that needed to be taken.

[Mr Philip Hollobone (Kettering) (Con)]

Q6. Last week, the published census figures revealed that the previous Government presided over the largest wave of immigration our country has ever seen, yet next Christmas our borders will be flung open even wider to potentially limitless immigration from among the 29 million people who live in Romania and Bulgaria. Will my right hon. Friend look seriously at triggering the national interest clauses buried deep in the EU free movement directive in order to stem this new flow, especially for those with criminal records and those who seek access to our welfare benefits system?

[The Prime Minister]

First, let me echo the first half of my hon. Friend’s question. The last Government allowed a completely uncontrolled system of migration, under which we saw net immigration of 200,000 people a year and 2 million people across a decade—that is two cities the size of Birmingham staying in our country every year. There has been not one word of apology for the mess that the last Government left.

My hon. Friend makes an important point about the transitional controls coming off the accession countries. I will look carefully at what he says. We have rules to try to restrict access to benefit. We will go on working to make those as robust as possible. I mentioned the national interest clauses in the statement on Europe on Monday. I think that those can be triggered only if there are emergency conditions, but I will look carefully at what he says.

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

Q7. A month ago, the Prime Minister told the House that universal credit will put in place work incentives for people at all levels of income. Why then does the Department for Work and Pensions now say that universal credit will mean that working women will consider giving up work?

[The Prime Minister]

That is not the case at all. By bringing different benefits together, universal credit means that people will always be better off in work and will always be better off by working extra hours. That is what we are doing. Labour had 13 years to sort out these poverty traps and it completely failed.

[Mr Mark Spencer (Sherwood) (Con)]

My constituent, Yogi Papi Depass, is currently stuck in Cuba, despite having a British passport. I wonder whether the Prime Minister could encourage the Cuban authorities to look at this matter with compassion and speed to get Yogi back home for Christmas with his family.

[The Prime Minister]

I quite understand why my hon. Friend raises that case. Yoandry Depass was born in Cuba. He entered the UK and obtained a British passport in 1997. We are in regular contact with the Cuban authorities, and they have advised Mr Depass that he should expect to receive his Cuban passport this week, which will enable him to travel. Ultimately, the decision rests with the Cuban authorities, but British embassy consular officials will continue to assist him and we will keep in touch with my hon. Friend.

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

Q8. In April, the Prime Minister stated that energy efficiency would be placed at the heart of Government policy. On Monday this week, the Government’s fuel poverty advisory group warned that there could be more than 9 million households in fuel poverty. That would include 25% of all households in Stoke-on-Trent. Will the Prime Minister tell us why, from next year, expenditure on heating insulation programmes for low-income households will be half that of 2010-11?

[The Prime Minister]

I know that the hon. Lady takes a deep interest in these matters. The green deal that is being brought in is a bigger and better programme. Labour promised to abolish fuel poverty altogether in its 2005 manifesto, and yet fuel poverty went up. We are investing in the Warm Front scheme, we have maintained the winter fuel payment, we have increased the cold weather payment, we are making money available under the Warm Homes Healthy People fund, and the green deal and the energy company obligation are some of the biggest schemes ever introduced in this country.

[Neil Carmichael (Stroud) (Con)]

Q9. Does the Prime Minister agree with the shadow Health Secretary that any increase in the expenditure of the NHS would be “irresponsible”?

[The Prime Minister]

My hon. Friend makes an important point. Some people in the House might have missed this. In a recent health debate, my right hon. Friend the Health Secretary asked the shadow Health Secretary:

“does he stand by his comment that it is irresponsible to increase NHS spending?”—[Official Report, 12 December 2012; Vol. 555, c. 332.]

What did the shadow Health Secretary reply? He said, “Yes, I do.” It may be Christmas time, but the shadow Health Secretary is the gift that keeps on giving.

[Jack Dromey (Birmingham, Erdington) (Lab)]

Last week, 100 young homeless people came to this House for the first ever young homeless people’s parliament. I am grateful to you, Mr Speaker, for being present, to the House authorities for their support, and to the Ministers who came to engage with those young people. They were excellent young people who gave powerful, personal testimony about why they had become homeless. They set out in no uncertain terms what they expect from us in this House. Above all, they want their voice to be heard. They agreed that they would seek a meeting with the Prime Minister. Will he receive a delegation of those young, homeless people?

[The Prime Minister]

I join the hon. Gentleman in welcoming the fact that those young people came to Parliament to make those points, and I will listen carefully to what they have to say. The truth is that in our country we have seen housing benefit increase by something like 50% over recent years, and even under our plans it will continue to increase. What we in Britain need to do is build more homes in the private sector and the social rented sector. That is the vital task ahead of us, and I give credit to planning Ministers and others who will help to make that happen.

[Andrew George (St Ives) (LD)]

Q10. The closure two months ago of the originally state-sponsored lifeline helicopter service to the Isles of Scilly has presented significant challenges to islanders, medical services and the economy, although local people and other stakeholders are working together to find solutions. Is the Prime Minister prepared to meet me and a small delegation of islanders to explore what encouragement and assistance the Government can provide to the islands in this their hour of desperate need?

[The Prime Minister]

My hon. Friend makes an important point; clearly proper transport links to the Isles of Scilly are absolutely vital. I understand that other providers are looking to fill the gaps left by the helicopter service. That would provide the most long-term and sustainable option, rather than Government subsidy, but obviously we have to look at all options, because that part of our country needs to be connected to the mainland. If it is necessary to have a meeting, then of course I will.

[Mr David Crausby (Bolton North East) (Lab)]

Q11. rose—[Interruption.]

[Mr Speaker]

Order. Let us have order for Mr David Crausby.

[Mr Crausby]

When the great train robbers stole £2.5 million from Royal Mail, they were sentenced to as many as 30 years in prison. When our bankers get caught fraudulently taking billions of pounds from poor people throughout the world, they just pay large corporate fines and walk away with fat pensions. How can we ever be in anything together as long as we tolerate powerful villains who are too privileged to be put behind bars?

[The Prime Minister]

The hon. Gentleman makes an important point, and that is why the Wheatley review into the LIBOR scandal recommends a series of changes, including criminal sanctions. I think that when people have broken the law they should face the full force of the criminal law. What punishment we should design for the people who sold our gold at half price, on the other hand, is another matter altogether.

[Mr Marcus Jones (Nuneaton) (Con)]

Dementia is a terrible condition that destroys lives. Will my right hon. Friend the Prime Minister join me in commending Warwickshire county council and local health care partners for developing the excellent Coventry and Warwickshire dementia portal that provides an excellent service to dementia sufferers and their carers?

[The Prime Minister]

I am happy to join my hon. Friend in paying tribute to his county council. We need to do far more as a country to tackle dementia. There are three important parts to that. First, we must recognise that dementia is a disease and not just a natural part of ageing, and we need to increase the research that goes into dementia. We need to improve the care that people get in hospitals and in care homes, and make sure that there is far more dignity. Frankly, all communities have to come together and make more dementia-friendly communities. That is where local government can help lead the way by bringing organisations together, as it has obviously done in Warwickshire.

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

Q12. It is interesting that the Prime Minister says that those who break the law should feel the full force of the law, as his local Heythrop hunt has pleaded guilty to four charges of illegally hunting foxes with dogs. Will he remind the House how many times he has ridden with the hunt and say whether he used his own horse or borrowed one from a friend?

[The Prime Minister]

I can happily put on record that I have never broken the law in this regard.

[Mr Julian Brazier (Canterbury) (Con)]

May I reassure my right hon. Friend that those of my constituents who are most strongly in favour of reforming benefits—focusing them more on those who need them and taking them away from those who do not—are people who live on council estates and are fed up with working long hours to subsidise the lifestyles of those who do not want to work?

[The Prime Minister]

My hon. Friend makes an important point. We have made three difficult decisions. We set a 1% pay freeze on the public sector, a 1% increase on working benefits and a 1% freeze on tax credits. Labour Members support the 1% freeze on public sector pay, which is progress, but they do not support the 1% increase on welfare benefits. They think the income of people who are out of work should go up faster than the income of people who are in work. That is why they are so profoundly out of touch with the nation, and why they do not deserve to be in government.

[Kevin Brennan (Cardiff West) (Lab)]

With the Prime Minister’s neighbours in trouble over phone hacking and, as we have heard, his local hunt in disgrace, he might find himself stuck at home a bit over Christmas watching films on TV. I have had a quick scan of the Radio Times. Which of these films would he fancy: “The Grinch Who Stole Christmas”, starring the Chancellor of the Exchequer; “The Muppet Christmas Carol”, starring the Lib Dem members of the Cabinet; or “It’s Not a Wonderful Life for the Poor”, starring himself?

[The Prime Minister]

The Labour party will have to swap “Wallace and Gromit” and have “The Muppet Christmas Carol” instead. I have one suggestion—full of Christmas cheer. Everybody knows that the shadow Chancellor does a brilliant job playing Santa at the Christmas party every year—[Hon. Members: “Hear, hear!”] He does an excellent job. Why not give everyone an early Christmas present, make the arrangement permanent and give him the sack?

[Mr Richard Bacon (South Norfolk) (Con)]

rose—[Interruption].

[Mr Speaker]

Order. The House should hear the voice of Bacon.

[Mr Bacon]

Thank you, Mr Speaker.

Does the Prime Minister agree with the increasing number of informed commentators who believe that the ring-fencing of the investment banking subsidiaries of commercial banks will not work properly, and that complete separation is required?

[The Prime Minister]

The Government have looked at this carefully. We commissioned the Vickers report, which came up with the idea of ring-fencing, which was right. The key is that we want to ensure that, if a bank fails, it can fail safely, without taxpayers having to stump up the money to sort it out. That would be a major advance, and something the whole country would support.

[Mr George Howarth (Knowsley) (Lab)]

The Prime Minister will be aware of the welcome news this morning that the Attorney-General’s application to quash the Hillsborough verdicts was upheld by the High Court. He will understand that that will involve the Hillsborough families in a great deal of legal costs to ensure that they are properly represented. Will he agree to waive the VAT on the CD “He Ain’t Heavy, He’s My Brother”, the proceeds from which will go directly to the Hillsborough families to support their legal case?

[The Prime Minister]

I join the right hon. Gentleman in welcoming the decision made today. The Hillsborough families have long wanted this new inquest, and it is very good that the system has moved relatively rapidly since the Hillsborough statement and the Hillsborough debate in the House to help bring the decision about. I have received representations on the Hillsborough families’ single. The Chancellor of the Exchequer is currently on the other side of the Atlantic, but as the First Lord of the Treasury, I think I can confidently predict that there will be a decision that will go down well on Merseyside.

[Sir Bob Russell (Colchester) (LD)]

As this is the season of good will and humbug, will the Prime Minister confirm that, for the greater part of the period of the Labour Government, the top rate of tax was 40p; the gap between rich and poor widened; and they left nearly 4 million children living below the poverty line?

[The Prime Minister]

My hon. Friend makes an extremely good point. He could have added that the Labour Government left a record deficit, saw youth unemployment double, made a complete mess of the economy, and had an open-door immigration system. They have never apologised for any of it.

[Mr Speaker]

Last but not least, I call Tom Clarke.

[Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)]

Many people watching our proceedings will be interested in the issue of fuel poverty, but they might be a little confused by the Prime Minister’s reply a few moments ago to my hon. Friend the Member for Stoke-on-Trent North (Joan Walley). Will he confirm—let us be transparent—that, as one body has advised, approaching 9 million households suffer from fuel poverty, which is the highest since records began? Will he explain to the House and our constituents, as we approach Christmas, what the Government are prepared to do about the horrible scandal of fuel poverty?

[The Prime Minister]

The right hon. Gentleman is entirely right that fuel poverty is a scandal and that it needs to be dealt with, but I do not believe the figures he gives are correct. The figures I have show that, in 2012, it is expected that 3.9 million households will be in fuel poverty. However, as I have said, we are committed to tackling fuel poverty. That is why we have maintained the winter fuel payments; why we have increased the cold weather payments and kept the increase permanent; and why we are investing in the Warm Front scheme and the warm home discount. The green deal will make a real difference—[Interruption.] I hear chuntering from Opposition Front Benchers. They promised to abolish fuel poverty, but they put it up.

Afghanistan

Wednesday 19th December 2012 Commons Chamber

12:35

[The Secretary of State for Defence (Mr Philip Hammond)]

With permission, Mr Speaker, I should like to make a statement on Afghanistan.

Let me once again pay tribute to the brave men and women of our armed forces serving in Afghanistan. Theirs is a difficult and dangerous job; they operate in the most demanding of environments, displaying courage and heroism on a daily basis. Since operations began in 2001, 438 members of our armed forces have made the ultimate sacrifice; 11 since my right hon. Friend the International Development Secretary made the last quarterly statement on Afghanistan on 13 September.

In the face of such sacrifice, we should be in no doubt about why we are operating in Afghanistan. It is for one overriding reason: to protect our national security. Atrocities on the scale of 11 September 2001 must never be allowed to happen again. We seek an Afghanistan able to effectively manage its own security and prevent its territory from being used as a safe haven by international terrorists to plan and launch attacks against the UK and our allies.

That is an objective shared by our coalition partners in the international security assistance force and by the Afghan Government. We in NATO fully support the ambition of the Afghan Government for them to have full security responsibility across Afghanistan by the end of 2014. Our strategies are firmly aligned. The phased process of transition of security responsibility, agreed at the Lisbon summit, is well advanced and on track. In accordance with ISAF planning, by the end of 2013 we expect that UK forces will no longer need to routinely mentor the Afghan national army below brigade level. This is a move up from our current battalion level mentoring, a reflection of rapidly improving Afghan capacity and capability and in line with the Chicago milestone.

As the Prime Minister has just announced, a progressive move to brigade level mentoring will also allow us to make further reductions to our force levels from the 9,000 we will have at the end of this year. Our current planning envisages a reduction to approximately 5,200 by the end of next year. That number is based on current UK military advice and is in line with the NATO strategy agreed at Lisbon and the emerging ISAF planning. It also reflects the real progress being made in Helmand. We will keep this number under review as the ISAF plan firms up and other allies make draw-down decisions in the new year. Let me be clear: this reduction is possible because of the success of the Afghan national security forces in assuming a leading role.

Across many parts of Afghanistan, security is already delivered by the Afghan national security forces. Today, the ANSF has lead security responsibility in areas that are home to three quarters of the population, including each of the 34 provincial capitals and all three districts that make up the UK’s area of operations. Across Afghanistan, the ANSF now leads on more than 80% of conventional operations and carries out 90% of its own training. It sets its own priorities, leads its own planning and conducts and sustains its own operations. By the middle of next year—marking a moment of huge significance for the Afghan people—we expect the ANSF to have lead security responsibility for the whole country.

This national picture is replicated in Helmand. The ANSF is now firmly in charge in the populated areas of central Helmand, increasingly with the ability and confidence to operate independently, and, as the ANA’s confidence in its own ability grows, it is showing an appetite to conduct Afghan intelligence-led raids, and we are focusing our advisory effort accordingly.

The focus of our assistance to the ANSF in Helmand is increasingly switching from company-level activities to mentoring at battalion level. Kandaks from the ANA’s 3/215 Brigade in Nad Ali and Nahr Saraj have already moved to the new model, working alongside the UK-led brigade advisory group, and further kandak advisory teams will be in place shortly. The reaction of the leaders and commanders at all levels in 3/215 Brigade has been one of pride based on self-confidence. Furthermore, this phased transition has allowed the UK-led Task Force Helmand to reduce its footprint significantly, and, since April, nearly 50 permanent British base locations—more than 60% of the pre-April total—have been closed or handed over to the ANSF.

Although progress on security has been real and meaningful, partnering is not without risk, and the attacks on our forces, including the so-called insider attacks perpetrated by rogue members of the ANSF, remind us how difficult the mission is. We are working at every level to suppress this threat and will do everything that we can to thwart it. We are clear that we will not allow these cowardly attacks to derail our strategy or commitment to the Afghan people.

The insurgents remain committed to conducting a campaign of violence in Afghanistan and continue to represent a threat to the future stability of the country. The ANSF, supported by ISAF where necessary, is taking the fight to the insurgents and pushing them away from the towns, markets, key transport routes and intensively farmed areas towards the rural fringe. As a result, the Afghan-led security plan is increasingly able to focus on disrupting the insurgency in its safe havens.

Although we cannot be complacent, the picture as a whole is of an insurgency weakened. The number of enemy-initiated attacks has fallen by an average of more than 10% in areas that have entered the transition process, so demonstrating that the Afghans are managing their own security. More importantly, the geographical pattern of enemy-initiated attacks shows a significant reduction in impact on the local population. Although our combat mission will be ending in 2014, our clear message to the Afghan people remains one of firm and ongoing commitment.

On the security front, at the Chicago summit in May, the international community agreed to provide funding to support the continued development of the Afghan national security forces in the years after 2014. NATO has agreed the establishment of a new, non-combat mission after transition completes. The UK will support this, including through our role as the lead coalition partner at the new Afghan national army officer academy. That is our baseline commitment, and, as the Prime Minister said earlier, we will consider other options for additional engagement after 2014.

On supporting the Afghan Government as a whole, the Kabul conference in June sent a clear message of regional engagement, and, at the Tokyo conference in July, $4 billion per year was pledged to meet Afghanistan’s essential development needs. The UK’s combined ongoing funding commitments from Chicago and Tokyo are almost £250 million a year. For the value of this support from the international community to be fully realised, however, the Afghan Government will need to address the corruption that remains rampant and could become a very real threat to the long-term stability of Afghanistan. The Afghan Government now need to deliver on their commitments through the Tokyo mutual accountability framework to establish a legal framework for fighting corruption, improve economic and financial management and implement key economic and governance reforms, including on elections.

Democracy is taking hold in Afghanistan—not, of course, in the same shape that we have here in Britain, but Afghan voters can look forward to a future of their choosing, rather than one that is imposed upon them. Afghan women enjoy a level of participation in their society and their politics that few could have dreamed of even half a decade ago. The Department for International Development will continue to provide funding and support to advance this important agenda further. In Helmand, the process of local representation has seen marked improvements. Voter participation in 2012 for district community council elections in the traditionally challenging districts of Sangin, Nahr Saraj and Garmsir has been impressive by comparison with levels in previous presidential and parliamentary elections in the same areas. October’s announcement of the 2014 presidential elections is another important milestone in Afghanistan’s history. Many challenges remain, but an inclusive and transparent electoral process will be a sign of real progress.

Ultimately, the best opportunity for a stable and secure Afghanistan for the long term lies in a political settlement—one that draws in those opponents of the Afghan Government willing to renounce the insurgency and participate in peaceful politics. Any political process will, in the end, require the Afghan Government, the Taliban and other Afghan groups to come together to talk and to compromise. We appreciate how difficult that is for the respective parties, so we are working with our international allies to help to bring all sides together. In particular, the engagement of Pakistan in the process is hugely important. Our aim is to generate confidence and dialogue. Our message to the Taliban is that reconciliation is not surrender; it is an opportunity for all Afghans to sit down together and help to shape their country’s future. Common ground can be found, focused on the need for a strong, independent, economically viable Afghanistan.

The future of Afghanistan can be seen in the increased level of economic activity across the country. Bazaars that had been deserted are re-opening and commercial investment is evident in the towns. Basic public services are available to increasing percentages of the population. Nevertheless, Afghanistan, although rich in culture and natural resources, remains one of the poorest countries in the world—a legacy of 30 years of conflict. Its people are proud and hospitable, yet they have suffered unimaginable brutality and deprivation.

Over the last 11 years, we have been helping to ensure that Afghanistan’s past is not inevitably its future. As we move towards full transition at the end of 2014, it is clear that there remain huge challenges ahead for the Afghan people. Our combat mission is drawing to a close, but our commitment to them is long term. Progress is clear and measurable, and our determination to complete our mission and help Afghanistan to secure its future remains undiminished. I commend this statement to the House.

12:47

[Mr Jim Murphy (East Renfrewshire) (Lab)]

I thank the Secretary of State for an advance copy of his quarterly statement. On each occasion when we meet to discuss Afghanistan, we rightly pay tribute to our service personnel and their families. That is even more poignant as we approach Christmas. As we prepare to celebrate Christmas with our families, we remember those in Afghanistan, separated from theirs, and those who have been lost, never to return to their loved ones. They are in the thoughts of us all and in the prayers of many of us.

The commitment to success in Afghanistan runs deep on both sides of the House. Although we on the Opposition Benches will scrutinise Government decisions, we will support the intentions with which they are made. Afghanistan has seen significant, but not irreversible progress. Al-Qaeda has been dispersed; we have overseen elections; the army and police forces are being trained; and a rule of law is developing. However, none of those tasks can be said to be complete. There are immense challenges to overcome. Facilitating free and fair presidential elections, tackling green-on-blue attacks, improving the representativeness of the police and the army, developing an education system and, above all, helping to deliver political reconciliation are all issues that necessitate our commitment up to and beyond 2014.

We all want to see our troops home as soon as possible, and we welcome today’s announcement. However, can the Secretary of State say when he will be able to tell us which units will leave and from which parts of Helmand? We are all concerned about the continuing risk to UK personnel who will remain. Can he tell us whether any force protection capabilities will be drawn down as a consequence of his announcement?

The Secretary of State spoke in general terms. Can he be more specific about how the capacity of those who are departing can be sufficiently replaced by Afghan forces? Can he give the House more details about the capability of Afghan forces specifically? What capacity do they have in providing an airbridge, aerial surveillance and intelligence?

The Secretary of State told us that 3,800 of our forces would leave by the end of next year. Does he currently envisage most of them remaining until the end of the fighting season, and does he expect the UK forces who remain after 2013 to be withdrawn throughout 2014 or to remain until the end of combat operations?

The co-ordination of the military coalition is essential. Can the Secretary of State tell us whether today’s announcement is part of a synchronised international set of announcements? Can he also say whether all those who return from Afghanistan, whether in 2013 or in 2014, will be exempt from any future tranche of compulsory Army redundancies?

Although the focus is rightly on withdrawal, it is also necessary to consider the post-2014 military settlement. The Chief of the General Staff is right to say that our commitment to Afghan institutions must be long-term, but we need more clarity about the nature of that commitment. Will the Secretary of State be more specific about the role of non-combat personnel? Is it his current thinking that our trainers will be embedded with the ANSF, and, if so, who will be responsible for force protection?

The Prime Minister rightly alluded to this earlier, but it is still unclear how many UK forces will remain post-2014 and from which services they will be drawn. When will the Secretary of State be in a position to give us more details abut that, as well as the UK’s equipment legacy to Afghanistan?

We all know that a long-term settlement for Afghanistan will be achieved through politics, not just through military might. There have been reports recently of a road map to peace from Afghanistan’s High Peace Council, outlining plans for talks between the Afghan Government and the Taliban early next year. How confident is the Secretary of State that such talks may indeed take place, and does he believe that talks between the Taliban and US officials will recommence in Qatar in the new year? Will he also comment on the significance of Pakistan’s release of 18 Afghan prisoners? Does he feel that it marks a potentially significant shift in the Afghanistan-Pakistan relationship?

One of the main measures by which we will judge progress in Afghanistan is the progress of women. Sadly, a recent detailed UN report showed that Afghan women remain frequent victims of abuse. What efforts are the UK Government making to ensure that women’s safety does not deteriorate once ISAF forces have left? In particular, beyond DFID’s efforts, what are the Government doing to sustain the progress that has been made for women in relation to the political process, the police and the judiciary?

As we enter the 12th and penultimate year of UK combat operations in this bloody but unavoidable conflict, there will rightly be lessons and consequences from Afghanistan. The time will also come for us to reflect, as a nation and free from party politics, on how we can mark in a lasting way our commemoration of those who have fallen and those who have been injured. I look forward to hearing from the Secretary of State how NATO can achieve withdrawal while maintaining the stability for which so many Britons have fought so fiercely. We need to get this right. This is our fourth conflict in Afghanistan, and we have no intention of there ever being a fifth.

[Mr Hammond]

I thank the right hon. Gentleman for his comments and for the tone in which he made them. I know that he expressed the views of Members in all parts of the House in sending best wishes for Christmas to the members of our service personnel who will be in theatre over the Christmas period. I am grateful for his continued support and for that of the whole Opposition.

The right hon. Gentleman was absolutely right to emphasise the scale of the challenge ahead, and the reversibility of the achievements that have been won. It is for precisely that reason that we are engaged in the ongoing process of building the Afghan national security forces and the institutions of the Afghan state for the long term, and it is for precisely that reason that we have gone out of our way to emphasise the nature of our ongoing commitment to the Afghan people way beyond the end of our combat operations in 2014.

The right hon. Gentleman understandably asked some questions about the draw-down of our forces during 2013. He asked which units would leave and from which parts of Helmand. Owing to our six-monthly rotational pattern in which units are deployed to theatre routinely around March-April and September-October each year, it is less a question of which units will leave than a question of deploying fewer units to replace those that are coming out of theatre at each successive turn of the handle. I expect that there will be some draw-down of numbers next April, a period during the fighting season in which numbers remain constant, and a further draw-down in September-October, towards the end of next year.

The right hon. Gentleman asked about force protection measures. Ours is an integrated force. The 5,200 figure was arrived at through a bottom-up process of military logic and military planning that took account of the shape and scale of the force that will be required to deliver the tasks that we expect to be delivering by the end of 2013.

As for the capabilities of the Afghan national security forces who will increasingly fill the gap as we reduce our numbers, the message is clear. The right hon. Gentleman will have heard it: I know that he has heard the back-to-office reports of returning commanders from Afghanistan. The Prime Minister mentioned it earlier, and I have heard it myself. Everyone talks of the Afghan forces’ increasing confidence, increasing competence and increasing willingness to engage. There has been a step change in the level of what they are able to do.

However, as the right hon. Gentleman pointed out, at present Afghan forces still depend on ISAF allies for some key enablers: air cover, air support, indirect fire support—they are building a capability of their own in that respect, but it is as yet immature—and, crucially, medical evacuation, which gives the Afghan army high levels of confidence on the battlefield. Over the next two years, we will focus on developing Afghan indigenous capabilities so that they can replace those enablers at the end of our combat involvement.

The right hon. Gentleman asked about the international dimension of draw-down. There is an emerging ISAF plan, which is being discussed among the ISAF nations, and today’s announcement is entirely consistent with that plan. Other allies, including the United States of America, will make specific announcements in due course.

The right hon. Gentleman asked about the rules on redundancy. Announcements about future tranches of Army redundancy will be made in the new year, and the rules will be set out to be as fair as possible. That means ensuring that the field of redundancy is as wide as possible, while ensuring that those who are about to be deployed on operations, those who are currently deployed and those who have just returned from operations remain exempt. The more widely we set the field, the fairer the process of redundancy selection will be.

The right hon. Gentleman asked about the post-2014 non-combat commitment and about embedded training. Those matters have not been decided, beyond the commitment that we have given to take the lead role in running the Afghan national officer training academy. There are a number of things that we could consider doing beyond that, but we have decided that it does not make sense to make firm commitments earlier than we need to, before we see how the situation develops on the ground and before we see what other allies intend to do. We will make announcements to the House in due course, during 2013, as those decisions are made.

Finally, the right hon. Gentleman asked about talks between the Afghan Government and the Taliban and between US officials and the Taliban. The Government are working very hard and very diligently. My right hon. Friend the Foreign Secretary is routinely engaged in encouraging the process of dialogue, as is the Prime Minister. We know from our own experience over many years that conflicts of this kind invariably have to be settled by means of dialogue and compromise. At the heart of that dialogue and compromise will be a renewed shared understanding of the need for future dialogue and co-operation between Afghanistan and Pakistan, and I am pleased to say the UK has played a significant role in enhancing that and in ensuring there is genuine engagement with Pakistan in these discussions.

[Mr James Arbuthnot (North East Hampshire) (Con)]

I welcome my right hon. Friend’s statement. My question is about force protection. As all the ISAF countries begin to draw down, they will have concerns about force protection, including how to protect increasingly isolated units. What is being done to reduce the isolation of ISAF units and to share possible force protection measures across ISAF countries and the Afghan national security forces?

[Mr Hammond]

My right hon. Friend is right to draw attention to that question, as the right hon. Member for East Renfrewshire (Mr Murphy) also did. As we draw down, force protection will be one of the key determinants of the shape of the force and the scale of draw-down that is possible. As my right hon. Friend suggests, there will be co-ordination across ISAF, including sharing force protection arrangements as the force gets smaller. I should also draw my right hon. Friend’s attention to what I said earlier about the reduction of the UK footprint in Helmand. That is significant and has significant implications for force protection. We are now servicing 32 UK locations in Helmand province, as opposed to more than 80 UK locations just nine months ago. That has led to a significant reduction in both the logistics challenge and the force protection challenge.

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

When military action was first taken in Afghanistan some 11 years ago, the purpose was rightly to remove, after 9/11, al-Qaeda from Afghanistan, and that was accomplished fairly quickly. I welcome the troop reduction, but does the Secretary of State accept that a military victory of any kind over the Taliban is totally out of the question—it has not come about so far, and it is not going to come about in the next two years—and that the future of Afghanistan will have to be decided by Afghans, even including some Taliban members, who are totally opposed to that obnoxious organisation?

[Mr Hammond]

To my surprise, I largely agree with the hon. Gentleman. He is right that the initial challenge was to defeat al-Qaeda and deny it the space to organise in Afghanistan, and that has been achieved. He is also right that military means alone will not solve the problem in Afghanistan, and I do not think anyone in this Government or the previous Administration has suggested that. In the end there has to be compromise and dialogue, and a process that draws into civil society what we might call the soft part of the insurgency, which is willing to renounce insurgent activity and engage in political dialogue. Our experience in the United Kingdom and around the world clearly suggests that that is the way sustainably to end these kinds of enduring conflict. If we want an enduring peace in Afghanistan, it will need to involve all sections of Afghan society and all strands of political opinion.

[Sir Menzies Campbell (North East Fife) (LD)]

May I also express my admiration for, and gratitude to, those who have served and who are serving in Afghanistan? Like other Members, I was reassured by what my right hon. Friend said about force protection, as it is axiomatic that land forces are at their most vulnerable at the time of withdrawal, but a further area of protection needs to be addressed. Will there be proper protection of equipment, to minimise opportunities for it to be used by insurgents or others with malign intentions towards the Government of Afghanistan?

[Mr Hammond]

I am grateful to my right hon. and learned Friend for his remarks. I should have said in relation to force protection that the transition from company-level to battalion-level and then to brigade-level mentoring and advising will make the force protection challenge much easier by reducing the daily footprint of contact with Afghan forces and the Afghan population. We intend to recuperate to the UK large amounts of equipment, as we are planning to use much of it in the construction of our future Army plans, Future Force 2020, but we will, of course, ensure that any equipment that is not required back in the UK is either properly and formally gifted to the Afghan national security forces or the militaries of friendly neighbouring countries, or is appropriately destroyed.

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

Out of which budget will the cost of repatriating and reintegrating equipment come? Will it come out of the £160-billion core equipment budget?

[Mr Hammond]

That is a good question. Our arrangements with the Treasury are that equipment that has been purchased as urgent operational requirements from the special reserve may be repatriated into core without any charge to the defence budget, but the cost of physically recuperating that equipment will be met from the core defence budget. In respect of armoured vehicles that have been purchased as UORs, therefore, the Army will have to decide whether it is cost-effective to bring that equipment back and overhaul and re-equip it for future service, or whether it is more appropriate to abandon it and devote the money saved to purchase new equipment.

[Sir Gerald Howarth (Aldershot) (Con)]

My right hon. Friend and the Prime Minister both rightly referred to the importance of maintaining a post-2014 commitment in Afghanistan. One of the ways that we might most appropriately manifest that is by maintaining Camp Bastion, which has been specially built for its purpose. Indeed, a huge amount of money has been invested in it. That would not only send a signal to the Afghan population and Government; it would also provide a useful strategic asset in what is an important and turbulent area of the world.

[Mr Hammond]

The United States is currently considering where to retain strategic bases in Afghanistan beyond 2014, and my understanding is that it is highly likely—although not yet absolutely certain—that it will choose to continue to occupy Camp Bastion.

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

A few weeks ago in the House of Commons there was the first ever meeting of the UK’s Hazara community. As the Secretary of State knows, the Hazaras are a Shi’a minority who have suffered considerable oppression in Afghanistan, going back at least as far as the first British war there, but in particular under the Taliban regime. The Secretary of State has rightly talked about the need for a political solution, but may I urge him and his fellow Ministers from other Departments to ensure that the interests of the minority Hazara community are not lost in the rush to achieve a political settlement?

[Mr Hammond]

I am grateful to the right hon. Gentleman for that question, and I will ensure that his concerns about the Hazara community are drawn to the Foreign Secretary’s attention. There is a significant number of minority communities in Afghanistan—it is a fragmented society—and one of the challenges will be to design a future solution that is coherent and promotes having a strong central Government but also respects the many different minority communities in the country.

[Bob Stewart (Beckenham) (Con)]

What does my right hon. Friend mean when he refers to mentoring at kandak or battalion level? Does that mean our soldiers and officers will not venture out on patrol, but will remain with the headquarters element and therefore will not be as exposed as in the past?

[Mr Hammond]

Not necessarily: some of the kandak-level advisory activity may well involve moving with the battalion headquarters element, and if the battalion commanders are moving outside their bases, on some occasions the advisory team may move with them. This is a flexible construct, however, and things will depend on how individual commanders prefer to work and how their kandak advisory teams find it most constructive to work with them. There is a large degree of discretion.

[Mr Jeffrey M. Donaldson (Lagan Valley) (DUP)]

Although of course it is right to press ahead with dialogue with the Taliban, it is also prudent to keep an eye on what they are doing as regards the ongoing conflict. What are our military doing to build the intelligence gathering capacity of the ANSF in advance of withdrawal?

[Mr Hammond]

That is a very good question. It is probably fair to characterise ISAF as having had rather poor human intelligence capability and having relied on very sophisticated electronic and other technological intelligence gathering. We will not be able to replicate in the ANSF a similar level of high-tech intelligence gathering, but I am pretty confident that what the ANSF will lack in that regard will be more than made up for by its human intelligence capability. Members of the ANSF have an intuitive understanding of what is going on in local communities that gives them a touch and feel for the local area that ISAF troops, however long they stay there, will never have.

[John Glen (Salisbury) (Con)]

Given what my right hon. Friend has said about the inherent risks of reversibility in the security situation, what plans are in place if there is a significant change in what is anticipated over the next couple of years so that, if there is not the training and leadership capability among the Afghan population, we have the flexibility to implement different plans and that our hard-won gains are not lost by the end of 2014?

[Mr Hammond]

Of course, we retain flexibility in our plans, but I would not wish to mislead my hon. Friend: our clear intention is to end our combat operations by the end of 2014, along with the rest of our ISAF partners. By setting that clear target, we have set the Afghans a target and all the evidence is that they are stepping up to the plate with alacrity and delivering on—indeed, exceeding—our expectations of their ability to respond to that challenge.

[Derek Twigg (Halton) (Lab)]

As Pakistan has a key role to play in any peaceful solution for Afghanistan and the Secretary of State has mentioned increased engagement, what evidence does he have of reduced involvement from certain sources in Pakistan, particularly the security services, in helping and sheltering insurgents and the Taliban?

[Mr Hammond]

As the hon. Gentleman knows and as we have discussed in this House before, the situation in Pakistan, particularly in the federally administered tribal areas, is extremely complex, as is the engagement of the Pakistani intelligence agency in activities there. We are seeing a clear political direction from the Pakistani civilian Government towards engagement and constructive working with the international community and Afghan partners, but we are also seeing a clear indication that the military are now thinking hard about where Pakistan’s long-term interests lie. They know that there are only two years left of ISAF combat presence in which to sort this out and they are engaging with international partners and the Afghans in a much more constructive way than we have seen for many years.

[Martin Horwood (Cheltenham) (LD)]

The Secretary of State quite rightly says that the relationship between Afghanistan, Pakistan and the Taliban will be central to any peace, which we all hope will include respect for the rights of girls such as Malala Yousafzai, who is surely one of the bravest teenagers in the world. Does the Secretary of State detect any lasting shift in Pakistani public and political opinion and in attitudes towards the Taliban following on from her extraordinary example?

[Mr Hammond]

I think that the answer to that must be yes, that has had an impact on Pakistani public opinion. There is also evidence that the Taliban is moderating some of its more extreme views because it recognises that they are costing it popularity with the population.

[Hugh Bayley (York Central) (Lab)]

I was in Afghanistan three weeks ago as president of the NATO Parliamentary Assembly. I concur that the Afghan national army is capable, well led and well equipped. It is essential that it remains under political control, however, and as President Karzai will step down early in 2014 and a new president will be elected, will the Secretary of State reassure me that our Government and those of our ISAF allies will give as much attention to the political transition as to the security transition?

[Mr Hammond]

The hon. Gentleman is absolutely right. Clearly, maintaining political control of the Afghan national army is crucial. I see little sign that it is becoming politicised and it operates effectively as a military force, but the Afghan Ministry of Defence is a weak institution. One area that we are considering for UK engagement beyond 2014 is the provision of support at senior level to the Afghan Ministry of Defence.

[Patrick Mercer (Newark) (Con)]

Will the Secretary of State assure me that he will not listen to the requests from the Opposition to provide yet further details about our tactical deployments and tactical draw-down? Our enemies already know too much about when we are withdrawing, how many troops we are withdrawing and in what numbers. Giving units, equipments and other important details would, I suggest, help our enemies and not hinder them.

[Mr Hammond]

As I have already said, I cannot at the moment give the details of which units will be in theatre in future. We make no secret about units being deployed—we make routine announcements on which units will be deployed to theatre—but I completely agree with my hon. Friend that a public discussion about which capabilities we will retain and withdraw and about when we will do that would not be helpful.

[Mr Dai Havard (Merthyr Tydfil and Rhymney) (Lab)]

I, too, was able to visit Afghanistan with colleagues from the Defence Committee, as the Secretary of State will know, and we saw much of the progress he has described. However, we identified one particular issue on which I would like him to make an observation: the detention of prisoners at Bastion and the difficulties in transferring them into the Afghan justice system. I understand that two of them are charged with the murder of British troops. Will he comment on how that process is progressing?

[Mr Hammond]

I am happy to update the House on the detention situation, which is an important aspect of our operations. We suspended transfers into the Afghan justice system earlier this year because of concerns about the potential for the mistreatment of prisoners in National Directorate of Security facilities. Over a period of months, a significant number of steps were taken to increase our oversight of what happens to transferred prisoners. We were hoping to recommence transfers in the autumn, but two things happened. First, in a case that is being heard in the High Court in London, an injunction was granted against us, preventing further transfers into the Afghan system without the permission of the High Court. Secondly, new and classified information came to my attention that led me to make a decision to continue as a matter of policy to suspend transfers into the Afghan system. That means that we are holding significant numbers of detainees who are to be charged in the Afghan judicial system but cannot, for reasons of policy and legal impediment, be transferred into the Afghan system at present. We are improving and increasing the size of the detention facility at Bastion to reflect the fact that those people will be held in larger numbers and for longer periods.

[Mr James Gray (North Wiltshire) (Con)]

People across Wiltshire, to where many of these soldiers will return, will strongly welcome the announcement about what is effectively the beginning of the end of our combat involvement in Afghanistan. It is very welcome indeed. Does the Secretary of State agree that the success of our withdrawal will be judged by two kinds of Afghan confidence? First, they must be confident that they can do the job, which increasingly seems to be the case, and secondly they must be confident that we will not cut and run—that we are not leaving them to it, but that we will keep an eye on what happens and stand ready, as my hon. Friend the Member for Salisbury (John Glen) said, to intervene again should that become necessary in the years to come.

[Mr Hammond]

As the Prime Minister has repeatedly made clear and I have emphasised again today, although our combat mission will be coming to an end, our commitment to the Afghan people will be enduring and is underpinned by a firm commitment of more than £250 million a year of military aid support and development aid.

[Keith Vaz (Leicester East) (Lab)]

Mohammed Hottak is a former Afghani interpreter who lives in Leicester. It took him years to get his asylum case processed, and his wife and children have still not joined him. He and other interpreters risk their lives to support our country. Why are the Afghani interpreters being treated differently from those who helped us in Iraq?

[Mr Hammond]

Locally employed civilians include interpreters, but the question goes much wider than interpreters. We are currently looking very carefully at how we are going to make appropriate provision to support locally employed civilians as we draw down and eventually end our combat mission. We have a clear commitment to treat them fairly and appropriately, and to ensure their safety and security beyond the term of their employment with Her Majesty’s Government. I cannot comment on an individual’s specific case, but I am confident that as we get nearer to the end of our combat involvement in Afghanistan, further statements will be made about our detailed policy towards locally employed civilians; I believe we currently have about 3,500 of them.

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

A few moments ago, the Secretary of State gave a very important answer to my hon. Friend the Member for Aldershot (Sir Gerald Howarth), when he confirmed, for, I think, the first time by a British Minister, that our American allies are thinking of retaining at least one strategic base in the region. Given that we face the threat of the return of al-Qaeda to Afghanistan and the destabilisation of Pakistan by the Pakistani Taliban—with their nuclear arsenal to be borne in mind—is it not extremely important that somebody has a fallback plan, based on the use of strategic bases, even if it is not us?

[Mr Hammond]

When any of my colleagues stands up and says that I have said something that no Minister has said before, my heart sinks, but I think on this occasion I am okay.

I would not be so presumptuous as to speak for the United States, but my current understanding is that US planning very likely envisages the retention of Camp Bastion. Of course, any remaining footprint in Afghanistan—strategic base or otherwise—depends on the agreement of the Afghan Government, and as my hon. Friend knows, negotiations are under way between the United States and the Government of Afghanistan about a long-term strategic partnership agreement.

[Jeremy Corbyn (Islington North) (Lab)]

Can the Secretary of State tell us exactly how much money has been spent by the UK in the Afghan operation over the past 11 years—[Interruption.] It is not a joke. Can he also tell us what the comparative figures are for poverty among the ordinary people of Afghanistan now and 11 years ago?

[Mr Hammond]

On the first part of the question, I cannot tell the hon. Gentleman off the top of my head what the total expenditure has been since the beginning of the operation in 2001, but I am happy to write to him to give him those numbers. I think they have been published, but I am very happy to write to him and place a copy in the Library.

On the hon. Gentleman’s second point about poverty, Afghanistan is still a very poor country, but its economy has been growing, and although it is of course relative, there is a strong sense in Afghanistan of growing prosperity. People are able to get their goods to market; if they farm their produce, they can actually sell it. There is investment in towns and cities, and the economy has been growing at 9% a year for the last few years. Those are positive signs for ordinary Afghan people, and the progress that has been made in moving the combat—the insurgency—out of the populated centres is crucial in restoring confidence in the local economy and allowing it to thrive and prosper.

[Jack Lopresti (Filton and Bradley Stoke) (Con)]

My right hon. Friend will be aware that Defence Equipment and Support is based in my constituency. Will he join me in paying tribute to DES for all the work it has done over the entire deployment, making sure that we have the right kit and the right people in the right place at the right time? Will he give us an assurance that DES will have all the resources it needs as the draw-down begins to take place, so that equipment and personnel can be brought back efficiently and on time?

[Mr Hammond]

I am happy to join my hon. Friend in paying tribute to Defence Equipment and Support, and in particular to draw attention to the extremely efficient way in which the UOR process has worked throughout both this conflict and the Iraq conflict before it. Resources will of course be available for the recovery of our personnel and equipment, and a huge logistic operation is beginning to get under way—reopening the reverse lines of communication both through the northern stans and Pakistan—to bring that vast amount of equipment out of theatre.

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

I welcome the news that more troops are to be swiftly withdrawn, but I want to go back to the question put by the right hon. Member for Leicester East (Keith Vaz) about Afghan interpreters. They are worried that they will be sent back to Afghanistan and killed, and interpreters still serving UK troops in Afghanistan fear for their lives as more British troops leave. Can the Secretary of State assure us that he will let us know as soon as he can whether a scheme similar to that in Iraq will be properly extended to Afghanistan? Legal proceedings are about to be mounted on behalf of those people, who fear that their lives are at risk.

[Mr Hammond]

As the hon. Lady says, legal proceedings are about to be instigated—we understand—so obviously it would be improper for me to say anything about them. This is a big and complicated issue. A large number of people are involved and not all of them are interpreters, who usually are quite highly educated. There are also large numbers of locally employed staff in other capacities. As I said, we are very much focused on the problem and we must have a properly thought-through and coherent approach. I give the hon. Lady an undertaking on behalf of the Government that once we have a clear plan we will announce it to the House.

[Mr Tobias Ellwood (Bournemouth East) (Con)]

This is a landmark statement, which signals the beginning of a long draw-down in a very difficult war. Difficult questions will need to be answered as to why it has taken us so long to get to where we are today. Peace is by no means guaranteed. Does the Secretary of State agree that the welcome advances in security must be matched by improvements to governance and economic development if Najibullah is not to be repeated?

[Mr Hammond]

Yes, I am happy to agree with my hon. Friend. In particular, progress has to be made on the endemic corruption that still exists in Afghan society and throughout the Afghan economy, if the progress already made is to be built on.

Perhaps I could take this opportunity to tell the hon. Member for Islington North (Jeremy Corbyn) that I have become aware—by magic—that the net additional cost of military operations since 2001 is estimated as £17.4 billion to date.

[Jim Shannon (Strangford) (DUP)]

I thank the Secretary of State for his statement. The murder in Pakistan of six aid workers delivering vital polio treatment shocked us all. Can he assure the House that there will be military protection for medical aid workers in Afghanistan to ensure that the polio inoculations and medical treatment that are so important for children and adults can be maintained?

[Mr Hammond]

The responsibility for protecting Afghan local health services will be primarily for the Afghan police and military, but I completely agree with the hon. Gentleman that we were all shocked by the reminder of the primitiveness of some of the Taliban doctrine, and that they would attack people for providing vaccination against life-threatening diseases. That is the scale of the challenge we are dealing with.

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

I welcome the statement, but as the Secretary of State knows, some Members of the House have long held the view that we were fighting the wrong enemy in the wrong country, as we strayed from the original mission. Will he confirm that ISAF is now conducting non-conditional talks with the Taliban? Until fairly recently, the American position was that they would only talk to the Taliban if the Taliban laid down their arms and accepted the constitution. The Americans were living in never-never land. Has the position on those talks changed?

[Mr Hammond]

I think it would be wrong to characterise the discussions as ISAF discussions. There are discussions that the Afghan Government have indicated a willingness to enter into, which are conditional on an acceptance of the Afghan constitution. That is the position of the Afghan Government. There are also discussions, which have been widely reported, between US officials and Taliban representatives, which do not have the same preconditions attached to them.

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

This year, Corby lost one of its sons, Grenadier Guard James Ashworth, who died in a grenade attack in Helmand. In paying tribute to James and all the soldiers from Corby who served in the past and will serve in the future in Afghanistan, may I ask the Secretary of State to say what assessment he has made of the increased risks to the 5,500 servicemen and women who will be in Helmand in 2014?

[Mr Hammond]

Our current estimate of the opening number in 2014 is 5,200. We do not think there will be an increased risk to them. There are balancing factors to consider. On the one hand, we will be mentoring and advising at a higher level of command; that will imply a lower footprint, fewer bases and fewer patrols going outside the wire. On the other hand, we will be drawing down, and drawing down and evacuating equipment is by its nature a complex and risk-based business. But I think overall we would not expect the total amount of risk to increase during the draw-down, taking those two factors together.

[Mr Julian Brazier (Canterbury) (Con)]

On our recent Defence Committee visit to Afghanistan it was impossible not to be deeply impressed with the progress made, and my right hon. Friend’s statement is extremely welcome. May I put it to him that pivotal to our successful operation in Malaya and also, arguably, Northern Ireland was the offer of a genuine amnesty to those who laid down their arms, and that the current amnesty on offer, which does not even extend to drug-dealing activities, is not really the right route to get the softer element of the Taliban to negotiate?

[Mr Hammond]

I am happy to agree with my hon. Friend that reintegration of people who have been opposed to the regime and, indeed, active supporters of the insurgency is an essential part of a stable future for Afghanistan. A substantial reintegration programme is under way, as he knows. Thousands of low-level Taliban fighters who have abandoned the insurgency have been reintegrated into Afghan society and that process will need to continue if we are to deliver stability in the future.

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

Having visited Helmand two years ago, I want to add my own tribute to the fantastic work of our armed forces, having seen that at first hand. I recently spoke to personnel serving in Afghanistan who fear leaving the forces, fear looking for a job, and fear the cuts to support to people on low incomes. Increasing numbers of veterans who have served in Afghanistan are turning to the Royal British Legion and other forces’ charities for advice and often emergency support. What is the Secretary of State doing to support those charities to serve our very brave veterans in their lives after they leave the forces?

[Mr Hammond]

Of course we support the service charities; they are a very important part of the overall service family. But the hon. Gentleman does not do our armed forces and the people who serve in them any service by painting that very bleak picture of their prospects after service. The truth is that over 90% of people leaving the armed forces who are looking for work have found work within three months and over 95% within six months. That is a good result. We can continue to do better; we can continue to deliver additional support, and the recent appointment of a transition tsar by the Prime Minister to support service people leaving the forces and to help them in the process of getting into work and establishing a new home is a very important contribution to that. It is basically a good news story, not a bad news story.

[Rory Stewart (Penrith and The Border) (Con)]

I join other Members in congratulating the Secretary of State on making a very difficult, very courageous, correct decision to draw down troops so rapidly. May I ask him to remain open to the possibility that, depending on US decisions in January, we look at this as being only the minimum amount we withdraw, and to remain open to the possibility of withdrawing significantly more?

[Mr Hammond]

I have announced that our current planning sees numbers going down to about 5,200 by the end of 2013. That planning is of course based on certain assumptions about what the rest of our ISAF partners are doing, and about what the ANSF will be doing. We believe that those assumptions are robust, but if it turns out during the course of 2013 that things turn out differently, of course we retain the flexibility to look again at our plans.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

Given that combat missions will continue to 2014, as the Defence Secretary has said, will he ensure, in the light of green-on-blue attacks and other reasons, that all soldiers are equipped with sidearms for force and individual protection? Like many, I have constituents in Afghanistan, and some who are going there, and they and their families would be slightly less tense if all soldiers were equipped with sidearms, which would also act as a deterrent.

[Mr Hammond]

Without getting into the technicalities, I do not think I can give the hon. Gentleman the commitment that all soldiers will be equipped with sidearms, but I can tell him that current orders require all soldiers to carry a weapon at all times when they are anywhere in contact with Afghans, and if they are in a circumstance where they cannot carry a weapon, a so-called guardian angel system is in place where armed troops overwatch them during any period where they are necessarily unarmed, such as during sports activities.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

One of the legacies we can give to those who have paid so much in sacrifice for our mission in Afghanistan is the long-term stability of the nation. In its economic stability, are we doing everything we can to make sure that the wealth of natural resources that my right hon. Friend mentioned is exploited to the best benefit of the people of Afghanistan, not those from outside?

[Mr Hammond]

My hon. Friend is absolutely right that the long-term stability of Afghanistan depends on its economic development and a key part of its economic development will be the successful exploitation of its mineral wealth. Mineral wealth cannot be taken offshore to Dubai; it sits in the ground, and as long as the wealth of Afghanistan is in Afghanistan, local people will invest in Afghanistan and the future of the country. There are all sorts of international efforts, including many supported by the UK’s DFID funding, to ensure the development and exploitation of that mineral wealth for the benefit of the people of Afghanistan.

[Paul Flynn (Newport West) (Lab)]

The withdrawal is of course very welcome, but why has the Secretary of State disregarded the alarming fact that in the past 12 months, $900 million has been stolen from the bank of Afghanistan by Government corruption, and that £4.5 billion has been smuggled out of that country, much of it to Dubai, to tart up the boltholes that the politicians have prepared to flee to in 2015? Does he think that the Afghan army will give their allegiance to a corrupt Government, to the Northern Alliance or to the Taliban?

[Mr Hammond]

I am not ignoring those facts. I have acknowledged that the Afghan Government will have to do much more about corruption if Afghanistan is to have a viable future. All our activity, through DFID and other channels, is to secure sustainable development in Afghanistan, which will encourage people to retain their wealth in Afghanistan, but I do not dissent from the hon. Gentleman’s suggestion that there is wholesale corruption and that significant amounts of money have been illegally expatriated from the country. He is of course right.

[Mr Philip Hollobone (Kettering) (Con)]

Poppy cultivation in Afghanistan fuels much of the illegal hard drug trade on the streets of Britain. What progress is being made, and will be made, to reduce the reliance of the Afghan economy on poppy cultivation, while also ensuring that the livelihood of many poor farmers is not endangered?

[Mr Hammond]

This is a perennial challenge in any country where narcotics cultivation is a core part of the economy—to develop sustainable alternative forms of economic activity that provide a livelihood for peasant farmers which can compete with the returns available from narcotics. That is a big challenge for the Afghan Government. We are putting a lot of investment into helping them with that challenge and counter-narcotics will be a continuing strand of our involvement with Afghanistan well beyond the end of our combat operations in 2014.

[Nick Smith (Blaenau Gwent) (Lab)]

May I press the Secretary of State to say whether Afghanistan campaign returners will be subject to compulsory redundancy?

[Mr Hammond]

The hon. Gentleman asks the question in the abstract—[Interruption.] It is not a yes or no question at all. At the time when redundancy decisions are made, a defined group of people will be excluded from consideration. That will be people deployed on operations, people preparing to deploy on operations, and people recovering on leave after operations, but I cannot tell the hon. Gentleman, as the right hon. Member for East Renfrewshire (Mr Murphy) asked me to do, that anyone who is now or at any time in the future deployed in Afghanistan will not be eligible for redundancy. That would reduce the field eligible for selection to a tiny number and would be most unfair.

[Jeremy Lefroy (Stafford) (Con)]

I welcome the ongoing United Kingdom commitment to give £250 million a year for development in Afghanistan. This represents about 10% of the pledged total. Does my right hon. Friend have confidence that the remaining 90% will be found and that the United Kingdom will not be left to pick up the difference?

[Mr Hammond]

I think my hon. Friend might be confusing two things. There are, rather unhelpfully, two separate 4 billions here. There is £4 billion of development aid that was pledged at Tokyo, and there is $4 billion a year of support for the ANSF, of which the United Kingdom has committed about $100 million—around £70 million. We are confident that these sums will be found and that they will be available to the Afghans on an ongoing basis. We have set out our commitment and we do not intend to change from that position.

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

Like many hon. Members in the Chamber, I represent several families who have lost their loved ones in Afghanistan over the past decade. That felt like a very optimistic statement from the Secretary of State on the progress we have made. I am a little more sceptical about what it has cost us in human life and treasure for the progress we have made. We would all agree that a political solution is necessary to resolve the conflict, but what assurances can the Secretary of State give us that when we reach that political solution with our draw-down forces, we will be able to maintain the safety of all those Afghans who have been our allies over the past decade, and we will not leave them to the mercy of the elements of the Taliban that we wish to draw into the future government of Afghanistan?

[Mr Hammond]

I do not know whether the hon. Gentleman has visited Afghanistan, but many of his colleagues have. It is not a perfect democracy and it never will be. It will not be the case that the Afghan Government will control every inch of their territory after 2014. There will be messy compromises in some parts of the country. Some will not be under the control of the central Government, and some of the behaviours will not be behaviours of the type that we would put up with here or in any European country, but any of the hon. Gentleman’s colleagues who have been there will tell him that the lives of ordinary Afghans are immeasurably better today than they were five or six years ago, and that is the standard by which we should measure our involvement.

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

The Secretary of State said that the civilian Government in Pakistan are fully committed to engagement and a stable Afghanistan. He will know that there are general elections in Pakistan in March—that is, three months away. Have there been discussions with other political parties to see whether they are committed to the same process of engagement and a stable Afghanistan?

[Mr Hammond]

To be honest, I cannot answer my hon. Friend’s question. It would be usual for our local post to have some degree of contact with non-Government parties, but as he has asked the question, I am happy to interrogate my right hon. Friend the Foreign Secretary on this and to write to him and put a copy of my letter in the Library.

[Sheila Gilmore (Edinburgh East) (Lab)]

Recent events have given rise to fears that some of the advances that have been achieved for women and girls in the region, particularly in education, might be lost. One of the ways to protect women and girls is to embed attitudes towards education for women in those who will be serving in the security forces. Can the Secretary of State confirm that that is being done and is being given priority?

[Mr Hammond]

I am grateful to the hon. Lady for her question because she highlights a dilemma: how do we at one and the same time say that the Afghans must be responsible for determining their future, and that we want their future to look, in this respect, like this—with women and girls remaining engaged in society? She is absolutely right that embedding a change in culture is the way to do it. That is one reason why the Prime Minister has, from the outset, been so determined that a significant part of our commitment post-2014 will be in the form of taking the lead in the Afghan national officer training academy, which will allow us to shape the cultural awareness training that officer cadets receive and that will filter down through the Afghan forces. The hon. Lady is right. DFID will go on investing in this agenda and the military commitment that we have made to the Afghan military will allow us to ensure that we are able to influence cultural attitudes within the security forces.

[Sir Bob Russell (Colchester) (LD)]

I associate myself with the tributes that have been paid already, and I want to mention specifically 16 Air Assault Brigade, many of whose members have been deployed four times. The Secretary of State’s statement says: “Although our combat mission will be ending in 2014, our clear message to the Afghan people remains one of firm and ongoing commitment.” Without giving specific numbers, can he state whether there will be a significant British troop presence in Afghanistan in May 2015?

[Mr Hammond]

As the hon. Gentleman is aware, we have made two firm commitments. We will support the ongoing non-combat NATO mission and we will support the Afghan national officer academy. Together those commitments will amount to a small number of hundreds of personnel. Beyond that, we are considering the options available to us. We do not need to make firm decisions yet and the National Security Council is clearly of the view that we should not make firm decisions before we need to do so. I can tell him that in May 2015 there will almost certainly still be a small number of logisticians dismantling the last of our equipment and returning it to the UK.

[Glyn Davies (Montgomeryshire) (Con)]

During the years of British involvement in combat in Afghanistan, a huge number of young men and women have lost their lives or been seriously injured, including very many Welsh young men and women. There can be no greater tribute or memorial to all those people and their families than a lasting, secure, stable Afghanistan. Will my right hon. Friend give us an assurance that he will be as committed to securing that stable, peaceful Afghanistan after 2014 as the British Government have been to combat up until that date?

[Mr Hammond]

I can give my hon. Friend that commitment. We are committed to sticking with the Afghan people beyond 2014 because it is the right thing to do by them, because it is the right way to protect our national security, and because it is the right way to honour the memory of all those who have given their lives and made such enormous sacrifice over the past 11 years.

Local Government Finance

Wednesday 19th December 2012 Commons Chamber

13:48

[The Secretary of State for Communities and Local Government (Mr Eric Pickles)]

With permission, I should like to make a statement on finance for English local authorities for 2013-14 and 2014-15.

The autumn statement sets out how the coalition Government are putting our public finances back on track after the catastrophic deficit left to us by the Labour Government. Local government has shown great skill in reducing its budgets. Committed local authorities have protected front-line services. Little wonder that at a time of retrenchment, satisfaction in council services has gone up.

This year’s settlement will see council expenditure fall in a controlled way. English local government accounts for £1 of every £4 spent on public services. It spends £114 billion. That is twice the defence budget and more than our spending on the national health service. It marks a new settlement for local government based on self-determination and financial independence, a move from the begging bowl to pride in locality. It begins the greatest shake-up of local finance in a generation. We are shifting power from Whitehall directly to the town hall and the county hall.

From April, local authorities will directly retain nearly £11 billion of business rates instead of returning them to the Treasury. Striving councils will benefit from doing the right thing for their communities. If they bring in jobs and business, they will be rewarded. Similarly, the new homes bonus remunerates councils for building more homes. Next year the bonus will be worth more than £650 million, and even more in 2014-15. Under our reforms, an estimated 70% of local authority income will be raised locally, compared with a little over half under the current formula grant system. That is a giant step for localism.

The start-up funding, which replaces the formula grant and gives each council a share, as was confirmed in the Chancellor’s autumn statement, will see £26 billion shared between councils across the country, with the smallest reductions for councils most reliant on Government funding.

We consulted local authorities on our proposals over the summer and have listened to what they told us. They said that less money should be held back from the settlement, so we have reduced the amount we are setting aside for the new homes bonus, the safety net and academies funding. I can announce that, in total, that means an additional £1.9 billion for local authorities up front in 2013-14.

Local authorities also told us that they wanted a stronger growth incentive, and we are happy to respond. We have made the scheme more generous, ensuring that at least 25p in every pound of business rate growth will be retained locally. The settlement leaves councils with considerable total spending power. I can announce today that the overall reduction in spending power next year will be just 1.7%. That represents a bargain to local authorities.

A small number of authorities will require larger savings to be made, but no council will face a loss of more than 8.8% in their spending power thanks to a new efficiency support grant. As the name implies, to qualify for the grant councils will have to improve services. It is unfair on the rest of local government to expect it to subsidise other councils’ failure to embrace modernity. However, the settlement is not about what councils can take; it is about what they can make.

Meanwhile, the settlement continues to protect fire and rescue as a blue-light emergency service. Today we can announce £140 million in capital grant money to fire authorities. Predictably, the doom-mongers have been consulting their Mayan calendars and issuing dire warnings about the end of the world as we know it on Friday and a £1 billion black hole in local budgets. Some have shamefully predicted riots on the streets. But Nostradamus need not worry, because all those predictions have come to nothing.

Concerns that the poorest councils or those in the north would suffer disproportionately are well wide of the mark. The spending power for places in the north compares well with those in the south. For example, Newcastle has a spending power per household of £2,522, which is well over £700 more than the £1,814 per household in Wokingham. We have also maintained the system of “damping”, whereby the Government set a floor that council funding will not fall below. This year’s average grant reduction for the most dependent upper-tier authorities will be less than 3%, compared with 8.7% for the wealthiest. That is more support and protection than last year.

I can also confirm today that local authorities will be able to use the receipts from asset sales raised from 2012-13 to fund outstanding equal pay claims. In addition to what I have announced today, the Secretary of State for Health will in due course confirm public health funding for local authorities.

In his autumn statement, the Chancellor recognised that local authorities have risen to the challenge. That is why local government, unlike most of central Government, will be exempted from the 1% top slice next year, which is worth approximately £240 million to councils. However, as it looks to 2014 and beyond, local government needs to continue finding better and more efficient ways of doing things. There remains scope for sensible savings. With the exception of a handful of authorities, nobody has got to grips with procurement. More can also be done to share offices and services, cut fraud and provide more for less.

I have also asked the outgoing chief fire and rescue adviser, Sir Ken Knight, to pinpoint practical ways to help fire and rescue authorities save money and protect the quality and breadth of front-line fire services. It is disappointing that the shadow fire Minister has signalled his opposition to that move—it is sad on so many levels.

Today I am returning to my ethnic roots by publishing 50 ways to save, setting out practical ways for councils to save money, big and small, but it all adds up. If councils merged their back offices, like the tri-borough initiative in London, they would save £2 billion. Procurement fraud costs taxpayers almost £1 billion a year. Councils are sitting on a record £16 billion of reserves—[Interruption.] Of course they are, and it is a record sum. Councils are not collecting over £2 billion-worth of council tax. Better property management could save £7 billion a year. We have also announced today that further savings will be made by the abolition of pensions for councillors. Councillors should be champions of the people, not the salaried staff of the town hall. Today’s guide gives more power to the elbow of the public to challenge crude cuts and champion sensible savings.

Next year’s exemptions will give local authorities time to put their house in order, but let us remind ourselves what this is all about: safeguarding vital public services, protecting families and pensioners, and ending the “something for nothing” culture. That is why, despite financial pressures, we will continue supporting, for the third year running, those who insulate residents from a further tax hike. We have set aside £550 million for local authorities to support council tax: £450 million over the next two years for the freeze and an additional £100 million for council tax support available in the new year. All councils have a moral duty to freeze council tax. It doubled under Labour and became unsustainable. We have cut it in real terms.

Just to be absolutely clear, this year’s freeze grant goes into the base for the spending review period and has the same status as every other item in that base. Those who would prefer to carry on with increases and see residents miss out should be ready to answer to their local taxpayers and not dodge them by setting the increase just below the threshold. For next year, we have set the referendum threshold at 2%.

I will also introduce a flexibility to support small district, police and fire authorities that have kept council tax low for years. My hon. Friend the Member for Great Yarmouth (Brandon Lewis), the local government Minister, has set out the details in a written ministerial statement today.

This is democracy in action: those who want to hike taxes should put it to the people. I contrast the action that we have taken to freeze council tax with the new housing tax being introduced in the Republic of Ireland. Tackling the deficit helps keep taxes down. If we deny the deficit, taxes on everyday families will rise.

To those who want to play the politics of division, let me say this. This is a fair settlement—fair to north and south, fair to rural and urban areas and fair to shires and mets. But it is also a watershed moment. For the first time in a generation, striving councils now have licence to go full steam ahead and grab a share of the wealth for their local areas and to stand tall and seize the opportunities of enterprise, growth and prosperity. I commend this statement to the House.

14:01

[Hilary Benn (Leeds Central) (Lab)]

I thank the Secretary of State for his statement and advance sight of it. We will, of course, study the announcement in detail and I look forward to debating it in the new year.

The House listened carefully to the Secretary of State, and it is clear that he is living in a world of his own. He simply does not understand the impact that his decisions on funding are having on services and the local people who use and rely on them. This is what his colleagues on the front line say about him. Baroness Eaton, the former Tory chair of the Local Government Association, described the right hon. Gentleman’s understanding of the effect of local government cuts as

“detached from the reality councils are dealing with”.

Sir Merrick Cockell, her successor, has called the cuts “unsustainable” and the Tory leader of Kent says that his county “can’t cope” with further reductions and “is running on empty”.

The Secretary of State carries on regardless, ignoring what is happening on his watch. Last week, he told the Communities and Local Government Committee that the cuts were “modest” and that the LGA’s fears for the future were “utterly ludicrous”. He did not mention this, but this week his top tip for cash-strapped councils was that they should loan out their artworks in return for cash. What planet is he living on? Meanwhile, local authorities have made big efficiency savings, cut costs and laid off 230,000 staff—but still, it is services that are going.

Let us be clear about what is being lost due to the right hon. Gentleman’s unfair cuts—libraries, sports centres, Sure Start centres and places at women’s refuges. Birmingham city council says that because of the cuts and spending pressures, its controllable budget will reduce by half in the next six years. In one case, a council has already been pushed to the brink. Earlier this year, Tory-led West Somerset council was declared to be “not viable” in the longer term—not by Nostradamus, but by the Local Government Association.

Will the Secretary of State confirm that local authorities are facing a 28% reduction in Government funding over this spending review period—the biggest cut in the public sector—even though local government is

“the most efficient part of the public sector”?

Those are not my words, but those of the Prime Minister. On top of that, the Chancellor announced in the autumn statement that a further £445 million would be cut in 2014-15. Will the Secretary of State confirm that he is unfairly hitting the poorest areas hardest? The Audit Commission has found that

“the most deprived areas have seen substantially greater reductions in government funding as a share of revenue expenditure than councils in less deprived areas.”

Why are the 10 most deprived local authorities having their spending power reduced by eight times as much per head of population as the 10 least deprived authorities in England? Why will today’s announcement mean that Liverpool will see a 6.2% fall, of £35 million, in its spending power in 2014-15 compared with the previous year, when Mole Valley will see an increase of 0.6%? How on earth can the Secretary of State justify that? Does he have any idea how local councils’ efforts to grow their local economies, encourage apprenticeships and build more homes are being undermined every single day by the Chancellor’s disastrous economic policy, which simply is not working?

Yesterday, the leaders of the core cities wrote to the Secretary of State in blunt terms about the LGA’s graph of doom. They warned that if current plans are not changed,

“there will be no money for anything but social care and waste collection”

later this decade. [Interruption.] That is what the core cities say.

The sad truth is that the right hon. Gentleman is in denial. He has failed to stand up for local communities and he is trying to wash his hands of the consequences. Will he confirm that millions of people on low incomes will now face a council tax increase next April as a result of “poll tax mark 2”—not my words, but those of the man who invented poll tax mark 1, the noble Lord Jenkin?

Councils should, of course, do everything that they can—and they will—to keep the council tax down in these difficult times for families, but the Secretary of State is being disingenuous when he talks about a moral duty not to increase the council tax. By cutting council tax benefit, he has decided that one group in the country will definitely see its council tax go up next year—people on low incomes; that is why they get council tax benefit in the first place. They will see their bills go up in the very same month when people on the very highest incomes will get a cut in their tax bills.

On business rate retention, can the right hon. Gentleman confirm that no council will be worse off from the change to the new system? Is it not the case that areas with less of an opportunity to attract new businesses will fall further behind as Government grant reduces? What impact does he expect appeals against business rate valuations will have on local authority income? What is the size of the adjustment he has made to the forecasts for this and for total business rate yield?

The Secretary of State did not mention the early intervention grant, but can he confirm whether the whole of the £150 million that has been held back will be allocated to local authorities and can he assure the House that that is being done on the basis of need? Local authorities want to know where they stand. Can he give us the figure for the amount that the Government will now be holding back from the settlement for the in-year safety net?

What provision is the right hon. Gentleman making for capitalisation and does that include the assistance that local authorities that face huge backdated claims arising from equal pay court judgments will clearly need? He mentioned asset sales, so can he tell us how much he estimates local authorities will raise in asset sales in respect of the councils affected? By how much has the Secretary of State reduced the hold-back for the funding of academies?

On public health, although the Secretary of State said that an announcement is yet to be made, will he tell the House what factors have been taken into account in distributing funding for public health? What changes have been made to the proposals for weighting, including for deprivation, that were part of the original Department of Health consultation? On the fire service settlement, why are the metropolitan fire authorities facing such a big percentage reduction in their spending power? How many firefighters does he expect to go as a result of what he has announced today and how will fire prevention services be affected?

Finally, on the local government pension scheme, why should a full-time council leader in a big city not be entitled to be a member of the scheme—the Secretary of State did not mention this—while mayors will be so entitled? Can he confirm to the House that continued membership of the pension scheme will be open to his friend the Mayor of London?

This is a bad day for local communities and the people they elect to look after their interests. They would have liked to hear from the Secretary of State a commitment to fair funding and a settlement that would help them through tough times, and they wish that he would understand the difficulties they are going through. Instead, they have a continuation of the profoundly unfair way in which funding has been distributed from a Secretary of State who simply refuses to recognise what is actually going on around him.

[Mr Pickles]

I am grateful to the right hon. Gentleman. It is entirely typical of him—perhaps he is not a very quick reader—that of the 50 tips he ignored the ones that are going to save billions of pounds, because apparently that is not terribly important. He was part of a Government who promised to deliver £52 billion of cuts. He stands at the Dispatch Box and pretends to local government that it would have faced no cuts under his Government. He knows as well as every single Member of this House that he would have been proposing similar cuts, and that remains the absolute truth. I remind hon. Members that the former Chancellor said in the Labour Budget of March 2010 that there would be £300 million of cuts to regional development agency regeneration, to the working neighbourhood fund—by the way, we picked up the tab for that—to the local enterprise growth initiative, and to the housing and planning delivery grant. On top of that there were £185 million of back-of-a-fag packet cuts to time-limited community programmes and rationalisations of others.

The right hon. Gentleman’s response might best be described as the Jo Moore memorial lecture, because the bad news that she sought to bury on 9/11 was about councillors’ pensions. Just to be clear, the contributions of those who have contributed will be protected, but from the middle of next year they will no longer be able to make a contribution. That will save £7 million, but £7 million probably means absolutely nothing to the right hon. Gentleman.

The right hon. Gentleman talked about Birmingham. Which local authority got itself into the most appalling mess over equal pay when the rest of local government was putting aside sensible savings? Birmingham, which now faces a potential bill of over £700 million. Who is getting Birmingham out of the mess? We are. We will be prepared to allow Birmingham to pay off this sum, which other councils dealt with sensibly over the past 20 years by the sale of assets. Birmingham should be grateful for that. I can further tell the House that out of the departmental expenditure limits—the money from Eland house not relating to local government—we have stumped up £100 million to help Birmingham in this process, because we recognise that it will take some time to deliver the results. Birmingham, and the right hon. Gentleman, would be in a right old mess were it not for us, and I look forward to receiving an apology from him.

The right hon. Gentleman asks why some authorities are actually increasing their spending power and says that it is an outrage. There is just one reason—the new homes bonus. [Interruption.] Oh, yes it is. It is exactly the reason, as the hon. Member for Halton (Derek Twigg) will see if he cares to look at the figures. In that lies the clue to this settlement, which ensures that local authorities now have greater control. That is due not only to the new homes bonus but to the retention of the business rate, which is how local authorities can make a big difference.

The right hon. Gentleman asked about academies. The figure is £150 million and the hold-back is £24 million.

One set of councils is seeking to tax the poor in the way that it is seeking to tax pensioners, widows and single mothers living at home—Labour councils. You will not catch a Tory authority trying to ensure that poor people have to pay 30% of the council tax. That is why we introduced the £100 million—to protect the people who have the misfortune to be represented by a Labour authority.

[Dan Rogerson (North Cornwall) (LD)]

I welcome the localisation measures that the Secretary of State has announced, but he also referred to damping. In previous decades, authorities such as mine have suffered from their distance from the target figures to which the Department says they are entitled. Is there some hope in this for Cornwall? Are we moving away from a damping mechanism that means we will continue to get less money than we should?

[Mr Pickles]

The hon. Gentleman raises an important point and he deserves a serious answer. We looked at whether we would be able to do that. We took advice from local government, which said that it is keen to have some degree of stability through the introduction of the new system. We certainly hope that the people of Cornwall, who are renowned for their enterprise and for living in a wonderful place to visit, will rise to the new funding arrangements. The further away we move from the old formula, the more places such as Cornwall will be able to triumph.

[Mr Clive Betts (Sheffield South East) (Lab)]

The removal of pensions from councillors will do nothing to encourage younger people in employment to come forward and stand for public service. Will he reflect on what he said at the Select Committee last week, and listen to his colleagues in local government? He dismissed the graph of doom then, but might he now start to think that this is not simply a fantasy, as he has claimed, but a reality of his own making, which has come into effect more quickly and more harshly with the withdrawal and destruction of public services in the poorest communities in our country?

[Mr Pickles]

I would have thought that the hon. Gentleman would be delighted that the spending power per household in his constituency is £2,421, which is much higher than in many Government Members’ local authorities, and that the drop in spending power represents only 2.7%. I have some faith in the entrepreneurial spirit of the people of Sheffield; the hon. Gentleman seems to want to keep them in chains. His point about pensions is frankly not worthy of him. A relatively small number of councillors have taken this up. It costs £7 million a year. It is perfectly acceptable to me, and I think that they will probably get a better deal, if they use part of the sums they receive out of the public purse to make their own arrangements.

[Heather Wheeler (South Derbyshire) (Con)]

I congratulate the Secretary of State on his statement, which is about realism in the financial situation that the country faces. I declare an interest in that my husband is the leader of South Derbyshire district council, the most forward-looking council in the midlands and probably in the whole country. It is interesting that where councils see that they have a future when they look at the new homes bonus, the new businesses that are coming in, and the retention of business rates, they are entrepreneurial in going out there and getting business. That is the future for councils, not “The state will provide.”

[Mr Pickles]

My hon. Friend, who speaks with enormous experience of local government matters, is right. Opposition Members seem to think that we are seeking to impose a strange alien world on local government, but this is how things operate in just about every local authority in the world. We have developed this strange world of resource equalisations, where the worse-off and the least enterprising get more, but if they show some gumption and a bit of enthusiasm, the Government will reward them by cutting the grant. Poor authorities around the world have been able to look after their population and ensure buoyancy in their funds by adopting these precise measures.

[Heidi Alexander (Lewisham East) (Lab)]

The Secretary of Secretary will be aware that the Local Government Association has warned that if growing demand for social care and waste services is met over the next few years, other local authorities’ services—parks, leisure centres and libraries—will face cash cuts of 66% by the end of the decade. When will the Secretary of State accept responsibility for this situation instead of blaming council leaders of all political persuasions for a mess of his own making?

[Mr Pickles]

That certainly cannot be happening in the hon. Lady’s constituency, because it gets £3,236 per household and the reduction in its spending power is well below the average—it is only 1.4%. People need to show some gumption. Of course, all those things will happen if people just stand around doing nothing, but libraries need to show some entrepreneurial spirit. The hon. Lady need only travel to Hammersmith and Fulham to see thriving libraries where people go through the door and want to use them. Rather than paying homage to the 1950s, she should produce libraries that people actually want to go to by bringing in coffee shops and finding ways to use them better. Rather than continually standing there with her hand out, why does she not show some leadership in her community and get things going?

[Mark Pawsey (Rugby) (Con)]

The need for growth is accepted throughout the House. Is not the best way to encourage local growth, to enable local authorities to retain and spend locally more of the additional business rate from new developments, exactly as the Secretary of State has set out today?

[Mr Pickles]

I am grateful to my hon. Friend for his question. Frankly, I could not have put it better myself. [Interruption.] On the Opposition Benches we see leaders of their communities, people who mock enterprise but who would have delivered cuts and said, “I’m very sorry, it’s not my fault,” and looked the other way. We on the Government Benches are different. We have been prepared to offer serious advice—50 ways to save. We are on the side of, and working alongside, those authorities, whether they be Labour, Conservative or Liberal Democrat, that want to work with their community to bring in prosperity.

[Bill Esterson (Sefton Central) (Lab)]

If the Secretary of State were leader of Sefton council—[Interruption.] Heaven forbid, but if he were leader of Sefton council, would he cut services to vulnerable, elderly and disabled people, or would he close libraries? Sefton faces a cut of at least 40% in its budget and it cannot save both, whatever smoke-and-mirror act the Secretary of State tries to pull—that is the reality.

[Mr Pickles]

I cannot understand why that is happening, because the hon. Gentleman’s constituency has experienced a drop of just 2.2% in its spending power and it receives £2,265 per household, which is well above what local authorities represented by Government parties face. If I was the leader of Sefton council, I would obviously consider giving the hon. Gentleman the freedom of the borough. I would also look to make those libraries income-generating and apply that money to help the most vulnerable. After all, this settlement sees considerable, important amounts of money going from the national health service directly to local authorities to deal with precisely that issue. If the hon. Gentleman wants to go back to his constituency and be an apostle for change, he has my backing.

[Several hon. Members]

rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. A lot of Members want to ask questions to the Secretary of State and not make speeches, but at this rate not everybody will be able to participate, because we have urgent business. I would appreciate short, direct questions and short, direct answers, at which I know the Secretary of State is an expert.

[James Morris (Halesowen and Rowley Regis) (Con)]

While the Secretary of State is dispensing advice, what advice would he give to council tax payers in Halesowen, who are seeing Dudley council spending thousands of pounds on a consultation exercise that calls for council tax rises of up to 4.6%?

[Mr Pickles]

I will watch the council’s progress with interest and our thoughts will be with the council tax payers at the ballot.

[John Healey (Wentworth and Dearne) (Lab)]

Death and danger from fire do not discriminate, but the Secretary of State did in his first funding settlement by giving six southern fire authorities a rise in funding and the six metropolitan areas a deep cut. Why has he not done what he has done with the police and what MPs from all parties have urged him to do and given a flat, fair, across-the-board cut for all fire authorities in this settlement? Why is he continuing to hit the north harder than the south?

[Mr Pickles]

The mets benefit considerably from this settlement. The right hon. Gentleman is a serious Member of this House and deserves a serious answer. He will recall that the reduction in police funding was front-loaded and that that for firefighters and emergency services was back-loaded. One of the reasons why we have set up the Knight review is to arrive at that equilibrium and to offer fire authorities some help in that process.

[Bob Blackman (Harrow East) (Con)]

I welcome today’s statement. Local authorities all over the country have no excuse whatsoever for increasing council tax. Will my right hon. Friend confirm that this settlement has sufficient funding to ensure that every council tax payer can look forward to a freeze this year and that local authorities should seek to maximise their resources for the benefit of their residents?

[Mr Pickles]

That is certainly the case. We are talking about a 2% trigger for a referendum. Local authorities can go for whatever figure they want, but they will have to face the people. We are offering 1% to local authorities, if they can get it down to that. Essentially, for those that want to increase council tax below 2%, we are talking about less than 1%. That seems to be a very dubious case, given that we are making it absolutely clear that this money is in the base.

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

Liverpool is the most deprived area in the country. Liverpool city council works closely with local businesses to support investment, but the cuts announced today are an added blow to a city already reeling from cuts in local public services as a consequence of Government decisions. Indeed, people in Liverpool have already suffered cuts of £252 per head, compared with an average of £61 per head in England as a whole. Why does the Secretary of State show such contempt for the people of Liverpool?

[Mr Pickles]

The hon. Lady makes an extraordinary point. Let us be absolutely clear: Liverpool receives the enormous amount of £2,836 per household and its cut is on the average. The hon. Lady has made a point that I have often heard in this Chamber, namely: why are other parts of the country not receiving a bigger cut? Let us put this in context. I have the figures for Liverpool. In terms of the old formula grant—the start-up funding allocation—Liverpool receives £386 million, Manchester £391 million, Birmingham £783 million. Windsor and Maidenhead, however, receives £28 million, Wokingham £31 million and West Oxfordshire £5 million. Essentially, the hon. Lady is asking those authorities, which already contribute to the national pool, to increase their council tax by somewhere in the region of 60%. That does not seem like a sensible thing to do.

[Robert Neill (Bromley and Chislehurst) (Con)]

Will my right hon. Friend, in due course, give the House further details of the efficiency support grant, which is a very welcome element of the statement? Will he confirm that it is a new initiative that, for the first time, will reward authorities that get on and do things, rather than subsidise those who sit back, carry on with the old ways and expect to be bailed out by central Government?

[Mr Pickles]

My hon. Friend will recall that that grant comes from the working neighbourhoods fund. When he and I were looking at that a couple of years ago, we found that the departing Labour Government had left no money to pay for it. We thought that that was completely unacceptable, so we created a transitional grant to help with the process. I am delighted to say that we are now down to about seven authorities that need such help. We are saying to those authorities, “You can’t expect the rest of local government to pay for you not doing the right thing. Provided that you give an undertaking that you will look towards better corporate government, joint working and getting your base down, we will give you the money next year, but if you haven’t made progress by the end of the year, you won’t get anything the following year.” It is completely unfair for local government to subsidise people who are being inefficient.

[Derek Twigg (Halton) (Lab)]

If what the Secretary of State is doing is about being fair, why has Halton borough council, which covers the second most deprived area in the country, had a cut per head of twice that in the affluent Tory council in Cheshire East? Is this not about transferring money away from Labour councils and towards Tory councils?

[Mr Pickles]

No, that has not happened. There has been a significant shift away from Conservative authorities and towards Labour authorities. I note that the loss of spending power in the hon. Gentleman’s area is 1.8%, which is not materially greater than the national average, and that it is getting £2,416 per household. That does not suggest that a significant amount of money has gone away from his authority.

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

In the past, local government settlements have underestimated the population of many authorities, including mine. Will the Secretary of State assure me that the figures that he has announced reflect need, deprivation and the real number of people in each council?

[Mr Pickles]

We use the best available statistics. It is amazing that Opposition Members are suggesting that they are not, because they are based on the old system. The extra money that is available relates to the old system. As we move further away from that system, we will ensure that poorer authorities are safeguarded, but we will also ensure—because these are relative changes—that they will benefit when they start to bring in new jobs and enthusiasm.

I hope that my right hon. Friend will allow me at this point to address a question that the right hon. Member for Leeds Central (Hilary Benn) asked, but which I neglected to answer. There are always two things in these equations that one needs to be certain about: the population numbers and the income that is likely to be generated through business rates. In the bundle of documents, there will be an assessment of that, which I think offers good news for local authorities.

[Several hon. Members]

rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. Secretary of State, I know that you have an encyclopaedic knowledge of this subject, but we would be grateful if you did not share all of it with us this afternoon. May we have slightly shorter answers please, otherwise Members who want to put a question to you will be disappointed?

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

May I remind the Secretary of State that Birmingham’s finances became a mess under a coalition of Conservatives and Liberal Democrats, and that it is a Labour administration that, since May, has been trying to put that right? However, Birmingham is facing some of the biggest cuts in local government history, with a reduction in income of £149 per person, which is more than double the national average. Will he meet me and a delegation of Members of Parliament from Birmingham to discuss the pressures that Birmingham is facing and to see whether we can find a way to mitigate the situation?

[Mr Pickles]

It is always a pleasure to see the hon. Lady under any circumstances. However, I politely remind her that the decisions on equal pay were taken 20-odd years ago under a Labour Administration. I am delighted to see that Birmingham has increased its balances by £24 million.

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

Will the Secretary of State comment on the flexibility that he is introducing to support small, efficient district police and fire authorities that have kept council tax low for years, but that have little room for manoeuvre? There are many such examples in the south.

[Mr Pickles]

The hon. Lady can read the written ministerial statement by the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Great Yarmouth (Brandon Lewis). Essentially, small authorities have in the past been capped at very small sums of money, so we will be introducing a de minimis sum of £5.

[Clive Efford (Eltham) (Lab)]

When the Secretary of State reads out the spending capacity for my area, will he include the spending capacity of the 14,800 people who will become eligible to pay council tax next year under what has become known as the Pickles poll tax? What thought has he given to those people in the announcement that he has made today?

[Mr Pickles]

I am delighted to say that in order to protect those good folk from the excesses of a Labour council, we have found £10 million to ensure that nobody has to pay more than 8.5%. Perhaps I should give notice that if councils persist in charging the poor—it is only Labour councils that are doing so—I may take the necessary powers to prevent them from doing so. I am delighted to tell the hon. Gentleman, because he wants it to be read out, that his area receives £3,222 per household and has a loss of less than 0.9%.

[Angela Smith (Penistone and Stocksbridge) (Lab)]

The leader of Sheffield city council has said that the Government’s cuts will mean the end of local government as we know it. As we have heard, the Local Government Association has declared that Tory-led West Somerset council is “not viable” over the longer term. Does the Secretary of State anticipate any other councils becoming no longer viable as a result of the Government’s huge cuts?

[Mr Pickles]

That is not what the leader of the council was saying when we were doling out all the extra money by way of the city deals. He was telling us how he was going to progress things.

[Angela Smith]

The leader is a she.

[Mr Pickles]

I beg the hon. Lady’s pardon. The light was not very good.

We are telling local authorities to work together and join services together. If they stay in the kind of dump or great fug that Opposition Members seem to want, in which they do not co-operate with one another, that prediction will come true, but if they co-operate, things will be better.

[Mr Philip Hollobone (Kettering) (Con)]

As a member of Conservative-controlled Kettering borough council, I commend to the Secretary of State its triple-zero policy: zero cuts to front-line services, zero cuts to voluntary sector grants and zero increase in the council tax over a five-year period. Is it not true that the best councils do not moan and groan about their financial settlement, but get on with cutting waste and inefficiency?

[Mr Pickles]

I am so happy with Kettering borough council that I am thinking of taking a weekend break there to enjoy its good services.

[Mr Adrian Sanders (Torbay) (LD)]

The previous Government extended the period until a referendum may be held to get rid of an elected mayor. I am thankful for the grant settlement for my area, which looks more generous than that for most other areas of Devon. However, we could go a lot further if we could get rid of our elected mayor and his unaffordable glory projects. Will the Secretary of State overturn the decision of the last Government and allow people to have a referendum before the end of the current mayor’s term of office?

[Mr Pickles]

I was rather hoping that, in the spirit of Christmas love and understanding, I might be able to bridge a rapprochement between the hon. Gentleman and the mayor. They are both wonderful people and it is a matter of some regret that they seem not to get on.

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

My constituents in Brighton have been singled out for the harshest cuts in the south-east. Will the Secretary of State explain to them why he is pursuing savage cuts that are not only socially devastating but economically illiterate? His Government’s plans to get local councils to drive economic recovery will never happen if he makes them cut so deep and so fast.

[Mr Pickles]

I do not know where the hon. Lady looks for her facts. Her council will receive £2,034 per household, which is a cut of 2.8%—slightly above average. To suggest, however, that people in the south-east have been picked out for the most savage cuts is utter bunkum.

[Gavin Barwell (Croydon Central) (Con)]

My council will warmly welcome the localisation of business rates, but my question is about the distribution systems that the Secretary of State inherited from the previous Government. Ten out of 12 inner-London councils charge less than £1,000 at band D, and 18 of the 20 outer-London councils charge more than £1,000. Does the Secretary of State think that is due to the efficiency of those councils, or the fairness of the distribution system?

[Mr Pickles]

My hon. Friend and I have had many discussions on that issue, and as I said when replying to another colleague earlier, to a degree some of the inequalities and possible bias towards Labour authorities had to stay within the system because I wanted to deliver stability. I can promise, however, that as we move further away from the old settlement, the more efficiency we will see. Given its entrepreneurial feelings, I have little doubt that Croydon will benefit greatly from the system.

[Mr Kevan Jones (North Durham) (Lab)]

I sometimes wonder what colour the sky is in the right hon. Gentleman’s world. When comparing Newcastle with Wokingham he cleverly uses statistics for spending per head. Does he agree, however, that Newcastle and other similar councils have larger demands on their services? Unemployment figures for central Newcastle are 1,280 compared with 175 in Wokingham. Even if the council were to implement each of the Secretary of State’s 50 recommendations, including No. 37 about not funding sock puppets, it would not be able to match the funding gap presented to it.

[Mr Pickles]

I commend the hon. Gentleman for thoroughly reading that document, although I trust he did not start from the back and work his way forward. The hon. Gentleman represents Durham—[Interruption.] Well, I would be superhuman if I remembered every single figure in my head. Per household, his council receives £2,228, and the reduction in its spending power is less than the national average. The hon. Gentleman should be thanking me rather than talking about sock puppets.

[John Pugh (Southport) (LD)]

In his statement, the Secretary of State said that next year the new homes bonus will be worth more than £650 million, and even more in 2014-15. He later said, “We’ve reduced the amounts that we are setting aside for new homes bonus.” Will he clarify whether there will be a cut in the new homes bonus?

[Mr Pickles]

Very easily. We had discussions with local authorities, and we were going to hold back by way of the top slice a particular sum in order to pay for the new homes bonus. Local authorities put to us a number of reasonable points about how the new homes bonus and—for want of a better word—the cash flow will be paid. We thought they made a reasonable point and decided that we were not taking much of a risk by keeping close to what local authorities were saying.

[Pat Glass (North West Durham) (Lab)]

The Secretary of State talked about £150 million of additional spending on academies. Is that part of or in addition to the existing £1 billion overspend on academies and free schools in the budget of the Department for Education?

[Mr Pickles]

I am grateful, because a scribbled note has arrived from the Under-Secretary of State for Communities and Local Government, my right hon. Friend the Member for Bath (Mr Foster), and the figure is not £150 million but £180 million. Those announcements will be made by the Secretary of State for Education.

[Mr Peter Bone (Wellingborough) (Con)]

East Northamptonshire district council and Wellingborough council have embraced the Secretary of State’s reforms. They have a wonderful new leisure park, a retail park plan, 2,000 new jobs and the project is ready to go. The only thing stopping the project is the Secretary of State’s Department. Will he speed up the process and approve it?

[Mr Pickles]

One looks at these matters in a quasi-judicial way, and despite my hon. Friend’s obvious charm, not even an invitation for a cup of tea with his delightful wife will persuade me to do anything other than observe proper process.

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

During the Secretary of State’s tirades about Birmingham, would he care to get his facts right? As my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) observed, Birmingham was run by a Tory-led coalition from 2004 until last May. The Labour administration before that set aside money for dealing with equal pay claims, but that money was spent by the Tory administration. How can the Secretary of State justify a reduction in spending power of twice the national average? Is it not time that Birmingham got a fair deal at last?

[Mr Pickles]

I recall that I was a councillor when all that started. However, even in a year when the council is claiming poverty it managed to increase its reserves by £25 million. As a Birmingham MP, the hon. Gentleman must know that the council stands no chance of being able to deal with the enormous burden—just short of three quarters of a billion pounds—without the generosity of those on the Government Benches who are prepared to help Birmingham. They do so happily because we cannot allow our second city to go under.

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

Does my right hon. Friend agree that when councils look to make savings, council tax payers should not be expected to pay the salaries of council employees who spend their time working for trade unions that then pay millions of pounds to the Labour party?

[Mr Pickles]

I am a very strong supporter of the trade union movement; it does absolutely marvellous work. In times of financial stringency, however, I am sure that the trade union movement will be embarrassed to receive money from the public purse. I will shortly issue best practice guidance to local authorities to find ways in which local trade unions can give money back to local government.

[Diana Johnson (Kingston upon Hull North) (Lab)]

In his statement, the Secretary of State referred to a “moral duty”. Where is the morality in cuts that are directed at the poorest areas and those least well equipped to generate extra business revenue? Why has Hull had a cut so far of £163 per head compared with £2.70 per head in West Dorset?

[Mr Pickles]

Of course, West Dorset receives considerably less money than Hull. The hon. Lady’s council will receive per household a figure well above the national average at £2,371, and a drop in spending power of less than the national average at 1.4%. She should show some leadership.

[John Hemming (Birmingham, Yardley) (LD)]

When Labour took control of Birmingham earlier this year, the council immediately put up costs by what will be £10 million a year by increasing wages for some staff by as much as 70%. It is now aiming to charge the poor council tax at 24%. Does the Secretary of State agree that we should protect the poor and not put up costs in a time of financial problems?

[Mr Pickles]

It was an outrage that Birmingham increased some wages by 73%—

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

Who? Name them.

[Mr Pickles]

Birmingham. The council put 16-year-olds on the same wages as adults. It made a mistake and it was foolish to do so—[Interruption.] The hon. Gentleman should listen, because he is probably not used to dealing with poor people—[Interruption.] No, no—a toff has an opportunity occasionally to meet the odd poor person. What was really bad about Birmingham involves the second part of the question from the hon. Member for Birmingham, Yardley (John Hemming) and how the council is seeking to get 23% council tax from poor people. As a committed socialist the hon. Member for Birmingham, Selly Oak should be on the phone now telling the leadership of Birmingham to look after the poor, not to tax them.

[Mr Dave Watts (St Helens North) (Lab)]

The Secretary of State will be aware that the Audit Commission has made it absolutely clear that the biggest cuts are hitting the poorest communities and boroughs. What is the public to believe: his fiddled figures or the Audit Commission?

[Mr Pickles]

The hon. Gentleman is being very selective in his reporting, but it is absolutely clear that the poorest authorities are receiving a smaller cut than the more wealthy authorities. The protection that we have offered the former in this settlement is better than the protection offered under the Labour Government.

[Julie Hilling (Bolton West) (Lab)]

Does the Secretary of State not realise that local authorities such as Bolton, which faces £100 million of cuts, are already doing all they can to support business growth, make efficiencies, share procurement and protect services? When will he admit that his actions are slashing services and hurting the most vulnerable?

[Mr Pickles]

What came out from the letter and the hon. Member for Birmingham, Selly Oak, who apparently meets the odd poor person at some of his surgeries, is that most of those authorities have done the odd thing on joint working or procurement, but I am talking about a much more fundamental realignment of local government services. I am looking not just at the back office, but at the front office. There have been far too many instances in the north-west of really good deals being turned down because people were concerned about the badge on the side of the van. I am therefore looking to the hon. Lady to show some leadership.

[Helen Goodman (Bishop Auckland) (Lab)]

Will the Secretary of State share with the House his estimate of the value of the business rate retention in Durham and its value in Westminster?

[Mr Pickles]

Westminster will make a considerable contribution to the levy so that money goes directly to Durham. Money from Westminster will go directly to Durham, so if Westminster does very well—as it will—Durham will benefit.

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

My local authority, Enfield, faces a triple whammy under the Government. First, the rapid demographic change of which the right hon. Member for Bermondsey and Old Southwark (Simon Hughes) spoke is happening but is not recognised. Secondly, the Audit Commission reallocation from poor to richer authorities affects my area. Thirdly, the damping formula, which will be engaged for an extra two years, will affect my local authority. Can the Secretary of State give my constituents any reassurance that the Government recognise the problems of London boroughs?

[Mr Pickles]

Yes. I can helpfully tell the hon. Gentleman that, per household, he will receive £3,015, which is well above the national average. I am delighted to say that spending power goes down by just 0.6%, which is significantly less than other reductions. He is therefore sitting pretty.

[Graham Jones (Hyndburn) (Lab)]

The Secretary of State has said that seven authorities will require larger savings to be made, but that no councils face a loss of more than 8.8% in their spending power, thanks to the new efficiency support grant, which replaces the transitional relief grant. Is that not a conditional, ring-fenced grant, and town hall to Whitehall, and therefore anything but localism? My local authority does joint services, and back-office and shared services, but how will it benefit from the Secretary of State’s statement?

[Mr Pickles]

The hon. Gentleman is a little confused. His authority is Hyndburn. I remind him that he would be receiving nothing additional had it been up to the Labour Government, who left no provision for the transitional grant. The transitional grant was wholly devised to help him, but his council must show some gumption. Who is paying for it? The rest of us are. He must ensure that Hyndburn starts to have joint services and better procurement—

[Graham Jones]

It is doing.

[Mr Pickles]

No it is not—or not enough. I remember the hon. Gentleman’s Adjournment debate, and what he says is certainly not the case.

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

The people of Birmingham will be delighted to hear how kindly disposed the Secretary of State is towards them. Along with his list of 50 simple savings, will he agree to publish the recommended savings in cuts that his officials say can safely be made in Birmingham, so that I can share that with the Birmingham public?

[Mr Pickles]

I will e-mail that to the hon. Gentleman. Why should I not like Birmingham? It is a beautiful city and the second city in England. Anybody who wants to set up enterprise will find a welcoming hand there. I wish Birmingham nothing but success, but I must tell him—I have some familiarity with the finance—that the top few suggestions would help Birmingham out. I hope Birmingham takes that line. If it does, it will produce better services and have a much more secure future. I wish it well.

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

Further to the question from my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman), may I remind the Secretary of State that Liverpool is the most deprived city in the UK? Will he tell the House why he is yet again disproportionately hitting both the Merseyside fire and rescue service budget and our council budget?

[Mr Pickles]

May I remind the hon. Lady that she has £2,740 per household, plus the amount for the fire authority? Metropolitan fire authorities are receiving a much higher level of settlement than other parts of the country. We have offered Liverpool a fantastic deal. The mayor of Liverpool had my complete confidence up to the point when he suggested that there will be riots on the streets—he was one of the first to offer reassurance during last year’s riots. I hope again to be able to work with Joe to the betterment of Liverpool.

Point of Order

Wednesday 19th December 2012 Commons Chamber

14:56

[Mr David Hanson (Delyn) (Lab)]

On a point of order, Madam Deputy Speaker. You have very helpfully held more than an hour’s discussion and questions to the Secretary of State for Communities and Local Government on the local government settlement. However, today’s Order Paper notifies us of only a written statement from the Home Office on the policing settlement. Compounding the fact that hon. Members cannot question Home Office Ministers on the important matters of police cuts, reductions in police officers and other matters, the statement from the Home Office is not released until the end of the statement from the Secretary of State for Communities and Local Government.

I know that these matters are outside your gift, Madam Deputy Speaker, but is it possible for you to examine with the Government whether they can have parity in their treatment of statements, so that we can question the Home Office on serious and damaging police cuts across the country?

[Madam Deputy Speaker (Dawn Primarolo)]

The right hon. Gentleman in fact answered his own point of order when he pointed out that it was outside the gift of the Chair to force the Government to make oral statements. As he will know, it is entirely a matter for the Government how they present information to the House, whether by written or oral statement. He has his point on the record, but I do not think that I can help him any further.

Royal Assent

[Madam Deputy Speaker (Dawn Primarolo)]

Before we proceed, I need to notify the House, in accordance with the Royal Assent Act 1967, that Her Majesty has signified her Royal Assent to the following Acts and Measure:

Civil Aviation Act 2012

Prisons (Interference with Wireless Telegraphy) Act 2012

Financial Services Act 2012

Police (Complaints and Conduct) Act 2012

Small Charitable Donations Act 2012

Church of England Marriage (Amendment) Measure 2012

Charities Act 2011 (Amendment)

Wednesday 19th December 2012 Commons Chamber

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

14:59

[Mr Peter Bone (Wellingborough) (Con)]

I beg to move,

That leave be given to bring in a Bill to amend the Charities Act 2011 to treat all religious institutions as charities; and for connected purposes.

On Monday this week, I delivered a letter to the Prime Minister at No. 10 Downing street. It was signed by 113 right hon. and hon. Members, drawn from many different political parties. It urges the Government to restore the presumption of charitable status to all religious institutions. The Charity Commission has recently ruled against a Plymouth Brethren church, stating that it is not of public benefit and can therefore no longer be seen as having charitable status. The repercussions of such a ruling could have a disastrous effect on religious institutions and the excellent work they do in the charitable sector.

The Charities Act 2006, which was consolidated into the Charities Act 2011, removed the presumption that religious institutions have charitable status. That has led to the unintended consequence of the state being able to interfere, through the Charity Commission, with religious institutions. Simply put, this is state interference in religious institutions through the back door. The 2006 Act removed the presumption that religious institutions were given charitable status—indeed, religious institutions now have to give tangible proof to demonstrate that they are a public benefit to be classed as charities.

My hon. Friend the Member for Isle of Wight (Mr Turner) led Her Majesty’s official Opposition on the Charities Bill in 2006. On Second Reading, he expertly pointed out the problem of religious institutions having to demonstrate their public benefit. Using the example of prayer, my hon. Friend asked the question:

“how can it be demonstrated that prayer is of a public benefit?”—[Official Report, 25 October 2006; Vol. 450, c. 1583.]

He later explained that religious institutions would find it hard to prove the benefit of prayer to a sceptical and secular group such as the Charity Commission. In that debate, the former Member for Maidstone, Ann Widdecombe, spoke on this subject. Deftly describing the situation regarding the previous legal presumption for religious institutions, she said:

“‘If it ain’t broke, don’t fix it.’”—[Official Report, 25 October 2006; Vol. 450, c. 1589.]

As usual, I wholeheartedly agree with what Ann said. I believe that the presumption for religious institutions should be returned to the Charities Act 2011. The 2011 Act clearly states in section 3(1)(c) that the advancement of religion should be considered a charitable purpose. Surely, if the advancement of religion is considered to be a charitable purpose, the presumption to grant religious institutions charitable status is the logical action to be taken by the Charity Commission, but the current commissioners are determined to misinterpret the law.

The advancement of religion is not the only category of public benefit that religious institutions bring to society. For example, the Salvation Army, a Christian organisation for more than 200 years, has provided help to the elderly, the young, offenders, drug addicts and disabled people. It provides food and shelter for the homeless, and it operates food distribution centres. From my own experience, as the chair of the all-party group on human trafficking, I know that the Salvation Army has helped the victims of human trafficking, by providing them with support and accommodation. Its efforts have been recognised by the Government and it has been awarded almost £2 million to support such victims. In future, if the religious practices of the Salvation Army are deemed not to be for the public benefit by the Charity Commission, will the Salvation Army lose its charitable status?

The commission’s ruling on the Plymouth Brethren makes the most extraordinary statement:

“There is no presumption that religion generally, or at any more specific level, is for the public benefit, even in the case of Christianity or the Church of England”.

There we have it: not even the Church of England is safe. Does this mean that the Plymouth Brethren are but the first to feel the wrath of the secular, biased Charity Commission? Will Judaism, the Catholic Church or indeed the Church of England itself come under pressure by the commission to prove their public benefit? The hon. Member for Dover (Charlie Elphicke) recently told the Public Administration Committee about the Plymouth Brethren and said that the commission

“are committed to the suppression of religion and you are the little guys being picked on to start off a whole series of other churches who will follow you there.”

I am reminded of the poem “First they came”, describing the persecution of different groups, in darker times. Today, it could be amended to read, “First they came for the Plymouth Brethren and I did not speak out because I was not a Brethren. Then they came for the Evangelical Church and I did not speak out because I was not an Evangelical. Then they came for the Catholic Church and I did not speak out because I was not a Catholic. Then they came for me and there was no one left to speak out for me.”

I fear that if the presumption for religious institutions to have charitable status is not reinstated in the Charities Act, we will bring about consequences that will not only be detrimental to the charity sector, but to the very fabric of our society. In fact, the removal of the presumption in the Charities Act 2006 was never intended by the previous Government to penalise charitable religious institutions. In Committee, the then Under-Secretary for the Cabinet Office and now Leader of the Opposition, the right hon. Member for Doncaster North (Edward Miliband) stated that

“religious organisations need to be given reassurance and confidence that those that have charitable status will continue to enjoy it and that the Bill does not affect their status. We can give them that assurance in broad terms.”––[Official Report, Charities Public Bill Committee, 4 July 2006; c. 66.]

The right hon. Gentleman went on to reiterate that religious institutions providing access to worship and the advancement of religion are “clearly a public benefit”. How can it be that the 2006 Act, championed by the current Leader of the Opposition through Parliament, who gave clear guarantees to protect religious institutions of their charitable status, can be used and abused by the Charity Commission in a clear misinterpretation of the public benefit requirement? For more than 400 years, since the Charitable Uses Act 1601, the advancement of religion has been considered a charitable purpose.

Recently, the Charity Commission ruled that the Plymouth Brethren did not fulfil the public benefit requirement as a charity. How can a group active in the role of advancing religion that contains more 16,000 members of the British public not be considered a public benefit? If the advancement of religion on its own as a charitable purpose cannot be seen as an identifiable benefit to the public, I will provide one of many examples of the selfless work of the Plymouth Brethren.

During the recent flooding, in the Bicknacre and Danbury areas, members of the Plymouth Brethren church helped local residents by sandbagging their properties, assisting in moving residents and their belongings from the flooded St Giles home for the mentally disabled, and using their 4x4 vehicles to remove vehicles from flood water—I am sure at some personal risk to themselves. If those acts cannot be described as selfless and charitable, then I do not know what can.

There is clearly an almighty mess. When I find such a situation, I have two default positions. First, it must have been caused entirely by the Liberal Democrats. Now, that just is not the case here. Many Liberal Democrat Members support the Bill and one is a sponsor, so that is clearly not the reason. I therefore move on to my second default position, which is that in nearly all cases the cause of all problems is the European Union. I have gone through every EU directive, but I cannot find one that imposes this restriction. What is happening is creeping secularism in society. With just a few days before we celebrate the birth of Jesus Christ, and in recognition of religious freedom, I urge right hon. and hon. Members to support my ten-minute rule Bill.

Question put (Standing Order No. 23).

15:09

Division 126

Ayes: 166

---

Conservative: 115
Labour: 32
Liberal Democrat: 10
Scottish National Party: 3
Democratic Unionist Party: 2
Independent: 2
Plaid Cymru: 1

Noes: 7

---

Labour: 4
Liberal Democrat: 2
Conservative: 1

Ordered,

That Mr Peter Bone, Steve Baker, Nick de Bois, Mr Douglas Carswell, Mr Christopher Chope, Philip Davies, Robert Halfon, Mr David Nuttall, John McDonnell, Tessa Munt, Stephen Phillips and Jim Shannon present the Bill.

Mr Peter Bone accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 1 March 2013, and to be printed (Bill 114).

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

On a point of order, Madam Deputy Speaker. Yesterday in my Adjournment debate on high-carbon investment, the Minister of State, Department of Energy and Climate Change, the hon. Member for South Holland and The Deepings (Mr Hayes) said that

“the Committee on Climate Change has recognised in its recent progress report…that we are on track to meet our first three carbon budgets”.—[Official Report, 18 December 2012; Vol. 555, c. 828.]

That did not sound right to me, so I returned to the report to check the details to which he had referred and sought clarification from the committee directly. I can confirm that the committee’s report states clearly that the current rate of progress is

“sufficient to meet the first and second…budgets, but not the third and fourth budgets,”

and that the

“rate of underlying progress is only a quarter of that required to meet future carbon budgets.”

Given this afternoon’s debate on the Energy Bill and the crucial matter of decarbonisation, I wonder whether you might invite the Minister to correct the record on this matter, Madam Deputy Speaker.

[Madam Deputy Speaker (Dawn Primarolo)]

The content of speeches in this House, whether by Back Benchers, Ministers or shadow Ministers, is thankfully not the responsibility of the Chair. The contributions made as a matter of debate in this House are the responsibility of the Member who makes those observations, so it is not a point of order for the Chair. The Minister is here; I am sure he took note of the hon. Lady’s comments and will want to engage again in debate on those facts.

Energy Bill

Wednesday 19th December 2012 Commons Chamber

Second Reading

[Madam Deputy Speaker (Dawn Primarolo)]

Before I call the Secretary of State to move Second Reading, may I say to all hon. Members that there is a very long list of Members who have indicated that they wish to speak in this debate? Even with a tight time limit, it will not be possible in the time we have left to call every Member. I regret, therefore, that some Members will be disappointed and will not be able to participate in this afternoon’s debate. May I also inform the House that the Speaker has selected the amendment in the name of the Leader of the Opposition, Mr Edward Miliband?

15:25

[The Secretary of State for Energy and Climate Change (Mr Edward Davey)]

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

We need to pass this Energy Bill if Britain is to have a credible and ambitious energy and climate change policy. The Bill represents both a practical and a radical approach to reforming our electricity market. It is essential if we are to deliver on our three objectives for energy and climate change policy—namely, secure energy that is affordable and clean—yet I believe the Bill offers the country much more than a better energy policy. With our current economic difficulties, as we along with many other nations strive to ignite sustainable growth, this Bill offers a significant opportunity to stimulate the sort of infrastructure investment that our country desperately needs, for both the short and long term. We estimate that an enormous £110 billion of energy infrastructure investment is needed between now and the end of the decade in low-carbon energy generation and the grid network.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

What hope, assurances or promise can the Secretary of State give to those wishing to engage in renewable energy generation in the Hebrides that the infrastructure will reach the Hebrides? Will the interconnector come?

[Mr Davey]

The hon. Gentleman knows that I set up a group to look at this issue, which has got together with the councils from the various islands, officials from my Department and others. We must await its work. I know he welcomed it at the time and I am sure that he, too, will await its work with patience.

This is not just an energy Bill; it is a growth Bill. I believe it can lead to new jobs in every region and nation of our country. If right hon. and hon. Members vote for this Energy Bill, they will be voting to give the British economy the long-term boost it needs.

[Dame Joan Ruddock (Lewisham, Deptford) (Lab)]

I am most grateful to the Secretary of State for allowing me to intervene at this early stage, but is not the very best boost we could give our industry in this country, particularly the renewables sector, to have the decarbonisation target for 2030 on the face of the Bill, as recommended by the Committee on Climate Change, as argued for by 1,500 companies and the CBI, and as apparently endorsed by the Prime Minister just two years ago?

[Mr Davey]

The right hon. Lady knows that I am very sympathetic to that argument. We will come to that argument and debate many times, not just today, but no doubt throughout the passage of the Bill.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

Does my right hon. Friend agree that in order to ensure the investment that the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) described, it is crucial that we get this Bill through, with its contracts for difference and its market reform? To do that, the Bill has to receive a Second Reading, so the best thing that hon. Members on both sides of the House can do is reject the reasoned amendment, which would delay any movement towards getting this new Bill through.

[Mr Davey]

My hon. Friend is absolutely right. Targets are important—they have a role to play—but we need practical measures. We need market reform. If we are to stimulate the investment in low carbon that our country needs, we need the Bill, contracts for difference and all.

[Huw Irranca-Davies (Ogmore) (Lab)]

Will the Secretary of State give way?

[Mr Davey]

I shall make some progress first, and then I shall take some more interventions.

I pay tribute to the many people who have contributed to producing a Bill which, let’s face it, could not be described as having been rushed. Even before the pre-legislative scrutiny so ably undertaken by the Select Committee on Energy and Climate Change—I thank it for its work—it was long, long in the consultation. Some have even argued that the fingerprints of the Leader of the Opposition can be found on the first designs for it, but in the event of a paternity test, I think that the name of my right hon. Friend the Member for Eastleigh (Chris Huhne) would probably end up on the birth certificate. Its careful nurturing owes much to my hon. Friend the Member for Wealden (Charles Hendry). Indeed, Members in all parts of the House have played a role in its production, and it is a better Bill for that level of cross-party development and scrutiny.

The reason why members of all parties recognise the need for a major change is easy to explain. First, about a fifth of Britain’s existing power plants are scheduled to close during this decade, which will reduce supply. Secondly, even if we are heroically successful in terms of energy efficiency and reducing energy waste, overall demand for electricity is set to rise—partly because of population growth, but also because our transport system is likely to be more electrified over the next two decades, as are our heating systems. What with supply falling and demand increasing, we would have a real energy problem if we sat back and did nothing. Energy security—keeping the lights on—is a critical rationale for the Bill.

[Mark Reckless (Rochester and Strood) (Con)]

Will the Secretary of State confirm that the key reason for the energy crisis is the fact that a vast amount of coal-fired generation is being forced to close down, not because of carbon dioxide emissions but because of emissions of sulphur dioxide, which, if anything, counters carbon dioxide. That is due to the European Union and its large combustion plant directive.

[Mr Davey]

My hon. Friend is right to mention that directive. Its aim is to clean our air, which is a good thing for a number of reasons. I support it, as do many others.

[Huw Irranca-Davies]

rose—

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

rose—

[Mr Davey]

I want to make a little more progress, but before I do so I will give way to the hon. Member for Ogmore (Huw Irranca-Davies), because he tried to intervene earlier.

[Huw Irranca-Davies]

May I make a point about the reasoned amendment? It is because of the go-ahead for licences for a new fleet of combined cycle gas turbine power stations, the potential for shale gas, and the current absence of the development of carbon capture and storage technology in this country that it is necessary to top up with a 2030 decarbonisation target. I think the Secretary of State is more than sympathetic to that idea, and that he would implement it if he were not encumbered by Cabinet colleagues.

[Mr Davey]

I am grateful for the hon. Gentleman’s intervention. He has merely convinced me more that this will be a hot topic of debate. However, I can confirm to him and the House that one of the purposes of the Bill is to decarbonise our electricity supply. That is a critical purpose. We need to move from coal to gas, from fossil fuels to low carbon. We need a more diversified energy mix, with renewables, carbon capture and storage, and new nuclear all playing their part in enhancing the security of our electricity supplies. Low-carbon energy security will help to insulate consumers from fossil fuel price spikes and will help us to meet our climate obligations, including our emissions and renewables target.

The key challenge that prompted the Bill was the need to attract tens of billions of pounds of investment, including investment in low carbon, while keeping energy bills affordable. Given that global gas prices had almost doubled since 2007, which was already putting huge upward pressure on bills, the need to stimulate that essential energy investment as cheaply as possible became a central consideration. Whatever the many debates in which we will rightly engage today and during the Bill’s passage, let no one lose sight of the three core challenges that it was designed to meet: attracting more than £100 billion of investment, creating the world’s first ever market in low-carbon energy, and helping people and businesses around our country who were struggling in the face of rising world energy prices. I think that those aims are widely shared across the House.

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

I agree with the Secretary of State about the importance of reducing fuel bills, but if that is important, why does the Bill enshrine a dash for gas? Organisations from the CBI to the International Energy Agency say that that will not reduce fuel bills, whereas much greater investment in renewables and efficiency certainly would.

[Mr Davey]

I reject the notion that our policy supports a dash for gas, and I absolutely reject the suggestion that the Bill is designed to do any such thing. On the contrary, it is designed to reform our electricity market. It favours not fossil fuels but low-carbon sources, and I should have thought that the hon. Lady and, indeed, all Members would support it for that reason.

You will understand, Mr Deputy Speaker, why I am genuinely disappointed that the Opposition decided to withhold their full support for the Bill in their reasoned amendment. They say that they want our economy to grow, they say that they support low-carbon energy, and they say that they want a better deal for consumers and business, but if they vote against the Bill, they will be opposing growth, opposing decarbonisation and opposing help for people who are struggling with high energy bills. Just a few years ago all the major parties worked together to deliver the Climate Change Act 2008. Why is a party led by the architect of that landmark Act refusing to support the practical reforms that will help to deliver its lofty objectives?

I predict that we will have many debates and exchanges about a decarbonisation target for the power sector—an issue that features prominently in the Opposition’s reasoned amendment—yet it should be noted that this Government will legislate so that the next Government can set a decarbonisation target alongside a fifth carbon budget, even though at the last election the manifesto of no party argued for such a power sector decarbonisation target. We will no doubt hear that industry would benefit from such a target, and I strongly sympathise with that argument, yet industry would be seriously damaged if we were not to take forward our wider reforms of the electricity market.

The right hon. Member for Don Valley (Caroline Flint) has the power to send a much stronger signal to energy investors in the UK even than setting a 2030 decarbonisation target. Almost every investment in energy is a long-term investment lasting far longer than any Parliament, and investors therefore worry about political risk. They worry about what happens if the governing party or coalition is replaced, and they therefore listen to what the Opposition say.

I presume that the right hon. Lady will press her amendment to a Division. If it is defeated, however, will she and her party colleagues support the Bill on Second Reading? I am happy to give way to her if she wants to answer that question—I am afraid she has not been tempted to respond. We shall, therefore, all await her speech with even greater anticipation, to discover whether she intends to vote against the Bill on Second Reading.

[Mr John Leech (Manchester, Withington) (LD)]

My right hon. Friend’s support for such a target has been well documented, so I suppose the current position is one of the practical realities of coalition Government, but what will be the effect of setting a target in 2016 rather than 2012, and what impact will that have on our reaching the target in 2030?

[Mr Davey]

My hon. Friend makes an interesting point. National Grid will have the job of setting the first stage of the electricity market reform delivery plan, and I will give it guidelines, as agreed with the Chancellor, on how it should set that plan. We will make it clear that it must consider power sector decarbonisation even ahead of the target that will be set in 2016.

It is worth reminding the House that the renewables energy target for 2020 was set in 2008, some 12 years ahead of the target date. If we set a decarbonisation target for 2030 in 2016, that will be a full 14 years ahead of its target date. It is therefore clear that we are planning for the longer term and that we have logic on our side. It would have been great if the Opposition could say that they had argued for this before, but they did not. I am glad they are joining us now.

The Bill’s central objective is to achieve electricity market reform, with a new investment mechanism at its core: the feed-in tariff with contracts for difference. Contracts for difference will provide long-term electricity price stability, and therefore revenue certainty, to developers and investors in technologies such as carbon capture and storage, renewables and nuclear.

[Neil Carmichael (Stroud) (Con)]

The Bill’s measures will provide clarity and certainty for investors wishing to develop infrastructure. Does the Secretary of State agree that that is imperative in delivering the model he is talking about?

[Mr Davey]

My hon. Friend has great expertise in this area, and I entirely agree with what he says. Revenue certainty will reduce investment risk, and it should therefore also reduce the cost of financing—the cost of capital. That is far more important for low-carbon technologies than for fossil fuels, because so much of the cost of renewables and nuclear is the set-up capital cost. Our electricity market reform is, essentially, shaping a new low-carbon market, in order to stimulate the energy investment Britain needs.

[Mr Donohoe]

Does the Secretary of State agree that one way to overcome the problem of the deficit in energy generation would be if the nationalists were to allow new nuclear stations to be built north of the border? Does he agree with that as a way forward?

[Mr Davey]

The hon. Gentleman notes that the energy debate is an important part of the debate on independence for Scotland, but I would not want to cloud that debate by suggesting that there should be new nuclear power plants there. He will know that our new nuclear build proposals include three consortiums, none of which is proposing new nuclear build in Scotland. We have a long way to go before that question arises.

[Mr Mike Weir (Angus) (SNP)]

rose—

[Mr Davey]

I think I should give the nationalists a right of reply.

[Mr Weir]

I was not looking for a right of reply, but I thank the Secretary of State for giving way anyway. Many are concerned that the contract for difference will not be introduced until later on and there is a real danger of a hiatus in investment because of uncertainty if the renewables obligation is closed in 2017. Will he consider extending that deadline if there are real challenges in obtaining that investment?

[Mr Davey]

I am grateful to the hon. Gentleman for his question. We have certainly spoken to people in the industry who make that argument, but our response has been to note that we have the final investment decision enabling contracts for difference, which will prevent a hiatus in investment in the immediate future. We are running contracts for difference side by side with the renewable obligations certificate to help people get more familiar with them before 2017. Some of the problems people had raised are now being answered and I hope that I will be able to persuade the hon. Gentleman that he need not have those concerns.

[Several hon. Members]

rose—

[Mr Davey]

I am afraid that I want to make a little more progress—this even applies to my hon. Friends on the Liberal Democrat Benches.

[Mike Crockart (Edinburgh West) (LD)]

rose—

[Mr Davey]

As I know him so well, I will give way to my hon. Friend, but I will then make some progress.

[Mike Crockart]

I am merely astounded by the nationalists’ interest in the renewables obligation for 2017, given that they hope that Scotland will be independent by that point.

[Mr Davey]

My hon. Friend makes a very good point. Perhaps the nationalists have given up before the referendum has even started.

It has been pointed out to me that my constituency neighbour and good friend, the hon. Member for Richmond Park (Zac Goldsmith), wishes to intervene, and, given his knowledge on this subject, I would like to take his intervention.

[Zac Goldsmith (Richmond Park) (Con)]

I thank my right hon. Friend for allowing me to intervene. Energy efficiency is by far the easiest, quickest and cheapest method of reducing bills and emissions. I know that the Government are consulting on measures to reduce electricity demand, but can he reassure the House that time will be made available for genuine scrutiny of the amendments when they eventually arrive and that they will be radical enough to ensure that efficiency is a core part of our energy programme?

[Mr Davey]

I am grateful to my hon. Friend for pointing out that we are consulting on electricity demand reduction. I am passionately keen to see that taken forward, but I do not want to prejudge the outcome of the consultation. There are a number of ways of taking forward that policy measure. It might require amendments to the Bill and if so, we have time to introduce them, but there might be other ways to make progress on that policy objective.

[Mr Ian Liddell-Grainger (Bridgwater and West Somerset) (Con)]

Will the Secretary of State give way?

[Mr Davey]

No, I am going to make some progress, I am afraid.

Some have argued that CFDs are somehow complex, but I disagree. Generators will receive the market price for their electricity plus a top-up to an agreed level known as the strike price. When the market price is above the strike price, the generator will pay back the difference, ensuring value for money and greater price stability for consumers.

CFDs are also a major improvement on the current system of renewable obligation certificates, because they keep the cost of energy to the consumer lower. During the scrutiny of the draft Energy Bill, one issue dominated the debate about CFDs, and the Energy and Climate Change Committee spent some time considering it. It was, in essence, the payment system and how generators would get their money in a CFD. The Select Committee recommended that the Government change the draft Bill in that respect and appoint a single counterparty to these contracts for difference so it was easier for investors to know who would pay them. We have accepted that proposal. There will now be a new Government company that will sign and manage the contracts over their lifetime and collect money from suppliers to meet the payments due to generators.

Electricity market reform will stimulate investment in new low-carbon energy, but low-carbon energy sources have different generating features from fossil fuels, so our market reforms must take account of them. For example, wind and solar are intermittent, and may need either storage technologies and/or back-up generation. Both nuclear and renewables tend to have low margin running costs and are likely to mean that fossil fuel power stations run at lower load capacities than in the past. If we do not consider the implications of such things, there might in the future be a danger of insufficient investment in the flexible generating capacity needed at certain times, especially at the peak, for example on less windy days.

Moreover, given that new nuclear reactors will take some time to come online, and that new renewables may not fill the energy gap created by the closure of old coal and nuclear quickly enough in the next few years, there is the challenge of ensuring energy security over the next decade or more. Alongside CFDs we will introduce a capacity market to ensure that sufficient reliable generating capacity is available to meet electricity demand as it increases over the next decade. The capacity market will provide an up-front payment for capacity, reducing the risk of investing in flexible generation. The capacity market will provide an insurance policy against the possibility of future black-outs—for example, during periods of low wind and high demand.

[Mr Liddell-Grainger]

I want to take the Secretary of State back to the rates retention scheme and community benefit, which both this Government and the previous Government have talked about. The scheme is not in the Bill, but can he confirm that it will help local investment and local communities, and that above all it will ease the pain of very large infrastructure projects for local communities?

[Mr Davey]

My hon. Friend has campaigned on the issue and he initiated a recent Adjournment debate on it. Whether it is new nuclear, onshore wind or other energy infrastructure, we need to consider how local communities can benefit, and we will do that. I give him that assurance again today.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

Is the Secretary of State aware that according to his impact assessment, a market-wide capacity payment system would cost the customer 11 times more on their fuel bill than a strategic reserve system of capacity arrangements? Does he intend to take that into account as the Bill progresses?

[Mr Davey]

I urge the hon. Gentleman to read the impact assessment a little more carefully. The bit he draws to the attention of the House assumes a perfectly operating electricity market. One reason why capacity payments will be a lot less than indicated in the part of the impact assessment he quotes is that without a capacity market, peak-demand electricity prices could go very high. One of the benefits of a capacity market is that it will smooth out the price of energy, so consumers will not have to pay high prices at the peak. That will offset the payment, and he needs to take that into account. The impact on the consumer will be far more beneficial than he suggests.

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

rose—

[Mr Davey]

No, I will not give way.

The two new instruments I have just outlined—CFDs and the capacity market—will be underpinned by a robust and transparent institutional framework that will provide certainty for industry and investors. Government will retain responsibility for both instruments, and will make decisions on strike prices for CFDs, taking into consideration our objectives for the electricity sector, and wider economic and sustainability impacts as appropriate. The system operator, National Grid, will administer and deliver both the CFDs and the capacity market, and Ofgem will regulate the system operator.

The Select Committee argued that there is a risk of conflicts of interest arising between National Grid’s existing role, including owning the transmission infrastructure, and the new role, so to reassure investors, we are working jointly with Ofgem to assess that risk, mindful of the very good reasons why the system operator should take the role. The Bill provides the Government with powers to manage any conflicts of interest if necessary, and ultimately to confer the functions on an alternative delivery body.

Industry and investors have urged us to press on with our reforms to the electricity market, but it would be damaging and costly if in anticipation of an improved investment environment, they postponed final investment decisions on existing, shovel-ready projects in the meantime. I want to ensure that those decisions can be taken with confidence, even before our reforms come into effect. Therefore, as a transitional measure, the Bill will enable the Government to give effect to early CFDs, referred to as investment contracts, on a case-by-case basis at an early stage, in advance of the CFD regime. Our intention is that any investment contracts will be transferred to the single counterparty once it has been established.

I am determined that the Bill will increase competition in all aspects of our energy markets, whether retail or wholesale, and I am particularly concerned about the lack of liquidity in the wholesale power market, and especially in the forward markets, which can deter investment by independent suppliers—so important for effective competition. By improving liquidity we would improve competition, promote long-term security of supply, reduce barriers to entry and increase the robustness of the reference price for CFDs. Ofgem is currently working on proposals to improve liquidity, but in the absence of significant improvements, Government intervention may be necessary. The Bill therefore provides for such intervention. It also provides for powers to intervene to support investment by improving access to long-term contracts for the sale of electricity. This is a key concern for independent renewable developers. While the CFD will significantly reduce risk for these developers, it is important to be able to act if necessary. I therefore refute the Opposition’s assertion that the Bill does not address liquidity and competition; it clearly does.

There are a range of measures in the Bill that deserve more attention than I can give them: the emissions performance standard, which will act as a regulatory backstop on the amount of carbon emissions that new fossil fuel plants are allowed to emit; the reform of Ofgem, with the introduction of a statutory strategy and policy statement, setting out the Government’s strategic priorities and intended outcomes with respect to energy policy, helping to align better the work of Government and the work of the regulators; and a new enforcement power for Ofgem, so where energy companies have breached regulatory requirements but are unwilling to provide redress voluntarily to affected consumers, Ofgem will be able to require them to do so, with fines going to the consumers affected, which will ensure fairer outcomes for consumers. There is also a key measure to support investment in offshore transmission systems, which is so vital to Britain’s offshore wind industry, specifically with an amendment to the Electricity Act 1989 which will provide confidence to offshore generators that for a time-limited period they can lawfully commission any transmission assets that they build. We also expect to introduce measures on tariff reform during the Bill’s passage, so that we can ensure consumers get the best deal; and after we have consulted on electricity demand reduction, we will consider amendments to the Bill to support this radical approach to saving electricity, at the appropriate time.

Yet there are two parts of the Bill that are substantial reforms but have received little attention to date, so I want to dwell a little more on those before concluding. The first is on the issue of nuclear regulation. Nuclear power has an important part to play in the low-carbon energy mix of the future, and the sector requires an appropriately resourced and responsive regulator. In April 2011 we set up the Office for Nuclear Regulation, and the Bill will place what is already a world-class regulator on a statutory footing. The ONR will build on its current strengths as a modern, independent regulator working to the principles of transparency, accountability, proportionality, targeting and consistency. Its five key areas of responsibility are nuclear safety, nuclear security, nuclear safeguards, the transport of radioactive material, and health and safety on nuclear sites. The ONR will have the financial and organisational flexibility required to meet its business needs on a sustainable basis. The Bill also contains an amendment to the nuclear waste and decommissioning cost recovery mechanisms, which contributes to the coalition’s commitment that new nuclear power stations should receive no public subsidy.

The final reform that I wanted to highlight is to the Government pipeline and storage system. This network was originally built for defence purposes, but is now predominantly used commercially, especially for civil aviation—it delivers around 40% of aviation fuel in the UK. Following a review, we have concluded that there is no need for this asset to be owned by the Government, and that its sale could encourage private investment in the system, potentially bringing wider economic benefits as well as reducing Government debt. We are confident that any continuing military requirements could be met through contractual arrangements with a purchaser, and that a sale would have no adverse effect on safety or security. A final decision on any sale will depend on striking the right deal with the private sector, with value for money a key consideration. The earliest date for a sale would be during 2014.

The House will see that the Bill is an ambitious one. It contains radical reforms, above all to secure the energy supply that Britain needs for our homes and businesses into the 21st century, boosting economic growth at the same time. The Bill will keep the lights on, it will help keep people’s energy bills down, and it will decarbonise Britain’s electricity system. I commend the Bill to the House.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Many Members wish to get in. I remind the House that there is a six-minute limit after the Front-Bench speeches. We may have to reduce the limit further, but if Members can be generous and try to shave some time off their speeches, they will be helpful to each other.

15:55

[Caroline Flint (Don Valley) (Lab)]

I beg to move,

That this House, whilst affirming its support for measures included in the Bill to reform the electricity market to deliver secure, clean and affordable electricity, declines to give a Second Reading to the Energy Bill because it fails to include a clear target to decarbonise the power sector by 2030, and because it fails to include direct measures to increase transparency, competition or liquidity or ensure that the energy market is properly regulated and works in the interests of consumers.

I am conscious of time so let me say at the outset that I will take very few interventions, as I welcome the positive way in which Members in all parts of the House have applied to speak this afternoon.

The challenge facing the Government is to produce a Bill that provides fairness for consumers today, security for consumers tomorrow and a sustainable energy supply for the future of our economy, our nation and our planet. These are the tests on which we will hold the Government to account during the passage of the Bill. As a responsible Opposition, we will support measures that balance the interests of the whole nation. On the broad objectives of the Bill, we have no disagreement.

We will support proposals that genuinely reform the electricity market to deliver secure, clean and affordable electricity. In part 2 of the Bill, we will support the establishment of the Office for Nuclear Regulation on a statutory footing—work begun under the previous Government, which the Bill will complete. In part 3, we support proposals on the Government pipeline and storage system, provided they are consistent with our national security and safeguard the resilience of our fuel supply. We will support the provisions on offshore transmission systems. They are a sensible modification enabling offshore wind generators to connect to the grid during the commissioning period. That is the good news.

As to whether the Bill as a whole will meet its objectives, we remain to be convinced—hence, the reasoned amendment before the House today. At this early stage of the Bill, permit me to set out how it could be improved to genuinely reform the electricity market to ensure that Britain has a secure, clean and affordable power supply for the future. Let me start with security. As the Secretary of State has said today and in the past, in the next decade a quarter of the UK’s generating capacity will be shutting down as old coal and nuclear power stations close. To rebuild our energy infrastructure will require an unprecedented level of investment, not just in new generation, but in energy transportation.

To provide the incentives to attract the investment that we need, the Government have proposed three main mechanisms. I will deal with each in turn—first, the introduction of contracts for difference. Since the draft Bill, the Government have provided greater clarity on where the liability for CFDs will lie, which is welcome. In principle, if CFDs are executed correctly, they should provide investors with long-term certainty, but ultimately the success of CFDs will depend on the details. Many details, such as the length of contracts, how contracts will be allocated or paid for, what the balance will be between renewable, nuclear and carbon capture and storage, and the process for setting the reference and strike prices, are still to be worked out.

[Mark Tami (Alyn and Deeside) (Lab)]

Does my right hon. Friend agree that we have to act now in a co-ordinated fashion, and not just talk about it? That has been the problem of previous Governments, both Labour and Conservative. We tend to have reviews but do not take the necessary action.

[Caroline Flint]

I agree. As has been said, the Climate Change Act 2008, led by my right hon. Friend the Leader of the Opposition when he was Secretary of State for Energy and Climate Change, was a world first. It put us in a position, with cross-party support, with a few honourable—or maybe not honourable—exceptions, in the forefront of change.

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

Is she allowed to say we are not honourable?

[Hon. Members]

She?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. If the right hon. Gentleman wants to make a point, he must stand up and do so to the Chair, not from a sedentary position. He should know better after so long in the House.

[Mr Lilley]

Is it in order to refer to hon. Members who oppose the speaker as not honourable?

[Mr Deputy Speaker]

It was a general reference.

[Mr Lilley]

It was not.

[Mr Deputy Speaker]

I am telling the right hon. Gentleman. When he says “she”, that is not acceptable language either. It is Christmas; we ought to give a little more humble time to each other, and certainly we do not want the debate to deteriorate. I hope we will have no further interventions from either side in that manner.

[Caroline Flint]

The second mechanism is the introduction of a capacity market designed to address possible shortfalls in generation. Again, in principle a capacity market could work, but whether it does will depend on important details, such as whether a capacity market will actually be introduced, the format of the auction, how the amount of capacity needed will be decided, what should be the balance between supply and demand reduction measures and how the capacity payments will be funded. All that still needs to be worked out.

The third mechanism is the creation of an emissions performance standard that sits alongside the Government’s gas strategy. Gas will have a role in our future energy mix, especially as we move away from coal-fired power stations, but setting the emissions performance standard at 450g of carbon dioxide per kilowatt-hour, which allows unabated gas and planning to build as many as 40 new gas-fired power stations, would blow a hole through our carbon budgets. It would leave consumers vulnerable to price shocks and rising bills. It would put investment in clean energy and the jobs and opportunities that come with it at risk. It would leave us, as a country, exposed to a wide range of risks over which we would have little or no control. A second dash for gas is not the basis for a secure energy policy for the future.

[David Mowat (Warrington South) (Con)]

On that point, will the right hon. Lady give way?

[Caroline Flint]

I will not give way to the hon. Gentleman.

Instead, we must shift our economy away from its dependence on fossil fuels and build a new low-carbon economy. But the hard truth is that the UK is now falling behind with green growth. Research by Bloomberg New Energy Finance shows that investment in renewable energy was half in 2011 what it was in 2009. Unless there is a remarkable upturn in the final quarter, investment will be lower this year than last year. The respected Pew Environment Group agrees. According to it, when Labour left office the UK was ranked third in the world for investment in clean energy, but today we are seventh. Figures published only last month from Ernst and Young paint the same picture. Its research on attractiveness for investment in renewable energy suggests that we have now fallen to sixth place, slipping below France, a country that generates nearly 80% of its electricity from nuclear.

The challenge for this Bill was obvious: to provide a clear policy framework to encourage investment in new, clean sources of energy. We know—this is very positive—that there is money out there to be invested in renewable energy, but unlocking it requires clear signals about the long-term direction of public policy. What the Bill needed was a commitment to decarbonise the power sector by 2030, because that is not only the most cost-effective way to meet our climate obligations, but the best way to protect our economy and consumers from volatile international gas prices and to attract long-term investment in new jobs and industries.

Of course, we have the levy control framework and the EU renewable energy target, which are already in place, but both will come to an end in 2020. For firms such as Vestas, Siemens and Areva—major energy and engineering businesses with operations all over the world—investment horizons extend well beyond 2020. For a business considering opening a new plant or factory, to justify the costs and the lead-in time they need to know what the order book will look like in 10, 15 or 20 years’ time.

So why have the Government failed to include in the Bill a commitment to decarbonise the power sector? Three reasons have been provided, so let me deal with each in turn before taking another intervention. First, the Secretary of State claimed that he did, in fact, want to set a target next year but was blocked from doing so by the Conservatives. Last month he told the Guardian:

“I wanted to set the decarbonisation target in 2013-14. The Conservatives wanted to wait”.

But the Minister of State, Department of Energy and Climate Change, the right hon. Member for Bexhill and Battle (Gregory Barker), told the House last week that there is

“a unanimous view among DECC Ministers”—[Official Report, 13 December 2012; Vol. 555, c. 437]—

on the Government’s decarbonisation policy. Both statements cannot be true.

The second reason that has been given is that it would not make sense to set a target until 2016 because that is when the fifth carbon budget, which covers 2030, is set. That is a smokescreen. The view of the Committee on Climate Change is absolutely clear: decarbonisation of the power sector by 2030 is not only crucial to the 2050 economy-wide emissions target, but the most cost-effective way of achieving it. That was its view in 2008 and that is its view today. The suggestion that for some as yet unknown reason that will not be its recommendation in 2016 is not only wrong, but disingenuous. It is disingenuous because we all know the real reason why the decision has been put off—because the coalition wants to have it both ways. The Liberal Democrats want to insist that a target is just around the corner, and the Tories do not want to have to admit that, if they were ever elected on their own, they would have no intention of setting a target to clean up Britain’s power sector by 2030.

As I said in the House last week, if I am wrong and if there are good reasons for waiting until 2016 before setting a target for 2030, there is nothing to stop the Government setting an interim target before then. The third and fourth carbon budgets have already been agreed and they run until 2027. Why not set a target for 2027, 2025 or even 2022? There is simply no good reason for putting the decision off for another four years. Ministers have to understand that any delay in setting a target does not just fail to reflect the urgency of the situation that we face, but will make it more difficult and expensive to achieve.

The third excuse that we have been given is that we already have too many targets, but the exact opposite is true. Between 2020 and 2050, there are no more targets for cleaning up our power sector—no benchmarks or staging points along the way. For investors, there is no certainty about what contribution the Government expect renewables to provide for the overall energy mix beyond 2020. If there is no certainty, why would firms choose to invest here when plenty of other countries are competing for investment?

[Mark Reckless]

Under the Government’s proposals, one thing that is pretty certain is that, on average, electricity bills will go up by about another £100. Will the right hon. Lady explain how much more electricity would go up by if she tried to ensure that electricity was produced without any carbon at all?

[Caroline Flint]

I could not have had a better intervention; I am just moving on to how we can reform the market to get fairer prices.

At a time when we are asking consumers to underwrite tens, if not hundreds, of billions of pounds to pay for the investment that we need, we must have an energy market that delivers fair prices. For the first time ever, the average annual energy bill has now hit £1,400—up by nearly £300 since the last election. Just this week, the Government’s own advisers on fuel poverty warned that unless Ministers change course, another 300,000 households will fall into fuel poverty this winter and up to 9 million people could be in fuel poverty by 2016.

From what the Secretary of State has said today and in the past, I think there is agreement across the House that Britain’s energy market needs to be more transparent, competitive and liquid if it is to work in the public interest. Having identified the problem, however, the Bill fails to do anything about it. As far as I can see, there is no provision to increase transparency; of 126 clauses, only one—clause 34—even addresses the issue of liquidity in the energy market, and even that clause does not propose concrete action. All it provides is a back-stop power, a measure of last resort, with no information about how or when the Government would actually use it to encourage market participation or improve liquidity.

The Bill could have scrapped the old model of unaccountable markets and secret deals and created a new, open, competitive market for energy by introducing a pool. I know that the Secretary of State has been hostile to the idea of a pool, simply because it did not work in the past, but the market has changed. When the pool was last in operation, there were effectively just two generators and the pool was one-sided with only generators placing bids. Today there are many more generators, so the issues we saw with the dominance of National Power and PowerGen in price setting would be much less of a problem—particularly if the pool were two-sided and both buyers and sellers could bid into it, as happens with the Nord Pool in northern Europe.

A pool would have three clear advantages over the current market arrangements. First, it would increase transparency. At the moment, no one really knows the true cost of energy because most of it is bought and sold through bilateral trades that are never made public. If all energy had to be traded through an open pool, those secret over-the-counter deals would end, companies would no longer be allowed to self-supply and we could establish a robust market reference price. If energy companies tried to blame wholesale costs for putting up bills, we would be able to see for ourselves whether that was true. When setting strike prices and reference prices for contracts for difference, as proposed in part 1, we would be in a much stronger position to set the right price, which will be vital to ensure that consumers get a fair deal.

The second advantage of a pool is that it would increase competition. If energy companies had to sell all their generation and buy all their supply through an open pool, anyone could compete on price to generate power or sell it to the public. This would encourage new entrants to enter the market, provide fairer access for independent generators and community and co-operative energy schemes, increase competition and put a downward pressure on prices.

Thirdly, a pool would increase liquidity. We hear a lot about liquidity, but all it really means is whether the market is providing the things that people want to buy. While there have been some improvements in liquidity on the day-ahead market, one of the biggest barriers to effective competition is the lack of liquidity in the forward market. In order to compete, firms need to be able to buy energy a week ahead, a month ahead, a year ahead, or even further, to ensure that they are not over-exposed to sudden changes in the price of energy. However, many smaller suppliers struggle to get access to these longer-term contracts. The big vertically integrated companies are in a better position because they can, in effect, hedge their supply against their own generation. By introducing a pool, we would effectively ban self-supply, whereby energy companies can generate energy and sell it to themselves. If any company wanted a longer-term deal, it would have to secure it through the open market. What better way is there to improve liquidity than to insist that everything is sold in an open marketplace?

Alongside reform to the energy market itself, we must put in place a regulatory system that protects consumers. The views of the Opposition on the existing regulator, Ofgem, are well known. In our view, it has failed to use the powers that it already has to enforce its own rules. It has turned down new powers—on trading, for example—and time after time it has ducked the opportunity to get tough with the energy companies. Today I reiterate our policy: the next Labour Government will abolish Ofgem and create a tough new watchdog with the teeth to protect the public.

I recognise that that is not, unfortunately, the policy of this Government. Let me contrast their proposals on Ofgem with ours. Clause 117 will enable fines levied by Ofgem to be paid directly to consumers rather than going to the Treasury, as happens now. In itself, this is a perfectly reasonable change to make. Consumers who have been mistreated, not the Treasury, should receive redress. Over the past 10 years, the Treasury has received just over £30 million in fines from Ofgem. Evenly spread across all households, that works out at about 10p per household per year. However, according to research by the independent price comparison website, energyhelpline.com, the mismatch between the prices that energy companies pay for the energy they buy and what they charge their customers for it means that last year alone consumers could have missed out on savings of over £1 billion pounds—more than £50 per household.

The real issue is not about a redress framework for when companies get caught out misleading their customers or putting people on the wrong tariff but about creating a fair market in the first place. The first solution is to make the market more competitive and transparent, which our proposal for a pool would do. Given the dominance of the big six energy companies, their huge regional market shares, and the low numbers of people switching supplier, the second solution must be to create a regulator with the power to correct the existing market failure and force the energy companies to pass on savings to consumers when wholesale costs fall.

This Bill must provide a pathway to the world we hope to pass on to future generations. It must put the consumer first, providing the fair prices and fair dealing that they have demanded for too long, with a guard dog for a regulator, not a poodle. It must stand up to the energy giants, providing the means and the will to make the energy producers the servants of our nation, not its masters. It cannot be a fudge to hold together disparate factions of the coalition until an election; it must be a roadmap for our nation’s destiny beyond our own lifetimes. I urge this House not to pass a law that is forgotten in a few years but to pass the legislation that we need and of which future generations will be proud—legislation for one nation, but for many generations ahead. I commend our amendment to the House.

16:14

[Mr Tim Yeo (South Suffolk) (Con)]

I draw attention to my entry in the Register of Members’ Financial Interests. In this context, I point out that my passionate conviction that more urgent action is needed to address climate change and to cut greenhouse gas emissions from both the energy and transport industries was formed in 1993, when I had ministerial responsibility for these issues, and that the financial interests listed in the register were all acquired more than a decade later, after I left my party’s Front Bench.

I welcome the Bill, although its introduction is overdue. To keep the lights on, Britain needs huge new investment in generation and transmission capacity. To make energy costs affordable, we need a step change in energy efficiency and improved competition in both the wholesale and retail markets. To achieve our carbon emissions reduction commitments, we need the right incentives for low-carbon energy.

I welcome the Government’s acceptance of some of the recommendations made by my Committee—the Energy and Climate Change Committee—particularly the inclusion in the Bill of the aims of electricity market reform and the change to the counterparty arrangements for contracts for difference. I regret, however, that the Bill still needs Government amendments, particularly in relation to energy efficiency, which should be right at the heart of energy policy, not an afterthought tacked on under pressure from outsiders.

Obviously, I cannot deal with the whole Bill in the space of six minutes, so I will stick to a few headlines. To secure investment at the lowest cost to consumers, absolute clarity of policy is needed. That clarity does not exist if different Government Departments put out different messages or, even worse, if different messages emerge from within the Department of Energy and Climate Change itself. Mixed messages create uncertainty.

Investors seek higher returns to compensate for the extra risk of investing in long-term assets in a country where energy policy appears to be subject to short-term changes. That is one of the reasons we need a carbon-intensity target in legislation. The need for that target is supported by my Committee, by the Government’s statutory adviser, the Committee on Climate Change, and by a large number of companies. It is even accepted by the Government themselves, but they will not decide what that target should be until 2016.

Delaying that decision for four years leaves investors wondering whether energy policy will be based on the gas strategy, which envisages a possible increase in the fourth carbon budget and the construction of 37 GW-worth of new gas-fired power stations, or on the energy mix rightly favoured by the Department. Running 37 GW of unabated gas at more than a third of its potential would end any hope of cutting carbon intensity from electricity generation to even 100 grams per kWh, let alone the 50 grams per kWh advocated by the Committee on Climate Change.

[Dame Joan Ruddock]

Does the hon. Gentleman agree, like me, with the finding by the Committee on Climate Change that, largely as a result of the rising price of gas, a virtually carbon-free sector by 2030 would cost consumers £23 billion less than relying predominantly on gas in the 2020s? It is, therefore, of huge benefit to consumers, as well as to companies that want to invest.

[Mr Yeo]

I noted the views of the Committee on Climate Change with great interest. I also note that, up to now, both Government parties have accepted its recommendations without alteration.

Deciding the intensity target now, or even in 2014, when the fourth carbon budget will be reviewed, would helpfully clarify the position. Alternatively, emissions performance standards could be amended to curtail the operation of unabated gas plants after 2030, instead of allowing grandfather rights for those power stations until 2045.

I stress that my Committee was one of the first to call for Britain’s shale gas reserves to be exploited, but basing energy policy on the assumption that Britain has decades’ worth of cheap, recoverable shale gas reserves before a single flow test has been completed in this country would be reckless. Shale gas is a game changer in America, but there is no certainty that similar benefits in the UK would be so dramatic. Therefore, particularly as a result of high transport costs, the price of gas in both Europe and Asia may be significantly different and possibly higher than that in America for decades to come. Gas will and must play an important part in our energy mix, but we need low-carbon technologies as well. Carbon capture and storage has huge potential benefits, but there is no guarantee that it will be available at an economic price.

The model in DECC’s “Pathways to 2050” helpfully shows how hard it will be to achieve emissions reductions without new nuclear power stations. To bring new nuclear and other low-carbon technologies forward, we need clarity on strike prices. I accept that, initially, strike prices must be set centrally, but I hope that we can move to an auction system before too long. Auctioning would allow the benefit of cost reductions in the more mature low-carbon technologies to be captured for the benefit of consumers much more quickly than if strike prices are decided centrally in perpetuity.

Turning to energy efficiency and the demand side, we must be hard-headed about value for money. I commend the success in energy-rich Texas where, on some days, 30% of the electricity is generated by wind power without any subsidy at all. As has been shown in Texas, demand-side measures can reduce the need for capacity market payments, even if they do not eliminate that need entirely. Better incentives for electricity storage or a bigger strategic reserve are other ways of addressing problems of capacity and peak demand. I hope that the Government amendments will reflect the most cost-effective way of tackling those issues.

We also need more clarity about how the incentives for energy efficiency will be funded. If the cost of capacity market payments will be met from outside the LCF total—I am sorry, but I am trying to do this in six minutes—surely the cost of energy efficiency payments could come from the same pool. The LCF is the levy control framework.

I firmly believe that countries that decarbonise their energy and transport industries and their built environment will enjoy a huge competitive economic advantage in the long term. Some low-carbon technology involves a small upfront cost compared with fossil fuel-based alternatives, but even those costs will fall significantly as economies of scale are achieved. As concerns about climate change become more acute, as I believe they will in the next 15 years, and the carbon price rises, driven either by emissions trading or carbon taxes, investment in low-carbon electricity will prove to be not only right environmentally, but beneficial economically.

16:22

[John Robertson (Glasgow North West) (Lab)]

I congratulate the Chairman of my Select Committee, the hon. Member for South Suffolk (Mr Yeo), on his contribution. I believe that our Select Committee has been more than diligent in calling the Government to account. Unfortunately, the Government have not exactly been forthcoming in giving us the information that we require. We deliberated on the Bill some time ago and had five weeks of pre-legislative scrutiny. That is roughly seven weeks shorter than the time in which anybody else has ever been asked to do pre-legislative scrutiny. As such, it put us under a great deal of pressure.

We are told that the Government will table a number of amendments to the Bill. I appreciate that this is a very technical Bill and that the Government are not sharp enough to fill in the details. The Minister was right that the Bill was long in the making. We expected to get it some time last year for our scrutiny. The Government have had plenty of time to put together what they require, but—here we go again—they are going to table a load of amendments that Members in this Chamber will not be able to scrutinise or talk about. That is not good enough. I believe that, as the elected Chamber, we should be able to scrutinise, ask questions and get answers. I do not believe that we are getting the answers.

We have to look at the Bill in general terms. In the short time that I have, I want to talk about my pet subject: the consumer—the person who has to pay the bill—and what we are going to do to help them. I do not believe that the consumer is getting a good deal in this day and age. In fact, they are getting a deplorable deal. The Government are part of the problem because in Ofgem they do not have a body that helps them by setting out where they can call the companies to account.

Will the Secretary of State consider whether some form of windfall tax could be written into the Bill? The Labour party would be happy to table an amendment for such a tax, based on excessive profits. I believe that at a time of austerity, energy companies—particularly the big six—should not be making excessive profits or receiving billions of pounds from the Government to develop other forms of energy without providing a return for that money. The Bill should therefore include a measure that would, perhaps, allow those companies only to make profits that are in line with inflation at this point in time. We could then look at the issue again in a few years’ time. Those companies must be held to account, and the only way to do that is by hitting them in the pocket.

[Sir Robert Smith]

There is a real frustration with the prices people pay and we must ensure that we have the best market possible. We also need huge investment, but that must make a return on its capital. Otherwise, it will go to another country. Does the hon. Gentleman think that his proposal could drive away that investment?

[John Robertson]

I agree to a certain extent with my hon. Friend—I will call him that because we both sit on the Energy and Climate Change Committee, which on this matter is non-party political and we support each other—but energy companies owe it to their customers to try to keep prices down as much as possible at this time. My hon. Friend may remember that the Committee wanted to consider—or, rather, could not consider—the companies’ accounts. Who knows what they make? In many cases they refused to give us information because they did not want their competitors to know what was going on. I am sorry but we need an open and honest industry.

I chair the all-party group on nuclear energy, and I tried to create an industry that was open and honest although it did not have a reputation for that. Energy companies must show their books and let people see what they are doing. The Secretary of State could not tell me what the companies’ profits really are. The companies tell us what they think their profits are, but we can be sure that the information will not be correct and that they will be earning a lot more money than they admit. Multinational companies in other areas do not even pay tax in this country. Are the energy companies paying what they should?

[David Mowat]

I am excited at being given way to, so I thank the hon. Gentleman for that. My point is similar to that of the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith). What return on capital employed would the hon. Gentleman consider reasonable for such an organisation? Does he believe that anything in those companies’ accounts demonstrates that the return on the capital employed that they have been making is unreasonable? What is a reasonable figure?

[John Robertson]

That would be a good question if I knew the turnover of those companies. They say that their turnover is roughly 2%, but I do not think that is correct. We must look in depth at what their profits really are and how much money they actually spend. The money that energy companies receive from the Government to invest in other forms of energy never appears in their accounts; it does not seem to be part of the equation. That money comes not from shareholders or the companies themselves but from a third party: the Government. I want to know exactly what that money is for and what we have had as a return. I have not seen a very good return, and in particular I do not believe that money given to the renewables onshore wind industry provided value for money. It has even been a drawback, because we should have been spending money on experimentation and research and development in other areas. If we had done that, we might be in a better place today.

However, the hon. Member for Warrington South (David Mowat) is right and it is imperative that we get investment. We must show that our industry not only does a good job but can be trusted and is reliable. I do not think the word “trust” can currently be attributed to the big six energy companies and we must look at that.

Ofgem needs to be beefed up, and if it needs to be replaced, we should do that; I know my right hon. Friend the Member for Don Valley (Caroline Flint) would like that. I am not against the idea, but those jobs in Glasgow are important to my constituency and others in the area and I would like to keep them. I would also like to give Ofgem staff the power to do something—to get out there and threaten those companies—but they cannot currently push people about.

The companies have put prices up three times in the past two years, which is ridiculous, and they want to put them up further. The main debates in Committee will be on how much the strike price will be and what contracts for difference will mean to companies, but the dearer things get, the more they will cost the general public. We do not do enough for the customer, and, as the Secretary of State knows, I believe we do not do an awful lot for the people who cannot help themselves—those who do not have access to computers and cheque accounts. We must see how we can help them.

In my short speech, I have covered a lot of matters. I will support the Bill and look forward to being in opposition again with the Secretary of State.

16:30

[Charles Hendry (Wealden) (Con)]

At the outset, may I put on record my new role as a visiting professor at the university of Edinburgh, which does outstanding work on the energy sector? My mantra as a Minister was that the fundamental building block of energy policy is energy security. My view was that the Minister would probably stay in post if the cost of energy went up by slightly more than anticipated or if we missed a few of our carbon targets, but that he would be sacked if the lights went out. He would probably be sacked by John Humphrys on the “Today” programme and gone by lunchtime, but nobody would know because their radios would not be working. I had not taken account in that thinking of the fact that the Minister could be sacked in any case.

I want to put on the record my thanks to the Prime Minister for the privilege of having the role that I had for seven years in opposition and in government and for the chance to work with two outstanding Secretaries of State and world-class civil servants. It was an immense privilege and the most rewarding part of my political and adult life.

The Bill is an extremely good one—I would say that, because I was deeply involved in many of its elements. It deals with critical issues such as affordability and nuclear regulation, but at its heart is investment. As we have heard, we know pretty clearly when much of our power plant—coal and nuclear—will close down. We now face a race to get the new investment in place. If we do not, at around the second half of this decade, we will face a critical energy challenge. That does not necessarily mean that the lights will go out, but prices will spike, particularly for heavy energy users. Therefore, the package of measures proposed in the Bill is essential to long-term energy security. It will enable us to bring forward new investment, recognising that the companies concerned have a choice about where they invest in the world, and therefore that we need to make this a more attractive place.

With a combination of the Bill, the gas strategy and the autumn statement, I hope that we can begin to get the debate back to a sensible place. It is profoundly damaging to investors to have an absurd debate in which people can be pro-renewables only if they are anti-gas, and pro-gas only if they are anti-renewables. That is damaging to investors, and introduces the new problem of political risk. One of my goals as a Minister was to try to take energy policy out of politics. The investment decisions are expected to last for 30, 40 or 50 years and more, and people want as much long-term clarity as possible. Therefore, cross-party agreement, including agreement within the coalition, and as much agreement as possible with the devolved Governments are integral to delivering that long-term strategy.

Political risk has a cost. It puts up the cost of borrowing. If we need £100 billion-plus of new investment, an increase in the cost of capital of just 1% will cost the consumers of this country an extra £1 billion a year on their bills. Ministers are therefore beholden to find ways in which we can try to ensure that we bring down those costs. The reality is that there is a broad consensus across the House. Most of us, though not everyone, want nuclear as part of the mix. Thanks to the work of Lord Hutton, the current leader of the Labour party, the two Secretaries of State and a broad coalition, this is now one of the most exciting and positive places in the world for new nuclear investment.

It makes sense, of course, for us to harness our own resources and take forward renewable development. If it is right for most of the oil and gas-rich countries in the world—Norway, Kazakhstan and Saudi Arabia—to look at how to harness their own renewables, it has to be right for us. If it is right in China—almost half the onshore wind turbines installed in the world last year were installed in China, and they would not have done so without an economic case—we, too, have to look at the economic benefits.

Carbon capture and storage gives a new opportunity for coal to be a critical part of the mix. Our coal industry has an extraordinary heritage, and I am personally extremely attached to it. I think, however, that we also recognise that much of that investment cannot happen before the end of the decade and that we therefore need to have new gas in the mix and policies that will encourage new investment in that sector.

[David Mowat]

I agree with my hon. Friend on the need for consensus. Was he therefore as surprised as I was to hear the shadow Secretary of State attack the 450 gram limit for gas, which by implication means that the position of shadow Front Benchers appears to be that we should build no unabated gas stations? If that is their position, it is an extraordinary one.

[Charles Hendry]

My hon. Friend makes an interesting point. I well remember debating a previous Energy Bill while in opposition and trying to persuade the then Minister of the case for an emissions performance standard, and her saying robustly that it was not part of the process at all. I am glad that we have made some progress, but the key issue is for the emissions performance standard to be a driver of investment, not a barrier. By providing long-term clarity, that is part of what it does in this process.

If we are to build new gas plants, it would, as my hon. Friend the Member for South Suffolk (Mr Yeo), the Chair of the Select Committee on Energy and Climate Change says, be a mistake automatically to assume that they will all be powered by our own shale gas. We have to recognise that more gas may mean more imported gas. I would like further consideration of what that will do for gas storage. What do we need to do to enhance our gas storage? I hope that the Public Bill Committee will address that when it goes into the detail.

There are a couple of other issues. I agree that there needs to be clarity in relation to energy efficiency. That should be at the heart of the Bill. We need finally to address the issue of a long-term decommissioning target. I will not vote for the Labour amendment, but that does not mean that there is not a significant amount of industry support for it. Right across the sector—in nuclear, renewables and even the hydrocarbon sector—people want long-term clarity. It is therefore right that this is debated and we try to find consensus.

It is often said that ministerial careers all end in tears and sadness; mine did not. The Bill is critically important to our long-term energy infrastructure, and I am very proud to have had the chance to be a part of that process.

16:38

[Dr Alan Whitehead (Southampton, Test) (Lab)]

It is a pleasure to follow the wise words of the former Minister, the hon. Member for Wealden (Charles Hendry).

The Bill, as its long title states, is intended to reform the energy market by encouraging low-carbon electricity generation. Essentially, the Bill should ensure that we have the mechanisms and regulations at our disposal not just to keep the market working well, with a secure electricity supply and reasonable prices for customers, but that that is done over the next 20 years within a framework of decreasing carbon emissions from all energy-producing plants that makes every drop of energy go as far as possible through efficiencies, good management in the system and, just as importantly, by removing from the system as much demand as possible, so that emissions are avoided by not producing additional energy in the first place.

The present energy market arrangements—the British electricity trading and transmission arrangements system—have served us well in some ways. They have ensured that a capacity margin has been constantly available to guarantee supplies and at some stages of its existence has applied downward pressure on prices. However, the world has changed radically since the present market arrangements were first introduced more than a decade ago. Prices are going up, not down, massive amounts of plant are being retired from the system in the next few years and their replacements will need to be far lower carbon than the retiring plants. Most importantly, the trading arrangements of the market are carbon blind and do not, in themselves, advantage low carbon over high carbon; it is left to other devices, such as the renewable energy obligation, and subsequent work with the market to do that.

If the ambition of the Bill is to be realised, three things will be central. First, we cannot in the end use the devices of the past market reliably to achieve the goals set out in the Bill for the future market, yet, remarkably, the Bill claims to reform the energy market without reforming its mechanisms. Real reform, such as the introduction of a pool system to make the wholesale selling and purchasing of energy for retail fully transparent and accessible for all, is wholly absent.

Secondly, we need a sense of where we are supposed to go with the encouragement of low-carbon electricity. What does that phrase mean in practice? Is it just a warm aspiration that can be set aside when the going gets a bit tough? If it is not, it seems essential that a target level of emissions should be included in the Bill, but there is no such target. The Secretary of State favours a target, but I am afraid that we have a bit of a problem with what we might call Liberal Democrat capture and storage. [Interruption.] A glass of water for the Secretary of State, please. During the passage of the Bill, I hope that a coalition of people who believe that there should be a target can get together to rectify that, regardless of party stances.

Thirdly, even if there were a target in the Bill, measures elsewhere in it will still take us in precisely the opposite direction and make its aspiration redundant. They need removing or replacing. I strongly believe that the Bill needs to do what it sets out to do in the long title. We need a robust framework that can guide the next stage of deployment of renewable and sustainable energy and that can establish effective mechanisms for those plants, once deployed, to bring their energy to market. We need a market that can deal with new and existing producers fairly and consistently, so that the goal of a well-balanced marketplace encouraging new entrants, rewarding and supporting the best management of energy and celebrating the removal of demand from the system as the ultimate way to decarbonise it can be achieved.

The Bill does some of those things, but, overall, in its present state and with its manifest large gaps, it is not fit for the purpose that it has to advance. These shortcomings simply have to be remedied, because we need the stability and certainty of a coherent and fair market system to encourage and sustain the unprecedented investment in our plant, our networks and our neighbourhoods that will be necessary for an enduring low-carbon energy environment. The regime needs to instil confidence and last for perhaps twice as long as a central system as its predecessor did. The measures in the Bill, many of which I accept are complex and difficult to get right, fail that test at present.

The Bill needs extensive surgery, and in the limited time available perhaps I can list one or two of the major operations that need to be rostered. Are the arrangements for securing a counterparty to contract for difference deals really right? Is there a potential conflict of interest in the body that the Bill selects to be both the system operator and the delivery body for CFDs? Is the proposed transition period between the end of the renewable obligation and the emergence of CFDs workable? Should there be a longer period of changeover and a better opportunity for next stage renewable developers to work with renewable obligation certificates?

Does the ending of an obligation for renewable power purchase and the disappearance of power purchase agreements not place potentially insuperable obstacles in the way of independent generators of low-carbon energy bringing their output to market? Are the administrative arrangements for the setting of a strike price in the Bill not so weighted as to give an advantage to new nuclear that they risk undermining the veracity of other strike price arrangements and the possibility of meaningful auctions in the future? Is a market-wide capacity payment system not just a recipe for paying too much bill payer money to produce overcapacity, when better, cheaper arrangements such as strategic reserve arrangements exist?

Why are there no demand-side reduction measures in the Bill and why will any measures as yet undetermined by the Government appear only at the very end of the legislative process? Why does the level at which energy performance standards are set effectively exempt all gas throughout its operational life?

[Mr Deputy Speaker (Mr Nigel Evans)]

Order.

16:44

[Ian Swales (Redcar) (LD)]

I welcome this Energy Bill and will speak about the provisions dealing with carbon capture and storage. I pleased to see this exciting new technology incorporated in the Bill, but clause 41, entitled “Interpretation of Chapter 8”, defines CCS technology as

“technology for…capturing carbon dioxide…that has been produced by, or in connection with, generation of electricity on a commercial scale…transporting such carbon dioxide”

and

“disposing of such carbon dioxide…by way of permanent storage”.

I am concerned that this definition is too narrow to cover the benefits deliverable from emerging CCS projects. There is the obvious one—where all or part of the energy is delivered as heat rather than electricity—but I am more concerned to ensure that industrial carbon capture and storage is covered too. I know that the Bill is targeted at generation and the market, but I do not expect that there will be another Bill to cover wider aspects of energy and CCS, so I feel that the relevant clauses must be properly structured.

[Nia Griffith (Llanelli) (Lab)]

Does the hon. Gentleman share my disappointment that the Government have made a savage 80% cut in investment in CCS?

[Ian Swales]

As far as I am aware, the £1 billion that was promised for CCS is still on the table. I am not sure where that 80% figure comes from, although I would be disappointed if what the hon. Lady said was true. [Interruption.] I hope the Minister will respond to that later.

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

Let me be quite clear: the £1 billion competition is entirely as my hon. Friend described it—it is in place and on target.

[Ian Swales]

I thank the Minister for that clarification; that was my understanding too.

I raise this issue because of the importance of the proposed Teesside carbon capture and storage network to my constituency, the local economy and, I truly believe, to the national economy. I was delighted by the recent announcement that placed the project in the UK shortlist of two for the European competition and the shortlist of four for the UK competition. I am obviously disappointed that it seems that the UK projects will not be supported in round 1 of the European competition. It was notable that the UK announcements—and, indeed, the European ones—simply listed the technology and electrical output of each project, whereas the Teesside project included the potential to bring back International Power’s mothballed 1.8 GW power station at Wilton. However, power is not the main driver of the project. Teesside has 18 of the top 30 carbon emitters in the country, excluding power stations.

[Alex Cunningham (Stockton North) (Lab)]

Will the hon. Gentleman give way?

[Ian Swales]

I will, although I am now in my own time.

[Alex Cunningham]

I am grateful to my Teesside neighbour for giving way. He talks about carbon capture. Does he share my concern about the lack of detail in the Bill on which companies will be exempt from the cost of contracts for difference? For example, it would appear that the Sahaviriya Steel Industries works in his constituency were not operating throughout the 2005 to 2011 period to quality for an exemption. What will happen to them? Will we need amendments to protect the steel works on Teesside?

[Ian Swales]

The hon. Gentleman makes a good point. There are issues about how some of the calculations have been made, given that companies were coming and going through the reference period, and he raises an obvious example.

The SSI steel works in Redcar alone account for around 1% of the UK’s carbon emissions. Supporting the Teesside project with an oversized network will therefore not only be good for decarbonising energy generation, but have the potential to decarbonise energy-intensive industry. In doing so, the project will protect existing industry—that includes steel, fertilisers and petrochemicals—and make it more competitive, and also make the area a magnet for future investment in both energy generation and industry. May I therefore gently remind Ministers that their Department is responsible not just for energy, but—the clue is in the name—for climate change? I also ask that the definition of CCS be reworded to ensure that it covers the wider opportunities that the technology represents. Meeting our carbon reduction goals requires action on all major emissions.

The Energy Bill and the move to a low-carbon economy are welcome on Teesside. In fact, the area is already something of a Disneyland for green technology. We have Ensus running Europe’s largest bioethanol plant, a £60 million anaerobic digestion power-generation unit run by Northumbrian Water, SembCorp’s Wilton biomass power station, SITA’s waste-to-energy plants, the pyrolysis of waste plants being constructed by Air Products, and 27 wind turbines being constructed just off Redcar by EDF, which I can see from my bedroom window.

The Energi Coast consortium in the north-east, consisting of more than 20 companies, has already invested £400 million, and is ready to exploit the offshore wind and marine energy sectors. I should also mention Redcar and Cleveland college, one of the first colleges in the country to be accredited for the provision of green deal training. Future plans include a biomass power station at Teesport, which has attracted Korean investment; a new community power station based on aeroplane engines; a plant for the pyrolysis of tyres, generating energy and fuel oil; more anaerobic digestion plants, one of which received money from round 3 of the regional growth fund; and sub-stations to deal with half the output of the proposed giant offshore wind farm at Dogger Bank, which are likely to be in my constituency.

I am pleased that we appear to have reached the end of the consultation period, and that there seems to have been an outbreak of agreement between DECC and the Treasury, because it is important for us to move quickly. There are many opportunities for business growth and technical leadership, but the rest of the world is not standing still. It is time to be bold and clear, and to get going. I welcome the Bill, and I hope that the Minister will note my comments on the clauses relating to carbon capture and storage.

16:50

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

Let me begin by referring to my entry in the Register of Members’ Financial Interests, which relates to my involvement—on an unpaid basis—with the Edinburgh community and energy co-operative.

I strongly support the call in Labour’s amendment for a commitment to the 2030 decarbonisation target to be included in the Bill. Before the Secretary of State leaves the Chamber, let me say that although he felt obliged to attack our amendment, he clearly supports that call. Indeed, he presented some good arguments for the inclusion of the target. For instance, he told us that discussions and negotiations with National Grid would shortly be under way, and suggested that the fact that there would be a decision in 2016 will strengthen his case in the negotiations, but his negotiating hand would be even stronger if National Grid knew now that the target was included in the Bill. I hope that he will work wonders with his colleagues in the coalition. If our reasoned amendment is not passed, an amendment could no doubt be tabled at a later stage.

There are other reasons for including the decarbonisation target in the Bill. As has already been mentioned, there is still considerable uncertainty in the industry about the direction of Government policy. That uncertainty has been caused primarily by the different messages coming from the Government, as even Conservative Members have pointed out. It does not relate only to renewables, although the impact has been particularly obvious in that instance. Many people work in the renewables industry in my constituency, and what they say leaves me in no doubt that uncertainty about the direction of Government policy is having an effect on future investment programmes. Anything that the Government can do to emphasise that certainty and clarity exist in their policy would be extremely important.

There have been some positive steps, such as the recent launch of the green investment bank and its initial programme, but much more needs to be done to provide clarity, not just for the purpose of encouraging future investment but in many other areas. A lack of certainty and clarity in Government policy will have an impact on what the Bill is trying to do as a whole. The proposals for a capacity mechanism are one example. The more uncertainty there is and the greater the consequent lack of long-term investment, the more need there is likely to be for increased capacity to deal with ups and downs in supply and demand; and the greater the need, the more that capacity is likely to cost the consumer at the end of the day. Uncertainty about policy will also affect the ability of the Government—or, if Members prefer the term, the counterparty—to negotiate the arrangements for contract for difference, and, again, it is consumers who will ultimately suffer as a result when prices rise.

Let us hope that the Government soon provide some clarity and consistency, and one way of doing that would be to accept our proposal for the decarbonisation target to be included in the Bill at some stage.

I also want to talk about the effect of these measures on Scotland. That is, of course, important to me and other MPs representing Scottish constituencies, but it is also important for the UK as a whole. England and Scotland benefit in different ways from the current situation; Scotland has greater renewables resources, and Scottish energy producers have access to the larger market in England.

There is uncertainty because the renewables obligation in Scotland is devolved and, unsurprisingly, the Scottish Government have not said how they intend to proceed as they do not yet know what will happen across the UK as a whole. I urge the Government to expedite their discussions with the Scottish Government about the arrangements for Scotland after 2017. The renewables sector is particularly important for the Scottish economy, and both the Scottish and UK Governments must ensure that renewables are supported across the UK. Already, some 11,000 jobs in Scotland are dependent on the renewables industry, and there is the potential for many more such jobs to be created, but lack of certainty and confidence will threaten that. I hope that, either today or later, Ministers can give an indication of the state of play in these negotiations with the Scottish Government and the possible implications of the Bill’s measures for Scotland.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. So as to accommodate all Members who wish to speak, the time limit for contributions is now reduced to five minutes.

16:56

[Nigel Adams (Selby and Ainsty) (Con)]

I support the Bill and applaud the momentum that has been built up towards achieving a secure and stable low-carbon electricity supply to see us through the coming decades. I also want to pay tribute to the former Minister, my hon. Friend the Member for Wealden (Charles Hendry), who spoke earlier. He contributed an immense amount to this Bill, and I know that there is immense respect for him in the industry.

In Eggborough and Drax, I have two of the country’s largest coal-fired power stations, and I refer Members to my entry in the Register of Members’ Financial Interests. Both of those stations were built to the highest standards by the Central Electricity Generating Board and are therefore still operating effectively well beyond their planned life. Indeed, it is a measure of our country’s past engineering skills that these plants are in their fourth and fifth decade and are still playing such an important role for the country.

[Julian Sturdy (York Outer) (Con)]

Does my hon. Friend agree that energy mix plays a vital role in energy security, and Drax and Eggborough contribute to that both for our region and across the country?

[Nigel Adams]

My hon. Friend is absolutely right. Drax, Eggborough, and Ferrybridge on our border, play an important part in making sure the lights are kept on.

Fossil fuel stations such as Eggborough can be converted from coal to sustainable biomass, which is an accepted form of renewable energy. Indeed, Drax is already being converted. That is being done in response to policy demands and is a move fully supported by DECC. It will also be helped by the Bill’s proposed transitional arrangements. Such a move will not only help ensure that the UK meets its 2020 carbon reduction targets, but will act as a vital bridge during the country’s transition to a lower carbon future, one in which I can envisage a new generation of more efficient—and, ideally, combined heat and power—plants being designed and built. They might be similar to those already in existence in Scandinavia, and they will benefit from what by then will be a more mature, sustainable global biomass supply chain.

Independent power generators such as Eggborough and Drax provide the country with flexible, dispatchable generation and, as a result of the measures in this Bill, I trust that that will continue. Such generation is essential not only to balance the intermittency and inefficiency of large-scale wind generation, which, in my view—perhaps controversially—is blighting countryside areas such as mine in Selby and Ainsty, but to keep the country’s lights on. I refer to the recent Ofgem report, which estimates that the capacity margin in UK generation will fall to 4% in 2015. That is equivalent to the full output of Eggborough or half that of Drax.

In support of such biomass conversion and to pre-empt any detractors, after much inquiry I am convinced not only that large quantities of biomass can be sourced sustainably—admittedly from overseas, like most of our present coal supply—but that by revitalising redundant plantations in, for example, the south-east USA, we will increase the carbon uptake across the forest landscape. By providing a commercial use for the vast area of beetle-killed boreal forest in Canada, an area the size of England, which is growing year on year, we can help to turn this emitter of harmful greenhouse gases into a new carbon sink through clearance and replanting.

It can be argued that by converting our coal-fired stations to burn sustainable biomass the UK would be part of a global regeneration programme for the lungs of the world. However, perhaps I had better move on from our possible global contribution to something more immediate and, for me, more local. The two coal-fired stations in my constituency currently employ thousands of people across the region. Those jobs are essential and they must be safeguarded.

I am delighted to see that Drax has commenced its initial conversion programme and am pleased to report that Eggborough is now shovel ready. Those conversion programmes are creating and will continue to create essential employment opportunities in the hard-pressed construction industry and will also provide long-term infrastructure improvements to our ports and railways, a legacy that will last long beyond the time those conversions are life-expired. I am heartened by elements of the Bill and by DECC’s stated support for full conversion programmes such as those at Eggborough and Drax, but I am aware—and so is the Minister—that some important issues about the funding of such projects remain outstanding.

We must not lose the opportunity to use our proven generation assets, which are already connected to the grid—assets that we as taxpayers originally paid for—to maintain a stable electricity supply and bridge the capacity squeeze we now so clearly face. Additionally, we must not squander the immediate potential to commence large-scale civil engineering projects in the UK. The combined value of the Eggborough and Drax projects is more than £1 billion and such investments will secure thousands of existing jobs and create many more in Selby and Ainsty and across the north.

17:02

[Albert Owen (Ynys Môn) (Lab)]

I agree with the Secretary of State that the Bill certainly has not been rushed, but although I support its main thrust—I have been arguing for it for many years—it is underdeveloped and needs to be developed further.

Electricity market reform would have been carried out by any Government who had won the election. It is the natural next step and a lot of work has been done in the past to establish a low-carbon economy. The Climate Change Act 2008—a very important piece of legislation—and other Acts in the previous Parliament and the one before it, paved the way for this Bill, so I shall support its main thrust, even though it is under development. I agree with the former Minister, the hon. Member for Wealden (Charles Hendry), that we need to build consensus on these big energy issues. Indeed, he extended many of the issues on which the previous Government moved forward.

There has been a hiatus and a very public disagreement between the Treasury and DECC, which has been too obvious and has caused uncertainty. When I speak to a number of groups, including non-governmental organisations and industrialists, they all say that they want that political certainty in the future. It is incumbent on us all to build it so that we have a safe and secure energy supply for the future that meets low-carbon targets, which are set at all levels of government. I welcome the provisions from that perspective.

Hon. Members know that I am pro-nuclear, pro-renewables and pro-energy efficiency. I see no contradiction in holding those three views, because we need to move forward. We need the base load electricity that nuclear, clean coal and gas can provide, if the capture and storage systems are in place, along with renewables.

I have a few questions for Ministers. I cite the CBI, which has lobbied us heavily and joined a broad coalition. Not even the Minister of State, the hon. Member for South Holland and The Deepings (Mr Hayes) could call the CBI left-wing academics—there may be one or two, but the CBI is very much the voice of business, and business is asking for decarbonisation targets. It is a mistake for the Government not to put a clear message about decarbonisation in the Bill and not to honour the Climate Change Act in full. Having a target of 2030—[Interruption.] The other Minister, the right hon. Member for Bexhill and Battle (Gregory Barker) asks which Act. The Climate Change Act was probably the biggest piece of legislation on these things and the Bill should have signposts to secure—[Interruption.] Business is telling me this. The Minister is chuntering from a sedentary position. Perhaps he does not want to listen to business, but if he wants to make an intervention, I should be pleased to take one. The business sector is worried about uncertainty.

I have some specific questions. Businesses, particularly the independents, are expressing concerns to me about access to the marketplace in the future. They are concerned about lack of feed-in tariffs for smaller companies; in particular, those below 50 MW. If we decentralise the grid, we shall need a support mechanism as well as a grid for big industry. I do not think that subsidy is a dirty word; we need support mechanisms in the interests of the country so that we can produce the energy we need for business to survive. Will the Minister reconsider the position on feed-in tariffs for smaller businesses? The Select Committee looked at the issue, and the evidence that they are needed is overwhelming.

Will the DECC team look again the renewable obligations transition period? There is a danger of losing investment if we do not have continuity. The contracts for difference could play a big part. I welcome the £7.6 billion that has been set aside under the levy.

I welcome the basis for the Bill, but the lack of decarbonisation targets is a weakness. I think we should have them. The Secretary of State wanted them, as did industry. That is why we tabled the reasoned amendment. I want a pro-nuclear, low-carbon economy to be the future, and I want the Bill to be the mechanism that takes it forward.

17:08

[Dan Byles (North Warwickshire) (Con)]

It is hard to overstate the importance of the Bill, but sometimes we need to pause and get back to basics, and remind ourselves what drives the tensions at the heart of strategic UK energy policy.

Traditionally, DECC has had two priorities: to keep the lights on and to do so at an affordable price. In recent years, a third priority has been shoehorned into the mix—decarbonising the sector. It is fair to say that at times the decarbonisation agenda butts up against the energy security and affordability issue. Much of the current debate is about how we manage that conflict. I am of the view that decarbonisation is vital, but that it cannot be considered in isolation. We cannot say at any point that there will be decarbonisation at any price. Indeed, when the Secretary of State came to the Select Committee last week he conceded that point.

Another problem in the UK is investment, which has already been mentioned by various Members. A fifth of our capacity will be gone by 2020; 12 GW of oil and old coal generation will be offline by 2015, and most of the remaining coal and older gas plant that stays online after 2015 will not be able to run at full capacity for various reasons. Nuclear power plants are coming offline without life extension; all bar one will be gone by 2023. I am pleased to see those life extensions coming forward, but the long and short of it is that we have an oft-quoted £110 billion investment challenge by 2020. That is a huge investment challenge.

Ofgem threw a hand-grenade into the debate in October, when it reported that we face a very real risk of power shortages in just four years’ time, when our capacity—our overhead—goes from 14% to 4%. My hon. Friend the Member for Selby and Ainsty (Nigel Adams) put that in context by saying that 4% is just Eggborough power station coming offline, which I find quite frightening. That is why the Bill is vital, and that is why it needs to be passed, and passed quickly. I am disappointed that the Opposition, who apparently support the Bill, have managed to word their reasoned amendment in such a way that they could end up voting against Second Reading.

[Albert Owen]

Reasonable.

[Dan Byles]

A reasonable amendment, is it?

There are investors out there who want to invest in the UK. Members of the Energy and Climate Change Committee have spoken to them. I have personally spoken to numerous private equity companies and pension funds. There are billions of pounds sitting, burning holes in investors’ pockets, but they are holding back because they need to see the detail in the Bill. There are a number of issues that we kicked around in pre-legislative scrutiny on the Select Committee, around the counterparty and the detail of the contracts for difference. I am very pleased that DECC has moved considerably on the counterparty, and I think has taken on board many of industry’s concerns, but some still remain about exactly how the contracts for difference will work, where in the investment cycle those contracts will be awarded and the route to market for small generators.

[Nigel Adams]

Does my hon. Friend agree that the contracts for difference must be absolutely defined and clear to allow such investment to go ahead?

[Dan Byles]

Absolutely. My hon. Friend makes the point very precisely. In fact, most of the arguments about the counterparty were prompted by exactly that. The contracts need to be bankable. They need a robust and clear counterparty who, to be blunt, may be sued if necessary, and has deep enough pockets; and at the end of the day, that really means the Government. We know that the counterparty will be Government-owned. It is still not entirely clear whether it will be underwritten entirely by the Government, but those are some of the details that we shall be teasing out in the Public Bill Committee. These are the issues that investors are looking at.

There has been much discussion of the 2030 target. We discussed it at length in the Select Committee. Some investors out there are calling for it. We also had investors who came before the Committee who—even though some supported it—said, “For God’s sake, do not delay the Energy Bill by arguing about it, because in the short to medium term the 2030 decarbonisation target is not the key issue that investors are looking at as a driver for investment. The key issues are the details of electricity reform, the contract for difference, the counterparty and so on.”

Before I finish, I want to speak briefly about costs. I mentioned at the start that I do not believe that we can decarbonise at any cost, and to be fair I do not think that anyone in the Chamber would argue that we could. It is important that the decarbonisation agenda—a very important agenda, which I support—proceeds at a sustainable pace. I sometimes get concerned when, as a member of the Select Committee, sitting around the table with representatives of Government, industry and academia, I find myself thinking that there is an empty chair at that table—that of the consumer. We are not having enough of a conversation with Mrs Jones in Acacia avenue about what we are doing in this place, and the impact that will have on her electricity bills. Because let us face it: structurally higher energy bills not only have a wider cost to the economy, but every pound that Mrs Jones spends on her electricity bills, she is not spending in Comet—and look what happened to Comet. Higher energy bills have a dynamic impact on the economy, and we need to ensure that the decisions we make here do not unnecessarily add to those bills.

In summary, the Bill is vital. If we want to keep the lights on and attract the huge levels of investments that we need, we cannot be seen to be bickering in a partisan way in this place. We cannot hold up the Energy Bill arguing about a 2030 target. There are other opportunities to talk about that target; it is still a long way off. The Bill has managed to unite the CBI and RenewableUK in its support. That is quite a feat.

I echo the words of my hon. Friend the Member for Wealden (Charles Hendry), who is no longer in his place, by saying that this is not about a choice between renewables and gas. We need a balanced energy policy. We need gas and renewables and nuclear, and we need to decarbonise our electricity sector and, eventually, our entire economy, but at an affordable pace and an affordable rate.

17:14

[Mr Mike Weir (Angus) (SNP)]

At the time of the autumn statement the Government’s gas strategy was also published. That perhaps tells us why there is no decarbonisation target—merely the ability in the Bill to set one, which is something entirely different. If we are to build a large number of new gas-fired stations without carbon capture and storage from the outset, there is little chance of meeting a decarbonisation target. Indeed, given the recent report from the Committee on Climate Change, which forecast that household bills would be £600 higher per year in the future if the UK relies increasingly on gas, rather than £100 higher if the country concentrated on renewable power generation, it would seem that the Prime Minister’s promise on energy prices will not be met either.

It is worth noting in passing that Ofgem predicts that spare capacity within the Great Britain system will fall from its current level of 14% to around 4% by the winter of 2015-16. The same methodology, however, shows that Scotland, which is pursuing renewables, will have spare capacity of around 35%.

As the Bill stands, contracts for difference form a large part of the meat of it. The provisions are perhaps not as bad as originally set out, but they are still very complex. If I am fortunate enough to get a place on the Committee that will consider the Bill, I will look forward to many happy hours examining the detail. At this stage, I have two main concerns about the use of contracts for difference. First, I am concerned about whether they provide a sufficiently robust system to allow investors to get planning permission and obtain finance. Investors are very clear about how the current system works but are yet to have sufficient clarity over the new system.

It is worth noting that Scotland has been successful in attracting several new investments in renewables over the past few years, but the level of investment in the UK as a whole has been falling over the same period. Some of that is due to the general economic situation and possibly the general tightening of finance, and it is concerning to say that some investment has dropped off, possibly because of uncertainty about the intentions of the UK Government. If we are to be successful not only in meeting carbon-reduction targets but in creating a green energy future, that needs to be addressed urgently, so if the Government are determined to change from renewables obligation certificates to contracts for difference, they must ensure that the new system is robust and easily understood by investors and delivers what is needed.

At present it is envisaged that the renewables obligation will end in 2017, but it is far from clear to many potential investors that CFDs will be up and running fully by that time. That uncertainty could lead to difficulties with projects which come on line after 2017. I understand that, for example, to get an offshore wind project through the consenting and development stages, developers typically spend between £30 million and £50 million. Such an investment would obviously need high-level approval and may be hard to get if we cannot be assured that the returns are clearly modelled, and the new contract for difference has been shown to work. It is likely that both developers and financiers will require several years to become familiar with the mechanism and how it works in practice. That poses a danger not only to such investments, but to the supply chain.

That risk was highlighted by the pre-legislative scrutiny process. The Committee noted that

“it may be necessary to delay closure of the RO in order to reflect slower progress in finalising the details of EMR”—

that is, electricity market reform. I urge Ministers to take that point on board and consider carefully whether we need to ensure that the renewables obligation continues beyond 2017.

The second concern about the CFD is that it is an instrument for giving a hidden subsidy to nuclear generators. It is interesting to note that the first reaction from nuclear generators was not entirely favourable. The key part of the system is the setting of the strike price, which determines the level of support that is given to each technology. I appreciate that the strike price in the first instance has to be set administratively, but that will give a strong signal to the market. It is rumoured that the strike price for nuclear will be very high and greater than for offshore renewables, which seems ridiculous. I urge Ministers to consider that.

The time available to me means that I cannot go into many of the other aspects that I would have liked to speak about, such as the potential difficulty with the capacity market. Although I have grave concerns about the Bill, I will not support the Labour amendment. We have to move forward and get the system up and running as soon as possible. I hope that a decarbonisation target will be introduced in Committee or on Report and I will certainly support that. We need to get on with this project.

17:19

[Mike Crockart (Edinburgh West) (LD)]

It would be difficult enough to cover this matter in six minutes, Mr Deputy Speaker, but in five minutes it is virtually impossible. I will canter through my speech as quickly as I can.

The Energy Bill represents the most complete and complex reform of the energy market to date, reflecting the Government’s ambition to be at the forefront of a green revolution. It sets out a series of steps that will change our energy footprint and our energy future, shaping our energy sources for the foreseeable future.

I never miss an opportunity to mention the green investment bank, and this is one such opportunity. The green investment bank, which opened for business last week, is leading the way in establishing the UK as a leader in low-carbon technologies and positioning us as a nation with a modern, energy-efficient economy capable of attracting investment and creating jobs while reducing emissions and bringing down energy bills. Those are fundamental changes to the way our economy is driven, but we also need to drive a change in the way people view energy and use it.

Energy saving is the quickest and cheapest way to cut carbon emissions and so should be at the heart of electricity market reform. To quote the Energy and Climate Change Committee’s report:

“Demand-side measures… are potentially the cheapest methods of decarbonising our electricity system… reducing overall demand”.

I welcome the Government’s move to consult on measures to reduce demand for electricity but urge that we clarify our ambition in that area, because without a clear target we are immediately on the back foot.

In business it is often said that what gets measured is what gets done. The Government’s analysis shows that demand for electricity could be cut by 40% by 2030, but the current policies will achieve only 15% of that demand reduction potential, and that is based on DECC official figures. The figures also show that, at 119 TWh, the residential sector made the largest contribution to the UK’s overall electricity demand of 328 TWh in 2010, so it is essential that we work with energy providers to maximise the potential for residential demand reduction.

The green deal is a step, or rather a leap, in the right direction. Allowing homeowners and businesses to pay for energy efficiency improvements over time through their electricity bills should see a greater take-up of efficiency measures. I hope that we will soon hear an announcement about green investment bank funds being available to finance the green deal.

As was acknowledged in a written ministerial statement today, smart meters are the best tool we have in energy reduction. They have the potential to give customers accurate, real-time information about how much energy they are using and how much it costs. In my constituency, British Gas has already installed 837 smart meters. With the average home saving 5% through the use of a smart meter, that is a potential saving of £54,405 in one constituency alone. It is essential that smart meters have the capacity for real-time management as well as the ability to record the energy that is fed back into the distribution network from co-generation sources, such as wind turbines and solar panels.

Small businesses could also benefit from that. However, the Federation of Small Businesses has raised concerns that under current proposals small businesses could face paying their energy supplier to access their energy consumption data. As the helpful FSB briefing paper states:

“This will seriously undermine the credibility of the programme as well as limiting its potential economic and environmental benefits.”

I agree. If we add to that the sharp practices of some energy companies in relation to the renewal of small business contracts, it could act as a significant brake on progress in that area.

Measures announced by the Government to ensure that consumers get the best deals on their energy prices reflect our determination to tackle rising energy bills, and I am pleased that we have taken action to help people with the cost of heating their homes. Which? has stated that 82% of consumers list the cost of energy and fuel as a top financial concern. The major way to deal with that, of course, is to open the energy market to more independent providers. At present, it is difficult for small players to enter the sector, so I hope that measures in the Bill will help deal with that.

We have a unique opportunity to reform our energy market and state our ambition, but setting a decarbonisation target is as much about stating our ambition for a green future as it is about delivering the kind of certainty that industry requires. Although targets already exist under different legislation, they are economy-wide. I believe that it would be beneficial to set sector-specific reduction targets, and not just in the energy sector, but in aviation and shipping. I am disappointed that today’s ministerial statement failed to do that and has moved the decision to 2016.

The Bill is a once-in-a-generation opportunity to decarbonise and ensure a more competitive green sector in the future. I hope that the points I have raised today will prove helpful in raising areas in which an already very strong Bill can be improved further.

17:24

[Mr Peter Hain (Neath) (Lab)]

In achieving the Bill’s aim to deliver secure, affordable and low-carbon energy, there is no bolder delivery vehicle for a greener Britain than Hafren Power’s Severn barrage. The Severn estuary has the second largest tidal range in the world and the Cardiff-Weston barrage would generate fully 5% of the UK’s electricity need—16.5 TWh a year of low-carbon, predictable and therefore baseload energy.

The barrage will power the UK for more than 120 years, cleanly, securely and sustainably generating as much electricity as three to four nuclear reactors or more than 3,000 wind turbines. It injects more than £25 billion of private investment into the UK economy; no Treasury funding is needed at all. With the multiplier impact on the economy, that is a stimulus of about £70 billion.

The barrage will be a massive boost to the economies of south Wales and the south-west of England, with 80% of the investment being spent in the UK; other forms of renewable energy have to date imported up to 80% of their equipment and services from abroad. Some 50,000 jobs will be created during the nine-year build, also leaving a legacy of industrial, tourism and leisure jobs.

Some 1,026 turbines will be installed in the barrage—new, slow-spin turbine technology capable of being exported from Britain to the rest of the world. Gigantic caissons will be built and assembled and then floated out from its deep-water casting yard at Port Talbot, which will be transformative for south-west Wales. The other benefit is a legacy in Port Talbot of the largest deep-water port in north-west Europe, which will be ideal for the new generation of container ships—ultra-large container ships, or ULCs, which otherwise would have to find a port on the other side of Britain.

However, the barrage will not affect existing shipping to other ports, because special locks will enable ships to pass through without charge. Additionally, because of the more benign sea environment in the giant 570 sq km sea lake behind the barrage, there will be enormous new opportunities for marine leisure and commercial activity currently rendered impossible by the Severn’s fearsome current, bringing extra work to ports in both the south-west and south Wales.

Contrary to what critics have alleged, Bristol port will also benefit in other ways from the barrage. During construction over nine years, millions of tonnes of aggregate will be shipped out from Bristol and other ports including Newport, Cardiff and Barry. Compared with previous barrage projects, this one dramatically reduces the impact on fish and birds by using the latest turbine technology and generating on both the ebb and the flood tides, simulating the natural flow of the Severn estuary. There is already a great deal of engagement with wildlife groups to try to configure the barrage in a way that is as friendly as possible to fish and bird life.

The barrage will produce electricity 50% to 75% cheaper than coal, gas, wind or nuclear beyond the initial consumer support phase that all renewable technology attracts. For more than 90 years, it will be the cheapest electricity source in Britain. The barrage has the lowest levelised cost of any electricity generating source—lower than nuclear, lower than wind, lower than gas.

Hafren Power supports the new contract for difference price support mechanism outlined in the Energy Bill. That enables consumers to share in the upside as wholesale electricity prices rise. The barrage will also offset 7.1 million tonnes of CO₂ per year; over its life, that has a value of £2 billion in today’s money. It will defend 90,000 properties and 500 sq km of floodplains from rising sea levels, saving the nation billions in flood damage and defence costs. It will protect Bristol, Cardiff, Newport and Weston from storm surges. A storm surge narrowly missed the Severn estuary in 2010; when it hit France, it caused $1.3 billion in damages. Those flood savings can be netted out against the cost of price support. Construction is 100% privately financed, so the barrage will cost the nation very little indeed.

The barrage is the biggest green energy project by far, enabling us to meet our renewable energy targets, as the Bill seeks. It will create jobs and investment; all in all, it should be a no-brainer for the Government. I ask the Secretary of State and the Government to make a decision in the context of the Bill, supporting the barrage in the first half of next year.

17:29

[Glyn Davies (Montgomeryshire) (Con)]

There are two reasons why it is a huge pleasure for me to speak about this Bill today. First, it is a very important Bill. Secondly, today is a significant personal milestone for me, because precisely 10 years ago, in the afternoon, I was at the Nuffield hospital in Shrewsbury in the throes of a six-hour operation to remove a cancerous tumour from my body. For those who are medically minded, it was a lower bowel perineal resection, which is pretty significant. One would have got very long odds indeed on my speaking in this Chamber 10 years later and representing my constituency of Montgomeryshire, particularly as it was one of the safest Liberal Democrat seats in the country.

I welcome the Bill and its commitment to energy market reform. Its purpose is to keep the lights on at an affordable cost to the country and to control the amounts of harmful gases which, it is said, are leading to global warming. Although I understand that we have not had global warming for 15 years, that is still a laudable aim for us to have. It is a complex and wide-ranging Bill, and we can come at it from a variety of angles. I do not want to repeat what other Members have said, which often happens later on in a debate; I want to put forward considerations that Ministers might take into account when they deal with the element of contracts for difference and put some detail on to that.

I have spoken in this Chamber several times before about my antipathy to onshore wind projects in my area, and it has been difficult for me to do so without becoming very angry because of the unreasonableness of the situation. My constituency has been very supportive of renewable energy for as long as I can remember. It probably has more turbines than any other constituency in England and Wales, and in the middle of it is the Centre for Alternative Technology. It had general support for renewable energy until the two Governments—here in Westminster and in Cardiff—came together to attempt to impose on the constituency the Mid Wales Connection. That project involves between 500 and 700 extra turbines, on top of what is there now, and almost 100 miles of cable, 35 miles of which is on 150 foot-high steel towers. It has transformed the attitudes of the people of mid-Wales because of its sheer unreasonableness.

It is not just me, as one Member in Montgomeryshire, who feels this way. I would point out to my right hon. Friend the Secretary of State that the other two MPs representing mid-Wales constituencies, both of them Liberal Democrats, share my view absolutely. There is a cross-party realisation of the unreasonableness of what is proposed for mid-Wales.

The element of local democracy is important. Governments in London or in Cardiff may feel that mid-Wales can be sacrificed in what might be termed the national interest, but it is not surprising that the people who live in these constituencies take an entirely different view and feel that we want to defend them. The applications by the development companies make no reference at all to the cumulative impact, to the importance of wild spaces and wild land in Britain, or to the scenic impact that the project might have. All these things are devastating to the local community.

A few days ago, the local council—the planning authority—announced that it had set aside £2.8 million to defend itself in the decisions that were going to appeal. There were only five such decisions. Powys county council does not have £2.8 million, and this would be devastating for local services. The council therefore asked the Welsh Government if they would help it to defend its planning judgments. The spokesman for the Welsh Government said that the council knew the costs involved when it turned the applications down. Clearly, the view is that the council should take the costs into account and approve applications because it could not meet them. That is an affront to democracy.

Another constituency issue relates to anaerobic digestion, of which I am a great supporter. Mr Clive Pugh from Mellington is a pioneer in this field, which he moved into before the feed-in tariff legislation went through. He is currently paid 7p or 8p per unit, while all new developments of the same size are paid 14p per unit. He is a pioneer who put himself on the line, and he will be driven out of business. We need to ensure that any new system under contracts for difference takes into account the impact on the pioneers—those who came before.

17:34

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

I first commend Members of all parties for their thoughtful contributions to the debate and associate myself with the comments made by my hon. Friend the Member for Ynys Môn (Albert Owen), who is no longer in his place. His words represented the type of mature and thoughtful approach that we need to take to energy and climate change and the Bill. We must redouble our efforts, both on renewables and on energy efficiency. Like many of my Opposition colleagues, I am deeply concerned about the failure to include the 2030 decarbonisation target in the Bill.

I want to touch briefly on four areas. The Minister and others have spoken many times about prices for ordinary consumers. I and, indeed, many of my constituents are deeply confused about how the energy markets function and how that affects the prices that we pay in our monthly energy bills. It has been deeply frustrating to hear the Prime Minister give confusing messages on this issue in recent weeks. That has simply added to the chaos and confusion faced by many people. The cheapest deal in an uncompetitive market is not a good deal. I associate myself with what my right hon. Friend the Member for Don Valley (Caroline Flint) said about abolishing Ofgem and instituting a regulator with real teeth that can fight the consumer’s corner, as that is what is needed.

One of the ways in which I believe we can increase the capacity, security and diversity of our energy supply lies in co-operative and community energy solutions, one of which is based in the constituency of my hon. Friend the Member for Croydon North (Steve Reed). A lot could be done to support such solutions, and I am concerned that the Bill does not mention such support. Will the Minister comment on that and consider the measures that the Government could take to support co-operative and community energy solutions?

It is important that we work on these issues with the devolved Administrations and the European Union. I commend the Welsh Government in particular on their efforts to introduce a sustainable development Bill and on their own measures for energy efficiency, particularly the Arbed scheme, which is making a difference in improving the energy efficiency of many homes throughout Wales, including in my constituency.

Will the Government consider devolving to the Welsh Government responsibility for decisions on energy developments of up to 100 MW? We may be able to discuss that in Committee.

Finally, I recently visited the Celsa Steel UK facility in my constituency. Energy-intensive users, particularly in the steel industry, are concerned about the pressures that they face. The Celsa Steel UK facility is one of the most energy efficient in Europe, using electric arc furnaces. I had the pleasure of going around the facility and seeing those furnaces in operation. The facility uses 100% scrap steel that has been recycled using top-of-the-range energy efficient methods. It is concerned, however, about the prices that it is paying for electricity in UK markets, as opposed to what some of its competitors are paying in other European markets. Will the Minister comment on what is being done to support such energy- intensive users? We need to meet our decarbonisation targets and climate change obligations, while ensuring that those industries that are working efficiently can transition effectively and continue to employ people in my constituency and throughout the UK.

17:35

[Christopher Pincher (Tamworth) (Con)]

Members will be relieved to learn that I plan to speak only briefly. I welcome the Bill, which is long overdue and of tremendous significance to our constituents. Who can blame them? In the past several years, gas prices have nearly doubled and the number of people trapped in fuel poverty has trebled. Between 2004 and 2010, 2.8 million more people were trapped in fuel poverty. Although the previous Government introduced remedial measures to help those people in crisis and although the current Government have done the same with the warm home discount and the cold weather payment and by freezing council tax, those measures are merely a sticking plaster. They treat the symptom, but they do not provide a cure.

It is sobering to reflect that the previous Government spent £25 billion on measures to combat fuel poverty, but those measures were swamped by the volatility of gas and oil prices. Those are not my words; they are the Library’s words. I will support any measure and any reform that will ensure cheap energy. I will also support any measure and any reform that, in the words of my hon. Friend the Member for Wealden (Charles Hendry), who is professorial, takes politics out of energy policy.

I should like to address two matters specifically: the capacity mechanism, which is in the Bill, and demand management, as referenced by my hon. Friend the Member for Richmond Park (Zac Goldsmith), which largely is not.

The capacity mechanism is designed to ensure that we have a secure supply of energy. I believe that it also needs to provide us with an affordable supply of energy. I therefore hope that Ministers will listen to the calls from across the industry. Big six companies such as E.ON, gas storage providers such as Stag Energy, and the Carbon Capture and Storage Association all say that if we have an extremely complex capacity mechanism that places undue risk on generators and suppliers and that comes into effect only in 2018, it could increase their costs by between £3 billion and £13 billion. Those costs would be passed on to the consumer, adding £14 or more to energy bills. I am sure that the Government will agree that we should not introduce a measure that is intended to reduce bills but that has the perverse effect of increasing them, particularly for the poorest and the most vulnerable.

With respect to demand management, if we are serious about reducing the cost of bills and reducing our carbon footprint, we have to be serious about reducing our energy consumption, which has increased by about 75% since 1970. I therefore hope that Ministers will use the Bill to put rocket boosters under the green deal. It is an excellent concept, but it needs to be more effectively communicated. The electorate need to be informed, so that they embrace it and so that the take-up rate meets the Government’s expectations. I want the green deal not just to rely on cavity wall insulation, but to bring the installation of the best and most effective boilers and the use of the most effective smart meters, so that consumers are put front and centre in the driving seat, controlling their own consumption.

The Bill has the potential to deliver transformational change to our energy landscape and to have the biggest effect on it since privatisation a generation ago. I hope that the Secretary of State will use the flexibility that he has given himself through the long parliamentary journey that the Bill has to go on and through the mass of secondary legislation that we await to listen to the causes of consumers, the industry and investors and to deliver a robust Act that has the confidence of those investors, that reduces bills, that ensures that we cut our carbon emissions and that puts the consumer first.

17:42

[Nia Griffith (Llanelli) (Lab)]

First, I must register my disappointment that there is no decarbonisation target for 2030 in the Bill. When Labour was in government, it took the lead and brought in the world’s first Climate Change Bill. At that time, the then Opposition Members were only too keen to parade their green credentials and to ask for demanding decarbonisation targets. It is therefore very disappointing to see yet another broken promise and the Government ignoring the clear advice of their advisers in the Committee on Climate Change who have consistently recommended a target for 2030 of 50 grams of carbon per kilowatt-hour. A sector-specific target for 2030 would give investors a clear signal about the direction of energy policy after 2020 and encourage greater investment in the UK-based supply chains. I hope that that can be remedied in Committee.

I am also concerned about the lack of emphasis on energy saving and reducing demand. Such measures by no means take away from the urgent need to increase generating capacity, but they have a significant role to play. Reducing demand and improving energy efficiency reduce the overall generating capacity that is required. It also reduces bills for consumers when their homes or businesses are made more energy efficient.

The Government’s decision to end the Warm Front programme is short-sighted. It contrasts sharply with the Welsh Government’s commitment to energy efficiency. Following on from their Arbed 1 programme, which put £68 million of investment into energy efficiency, using mainly local installers, they have now embarked on Arbed 2, which will make energy efficiency improvements to 4,800 homes, with a minimum reduction of 2.54 kilotonnes of carbon.

The Welsh Government must be commended on their commitment to renewables. It would be nice if they had the opportunity to take charge of renewables up to 100 MW, but perhaps that, too, will be discussed in Committee.

No one denies that we need to rely on gas for electricity generation in the interim, but it is a mistake to see gas as a quick and easy solution at the expense of renewables. First, there is a problem of the security of supply. Relying on gas makes us dependent on supplies from abroad, but we cannot be sure that supply countries will always want to supply us or that they will not increase prices significantly. The domestic consumer may find that they have all their eggs in one basket because, if gas prices rise, the price of electricity that is produced from gas will also rise, which will be a double whammy. We seem to be wasting the opportunity to use gas for its versatility—it can be transported as gas and used as such, rather than used for electricity generation—and we must look carefully at that balance in the Bill.

As secretary of the all-party group for the steel and metal related industry, let me move on to energy-intensive industries. It is vital that appropriate help is given to those industries, many of which are making significant investments in upgrading their equipment and reducing their energy demand, which is clearly in their interest. At Port Talbot, for example, Tata Steel has spent more than £60 million on the waste gas recovery scheme, reducing carbon dioxide emissions by 240,000 tonnes per annum, and its new blast furnace will be 10% more efficient than previous models.

If we are to keep heavy industry in the UK and stop carbon leakage—allowing our steel to be replaced by imports from countries that are less strict on emissions—we must get things right for energy-intensive industries. As the Bill goes through Committee, it is essential that the Government stick to their pledge to give sufficient consideration to protection against the rising cost of energy from electricity market reform. Tata Steel paid £13.9 million in 2011 in renewables obligations and feed-in tariffs, which will rise to £26.4 million in 2013. That risks making steel in the UK uncompetitive compared with other European countries.

What measures—if any—are the Government considering to compensate for the impact on energy-intensive industries of existing pre-EMR renewables subsidies, the renewables obligation and small-scale FITs? What analysis has been made of the impact of the proposed capacity mechanism and increased balancing costs on industrial electricity prices, and how will energy- intensive industries be compensated for that?

[David Mowat]

The hon. Lady makes a number of interesting points on energy-intensive industries, most of which I agree with. Does she agree that, although the Government may be doing some things to help energy-intensive industries, energy use is a continuum and any energy that is differentially expensive compared with our competitors will hurt our economy? It is not only the intensive industries that we have to sort out.

[Nia Griffith]

It is important to be aware of the effect of our provisions on all industry and business.

In conclusion, I congratulate my right hon. Friend the Member for Neath (Mr Hain) on his support for the Severn barrage, and I hope that such support will be found more generally. It disappoints me significantly that the right hon. Member for North Somerset (Dr Fox) has taken to opposing the barrage and whipping up opposition, rather than engaging constructively and looking at ways to make it a valuable project. I congratulate my new hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) on his contribution to the debate, and I emphasise his point that we must remove barriers to independent and community generators to allow them to take part and contribute to energy sources in this country.

17:48

[Peter Aldous (Waveney) (Con)]

To my mind this is the most important Bill to come before the House in this Parliament, and if we get it right the rewards are significant. We will develop a secure energy supply for a generation—a supply that is home-grown, made in Britain and clean, and that means we are less vulnerable to fluctuations in the price of oil and gas on global markets. The move to low-carbon energy production could be the catalyst that ignites the green economy and provides the growth that we all want to get the country moving.

I see that potential in my own backyard, in East Anglia and my Waveney constituency. Last month, EDF launched its consultation for the construction of Sizewell C in the constituency of my neighbour, my hon. Friend the Member for Suffolk Coastal (Dr Coffey). This week, ScottishPower and Vattenfall have submitted their planning application for the East Anglia ONE offshore wind farm, the first of six potential projects in the East Anglia zone.

Low-carbon energy supply is the foundation stone on which a green economy can be built. It will enable us to rebalance the economy away from a reliance on the service sector, and provides the opportunity to regenerate parts of the country—often coastal communities—that we have left out in the cold for too long. The New Anglia local enterprise partnership recognised that opportunity in its green economy pathfinder manifesto, which outlines the significant growth potential that Norfolk and Suffolk possess. It is important that the Government provide the framework within which that growth can be unleashed.

The Bill sets about providing the framework and achieves the right balance of transforming our electricity market and minimising cost and consumer bill increases. It shifts our energy supply from largely fossil-fuelled power stations to a balanced mix of nuclear and renewables, and makes the electricity market more attractive to smaller, independent generators and suppliers. I welcome the investment and commitment shown by companies such as EDF, ScottishPower, Vattenfall and SSE, but it is important that we ensure the market is open to smaller community providers.

The Bill is a welcome move forward and provides the country with a great opportunity, but this is a complicated subject and the devil is in the detail. The Energy and Climate Change Committee pre-scrutinised the Bill and made recommendations, some of which the Government have taken on board. It is important that that spirit of co-operation continues in the Public Bill Committee. Issues such as whether there should be a decarbonisation target need to be considered carefully. I will not vote for the reasoned amendment, because the Bill points firmly in the right direction, but I ask the Minister for an assurance that that target will be considered fully in Committee and in the necessary evidence sessions. There is a view that setting a decarbonisation target now will help to develop the supply chains of businesses—this country’s businesses—that can and should build and install wind turbines and construct nuclear power stations. Suffolk is on the cusp of being home to two of the largest construction projects in the world. I want local businesses and local people to benefit. We need to provide every encouragement, and to nurture that local supply chain.

Last year, the Aldersgate Group, of which I am a member, produced a pamphlet, “Greening the Economy: A strategy for growth, jobs and success”, which expressed the view that the Government must provide long-term policy frameworks with a different combination of market-pull and supply-push interventions. That approach has helped to drive Germany’s renewable sector, made silicon valley a centre of technological innovation, and built South Korea’s high-tech manufacturing virtually from scratch. A great deal of work remains to be done, but the Bill has the potential to be a similar catalyst in this country. Let’s get on with it.

17:53

[Alex Cunningham (Stockton North) (Lab)]

The need for reform of the energy market could hardly be more pressing, with rocketing prices from the big six. They have a stranglehold over the market, and yet are content to make billions in profits between them while millions of people cannot afford to heat their homes. The Bill rightly tries to deal with the lofty issues of investment contracts, capacity agreements, barriers to market, access for new investors, low-carbon generation, and countless rules and regulations, but not one of them will mean much to consumers if they do not provide an answer to the crisis that has plunged millions of people back into fuel poverty, leaving many with the decision of whether to eat or heat.

The prices crisis extends to industry, and particularly to energy-intensive industries, of which I have many in my Stockton North constituency. We need to build confidence in our country’s energy policy and reverse the coalition Government’s failure to grow our economy. We know the UK renewable energy market has suffered under the weight of mixed and inconsistent messages from the Government. While we have dilly-dallied in Britain, other countries have simply got on with it. The EU contribution of renewables to total energy is around 13.4%, but we are third bottom of the EU renewable energy league table, and our renewables contribution is just 3.3%.

Other countries have built the capacity for manufacturing wind turbines and solar panels, so much so that Germany and Holland in particular are picking up billion-pound contracts for British offshore wind farms while British companies are excluded by the foreign-owned energy generators. That is very bad news for constituencies such as mine, where many of us saw the wind and solar industries as the future for thousands of jobs and as major manufacturing activities that could prove to be the saviour for our faltering economy. If the Government will not listen to industry, maybe they will take note of Roseberry primary school in Billingham in my constituency. It is engaged in the solar schools project because it recognises the environmental and financial benefits of solar power, and it is raising funds to install it.

The consensus among campaign groups seems to be that the Bill will not do enough for consumers. Which? recommends that rather than placing customers on the lowest tariff, the new regulations should ensure that all tariffs are structured with a simple, consistent unit price that allows people to compare and immediately identify cheaper alternatives, as they do with petrol prices. When even the lowest price in an uncompetitive market is too high, the Government must make it work better for ordinary people. Requiring generators to pool their power to create a genuine market would ensure that decreases in wholesale prices are passed on to consumers, not just the increases, which happens at present. Gas from around our coast is largely used up and we are now at the mercy of overseas prices. We need alternatives and cannot be totally dependent on other countries for our long-term energy needs.

During my career, I was involved in setting up fuel poverty campaigns, in partnership with energy suppliers, to develop projects that rescued tens of thousands of people from fuel poverty, to add to the several million others who benefited from similar schemes under the previous Labour Government. Stockton Warm Zone took thousands out of fuel poverty. Sadly, a large proportion of those people, and people across the country who benefited from efficient boilers and loft and cavity wall insulation, have now seen a reverse in their prospects. I am sad to say that more than 20% of households once again count as fuel poor. That is bad enough, but what saddens me further is the way in which the Government plan to take energy efficiency schemes forward, because it means that the kind of benefits enjoyed from schemes across the country can no longer be replicated effectively on a scale that will make a real difference. They should rethink the energy efficiency measures policy and maximise the sums invested by ensuring that every penny raised from consumers is spent on such measures.

From April 2008 to December 2012, the Department of Energy and Climate Change estimated that the carbon emissions reduction target and community energy saving programme cost the energy supply companies £5.5 billion, but it does not know how much each energy company paid per tonne of carbon saved. There is no clear audit trail of what happened to the money. Energy companies must be compelled to be transparent in their approach to how that money is invested—after all, it is a tax raised for the specific purpose of reducing fuel poverty and tackling carbon emissions.

I mentioned earlier that our energy-intensive industries are worried about the limited detail in the Bill about exactly which companies will be exempt from the cost of contracts for difference. For example, what would happen to SSI steelworks, which recently reopened at Redcar? It was not operating during the 2005 to 2011 window to qualify for an exemption. I hope the Minister will address that point, and tell us whether it will be protected.

17:58

[David Mowat (Warrington South) (Con)]

The overarching policy statement sets out the context of the problem we are trying to solve, and to which there are three dimensions: cost, decarbonisation and security. We have heard quite a lot about decarbonisation, and something on security, which has two parts to it: the level of imports that we continue to need and keeping the lights on. We have heard less about cost, and I will also talk about that.

On security, the big issue unique to the EU is that we must spend £200 billion on new capacity in the next two decades. The companies that need to spend that money are more or less the same companies that we have heard so much about from the Opposition, who say they are ripping off consumers and so on. I gently say to the Opposition Front Bench, and to other hon. Members, that if that sort of language is heard in the boardrooms of some of those companies—which, due to the previous Labour Government, are now principally foreign-owned—it will not be an incentive to invest in our country. A great deal of work needs to be done on that. The biggest source of the increase in electricity supply in the past three years has come from imports through the interconnectors from France and Holland. That is a failure.

On cost, fuel poverty increased from 6% to 16% in the decade up to 2010. It is not possible to grow an economy with differentially high energy prices, particularly when trying to rebalance it towards manufacturing. We must be cognisant of that.

It is right that we decarbonise, but decarbonisation comes at a cost. Ministers must accept that there is a cost to be paid and not hide behind savings from better energy use and all that goes with it. We need to win that argument, otherwise the whole thing will unwind over the next two decades.

I want to ask Ministers about a particular issue. Hon. Members have talked about the European dimension and globalisation. The hon. Member for Stockton North (Alex Cunningham) rightly said that we are 25th out of 27 when it comes to renewables, although that—I gently tell him—is something we inherited in 2010. Nevertheless, it is true. It is also true, however, that we are one of the best when it comes to carbon per head and carbon per unit of GDP. In particular, Germany uses 30% more carbon per head than we do and 25% more per unit of GDP. It is often set up as an exemplar when it comes to renewables, and it is true that it has a lot of renewables, but the reason it performs so much worse than us is that it burns so much coal.

[Dan Byles]

Does my hon. Friend find it remarkable that Germany chose to switch off its nuclear fleet and replace it with a new fleet of additional coal-fired power stations?

[David Mowat]

It is more than remarkable. Germany has also banned carbon capture and storage. That says to me that the people in the heavy industries of the German economy will not put up with differentially high energy prices. Germany is about to build 23 unabated coal-fired power stations. We have heard about how the Opposition Front-Bench team apparently do not want us to build gas-fired power stations, but the amount of carbon coming out of coal-fired stations is huge.

Shale gas will probably not change the world. It has already happened in the US, which now has gas prices one quarter of ours, and it will use that to suck in the chemicals industry and the global chemicals capacity that we need in places such as Teesside and Stockton North. It might well be true that we will never get our gas prices down to the level in the US, but something has happened structurally in the world when an economy the size of the US has energy prices one quarter of what they are in Europe. We need to be cognisant of that and respond. PricewaterhouseCoopers has estimated that the benefit to US heavy industries of differentially low energy prices is $12 billion a year. Our shale gas prices might not deliver that, but shale gas could have a big impact on our economy.

I would like Ministers to consider certain actions. The first relates to honesty. If we must decarbonise, let us say that there is a price to it. Let us not say that it is actually cheaper. It is true that renewables are a hedge against rising fossil fuel prices—I do not hear that argument being deployed often enough—but it is also true that, at least for the foreseeable future, they are more expensive. We need to win that argument and take it head on, otherwise we will lose it incrementally. That is very important. Secondly, we should take on the EU over the confusion between renewables targets and decarbonisation. We are trying to decarbonise, not get higher up on a graph of who has the most renewables. They are not the same thing.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. The time limit is being reduced to four minutes. If hon. Members can make their points in less than four minutes, others may get in.

18:04

[Mr Iain Wright (Hartlepool) (Lab)]

I vividly remember speaking in the Second Reading debate on the Energy Bill of May 2011. I remember thinking that the Bill was a wasted opportunity, treading water while British industry and enterprise were being left behind by our competitors and failing to help vulnerable households at a time of rising bills. Nineteen months on, those comments could be replicated word for word about this Energy Bill.

When the Labour Government left office, this country was in the leading pack of economies for low-carbon technology, ensuring that we could exploit comparative market advantage in an important global sector. By May 2010, the UK was third in the world for investment in new low-carbon manufacturing and innovation. My constituency and the north-east region still have the potential to be the leading centre of excellence for energy production and distribution in its many forms—from nuclear to offshore wind, carbon capture and storage and energy from waste. However, this country is sliding down the competitiveness and investment tables faster than Father Christmas comes down the chimney. As my right hon. Friend the shadow Secretary of State said, Bloomberg New Energy Finance has stated that investment in renewable energy fell by a half in 2011. The debacle of the feed-in tariff for solar has damaged investor confidence. The CBI has said that

“while business wants to keep up the pace, they are equally clear that the government’s current approach is missing the mark, with policy uncertainty, complexity and the lack of a holistic strategy damaging investment prospects.”

There are also splits at the top of Government, with Ministers saying contradictory things. That has stalled investment and undermined the competitiveness of industry. The Chancellor says one thing, the Energy Secretary says another and the Minister of State—who is on the Treasury Bench—says something quite poetical and profound, but none the less questionable and contradictory. Little wonder that Camilla Cavendish wrote in The Times that companies

“remain uncertain about investing in the UK…the impression that the coalition is split has spooked companies whose boards need to commit capital for 20, 30, 50 years, whether in wind or nuclear power, biomass or solar.”

The Chair of the Select Committee on Energy and Climate Change said much the same thing in his contribution to today’s debate. Indeed, he said in a speech this week that

“instead of being out in front again, leading the green industrial revolution, Britain risks being left behind. Our competitors—China, Japan, Germany and the US—are pushing ahead on clean new technologies.”

This Energy Bill could have righted those policy wrongs. It could have provided a compelling vision, but it has failed to do so.

My second point is about the effect on people in Hartlepool. The situation in my constituency is getting worse: 42 people died in Hartlepool last year due to the effects of cold weather, up from 38 the previous year. That figure will increase this winter. Of course, nobody in this House wants to see death, which is the most extreme and unwanted example of a failed social energy policy, but there are far too many examples in Hartlepool of people being unable to keep warm this winter. Hartlepool is particularly vulnerable, owing to a relatively large proportion of pensioner households, people with long-term illnesses, high unemployment and low and part-time wages. One in six households in Hartlepool is fuel poor. Bills have gone up by nearly a third over the lifetime of this Parliament. Many people in Hartlepool now simply cannot cope with the rises in fuel bills.

This Energy Bill does nothing to alleviate those concerns or help vulnerable households in Hartlepool or elsewhere. There is nothing in the Bill to incentivise energy efficiency schemes, which might provide some respite to vulnerable households and provide some much needed employment in my constituency. Taken together with other things the Government are doing—such as ending Warm Front and slashing budgets to help fuel-poor households—this Bill is another missed opportunity to help those who are struggling and help the competitiveness of our economy. That is why I will vote for the reasoned amendment this evening.

18:08

[Mark Reckless (Rochester and Strood) (Con)]

Twenty years ago this country led the world in creating a competitive electricity market. This Bill promises electricity market reform, but the reality is that the contracts for difference, the capacity payments and the emissions performance standard will put an end to that market in any recognisable form. Instead, we will have a market that is fixed by civil servants.

When we hear “contracts for difference”, what that means is that instead of the price being set by the market, prices will be set by civil servants for decades in advance, with different prices for different technologies and, potentially, different prices for different consumers. They will not even depend on how much CO₂ a particular technology emits; rather, they will depend on what civil servants happen to agree in their commercial negotiations with providers, who I fear will have them over a barrel. Our constituents will be ripped off, with tens of billions of pounds of their money being transferred to producers who manage to negotiate the best deal with civil servants, who I am afraid are not up to the job of running electricity in the way that a market could in the interests of our constituents.

We should consider the price that our constituents will pay. We hear Opposition spokesmen say airily, “It is only £100 a year: it is remarkably good value.” However, the DECC levy-funded spending is to rise from £2.1 billion last year to £9.8 billion in 2020, which is almost a fivefold increase. The Department’s spending is rising even faster than our contribution to the European Union budget. Moreover, our constituents will pay a great deal more than £100 a year. If we divide that £9.8 billion by the 27 million households in the country, the result is £360 per household.

[Martin Vickers (Cleethorpes) (Con)]

My hon. Friend is making some interesting points. Will he expand on the implications of that £360 figure? Is it connected with EU regulation?

[Mark Reckless]

A lot of it is connected with EU regulation, but many of the costs of EU regulation are outside and in addition to it. It does not include the EU’s emissions trading scheme. It does not include our own carbon tax, which will rise from £16 to £70 a tonne. It does not include what is happening with the national grid: just two days ago it was announced that that would add a further £15 to each household’s bill, and £8.50 of it will kick in next year—on top of the £53 that the national grid is already adding to bills.

The depreciated investment shown on National Grid’s balance sheet is only £20 billion, yet over the next eight years £38 billion more will have been invested. I fear that much of the investment that has taken place is merely to link wind turbines and other renewables from remote parts of the country with major population centres in order to make the grid less unstable than it would otherwise be. Because of what we are doing with these technologies, all of which are subsidised and costing our constituents large amounts of money, my constituents will have to choose between heating their homes and buying Christmas presents. I fear we have got ourselves into a Westminster bubble.

The only thing that I can say for the Bill is that it is not quite as bad as it would have been if the other lot were in charge. Debating how many hundreds of pounds we should be adding to electricity bills when 6 million, 7 million or 9 million households are in fuel poverty, with more than 10% of their spending going on electricity, is simply wrong. Sooner or later the electorate will prick that Westminster bubble, and many of us will be faced with the reality that very few of our constituents think it acceptable for politicians to load hundreds of pounds on to their electricity bills for the purpose of what is essentially a political conceit.

We hear it said that because so many other power stations are shutting down, we have to replace all the coal. No, we do not have to replace all the coal. The reason we are replacing the coal is the EU’s large combustion plant directive. It is shutting Kingsnorth power station in my constituency, with the result that 300 workers are losing their jobs, and we are losing £7 million in business rates because of the rateable value of the station. It could perfectly well go on producing electricity. It emits sulphur dioxide, which if anything is a cooling rather than a warming agent. However, it cannot be replaced with a more efficient coal-fired station that emits much less CO₂ because of the emission performance standard that we are introducing, which basically bans any new coal-fired power even if it is much cleaner and emits much less CO₂ than what it would replace.

[David Mowat]

Will my hon. Friend give way?

[Mark Reckless]

I will, for the last time.

[David Mowat]

My hon. Friend may know that Germany is about to build 23 unabated coal-fired stations. Perhaps those 300 people from Kingsnorth could find work over there.

[Mark Reckless]

My constituents work for E.ON, which is a German company, but I am not sure that they would want to move to Germany even if jobs were available. However, I understand what my hon. Friend is saying. We do not see the Germans, let alone the Chinese—or the Americans: we have just heard about the gas price there—applying legislation like the legislation that we are applying to ourselves. Although the Bill will constrict our industry and impose vast additional costs on consumers—on our constituents—we are going to vote it through tonight. I think that we need to care much more about the family budget, and minimise the costs that we, as politicians, are imposing on our constituents.

[Kelvin Hopkins (Luton North) (Lab)]

Will the hon. Gentleman give way?

[Mark Reckless]

I do not think I should give way any more.

Why should we not just allow people to build power plants if they get local planning permission, thereby allowing them to support and pay the local community and sell into the market? Why do we want to ban some of the cheapest possible technologies for producing electricity? Why do we want to subsidise others, too—tens of billions of pounds might be transferred to an emanation of the French state? We should instead put our constituents first, and prioritise cheap electricity bills for them, and vote against this Bill tonight.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. May I point out that interventions could result in some Members not getting a chance to speak?

18:14

[Ian Lavery (Wansbeck) (Lab)]

The Bill is supposed to deliver secure, affordable and lower carbon energy. It is divided into six parts and is 195 pages long, and in the brief time available it will be impossible for me to discuss many of its most important measures, such as the contracts for difference, the capacity mechanisms, the emissions performance standard and the investment controls. I shall focus on the position of coal in the energy portfolio.

Several Members on both sides of the House have mentioned coal. The hon. Member for Rochester and Strood (Mark Reckless) mentioned it twice, once in an intervention and again in his speech. He said that the coal industry is being slaughtered as a result of EU legislation, and in particular the large combustion plant directive. That is partly true, but the fact is that coal has been frowned upon by Government after Government. Even in respect of the emissions performance standard for gas, the Bill allows the gas sector 450 grams of carbon dioxide per kWh, whereas coal has not got any such exemption, yet coal produces 50% of the UK’s winter-time energy requirement, and the average overall proportion is probably between 20% and 25%. Coal is, therefore, unbelievably important.

The Minister, the hon. Member for South Holland and The Deepings (Mr Hayes), is a great supporter of coal, and I am looking forward to hearing him say that he agrees with me that we must do everything we can to maintain what is left of the British deep-mine coal industry. We learned this week that Maltby colliery is to close. It is one of the last five or six collieries in the UK, and it has vast reserves. I look forward to hearing from my friend the Minister on how we can best maintain the British deep-mine coal industry.

We should bear it in mind that the rest of the world will be burning coal. As has been mentioned, Germany has shut down its nuclear power stations and will build 23 unabated coal-fired power stations. I am totally opposed to that. I believe that we should use coal, but we should do so responsibly by using carbon capture and storage and burning coal cleanly. That policy option is probably not on the agenda at present, but it should be. I am not sure how we can get rid of our coal capacity between now and 2020 or 2025 without there being an energy crisis.

Some 30 new gas-fired power stations will supposedly come on stream between now and 2030. I am amazed about that. Those power stations will be emitting gases at a rate of 450 grams of carbon dioxide per kWh.

[Richard Graham (Gloucester) (Con)]

I understand the hon. Gentleman’s passion for coal, but does he not agree that the decision to open three new power stations, with commitments from EDF Energy and Hitachi, will make an enormous difference in the provision of secure, clean and affordable electricity in this country, and does he not see the advantage of nuclear as well?

[Ian Lavery]

I see nuclear as part of a cross-portfolio of different types of clean energy, and leading that portfolio should be clean coal technologies, such as carbon capture and storage and burning indigenous coal reserves.

China will double its coal production over the next few years into billions of tonnes and will be burning coal largely unabated. The Germans and other nations that have coal beneath their feet will be digging it and burning it. Why should we not do that and use the new Energy Bill, with its capacity mechanisms and the contracts for difference, to bring investment forward for carbon capture and storage? We need to consider that and I hope we will get some small crumbs of comfort from the Minister on that issue.

18:20

[Oliver Colvile (Plymouth, Sutton and Devonport) (Con)]

Thank you for calling me, Mr Deputy Speaker, to speak in support of the Bill. The debate has reminded me why I should have paid much closer attention to my physics lessons when I was at school.

It seems to me that our country will face a series of issues over the next 10 years: securing a good, stable energy supply; ensuring that we play our part in cutting CO₂ emissions in the fight against global warming; and developing new business growth in our economy. A number of Members have spoken about Ofgem and how it expects our energy capacity to fall from 14% to 4% by 2015-16. We must get on with this and I hope that the Bill will be the first step in delivering a much more sustainable energy supply.

Unless we are very careful, Britain will be increasingly reliant on foreign energy or, for that matter, will have to turn the lights out shortly before the general election. I am sorry to say that in my opinion the Labour party, when it was in power, was partly responsible. The Labour Government failed to deliver any nuclear power stations and when they were elected in 1997, they decided to introduce a moratorium on any new gas power stations but cut VAT on energy to just 8%. The policy was at war with itself.

In February, I went up to have a look at the British Antarctic Survey. Those working for BAS have drilled down into 800,000 years-worth of ice, have taken it out and are analysing it. They have found that for the majority of that time—700,000 years—there was almost no global warming, and when there was it was due to a tilt in the earth. Over the past 300 years, when we have had industrialisation, they are finding from the analysis that there have been significant levels of change in our atmosphere, which has ended up going into our sea and having an impact on our fishing stocks. It is very important that we do something about that.

In a meeting I attended recently, I heard that America is doing a significant amount of work and will be independent on energy in the next 10 or 15 years, whereas, as others have said, China will not.

I want to thank my right hon. and hon. Friends on the Treasury Bench for delivering a marine energy park down in the south-west, and I am delighted that part of it will be in my constituency of Plymouth Sutton and Devonport, using the south yard. I am grateful for that and will work closely with those on the Front Bench to try to deliver it. However, in order to ensure we can deliver the marine renewable energy park we must ensure that we have a significant amount of investment from the private sector. I am campaigning for that, because if we do not get it right, like a game of chess, it will be checkmate and we will be out of the game.

18:20

[Steve Reed (Croydon North) (Lab)]

The Bill misses an opportunity to support community energy co-operatives. Brixton solar energy 1 was the country’s first urban energy generation co-operative and was set up by the local community in Brixton, working in co-operation with the local authority, Lambeth council. Solar power generation is not generally feasible on the majority of houses, because they might face the wrong way or suffer from shading from chimneys or other structures, or because the roofs are too small. Collective schemes, such as Brixton energy, are far better. They require partnership working. Solar panels are more likely to be financially viable when they are built on social housing blocks, schools or other public buildings, or on churches or businesses that have a large roof space facing the sun.

Brixton solar 1 was built on the roof of a social housing estate, Loughborough Park in Brixton. Brixton solar 2 is being built on another part of the same estate and a third scheme is planned for another estate in the area. The schemes are funded by community subscription and offer a 3% return to investors, most of whom are local. They are part-resourced by the local authority, which makes the buildings available.

Those projects tackle fuel poverty by offering lower energy prices to residents, who benefit from the feed-in tariff. They reduce carbon emissions by generating energy sustainably, and some of the profits are invested in schemes such as draught-busting, retrofitting, home energy audits and training on energy efficiency. In addition, they build social capital; they bring communities together and keep profits circulating in the local community in a way that does not happen with larger energy companies.

Instead of supporting such schemes, the Bill offers smaller community generators lower market prices for their power, making them less financially viable, and it fails to recognise the administration costs needed to run them. The Bill also ends the renewables obligation, which means that suppliers have no incentive to purchase from independent generators such as Brixton solar energy.

The Bill should be amended to increase the fixed feed-in tariff threshold for community projects, guarantee a market for community energy schemes and set a minimum annual target for new generation capacity from community schemes. I should like to see local authorities incentivised to lower overall household carbon emissions in their area, which they could do in part by supporting projects such as Brixton solar energy.

The Government should recognise the benefits of co-operative energy generation projects in tackling fuel poverty and promoting sustainability, but instead of acting to help them expand to areas such as Croydon North, which have relatively high levels of fuel poverty, they have introduced a Bill that I fear will damage those initiatives.

18:26

[Martin Vickers (Cleethorpes) (Con)]

The Bill is important for the country and particularly for my constituency, as its economic future is closely linked to the development of the offshore renewables sector, which is a vital ingredient if we are to see the economic renaissance of northern Lincolnshire and Humberside. Indeed, the Government recognised that by establishing the pan-Humber local enterprise partnership with specific responsibility for developing an energy super-cluster for the renewables sector. Growth is already happening, with more than 1,500 jobs having been created in the year to April. More than 20 vessels now sail from Grimsby docks to service offshore projects. Those jobs did not exist two years ago.

The green economy is producing jobs as well as improving the environment, but taxpayers and customers must be convinced. The Humberside area highlights the difficult balance the Government must achieve, as a large proportion of the jobs in or close to my constituency are in energy-intensive industries—oil refineries, chemicals, Tata Steel at Scunthorpe and others—while as I said, thousands of future jobs depend on the offshore renewables sector. Crucial to those long-established employers is the secure, reliable supply of energy that allows them to compete on the world stage. I welcome the scheme that goes some way to compensate some of those energy-intensive businesses.

I make no apology for stressing offshore. I recognise the industry’s preference is for onshore, where costs are considerably less; but it must be accepted that across the country, especially in a constituency such as mine, which is located on the edge of the Lincolnshire Wolds—an area of outstanding natural beauty—an overwhelming number of residents oppose onshore turbines. Recent comments by the Minister of State, the hon. Member for South Holland and The Deepings (Mr Hayes), have been warmly welcomed throughout Lincolnshire. I fail to understand why developers do not consider dockland and industrial areas for onshore turbines.

Doubts remain among our constituents as to the value of wind power, and I share them; but the course is set and I want the much needed investment on the Humber bank. If we are to have wind turbines, I want them designed, constructed, serviced and maintained in northern Lincolnshire with the corresponding benefits to existing local businesses, including the supply chain. I am pleased that, after a protracted planning process, progress is now being made with the south Humber energy park. The area is also gearing up, through its local colleges, to establish better training courses.

Whatever course is followed, what potential investors want is certainty, and what those of us paying the bills want is transparency and clear, logical reasons as to why those bills must subsidise large, multinational energy conglomerates. From the point of view of domestic customers, the most welcome feature will be the proposals, helpfully trailed by the Prime Minister, that will result in a reduction in household bills of between 5% and 9% between now and 2030.

This issue is yet another tightrope across which the Government must tread. The public, though still somewhat sceptical about climate change and moves to wind energy, recognise that there are massive costs in its development, but there is a limit to what they are prepared to pay. I have already mentioned the need to limit the costs to industry, but for hard-pressed households, particularly in areas such as my own, where wages are much below the national average, that is absolutely vital. Constant attention is needed to that, and I urge Ministers at all costs to ensure that the consumer is the focus of their—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order.

18:30

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

The interpretation that the Secretary of State put on the two main mechanisms underpinning the Bill was, in my view, disingenuous at best and seriously misleading at worst. Under the contracts for difference, the Government will agree a strike price with an electricity generator, offering a guaranteed payment per megawatt-hour of electricity. That means that nuclear generators will have a built-in certainty that, come what may, they will get whatever they demand as a necessary return on their investment—and nuclear plants do not come cheap at £8 billion a time—courtesy of the taxpayer.

Today the Secretary of State repeated again the fake promise that there will be no public subsidy. Parliamentary answers of 8 March 2011 showed that the cost of generating new electricity will be up to £98 per MWh, yet even EDF’s chief executive, Vincent de Rivaz, has estimated that the strike price will be at least £140 per MWh. That implies a public subsidy of £4 billion or more. However, Citigroup analysts have estimated that it is likely to be £166 per MWh. That would require a public subsidy of £5 billion—so much for there being no public subsidy.

Then there is the issue that nuclear costs are on an ever-rising spiral, while renewable costs are set to fall dramatically. For example, large-scale solar will reach grid parity prices this coming year, so feed-in tariff payments to renewable technologies have falling digression rates attached to them, requiring ever lower annual payments for their electricity. Nuclear, however, is a technology requiring an internal subsidy on a rising cost curve. Contracts for difference are therefore in this Bill the mechanism to lock the UK into an ever rising cost spiral for uncompetitive nuclear.

Then there are the so-called capacity mechanisms, which bail out the old fossil fuels. Wind, waves and sun are, of course, free, unlike gas. The obvious policy is to give them priority in meeting grid requirements, leaving the more expensive and polluting fossil fuels to fill in the gaps. That is exactly what happens in Germany, which has reduced the price of electricity at peak demand by between 25% and 40%. If that were done in the UK, it is estimated that it would generate another 77,000 jobs and remove nine out of 10 families from fuel poverty. But that is not what is going to happen in this country under the Bill. Experience in the US of the first six rounds of capacity payments showed that existing fossil fuels took over 70% of the payments under such auctions. It is really tragic that this Government are squeezing renewables in this way, even though they are the most cost-effective methods.

There is one further absurdity. DECC’s own demand-reduction project, published in July this year, found the following:

“We have identified…155 TWh of demand reduction potential…across all…sectors, of which current policy is estimated to capture…54 TWh”.

Frankly, that undermines the whole case for building any nuclear power stations at all, since the 100 or so TWh of savings that remain to be captured are almost exactly the same as the total quantity of electricity that the eight new nuclear power stations are expected to generate.

[Mr Deputy Speaker (Mr Nigel Evans)]

Order.

18:34

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

I tabled a reasoned amendment to decline giving the Bill a Second Reading. I do not do that lightly, and I recognise that there are some small steps forward, including the £7.6 billion for low-carbon energy to 2020, but overall the Bill fails miserably when compared with the scale of the challenges we face. It fails, first, on energy bills and the scandal of 6 million households in fuel poverty; secondly, on the scale and pace of carbon reduction needed; thirdly, because it does not fully recognise the huge potential of energy efficiency and renewable energy, including community renewables, to meet energy needs and create thousands of jobs now and into the future; and finally, because it locks us into a centralised fossil fuel and nuclear energy system at exactly the time when we need more decentralised energy.

Lack of time means that I can focus on only a few aspects. I agree with everything that the right hon. Member for Oldham West and Royton (Mr Meacher) said about nuclear. Let me say a few words about energy efficiency and fuel poverty. It is extremely disappointing that the Bill overlooks the huge potential of energy efficiency and demand reduction, despite widespread consensus that they are the cheapest, quickest, most effective ways to protect householders and businesses against high energy bills and to cut emissions.

The Government’s record is dismal. Ministers have slashed overall funding for fuel-poor households by 26% and cut energy efficiency funding for fuel-poor households by almost a half. I very much hope the Government will table amendments on demand reduction when the last-minute consultation is complete, and that they are commensurate with their own analysis, which shows that demand for electricity could be cut by at least 40% by 2030. Unfortunately, current policies would achieve at most about a third of that potential. It is crucial that any such demand-side incentives do not compete with renewable energy, and I hope Ministers will today confirm that demand-side measures will not be funded by the levy control framework.

It is worth reiterating that whether we see proposals for an energy efficiency feed-in tariff or other mechanisms, they must be additional to wider measures, including high efficiency standards for buildings and the recycling of revenue from carbon taxes and the EU emissions trading system to invest in a nationwide housing retrofit to ensure that all our homes need far less energy in order to keep warm.

On renewables, I welcome the announcement last month that the Government will provide sufficient funds through the levy control framework to ensure that the UK meets its legally binding renewables target by 2020. I sincerely hope that that will help reverse the current situation in which the UK is falling miserably behind other EU countries. The UK languishes at third from the bottom of the league table, on just 3.3% in 2011, a quarter of the EU average.

I am worried also about the future of community energy, on which Ministers deliver platitudes and promises but no policy. As a result, the Bill prolongs the uncertainty faced by small electricity generators, including community-owned renewables. What we need is a radical change in ownership—a move towards many more independent generators, smaller companies located in the UK, and community and co-operatively owned energy generation. Many hon. Members will have in their constituencies projects similar to Brighton energy co-operative that offer a real alternative.

I hope we can work together to change the Bill so that it does not disadvantage such schemes, by supporting, for example, the creation of a purchaser of first option to provide a guaranteed market for community energy schemes and other smaller generation projects; an increase in the fixed feed-in tariff threshold to allow funding certainty for community projects; and a minimum annual target for new generation capacity from community renewables schemes.

I will not go into detail—the House can imagine why—on the many reasons why I am a supporter of putting a decarbonisation target in the Bill, but at the risk of sounding just like the Prime Minister did two years ago, I will quote him. He said:

“If we don’t decarbonise electricity, we’ve got no hope of meeting the targets that we’re all committed to.”

That means at the very least a 2030 target of 50g of CO₂ per kilowatt hour by 2030. If the scientific evidence shows that we should have more ambitious targets, however, for either power sector or economy-wide decarbonisation, it is crucial that the Bill provides a mechanism to ensure that that can happen in a timely manner.

[Mr Deputy Speaker (Mr Nigel Evans)]

To resume his seat no later than 6.40, I call Mr David Anderson.

18:38

[Mr David Anderson (Blaydon) (Lab)]

Thank you, Mr Deputy Speaker.

We face the party that inherited the policies of the past 30 years, the party that believed that to tell Sid was the way to go ahead, but what did it tell Sid? “Buy something you already own”, it said. The party told him that he would be part of the great share-owning democracy. The party told Sid not to worry. Those wonderful private companies were dedicated to serving the public, they would ensure that they invested in the infrastructure, and they would give the country great value for money and transfer all the risk away from the public sector.

What the party did not tell Sid was that 9 million people would be living in fuel poverty by 2016; that it would set up a cartel of six big energy suppliers that would have complete control over every facet of energy policy; that the industry would be regulated by the weakest regulator in history; that it would fail badly to invest in the industry’s infrastructure; that we would face the real possibility of power cuts as a result of that failure; that we would have a national grid that has been described as not fit for purpose; that the failure to invest in skills and training would leave a work force incapable of dealing with the challenges we face; and that, 30 years down the line, the industry would want another £250 billion from the men and women of this country—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. We must move on to the wind-ups.

18:40

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

We have had an interesting and, at times, enlightening debate on what will be highly significant legislation. Given the number of contributions that we have heard, I apologise in advance if I am unable to refer to them all in my remarks.

As my right hon. Friend the Member for Don Valley (Caroline Flint) said at the beginning of the debate, the Opposition share the objectives that the Government have set for the Bill. However, as we have heard from many right hon. and hon. Members, including my hon. Friends the Members for Glasgow North West (John Robertson), for Ynys Môn (Albert Owen) and for Southampton, Test (Dr Whitehead), parts of the Bill still require further detail and greater clarity and gaps need to be plugged.

The Minister, who is charged with taking the Bill through Committee, can anticipate full scrutiny on the many issues that have been flagged up today by hon. Members from across the House. I am sure that he would expect nothing less. Indeed, he is known to be a fan of Burke and a prodigious quote machine, so he will know that Burke said:

“Bad laws are the worst sort of tyranny.”

As my hon. Friend the Member for Ynys Môn said, we do not consider the Bill to be a bad one, but we do consider that it requires some improvement and change.

I hope that the Minister’s constructive approach will endure through Committee. Judging by the nature of the contributions from hon. Members on both sides of the House, he will have heard a significant number of concerns expressed about the areas that require further work. It is in that spirit of constructive engagement, genuine scrutiny and an overriding determination to improve the Bill that we will act, as our reasoned amendment makes clear.

As the hon. Member for South Suffolk (Mr Yeo), who chairs the Energy and Climate Change Committee, said earlier this week:

“This legislation is far too important for Britain’s future to get wrong.”

As the hon. Member for Wealden (Charles Hendry) and my hon. Friend the Member for Wansbeck (Ian Lavery) observed, in the next decade around 20% of the UK’s generating capacity is likely to cease to operate. The hon. Member for Rochester and Strood (Mark Reckless) referred to the power station in his constituency, and although some nuclear power stations have had their lives extended in recent weeks, the power stations at Cockenzie, Didcot and Tilbury are likely to close in the next few months. The hon. Member for Selby and Ainsty (Nigel Adams) referred to the Ofgem report and the impact of the capacity squeeze over the next few years.

For all those reasons, the Bill is very important and the implications of not dealing with these issues are particularly serious, as my hon. Friends the Members for Southampton, Test and for Edinburgh North and Leith (Mark Lazarowicz) said in reference to our carbon targets.

It has been a long road to get to this point. It is almost two years since the Government launched their consultation on electricity market reform. Since then, we have had a White Paper, technical updates, a draft Bill, pre-legislative scrutiny, which my hon. Friend the Member for Glasgow North West and other members of the Select Committee referred to, and now the Bill is before the House. I am sure that Ministers would concede that it has not been a painless process for the Government. The Chancellor’s interventions have not always helped in DECC’s desire to provide, if not certainty, certainly predictability for the investments that need to be made in the future, as my hon. Friend the Member for Ynys Môn observed.

What the Minister described in last night’s Adjournment debate as the great bargain between DECC and the Treasury, with the incessant semi-public fighting within Government, has left many people nervous and reticent about investing in the UK. Those mixed signals are not good for reducing the capital costs of investment, as the former Minister, the hon. Member for Wealden, my hon. Friend the Member for Stockton North (Alex Cunningham) and others observed.

The recent Ernst and Young renewable energy attractiveness index for the third quarter of 2012 blamed

“political miscommunication and the lack of consistency”

over key energy reforms for impeding future investment in the UK. We cannot allow that situation to continue. Without a sense of purpose, the upgrade in energy infrastructure that we need in this country will not happen as quickly and might well cost more, and we will be ever more at the mercy of global commodity prices than we would be with a much more balanced and diverse energy mix that many of us, although not all who have taken part in the debate, see as very important.

As many hon. Members, including my hon. Friends the Members for Southampton, Test and for Ynys Môn and the hon. Member for North Warwickshire (Dan Byles) made clear, there are gaps and omissions in the Bill. There are not yet measures on demand reduction, as my right hon. Friend the Member for Oldham West and Royton (Mr Meacher), my hon. Friend the Member for Llanelli (Nia Griffith) and the hon. Member for Tamworth (Christopher Pincher) mentioned. There is not yet any fulfilment of the Prime Minister’s promise of a few weeks ago on prices and not yet, as my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) and many others observed, a clear 2030 target for the decarbonisation of the power sector.

All those things, I contend, are required to stimulate the necessary investment. As the Chair of the Energy and Climate Change Committee said earlier this week:

“Setting a target for emissions from electricity generation as recommended by the Climate Change Committee has been put off until 2016, prolonging the political and regulatory uncertainty that is killing investment.”

That issue is at the heart of our reasoned and reasonable amendment, and it is an issue for which the Secretary of State and his Cabinet colleague the Chief Secretary to the Treasury argued vehemently less than three months ago at their party conference. We all know how important consistency is to the Liberal Democrats; we also know the perils of inconsistency and the need to ensure that we move towards a decarbonisation target.

As one industry chief executive remarked to me just last week, targets help investors see the direction of travel, like the star shining over Bethlehem that showed the direction of travel for the three wise men. As I look at the ministerial Bench this evening, I indeed see three men; given the charitable time of year, I will wait until Third Reading to judge their wisdom.

Also missing from the Bill are measures to support the type of co-operative and community energy about which my hon. Friends the Member for Edinburgh North and Leith and for Cardiff South and Penarth spoke so eloquently, as did my hon. Friend the Member for Croydon North (Steve Reed), with his experience of what happened in Brixton. Members will be aware that his predecessor was one of the most thoughtful and serious contributors to energy debates in the House; in this, as in many other respects, he has a worthy successor.

The Secretary of State recently said that he wanted nothing less than a community energy revolution. I say to him that the Bill is an opportunity that we will help him to use to encourage that. There remain serious questions. We are all pleased to see the hon. Member for Montgomeryshire (Glyn Davies) here 10 years after his operation; he referred to some of the difficulties with the detail of the contract for difference. Many other hon. Members referred to the capacity market and other things for which some detail has yet to be given.

I can anticipate some of what the Minister, a seasoned and erudite contributor to the House, may well say in response this evening. He will doubtless quote Dickens, Churchill, Burke or Disraeli—if we are lucky, more than one of them. He will indicate his own brand of energetic commitment to the Bill and say that he is working with officials, industry and stakeholders to hammer out the detail to which I have referred. Yet a failure to fill some of the gaps in such a significant Bill, leaving it all to secondary legislation, will prolong the period of uncertainty.

Were the Minister able to offer publication of some of that secondary legislation in draft in Committee, Members on both sides would find that extremely helpful for effective scrutiny. At the very least, Ministers should be able to ensure that the impact assessment is updated before Committee and made available to Members; I have raised the issue directly with the Minister and his officials, but it is important to get that on the record to ensure that there is a commitment to assess properly the impact assessment that needs to be updated.

It is in the best interests of the country that the Bill should leave the House in the best possible shape. The Minister prompts me, just by his presence, into recalling the words of Disraeli:

“The world is governed by very different personages from what is imagined by those who are not behind the scenes.”

I anticipate keenly my behind-the-scenes encounters with the Minister and hope that he will not disappoint me in taking into account the many issues that have been raised not just by Opposition Front Benchers but by Members across the House during the debate.

It is a pleasure to be taking part in the final debate of the year on Government legislation before Christmas, before many of us spend time with our friends and families—and in my case, no doubt, a daily dose of Peppa Pig. Christmas is also a time of year for reflection. Given the pace of our work and proceedings in the House, we often do not get much time for the luxury of reflection. I therefore conclude by genuinely wishing Ministers a happy Christmas and expressing the hope that during this period they will have the opportunity to reflect on the issues raised by Members across the House and come back reinvigorated, refreshed and ready to engage in those issues so that we can ensure that this Bill does the job that many of us want it to do.

18:50

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

Labour Members really are keen now to emulate us as the party of one nation, because we heard the hon. Member for Rutherglen and Hamilton West (Tom Greatrex) quote both Burke and Disraeli. I do not want to disappoint him, so I will start by quoting Mark Twain, who remarked,

“what is a man without energy? Nothing—nothing at all.”

It is in such energetic spirit that I begin to sum up this important debate. Let me say at the outset that we will certainly make the revised impact assessment available before scrutiny starts in Committee, and we will certainly, in the spirit in which I intend to conduct the Committee, make available draft material of the kind that the hon. Gentleman described so that, I hope, all members of the Committee get the chance to shape the Bill, as he suggests.

Let me give the hon. Gentleman another quotation—

[Mr Frank Field (Birkenhead) (Lab)]

Will the Minister give way?

[Mr Hayes]

Not until I have quoted Ruskin—that would be premature—but I will do so immediately afterwards.

“The first duty of government”

according to Ruskin,

“is to see that the people have food, fuel, clothes. The second, that they have means of moral and intellectual education”—

and who better to intervene on the subject of moral and intellectual education than the right hon. Gentleman?

[Mr Field]

On Ruskin’s point that people should have fuel, the Government estimate that 4 million people are in fuel poverty. To what level will that fall if the Bill becomes law?

[Mr Hayes]

As I hope the right hon. Gentleman knows, we are committed to helping low-income and vulnerable households to heat their homes affordably. As part of our work to redefine fuel poverty, we have announced that we will publish a refreshed strategy for tackling it in 2013—he will know, too, that that is the first such strategy since 2001—because we want to ensure that resources are used as effectively as possible. I will be more than happy, following his intervention, to go back to my Department and recommit to that, because I share his passion for the vulnerable. I have little power over food and clothing, although I will continue to do all that I can to make the case for moral and intellectual education. I can certainly say with confidence that the Government, through the Bill, will enable the market to provide the fuel that we need.

My hon. Friend the Member for North Warwickshire (Dan Byles) and the Secretary of State himself said that the Bill has been warmly welcomed. I appreciate the broad welcome that it has been given by hon. Members across the House, including by shadow Front Benchers. It deserves such a welcome because it provides a framework for certainty to bring heat to homes, light to lives and power to the people, as the Secretary of State made clear in his opening remarks. Most importantly, it ensures a future where the needs of the many, not the interests of the few, drive energy policy. Our utmost priority is that consumers get secure energy at the best prices.

Let me say a few words to my old friend, the right hon. Member for Oldham West and Royton (Mr Meacher). It is true that nuclear power is part of our strategy, but not at any price. Some of the things that he suggested are well outside what would be the acceptable range in the interests of taxpayers. I cannot say more, of course, because this is a commercial matter, but I just say again: not at any price.

The Bill will, in the terms that the shadow Secretary of State, the right hon. Member for Don Valley (Caroline Flint) described, bring about unprecedented investment. That is necessary simply to ensure that supply meets demand. As my hon. Friend the Member for Wealden (Charles Hendry) said, the certainty that comes from long-term contracted prices also reduces the cost of capital, which is vital. As the Secretary of State observed, this is a growth Bill. It will bring jobs and investment to every part of the UK, by providing a boost to the energy industries through developing the low-carbon supply chains that my hon. Friend the Member for Cleethorpes (Martin Vickers) said were so important to his area, as to many others.

I ask hon. Members to reflect on this: when we speak of infrastructure investment, we frequently speak of housing, transport, roads and rail, but let us from now on ensure that whenever we speak of infrastructure investment and macro-economic policy, we speak too, largely and loudly, of the importance of energy. That is something that can unite the whole House.

I share the passion of the shadow Secretary of State and the hon. Member for Glasgow North West (John Robertson) for a more plural and more liquid system. I agree that, under the system that will be devised as a result of the Bill, the energy marketplace will need to be more competitive, because it is through that competitiveness that prices can be driven down. It is curious—I will put it no more strongly than that in the interests of creating a consensual approach to the Bill—that the Labour party should say that, given that the number of energy companies fell from 14 to six on its watch.

It is still more curious that Labour Members are advocating a return to the pool. I do not agree with them about that. [Interruption.] The right hon. Member for Don Valley says that it is a different pool, but she will know that the National Audit Office has said that in effect, despite lower input fuel prices and reductions in the capital costs of generating, the pool—which was abandoned by the Labour Government, not ours—meant that consumers paid higher prices than necessary. There are real questions about the gaming that takes place in a pool situation and the effect that that has on consumer interests.

[Dan Byles]

A number of Members mentioned carbon capture and storage during their speeches, and my hon. Friend has done a lot of work in this area. Does he think that we will realistically see cost-effective CCS programmes in the foreseeable future?

[Mr Hayes]

My hon. Friend will know that the CCS cost-reduction taskforce reported just a week ago and concluded:

“UK gas and coal power stations equipped with carbon capture, transport and storage have clear potential to be cost competitive with other forms of low-carbon power generation, delivering electricity at a levelised cost approaching £100/MWh by the early 2020s”.

That is not my conclusion, but that of the independent taskforce. By the way, the hon. Member for Wansbeck (Ian Lavery) is right that CCS can and should include coal. It is absolutely right that, in the long term, we should consider gas and coal as low-carbon technologies, alongside renewables and nuclear.

This is a framework for certainty and secure investment, a commitment to rejuvenate our infrastructure and an understanding that, with a mixed economy of generation, we are most likely to build sustainability by building resilience. We grasp that this is a growth Bill that offers a chance to deliver jobs throughout the whole country. Changes have also been made as a result of the scrutiny of the Energy and Climate Change Committee. There has been a proper process whereby the Committee’s considerations on things such as the counterparty body have been taken into account, considered and acted on. The Bill has been framed on the basis that it will not merely be legislation for this Parliament, but an Act that can help us to inform the future and, in the words of the right hon. Member for Don Valley, shape our destiny.

Some will say that the Opposition, in tabling a reasoned amendment, are dancing on the head of a pin, but I want to defend their Front Benchers. It is true that they are dancing—the choreography being more Sid Owen than Cyd Charisse—but they are trying to occupy a space on narrow ground, because they know, in practice, that the Bill will deliver the kinds of reforms that they would also seek in government. They know, too, that they share the Bill’s purpose, which is to deliver safe, secure, sustainable and affordable energy for future generations. I welcome the chance to shape the Bill to that purpose in Committee.

The spirit that the hon. Member for Rutherglen and Hamilton West proposed should enliven all we do is a spirit that I share, and I invite Members to reject the amendment and to support the Bill in that very spirit—the national interest and the common good that drives all we do.

Question put, That the amendment be made.

18:59

Division 127

Ayes: 206

---

Labour: 202
Plaid Cymru: 1
Independent: 1
Green Party: 1

Noes: 279

---

Conservative: 235
Liberal Democrat: 42
Democratic Unionist Party: 1

Question put forthwith (Standing Order No. 62(2)), That the Bill be now read a Second time.

Question agreed to.

Bill accordingly read a Second time.

Business without Debate

Wednesday 19th December 2012 Commons Chamber

Energy Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Energy Bill:

Committal

1. The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

2. Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 12 February 2013.

3. The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

4. Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

5. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

6. Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

7. Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Mr Goodwill.)

Question agreed to.

ENERGY BILL (MONEY)

Queen’s Recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Energy Bill, it is expedient toauthorise the payment out of money provided by Parliament of—

(1) any expenditure incurred by the Secretary of State by virtue of the Act,

(2) any expenditure incurred by the Gas and Electricity Markets Authority by virtue of the Act, and

(3) any increase attributable to the Act in the sums payable out of money so provided under any other enactment.—(Mr Goodwill.)

Question agreed to.

ENERGY BILL (WAYS AND MEANS)

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Energy Bill, it is expedient to authorise—

(1) provisions by virtue of which persons may be required to make payments, or provide financial collateral, for the purposes of, or in connection with, enabling—

(a) a CFD counterparty to discharge obligations in relation to CFDs;

(b) a settlement body to meet its costs in carrying out functions conferred by or under the Act;

(c) a CFD counterparty, an investment contract counterparty or the Secretary of State to discharge obligations in relation to investment contracts;

(2) the imposition of a levy in connection with the certificate purchase obligation;

(3) the imposition of fees under the Act;

(4) the payment of sums into the Consolidated Fund.

In this Resolution—

‘CFD counterparty’ and ‘CFDs’ have the same meaning as in Chapter 2 of Part 1 of the Bill;

‘settlement body’ has the same meaning as in Chapter 3 of that Part;

‘investment contract counterparty’ and ‘investment contracts’ have the same meaning as in Chapter 5 of that Part; and

‘certificate purchase obligation’ has the same meaning as in Chapter 7 of that Part.—(Mr Goodwill.)

Question agreed to.

ENERGY BILL (CARRY-OVER)

Motion made, and Question put forthwith (Standing Order No. 80A(1)(a)),

That if, at the conclusion of this Session of Parliament, proceedings on the Energy Bill have not been completed, they shall be resumed in the next Session.—(Mr Goodwill.)

Question agreed to.

European Union Documents

Motion made, and Question put forthwith (Standing Order No. 119(11)).

EU Development Assistance for Drinking Water and Basic Sanitation

That this House takes note of European Union Documents No. 14531/12, European Court of Auditors’ Special Report No. 13/2012: European Union Development Assistance for Drinking Water Supply and Basic Sanitation in Sub-Saharan Countries, and No. 14028/12, Commission Staff Working Document on Humanitarian WASH Policy: Meeting the challenge of rapidly increasing humanitarian needs in Water, Sanitation and Hygiene (WASH); and welcomes the Government’s approach to developing WASH policy within the European Union.—(Mr Goodwill.)

Question agreed to.

Portland Search and Rescue Helicopter

Wednesday 19th December 2012 Commons Chamber

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

19:14

[Richard Drax (South Dorset) (Con)]

It is a huge honour to speak in this debate, and I should like to start—[Interruption.]

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. Would Members leaving please do so quietly, so that we can hear the Adjournment debate?

[Richard Drax]

Thank you, Mr Deputy Speaker.

This campaign is not just about one MP. Other hon. Members are here for the debate and they are equally concerned about the future of Portland’s search and rescue helicopter. We represent tens of thousands of people along the south coast who are worried, many of whom have campaigned tirelessly in the past months to help me. This is a team effort and I pay tribute to, and thank, all who have contributed to the battle to save our helicopter. It would be negligent of me not to pay special tribute to all crews of search and rescue helicopters in the United Kingdom, and in particular to ours in South Dorset.

I will begin by telling a story about a fishing boat called the Purbeck Isle. Sadly, it sank recently and we lost three young fishermen. The search went on for three days non-stop and could only be carried out effectively by helicopter because the search area was so huge. The helicopters had to refuel a number of times. If it were not for the Portland base, they would have had to fly some 21 to 25 minutes to Lee-on-the-Solent before refuelling and coming back. That would have meant being away from the search area for at least an hour. The current water temperature in most of the United Kingdom means that people can survive for about 10 minutes before they become unconscious, and 30 minutes before their core is so cold they die—those are the maximum times.

I remind the House that the initial funding for the helicopter came from the private finance initiative, which was cancelled by the coalition Government in February 2011.

[Mr Tobias Ellwood (Bournemouth East) (Con)]

I congratulate my hon. Friend on the work he has done, and I join him in supporting all the crews who work so tirelessly to keep our seas safe. Does he agree that the mess the previous Government made of that PFI deal—the fact that decisions were not made then—is why we are confronted with this awful situation today?

[Richard Drax]

I agree with my hon. Friend to a certain extent, but when there was an earlier attempt to remove the helicopter, my predecessor was able to keep it because of PFI. In those days the Government were able to throw more taxpayers’ money at retaining it. Sadly, I am not in that position. The proposal has been put out to contract under the Official Journal of the European Union, which states certain key user requirements. As long as those requirements are met—at least theoretically, and that is the point—the Department for Transport assumed that no consultation was necessary. The previous Secretary of State for Transport, my right hon. Friend the Member for Putney (Justine Greening), wrote to me and said that no consultation was necessary because she was “improving the service”. That presumption was criticised by me and many others. It has now been criticised strongly by the Select Committee on Transport, which has called on the Government to rethink their proposal.

The Portland helicopter operates in one of the busiest areas in the UK, and 25% of all coastguard call-outs come from there. It is illogical to close a base in the middle of all the action and rely on those further away. Cover should surely be provided close to where it is needed. Portland is only a 12-hour base, yet it compares favourably with its 24-hour neighbours—Solent, Culdrose and Chivenor. In 2011, the call-outs were: Portland 194; Solent 210; Culdrose 249; and Chivenor 272. Its helicopter is being called out as much as helicopters at the 24-hour stations.

Furthermore, the costings were wrong. When I first got involved, the Secretary of State assumed that the Portland base cost about £9 million a year to run. It does not. It is a 12-hour base and costs between £4 million and £5 million. If the Government think they will save money by closing the base, let me tell them that the money spent on diving casualties and flood rescues this year alone would pay for multiple helicopters. Portland costs half the amount of other bases and does almost the same number of taskings. That important point bears repeating.

The flying times were also wrong, and this relates to what the then Secretary of State was told by her advisers. The flying time from Culdrose to Portland is 48 to 54 minutes. If we add 15 minutes—the key user requirement to get the helicopter off the ground—we are looking at about 63 minutes. The flying time from Solent to Portland is between 21 and 25 minutes, plus the 15 minutes, which makes 36 minutes. The flying time from Chivenor to Portland is 37 minutes, plus the 15 minutes, which makes 52 minutes. That is on the basis that the air is still, conditions are perfect and no wind is blowing. As we all know, helicopters are not called out to rescue people unless something has happened—normally in stormy weather. In the sea, a person has 10 minutes before they are unconscious—that is the maximum in current sea temperatures—and 30 minutes before their core temperature drops and they are dead. Not one of the proposed helicopter bases would meet that time. All the people in the water—children, mothers, grannies, whoever—would be dead.

The other helicopters—at the three other bases I have mentioned—are as busy as ours. The point I have made repeatedly to the Under-Secretary of State for Transport, my hon. Friend the Member for Wimbledon (Stephen Hammond) is that one helicopter can only be in one place at any one time—however new, however fast, it can only be in one place at any one time. So if the Lee-on-the-Solent helicopter, and we will have to rely on that, is called to the east of its basing area, we can add to the 21—or 36—minutes at least another half hour or even an hour because that is how long it will take to get back to its base, having completed its task, to refuel and to come to us. And the people in the water? They would be dead.

On concurrent call-outs—when the other helicopters are in the air at the same time as ours—I have documentation proving that, in the past 14 months, the Portland helicopter responded to 21 incidents at the same time as the Solent helicopter. My helpful and moderate letter from the Under-Secretary, dated 17 December, includes a table on tasking concurrency. It lists the call-outs for Lee, Portland and Chivenor in 2009, 2010 and 2011. According to these figures, tasking concurrency happened three times in 2009, once in 2010 and once in 2011. Why, then, do we have other figures stating that on 21 occasions the helicopter at Lee-on-the-Solent was in the air and doing a task at the same time as the Portland helicopter? Something is seriously wrong, and I urge Ministers to look at the modelling, which I believe is fatally flawed. Someone somewhere has got their maths wrong.

Over the past 10 months, 25 out of the 32 transfers to Dorset county hospitals were so life threatening that the Civil Aviation Authority regulations were waived so that the helicopter could land at the hospital. According to Department for Transport figures, every road death, which equates to a water death—it is the nearest we have got—costs £1.6 million. On the basis of those figures, we save about £40 million by having the helicopter at Portland. If the Government needed any lessons on saving money, that is a pretty stark example.

Sadly, all this is being compounded by the proposals to close the maritime rescue co-ordination centre. They, too, are criticised by the Select Committee. The local resilience forum is particularly concerned. The Government said there would be no cuts to front-line services. I wonder what these are: no emergency towing vessels in England or Wales; no offshore firefighting capability, because the marine instant response group was withdrawn; a proposal that more than 50% of the co-ordination centres should go; and two helicopters going—ours and another—reducing the number of bases from 12 to 10. If these are not front-line services, I would love to know what the definition of a front-line service is, because to me that is the very coal face that the search and rescue capability depends on.

It is not just search and rescue that our Portland helicopter is involved in. It also works with the police and the ambulance service—yes, we have a charitable air ambulance, as do many counties, but it is small and does not have a winch. Without a winch, it can land only at certain places, so on many occasions the Portland search and rescue helicopter is called to help. The air base played a major role at the Olympics—TV companies, VIPs, business; you name it, it was used. Then there are pan and mayday alerts, and let us not forget the Channel Islands, which are also in the Portland helicopter’s area of responsibility.

I would like to thank the Under-Secretary, —he is not the Minister currently sitting on the Front Bench; it is hard to track the right Minister down when trying to fight one’s case—for his letter. To be fair, he has seen me and listened to me, and when he got his facts wrong about the timing from Culdrose to Portland—he initially thought it was 21 minutes, until I said, “By Concorde, yes,”—he wrote a helpful letter saying that the flying time is actually 48 minutes. These are fairly serious errors.

Those on the Front Bench are very intelligent, capable men and women, but I urge them please to come down to Dorset and listen to those involved in search and rescue along our coast. I am a former soldier, and I cannot think of any major decision where one would not appreciate what one was about to do beforehand. It is military training; it is civilian training; it is what we all do—we make an appreciation. To do that we must go on a reconnaissance mission; and to do that we need to go up front as a commanding officer and look over the land that we are about to move over or perhaps the hill that we are going to attack. We do not just sit there in our bunker, look out and say, “Onwards men! There’s the hill! Go and take it! I’m having some breakfast”—and off they go and they get slaughtered. That is what happened in the first world war.

It is that important. I cannot request enough—it must be at least three, four or five times now—that someone comes down to Dorset and listens to those intimately involved. I do not pour scorn on civil servants—they have a very important role to play—but sitting back in Whitehall pressing computer buttons, playing with their modelling and making pretty circles on maps is not really the way to come to a logical conclusion. If someone came down to Dorset and listened to people—this is another thing that really appals me—they would find that they are frightened to speak their minds. Why is that? Because if they do, they will lose their jobs. Is that not unbelievable? In this democracy of ours, in which millions have died to allow me to stand here and speak, the people who should be giving the Government the proper advice that they need are too frightened to do so, because if they do, they will lose their jobs. That is utterly outrageous.

Let us for once, as a Government, stand up and start leading. I say this: “Come down and listen. Listen, and listen. Do not talk; you can do that when you get back to your office. Listen, and I am convinced that once you have done that, Ministers will change their minds, or at least will start thinking about the whole process again.”

In a letter to the Government, the Transport Select Committee said:

“There are understandable concerns that the withdrawal of these bases will lead to…increased fatalities”.

The Under-Secretary took the view that that was entirely different from saying that lives would be lost. I have to disagree: temperate language was rightly used to a Government Department by a responsible and highly influential Select Committee.

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

I congratulate my hon. Friend on securing the debate. The issue that he has raised is very important throughout Dorset. Although none of my constituency is on the coast, my constituents are just as concerned as my hon. Friend about the potential for fatalities. Let me reinforce his point that it is essential for someone to come down to Dorset and observe, for example, our lack of roads.

[Richard Drax]

My hon. Friend is absolutely right about the lack of roads. We live in a beautiful part of the land, and helicopters provide the only way of reaching people who need help quickly. Moreover, it should be borne in mind that half my constituency is at sea, and that “at sea” is a dangerous place. Millions of people use our coastline, our seas and our cliffs. They dive under the sea and they boat over the top of it, and all that generates tremendous activity.

In Fareham, one of the new maritime operations centres is to replace our co-ordination centre in Weymouth. At present, people who live locally get out of bed and, as they have done for many years, look out of their windows, see the rain, look at the sea, and get a sense of what is going on. Because they know the area, when something happens they are able to target the right asset immediately. They will know, for instance, that the field by Durdle Door is so boggy that a four-wheel drive will not get there at this time of year, so they must get the helicopter out.

What will happen if, during a busy bank holiday weekend, that huge MOC—with at least 40 staff—is bombarded by calls from people all along the south coast saying, “We have a child here, a mother there, a lilo somewhere else”? I predict that there will be utter chaos. That is another part of my constituency that I am trying to save, and I urge the Government to think again about an issue that is very dear to my heart.

I want to be generous, and to give the Minister as much time as possible in which to respond. Some Ministers—dare I say—stand up and read from a written script which, for eight of the nine minutes available, repeats what we all knew already. I should be very grateful to the Minister if he answered my specific questions. The first is this: will someone come down to Dorset and listen? If no one does, the consequences will be absolutely terrible. My invitation to a Minister to visit South Dorset was declined on the basis that it was

“important that the procurement proceeds as planned.”

I submit that, as it currently stands, it must not, because if it does, lives will be lost. I have been around long enough not to make such a statement loosely or lightly. I say it with the backing of those who are in the know, and who speak to me in the dark of night for fear of speaking out loud. They predict we will lose five, six, seven or eight more people a year. That many people each year will be dead if we do not have our helicopter. That is all because the Government are relying on modelling from miles behind the front line, rather than having the courtesy, if nothing else, to come down to Dorset and listen.

Will the Minister tell me how many search and rescue stations he has visited? How many helicopter crews has he spoken to? How many co-ordination centres has he been to? Talking to the crews and visiting the centres is the best way to learn what this is all about.

Finally, I thank the air crews—especially ours in Dorset—for the incredible bravery they demonstrate in the job they do. My aim is not to be a belligerent Back Bencher. I am supported by tens of thousands of people, as well as many colleagues, who believe the Government have got this badly and seriously wrong.

19:36

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

In the seven or so minutes my hon. Friend the Member for South Dorset (Richard Drax) has left me, I will try to respond to all his points and questions. I congratulate him on securing this debate and recognise his strong and genuine interest in this matter on behalf of his constituents and the wider public in Dorset and elsewhere.

I am responding today in place of my ministerial colleague, the Under-Secretary of State for Transport, my hon. Friend the Member for Wimbledon (Stephen Hammond), who is in Brussels attending the Transport Council. Therefore, to answer one of the questions put to me, I have visited no search and rescue stations, as it is not part of my portfolio to do so. I do not know whether my hon. Friend the Under-Secretary has visited any, but I imagine that if he has not, he will want to do so, as he is very keen to discharge his responsibilities in a serious manner.

My hon. Friend the Member for South Dorset recently met my hon. Friend the Under-Secretary, and he referred in his speech to the letter that followed that meeting, issued on 17 December. I am pleased that he received a copy before this debate, because it deals with many of the points he has raised. As he will know, therefore, last year approximately 23,000 responses to incidents were co-ordinated by the coastguard service, many of which were responded to by the service and the Royal National Lifeboat Institution. Search and rescue helicopters responded to approximately 2,500 call-outs. I pay tribute to the brave men and women who often undertake challenging operations in treacherous conditions to save lives.

As I do not have much time, I will not bother the House with a run through of the history of the service. I should point out, however, that the oldest of the Sea Kings used in search and rescue entered service in the early 1970s, so the fleet is clearly nearing the end of its useful life. As a result, the military are withdrawing the Sea Kings and their personnel from search and rescue in 2016, and, as the most recently awarded coastguard helicopter contracts expire in 2017, the Department for Transport is running a procurement to put a new, modern, state-of-the-art contracted service in place for the whole country, to be managed by the Maritime and Coastguard Agency.

Helicopter technology has developed over the past few years, and we will put in place a new service that benefits from those technological improvements. The new service will therefore utilise a full fleet of state-of-the-art aircraft. These aircraft will provide greater reliability and faster flying times to many more locations than the current military helicopters. The Department is determined to provide at least the same level of service as now, but in the current financial climate we must also consider the most cost-effective way to achieve that objective. That has led us to decide to alter the basing arrangements for the service. The increased capability of modern aircraft will enable us to move from 12 bases to 10 and provide at least the same capability as today while reducing costs.

We chose to prescribe 10 bases with 98% availability. We could, according to procurement and other experts, have had a lower figure but we have settled on 10. That enabled us to ensure that the future service would be at least as good as the existing capability and not endanger life by risking an overall increase in response times. My hon. Friend the Member for South Dorset referred to the statement from the Select Committee and, to be fair, read out the response. In linguistic terms, “having a concern that the withdrawal of bases will lead to” is not the same—I agree with my hon. Friend the Under-Secretary—as saying that that will be the inevitable consequence of any change. Clearly, the impact on the capability of the service and the ability to deal with incidents has been foremost in the Department’s mind in considering the future configuration of the service.

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

Will the Minister give way very briefly?

[Norman Baker]

If my hon. Friend does not mind, I will not, as I have been left seven minutes to try to respond sensibly to a debate. I am very sorry and will happily take any interventions in a subsequent debate—if that is technically possible—when I or my hon. Friend the Under-Secretary will respond.

This is obviously a matter of concern in South Dorset, but the Department is confident, as our independently verified analysis shows, that the arrangements we are putting in place will provide a comprehensive level of coverage that will not compromise our ability to reach persons in distress. Furthermore, the future service will bring substantial overall benefits to the country as a whole. It will require helicopters to be airborne within 15 minutes of being tasked during the day and to have a minimum availability of 98%. Within 60 minutes, the fleet will be able to reach all areas in the UK where there is a very high or high risk of incidents occurring, and modelling shows that average flying times to incidents would improve by approximately 20% under the future arrangements.

Currently, approximately 70% of high and very high risk areas within the UK search and rescue region are reachable by helicopter within 30 minutes. Under the new contract approximately 85% of the same area—therefore more of it—would be reached within that time frame. I recognise that Portland is of particular significance for my hon. Friend and other colleagues on the Government Benches. I am advised that approximately 5,000 coastguard co-ordinated incidents are handled by the Brixham, Portland and Solent coastguards annually, but over the past three years, an average of 214 a year required assistance from the Portland helicopter—that is about four a week. Other bases operating Sea Kings have performed up to double the number of taskings in a year, so it is not unreasonable to expect that neighbouring bases with modern helicopters would be able to respond to future incidents that Portland might respond to today. Indeed, other bases already do so at night because, as my hon. Friend said in his opening remarks, Portland only operates during the day.

It is of course true that a helicopter, however modern, can only be in one place at a time, but there are three other bases in the region, all within reach of the areas the Portland base often flies to when responding to incidents. Of these other bases, the closest are Chivenor and Lee-on-the-Solent, just 20 minutes from Portland.

[Richard Drax]

Will the Minister give way for just one second?

[Norman Baker]

I will, as it is my hon. Friend’s debate.

[Richard Drax]

Will he answer just one question, because—dare I say it—I have heard all this before? Will he guarantee that someone will come down to Dorset to listen?

[Norman Baker]

I was trying to respond to that point. His request has been clearly heard and I shall pass it on to my colleague the Under-Secretary and to the Secretary of State. It is their responsibility to deal with this issue and they will make a judgment, but he has made his point very firmly and I am sure that it has been heard by others in the House, too.

Let me try to deal with one more point before I run out of time. Over the past three years, Chivenor and Lee-on-the-Solent have been tasked at the same time as Portland on only five occasions. He cited the figure of 21, but I am advised by officials that the concurrent tasking figures to which he referred were from the Aeronautical Rescue Co-ordination Centre, the RAF tasking authority, and relate to three bases—Portland, Chivenor and Lee-on-the-Solent—not just to one. That might account for the difference in figures to which he referred—

19:44

House adjourned without Question put (Standing Order No. 9(7)).