Westminster Hall

Tuesday 5th February 2013 Westminster Hall

Tuesday 5 February 2013

[Mr George Howarth in the Chair]

HM Revenue and Customs

Tuesday 5th February 2013 Westminster Hall

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

09:30

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

I am grateful for hon. Members’ attendance this morning at this debate about Her Majesty’s Revenue and Customs and its capacity and resources. Over the past decade or so, tax debates in Westminster Hall have usually been attended by the usual public administration anoraks—a club that I am a member of—or failed accountants who have been elected to the House of Commons, which is even worse. Not any more, however: the recession means that we all take an interest in public expenditure and look at every element of public income. A tax justice campaign is being waged as a result of the recession, and I pay tribute to tax justice campaigners John Christensen and Richard Murphy for their work over the years, as well as to UK Uncut, whose direct action campaign brought the issue to the attention of the public. It is concerned about the scandal of unpaid and uncollected tax. The debate reveals that our system does not work effectively.

There is another scandal associated with our taxation system: not just how much taxation is avoided or evaded, but how badly our tax collection and administration is managed overall—and, to be frank, how it has been mismanaged by politicians over the past few decades. At times, there has been almost catastrophic short-sightedness and incompetence. The genesis of the debate was a lobby by the Public and Commercial Services Union that happened in the past six months, and meetings with members. I chair the PCS parliamentary group, and the union represents 55,000 staff at Her Majesty’s Revenue and Customs. There have been many meetings with Members, and meetings in constituencies, to express the overwhelming sense of frustration, which has at times verged on anger that, as professionals, staff have been held back from fulfilling their role of ensuring that taxes are collected efficiently.

There is a particular sense of frustration because during the recession HMRC could, through tax collection, make a significant contribution to tackling the economic crisis and, indeed, the overall deficit. Staff feel that they are being held back professionally, and undermined by cuts: staffing cuts, office closures, deteriorating work conditions resulting in low morale, and the lack of appropriate professional and legislative tools to do the job. Time and again the view has been expressed that more and more policy changes load responsibilities on to them—more work for an overstretched and overburdened work force. The expression used by many of the staff is that they have been set up to fail—in some instances so that their jobs can be privatised. I want to explore the current situation in HMRC and consider the remedies that are needed. The Government need to stand back at this point, and consider staffing resources and the challenges that staff face.

What is the job? It dates back to the time of Chaucer, the earliest famous tax collector—a putative PCS shop steward. It is simply to collect taxes. The Institute of Chartered Accountants in England and Wales circulated an excellent brief before the debate, and summed it up. HMRC simply makes the tax system work: that is what it is meant to do, but the reality is that it struggles to do so. We know that from the evidence that is available to us. If the main role of HMRC is to collect the taxes, it is clear from the recent evidence that it has not the resources and legislative tools to do so. That is clear from the evidence of the tax gap—we have debated the tax gap at length in this Chamber and I appreciate that there are disputes about using it as an overall assessment of performance, and about the overall level of the tax gap itself, but we know that the range is anything from the £70 billion to £120 billion estimated by Tax Research UK, under Richard Murphy, and the HMRC’s and the Minister’s estimate of between £30 billion and £40 billion a year. In other words, even on the Government’s own assessment, half the current deficit is not being collected in taxes, because of tax avoidance and evasion.

The scale of tax avoidance and evasion has caused anger throughout our communities. It is not only the tax justice campaigns and the media that have been railing against them—so have the Government. In December the Chancellor said that people are “right to be angry” about companies not paying their fair share of the tax, and I fully agree with him. The Secretary of State for Business, Innovation and Skills said in November that it was “completely unacceptable” that companies could get away with what he described as gaming the system, to avoid tax, and referred to “appalling stories of abuse” within the tax system.

Last week, the Public Accounts Committee, which has been consistently complimented on its excellent role, under the chairmanship of my right hon. Friend the Member for Barking (Margaret Hodge), tore aside the veil that covered the operation, mainly in secret, of the major accountancy companies of devising, and ruthlessly implementing, large-scale—massive—avoidance schemes described by some as obscene. It is worth repeating the scale of what we have seen, in example after example: Starbucks paying only £8.5 million in corporation tax since it was launched here in 1998, despite £3 billion of sales; Google paying £6 million in tax last year on a turnover of £395 million; Apple paying £14.5 million in tax on £1 billion of sales. Numerous other examples have been highlighted by the PAC and others in the investigations of the past year.

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

The hon. Gentleman has listed a range of selective statistics, but he is well aware that tax is paid on profits, not turnover. Part and parcel of sales is VAT, so taxes other than corporation tax are involved. Does he think that a big danger in the debate is the intermingling of the sense of tax evasion, which is absolutely illegal, with tax avoidance? Not only is tax avoidance legal, but it is bizarre for politicians in government to rail about it, as they have it within their power to change the law to remove loopholes.

[John McDonnell]

That is an excellent point, which goes to the heart of the debate, because I agree with the Prime Minister that much of what is happening is morally repugnant, but the onus is on us to ensure that the system works effectively in relation to tax evasion and avoidance, and other matters, so that we serve the community that elected us well and so that HMRC does its basic job of collecting taxes. That means giving it sufficient staff and the right resources, so that they can do the job.

[David Simpson (Upper Bann) (DUP)]

I congratulate the hon. Gentleman on obtaining the debate. Does he agree that a simpler form of tax collection is needed, in relation to administration? I understand that the UK is second to India for paperwork. Does he also agree that HMRC needs to make a radical change to its approach to tax collection in Northern Ireland? We have a major problem with fuel smuggling. More than £200 million should be going to the Exchequer and is not.

[John McDonnell]

That excellent point about simplification of our taxation system, and focusing on priorities, is made time and again, and I fully agree. We shall return to it, and perhaps new measures that the Government are presenting this year will help. However, there is no use in our introducing measures or making policy demands without the staffing resources and professionals to implement them.

Last week’s PAC interrogation of the big four accountancy firms revealed the scale of the resources that they plough into advising their clients—the big corporations, and the wealthy—on how to avoid tax. Private sector accountancy firms, including many of the banks—it is not just the big four, but some banks and other financial advisers—have a long history of devising ingenious tax avoidance schemes on what I believe the Minister once described, with reference to a scheme that Barclays Bank once operated, as an industrial scale. Schemes to enable companies to avoid tax have been operated on such a scale. It has been going on for at least the past two decades.

Although the big accountancy firms, along with banks and financial advisers, have been investing in staff recruitment and training on a scale that has produced this massive base of tax avoidance opportunities for companies, there have been massive staff cuts in HMRC and the department feels, therefore, that it has one hand tied behind its back when trying to confront the issue.

[Sir Peter Bottomley (Worthing West) (Con)]

The greater part of the hon. Gentleman’s speech is obviously about the collection service and HMRC’s resources, but as he has talked about some of the bigger companies and the accountancy firms, does he agree that it is right to consider whether each company should state on the front of its annual accounts its turnover, surplus, calculated profit, and tax paid other than on staff wages and national insurance? That would bring things out in the open, and directors might ask themselves, “Is this justifiable?” let alone lawful.

[John McDonnell]

That is an excellent proposal. The hon. Gentleman has hit the nail on the head regarding transparency and openness. It is not only the directors; the shareholders have a responsibility as well. The veil of secrecy over tax avoidance, and the advice given on it, undermines the opportunity for shareholders to hold directors and companies to account. Many shareholders are institutional ones, and they have a commitment to their companies behaving morally as well as legally.

It is not just avoidance though. On January 7, I read —in The Daily Telegraph, so it must be true:

“Tax fraud has reached its highest level since the onset of the financial crisis, as VAT evasion has exploded, costing Britain more than £3bn a year…The size of the so-called ‘VAT gap’ due to fraud, the difference between the amount of tax HMRC expects to receive and what it actually collects, is reckoned to have reached £3.3bn, or enough to fund a 1p reduction in the tax of every UK taxpayer.”

So it is not just evasion and avoidance; it is VAT fraud as well. It is no wonder there are problems. I again quote from The Daily Telegraph—I am going to have to give up reading it:

“taxman embroiled in 20,000 tribunal cases”.

According to the article, HMRC estimates that because of the lack of staff the backlog of cases will take “38 years to clear.” That is how bad it has got.

The Institute of Chartered Accountants briefing states simply that, in the view of independent accountants, the system is not working. Why not? One reason is the scale of the cuts. HMRC has been charged with finding a 25% reduction in expenditure. I accept that that was under the previous Government, but I was critical then also. Under this Government, it is expected to find another 15%. What does that mean? The Minister and I were involved in a discussion about this in the main Chamber a few weeks ago. That scale of reduction would be startling for any organisation. In 2005, HMRC employed 97,000; by 2015 it is planned that the total staff numbers will be 55,000—almost half the staff cut. Since this Government were elected, 7,000 HMRC jobs have gone. The objective in all this is to save what? Some £1 billion. That makes no economic sense when there is a tax gap—tax that remains uncollected—of, according to Government figures, £40 billion or, according to other people, potentially £120 billion.

To be frank, HMRC is woefully under-resourced to tackle the tax gap, and fraud and evasion, and the view of professionals in the field is that the staff cuts seriously hinder the department’s effectiveness. The Government have claimed that they have recently overseen a rise in staff levels, and that is true. There have been some additional staff, and I congratulate the Minister on that. Overall, however, staff numbers have dropped by 7,000 since the Government were elected.

[John Mann (Bassetlaw) (Lab)]

Does my hon. Friend accept that it is not just about the numbers of staff but about their morale? Has he read the repeated surveys, over a number of years, that demonstrate that HMRC staff are the most demoralised anywhere in Government?

[John McDonnell]

I will come on to that in due course. The expression that has been used by non-HMRC staff—observers—is that staff morale is “at rock bottom.” That was demonstrated by a recent internal Government survey, which reported that fewer than one in five staff thought that HMRC was well managed. That is how bad it has got.

I want to get back to the important issue of staff numbers. The Minister claimed in a previous debate that there had been an increase in the numbers of tax inspectors, with 100 new ones having been or being recruited, but that fails to appreciate the role of other front-line staff in dealing with tax inquiries and chasing up payments. Those essential back-room staff, who are not respected in the role they play, seem to be the ones who are vulnerable to losing their jobs. The Government have partially recognised some of the staff resource issues, providing £900 million to secure an extra £7 billion in tax revenue, and announcing a further £77 million in December to expand HMRC’s anti-avoidance and evasion activities, which they predict will secure another £2 billion. That small investment over the coming years will secure a total of £22 billion of additional taxation, demonstrating that investing in the staff and the professionals will have an economic success in tackling the tax collection problems.

Although limited, the additional funding is welcome, but it fails to appreciate the impact of previous job cuts and the threat to staff of another 10,000 jobs going between now and 2015. It is not just PCS members who urge the Government to think again about the cuts; accountants, including the Institute of Chartered Accountants, have expressed their concern in public. One of them described the cuts as happening “wildly”, with little planning, resulting in the loss of highly skilled professional staff.

I urge Members to read the Commons Library briefing note, which cites a number of independent accountants who have gone public with their worries about the impact of staffing cuts on HMRC, including Ken Frost, the accountant blogger, and Mike Warburton. The running theme is that the cuts are causing difficulties and leading to lost experience, and that staff are overwhelmed at a time when more demands are being placed upon them. According to the briefing by the Institute of Chartered Accountants, the recent child benefit changes are predicted to bring an extra 500,000 taxpayers into self-assessment, stretching the already overstretched system.

HMRC staff have expressed their concerns that under-resourcing is leading to mistakes. In an article in the Institute of Chartered Accountants journal, one staff member states:

“The pressure we’re under to hit targets and get post turned round leads to errors because we’re having to do it that fast…The emphasis is placed on getting rid of the stuff whether it’s right or wrong.”

It cannot be right that that is happening in our system. To deal with the work load with fewer staff, HMRC management has introduced a working system based on what have been described as manufacturing principles. The pacesetter system is a rigid, time-limited process with specific targets, which leaves little room for professional judgments, resulting in further errors and failures to resolve problems.

It is not just accountants and other professionals who are complaining about the impact of cuts on services; members of the public, individual taxpayers and small businesses are complaining about the often nightmare problems of accessing HMRC services. The closure of local offices has meant that virtually all contact for some taxpayers is now by telephone.

The National Audit Office reported in December that, in 2011-12, HMRC answered 74% of phone calls. The NAO acknowledges that, despite exceeding an interim target of 58%, the level of service is low. For example, 20 million calls, including calls where customers rang back because they did not get through the first time, were not answered. Customers who got through to HMRC in 2011-12 had to wait on average 282 seconds to speak to an adviser. Between April and September 2011, 6.5 million customers waited more than 10 minutes to have their call answered. Depending on the tariff they pay their phone company, customers are charged from when their call is connected, even if they are held in a queue. The NAO estimates that being in a queue cost customers £33 million in call charges; the estimated value of customers’ time while they were in a queue is £103 million, which cannot be right.

I am pleased that the Government have announced that, from the end of the summer, people who phone for advice will no longer use the costly 0845 number. They are also setting a new target from April for 80% of people to wait no longer than five minutes to speak to a real person, including recorded messages. I am grateful to the Government, because there have been improvements and HMRC has hired an extra 2,500 staff. Those staff, however, are employed only on temporary contracts, and the union and others feel that the Government need to allow HMRC to employ properly trained, permanent staff who will benefit the organisation, rather than the reactive, quick-fix recruitment policy that many people feel will not bring about sustained improvement in service delivery.

There is anxiety about over-reliance on phone services. The reason for high caller demand and over-reliance on caller services is because 200 local HMRC offices have closed over the past six years, and there are more to follow.

[Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)]

My hon. Friend is right that there are more closures to follow. In my constituency, Weardale house is due to close, and in the neighbouring constituency of Sunderland Central, the closure of Shackleton and Gilbridge houses is under consultation. That is three offices and a number of staff in just one city, and in Sunderland unemployment is 7.5%. Does he agree that that is not only bad for HMRC services but devastating for the local area?

[John McDonnell]

I will use the example of Sunderland, because my hon. Friend has hit on a wider issue than just the impact on staff. HMRC plans to close Gilbridge and Shackleton houses, which are in the centre of Sunderland, and Weardale house next to the Washington Galleries. Some 300 staff from Sunderland and 200 staff from Washington could be moved to Waterside house, which is on an enterprise park outside the centre of town.

PCS asked staff at Gilbridge and Shackleton houses to keep track of their city centre expenditure for two weeks as a sample. They spent more than £22,000 across more than 100 businesses in that particular area. I have details of a survey that I would like to hand to the Minister after the debate, because it demonstrates the financial impact on a town centre of removing that number of staff. To a previous question on the union’s assessment that £600,000 would be lost each year, the Minister’s response was that that will be made up for when the buildings are let. Well, those buildings are not being let; the offices are being closed and not being replaced by firms that recruit and employ the same number of staff with the same spending power in a town centre.

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

Does my hon. Friend agree that closing offices is a false and unfair economy, because it limits the opportunity for face-to-face discussion in settling complex tax matters, which now have to be decided by either calling a call centre, going online or writing?

[John McDonnell]

That is both frustrating for the person who is trying to identify what they should properly pay and counter-productive given the lost revenue to the HMRC.

[John Mann]

Has my hon. Friend considered the disproportionate impact of tax office closures on traditional market towns such as Retford? Where a significant number of staff are moved out and the offices are not re-let, the consequence is that other small businesses, newsagents, cafés and so on get into difficulties because part of their core lunch-time business disappears.

[John McDonnell]

It flies in the face of all the statements by this Government and previous Governments about moving staff out of London into the regions to boost regional economies. We now have a hokey-cokey, with staff being brought in as other staff are taken out. The result is not only instability but, through overall cuts in staff numbers, a depressing effect on local economies, as evidenced across the country where there have been closures.

The offices set to close by 2014-15 are: City Gate house in Leicester, where there are 124 staff; Pentland house, Livingston, with 220 staff; Crownhill court, Plymouth, with 76 staff; Wingfield house, Portsmouth, with 510 staff; Merrywalks house, Stroud, with 53 staff; Gilbridge and Shackleton houses, Sunderland, with 213 and 103 staff respectively; Truro with 49 staff; Weardale house, Washington, with 181 staff; Valiant house, Wembley, with 40 staff; and Lingate house, Wigan, with 69 staff. Those are enormous figures within a particular local economy. HMRC has also confirmed plans to shut nine offices in 2013-14 that were threatened with closure in September 2011, including one in Wick in northern Scotland that won a reprieve after a previous union campaign. Those offices are: Norfolk house, Bristol, with 213 staff; Norwich with 72 staff; St John’s house, Poole, with 67 staff; Somerset house, London, with 265 staff; Slough with 101 staff; Stockport with 415 staff; Twickenham with 51 staff; Quorum contact centre, Newcastle, with 647 staff; and Government buildings, Wick, with 17 staff.

More than 100 staff in Stockport have recently been offered voluntary redundancy as the office prepares to close, which means the loss of many staff with many years’ experience of administering the system and delivering customer services. We are losing staff with years of knowledge and experience. That is local knowledge of local tax collection policies and of where the local tax gap may be addressed.

I will not delay the Chamber too long, but I have an example of the contradictory nature of the whole affair, which is the closure of the Wick office. All 15 staff based at the office work in local compliance, or local tax collection. The total cost of commercial rent and staff comes to £494,475—I will offer the Minister my detailed brief afterwards if he so wishes. The total tax yield for the same period is £14 million. Each member of staff is responsible for bringing in close to £1 million in one tax year. The office, which we think has a realistic target of £20 million a year, is to close. To save £500,000, therefore, we lose £20 million as a result of the staff cuts. The Wick staff are all experienced and have used that experience gained over the years to be successful in their work. The loss of 15 jobs in Wick is equivalent, per head of population, to the loss of 17,000 jobs in London. There is a significant impact on the local economy, and that is repeated in area after area. The problem is that local office closures will mean new demands on call centres.

The transition to universal credit will bring added problems. The Government expect 80% of universal credit claimants to use online services, but it is likely that many of those people will not have internet access. In the absence of local offices, the next port of call will be the telephone service, on which the cost burden will fall ever more greatly as people are called on to fill out more detailed information in order to access benefits such as tax credits and employment and support allowance. That demonstrates the digital divide in our country and the divide between those who can access a local office and those who cannot. That is worrying.

My hon. Friend the Member for Bassetlaw (John Mann) mentioned staff morale. Any manager would say that an organisation that deals with the general public, provides a public service and works in such a complex field needs committed, dedicated, well-trained and professional staff, which HMRC has built up over the years, and which both the Inland Revenue and Customs and Excise had before HMRC was formed from their merger. I still believe that HMRC staff want to work in an organisation that values them for that.

I warn the Minister and others here that staff morale in the organisation, as the media have described, is at rock bottom. Recent evidence in documents leaked from the department has confirmed that, and I have mentioned the recent survey in which only 18%—fewer than one in five—of staff felt that the organisation was well managed. Any manager in such an organisation will tell you that there are problems if staff morale is that low.

Industrial action has taken place in HMRC in recent years; in some areas, for the first time in the history of tax collection and administration arrangements in this country. Staff morale is low because of the continuing threat to jobs and terms and conditions, and of privatisation. It is wearing people down and undermining morale. Insecurity is ever present. Staff have suffered a pay freeze, pension cuts, job cuts and office closures, and now, as a result of Cabinet Office procedures, the department is reviewing all terms and conditions, including hours of work, leave, parental and special leave, child care, job sharing, flexitime and part-time working, all of which affect HMRC staff, many of whom are women with caring responsibilities whose arrangements are being destabilised as a result of the review.

The handling of the HMRC nursery closures was brutal and incompetent. HMRC announced on 23 August 2012 that it was to close eight workplace nurseries by November. The nurseries were in Blackburn, Cardiff, East Kilbride, Leeds, Leicester, Nottingham, Salford and Wolverhampton. Parents were given just 12 weeks’ notice, and the decision was taken without any consultation with the trade unions. PCS led a campaign with the support of numerous Members, whom I thank, and one of my hon. Friends secured an Adjournment debate on the topic. HMRC agreed to keep the two biggest nurseries open until October 2015 and provide financial compensation for the carers and parents affected.

HMRC’s rationale for closing the nurseries was that it would be fairer to everyone to have the same level of child care provision, so it introduced a child care voucher scheme, taking no account of the financial or personal impact of the decision on staff. It raised serious concerns among staff about HMRC’s commitment to family-friendly policies. The organisation’s management have admitted that it was not their finest hour. It has certainly hit morale badly within the department.

The threat of privatisation is ongoing. All jobs are up for sale. What is most galling to HMRC staff and to us is that contracts are being handed out to corporations involved in large-scale tax avoidance. It is extraordinary. I raised the issue in the House some weeks ago, but I will run through the examples. Capgemini and Accenture, two IT companies with HMRC contracts, were both identified recently as having avoided paying tax. Capgemini, the lead contractor on the £8 billion Aspire contract, paid only £308,000—or less than 1%—in corporation tax last year on £38 million in profits. There is no justification for that happening in the first place, and certainly no justification for us feeding a tax avoider with Government contracts. Accenture, which has a £9.6 million contract with HMRC to supply technical support, managed to reduce its tax bill to 3.5%, paying only £2.8 million in tax on nearly £82 million in profits in Britain last year, yet we awarded it another contract.

To be fair, the last Government were to blame as well, and under them I raised the issue of the selling-off of the HMRC estate to Mapeley. HMRC now leases the buildings back. In 2010, NAO findings showed that if Mapeley, which is now part of the US offshore group Fortress Management Services, were based in Britain, the Treasury could expect to receive around £184 million in tax revenues. In fact, the company is expected to pay only £14 million on its lucrative HMRC contract. We have to learn some lessons. If nothing else, we must ensure that we do not provide tax avoiders with incentives by giving them Government contracts.

Many staff members and independent advisers have expressed the view that the general tax avoidance mechanisms that the Government are introducing will not give them the tools that they need to tackle tax avoidance. That needs a much wider debate than we have had so far in the House and elsewhere about the parameters, role and remit of the tax avoidance measures that the Government are introducing. As the hon. Member for Upper Bann (David Simpson) said, that also includes simplification of the system.

Cut after cut has been made. Staffing cuts are undermining professionalism, reducing the number of local offices and creating low morale among staff. It all points to a key department labouring under intense pressure without the resources to cope. HMRC has been on the edge of a crisis for some time. I believe that Ministers have begun to become aware of it in recent months, but there are public fears about tax justice, and the Ministers responsible for HMRC must recognise that the department needs to be re-resourced. Staffing levels must be brought back up. A new sense of purpose and a new direction must be injected into the department. Staff must be re-motivated, and the threats of privatisation must end, as well as the cutbacks to terms and conditions that are impeding staff in undertaking their professional work.

All staff want is the chance to make their contribution by collecting taxes, enforcing legislation and advising us how to create a system that is fair, efficient and effective. They are professionals, and they should be treated as such. I hope that as a result of this debate, the Government will open a wider dialogue, particularly through the trade unions, especially PCS, about how HMRC will go forward, working with the grain of its staff’s professionalism and with their good will to turn the department around so that it can implement a fair and effective tax collection system.

[Several hon. Members]

rose—

[Mr George Howarth (in the Chair)]

Order. I intend to call the Front-Bench speakers at 10.40. In order to allow as many people to speak as possible, I will impose a five-minute limit on speeches. If hon. Members stick to that, it is possible that all the people who have indicated that they want to speak will be able to.

10:07

[Mr Iain McKenzie (Inverclyde) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Howarth. I congratulate my hon. Friend the Member for Hayes and Harlington (John McDonnell) on securing this important debate.

In these difficult times, we are all more aware than ever of the need to pay our taxes, to pay our way, and to be able to collect taxes efficiently. The Government and the country rely heavily on HMRC to collect the taxes that the Government claim are necessary to reduce Britain’s deficit yet, at the same time, the Government are making cuts to HMRC and hitting hard its ability to do its job. They simply cannot run down the machine that they require to deliver for them in these difficult times.

Last year, HMRC estimated the total UK tax gap through aggressive avoidance and evasion by UK residents and businesses at about £32 billion, which is almost a quarter of the deficit. The staffing cuts at HMRC are particularly shocking, as is its shortage of resources. By 2015, its staffing numbers will have fallen by 44% from 2005 levels, which represents a huge reduction in staff over 10 years. Staffing levels in the tax collection department are set to reach an all-time low of just over 56,000 by 2015, which is down from 97,000 in 2005.

Job cuts among Revenue officials have meant that £1.1 billion less unpaid tax has been recouped than could have been. The influential Public Accounts Committee has praised an HMRC crackdown that brought in an extra £4.32 billion in five years, which was 11 times what it cost. However, the PAC said that the decision to axe 3,300 posts at the same time appeared to have undermined effectiveness and it urged caution over further reductions. The Committee said:

“We are not convinced that the decision to reduce staff numbers working in this area in the past represented value for money for the taxpayer.”

The general secretary of the Public and Commercial Services Union said recently:

“the effort to ensure people pay the taxes they owe will continue to be seriously undermined by job cuts.”

The case for investment in our public services could not be starker or more obvious than it is in the case of HMRC, yet the Government are planning to cut 10,000 more jobs from it in the coming years. Staff morale is at an all-time low, but if we look at the job losses and cuts, is that any wonder? The Government have also proposed a review of the terms and conditions of staff, leaving them suffering disproportionately from the Government’s austerity programme, and that comes on top of changes to pensions and part-time work issues.

Let us look at the staffing in HMRC. In benefits and credits, the staffing level was more than 7,000 in 2009, but only a little more than 5,000 in 2012. In business tax, the number was more than 4,000 in 2009, but only a little more than 3,000 in 2012. In enforcement and compliance, the figure was 34,700 in 2009, but 28,700 in 2012. In personal tax, the staffing level was again some 34,700 in 2009, but it was 29,000 in 2012, and in corporate services, the figure was more than 7,000 in 2009, but only a little more than 5,000 in 2012. Those are not my figures but the Government’s own. How can HMRC perform with the capacity that we would wish following such job cuts? How can it possibly act against the tax avoidance that we have seen when such numbers have been reduced from its staff?

At a time of a severe economic recession, tax avoidance is something that HMRC should be pursuing wholeheartedly, but its resources and capacity to do so are being cut. I can only wonder at the Government’s mismanagement—

[Mr George Howarth (in the Chair)]

Order.

10:12

[Ian Swales (Redcar) (LD)]

I congratulate the hon. Member for Hayes and Harlington (John McDonnell) on securing the debate and his knowledge of, and campaigning on, the issue. I hope that he was not referring to me when he talked of “failed accountants”.

I am a member of the Public Accounts Committee, so I deal with such matters a lot, and something that strikes us is that, despite the need to cut the deficit, HMRC is not a normal cost centre. It is a cost centre that brings in 100 times what it actually costs. Even if we take HMRC’s own estimate of the tax gap of £40 billion, it is worth remembering that the entire cost of HMRC is only £4 billion—a tenth of the tax gap.

HMRC faces not only its existing challenges, but major new challenges: the European Union, globalisation, the internet, rising customer service expectations and, as we have heard, tax avoidance on an industrial scale. On the very day of one of the PAC’s hearings on tax last week, the headlines in The Times were about a charity that hon. Members would never had heard of, although it got more money in the past two years than the British Heart Foundation, the Royal Society for the Protection of Birds and Cancer Research UK put together. Why had we never heard of it? Because it was a gigantic tax scam that brought in £176 million and paid only £55,000 to charity. It was a gift aid rip-off, and that is yet another area in which HMRC staff are needed.

The hon. Member for Hayes and Harlington mentioned customer service. HMRC officials told the PAC that they were proud that they were getting close to their target of answering 80% of calls in five minutes, but the industry standard is 20 seconds. We also need knowledgeable staff on the end of those calls, as is the case for banks such as First Direct, who can answer people’s queries and help them to do whatever they want done in one call. Face-to-face service seems to be disappearing, and knowledgeable face-to-face service certainly does not happen in my local tax office.

We need a new effort on globalisation and the EU. Last week, the big accountants said that they would like to see more people in HMRC’s transfer pricing department. The big four have nearly three times as many staff working on transfer pricing as HMRC. We also need a lot more people on investigation and enforcement to deal with the growing tax avoidance scandals.

There must be many opportunities for what I call “invest to collect” in HMRC. It has stated that whenever it looks at the business case for more staff, it typically gets returns of 17:1 or 11:1. Frankly, as a taxpayer, I would be happy with even 2:1, because investing £1 to get £2 sounds like a good deal. We need to invest to collect, and there are many ways of doing that.

It interesting that journalists and TV programmes seem to have no trouble getting right to the heart of tax avoidance. They do so on “Panorama” and in newspapers, so how come HMRC is not employing more investigators to go to the places such as the West Indies, where some people might have 12,000 directorships and there is a forest of brass plates on the door, to find out what is happening? If independent journalists can do that, it would not be difficult to have a much bigger unit in HMRC to do so. The gap is large, and we should invest in people to close it.

Finally, I have a special plea. Other Members have mentioned their areas, and I have been to the tax office at Thornaby, near Stockton. I am told that I am one of only two MPs to have visited a tax office over 12 months, so I urge all Members to get out and talk to the staff. People were disturbed that I wanted to talk to the staff as well as to the management, and it was interesting to find out what the staff were saying.

The Thornaby office is excellent but, as in all tax offices, morale has been damaged. My plea is to keep that office going. It is a good, low-cost place to be and, given the paucity of white-collar jobs on Teesside, it would be easy to get new people there to replace the 400 jobs that were lost in Middlesbrough when the tax office closed a few years ago. Middlesbrough has the second highest unemployment rate in the country, so the loss of those jobs was hugely damaging. We need more resource, and let us have some on Teesside.

10:17

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

I congratulate my hon. Friend the Member for Hayes and Harlington (John McDonnell) on getting the debate, which is important. I do not intend to go over the same ground as other colleagues, but some points need to be re-emphasised. I am looking forward to the Minister’s reply, and if he gets time, I hope that he will answer a few of my questions, although I am happy to get a response in writing.

Other than the 40,000 jobs that will be lost by 2015—over the past eight and future two years—which is bad enough, what we have is an HMRC that has just employed three new non-executive board members. Volker Beckers, previously chief executive of RWE npower, is now the chair of the scrutiny committee and has a job worth £20,000 a year. That might not be an awful lot to Mr Beckers, but it would be to people who were about to lose their jobs. Why does that man have a job at £20,000 a year, which will not mean a lot to him? He also comes from the electricity companies, which have been ripping off customers left, right and centre, although the Minister might consider the case to be one of poacher turned gamekeeper. That might be right, but I would still like to know the reasons.

Norman Pickavance was previously director of human resources and communications at Morrisons. He left Morrisons just before it announced a third year of no profits. Will he be asked to bail out of HMRC if it is not successful? He is on a retainer of £15,000 a year, and I would like to know what he does for that £15,000 a year.

John Whiting, previously of the Chartered Institute of Taxation, perhaps has a job that is connected with HMRC, but he is working for it only part time, and he will receive £20,000 a year. How much time will he spend earning that money, and what will he be expected to do in return?

On 1 February, the Daily Mirror reported that a group called the Cup Trust had been banking millions of pounds and giving out millions of pounds in gifts to people, yet only 8% of its money seems to go to charity. Two days later, the same newspaper revealed that it had not given £80,000 to charity, although its books said that it had. That is not tax avoidance; it is ripping off charity people. On many occasions, I have asked what happens to the extra money that is put aside for proper charities, and we are told that the Treasury takes it back and will not give it to charities that do the right thing. The Daily Mirror stated:

“Charity tax avoiders: Scam bosses could trouser £7.7 MILLION while good causes received just £135,000”.

If the Daily Mirror can find that information, and we hear about it only through the paper, what have the Treasury and HMRC been doing?

The problem with HMRC is not the people at the bottom—the 40,000 people who will lose their jobs or have already lost them—who do a good job and work hard, but those who run it and are in charge of those people. That, Minister, is you.

10:22

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

Let us cut to the chase. Among the vast number of businesses and UK taxpayers, HMRC has a not entirely undeserved reputation as a byword for incompetence, opaqueness and arbitrary action, verging on shambolic. In his passionate opening speech, the hon. Member for Hayes and Harlington (John McDonnell) expressed some specific concerns, and I want to touch on some of the issues.

I am a Member of Parliament who represents a constituency that is an important part of the UK economy, and there is a real problem—we will, no doubt, discuss it at greater length in other debates—about tax and the increasing feeling of unfairness, which is dangerous for society. I have spoken about that in the House, and particularly against the backdrop of the protests at St Paul’s cathedral a little over a year ago. Many—dare I say this?—middle-class Conservative voters feel that somehow the rules of capitalism are skewed against them. The narrow politics of that is obviously dangerous, but it reflects a real feeling of concern about where we are going with tax.

I want to mention a few warning signs about some elements of the political game scoring that goes on. We need a far better pre-clearance system, certainly if we are to have a new anti-avoidance rule that is both equitable and, more importantly, effective. The Government have made it clear that they want to introduce such a rule in the Budget within six or seven weeks. Therefore, the pace of change of tax law must alter. I have served on many Finance Bill Committees, both as a Front Bencher in opposition and as a Back Bencher in government and opposition. Our system is horribly and terribly complex, and our code is much longer than the much-derided Indian system of the past. We should all aspire to a simpler tax system because complexity is the godfather to the complex avoidance schemes that we have heard about at great length during this debate.

Taxation of small businesses must be better understood. I was a small business man for seven years before I became a Member of Parliament in 2001, but thank goodness, I am not still in business. I speak to businesses of a similar size in my constituency—I had a dozen staff with a £2 million turnover—and they have appalling problems trying to get their tax right, not just with HMRC, but with all tax authorities.

There is a danger that, in the perennial chatter about the failings of the tax system and politicians’ understandable reluctance not to play to the gallery, tax regulation will become much more arbitrary. One of this nation’s greatest assets as a place to do business is our reputation as a predictable, reliable and certain jurisdiction that is underpinned by the rule of law. We undermine at our peril that timeless tradition of being an open place to trade and prosper.

If large international corporations are arranging their affairs to avoid playing their fair share of tax, Governments and Oppositions—at least, Front Benchers—should cease moralising about that and get back to legislating such loopholes out of existence. The sheer complexity and size of the UK’s tax code, which is now larger even than that in India, has created the highly remunerated guild of tax avoiders, of which my hon. Friend the Member for Redcar (Ian Swales) may have been a member.

What should worry us most is that, when the tax authorities are empowered to make ethical judgments on the affairs of global corporations, before long they will turn their attention to ordinary taxpayers—the easy target—who may not have access to an army of professional advisers to allow them to make a long and protracted case. Ordinary taxpayers have every right to feel that once settled, their tax affairs should not be reopened on a whim.

My impassioned plea is to use our money wisely. I appreciate that, in the resources battle, it is not easy at this difficult time to justify employing vastly more people, but we need a much better relationship and more co-operation between tax advisers, companies and individuals, and HMRC, instead of its role being portrayed as a battle with a presumption that every taxpayer is trying to rip off the system. I hope that we will have better pre-clearance and that such debates will be consigned to history.

10:27

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

I congratulate my hon. Friend the Member for Hayes and Harlington (John McDonnell) on securing this important debate. I want to start by asking why it is necessary to deal with some of the problems. In an age of austerity, particularly, every pound matters and every pound not collected means front-line cuts in operating Departments, such as the Department for Education, the Home Office and so on. It is important to get all the money in. In this country, people respect taxpayers and the need to pay tax, but they demand that the system is fair and efficient.

The system is failing in two ways. I do not think, as my hon. Friend the Member for Glasgow North West (John Robertson) said, that it is a question of management. People from HMRC have appeared before the Treasury Committee, and they are largely hard-working and trying to do their best, but that is difficult because of cuts imposed on the department by the last Government and the present one. There is total disregard for the fact that, when money is cut, 10 times the revenue is cut. The problem is to face up to money.

On efficiency, the withdrawal of finance affects HMRC’s efficiency and ordinary people’s perception of how it treats them. The effect of staff cuts is self-evident and disastrous on a scale that is totally unacceptable. On paper, it may seem that office cuts involve just a bit of money and a bit of real estate, but that is not so. For many people—the elderly, those with complicated problems, or those who just have trouble filling in forms—in many towns and regions, offices provide their only chance to meet face to face, and that is the point. Because of those savings and staff cuts, the department is taking the decision for ordinary people that they either go online, telephone, or write, and they never get a face-to-face explanation of complicated tax matters. Call centres are fine, but people do not know who they are talking to. Once people think about what has been said and want to go back, they are starting the conversation afresh.

It is a criticism of the department and the chief executive that when she went to the Public Accounts Committee last week, she said that an HMRC review showed that customers believed a five-minute wait was acceptable. I do not know of any politician in this Chamber who would hang on a phone for five minutes to get an answer, especially when it is an automated answer that goes through information and costs money, and when people do get through, they are asked the same questions. That is about efficiency, and it is putting people off. Some money would put that right.

Many Members have referred to the unfairness in tax avoidance and tax evasion—and tax evasion by rich people and large multinational and British companies. In the minute I have left, I would like to put two questions to the Minister. The first is straightforward. The Chancellor of the Exchequer put in £174 million for an army of investigators to deal with such companies. Is that fresh money, or is it part of the £900 million that was included in the spending review?

The second question relates to unfairness. Two and a half years ago, Christine Lagarde, the head of the International Monetary Fund, gave the British Government the names and addresses of 2,000 people who had Swiss bank accounts. A number of them—I think 500—were being looked at for serious fraud. To date, two years later, only one has been charged. Is that the end of it? With the Swiss tax deal, is that issue now being dropped, as those people are being treated under the terms of the tax deal? If so, it would be totally unacceptable.

10:32

[Julie Hilling (Bolton West) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Howarth. I start by congratulating my hon. Friend the Member for Hayes and Harlington (John McDonnell) on securing this important debate.

In 2010, the Public and Commercial Services Union commissioned one of the most comprehensive calculations of the UK tax gap ever undertaken. The report, by Tax Research UK, estimated that the tax gap could be as big as £120 billion a year. I accept that the report was criticised by tax professionals, Ministers, HMRC and many large companies, but we have learned since 2010 that that estimate is likely to be more accurate than HMRC’s estimate of £35 billion.

What is the tax gap? The tax gap includes tax lost to avoidance, which is people seeking to minimise their tax bill without deliberate deception, but contrary to the spirit of the law. A good example was seen when tax for those earning £150,000 a year went up to 50% and some payments were brought forward, so that people subject to the 50% tax rate did not pay tax on that amount of money. As we see now, payments such as bonuses are being paid late, so again, they miss the 50% tax rate. That is immoral, as I am sure that many in the Chamber would agree, but it is not illegal. There is also tax lost to evasion, which is the illegal non-payment and underpayment of taxes by making a false declaration. Interestingly, that includes not only fraud, but error and neglect, which I will briefly come on to later. The tax gap also includes late or non-payment of tax—tax not due or not paid on time.

Whether the tax gap is £35 billion, £120 billion, or somewhere in between—or, as some of the recent scandals with well known names show, possibly even higher—it is a heck of a lot money, and it could make a real difference at this time of austerity and devastation of public services. All Labour Members will argue that we need to grow our way out of a recession, and we can see the current consequences of trying to cut our way out of it, as the triple-dip looms. However, fundamental to that growth must be the effective collection of tax, and it seems the closure of local offices does not make financial sense.

When Starbucks, Amazon, Google, and the others were exposed for arranging their tax affairs so that they did not pay their taxes here, all of us could recognise that something was wrong. All who used their shops and services could say, “Hang on a minute. How could enormous companies like that be paying such little tax in this country?” They are household names. We could all question it.

[Mark Field]

It is important in the context of Starbucks and the other companies to point out that much as there was public outrage, they pay significant amounts of value added tax on the products that they produce, and they pay significant amounts of employers’ national insurance on the number of people that they employ. I accept that there was a lot of unrest, but to suggest that they pay no tax at all misrepresents the situation.

[Julie Hilling]

I accept the hon. Gentleman’s point, but it is like saying, “I pay VAT when I buy things in shops, and I pay other taxes.” People who are employed by all of us pay national insurance, but there is that whole bit of tax that should be paid, and there are those who are not doing so. As we know, many individuals and companies manage to avoid paying it, and as has been said, the tax system is so complicated that it makes it easy and possible for people to avoid tax. It is wrong, and in my view, absolutely immoral that people, particularly at this time of austerity, do that.

If Fred Bloggs of Bolton or Freda Brown of Wigan do not declare all of their tax, how will the tax collector in another area have any idea of the scale or scope of their business when they are not household names? Local knowledge is invaluable and it is a real asset in ensuring that the right tax is paid. As other hon. Members have said, it is also an important service in the local area. It is about assistance so that people can try to get their tax right, so that they are not evading tax by error or neglect—unwittingly or unwillingly. They should have people to talk to on their doorstep. Again, as others have said, HMRC is an important local employer with an important role in the local economy.

It is a disgrace that 20 million calls were not answered in 2011-12, that the estimated cost of calls was £33 million, and that the value of customers’ time was £103 million. How can we support and run a system that costs businesses so much? We need to be working to build our economy. How can it be right that trying to talk to people about paying tax costs industry that amount of money? It is a service that earns money. It beggars belief that we are cutting it to the level that we are, and reducing staff by almost 50%.

I am running out of time, but I hope that the Minister will explain how he expects to collect all the tax that is due by nearly halving the number of tax inspectors, by closing local offices, and through the cuts that are taking place. Having served on the Finance Bill Committee and seen even more taxes introduced from the previous Budget, I hope that the Minister will explain what the Government will do to simplify tax as a whole, so that people do not either manage to avoid or unwittingly evade their tax.

10:38

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

It is a pleasure to serve under your chairmanship, Mr Howarth. I join colleagues in congratulating my hon. Friend the Member for Hayes and Harlington (John McDonnell) on securing this morning’s extremely timely and interesting debate. His interest in all matters related to HMRC is well known, particularly through his work as chair of the PCS parliamentary group. I am keen to take this opportunity to commend him for his tireless commitment to ensuring that those who work for HMRC and their concerns are properly represented in this place.

I described today’s debate as timely not least because, until very recently, I had anticipated being briefed this morning by HMRC’s chief executive in my capacity as shadow Exchequer Secretary. Sadly, that meeting was cancelled at short notice—or was it perhaps prevented from taking place? I could not comment. In any event, as luck would have it, my hon. Friend successfully secured this debate, and the Minister will be pleased to know that many of the issues that I wanted to raise with the chief executive I will now raise directly with him instead.

What is clear from the many excellent contributions this morning is the absolutely crucial function performed by HMRC and its staff. Of course, HMRC does not just act as the UK’s “credit control department”. It has a vital role to play in delivering key Government policies, such as the impending universal credit, to which I will return. HMRC interacts with most of the UK’s adult population of 45 million and, indirectly, with their children, as well as with about 5 million businesses, and its primary function in doing so is to make our taxation system work. Indeed, without the money that HMRC collects, there would be no funding to invest in public services. That is why the capacity and resources that it has to perform its role are so critical and an ever-more pressing issue in this period of austerity and growing Government debt—a point that was made forcefully by my hon. Friend the Member for Leeds East (Mr Mudie).

HMRC staff can provide a pretty impressive return on investment. We know that, last year, senior HMRC officials brought in £16.7 billion over and above that which was returned by businesses and individuals. Indeed, the Association of Revenue and Customs—ARC—estimates that a senior tax official, earning £50,000 a year, can expect to generate an additional yield of at least £1.5 million a year—a return of 30 times the cost of their salary. Many hon. Members have referred to the excellent analysis provided by the PCS of the yield provided by HMRC’s office in Wick alone. That office is scheduled for closure in this financial year, as hon. Members have also mentioned. Each member of the 15 staff working in the Wick office in northern Scotland is responsible for bringing in about £1 million in tax a year. The total is more than £14.3 million. That compares with the overall annual salary and rental bill for the office of £494,000. It is an impressive return.

Despite the impression that one may have gained from recent media reports, we are fortunate to live in a generally tax-compliant country, with 93% of all tax paid as it should be. However, that figure, which compares well with those for our trading partners, can be maintained and improved only if we have a properly resourced HMRC. The Government should be doing everything within their power to assist HMRC to close the remaining tax gap, which my hon. Friend the Member for Bolton West (Julie Hilling) talked about in some detail. Many hon. Members have contributed today to give colour to the picture of just how difficult it will be to close that tax gap in the context in which HMRC currently operates.

As we are all too aware, HMRC faces budget cuts of £2 billion in the course of this Parliament. The Minister is likely to mention that the Government are “reinvesting” more than £900 million in HMRC, but the straight fact is that that is money that the Treasury had planned to take away from HMRC and is now returning. That still leaves HMRC with a £2 billion net reduction in resources. The Prime Minister may claim that HMRC’s staffing levels are increasing under his Government, but a quick fact check reveals that HMRC is losing 10,000 staff. It is little wonder, therefore, that there are serious concerns that HMRC staff and resources are being stretched to the absolute limit, and that situation is likely to get worse.

Indeed, the National Audit Office report on HMRC’s customer service performance, published in December, revealed truly worrying findings about the way in which HMRC handles its customers. A completely unacceptable 20 million telephone calls to HMRC went unanswered last year. As other hon. Members have mentioned, the NAO estimated that it cost customers £33 million in call charges while waiting to speak to a human being, on top of the estimated £103 million cost of wasted customer time. That is particularly concerning for those on low incomes, who literally cannot afford to keep hanging on the telephone, and for struggling small and medium-sized enterprises, which could be making far more productive use of their time. The hon. Member for Cities of London and Westminster (Mark Field) made a very passionate plea for small businesses in his contribution to the debate, and I agreed with much of what he said.

It is therefore welcome that HMRC appears to be improving its performance in that area, but I am sure that the Minister would acknowledge the Public Accounts Committee’s conclusion that that is from a very low base, with targets far below industry standards. I urge him to ensure that the recently announced move away from 0845 numbers will benefit people on low incomes, who often use pay-as-you-go mobile phones rather than mobile contracts or landlines.

We also heard the truly staggering statement by HMRC’s chief executive at a Public Accounts Committee session just last month that the agency currently has about 100,000 unanswered letters, although admittedly the number has fallen from the incredible 1 million at one point last year.

It is not just the NAO and the PAC that believe that HMRC is creaking at the edges. A survey by the Chartered Institute of Taxation of its members in the summer of 2012 found significant concerns regarding customer service provided by HMRC, including: delays in post handling; telephone calls that are passed to a customer service centre, resulting in a four-to-six week further delay; increases in basic errors; and delays in getting through to PAYE telephone lines.

A similar survey by the Institute of Chartered Accountants in England and Wales found that HMRC is often failing to meet its “basic responsibilities”, with phone calls and letters frequently going unanswered and staff often lacking the knowledge and training to handle complex inquiries. That is not just an inconvenience for taxpayers; mistakes by HMRC can be very costly and can make all the difference to a struggling SME or a struggling family. Every hour spent on hold to HMRC is holding back our economic growth, and that is at a time when the Government are relying on SMEs to dig us out of this economic stagnation.

Of course, the situation is not helped by a Government who simply do not seem to think through how their policies will be delivered on the ground. The debacle over the changes to child benefit, which came into force last month, has seen 475 staff drafted in to deal with that policy at a cost of £11.7 million and an additional 500,000 taxpayers being drawn into the complex self-assessment regime. I would therefore be grateful if the Minister confirmed from which areas of work those 475 staff have been taken in order to implement that ill-thought-through policy. What assessment has been made of the impact on what would be their usual work?

Will the Minister also give us some clarity this morning on progress in relation to the real time information system? He is well aware of the concerns of small businesses about the huge financial and administrative burden that that will place on them at what is already an extremely challenging time. It is extremely worrying, given that the functioning of universal credit will depend on that system functioning properly, that answers to recent written parliamentary questions suggest that the IT system matching employers with their bank records in the RTI pilot has a current failure rate of 25%. Will the Minister outline whether the success rate has improved in recent weeks? Can he provide us with some reassurance that he is confident that real time information will be delivered by HMRC as intended and on time?

Those are just two areas of significant change where HMRC is being expected to deliver ill-thought-through Government policy with significantly reduced staff and resources.

One area in which the Government have been making themselves look extremely busy of late is that of initiatives to tackle tax avoidance. The Chancellor’s announcement ahead of the autumn statement of £77 million of “new” funding for HMRC to expand anti-avoidance and evasion activity is welcome. However, the Minister must acknowledge that that does not come close to the £2 billion of swingeing cuts that HMRC faces. I have asked him this question before, and my hon. Friend the Member for Leeds East asked it again this morning: can he clarify whether that is indeed new funding or whether it just represents funding being shifted from one area of HMRC to another? If it is the latter, what assessment has been made of the revenue that will be lost from elsewhere as a result of reduced resource and capacity?

Time is limited, so the final key concern about HMRC capacity and resources that I will raise this morning—the case has been made powerfully by my hon. Friend the Member for Hayes and Harlington—is about the staff. Many concerns have been expressed about the number of highly skilled, experienced staff who have left HMRC. The Association of Revenue and Customs describes it as a “demographic time bomb”. I understand that more than half of HMRC’s work force are over the age of 45 and 18% are over 55. I have nothing against older employees, but there are genuine concerns about future work force planning and the ability of HMRC to deliver on some of the Government’s priorities.

HMRC is being asked to deliver ever-more complex taxation legislation, to deliver what have been described as “undeliverable” Treasury policies, to close the tax gap and to improve dramatically its customer service—all the while receiving £2 billion less in funding and operating with 10,000 fewer staff. Nobody disputes that efficiencies need to be made—every part of the public sector needs to make them and HMRC does not expect to be immune from that requirement—but it has already made hugely significant savings over recent years, including under the previous Government, so I urge the Minister to accept that there must be a limit to HMRC’s capacity to do more with less.

10:50

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

It is a pleasure to serve under your chairmanship, Mr Howarth, and to respond to the debate. I congratulate the hon. Member for Hayes and Harlington (John McDonnell) on securing it. He has taken a close interest in HMRC funding over a number of years. Although I did not agree with everything he said, I commend him for his consistency and the non-partisan way in which he has pursued this issue over many years with a willingness to criticise Governments of both descriptions.

Time may be short, but before addressing the points raised today, it will be helpful to set out some context by discussing the history of the resources available to HMRC over recent years and the results that it has managed to achieve with those resources.

As hon. Members will know, HMRC was formed a little under eight years ago by the merger of Customs and Excise and the Inland Revenue. At that time, it was made up of around 100,000 staff. The previous Government sought efficiencies and, as a result, staff numbers fell by around 25,000 between 2005 and 2010. As part of that process, the number of staff engaged in compliance work also fell each year, and by 2010, about 10,000 staff had been lost in those important revenue-raising areas.

In 2010, as part of this Government’s first spending review, it was crucial that we recognised the dual role that HMRC would play in contributing to deficit reduction, through both cost reductions and, more significantly, collecting additional revenue by tackling tax avoidance and evasion—a point that several hon. Members raised this morning. Our priority was to ensure that HMRC delivered a service that would provide the best possible value for money to taxpayers. Consequently, we required HMRC to make 25% efficiencies to reduce its costs. We then agreed to reinvest a proportion of those efficiencies to tackle avoidance and evasion. The result was a net impact of overall savings over the spending review period of about 16% and a net reduction in overall staff numbers of about 10,000. I say “net” because in that figure is an actual increase of about 2,500 in the number of staff HMRC deployed on its compliance activities over the period.

[John McDonnell]

The Minister mentioned the impact. One of the points made by PCS, ARC and the ICAEW is that the impact assessments religiously fail properly to assess not only the implications for staff, but the cost to business and taxpayers overall. Will the Minister look at, and perhaps consult on, how such impact assessments are undertaken and how they can be improved?

[Mr Gauke]

I will indeed. I understand that the NAO will publish a report tomorrow on cost savings in HMRC and the way in which HMRC has proceeded. Time prevents me from running through in detail all the areas in which there have been savings, but it is worth pointing out that there have been significant savings of £74 million in the price paid for IT equipment and services, and savings in estate costs through vacating buildings. It is important that HMRC seeks savings, but it is also important that we raise the revenue. A number of hon. Members mentioned the tax gap.

[Ian Swales]

Will the Minister give way?

[Mr Gauke]

I will give way, but I have a lot of material and a very short time.

[Ian Swales]

It is a very important point. The Minister said that HMRC was required to lose 25% of staff. Was an assessment made of the tax that would be lost as a result, or was taking 25% of people out deemed to be tax neutral?

[Mr Gauke]

We ought to be clear about this and look at outputs rather than inputs. As it happens, the number of staff working in compliance and enforcement is going up under this Government—a reversal of what happened under the previous Government. Although we think that it is right to seek savings and efficiencies—if we can spend less on IT and less on estates, that is surely sensible—we also want to do more to raise revenue.

The reinvestment of efficiencies involves £917 million over the spending review period, and, in return, HMRC has agreed to bring in an extra £7 billion of tax every year to 2015. That means that, cumulatively, over the spending review period, HMRC will bring in about £20 billion of additional revenues, and an additional £7 billion every year thereafter. Additional revenues will come from a range of initiatives, including: increasing the number of criminal prosecutions fivefold; cracking down further on offshore evasion; and extending HMRC’s coverage of businesses, focused on providing resources to tackle high-risk areas.

HMRC results have shown that it can deliver the additional yield. As the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) noted, in 2011-12, it delivered £16.6 billion against its targeted increased yield of £15 billion, and is on course to deliver an additional £17 billion this year. In the light of that record of success, it was decided that we would exempt HMRC from cuts imposed on other Departments in the 2012 autumn statement. Instead, we made the decision to invest in HMRC in two separate ways.

First, we made a further, new £77 million of investment in HMRC to increase its efforts to tackle tax avoidance and evasion, through improving HMRC’s computerised risking systems; further strengthening the risk assessment capability across the large business sector; increasing the attention given to offshore evasion and avoidance, and—probably of most interest to hon. Members here—increasing the staff employed to target avoidance and evasion by the wealthy.

Secondly, in the autumn statement, we invested a further amount, totalling £77 million, to accelerate HMRC’s debt collection activities and bring in about £1 billion in tax over the period; to reduce tax credit error and fraud and reduce losses by about £0.5 billion; and to expand HMRC’s digital service to its customers, which will include help to small businesses as part of our initiatives to introduce growth into the small and medium-sized enterprise sector. My hon. Friend the Member for Cities of London and Westminster (Mark Field) is right when he says that we want to do everything we can to ensure that the burden on small businesses can be reduced and that it is easier to deal with HMRC.

Taken as a whole, the investment package will mean that HMRC will collect an additional £2 billion in 2014-15. That is over and above the £7 billion in additional revenue that HMRC will collect in that year as a result of the spending review settlement in 2010. On top of that, our investment in digital will allow HMRC to offer a modernised service to customers, while working more efficiently.

The Government have recognised the crucial role that HMRC has played, and will continue to play, in helping to manage the deficit we inherited. It is bringing in more additional revenues than ever before, and that is not the only area where HMRC is delivering well. The latest performance figures, from December 2012, show that post handling in local offices is the best it has been since HMRC was formed, with about 90% cleared within 15 days of receipt in recent months. The hon. Member for Newcastle upon Tyne North highlighted press reports saying that 100,000 items of post have not been dealt with, but that must be put in the context of HMRC’s receiving 200,000 items of post every week. We are talking about post that has by and large arrived in the past two or three days.

HMRC’s self-assessment filing system is a clear success: 92.9% of self-assessment tax returns for 2011-12 were filed on time this year—the best result since HMRC was created—and 82.5% of those returns were filed online, which is a new record. We are all aware of the difficulties that HMRC faced a few years ago in handling the fallout from the new computer system, but such difficulties are now behind it and it is on track to bring PAYE up to date by March 2013. We are also taking steps to improve automation.

I would like to say more, but it is sadly not possible to do so today in the time available. I apologise to hon. Members for not being able to address every question that has been asked. We appreciate what the taxpayer wants from HMRC. We want to raise revenue and reduce the tax gap. We are giving HMRC the resources to do precisely that. I will continue to work with HMRC to ensure that it continues to provide the best possible value for money for the taxpaying public.

University Hospitals of Morecambe Bay NHS Foundation Trust

Tuesday 5th February 2013 Westminster Hall

11:00

[John Woodcock (Barrow and Furness) (Lab/Co-op)]

I am pleased to have secured this debate. It is a pleasure to speak under your chairmanship, Mr Howarth.

I represent a community in shock, reeling from the suddenly announced intention to transfer Furness general hospital’s beloved special care baby unit and consultant maternity services out of the county, from 9 o’clock this morning, to Lancaster. Pleas to rethink that emergency transfer have so far been rebuffed, leaving expectant mums distraught at the prospect of a 50-mile trip in the back of ambulance if they suffer complications in labour. I will set out our concerns in detail and stress the areas in which we hope the Minister, who is of course an expert in the field, will agree to intervene, but first I will discuss the wider issues the area faces, which prompted my application for this debate.

There is the forthcoming review of hospital services, triggered by the need for significant budget reductions across the University Hospitals of Morecambe Bay NHS Foundation Trust. All of us here are acutely aware of the long-term threat that that might pose to key provision, such as the need to sustain a consultant-led maternity service and accident and emergency provision across more than one site in the area.

There is also the campaign against the removal of A and E, maternity and intensive care units at Royal Lancaster infirmary, on which the Downing street petition in the name of Matthew Hood already has thousands of signatures. I think that my constituency neighbour, the hon. Member for Westmorland and Lonsdale (Tim Farron) wants to do exactly that—move Lancaster’s A and E department to the Westmorland general hospital. Let me simply say that any attempt to question Barrow’s need for an A and E department would be met with horror not only by every single resident of the Furness area, but by the prized and highly regulated industries on which the nation depends.

The broader question facing the Morecambe Bay trust is how best to locate services when the population is far more spread out than in most areas of Britain, and when centres of population are often connected by a single road that winds through Cumbria’s unique landscape. In other areas, a trust for hundreds of thousands of residents might naturally be based around one A and E department and one maternity unit, but that would put an unacceptable strain on residents of Morecambe bay. People in pockets of severe deprivation in Barrow and families who, for whatever reason, just do not travel would be forced to go to another county and be completely cut off from their families. In an emergency, it would result in journey times of more than an hour on routes that are prone to become blocked by breakdowns.

I want to ask the Minister four questions about the four tests in the Government’s forthcoming consultation. His first test is the evidence base. Will he ensure that the options and risks are properly weighed, so that the risks inherent in long-distance ambulance travel are set alongside what might otherwise be the optimal configuration of services? The second test is whether there is the support of GP commissioners. The past 24 hours have shown the damaging shambles that can occur when a trust attempts to press on against the will of local commissioners. The Government back the new system, so will the Minister ensure that local GPs have the teeth to insist on the services that communities need? The third test is choice for patients. Will the Minister ensure that problems of isolation and lack of access to services are an integral part of the assessment when it arrives on the Secretary of State’s desk? It is hard to imagine the test of choice being passed if, for example, an isolated peninsula’s only consultant-led maternity unit were downgraded. The fourth test is strengthened public engagement. The trust needs to do much better than the mess of the past few days, which has left women desperately worried and confused. I shall say more on that in a moment, but the underlying point is that engaging means listening and acting. Of course, health professionals have a duty to present the options and a proper assessment of safety in each case, but if the public weigh that up and say that they want to keep the services they need close to home, the Government should listen to them.

Another major issue is the need for Ministers to ensure that our local hospitals and the wider national health service adequately learn the lessons of the significant and prolonged failings in hospital management at the Morecambe Bay trust. There have been tragedies about which people are still demanding answers and which apparently did not trigger sufficient improvements, despite laying bare shortcomings in areas such as maternity provision several years ago.

[Mr Jamie Reed (Copeland) (Lab)]

As usual, my hon. Friend is making an excellent case on behalf of his constituents. Many people in the south of my constituency use Furness general hospital, as well. Does he share the fear that some of them have expressed to me that the rapid removal of the special care baby unit heralds a stealth reconfiguration of services there?

[John Woodcock]

My hon. Friend is absolutely right that that is indeed the great fear. It is up to the trust, and ultimately to Ministers and the Government, to demonstrate that that is not the case, but there are still questions to be answered.

The need for lessons to be learned has been shown by such problems as the basic lack of grip in key areas in recent years—for example, the failure of new computer systems designed to remind patients about repeat appointments, which has clearly put lives at risk. A police investigation into a number of deaths is ongoing. There is also a lack of openness at the trust.

I pay tribute to the hard work of the staff in the maternity unit and across Furness general hospital. They are dedicated people, who come to work wanting to help others and to save lives. There have been real improvements of late, and we should recognise the immense strain placed on staff by the ongoing spotlight on the hospital and the longer-term uncertainty over their future. None the less, families are still grieving because of past mistakes made in a poorly managed system. The Minister was good enough to write to me in response to a letter from my constituent James Titcombe, and again recently on the need for a genuinely independent inquiry into the lessons for the wider NHS of management failings at Furness general hospital.

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

I congratulate the hon. Gentleman on securing this debate and, as I know from having worked with him, on his concern for his constituents. Does he not think that we constantly go round the roundabout in relation to the Morecambe Bay trust? To the centre, Morecambe bay sounds as though it is a natural unit, but in fact it is a barrier. I suggest that we need to look at the fundamental geography, which might mean challenging the boundaries of the Morecambe Bay trust, if we are ever to get some balance between the demands of Furness, Kendal and Lancaster.

[John Woodcock]

The hon. Gentleman makes an interesting point, for which I am grateful. I am sure that Ministers will want to consider that, but I think it must not come at the expense of local MPs’ taking our eye off the ball in the forthcoming consultation.

The Minister was good enough to write to me about James Titcombe and other grieving families. In the first letter, he said that he would keep the issue under review. I hope that, when he has time to look at the matter further, the Minister will agree that the trust’s commitment to an independently chaired but internally managed inquiry, although it is a welcome step forward, will not be sufficient to give confidence and ensure that lessons are learned, not only in this individual hospital, but in the entire NHS. Most of all, I hope that he will join me today in sending a message, loud and clear, that the need to be accountable for past mistakes must never be used by the trust as an excuse to remove services that our community clearly needs.

The final part of my speech relates to the crisis caused by the trust’s shock decision to transfer, apparently temporarily, the special care baby unit and consultant maternity services out of Furness general to Royal Lancaster infirmary due to increased sickness absence levels at the trust.

Let me deal first with the shambolic process that has left expectant women unsure about where they can give birth—even now, as we speak, two hours after the transfer was due to take place—because of genuine fears about a lack of ambulance cover. The decision was taken unilaterally by the trust, with no consultation or warning given to the public, the obstetric consultants who work at Furness general, or the GPs responsible for commissioning the services. The option of transferring staff from the Royal Lancaster infirmary was not put to the board. Although there can be no doubt that staffing levels are low at Furness general, there was no detailed risk assessment of the dangers of transferring mums in labour by ambulance. Most alarmingly, no attempt was made to engage the North West ambulance service—this was confirmed to me by the service last night—until last Wednesday evening, leaving that organisation unable to find the extra unit that it estimates will be necessary to cope with the increased demand on an already stretched operation. This is an appalling and potentially dangerous shambles that has greatly increased the anxiety of pregnant women in my constituency, on top of the worry they already felt at the news, during what is naturally one of the most worrying times in their life anyway.

Will the Minister intervene personally to impose order on the chaos? Will he confirm that the regional health authority’s gold command is meeting today to escalate the situation? Will he meet me to ensure that we have the best chance of getting the services we need back as soon as possible? Let me be clear: families in my constituency and beyond will be devastated if we lose consultant-led maternity services permanently. The Minister is a practising obstetrician and will know better than I that the removal of the clinician-led special care baby unit will result in women who expect complicated deliveries or who experience complications during birth facing a transfer to Lancaster, involving a journey time of about one hour along a road that, less than a fortnight ago, became almost impassable due to heavy snow—in fact, journeys between Barrow and Lancaster were taking up to 10 hours. Trying to transfer a mother who needs consultant care in such conditions is hard to imagine.

It has been suggested that air ambulances could be used to speed up transfer times in the event of Furness general hospital’s maternity unit being downgraded, but serious questions need to be answered about the practicality of that proposal. The Great North air ambulance service is a fantastic organisation that helps to save many lives each year, but it has just three helicopters to cover not only Cumbria, but the whole of north-east England and North Yorkshire. We cannot simply assume that the answer lies in the air.

I am immensely proud to be backing the “Thousand Voices” campaign in my constituency, which comprises mums who got together to make themselves heard when they saw the crisis coming. I know that I cannot use props, Mr Howarth, so I will not, but I urge all hon. Members to go to www.YouTube.com/saveFGHmaternity to hear the stories being shared. People are going out and using camera phones to get video clips from mums and dads, wherever they can find them. Let me read just one such story on the site, which reflects the views of hundreds. Mum of three, Christina Pickering, said:

“Due to extreme circumstances in my third pregnancy, I was sent to the Royal Preston hospital to deliver my daughter and that’s got to be one of the most terrifying experiences of my life, being in an unknown hospital, on my own, to deliver my baby. I don’t want this to happen to any mums—it doesn’t have to. Downgrading our maternity services at Furness general would not only be detrimental to mums and babies, but to the whole community. We’ve got to stop this happening.”

Let me end with the Minister’s own words from before he was promoted, which I wholeheartedly endorse. In a Westminster Hall debate in September 2010, he said that,

“generally speaking, if we consider the example of”

other hospitals,

“we see that the push has been to have a low-risk, midwifery-led unit alongside a higher-risk unit. We in obstetrics know that a greater number of women—rising to about 30%—are giving birth by Caesarean section, and that number is going up year on year. Many births that we initially think uncomplicated end up being much more complicated.”—[Official Report, 14 September 2010; Vol. 515, c. 230WH.]

The Minister summed it up perfectly. Families in Furness want the security of knowing that they can have their babies in Barrow with specialist help on hand. They pay for their health services with their taxes and they are speaking with one voice. They need the Government to listen.

[Mr George Howarth (in the Chair)]

I call David Morris, but for two minutes only, as the Minister needs time to respond to the debate.

11:16

[David Morris (Morecambe and Lunesdale) (Con)]

I thank you for calling me in this debate, Mr Howarth, as it is one that will be closely watched in my constituency. For some weeks, the local press has been awash with allegations about both maternity and accident and emergency services at our NHS trust. I am concerned not about services changing but about the scare stories surrounding the matter. I have a letter from the chief executive of the trust that confirms that it will not shut the A and E at Royal Lancaster infirmary. The Minister also has this letter, but I will quote from it:

“The A and E at the Royal Lancaster Infirmary serves the population of Lancaster and surrounding areas and treats in the region of 50,000 people each year. Whilst it would be wrong of me to second guess the future, I personally find it hard to imagine Lancaster not having emergency services. Let me be clear, we do not have any plans to shut the Accident and Emergency department in Lancaster. We are deeply concerned that these continual rumours are undermining confidence and frightening the public. We will continue to work with the public, staff and stakeholders to better understand the review of services to help allay these concerns.”

Jackie Daniel, the CEO of the trust, is saying there that not only does she have no plans to close the A and E, but she cannot even imagine a scenario in which anyone would close it, not least because it serves 50,000 people a year.

However, a concerted Labour campaign has been mounted by local party members who actually work in the NHS to make people believe that the A and E is likely to close. The campaign involves press briefings, an online petition, a Facebook group and even people walking round the centre of Morecambe with clipboards inviting people to join. I want the e-petition removed from Directgov and have written to the Cabinet Secretary to ask for him to intervene. We cannot have this dishonest campaign fought through the Directgov e-petition platform. If the A and E is not under threat, it must be concluded that Labour is frightening people for its own political advantage, which is morally wrong.

It is perhaps time to admit the truth: the trust is getting better under this Government. A new and better management was brought in by the previous Secretary of State for Health. A new minor injuries unit was opened in my constituency by the Minister only a few weeks ago. A new health centre in Heysham, costing £20 million, was opened last year. We have four new wards just opened. All of that was paid for by the 2.8% increase in funding for the NHS.

[Mr George Howarth (in the Chair)]

Order. I call the Minister.

11:18

[The Parliamentary Under-Secretary of State for Health (Dr Daniel Poulter)]

It is a great pleasure to serve under your chairmanship, Mr Howarth. It is not the first time, but nevertheless it is a pleasure.

I pay tribute to the hon. Member for Barrow and Furness (John Woodcock) for his advocacy on behalf of his constituents and all those in Cumbria who are looked after by the local trust and to my hon. Friend the Member for Morecambe and Lunesdale (David Morris), whose constituency I recently had the pleasure of visiting, for his advocacy on the behalf of his constituents. I have indeed received a copy of the letter sent to him by the chief executive of the NHS trust, which says:

“Whilst it would be wrong of me to second guess the future, I personally find it hard to imagine Lancaster not having emergency services.”

I hope that that is reassuring to him and his constituents.

On the main issues raised in the debate, I have already paid tribute to the strong advocacy on behalf of his constituents by the hon. Member for Barrow and Furness. He was very kind to brand me an expert in obstetrics. I would not go quite that far, but he is right to say that I have considerable understanding of the issues involved and of the importance of ensuring that we provide safe and comfortable environments in which women can give birth. He is also right to read out the case that I advocated in a debate here in Westminster Hall some time ago, and it is important that we recognise that uncomplicated deliveries can become more complicated. We know that for women in some parts of the country, particularly those in more deprived areas, there are often higher risk rates of prematurity. These are all issues that need to be taken fully into account whenever services for the safe delivery of babies, and for the safe care of women during pregnancy, delivery and the period afterwards, are examined.

The hon. Gentleman is also right to highlight that there are geographical considerations in Cumbria, as in many rural areas, including the fact that there is only one main road and the problems that presents in respect of allowing the local trust to transfer patients effectively and safely from one site to another. It potentially creates difficulties at certain times of day if the road is busy, as he is aware. However, it also requires the availability of ambulances, and he was right to point that out.

When decisions are made about changing services, whatever the reason may be for changing them, they cannot be taken in isolation. In this case––I will discuss this further later––I believe that the decision was made in good faith, although I share some of the concerns that the hon. Gentleman raised, given that we know that there have been a lot of problems at the trust with maternity services as well as the safety concerns he outlined. Those decisions cannot be taken in isolation. They need to be taken in collaboration and after discussion with local commissioners and indeed with the ambulance service, if they are to be made correctly and for the benefit of patients.

The hon. Gentleman was also right to outline the four tests for reconfiguration. In particular, he was right that reconfiguration must be clinically led, based upon evidence and always in the best interests of patients. Reconfiguration should never happen for cost reasons alone, and he was absolutely right to highlight that. Reconfiguration also needs to have the support of local GP commissioners. However, from what he has said today it appears that there are local concerns about the proposed changes, and that there has not been an integrated, joined-up approach in relation to this decision.

We have also discussed the concerns over the need to integrate ambulance transfers into any local decisions because of the travelling distance from Barrow to Lancaster. That is one of the issues that should have been take into account when these decisions about reconfiguration were being made, and I am very concerned to hear the hon. Gentleman say that he does not believe that they were taken into account and that local commissioners also have concerns about this matter.

I am very happy to meet the hon. Gentleman again in the very near future to discuss this; that would be very desirable. It is vital to ensure, as the hon. Member for Copeland (Mr Reed) said, that we do not see service reconfiguration by stealth or via the back door. We should have an integrated, joined-up approach to local decision making, particularly in view of what can only be described as the deficiencies of the past at the trust and the very sad cases that the hon. Member for Barrow and Furness and I have corresponded about, as well as the police investigations that are going on. He is aware that it would be inappropriate for me to comment directly on those.

There is a need to ensure that in the future decisions are made in a holistic way and in the best interests of patient safety. Such decisions are not just for the trust to make alone but must be made in conjunction with the local commissioners and the ambulance service, if we want to ensure patient safety. The hon. Gentleman and I can discuss that further when we meet.

The hon. Gentleman raised another important issue: the ongoing investigations at the trust. He was right to do so. As we know, tomorrow the Mid Staffordshire report will be published, which makes these sorts of issues all the more poignant and important. The NHS has sometimes had a history of covering up bad things that have happened to patients, and that is completely unacceptable. The result of that is bad care for patients, and cultural problems in trusts and hospitals. Those sorts of things cannot go on. When there are investigations, they need to be carried out transparently and openly, so that people feel the issues have been fully aired. It is also vital that those investigations have a degree of independence, as he suggested.

[John Woodcock]

I thank the Minister for giving way, and for the excellent and considered way that he is responding to my points. He referred to the Mid Staffordshire situation. Does he accept that that started as an internal inquiry, which was found to be insufficient to get to the bottom of the issues and required a greater degree of independence to be established? We are worried that the same thing may be apparent in Furness.

[Dr Poulter]

Absolutely. There will be a full response to the Mid Staffordshire inquiry tomorrow, so I will not pre-empt it or go into detailed discussion of that issue. However, it is absolutely right that we must encourage staff who have concerns about patient care to raise those concerns and air them in an open way. Moreover, when we know that there have been long-standing failings at a trust about the quality of care provided to patients and concerns raised about those failings—although Morecambe Bay NHS Foundation Trust, for example, has made some good progress in recent months, there are some long-standing issues there—it is important that, when an investigation is carried out, it is carried out in a transparent, open and independent way; there must be a great degree of independence involved.

If a trust sees fit to launch an investigation and a review of what has happened, it is important that the investigation and review pass the test of transparency. There may well be a role for local MPs and other interested parties in that process, and when the hon. Member for Barrow and Furness and I meet, that is an issue that I will be very keen to discuss further, to ensure that we can discuss with the local trust ways in which we can ensure that there is that transparency and independence in the process. That is very important to ensure that those patients, and their families who have had problems in the past—in some cases, there have been deaths at the trust—feel that the investigation addresses their allegations.

Obviously, this debate is not just about maternity services at the Morecambe Bay NHS Foundation Trust; there have been other issues around the trust, and any investigation will need to take account of all those issues. I understand that that is what will happen.

[Mr Jamie Reed]

I am very grateful to the Minister for his considered and thoughtful response to the debate. I agree with him wholeheartedly on the importance of transparency and openness. However, where there are different clinical groups commissioning services from a single trust that operates a number of different hospitals, who actually holds the ring and decides which services are commissioned where?

[Dr Poulter]

The hon. Gentleman asks a very good and thoughtful question. It is the duty of the commissioning groups to work collaboratively for the best interests of patients. They obviously have responsibility for their own budgets and, as I say, they all ought to work collaboratively for the benefit of patients. However, if there are concerns about that, there is also a role in this process for the commissioning board, which will have some oversight over the process, to help to ease it through. In many parts of the country, there is already good evidence that the emerging local commissioning groups are working together collaboratively in just the way that I have described. I hope that that is reassuring for the hon. Gentleman.

We know that the Morecambe Bay NHS Foundation Trust has had a very long and troubled history. We also know that it serves a very important purpose in looking after people throughout north Lancashire and Cumbria. My hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw) made clearly the good point that the configuration of the trust geographically is challenging. We, as a group, are going to meet together to talk through some of these issues and the troubled history of the trust, to ensure that we can do our best to work through these issues.

There have been problems in the past with the trust and local patients have not been treated properly, and they and their families have suffered. There have been long-standing concerns over local care quality issues. That may mean that we have to redesign the way that services are delivered; that may be an inevitable consequence of improving patient care in the long run. Nevertheless, the driver of this process must be delivering high-quality local health care within the envelope of providing improved patient care with better outcomes and safer care for patients. However, the only way that we will achieve that is if all the commissioners are working collaboratively with the trust in a more integrated approach to care. The failure to do that is where things have gone wrong in the past, and that is what needs to change in the future.

11:30

Sitting suspended.

Animal Experiments

Tuesday 5th February 2013 Westminster Hall

[Jim Sheridan in the Chair]

14:30

[Henry Smith (Crawley) (Con)]

Thank you very much indeed, Mr Sheridan, for calling me to speak. It is a pleasure to serve under your chairmanship.

There are four main issues that I will raise in this debate on animal experimentation and Government policy: first, reducing the number of animals used in experiments; secondly, the testing of household products on animals; thirdly, section 24 of the Animals (Scientific Procedures) Act 1986; and fourthly, the implementation of the new EU directive—2010/63—which, of course, took place on 1 January.

The coalition Government’s programme for government was very welcome as it included two specific pledges on the use of animals in experiments, stating:

“We will end the testing of household products on animals and work to reduce the use of animals in scientific research.”

The European Commission has recently confirmed that the ban on importing and selling animal-tested cosmetics throughout the EU will come into force, as planned, on 11 March. The UK was rightly one of the first countries to adopt this position, and the ban comes into force after more than 40 years of campaigning—principally led, I must say, by the British Union Against Vivisection, and others—and it is, of course, most welcome.

As we pass the mid-point of this Parliament, I hope through this debate to examine the Government’s progress and see how the very worthy commitments that they made in 2010 can be realised in a timely manner.

I turn to the first of the four main points that I will raise: reduction. In their recent mid-term review, the Government said:

“We worked to reduce the use of animals in scientific research through a science-led programme headed by the National Centre for the Replacement, Refinement and Reduction of Animals in Research. However, the Government continues to recognise that there remains a strong scientific case for the carefully regulated use of animals in scientific research where no practicable alternatives exist.”

As the number of such experiments has risen further, to its highest level since records began, my concern is that the use of the past tense in that sentence could be interpreted to imply that the Government have given up their attempt to reduce numbers. If not—and I sincerely hope that the Government have not given up that attempt—what new steps will be taken and when do the Government expect a visible impact?

The number of animals currently being used in experiments in Great Britain—of course, Northern Ireland has a separate system—is the highest since 1986, when statistics were comprehensively collected for the first time following the introduction of the Animals (Scientific Procedures) Act. According to Home Office statistics published in July 2012, in 2011 there were 3,710,621 animals used in 3,792,857 procedures in Great Britain. That represents an increase of 1.9% on the 2010 figures. Procedures were performed on particular species, including 1,459 primates, 11,844 rabbits, 11,514 guinea pigs, 2,865 dogs, and 161,733 birds. Of those experiments, only 13% were directly related to human health. Some of the non-medical experiments included: the use of 3,524 animals to test food additives; the use of 541 animals to test the effects of alcohol; the use of 13,676 animals in experiments examining the effects of pollution; and the use of 22,785 animals in experiments relating to agriculture. More than half the animal experiments in 2011 were carried out on animals that had been genetically altered, and many such animals are killed before they are even used because they do not show the correct characteristics.

The second issue that I will raise is the testing of household products on animals. The Government have recently announced their guide for licence holders on the operation of the Animals (Scientific Procedures) Act 1986, which takes account of the changes introduced by the new European directive, under which no project licence will be granted for

“work using any animals for testing household products”.

However, the definition of “household products” is unclear. In response to a recent parliamentary question, the Minister for Policing and Criminal Justice said:

“There is no authoritative definition of ‘household product’ in UK or European legislation. For the purposes of the current annual statistical collection, project licence holders are required to report the use of animals to test ‘substances used in the household’. Where there is uncertainty, decisions on whether procedures should be recorded under this heading are taken on a case by case basis. No procedures were reported for this purpose in 2011, the latest year for which figures are available.”—[Official Report, 22 January 2013; Vol. 557, c. 151W.]

The statement that there were no tests of this nature in 2011 leads me to believe that the ban would cover only finished products, rather than also covering ingredients. I believe that would seriously undermine the ban, as the vast majority of testing for household products involves testing ingredients. Indeed, as much was admitted in response to another parliamentary question, which was answered on 28 March 2011 by the then Home Office Minister, who is now the Under-Secretary of State for International Development. She said:

“We plan to apply the definition of ‘substances used in the household’ used for reporting purposes in the Statistics of Scientific Procedures on Living Animals published annually. This includes all products that are primarily intended for use in the home, including detergents and other laundry products, household cleaners, air-fresheners, toilet blocks, polishes, paper products such as infant nappies, paints, glues (and removers), other furnishing and DIY products and household pesticides. The prohibition will apply to both finished household products and their ingredients, although in practice mainly the latter are tested.”—[Official Report, 28 March 2011; Vol. 526, c. 80W.]

However, recent Home Office reports have indicated that the actual definition may well be much narrower than that.

I move on to section 24 of the Animals (Scientific Procedures) Act 1986, under which it is a criminal offence to divulge any information that a researcher would have liked to be kept secret, regardless of whether there is any personal information involved. In May 2012, in response to the public consultation on transposing European directive 2010/63, the Government said that

“the new Directive focuses on greater transparency in relation to the use of animals in scientific research”.

It was the Government’s view that the requirement is incompatible with section 24 of the 1986 Act as it currently stands. The Government said that they would

“consider the options for reforming Section 24 and publish conclusions separately in due course.”

Indeed, in Grand Committee in the House of Lords, Lord Taylor of Holbeach said:

“Our consultation revealed no clear consensus on whether the provisions of Section 24 should be repealed and replaced, and we need to give that further thought.”—[Official Report, House of Lords, 13 December 2012; Vol. 741, c. GC399.]

I understand that currently there is no date set for any further conclusions or consultations to be published by the Government.

The fourth point that I will raise is the Government’s implementation of the requirements of European directive 2010/63 on 1 January. Most of the UK controls, which are of a higher standard than those in many other EU countries, will remain in place. However, as some features may be slightly different, it will be some time before it is clear how the changes will affect animals. Nevertheless, there are some ongoing concerns.

In transposing the new European directive into UK law, while existing UK standards are retained where they are higher than those set out in the directive, a key concern is how the legislation will be interpreted in practice. The draft guidance, which has now been released for consultation, needs to be unequivocal, to ensure that UK standards are retained.

The revised legislation includes a move to transfer more responsibility for its implementation from central to local control at individual establishment level. The Royal Society for the Prevention of Cruelty to Animals believes that the Home Office must have a robust programme in place to ensure good practice, to identify shortcomings within establishments and, where needed, to have proper sanctions. It will also be important for establishments to maintain a strong and effective local animal welfare and ethical review body, so that each establishment can ensure compliance with the law and with good practice. The new body replaces the local ethical review process, which progressed well over its 12 years and had widespread support. Indeed, the RSPCA has developed guidelines on best practice for the ethical review process, which should form the basis of the new body’s roles.

The Home Office has chosen to retain the personal licence system, but the content of the proposed new licence has been considerably reduced and now, I fear, contains inadequate detail. The proposed new licence removes much of the detail from the previous licence, and places greater emphasis on an individual’s training and competency record. Potential licensees will have to specify only the broad categories of animals and experimental techniques they want to use, whereas the previous licence required a detailed list of techniques, along with details of the species and the stage of development of the animals to be used. The information will now be held in a training and competency record within the establishment, which could lead to inconsistencies.

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

Is it not also important to ensure that staff are not asked to undertake duties that they are not competent in or trained to perform, because of the risk of unnecessary cruelty to animals?

[Henry Smith]

The hon. Lady anticipates something I was going to come on to. It would be particularly pertinent to ensure that that was the case when someone had to step in to undertake a procedure, perhaps because the individual who usually did it was off sick, or for another reason. I am concerned that the watering down of the licensing regime could lead to staff being asked to undertake procedures in such a way.

I contend that the personal licence should set formal, legal boundaries with respect to what people are, and are not, allowed to do. The fear is that the new licence will erode the previous protection. The processes that establishments put in place for ensuring that all persons are both trained and competent will need to be robustly enforced by the Home Office.

[Mr Adrian Sanders (Torbay) (LD)]

I congratulate my hon. Friend on securing the debate. Does he think that there ought to be some provision that would protect staff from having to carry out procedures they did not wish to carry out, within the licensing system?

[Henry Smith]

My hon. Friend makes an important point. Just as the new licensing system should ensure that people carrying out procedures are properly qualified, people who have an objection to certain types of procedure should have such protection afforded to them. I am grateful for that helpful intervention.

The project licence has already been rewritten several times over previous years, with animal users being fully engaged and account taken of their views. There may be pressure from establishments for the amount of paperwork to be further reduced, but that could seriously affect the ability of the local ethical body and the Home Office to carry out a proper assessment of whether the three R’s of replacement, reduction and refinement had effectively been applied, and so consider the justification for using animals.

Despite the number of animal procedures increasing, recent years have seen reductions in the number of Home Office inspectors and the number of visits they make to research establishments. As the animals in science regulation unit is fully funded through fees paid by those holding licences to use animals, the inspectorate must be re-strengthened and given adequate resourcing to perform all its functions, including providing advice on welfare and promoting good and best practice.

The new Animals in Science Committee—ASC—has a wider remit than the Animal Procedures Committee—APC—had under previous legislation. Completely new tasks include advising ethical bodies on animal care and use, ensuring the sharing of best practice, and exchanging information with the national committees in other EU member nations. Despite the new functions, no extra funding or resource has been made available, and the remuneration for the chair has been withdrawn. The Home Office should demonstrate that it takes the role of the ASC seriously, by releasing the protocol for its operation and resourcing it properly.

There are several steps that would enable the number of experiments to be reduced significantly. One would be to ban the importing of primates for use in experiments. In 2011, 47% of primates used in the UK were sourced from outside the EU. A recent British Union Against Vivisection investigation found that a breeding centre in Mauritius was killing monkeys that were not of the correct size. Another important step would be rigorous implementation of the new regulations, especially those relating to ethical consideration of whether and how animals are used. A third important step would be better implementation of the three R’s—the replacement of animals with humane alternatives, a reduction in animal use, and refinement to reduce suffering and improve welfare. Fourthly, it is important to have an effective system that ensures that all persons involved are well trained in the legal, ethical, animal welfare and three R’s issues, and are fully competent with respect to practical skills.

A fifth step would be to introduce more transparency into the system by repealing section 24 of the 1986 Act, which enables information about animal experiments to remain secret. Other steps would be to set a detailed timetable for the ending of all research not for medical purposes, which could reduce the number of experiments by an estimated 87%, and to ban the most severe experiments allowed by the new European directive. In transposing the new directive, the Government have, unfortunately, yet to rule out those aspects, which means that animals could, for example, be subjected to repeated electric shock treatment to induce a state of learned helplessness or be forced to do exercise until they suffered from exhaustion. Although the transposition is now complete, the Government still have time to issue a policy statement making it clear that no project licences will be granted for such experiments. In particular, more must be done to end suffering that is graded as severe.

Only absolutely necessary animal experimentation should be allowed. To do otherwise is bad science, inefficient and ultimately cruel.

14:48

[Kerry McCarthy (Bristol East) (Lab)]

I congratulate the hon. Member for Crawley (Henry Smith) on securing this debate, and on outlining in such depth and detail the case against not animal experimentation per se, but the huge number of unnecessary experiments. He says that we need to get to a situation in which only absolutely essential tests continue. I would very much like one day to see a world in which there was no animal testing, but I accept that, at the moment, we should be lobbying and campaigning for a gradual incremental approach, highlighting the fact that there is so much duplication of unnecessary animal tests and that there are areas in which it is completely unethical to test products on animals.

Cosmetic testing is the one such area in which I think most people would support that kind of lobbying work. Indeed, public opinion polls show that the vast majority are against cosmetic testing on animals, which is one of those things that, if asked, people are very much against, but they struggle as consumers to put that into practice. People like me might spend ages looking at all the labels on everything—the Leaping Bunny logo is useful if people are trying to find a product that has not been tested on animals anywhere through the supply chain—but many others are misled by products such as Herbal Essences. People think that because something has “herbal” or “natural” in its name, all the ingredients must be derived from the plant world with no chemicals. They also extrapolate that those products are humane and not tested on animals, whereas we know that in most cases they are, or at least they are produced by companies that do a lot of animal testing.

It has taken 20 years to get to the stage where the cosmetic testing ban is about to come into force. In 1991, the British Union for the Abolition of Vivisection set up the European coalition of leading animal protection organisations with the aim of ending the use of animal testing for cosmetics. We now have the ban on the import and sale of animal-tested cosmetic products and ingredients, which comes into force on 11 March.

I am interested to know how that ban will be enforced—I believe that that is the responsibility of the Department for Business, Innovation and Skills. I recently asked a question of the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson) and was told that her Department is working with trading standards to develop guidance for local authority trading standards services on implementing the ban. My concern is that trading standards has many other things on its plate, that it is not well resourced and that it is affected by cuts, as are many other public sector bodies. Will the Minister tell us whether the guidance has already been published? Will there be consultation? What is the timetable for disseminating that guidance to local authority trading standards, and what training will there be on implementing the guidance? What enforcement action are local authority trading standards likely to take?

There needs to be more proactive testing of cosmetics during the import process, rather than waiting to try to catch people in shops and market stalls who are selling products that are still being tested. We ought to be able to stop those products from coming into the UK in the first place. The BUAV suggests that that could involve an inspector checking documentation to ensure that batches are compliant. Not only would that act as a deterrent to companies that might want to chance their arm, but it would uncover anything before it reached the market. When we consider the way in which the recent horsemeat situation came to light, everyone would agree that we should not find out after the event that something such as horsemeat has entered the food chain; we want to stop it coming into the country in the first place. Will the Minister examine the BUAV’s proposal to ensure that the ban is properly implemented?

The pledge to end testing household products on animals was set out in the coalition agreement in 2010. I remember in the run-up to the 2010 general election there was an event in Parliament at which speakers from the three main political parties pledged their support. Obviously, there is political will to do something, and the Government have said that no project licences will be granted for testing household products on animals.

When I recently tabled a parliamentary question asking for the definition of “household product,” the Minister for Policing and Criminal Justice answered:

“There is no authoritative definition of ‘household product’ in UK or European legislation.”

He said that new guidelines will apply to

“‘substances used in the household’”,

and that decisions will be made

“on a case by case basis.”—[Official Report, 22 January 2013; Vol. 557, c. 151W.]

Obviously, substances “used in the household” may cover a wide range of things, and I could imagine getting into a dispute about whether something will be covered by those rules.

As the hon. Member for Crawley said, there is no mention of any restriction on testing the ingredients of household products. As the Minister for Policing and Criminal Justice confirmed, Government figures for 2011 show that the number of tests on finished household products was zero. So implementing a ban on the testing of finished products will not achieve anything; it is the ingredients that are important. When the hon. Member for Hornsey and Wood Green (Lynne Featherstone), who was then a Minister in the Department, was asked about that in 2011, she said that when the ban is introduced, it will

“apply to both finished household products and their ingredients, although in practice mainly the latter are tested.”—[Official Report, 28 March 2011; Vol. 526, c. 80W.]

I would be grateful if the Minister elaborated on that. Does the ban apply to ingredients, as well as to finished products? If the ban applies only to finished products, how effective will it be? Or is the ban simply an empty gesture?

A new version of some household products seems to hit the market every few months. One moment we are told that a washing powder is the best ever and that it gets everything 100% white—it is marvellous, wonderful and cutting edge, and nothing could be better. Then, three months later, there is suddenly a new, improved version. That constant drive to get market share, to sell a new product and to present it as something different in some ways buys into the need to test more things that go into the product. Perhaps I am a bit old-fashioned, but we have plenty of household products that are capable of washing our clothes and cleaning our floors and windows. We do not need to introduce any new products or ingredients. We certainly do not need to do so at the expense of animals that have to have ingredients tested on them.

I hosted an event in Parliament on 16 January, which the hon. Member for Crawley attended. At that event, the Dr Hadwen Trust announced that it is funding the first professorial post in animal replacement science at Queen Mary, university of London. The post is an academic position, and another researcher will also be funded as part of the unit. They will be working solely on replacements for, and the reduction of, testing on animals. That means that the UK will be at the forefront of efforts to provide alternatives to animal testing. The new professor will be appointed in the next few months and will be based at the Blizard institute. The professor will particularly look at things such as developing in vitro models using human cells and tissue, and developing three-dimensional models in cutaneous gastroenterology and cancer research, which is a welcome move that provides credibility to the field of animal replacement.

People often think that the debate is just scientists against people who care about cuddly animals and have an emotional response, rather than people who are interested in the most effective scientific methods. At the launch, it was interesting that so many research scientists came up to me saying, “We don’t actually think that testing on animals is an effective way of doing it. We don’t think it gets the right results. Mice are genetically not the right animals to test something that we are developing to treat humans.” The professorial post creates credibility for the search for alternatives to testing on animals, which is important.

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

I welcome what the hon. Lady is saying. She talked earlier about science and new technology. Does she welcome the fact that, last year, the National Centre for the Replacement, Refinement and Reduction of Animals in Research established 15 PhDs to consider alternatives to animal experiments? I think it is great to see both more scientists and more funding.

[Kerry McCarthy]

That is another welcome development. The National Centre for the Replacement, Refinement and Reduction of Animals in Research has done some good work, but more can be done. As we know, the number of animal experiments has gone up, partly because of medical developments, new forms of testing, and so on. I will judge the centre’s success by the reduction in the number of overall animal experiments, rather than success in one area and increased tests elsewhere.

[Angela Smith]

Is it not also important that the key Departments work together on reducing the incidence of animals used in research? The Home Office regulates research, the Department for Environment, Food and Rural Affairs funds much of the research and the Department for Business, Innovation and Skills often funds academia to undertake research on alternatives. Is it not important that those Departments should be committed to working together to deliver the coalition Government’s objective?

[Kerry McCarthy]

That is true, and I would add the Department of Health into the mix with its role in new drugs, safety standards, and so on. To an extent, the issue has suffered from being parked in the Home Office. The previous Minister, the hon. Member for Hornsey and Wood Green, for example, had the equalities brief and so much else to deal with that did not sit neatly with addressing the animal experimentation side of things. There is a tendency for the issue to be sidelined and not given the attention that it deserves. It would have been better to pull it together in a cross-cutting way under one post.

I have a couple of questions for the Minister. The recent legislation carrying forward the Animals (Scientific Procedures) Act 1986 came into force in January 2013. It requires that alternative non-animal research techniques be used in medical research if available. Researchers must ensure that, wherever possible, a scientifically satisfactory method or testing strategy not entailing the use of live animals should be used, and the number of animals used in projects should be reduced to a minimum. How will scientists know whether a non-animal alternative method is available, given that no central database currently exists? Without such a resource, how will the Home Office be able to monitor compliance properly or encourage the promotion of alternatives?

As I mentioned earlier, that topic leads into the ongoing problem of duplication. Currently, researchers have no way of knowing the results of previous experiments involving animals. An experiment at Cardiff university, for example, which involved sewing up the eyelids of newborn kittens had already been done elsewhere; it had turned out to be fruitless in finding a cure for lazy eye in children. Has the Home Office assessed the feasibility of introducing a central database that licence holders would have to search before submitting a project application? I understand that it has been discussed recently at European level in working groups, but that no progress was made. Why, and what steps will the Minister commit to take to help those discussions progress?

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

I thank the hon. Lady for giving way before coming to the end of her contribution. She is absolutely right about duplication, but one problem is that not all scientific work is published, because sometimes no journal is willing to publish it. Would it not be a good idea to have a system of open access, so that all work could be published on a database and everybody could have access to it, even if journals were not prepared to publish it?

[Kerry McCarthy]

The hon. Gentleman makes a good point. It is partly that results of some research are not publicly disseminated, but there is also an issue of commercial confidentiality where products for sale are involved. People do not want to reveal in what direction their thoughts are headed, in case someone steals their research and comes up with a similar product. They do not want to give their rivals a commercial advantage. I can see why drug companies, for example, would resist the idea of a central database, but we definitely need to go down the path of open access.

Finally, I hope that the Minister will welcome the creation of the professorial chair at Queen Mary, university of London. Can he do anything in conjunction with his colleagues at the Department for Business, Innovation and Skills to roll it out in the research departments of other universities in the UK?

15:02

[Mr Adrian Sanders (Torbay) (LD)]

It is a genuine pleasure to serve under your chairmanship for the first time, Mr Sheridan. I congratulate the hon. Member for Crawley (Henry Smith) on securing this important debate. The participants so far have certainly reflected quality rather than quantity.

Over the past few decades, many improvements have been made to the welfare of animals in research laboratories. We banned testing for cosmetic products and toiletries back in 1998, and conditions have improved under strict adherence to the three R’s. Unfortunately, as has been said, the number of animals used in scientific research continues to increase.

The guiding principles for the humane use of animals in scientific research are known as the three R’s: replace, reduce and refine. According to those principles, scientists must prove that there are no alternatives to using animals, use the minimum possible number of animals and refine their experiments to ensure that animals suffer as little as possible. The National Centre for the Replacement, Refinement and Reduction of Animals in Research is the organisation working on the coalition Government’s pledge to reduce the use of animals in scientific research. According to its research, drastic advances have been made in implementing the three R’s. As a result, thousands fewer animals are being used in certain experiments.

The problem of animal testing is global, and progress towards minimising its use has been hit and miss. As of March this year, EU law will prohibit not only animal testing for cosmetics within the EU, but importing any cosmetic products tested on animals outside the EU. Sadly, many companies responding to the growing appetite for cosmetic products among China’s middle classes are abandoning their cruelty-free status and resuming animal testing. Chinese law currently requires all cosmetics to be tested on animals to ensure that they are safe for humans. The law forces cosmetic companies to test every product in that way, even products that have been tested by other means and deemed safe.

There is knowledge within China of how to test cosmetics without animals. A grant from People for the Ethical Treatment of Animals helped train a number of Chinese scientists at Beijing technology and business university to test cosmetic ingredients without using animals. Perhaps we should add the Foreign and Commonwealth Office to the long list of Departments mentioned by the hon. Member for Bristol East (Kerry McCarthy) and involve it in cross-departmental action and discussion on the protection of animals from cruelty.

[Kerry McCarthy]

The hon. Gentleman might be aware that one of my other hats is shadow Foreign Office Minister. I talk to animal welfare groups, and then I meet ambassadors or visiting delegations. People have raised with me the dog meat trade in the Philippines, for example, but the problem is that, if our Foreign Office representatives go over there, that issue will be so far down their agenda that they never raise it. There are far more important issues of trade, defence, security and so on to raise. I accept entirely his point that the FCO should be involved as well.

[Mr Sanders]

I thank the hon. Lady for that intervention.

I hope that the training will ensure that if China changes the law requiring mandatory animal testing of cosmetics, scientists will know how to test products without using animals. The only way that the situation within China will change is if pressure is put on the Chinese Government to change their laws.

The claim that animal testing is needed for safety reasons does not hold up, given that the EU and many countries around the world manage to ensure that products are safe without involving animals. It is important that we all encourage cosmetic companies to put principles before profits and, rather than reversing years of progress, to stay firm by refusing to conduct tests on animals. Testing on animals is not necessary, and the companies that have started using animals again are doing so only to increase their profits.

We have a number of great companies here in Britain, such as The Body Shop, Lush and many others, which refuse to stock products tested on animals. I hope that we can do more to promote such companies and refuse to buy from the growing number of companies that are selling out by needlessly testing their products on animals. I hope that the Minister can give us some reassurance that the Government are aware of the growing problem and will introduce measures to reduce it.

15:08

[Gloria De Piero (Ashfield) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Sheridan. I congratulate the hon. Member for Crawley (Henry Smith) on securing this debate and speaking expertly and clearly about the four issues that he wanted to raise, particularly the importance of reducing the number of animal experiments —he pointed out the 1.9% increase in their number—and the issue of inspections. I will address both those issues in my contribution.

I congratulate my hon. Friend the Member for Bristol East (Kerry McCarthy), who reaffirmed and reinforced the point that animal testing should be carried out only when essential. She explained duplication in animal testing and raised the issue of public opinion on cosmetic animal testing, as well as asking numerous detailed questions that I hope the Minister will address. I thank the hon. Member for Torbay (Mr Sanders) for giving us an international perspective. He spoke about the high-quality contributions that had been made to the debate, and his was one. He talked about the global challenges we face and about the need for a global strategy.

I should say that I am standing in for the shadow Minister, my hon. Friend the Member for Kingston upon Hull North (Diana Johnson). If people want to raise issues, I will make sure they get the answers they require.

Many Members talked about the EU directive, which the Labour party was proud to support. It ensures that welfare standards do not drop below a certain level. Where the standards in it were lower than those in the UK, the Labour party called on the Government to maintain the UK’s high standards, and I am pleased to say there was broad agreement on that. Where the directive raised standards, we of course welcomed the extra protection.

As Members have said, the key to how the regulations work will be in the detail of the codes of practice. Although we have not seen all the regulations, I can assure hon. Members that the Labour party will examine them in great detail when they are published to ensure the UK remains a leader on animal welfare standards.

Although the directive will come into force under this Government, it is the result of 10 years’ work, much of which was done by the previous Labour Government and our MEPs, who were instrumental in strengthening the animal welfare provisions in the European Parliament so that all EU countries have the same basic standards of animal welfare for the first time. That will not only protect animals from unnecessary suffering, but prevent UK bioscience jobs from going to other EU countries, thus ensuring that one of our most important sectors remains competitive with its rivals around the world.

It is essential that the Government’s policy on animal experimentation continues to strike the right balance. As Members have said, it is vital that we keep a watchful eye on the number of experiments being conducted. The Labour party supports the coalition agreement to reduce the number of experiments conducted on animals, and we want to ensure that the Government stick to their pledge. As Members will be aware, the number of experiments involving animals has been steadily rising for a number of years, reaching a 25-year high in 2011.

It should, therefore, come as no surprise to the Minister to hear that the shadow Front-Bench team are as concerned about the issue as we were when my hon. Friend the Member for Kingston upon Hull North raised it towards the end of last year. Clearly, the Government need to examine the issue and to get to grips with the numbers as quickly as possible. As with any other issue, Governments are judged on what they say and what they deliver, and this issue should be no different. The Government need to work with the bioscience industry to ensure that progress is made.

The shadow Front-Bench team’s other concern, which the hon. Member for Crawley also raised, is the fall in the number of laboratory inspections and the closure of regional inspection offices. The Labour party’s stance on the issue remains the same. The UK has some of the world’s highest animal welfare standards, but the number of inspections has fallen, while regional inspection offices have been closing. We have understandable concerns about how the Government expect to implement those closures without compromising the quality of inspections and animal welfare standards. The public, campaign groups, animal rights groups and the Labour party expect the Government to ensure policy is strictly enforced.

We have heard a lot about the three R’s, and I reaffirm the importance of the need to reduce the number of animals used, to refine experiments to avoid suffering and to replace animals where possible.

Animal experimentation is an issue that both sides of the House can feel passionate about, and I have no doubt that it will remain high on the agenda of animal welfare groups and our bioscience industry. It is essential that the Government continue to do their utmost to guarantee that their policy on animal experimentation is well protected.

To conclude, I have two questions for the Minister. First, I ask him to address the rise in the number of animal experiments and the steps the Government are taking. Secondly, has an assessment been made of the impact of the fall in the number of laboratory inspections on the quality of inspections and animal welfare standards?

15:14

[The Minister for Immigration (Mr Mark Harper)]

It is a great pleasure to serve under your chairmanship, Mr Sheridan. I congratulate my hon. Friend the Member for Crawley (Henry Smith) on securing the debate, which has been a good one. I am pleased to see the hon. Member for Ashfield (Gloria De Piero) in the Chamber, standing in for the hon. Member for Kingston upon Hull North (Diana Johnson).

I am pleased that colleagues have given me time to elaborate at length on all the points raised by my hon. Friend and other Members, including, in particular, the hon. Member for Bristol East (Kerry McCarthy). First, however, I will set out a bit of context. I can do that because we have time left, so people will not think this is an excuse for not getting to my hon. Friend’s detailed questions.

The position of both coalition parties—I think it is shared on both sides of the House—is that we should license the use of animals only when it is essential and when there is no alternative. That is, indeed, Government policy, and it was the policy of the previous Government.

As several Members, including my hon. Friend, said, our current legislation—the Animals (Scientific Procedures) Act 1986—has recently been revised to transpose European directive 2010/63/EU on the protection of animals used for scientific purposes. There were two key objectives in the new directive. One was to strengthen the protection of animals used in scientific procedures, and the other was to promote the three R’s—strategies that replace, reduce and refine the use of animals in scientific procedures. The hon. Member for Bristol East asked about an academic post in that regard, and I will come to that in a little while.

The Government have fully embraced those aims in transposing the directive. The amended Act provides a high level of protection for animals. As several Members have made clear, work cannot be licensed if it could be carried out without using animals. The procedures must also cause the minimum possible suffering to the smallest number of animals of the lowest sensitivity.

We have taken the opportunity to place in the legislation absolute bans on the use of great apes and stray animals of domestic species. We have retained stricter United Kingdom standards, which provide for: special protection for cats, dogs and horses, in addition to non-human primates; protection for immature forms of birds and reptiles; larger enclosure and cage sizes for dogs and a number of other species; and more humane methods of killing animals. Those measures are necessary and justified on animal welfare grounds and to maintain public confidence that animals used in experiments and testing will continue to be properly protected.

At the same time, animal experiments continue, at the moment, to be necessary if improvements in health care are to be developed with the minimum of delay. It is a fact that our national health service would be unable to function effectively were it not for the availability of medicines and treatments that have been developed and tested through research using animals. Almost every form of conventional medical treatment has relied in part on the study of animals. That includes asthma treatments and medicines for ulcers, schizophrenia and depression, polio vaccine, and kidney dialysis and transplants—those are just a few examples.

While we accept that animal experiments are effective and necessary, they should be used only when the benefits have been carefully weighed against the costs to the animals; when there is no other way of achieving the desired result; when the procedures applied to the animals will cause the least suffering possible; when the minimum number of animals will be used to achieve the outcome; and when high standards of animal welfare are applied. That approach closely reflects what the public want. They understand the necessity and importance of using animal experiments in some areas, but they want the number of such experiments to be the minimum necessary.

[Roger Williams]

While animal welfare considerations must always be paramount, the use of animals in scientific procedures is extraordinarily expensive, so there is pressure in that sense to ensure that other forms of experimentation are used where appropriate.

[Mr Harper]

My hon. Friend makes a good point. There is sometimes a caricature of those involved in research. If they had alternatives to using animals, they would implement them; they use animals because there are not currently alternatives in all cases. My hon. Friend puts his finger on the issue: the use of animals for experiments, particularly in a country such as the UK, which has high standards, is expensive. Companies use animals only because there are not more effective remedies. Also, they are conscious that they could develop effective alternatives that would also be more cost-effective. However costly—in several senses—animal experiments are, if there are no alternatives, those cannot be used; but many pressures are pushing researchers towards the use of alternatives when they are available, and that is welcome to all of us, including my hon. Friend.

We also accept that regulation must not be overly bureaucratic, so we have made some small but important changes, allowing us to simplify the detail required in personal licences and the way we process applications for them. Another important change in the revised Act is the requirement placed on member states to collect and publish statistical information, on not just the number of animals used, but the severity of the procedures applied to them. Publication of information about the experience of the animals will be an advance in transparency. Combined with the mandatory requirement to publish non-technical summaries of authorised projects, that will help to inform the parliamentary and public debate .

[Kerry McCarthy]

To what extent is security an issue affecting the making public of the kinds of testing that are going on? I do not agree with some of the more extreme, violent protests used to highlight animal testing. Would that prevent some experiments from being made public?

[Mr Harper]

The hon. Lady raises an important issue. This may be a good time to pick up on the point made by my hon. Friend the Member for Crawley about section 24 of the 1986 Act, which, as he said, currently prohibits the disclosure by Home Office Ministers and officials, other than in their discharge of functions under the Act, of confidential information about the use of animals in scientific procedures. There are two reasons for the provision. One relates to the hon. Lady’s point, and covers information that might put individuals at risk from those people who sadly are not content with democratic decision making and debate, but choose to use violence—something that we in the House would all abhor. In addition, the provision protects intellectual property. I think that I can say a little more on that than my hon. Friend did.

The Government agree that section 24 is not framed satisfactorily. There is little room for manoeuvre, and it acts somewhat as a blanket ban on disclosing information. It can, for example, make it difficult for Home Office inspectors to share good practice between establishments. The hon. Lady raised that, and so did my hon. Friend the Member for Crawley. The problem is that clear consensus about what we should do did not emerge in the recent public consultation on the transposition of the European directive—whether we should repeal the section or change it in some way. There was a range of views, and we wanted, as my hon. Friend said, to give it further thought. As to a timetable—I think that is what he was after—I can be a bit more specific. We are doing that work now, over the next six months, and aim to report our conclusions to Parliament before the House rises for the summer. I hope that that gives some reassuring firmness to the timetable.

The problem was that many of the people who responded to the consultation did not like the status quo, but there was no really clear sense of what to replace it with. We must be mindful of the two issues I raised: intellectual property, which it is legitimate for researchers to protect; and the extent to which we need to protect those involved in important work. Changes to the regime for animal welfare should be made by Parliament, after legitimate public debate. They should not happen because people take it on themselves to try to drive out of business through intimidation and violence those who conduct lawful work. Those are the things that we shall be thinking through: being as open as possible, but with those two constraints. I hope that that is helpful, and that that approach is widely shared in the House.

It is probably worth picking up the point about statistics, which my hon. Friend the Member for Crawley and several other hon. Members raised. He is correct to say that the latest statistics, for 2011, showed that the number of animals used in experiments and testing was higher than it had been for some years. It was not the highest ever number. The high point was reached in statistics produced under the Cruelty to Animals Act 1876, which preceded the current legislation: in the 1970s about 5 million animals were used. Thus there has been a drop, but my hon. Friend is right to say that the number is going up.

An interesting point arises in that context, which brings me back to a point made by the hon. Member for Ashfield, about the United Kingdom’s reputation as a place to do life sciences and bioscience. I understand that that industry is growing in the UK, more quickly than the increase in the number of animals used; so the usage of animals for each £1 of research, or however one might characterise it, is falling, but more such work is being done in the UK. It seems to me that that is a good thing, because we want that work to be done here; we want those generally well-paid jobs to be in the United Kingdom. Also, because we have high standards of welfare in our animal testing regime, it is better for animals, if research is to take place anywhere in the world, for it to happen in the UK. However, if the size of the business in the UK grows, that may mean that even if the number of animals used for every given type of research falls, the overall number goes up.

Of course, the quickest way to reduce the number of animals would be to drive the work overseas, which would not be good for the United Kingdom, for jobs or for animal welfare. We must be thoughtful about the numbers. We should consider the size of the industry and the work that is being carried out, and whether we are driving down the proportion of animals being used in that work. We need to think about the global position. It is a coalition Government objective to get more of the life sciences business—the bioscience industry—in the United Kingdom. As the hon. Member for Ashfield said, the Opposition support that, and if we attract such business here more quickly than we manage to deliver on the three R’s, the number of animals that are used will rise. However, we may be driving down the rate at which they are used, while the industry grows. That is a bit of a conundrum, and I do not have the answer, but it shows that care should be exercised in using statistics.

[Roger Williams]

The Minister makes a good point. I put a question to the Home Office about the number of animals used for experimentation in Wales, and was surprised that the figure had gone up; but after I visited Cardiff university, I understood that its success in attracting research funds, and its high status in life sciences and bioscience, was the reason for the rise.

[Mr Harper]

My hon. Friend makes a good point. I was really only cautioning about the need to examine data and be careful about how we apply it. It is also worth commenting on the way statistics are set out, which was put into primary legislation. The most significant number relates to the breeding of genetically modified animals—largely mice. When the relevant table was designed, that was a small number at the end. Most of the animals that are bred—1.4 million mice—are used in other areas of research: they might well be used in medicine studies, or in fundamental biological research, but they are not categorised in that way. We need to be careful about categories and how we define uses. For example, my hon. Friend the Member for Crawley said that only 13% of procedures relate to applied studies for human medicine or dentistry; but, of course, the remaining 87% includes fundamental research, which can involve any of the categories; and applied veterinary studies and the protection of man, animals and the environment also underpin much medical research. Again, therefore, it is worth being cautious about numbers and what we read into them.

Several hon. Members mentioned enforcement. It is no good having good legislation if we do not enforce it properly. The Home Office inspectorate picks up much of that work. The Home Office inspectors are skilled individuals. They are all registered medical or veterinary practitioners and usually have first-hand experience of biomedical research and possess higher scientific or clinical postgraduate qualifications. Their work underpins the 1986 Act. They provide advice to the Secretary of State on licence applications, and technical and operational advice on issues related to regulating animal experiments. They also visit the facilities where work is carried out, to check compliance with licences and certificates and to provide advice on applications and good practice.

The majority of visits are unannounced. The relationship between inspectors, licence holders and animal care staff is critical to our implementation of the regulatory framework. We want to be careful not to jeopardise that. The Government are committed to maintaining a strong, properly resourced inspectorate with a full programme of inspections.

There is no magic number of inspections. Under the revised Act, there is a risk assessment for determining the frequency of inspection. We look at the number and type of procedures that take place at an establishment; the severity of those procedures; the number and species of animals housed and used; any special conditions placed on the licences; the history of compliance of that institution; and any information that might come to light and indicate non-compliance with the terms of the licence. That means that inspectors focus their effort where they can be most effective.

The Government made two specific and important commitments on animal research and testing, as mentioned by my hon. Friend the Member for Crawley and Opposition Members. One was to work to reduce the use of animals in scientific research, and the other was to end the testing of household products on animals.

The commitment to work to reduce the use of animals is ambitious. There is no quick fix, as people have acknowledged. We want genuine reductions that improve animal welfare. We must be careful not to drive work abroad to countries where, it is generally accepted, standards are lower and there may be less stringent guidelines. The strategy should be science-led and that is why we have asked the National Centre for Replacement, Refinement and Reduction of Animals in Research to take a leading role in its delivery.

That might be a good point to pick up something the hon. Member for Bristol East said. She referred to the Dr Hadwen Trust chair in replacements. We welcome that. Home Office officials meet that trust regularly and we look forward to seeing the impact of its professorial post. That is a welcome step towards the science of replacement methods and will contribute to our commitment. The hon. Lady raised the specific question about the extent to which it could be rolled out elsewhere. We will take that away and think about how we might practically do that.

The Home Office takes this issue very seriously. Lord Taylor of Holbeach this morning visited a research laboratory to observe the work. He also has a close relationship with the Minister for Universities and Science, and they work closely together on examining trends in the industry, attracting life sciences to the UK and the implications for regulating this area. There is a fair bit of joined-up activity between the Home Office and the Department for Business, Innovation and Skills.

The hon. Lady also raised information sharing. I mentioned in connection with section 24 that that sometimes gets in the way of inspectors sharing best practice. We will think about that as we consider how we change that section. She also mentioned databases and alternatives to animal testing. Several databases already exist. A new role has been created of the named information officer, who, we hope, will be able to assist scientists in searching for alternatives. I have said this before, but I repeat that nobody really wishes to use animals when there are alternatives. We need to make it easier for those involved to seek those alternatives and use them where we can.

Several other issues were raised by my hon. Friend the Member for Crawley and supported by others. The number of procedures conducted for testing household products and their ingredients has fallen since 1997. There were no procedures under that heading in 2011. We have already announced our commitment to end testing household products on animals, to be implemented using licensing powers under the 1986 Act. We will put a condition on the relevant product licences. We have consulted on that to get a working definition of “household product”, as mentioned by the hon. Member for Bristol East. We are close to finalising a definition that we think will be workable—there is no point having one that is not. We will make an announcement on that in due course.

Several responses to the consultation favoured inclusion of ingredients in the ban, a point made by the hon. Lady. That is a bit more complicated than it might at first appear. Some substances used as ingredients in household products can have other uses. There are also ingredients, such as chemicals and biocides, that under other legislation have mandatory safety testing requirements that involve using animals. Therefore, it is quite a difficult area. We are in the process of thinking the matter through to come up with something that is workable and sensible, but does not have a chain of unforeseen consequences. It is complicated, and an obvious answer did not present itself during the consultation. I assure the hon. Lady that we are thinking and working on that, but rushing to do it and getting it wrong would not be helpful. I hope that she can take it on trust for the moment that the thought processes are under way. I have listened carefully to what she and my hon. Friend the Member for Crawley said and will feed that into our thinking.

My hon. Friend also talked about the mid-term review. He was slightly concerned by the use of the past tense. That was simply because it was a mid-term review, looking back over the first period of government. However, we are very much in the present tense in terms of continuing work. The national centre I talked about is actively pursuing a wide range of initiatives, including increased funding for three R’s work in universities. It supports innovation in the three R’s through its CRACK IT programme. It looks at new disciplines such as engineering and mathematics to reduce animal use. I think the hon. Member for Bristol East touched on that when she talked about the professorial post.

Other initiatives include working with regulators to reduce animal use, investment in education and training and support for stem cell and tissue engineering technologies. There is quite a lot of work going on led by experts in their field. That is what we want: a science-led approach to driving some of the change. That was touched on by my hon. Friend, and by the hon. Lady when she spoke about those involved in the business having alternative methods of delivering testing and safety assessments.

My hon. Friend also talked about the animals in science committee—the advisory committee that is in the process of being set up. There will be a working protocol agreed with the committee chair that sets up the size and qualifications of the committee. That working protocol will be published and will set out the issues that will be automatically submitted to the committee for advice. It will also cover important issues such as the promotion of the three R’s.

My hon. Friend talked about the use of non-human primates and their importation. Many people have a particular concern about the use of non-human primates in scientific research. It is a small part of animal research compared with overall usage, but it is an important part. In the UK, we use small numbers of non-human primates for developing and testing vaccines against some of the world’s largest killers, such as malaria, HIV/AIDS and TB, and for the potential future treatment of degenerative diseases such as Parkinson’s and Alzheimer’s. The majority—about three quarters—of the primates used in 2011 were used for the safety testing of medicines.

Most such primates are sourced outside the UK, where animals of the right quality are readily available—I am afraid that that comes down to our not-brilliant climate. For those particular animals, rearing them in the UK is not viable, as they would have to be reared inside. It is much easier to rear them outside in overseas locations, which makes the process more productive. Banning their importation would harm essential work. However, what is important, as my hon. Friend said, is for those who import the animals to ensure that the suppliers they deal with have proper controls and processes in place so that, in the breeding part of the operation, the animals are well treated.

My hon. Friend also talked about the personal licence system, which identifies the individual, the place where the work will be carried out, the species authorised for use and the types of techniques. Granting a licence depends, as it did previously, on a demonstration that the person has done the appropriate training, both for the species they are using and the techniques they are carrying out. The application requires a declaration by the local named training and competence officer to confirm that that level of training has been carried out by the applicant, and that the list of species that may be authorised is similar to the previous descriptions provided by applicants. It is also similar to a list used for the statistical returns. It is personal to the individual, which is important—when we debated the transposition of the directive, the personal link was felt to be welcome and valuable—and so it is not transferable to someone else. Furthermore, not only training, but the practical work experience under supervision, is important. That is something that the Home Office inspectors can monitor on their visits—not only someone’s initial training, but the practical experience under supervision to ensure compliance with the terms of the personal licence.

The hon. Member for Bristol East asked a couple of questions to do with cosmetics. She rightly noted that the UK banned the testing of finished cosmetics and ingredients in 1997 and 1998, because the Government considered the justification for using animals to be inadequate given the benefits of the products and the alternative tests available. She also referred to the European cosmetics directive; the EU banned animal testing for finished cosmetics in 2004 and for ingredients in 2009. To meet the requirements of the directive, a partial marketing ban was also implemented in 2009. It banned the supply of cosmetics for which animal tests had been carried out anywhere in the world, but did not extend to the test for the three most complex human effects of testing. A full marketing ban, which includes such tests and to which the hon. Lady referred, is expected to come into effect on 11 March, regardless of the fact that validated replacement tests are not available.

The ban is not a complete sales ban on all animal-tested cosmetics. Some parts of the world, as discussed by my hon. Friend the Member for Torbay (Mr Sanders), insist on animal testing as a regulatory requirement, so products subject to such a regime are not banned from the EU. Nevertheless, animal testing to meet the requirements of EU cosmetics legislation will be prohibited once the marketing ban enters into force. That is a bit complicated, and I have probably made things less clear, rather than clearer. The impetus, however, will come from consumer pressure, which the hon. Lady talked about, and transparency. Moreover, as other countries develop, as their consumers become more sophisticated—as happened in this country—and as their legislative processes improve, they will come under pressure on such issues. It is helpful, working through the Foreign Office and elsewhere, for us to explain what we have done in the UK and the EU to set our standards, to show that we can deliver on testing when necessary, or simply to lead by example when it is not necessary. We can all participate in that.

The hon. Member for Bristol East mentioned enforcement of the marketing ban, which does indeed fall to local authority trading standards, on which the Department for Business, Innovation and Skills leads. I will talk to my colleagues in BIS to see where that issue has got to and how it is being rolled out to trading standards departments. It may be rather dreadful to hand the action over to my colleagues, but I will ask them to look into the subject and to write to the hon. Lady. I will put a copy of the reply in the Library. I suspect that she will then use that information to go and duff up her local trading standards organisation, to ensure that it is fully engaged in that important work.

I hope that I have set out the Government’s approach. My hon. Friend the Member for Crawley made a wide-ranging speech. I think I have addressed all his questions, as well as those asked by the hon. Member for Ashfield, who spoke for the Opposition. I am grateful for the shared work with the Opposition on the subject; when the hon. Member for Kingston upon Hull North and I debated the transposition of the directive, she was machine-gunning her questions at me, so it did not feel entirely as if we were on the same side, but I machine-gunned all the answers back. A lot of the work in this area, however, which we supported, was done when the Labour party was in government, and now we are taking things forward with support from the Opposition.

The United Kingdom has a good reputation for delivering expertise in science and research, which is recognised throughout the world, and for doing so while delivering high standards of animal welfare and minimising the use of animals in research. That sends out all the right messages. Working together, we can continue to move in the right direction, minimising the use of animals, using them only when absolutely necessary and, if we do use them, having the highest possible standards. I thank my hon. Friend the Member for Crawley for the debate, which has been an excellent opportunity.

15:45

Sitting suspended.

A120

Tuesday 5th February 2013 Westminster Hall

16:00

[Priti Patel (Witham) (Con)]

Good afternoon, Mr Sheridan. It is a pleasure to serve under your chairmanship, and I am grateful to Mr Speaker for granting me this important debate for the county of Essex.

I thank the Minister for his attention today. He is fully aware of the strategic importance and significance of the A120, in particular, as an economic and strategic link, not only throughout the county of Essex, but to Europe. It is part of the trans-European transport network route known as the UK-Ireland-Benelux road axis, and it connects with Stansted airport in the west—in the constituency of my right hon. Friend the Member for Saffron Walden (Sir Alan Haselhurst)—which is Britain’s second largest air freight port transporting cargo worth £8 billion a year, as well as with Harwich International port in the east, which has trade links with northern Europe and serves about 1 million passengers a year.

However, the A120 is not only about connecting locations. It is important and strategic, because it gives people and businesses opportunities to access national, European and global markets. The importance of the road to the economic well-being of the region and the county of Essex cannot be understated. The road is particularly important to my constituents and to businesses there. Essex is a dynamic county of entrepreneurs with a vibrant mix of traditional industries, such as manufacturing, rural farming and innovative light businesses. Of course, entrepreneurs are the wealth creators not only for the county of Essex, but for the country, and are creating private sector jobs and prosperity in our economy.

In my constituency, small and medium-sized businesses are highly significant. The proportion is more than 80%, and they are growing, despite the economic downturn that we have had. I have to say—the Minister has heard me say this before, as have many other Essex colleagues—that we are a great county to do business in. Our strategic geographical location, our proximity to London, and our access not only to ports, but to Stansted and Southend airports has a lot to do with it. Our 20th century transport infrastructure, however, is holding us and, particularly, businesses back. Nowhere is that more evident than with the A120 and particularly the 12-mile single carriageway stretch that runs north to my constituency, between Braintree and the A12 at the Marks Tey end of the A120. That also touches the southern edges of the constituencies of my hon. Friends the Members for Braintree (Mr Newmark) and for Harwich and North Essex (Mr Jenkin).

The road is one of the most heavily used in Essex by the business sector. Some 56% of businesses responding to an Essex chambers of commerce survey indicated that they use the road regularly. However, the single carriageway section, as I have alluded to, is not fit for purpose. It is extremely congested, causes severe delays, is highly dangerous, and is a barrier to economic growth. Those delays harm businesses and damage small and medium-sized firms, not only in my constituency, but in neighbouring constituencies. For them, an extra half-hour delay in traffic can mean the loss of a lucrative contract. It can damage their reputation, prevent them from expanding and adding more capacity, and it adds hundreds of thousand of pounds to their running costs each year.

The Minister has been generous with his time, meeting me and other representatives from my constituency to look into the pressures on the road, but I would like to highlight that figures as far back as 2005 show that an estimated 25,000 vehicles use that stretch of road every single day, when single carriageway roads are typically expected to carry approximately 23,000 vehicles. Annual daily traffic flow data from the Department for Transport in 2010 indicated that on parts of the A120, some 14% of traffic is accounted for by HGVs, compared with an average of only 6% across Essex. That demand inevitably puts strains on the road and its junctions, leading to delays and a backlog on to smaller roads, affecting nearby villages.

In 2008, a report by Atkins, commissioned by the East of England Development Agency, examined those problems and stated:

“The single carriageway section of the route, between Braintree and the A12, is congested and suffers traffic delays.”

It noted:

“The A120 is currently constrained by the capacity of the single carriageway section of A120”,

and there is clear evidence that most traffic on that particular section

“has no real choice of route”.

There are no alternative routes where traffic can go. The report also highlighted that unless plans were put in place to accommodate increased traffic flows in future, stress levels as measured by the congestion reference flow indicator could reach 150% on the western section of the single carriageway.

To address those problems, it was recommended that the A120 was classified as a route of strategic national importance to attract funding from other sources and a wider pool, and crucially that the single carriageway section be dualled in a scheme which, at that time, would have cost approximately £500 million. The advantages of dualling were clearly laid out. First, it would enable the road to increase capacity and accommodate an average 25% increase in traffic in both directions. Secondly, with less congestion, journey times would decrease by between six and 11 minutes, which is significant for this 12-mile stretch of road. Thirdly, an upgraded and dualled road would lead to economic benefits, estimated at the time to be around £725 million for users, and with wider economic benefits of £106 million. At today’s prices, it is estimated that the benefits would exceed £1.1 billion. The proposed scheme would have delivered good value for money and, naturally, it would have unlocked wider economic potential, helping to create thousands of new jobs in the process and improving access to the Haven Gateway.

However, as my hon. Friend the Minister and other colleagues know, the A120 was not considered to be a priority by the previous Labour Government, who went on to scrap the scheme. We are now living with that local legacy, and there is huge disappointment locally. The Minister will be aware that we are coming together collectively with the Essex chambers of commerce, Essex county council, Braintree district council, the Highways Agency, Colchester borough council, Tendring district council and the Haven Gateway partnership, in particular, to start lobbying and fighting to make it a strategic route, and to get it listed as a strategic route on the priority scheme.

I take this moment to pay tribute to all my colleagues, and my local authorities and neighbouring local authorities. Despite the disappointment of what happened in the past, we are now adamant about building an even stronger economic and business case for dualling the A120. The Essex chambers of commerce has recently set up the Essex business transport and infrastructure forum to support businesses and the business effort in co-ordinating the development of economic arguments. I invite the Minister to come to one of our future meetings to discuss this important issue, and to support new and much needed road infrastructure for our county.

I want to touch on the A120 and the road safety implications. As the Minister has heard before, there are significant road safety issues relating to the A120 and to the single carriageway being dualled. Local parish councils along that route—Marks Tey, Bradwell and Coggleshall—along with local residents, to whom I would like to pay tribute, have set up a significant campaign called “Save Lives Not Time”, and they have campaigned to see the road become much safer. We have had lots of problems on the road, as I have mentioned, but they have done tremendous work to see that lives are saved and that accidents are prevented.

The Road Safety Foundation has classified the A120 as one of the 10 most dangerous roads in the country and figures from the CrashMap website, set up by the Government, also show the number and seriousness of road traffic accidents. There has been not just a high number but more than 50 further serious accidents in the period from 2005 to 2011, and further fatalities have occurred on this stretch of road. Naturally, we want to see that stopped. The Highways Agency has been very helpful and recognised that. It has in place a maintenance programme to address some hot spots—in particular, around the Earls Colne road junction. However, unless this road is upgraded and the capacity issue addressed, there will be further serious and life-changing accidents, all of which I believe can be prevented.

I would like now to come on to how we can fund the A120. I have touched on the fact that the cost of a previous scheme was estimated at £500 million. I appreciate that in the current economic climate and given the appalling state of the public finances inherited from the previous Labour Government, the current Government are prevented from doing what we would all like to see—investing and committing hundreds of millions of pounds to the A120. However, I have already said—the Minister has heard me say this consistently—that this should be treated as a priority scheme. I believe that there is an opportunity for the Government to consider innovative funding models.

The Minister will be aware that in recent years the Marks Tey consortium, known as Gateway 120 Ltd, has developed proposals that could unlock a considerable amount of money, through section 106 agreements and the community infrastructure levy, to help to provide private sector funding to support upgrades. Braintree district council has already said that it has allocated £5 million of new homes bonuses to contribute towards joint investment in this major infrastructure project. In addition, there have been discussions on and the development of a revised proposal, which differs from the previous scheme considered by the Highways Agency and could be much more cost-effective.

I believe—I would like the Minister to look into this—that funding may also be available through the European Union. The A120 is part of the trans-European transport network and may qualify for TEN-T programme funding or funding from the structural and cohesion funds. I urge the Government to look into that. The Minister will not be surprised to hear that I believe that Europe has had far too much of our money. I think that this is an opportunity for us to bring back some of that money and invest it in infrastructure, not just within the region but in our country. I urge that more work be done to investigate that aspect of funding.

I believe that spending public funds on upgrading this road will yield significant economic benefits, along with greater tax revenue for the Government. At a time of economic austerity, we need barriers to trade and private sector growth and investment to be removed; with alternative private funding models, such as that to which I have alluded, we can help to unlock that process. If the Government can commit to upgrading the road, that will naturally help to unlock the economic potential not just of Essex but of the eastern region and also the south-east of this country and unleash the power of the country’s wealth creators. But at the same time, we must look at alternative funding sources as well. I look forward to hearing what the Minister has to say.

16:13

[Sir Alan Haselhurst (Saffron Walden) (Con)]

I am very grateful to my hon. Friend the Minister for being allowed to make a small contribution to the debate. If I may, I shall add a little historical perspective. The Saffron Walden constituency, from the point at which I became the Member in 1977 until 2010, included the northern part of the Braintree district, and across that section of the county there ran the A604, which was a principal road between Colchester and Cambridge. It was later downgraded to become the A1124 and the A1109. I had, as the Member, many representations at that time for village bypasses to overcome some of the problems—very similar to those that my hon. Friend the Member for Witham (Priti Patel) has mentioned on the stretch of road from Braintree to Marks Tey—and to avoid the heavy traffic that was thundering through, with accidents and great risk to pedestrians.

However, I was told then, by Essex county council and by the Department for Transport, that I did not understand what the strategy was. It was explained to me that the strategy to bring heavy traffic and, indeed, all traffic from the east coast ports to the midlands and the north was twofold. It was to build the Orwell bridge, so that traffic could have the choice of going up the A12 and then on to the A14, or come along the A120, which was to be upgraded to the M11 at Stansted. It is extraordinary that after 35 years, we had half of that done, from Stansted to Braintree, and the other half conspicuously, dramatically undone—one and a half routes between the east coast and the midlands and the north. That is truly ludicrous.

Of course, that strategic decision, explained to me in 1977-78, was before a decision had been taken to allow the development of Stansted airport, which of course has generated much more traffic, so it is even more extraordinary, with the institution by many of the freight companies of headquarters at Stansted and the traffic that that generates, that there still appears to be no recognition in the Department for Transport, over many, many years now, of the importance of completing the link that was originally intended when I first became involved on behalf of my constituents. Thirty-five years we have had to wait—how much longer? Surely the time for the gap to be plugged has come.

16:16

[The Parliamentary Under-Secretary of State for Transport (Stephen Hammond)]

I am pleased to see you in the Chair, Mr Sheridan, and I am delighted to be here. I congratulate my hon. Friend the Member for Witham (Priti Patel) on securing the debate. She knows that, were it not for the debate in the main Chamber, many more people would be here this afternoon. I have been particularly struck by what she and my right hon. Friend the Member for Saffron Walden (Sir Alan Haselhurst) said in lobbying to reverse the local legacy and to ensure that Essex is a great county in which to do business in the future, to quote her.

My hon. Friend has been a tireless campaigner on the need for future investment in this road, as has my right hon. Friend. I recognise her continuing determination to speak about the importance of this subject for her constituents, local businesses and the local economy. I am of course aware that she has asked a number of parliamentary questions about the improvements that she quite rightly believes are required to the A120 and to the A12. She secured an Adjournment debate last year on transport in Essex. As she will remember, I met her recently to discuss the proposals to improve the A120 and therefore I am pleased to be responding to this debate this afternoon.

The strategic road network is the Government’s largest single asset, currently valued at about £100 billion and comprising some 4,350 miles of motorway and trunk road. The Government recognise the importance of the transport infrastructure to supporting the economy, and local economies throughout the country, and therefore we have announced increased levels of Government funding to deliver improvements targeted at supporting economic growth.

My hon. Friends will remember the announcement in the 2010 spending review that we were investing an extra £1.4 billion in starting 14 major road schemes over the spending review period. My right hon. Friend the Chancellor of the Exchequer, as part of the 2011 autumn statement, identified several other schemes that would be brought forward for delivery. In the 2012 statement, the Chancellor announced additional capital investment in this Parliament that would enable four major schemes to be brought forward.

I therefore hope that my hon. Friends will recognise that the Government are keen to support the infrastructure of our country. Indeed, in the 2012 statement, there was the provision of a further £100 million of capital expenditure in this spending round to undertake further pinchpoint schemes. My hon. Friend the Member for Witham will be aware that that included a £0.28 million—£280,000—pinchpoint scheme to widen Galley’s Corner roundabout south-east of Braintree. It is obviously true, but I am sure that it disappointed her, that no other schemes that applied for pinchpoint funding on the A120—several did apply—could be delivered within the scope and the criteria of that fund. She and I have spoken about that.

My right hon. Friend the Member for Saffron Walden spoke a little about the history of the A120, as did my hon. Friend the Member for Witham. Obviously, sections of it are single-carriageway road, as she rightly said. The A120 east of the M11 is a trunk road and therefore part of the strategic road network. As she points out, it also forms part of the comprehensive trans-European road network.

My hon. Friends were right to point out that if one looks at the history of the road and the Department’s consultations, surveys and studies on proposed improvements to the A120, one sees that in 2001-02 a comprehensive study was undertaken to look at the problems facing the A12 corridor between London and Ipswich, which included the A120. The study recommended road improvements between Marks Tey and Braintree, and that dualling the A120 from the A12 to Harwich should be considered in the longer term.

As my hon. Friends said, the previous Administration’s review of regional priorities in the east of England provided advice that changed those priorities, and the regional assembly removed the proposals from their prioritised programme. In the previous Government’s response to the advice, they accepted the recommendations for prioritisation, and the Department for Transport instructed that the scheme should not proceed further. That is the history. It is worth setting out the context.

My hon. Friends will know that, given the previous decisions on the prioritisation of improvements, there was not a sufficiently developed business case for the proposal at the time of the Government’s 2010 comprehensive spending review. I have spoken about the schemes that the Chancellor prioritised. A developed business case was a key requirement in both 2010 and 2011. The Department therefore had no plans to develop future scheme improvements in this location. There have been subsequent developments, to which my hon. Friends referred.

In our January meeting, I explained that, in assessing schemes for the future, the Highways Agency is looking at a process that would involve local parties in considering future priorities on a more local level, rather than on a simply regional basis. For the record, it may be worth setting out exactly how we expect such route-based strategies to work.

In response to the recommendations in Alan Cook’s review of the Highways Agency, we agreed to develop and roll out a programme of route-based strategies to identify future transport investments for the strategic road network. The Highways Agency is developing three route-based strategies at initial locations, one of which is the A12 from its junction with the M25 to its junction with the A14 and the A120 between Colchester and Harwich.

The three initial strategies will be complete in March this year. We will take the lessons learned from the production to inform a wider programme of strategies to assess network prioritisation, starting in the next financial year, which as I explained is likely to include the remaining section of the A120 west of the A12. Route-based strategies will ensure that there is clear evidence to make informed decisions on what is necessary for the strategic network to support economic growth locally and keep the country moving.

As I said to my hon. Friend the Member for Witham when we met in January, a key element of the route-based strategy is the engagement and involvement of local groups, including, as we discussed, local enterprise partnerships. I very much welcome the work of the Haven Gateway group in bringing together the range of local interests. I also welcome its analysis of the potential transport benefits and, more importantly, the potential benefits for economic growth in the region, which will be useful in informing the route-based strategy for the rest of the A120. I have made it clear, and I hope she accepts my reassurances, that the Highways Agency will work closely with local groups, via the LEP and local authorities, when it undertakes the route-based strategy work for the rest of the A120.

As I have said in this and other debates, the Government recognise the importance of transport infrastructure to facilitating economic development and the role that it can play in bringing forward proposed new housing developments. In our January meeting, my hon. Friend highlighted the development proposals from Gateway 120 Ltd. My Department and the Highways Agency are more than happy to discuss with prospective developers the needs and costs of transport infrastructure improvements to the strategic road network in the area. As she will recognise, any development proposals will clearly need to fit in with the aspirations of the local plans, and, at the meeting, I took some reassurance from her that that was so. She also knows that I promised to facilitate a meeting between officials and Gateway 120 to that end. That meeting took place yesterday. I am happy to ensure that she gets a full debrief.

My hon. Friend is right that, potentially, there are new and innovative funding areas for the A120 for us to explore together, with my Department’s officials, and I will ensure that we do so. She will also be aware that the Department clearly needs to know more about the absolute details of the transport proposals that underline the Gateway 120 scheme before we can take a view on the future funding that could be committed. She and Gateway 120 have undertaken to ensure that such details are available.

My hon. Friend rightly mentioned safety. I understand the deep concern and recognise the continued campaign for improvements. I have been speaking to the Highways Agency. We recognise the concerns over safety. I have asked Highways Agency officials to investigate options to make the junction at Pellens Corner safer. It is shortly due to complete a road safety audit for that location, which will provide detailed evidence of incidents and accidents and allow a detailed analysis of the situation. That will allow us to bring forward options to address the problem. I am more than happy to meet my hon. Friends to discuss their concerns about safety and the options that we are likely to bring forward.

Again, I thank my hon. Friend the Member for Witham and my right hon. Friend the Member for Saffron Walden for their contributions. I congratulate them on their tenacity in campaigning for the transport infrastructure needed in their local area to make Essex a great county in which to do business. The Government recognise the importance of the A120 as a strategic road and the benefits that the Highways Agency and Gateway 120 working together could bring to their constituencies.

16:28

Sitting suspended.

Universal Credit (Wales)

Tuesday 5th February 2013 Westminster Hall

16:30

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

It is a pleasure to serve under your chairmanship, Mr Sheridan. It is delightful to see that so many colleagues from across Wales have joined me here, and some of them will undoubtedly wish to intervene during my speech.

We have been repeatedly told by Ministers that universal credit would ensure that work pays, improve incentives to work, simplify the benefits system and be easy to introduce. I am afraid to say that the widespread consensus is now that it might be fine in theory, but that it will seriously backfire in practice, with serious consequences for some of my most vulnerable constituents and those of my hon. Friends throughout Wales. I applied for this debate to draw attention to my sincere worries about the potential impacts on people across Wales of what one colleague has described as a car crash waiting to happen.

[Mrs Madeleine Moon (Bridgend) (Lab)]

Is not part of the problem the whole climate of uncertainty and insecurity in which benefit claimants are living? In particular, the bedroom tax means that carers cannot have a bedroom available for night sitters, people on home dialysis cannot have a room for that purpose and, more worryingly, parents without custody of their children during the week cannot keep a room so that they can have custody of them at weekends. Should the Government not have sorted that out before introducing yet more changes?

[Jim Sheridan (in the Chair)]

Order. In anticipation of the number of interventions that may be coming, it would be acceptable if they were brief.

[Stephen Doughty]

I agree with my hon. Friend the Member for Bridgend (Mrs Moon). I will come to the issue of uncertainty, but that point has certainly been reflected to me by many constituents and organisations that work with those affected by the changes. I have spent much time speaking to constituents. One of the benefits of standing in a by-election is spending an awful lot of time speaking to people, and the issue regularly came up on the doorstep. I have spoken to housing associations and other registered social landlords, to local authorities—specifically Cardiff council—and to other experts. Although there are a variety of views about whether the simplification of welfare payments is desirable, there are clearly consistent fears and forecasts of dire consequences that Ministers and the Department for Work and Pensions have not adequately answered or addressed. Perhaps the Minister will do so today.

[Hywel Williams (Arfon) (PC)]

To be brief, it seems to me that the Government have simply not considered the inflexibility in the housing market, or if they have considered that, they do not seem to care. Is that the hon. Gentleman’s view, too?

[Stephen Doughty]

Indeed. I agree with the hon. Gentleman’s comments.

Coming on top of two of what my right hon. Friend the Member for South Shields (David Miliband) has called “rancid” measures—the bedroom tax, and the tax on people in work in the Welfare Benefits Up-rating Bill that we saw a few weeks ago—I am deeply fearful about the impact of the changes on many of our most vulnerable constituents, not to mention the organisations that support them.

Let us look at some of the headline figures. On Monday 10 December 2012, the Government published their new impact assessment for universal credit, which showed several very worrying facts. First, 800,000 more people across the UK face lower entitlements. The original assessment, which was published in 2011, said that 2 million people would face lower entitlements under universal credit, but that number has now risen to 2.8 million, with an average loss of entitlement of £137 a month. I will come to the specific statistics for Wales in a moment. Of those losers, 400,000 will be concentrated in the two lowest income groups.

We expect 600,000 more parents to lose out under universal credit. Households will also lose more: the original impact assessment said that only 200,000 families would lose more than £75 a month, but the latest one states that 1.3 million households will lose more than £100 a month and that an incredible 300,000 families will lose more than £300 a month, which amounts to £3,600 a year. The impact assessment points out that higher administrative costs will result from the changes. The Department has also dropped its claim that universal credit will tackle poverty, which has been removed from the 2012 impact assessment.

There have been delays, and we might hear the reasons for some of them when the Minister speaks later. The roll-out of universal credit is already a significant number of months late, and the DWP has been unable to confirm the timetable. Indeed, there is a great lack of clarity on the part of my local authority and others about how universal credit will be rolled out and when.

[Jessica Morden (Newport East) (Lab)]

Does my hon. Friend agree that the Government have still not given any real answers about how those without bank accounts or internet access will be helped to adapt to the new monthly payments? Such answers are long overdue.

[Stephen Doughty]

Absolutely, and I will come on to that point in due course.

It is not only those whom I have spoken to who have sincere worries about universal credit. As we have several times seen in the press, one Cabinet Minister has reportedly said in private:

“The information technology for the new system is nowhere near ready. It’s a disaster waiting to happen.”

Who knows whether such rumours are to be believed, but I understand that a number of Cabinet Ministers share that view, which is perhaps one reason for the delays.

What is the specific impact on Wales? Based on an analysis of the December impact assessment and some rough calculations, we estimate that a staggering 140,000 people across Wales might lose £1,600 a year. That is based on an estimate of the Welsh population that will be affected. I would be grateful if the Minister shared the Government’s figures and estimates about how many will be affected in Wales and how much they will lose. Will he provide a breakdown by local authority to help local authorities prepare for the impact of the changes?

Aside from the raw figures, which are shocking in themselves, I want to share the key fears that people have raised with me about the implementation of universal credit in Wales. First, there is the challenge of budgeting for many families; secondly, as my hon. Friend the Member for Newport East (Jessica Morden) mentioned, there is the digital divide; thirdly, there are power relationships within the home; and, finally, there are the risks posed to local authorities, housing associations and other registered social landlords.

First, on budgeting, the Secretary of State for Work and Pensions frequently appears to suggest that those of us who raise the issue are patronising our constituents. Rather than taking so entirely complacent an approach, I commend the work that organisations such as the citizens advice bureaux, the Cardiff and Vale credit union, housing associations—for example, Cadwyn in my constituency—are doing to support tenants by helping them to set up bank accounts, jam jar accounts and similar facilities in credit unions. I also commend the Welsh Government’s work to support those efforts.

Levels of financial literacy––let alone access to a bank account––are not, unlike this measure, universal, and we need to be realistic about the impact of the changes on many people. Rather than making huge assumptions, perhaps the Minister would tell us what risks he sees in relation to the problems in the area and what his Department is doing to assist. I can certainly tell him that many of the organisations that I have mentioned, let alone individual constituents, have experienced varying or little support from his Department, and that relates only to those who are aware of such support.

I want to touch on direct payments and the data from the direct payment pilots that the Department has conducted. A couple of days ago, “Inside Housing” published an article entitled, “Direct payment pilots report increased arrears”, by the journalist Carl Brown, which states:

“Landlords testing direct payment of benefit failed to collect 8 per cent of rent on average in the first four months of the six pilot projects.”

[Nia Griffith (Llanelli) (Lab)]

Will my hon. Friend also ask the Minister what assessment has been made of the effect on local councils of all those arrears, because they will have major cash-flow problems?

[Stephen Doughty]

Indeed, I absolutely agree with my hon. Friend’s point, which I will move on to later.

Mr Brown also stated:

“Data released today by the Department for Work and Pensions showed 6,220 tenants across the UK were paid directly in the first four months of the projects. Of these, 92 per cent of rent was collected on average overall, meaning arrears were around double the normal figure. A total of 316 tenants have been switched back to payment of benefit to the landlord.”

To give a figure that is specific to Wales, in relation to Bron Afon Community Housing and Charter Housing in Torfaen, 535 tenants were involved in the first payments and there have been 59 switchbacks so far, which is about 11%. Those figures are obviously of deep concern and they raise wider issues: there are deep worries about how universal credit will work in practice and about the support provided to people, and there are also major implications for organisations, whether they are local authorities or housing associations, that are supporting those tenants.

Secondly, on the digital divide, my colleague the Welsh Minister for Finance, Jane Hutt, has repeatedly warned that people with few or no IT skills might have difficulty applying for universal credit. In 2010, figures suggested that about a third of adults in Wales did not use the internet regularly, and recent figures from the Office for National Statistics suggest that about 20% have never used it.

[Wayne David (Caerphilly) (Lab)]

Speaking as the former deputy Minister for digital inclusion, may I say that my hon. Friend makes a strong point? In my borough of Caerphilly, some 37% of the population are excluded digitally. The borough is making provisions to ensure that those people have access to computers, but many local authorities have had, for example, cuts in library services and excluded people will have no access to computers whatsoever.

[Stephen Doughty]

My hon. Friend also makes a strong point. What assessment has the Minister made of the problem? I quote to him evidence submitted by Community Housing Cymru to the Work and Pensions Committee last year, which said:

“The presumption of a predominantly online self-service process is concerning since it is our experience is that a large percentage of people lack not only the knowledge and accessibility to make on-line claims but also the confidence…We know that a large percentage of social housing tenants do not have access to the internet at home, for example, in 2010 Tai Calon, a housing association based in Blaenau Gwent found that 42% of their tenants have access to the internet.”

That is shockingly low. The evidence continues:

“Blaenau Gwent remains the most digitally excluded area in Wales”

which I know from conversations with my hon. Friend the Member for Blaenau Gwent (Nick Smith). Finally, the evidence states that there is

“a lack of clarity in Wales as to where independent advice can be sought on Universal Credit. Citizens Advice Bureaux are already inundated and welfare benefit enquiries have now overtaken debt enquiries in number.”

The concerns are serious.

Thirdly, in the spirit of openness, I announced on Twitter that I would be holding this debate and asked constituents to come forward with concerns. One such concern, which was shared by many others, is that there will be particular risks for women as relationships in the home may be affected by changes to payments and to who will have control of the money, especially given that child benefit was always paid to the mother in the past and provided some security. Will the Minister reassure my constituents and others who have raised such concerns?

Finally, I turn to the real concerns of organisations working with vulnerable clients, particularly those in the housing sector in Wales. Last week, I met representatives of Cadwyn, a housing association with significant numbers of homes and tenants in the Grangetown and Butetown areas of my constituency, and they are deeply worried about what they see as a perfect storm with the coming together of the bedroom tax, the benefit cap—by which only London is affected more than Cardiff—and universal credit. They showed me some extremely worrying figures about rent payment, the risk of arrears, high-risk customers and the challenges that the proposal will create for them and other registered social landlords across Wales. What forecasts has the Department for Work and Pensions made of the financial challenges that registered social landlords may face as a result of increasing rent arrears?

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

The hon. Gentleman has made some strong and valid points. I know that what I am about to refer to took place before his time in this place, but does he agree that it was a serious political miscalculation of the Labour party to abstain on Second Reading of the Welfare Reform Act 2012 that led to the changes being implemented?

[Stephen Doughty]

As the hon. Gentleman says, it was before my time in this place, so I will refrain from commenting and make some progress.

I am happy to report that Cadwyn is taking proactive measures to help its tenants adapt to the swathe of changes, including help with jam jar accounts, visits in person to vulnerable tenants and organising property swapping mechanisms on Facebook. Those are the types of methods to which it is resorting. There is, however, a limit to what it can do to mitigate the impact of all the changes coming together, particularly with the hard core of tenants who will prove difficult to access, reach and support and who will find it difficult fundamentally to adapt to universal credit and other changes. On the bedroom tax, there are simply not the properties to move into.

If that is not enough, let us take the perspective of Cardiff, the largest local authority in Wales. I know that its concerns are shared by many neighbouring local authorities, including Vale of Glamorgan, which is also in my constituency. Last week, I spoke to officials at Cardiff council last week who said:

“With regard to Universal Credit, this is expected to start in Cardiff from February 2014 but there is still considerable uncertainty about when this will be fully implemented. This will affect 140 jobs in Cardiff.”

They face concerns such as a

“lack of clarity about how face to face services will be delivered. Cardiff currently sees 1000 customers a week about housing benefit face to face. The insistence on digital by default fails to recognise how many low income households cannot afford broadband and how much help is needed by vulnerable tenants to claim benefits. Payment direct to tenants in social housing…is likely to result in arrears, evictions and homelessness. Indications from the pilots are that tenants are falling into arrears.”

I have already mentioned that evidence. The concerns continue:

“There is still no clarity about the circumstances in which payments will be made to the landlord.”

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

Like me, my hon. Friend is a supporter of the Co-op’s campaign against legal loan sharks. Does he agree that, in the case of his and my constituencies, legal loan sharks are positively rubbing their hands and waiting for residents to come to them?

[Stephen Doughty]

I absolutely agree with my hon. Friend. I have seen an explosion in legal loan-shark activity on our streets, whether that be people knocking on doors or opening up offices on the high street. I commend the work of organisations such as the Cardiff and Vale credit union that are trying to provide alternative options.

Cardiff council was also concerned about the following:

“Budgeting issues are also a concern as Universal Credit will be paid monthly in arrears. This is one of the major concerns expressed by customers visiting our roadshows.”

It has been taking proactive steps. It was also concerned that:

“Low income families who depend on this money will have no resource at all if there are any problems with receipt of the payment.”

I do not want to guess the future, but a serious concern is that the record of all Governments in implementing large-scale IT projects leaves much to be desired.

Lynda Thorne, the cabinet member for housing at Cardiff council, wrote to me just yesterday and said:

“I am concerned that the end result of many of these changes will be an increase in homelessness and the transfer of extra financial burdens falling on local council tax payers in terms of picking up the cost of a reduction in the collection rate of council tax, the extra cost of providing help and support to those who need support completing claims and a rise in homelessness created from direct payments.”

She makes the point that Cardiff has

“more private Landlords providing accommodation to those on benefits than all the RSLs, housing Associations, put together. Private Landlords have indicated that they are likely to revert back to only letting to those in work resulting in even more families and individuals becoming homeless thus costing council tax payers more. We currently have more than 500 families and individuals in temporary accommodation at any one time.”

What are the Minister’s reflections on those legitimate concerns raised by a major housing association in my constituency and the largest local authority in Wales?

[Kevin Brennan (Cardiff West) (Lab)]

My hon. Friend is being generous. Would it not be ironic were the Government to bring about a situation in which, as he describes, private landlords cannot rent out their accommodation to those most in need, because it cannot be guaranteed that they will receive their rent? Is that not the sign of a policy that is ideological and not based on evidence and common sense?

[Stephen Doughty]

rose—

[Jim Sheridan (in the Chair)]

Order. I recognise that the hon. Gentleman is new to the Chamber, but we would like to leave some time for the Minister to respond.

[Stephen Doughty]

Thank you, Mr Sheridan. I will give the Minister some time to respond very shortly.

If the examples I gave before the intervention are not good enough, the Minister can look at the example of National Energy Action in Wales, which works extensively on fuel poverty. It recently stated:

“Sweeping changes to welfare reform including Universal Credit…will be hitting Welsh households hard in the coming months and will have major implications for the Welsh Government's plans to tackle poverty, including fuel poverty, in Wales.”

My friend, Huw Lewis, the Housing Minister in Wales, has said:

“We can't make any distinction here. I think it would be foolish if people were under the impression that it's just going to be something that affects people in social housing.”

There are huge concerns, which are shared by not only me or the people who have raised them with me on the street or in correspondence to my constituency office, but also the largest local authority in Wales, a number of housing associations, the bodies representing such people and a wide range of other experts. Wales will be hit disproportionately by the measures and by what could be an extremely chaotic set of reforms. I am seeing, frankly, poor evidence of support and engagement from DWP Ministers and others, and I fear that many unintended consequences will affect some of the most vulnerable people across Wales.

16:48

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

I congratulate the hon. Member for Cardiff South and Penarth (Stephen Doughty) on securing the debate. He raised some important issues, but I counsel some caution. It is easy to create uncertainty among constituents by mentioning such stories in a way that is not balanced and does not reflect the support that will be in place. He actually identified the answer to his problems in one of the quotes he gave from a housing association about the additional work that it will do to help to support its tenants, such as jam jar bank accounts and additional support for budgeting, both of which we intend to deliver. The support around the introduction of universal credit will not only make the transition easier but improve families’ quality of life and financial stability. He should not overlook the beneficial impact that the proposal will have in improving financial capability.

[Hywel Williams]

Will the Minister give way?

[Mr Hoban]

I have 12 minutes and many questions to answer in that time, and I want to correct some of the misapprehensions and misunderstandings that have been raised in the debate.

Universal credit is a cornerstone of the Government’s welfare reform programme, and it will simplify the benefit system and tackle welfare dependency by making work pay. Our aim is to offer seamless support for people making the transition into work. No longer will people find themselves in the absurd position where their benefit is disrupted the moment that they start work. Our reforms will ensure that people are better off in work than they are on benefits.

In Wales, we estimate that once universal credit is fully up and running some 200,000 households will be eligible for higher payments under it, typically seeing an increase of almost £160 per month, and we also estimate that the proportion of people in Wales who would stand to lose more than 70% of their increased earnings by moving into work for 10 hours a week will reduce under universal credit from 32%—as it is under the system we have inherited from the previous Government —to 3%. That is why delivering this reform is important for the people of Wales. It will make people better off in work, it will make work pay and it will reduce the risks involved in taking up work or doing more work.

Let me deal with some of the specific concerns that have been expressed. The hon. Member for Cardiff South and Penarth raised the issue about benefits being paid in arrears on a monthly basis. It is important that the new system is designed around the patterns of modern working life. Given that three quarters of the employed population are already paid on a monthly basis, receiving payments monthly will be something that people are familiar with when we move to universal credit.

Of course we recognise that some people may struggle to budget, and we are making provision to ensure that they do not fall through the cracks. We are working with banks and credit unions, such as the ones the hon. Gentleman quoted, to explore suitable financial products that may help people to budget and to put money by each month to fulfil their responsibilities to pay their rent and other household bills. Around 4.2 million Department for Work and Pensions claimants already have a bank account. We know that historically some people on a low income have experienced difficulties in accessing and using banking products. We want to ensure that claimants have access to a basic bank account with safe and secure standing order and direct debit facilities.

Let me move on to the point that was made about online services. As the hon. Gentleman indicated, the service will be online. We want people to be able to make a claim and to report changes, as they would with online banking. If people are going to participate effectively in today’s modern labour market, they will have to be conversant with digital tools. In the words of Lord Freud, digitisation is a “social imperative”. Of course we can and must do more to ensure that people can access services online. We do not want the digital divide in his constituency and others to persist. We must tackle it and this process is a very good way of tackling it. I am surprised that Opposition Members are so resistant to the actions that we can take to help tackle that digital divide and improve social inclusion.

We are already looking at some of the local authority pilots that have been carried out. Two of them are in Wales, with one in Caerphilly and one in Newport. The pilots are helping us to understand what support we need to give to help people to move into universal credit. We will use the pilots to learn the lessons, and we will apply them as we develop future stages of delivering universal credit, because we have ambitious targets for digital take-up of our services.

[Stephen Doughty]

Will the Minister give way?

[Mr Hoban]

No, I will not give way. The hon. Gentleman had more than his fair share of time, so let me try to deal with more of the questions that he put.

The hon. Gentleman talked about this project being behind schedule. I have no idea where he got that idea from. The programme is not behind schedule; it is actually on time. I counsel him, and he will learn this more as he is in this House, never to believe what he reads in the paper. The programme is on time and on schedule. The first stage will start at the end of April in the pathfinder area in Greater Manchester and the north-west, and the programme will continue to roll out nationally.

The hon. Gentleman rightly made a point about the failure of previous Governments to deliver big IT projects on time. We saw that under the previous Government. I think that all of us in this House who have had to work with the complexity of tax credits on behalf of our constituents will recognise the failure of that system and the problems that it created for our constituents.

The way that we are working through the implementation of this programme is through our pathfinder approach, which enables us to proceed with implementation in phases. It is an approach that we have used in other large programmes. For example, in the new child maintenance scheme we have used the pathfinder process. In implementing the personal independence payment, which replaces the disability living allowance, we will begin with a few thousand new claims in April, before rolling it out. So the staged and methodical approach that we take to rolling out programmes—“prove before you move”—means that we will fully implement a change once we are satisfied from experience in a live environment that it is safe to do so.

That is why we are rolling out the pathfinder in April in Greater Manchester and Cheshire, to allow us time to test during this period and with a view to successful implementation nationally later this year. This thoughtful and considered approach to rolling out is important. It will ensure that we test the operation to run universal credit; the people capabilities required to support the service; communications; implementation; the behaviour of claimants; and how to ensure that we respond effectively to unintended consequences.

Let me touch on direct payments. I understand the concerns about the payment of housing costs directly to claimants, but we remain of the view that paying housing costs directly is an important way of helping people to manage their own finances and to become more independent. The emerging evidence from the demonstration projects, including the one in Torfaen, does not suggest that large numbers of claimants will suddenly fall into arrears. On the contrary, because the take-on of claims is going to be gradual—over a period of years—there will be no big bang effect, and there is no real evidence of any likely sudden impact on landlords’ incomes.

There will be lessons to learn from those projects, and we will continue to monitor the position very carefully. They will enable us to test trigger points at different levels of arrears, so that if a tenant does fall behind with their rent, action can be taken, including—if necessary—switching back payment to the landlord for a period and offering additional support to the tenant.

We should treat people receiving universal credit as adults. We should encourage them to stand on their own two feet and to manage their money as others manage their money, particularly as they will have to do so as they move into a situation where they increase their earnings. Nevertheless, the support mechanisms that are in place are very important. They give landlords a real incentive to work with their tenants around employment issues to help them into work, and encourage landlords to work more closely with their tenants to understand their financial capabilities and what support might be needed. We should not infantilise universal credit recipients in the way that Opposition Members seem to be suggesting.

There has also been discussion about local support services. We are working in partnership with local authority associations, including the Welsh Local Government Association, on a local support services framework. That will ensure that effective local partnerships are put in place to help claimants with getting online and to learn how to manage their household budgets. As I said earlier, we will learn a great deal from the pathfinder phase of universal credit.

To ensure that we have taken into account the concerns of authorities in Wales, Wales is also represented in the development of the universal credit across a number of forums, pilots and projects, including a senior stakeholder group, a local authority transitional working group, a local authority finance and commercial group, a local support services taskforce, a direct payment demonstration project and local authority-led pilots.

Let me say just a little more about the pilots. We are currently running 12 local authority-led pilots and we aim to conclude those by the end of September. The aim of the pilots is to test and inform the development of a face-to-face delivery model. The pilots will provide important practical lessons on delivering services in an innovative way at the local level, including triage, which is working with claimants to identify their needs, how those needs can be met and where support can be accessed locally; improving online access, so that we can get more claimants using online resources and, where they cannot use them, providing assisted support to get online locally at libraries, community centres and other community buildings where personal computers may be accessible; budgeting support, so that people can manage their finances independently; and, of course, all underpinned with a work focus, to help claimants to find work and stay in work through a range of training and support networks. We have been working very closely with local authorities on a framework for delivering local support to those who need it, and we will announce further details of this very shortly.

We recognise the valid point that the hon. Gentleman made about ensuring that support is available at a local level. It is in none of our interests for claimants of universal credit to be left high and dry. That is why we are working to ensure that the support is in place, whether it is about getting online, debt advice, managing money, or setting up the right bank account or jam jar account to enable people to manage their money. We want to provide the infrastructure around universal credit to help claimants.

By doing it that way, and focusing on how we tackle those problems rather than simply throwing our hands up in horror and saying that it is all doomed to fail, we will provide the right outcomes for the hon. Gentleman’s constituents and for mine. That is because it is absolutely right that we do all we can to ensure that people know that work pays, that people in Wales will be better off as a consequence of the introduction of universal credit and that people do not see the disruption that happens at the moment when they move from out-of-work benefits to in-work benefits. The system is here to ensure that people understand that it is better to work than not to work, and better to earn more than to earn less. There will not be the situation that many people are in now, of having to turn down bonuses from their employers because it does not work with the benefit system. We need to tackle some of the problems of the past, to give our people hope for the future.

17:00

Sitting adjourned without Question put (Standing Order No. 10(13)).