House of Commons

Thursday 24th October 2013 Commons Chamber

Thursday 24 October 2013

The House met at half-past Nine o’clock

Prayers

Thursday 24th October 2013 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Thursday 24th October 2013 Commons Chamber

The Secretary of State was asked—

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

1. What steps he is taking to support small businesses.

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

3. What steps he is taking to support small businesses. [R]

[Dr Julian Huppert (Cambridge) (LD)]

4. What steps he is taking to support small businesses.

[Mark Pawsey (Rugby) (Con)]

14. What steps he is taking to support small businesses.

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

We are doing more than ever to support small business. More than 7,000 start-up loans have been drawn down since the scheme’s launch in September 2012. Over the past year, UK Trade & Investment has helped 31,800 businesses to export, the growth accelerator scheme has supported more than 9,000 small businesses, and the regional growth fund has helped a further 3,000.

[Rehman Chishti]

I am grateful to the Secretary of State for that answer. Will he clarify how many businesses have been backed by the Government’s start-up loan scheme, and are there any plans to extend it further?

[Vince Cable]

We estimate that something of the order of 7,000 start-up loans have been drawn down since the scheme’s launch in September 2012, a significant number of them in the hon. Gentleman’s constituency. To sustain it, we have made available an extra £34 million from September, to bring the total to £151 million.

[Nigel Adams]

Business creation is on the up and unemployment is down by almost 30% in Selby and Ainsty since the election. However, many small companies are struggling with crippling business rates. In some cases, rates are almost the cost of the rent they are paying. What can the Government do to encourage local councils to engage with small businesses to assist them with their rate costs?

[Vince Cable]

The hon. Gentleman is right that the trend is a positive one. Half a million small businesses currently get rate relief and a third of a million pay no rates at all. Under recent changes whereby local councils give discounts, as they are now encouraged to do, half of that will come from the Government.

[Dr Huppert]

Arthouse cinemas such as the Cambridge Arts Picturehouse are much smaller and completely different from massive chain multiplexes. Despite this, the Competition Commission wants to force the sale of the excellent Cambridge Arts Picturehouse. The Leader of the House said in response to a question I asked that

“there is no cause for the Competition Commission to seek to intervene”.—[Official Report, 10 October 2013; Vol. 568, c. 314.]

Will my right hon. Friend the Business Secretary talk to the Competition Commission and encourage it to work on real local monopolies and not this issue?

[Vince Cable]

As an avid cinema-goer and, indeed, someone who used to go to that cinema, I have some sympathy with my hon. Friend, but the process is this: the Competition Commission has come to a resolution and the next step has to be to go to the Competition Appeal Tribunal. I suggest to my hon. Friend that, since the Cambridge law faculty has some of the best minds in the country, including that of his predecessor, it may want to take on this issue on a pro bono basis.

[Mark Pawsey]

Having run a small business, I understand exactly the burden of regulation that small businesses have to deal with, and I know how pleased small businesses in Rugby are about the Prime Minister’s commitment to make this Government the first in history to cut the overall amount of regulation. Will the Secretary of State confirm that his Department will lead the efforts to cut burdens that hold back small businesses from growing and taking on more staff?

[Vince Cable]

We are totally committed to that task. Under the red tape challenge—the one in, two out system that my colleague the Minister of State, Department for Business, Innovation and Skills, the right hon. Member for Sevenoaks (Michael Fallon) is leading admirably—we estimate that we have probably already saved business about £1 billion a year, and there is a commitment to extend that process.

[Mr David Hanson (Delyn) (Lab)]

What discussions has the Secretary of State had with his Government colleagues about the impact of energy prices on small businesses? Does he support the Prime Minister’s call for a cut in green taxes? Does he support the call by my right hon. Friend the Member for Doncaster North (Edward Miliband) for a price freeze? Does he support Sir John Major’s call for a windfall tax? Or is he in favour of doing nothing at all?

[Vince Cable]

We have made it clear that doing nothing is not an option. We fully understand the implications of rising energy costs for business, particularly energy-intensive businesses. We have framed compensation arrangements and payments have already been made under the European Union emissions trading scheme, and state aid approval is now being sought for compensation for the carbon price floor for energy-intensive companies.

[David Simpson (Upper Bann) (DUP)]

What more can the Secretary of State do to encourage small businesses to apply for Government contracts?

[Vince Cable]

A great deal has been done at central Government level to ensure that we reach our target of 25% of Government contracts going to small and medium-sized enterprises. Considerable progress has been made in reducing the bureaucracy of pre-qualification questionnaires. The problem remains at the decentralised level—local government, hospitals and so on. Efforts will be made through legislation to simplify that process.

[Bill Esterson (Sefton Central) (Lab)]

The No. 1 issue for small businesses in my constituency is the high level of business rates. I urge the Secretary of State and his ministerial colleagues to support our proposal for a business rate cut, followed by a freeze.

[Vince Cable]

As I have said, there is an extensive programme of business rate relief, which extends to half a million companies. That is a very good programme, but there is an issue with how we will continue to pay for it, given the many other claims on Government spending.

[Paul Blomfield (Sheffield Central) (Lab)]

May I press the Secretary of State further on business rates? Does he not recognise that in his constituency, as in mine, businesses are raising the issue of the rising cost of business rates? Businesses in my constituency welcome the proposal to save them £450 by cutting and freezing business rates. Would that not be welcomed in his constituency?

[Vince Cable]

I am aware of this problem in the town centres of my constituency, and I am sure that it is a problem across the country. I repeat that there is an extensive programme of business rate relief. The Government have given local councils the freedom to offer discounts on business rates and we provide a 50:50 matching contribution.

[Toby Perkins (Chesterfield) (Lab)]

Labour is the party of small business—[Laughter.] Conservative Members may laugh, but their party believes that a business that has 300 members of staff is not that large. That shows how out of touch they are. Some 99% of businesses are smaller than that.

Under this Government, 1.5 million businesses have seen business rates rise by an average of £2,000. Our plan to shelve the Government’s 1% corporation tax cut in 2015 and direct all that money towards reducing business rates has won support among organisations from the Federation of Small Businesses to the British Retail Consortium. Does the Secretary of State not realise that many businesses are being crippled by business rates? Why does he not just follow our lead and end the business rate nightmare now?

[Vince Cable]

The hon. Gentleman seems to have forgotten the record of the last Government. I distinctly remember that in one of the last pieces of legislation that I dealt with in the previous Parliament, the Government started to impose business rates on empty property. That was a few months before the collapse in the commercial property market.

[Mr Philip Hollobone (Kettering) (Con)]

2. How many and what proportion of employees of Royal Mail opted out of the allocation of free shares.

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

Of the approximately 150,000 employees who were eligible for free employee shares, only 372 opted out of the scheme. Therefore, 99.75% of employees have accepted the shares that we offered them.

[Mr Hollobone]

Is not the number of posties who have opted out of the scheme remarkably low? Despite the threats of industrial action and union militancy, is it not clear that the vast majority of Royal Mail employees have accepted the invitation from Her Majesty’s Government to take part in the biggest employee share scheme of any major privatisation?

[Vince Cable]

Yes, it is a very positive story. The engagement of almost every employee of Royal Mail is extremely encouraging. I seem to remember that under the last Labour Government we lost in the order of 2 million working days through industrial action in every single year. This is a big change for the better.

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

May I remind the Secretary of State that before this privatisation every one of my constituents had a share in Royal Mail? It has been revealed that only a tiny number of people in most constituencies now have any shares at all and that the Prime Minister’s hedge fund friends own a lot of them.

[Vince Cable]

On the contrary, the share register is dominated by large long-term institutional investors, most of whom hold the savings of millions of our citizens.

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

This afternoon, I am due to meet for lunch that great Welsh export and one of the world’s best rugby players, George North. As the Secretary of State knows, George North was bought by Northampton from the mighty Scarlets at a very reasonable price during the summer. Does he think that the hedge funds feel the same as Northampton Saints, because they have acquired the Royal Mail crown jewels at a cut price?

[Vince Cable]

No; in fact, the offer was framed in such a way as to ensure that the shares were acquired predominantly by long-term institutional investors. A few hedge funds are involved and, indeed, some hedge funds take a long-term view.

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

Many small businesses and consumers across the country rely on local delivery offices such as the one in Feltham to pick up parcels and important letters. Will the Secretary of State confirm that there is nothing to prevent Royal Mail from selling off its local properties across the country and moving them to out-of-town locations that will be far more difficult to reach?

[Vince Cable]

I think I know the sorting office that the hon. Lady is talking about, because it is the one that serves my constituency. It was rebuilt and re-equipped three years ago, I believe, so it is wildly improbable that the Royal Mail will now want to sell it.

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

5. What steps he is taking to improve adults’ basic skills.

[The Minister for Skills and Enterprise (Matthew Hancock)]

It is our priority that all adults throughout England have the English and maths that they need to build successful careers and support their families. We have put English and maths at the heart of our schools reforms and fully fund basic English and maths courses for adults who lack those skills.

[Mr Buckland]

I am grateful to my hon. Friend. Will he join me in congratulating Swindon organisations such as Uplands Educational Trust and Enterprise Works that are providing training and support opportunities to adults with disabilities? What plans does he have to ensure that that provision can be enhanced and increased?

[Matthew Hancock]

I am delighted to hear about creative enterprises such as Enterprise Works and Uplands Educational Trust in Swindon. I know that for many people with disabilities, school or adult education is a rewarding experience that helps them gain life skills. My hon. Friend is a passionate and effective champion of that, and I look forward to talking to him in more detail about those enterprises and others to ensure that we support disabled people as much as possible.

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

I know that the Minister will be as concerned as I am that unemployment among young adults is still more than 1 million, and that the number of apprenticeships among adults under the age of 19 is now below the level in 2010. Can he assure the House that in the next set of figures the number of apprentices under the age of 19 will increase? While he is at it, will he explain why he voted against Labour’s plans to use the power of public procurement to increase precisely those vitally needed apprenticeships?

[Matthew Hancock]

Of course we do use public procurement to increase the number of apprenticeships, not least in Crossrail, which is the largest public procurement and construction project in Europe at the moment. It is true that we had to take action to remove some low-quality provision in the 16-to-19 space when we introduced rules to ensure that every apprenticeship was a job, which it had not previously been. I would have thought that the right hon. Gentleman would welcome the improvement in quality. We also have a programme in hand to increase the numbers. Participation in apprenticeships is at the highest level ever, which I would have thought all parties would be able to support.

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

Young adults in north Northumberland who have left school without the basic skills to which the Minister referred do not have ready access to further education, because there are no college facilities within a reasonable distance of them. Will he work with potential providers to ensure that the gap is filled?

[Matthew Hancock]

I have visited Northumberland college, which serves my right hon. Friend’s constituency, and it is an impressive institution. Of course, it is important to ensure that adult skills are available throughout our country, and as the recent OECD study showed, spreading English and maths skills is vital to ensuring not only that we can improve our competitiveness as a country but, most importantly, that we can allow everybody to participate. Improving technologies in teaching will help, but we must ensure that there is access to basic skills throughout the country.

[David Mowat (Warrington South) (Con)]

6. What projects will be eligible for funding from the Green Investment Bank.

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

The UK Green Investment Bank has a total of £3.8 billion of funding to finance green projects in sectors within its approved remit, and to date it has committed £714 million, including for waste recycling facilities, energy from waste plant, offshore wind farms and energy efficiency projects.

[David Mowat]

I thank the Secretary of State. It is impressive how quickly the bank has got up and running. However, the scope envisaged during the Committee stage of the Enterprise and Regulatory Reform Bill, and indeed in the Bill’s green purpose, included low-carbon industries such as the nuclear supply chain. I understand that that did not get EU state aid clearance. Are we going to appeal against that so that we can go back to the original mandate?

[Vince Cable]

The hon. Gentleman is right that European state aid restrictions mean that the sectors involved are narrowly defined, and I understand his concern for the nuclear industry supply chain. However, following the announcement of the new reactor this week, and the commitment by the companies involved to provide more than 50% of procurement to British companies, the nuclear supply chain has a really excellent future anyway.

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

The UK Green Investment Bank has indeed been a success so far and part of its success is in bringing in co-investors from the private sector for projects that it supports. Although I do not expect the Secretary of State to admit this, he will know that the Prime Minister’s announcement yesterday of a review of green taxes has already thrown up uncertainty about long-term investment in the green economy. Does the Secretary of State recognise that if the Government are prepared to give long-term price guarantees to new nuclear, they should also give long-term security to the whole green economy?

[Vince Cable]

I thank the hon. Gentleman for his positive comments. He is absolutely right: for every £1 the UK Green Investment Bank puts in, something in the order of £4 of private funding goes in parallel with it. I agree that if we are going to get long-term investment in renewable energy there has to be stability in policy.

[Robert Halfon (Harlow) (Con)]

7. What changes he is planning to make to the national minimum wage.

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

I am asking the Low Pay Commission to consider what conditions would be needed to allow the minimum wage to rise in the future by more than current conditions allow and without damaging employment.

[Robert Halfon]

As the Government are supporting hard-working people, does my right hon. Friend agree that we should help lower earners more by raising the minimum wage—by adding regional minimum wage top-ups, increasing the threshold for national insurance or taking people who get the minimum wage out of tax altogether?

[Vince Cable]

I commend the hon. Gentleman for the work he has done on low pay. Indeed, I think he is a member of the Prospect union and has campaigned for the work force in his constituency. I think that the best way forward is the one that we have chosen: lifting the personal allowance, which has so far taken 2.7 million people out of tax. As a consequence, almost 40% of adult minimum wage workers have seen real increases in their take-home pay since 2010.

[Steve Rotheram (Liverpool, Walton) (Lab)]

8. What steps he is taking to increase the number of students from Liverpool who go to university.

[The Minister for Universities and Science (Mr David Willetts)]

We have placed increased responsibilities on universities to widen access. Universities and colleges plan to spend more than £700 million a year by 2017 on broadening access, and our highly successful student finance tour is running again this year, providing students and parents with information about the student finance available.

[Steve Rotheram]

The Minister will be aware that we face a difficult task in attracting people from deprived areas in Liverpool to universities and that we also face a challenge in retaining students who have graduated from higher education institutions. What steps does he plan to take to make it more attractive for graduates to stay in the city of their learning?

[Mr Willetts]

We are seeing an increase in the percentage of people from deprived areas who are applying to university and last year saw a national record overall. The figures in the Liverpool local authority area also show continuing increases in the percentage of people from poorer backgrounds applying to go to university. Of course, one of the great attractions of having a leading university in the city is that many graduates then stay.

[Several hon. Members]

rose—

[Mr Speaker]

The question is purely on the subject of students from Liverpool, not elsewhere in the north-west. If the question is about Liverpool, it is in order. If it is not about Liverpool, it is out of order.

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

Will the Minister join me in welcoming the fact that 16% of students from Liverpool go on to the top Russell Group universities, making it one of the top 10 local authorities in the country?

[Mr Willetts]

I absolutely agree with my hon. Friend and congratulate him on his commitment, particularly to education as it affects Liverpool.

[Mr Speaker]

I call Mr Simon Hughes, from the distant territory of Southwark and Bermondsey.

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

When I visited Liverpool to do some work for the Government on access to education, I was clear that one thing that students there wanted was the opportunity for scholarships to help with living costs. Will the Minister update us on the roll-out of the scholarship programme for young people from deprived backgrounds in Liverpool and elsewhere?

[Mr Willetts]

We have been able to help people from deprived areas in Liverpool and across the country through the fact that the combination of the value of the maintenance grant and the maintenance loan is higher now for people from poorer backgrounds applying to university than it ever was before.

[Karl Turner (Kingston upon Hull East) (Lab)]

9. What assessment he has made of the effect on postal services of the privatisation of Royal Mail.

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson)]

The universal postal service is protected under the Postal Services Act 2011. The service is unaffected by the sale of Royal Mail and can be changed only with the agreement of Parliament.

[Karl Turner]

Does the Minister share my concern that following the fire sale of Royal Mail, private hedge fund shareholders will no longer be prepared to fund the not-for-profit universal service obligation?

[Jo Swinson]

The hon. Gentleman should be aware that that is not an option for Royal Mail, which remains the universal service obligation provider, and it is the duty of Ofcom as regulator to ensure that it complies with that obligation. If any future changes are to be made, it is up to Parliament to agree to it, and I do not see that happening. In fact, we go beyond minimum EU requirements in having a six-day-a-week universal service delivery.

[Ian Swales (Redcar) (LD)]

Does the Minister share my regret at some of the scare stories that were put round by campaigners against privatisation, and will she confirm that the Ministry of Defence pays for Royal Mail post overseas to forces, not Royal Mail?

[Jo Swinson]

My hon. Friend is quite right to say that it is unhelpful when scare stories are put out. For example, free services for the blind are included in the universal obligation and will continue. As he rightly says, free mail for the armed forces is funded separately by the Ministry of Defence, which will continue with that. There is no need for people to be scared by those kinds of stories, which were unfortunately put out by some critics of what is happening.

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

The Minister needs to talk to her colleague, the Minister for Skills and Enterprise, the hon. Member for West Suffolk (Matthew Hancock), as well as her hon. Friend the Member for Redcar (Ian Swales). When I raised with the Minister for Skills and Enterprise the issue of the USO being reduced from six to five days, he said at the time that that would need primary legislation on the Floor of the House. He later wrote to inform me that it would need only a statutory instrument to be passed upstairs for that to change. Would the Minister like to correct the record on behalf of her colleague?

[Jo Swinson]

The Postal Services Act 2011, which the House voted for, puts in place a universal service obligation of six days a week. It is therefore something over which Parliament has control. I do not know whether the hon. Gentleman is suggesting that were there to be a Labour Government again, they would in some way threaten that universal service, but I assure the House that the Government are certain that the universal service obligation should stay as it is.

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

What steps is the Minister taking to ensure that rural communities continue to be served well by the postal service, post privatisation?

[Jo Swinson]

The universal service is particularly valuable to rural areas, where it can be a lifeline. That is why it is important for it to be entrenched in the Postal Services Act 2011. For other postal services such as access to posting parcels and so on, the Government have promised to ensure that we maintain the network of more than 11,500 post offices. That is in stark contrast to the closure of thousands of post offices across the country by the previous Government, including in rural areas. We are ensuring that people across the country have good access to postal services.

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

10. What representations he has received from manufacturers on the case for continued UK membership of the EU with regard to their business and investment plans.

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

Ministers and the Department frequently receive representations from manufacturers, and others, in support of continued UK membership of the European Union and the single market. A recent example is the report by the Engineering Employers Federation, “Manufacturing: Our future in Europe”.

[Jonathan Reynolds]

Manufacturing is vital to my constituency, the country, and to increasing exports and getting our economy back on stronger ground. Does the Secretary of State agree that the constant doubts cast over our relationship with the EU by Members of his Government are harmful to our manufacturing industry, which wants certainty so that we can invest and grow for the future?

[Vince Cable]

I agree that there should not be any doubt about our continued membership, but evidence suggests that so far that has not done any harm. Britain remains very much the No. 1 country in Europe for inward investment, which last year rose by 22%, despite falling globally by 18%.

[Philip Davies (Shipley) (Con)]

Is it true that what businesses want in relation to the EU is free trade? Given that we have a £45 billion a year trade deficit with the EU, is it not perfectly obvious that whether we remain in or out, we will keep free trade? Does the Secretary of State seriously believe that BMW, Mercedes and such companies will say, “Well, it’s the principle that’s important. We don’t want to export to the UK anymore”?

[Vince Cable]

The car companies the hon. Gentleman has cited, and indeed others, particularly the Japanese, have made it clear that they expect Britain to remain in the single market, and they attach enormous importance to being able to frame its rules.

[Bridget Phillipson (Houghton and Sunderland South) (Lab)]

The Secretary of State knows the vital role Nissan plays in the north-east economy, but do not recent comments from Nissan on the importance of our ongoing membership of the EU, and the potential impact of any tariffs if we are not in the EU, underline the risk and uncertainty the Government’s policy is creating?

[Vince Cable]

Nissan has been very clear on the subject—on its behalf, the Japanese Government have made exactly the same point that they do not want the re-imposition of tariffs. However, there is no evidence so far that our policy is discouraging Nissan. Its investment in the UK continues at a high level. I continue to welcome that.

[Mr Peter Bone (Wellingborough) (Con)]

Is the House seriously going to believe that the Secretary of State believes that, if this country were not in the EU, we would not have a free trade agreement with it? Does he expect the House to believe him?

[Vince Cable]

I know the hon. Gentleman’s position, but that is the not the issue. The issue is certainty. There is a lot of risk in the business world. Reopening the matter creates massive uncertainty for employers and makes it even more difficult for them to invest.

[Mr Iain Wright (Hartlepool) (Lab)]

The Secretary of State has referred to the publication from EEF, the manufacturers organisation. The report states that 85% of EEF members said that membership of and staying in the EU is good for their businesses. My hon. Friend the Member for Houghton and Sunderland South (Bridget Phillipson) mentioned the comments of the chief operating officer of Nissan, who has said that the threat of import tariffs between the UK and the rest of Europe in the event of an exit could be an “obstacle” to further investment by the company in this country. Who has more influence over Britain’s manufacturing policy: Britain’s manufacturers or the United Kingdom Independence party?

[Vince Cable]

It is fair to say that our manufacturing companies have a great deal more influence and we agree with them. I would add one point: it is not just about manufacturing. A recent survey by CityUK suggested that 60% of banks in London are here because we are part of the single market.

[Emily Thornberry (Islington South and Finsbury) (Lab)]

11. What plans he has to publish the Government’s planned register of companies’ beneficial ownership.

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson)]

The UK has committed to implement a central registry of company beneficial ownership information, accessible to law enforcement and tax authorities. We recognise the potential benefits of making the information available publicly and have consulted on that. That consultation closed in September and we are now analysing the responses. We will issue a Government response in due course.

[Emily Thornberry]

The Prime Minister has expressed his personal support for a public register and is supported in that by four former Labour Home Secretaries, the British Bankers Association and anti-corruption non-governmental organisations, but, as my mum used to say, fine words butter no parsnips. Will he take the opportunity of the open government partnership summit, which I understand will happen later this month, to confirm that the Government will have an open and public register of beneficial ownership of companies?

[Jo Swinson]

The hon. Lady is right to mention that the Prime Minister has shown a great deal of leadership on that, not least at the G8 summit in June, where he also said that he has a huge amount of sympathy with the idea of making that information fully public. I am sure she will appreciate that we are analysing around 300 responses to the consultation. I am certain that more information will be forthcoming to the House and beyond as we set out what we plan to do to introduce a register of beneficial ownership, which we have committed to do within this Parliament.

[Duncan Hames (Chippenham) (LD)]

12. What initiatives local enterprise partnerships are taking to support small businesses.

[The Minister for Skills and Enterprise (Matthew Hancock)]

The Government believe that local businesses are best placed to make the case on their needs. Local enterprise partnerships have consulted with small businesses to develop their strategic economic plans, which will help to give them access to the local growth fund and support skills, housing and infrastructure.

[Duncan Hames]

I thank the Minister for that reply and, while I am at it, for his support for investment in the further education college estate. Does he agree that, whether through the regional growth fund, Europe, city deals or local enterprise partnerships and the single local growth fund, supporting initiatives that help small businesses to grow and provide more jobs is critical?

[Matthew Hancock]

The Government are a passionate supporter of small businesses. The fact that 4.9 million businesses exist—a record number—is partly a response to the improvement in the environment for small businesses, supported by LEPs and the skills system, which we have done so much to put in place.

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

Our LEP around the Humber is supporting and wants investment by Siemens in Hull. Further to the question from my hon. Friend the Member for Warrington South (David Mowat), will the Department do everything possible to talk to the EU about changing the rules that restrict the ability of the Green Investment Bank to invest in great projects such as that with Siemens, which are so important to our area?

[Matthew Hancock]

Yes, of course. I thoroughly enjoyed my visit to my hon. Friend’s constituency. Many people raised the issue of Siemens, which would invest not only in the UK, but, through the supply chain, in many small businesses. I will look in detail at what he says.

[George Freeman (Mid Norfolk) (Con)]

May I congratulate the Government on the great news that 102,000 new businesses were created last year, bringing the total to an all-time record of 4.9 million? Does the Minister agree that many first-time entrepreneurs and start-ups find that compliance with a whole raft of Government red tape, often designed in Europe and gold-plated in Whitehall, is a genuine barrier? Will he meet me and representatives of entrepreneurial start-up companies to see what we might do to ease the burden on start-ups in particular?

[Matthew Hancock]

I am always delighted to meet my hon. Friend, so I would love to do that. We are always looking at how to ease the burden further. We have reduced the burden on business enormously. The one in, two out rules are in place and are working, but there is always more to do.

[Mr David Heath (Somerton and Frome) (LD)]

Is the Minister aware of the huge disparity in the attitude of local enterprise partnerships to rural areas? Some are fully engaged and interested, but others appear to think that rural Britain is simply the inconvenient gaps between cities. Will he disabuse them of that notion?

[Matthew Hancock]

I certainly will. Local enterprise partnerships are led by local businesses and, in large part, respond extremely effectively to the needs of local businesses. In some areas of the country, they are almost wholly reflective of the rural economy—that is true of East Anglia, which is largely rural. I take on board the point that that does not always happen everywhere, and I will ensure that it does.

[Clive Efford (Eltham) (Lab)]

13. What assessment he has made of the value for money for the public purse of the recent sale of shares in Royal Mail.

[The Minister of State, Department for Business, Innovation and Skills (Michael Fallon)]

Our overarching objective is to put Royal Mail in a position to be able to deliver the universal service on a long-term and sustainable basis. When considering value for money, we will assess the sale proceeds together with the long-term value of the taxpayers’ retained stake in the business and the reduced risk to the taxpayer of a stable company with access to private sources of capital.

[Clive Efford]

The shares were sold at £3.30 each and this morning they are selling at £5.32. Does the Minister agree that the taxpayer got a raw deal in the share sale, and does he accept full responsibility?

[Michael Fallon]

It is not unusual to see some share price volatility in the immediate aftermath of a sale. Let us be clear: this sale was popular, oversubscribed and successful. When the Labour Government tried to sell Royal Mail, they failed.

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

Will the Minister tell us how much money was paid to Lazard for so comprehensively undervaluing Royal Mail?

[Michael Fallon]

The fees paid to the Government’s advisers will be disclosed in the normal way to the National Audit Office, which is of course looking at this sale as they looked at the Northern Rock sale, but they compare favourably to the fees paid to advisers by the Labour Government in the sale of QinetiQ 10 years ago, when 10 senior managers were allowed to walk away with £107 million and no shares were sold to the public.

[Ian Murray (Edinburgh South) (Lab)]

The Minister claimed that value for money for the taxpayer was central to the Government’s fire sale strategy for the national institution that is Royal Mail. Given that many investment banks valued the company at £1.7 billion more than the sale price, that the sale was oversubscribed 20 times over and that the share price has steadily risen to more than 60% of its initial value, why did the Minister reject raising the price range when he knew the offer was oversubscribed? Does the Minister agree with the Secretary of State that the loss of more than £750 million to the taxpayer is froth and ill-informed?

[Michael Fallon]

It is far too early to judge the long-term performance of the Royal Mail share price. With any initial public offering there will be volatility in the price and it is too early to make a judgment. As far as the banks are concerned, a whole number of banks were consulted on the value of Royal Mail. The value established was, I think, around the mid-point of the range of the advice we received.

[Peter Aldous (Waveney) (Con)]

15. What steps his Department is taking to promote regional growth.

[The Minister of State, Department for Business, Innovation and Skills (Michael Fallon)]

The Government believe that local businesses and civic leaders are best placed to understand what drives growth in their area. Resources available to local enterprise partnerships have been increased to at least £20 billion until 2020-21, and LEPs will be able to access funding and powers to support growth through local growth deals. Furthermore, the regional growth fund is projected to deliver more than 500,000 private sector jobs, leveraging in more than £14 billion of private sector investment.

[Peter Aldous]

The Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Great Yarmouth (Brandon Lewis), and I, along with 12 other colleagues from Suffolk and Norfolk, wrote to the Minister earlier this week emphasising the advantages for promoting growth that assisted area status for Lowestoft and Great Yarmouth will bring to the two counties. Will my right hon. Friend give full consideration to the strong and compelling bid submitted by the New Anglia local enterprise partnership?

[Michael Fallon]

I certainly undertake to do that. I have seen my hon. Friend’s letter, signed by several colleagues, and I have also written this week to all Members setting out the benefits of assisted area status and explaining the process and timetable for revising the map for the period 2014-2020.

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

16. What steps he is taking to promote provision of apprenticeships.

[The Minister for Skills and Enterprise (Matthew Hancock)]

There were almost 860,000 people undertaking an apprenticeship last year; that is more than ever before. We have raised standards, introduced higher apprenticeships, made it easier for employers to engage and created the £1,500 apprenticeship grant to encourage more employers to recruit an apprentice for the first time.

[Caroline Lucas]

Will the Minister’s Department do even more—a bit of ambition here—to help young people in my constituency taking part in schemes run by City College and organisations such as Proactive and make it his policy that suppliers winning public contracts worth more than £1 million should be required to offer apprenticeship opportunities on those contracts?

[Matthew Hancock]

I would be delighted to work with the hon. Lady to promote apprenticeships in Brighton. I might point out that in her constituency the number of apprenticeship starts has doubled since 2010. We have taken action to ensure that quality is improved as well, but the more we can do to improve and widen the opportunities for people to go into apprenticeships the better.

[Peter Luff (Mid Worcestershire) (Con)]

The scandalously low number of women in engineering apprenticeships is a missed opportunity for young women themselves, engineering employers and the wider economy. Does the Minister share my concern about the continuing and powerful evidence of gender stereotyping in schools, particularly co-educational schools, and the low number of engineering companies taking action to improve work force diversity, revealed by the Institute of Engineering and Technology only this week?

[Matthew Hancock]

Absolutely. I pay tribute to the work of my hon. Friend on this subject and look forward to following his leadership in driving up the number of women in engineering apprenticeships.

[Kerry McCarthy (Bristol East) (Lab)]

17. What assessment he has made of the potential effect on UK artists and creators of introducing a private copying exception without compensation.

[The Minister for Universities and Science (Mr David Willetts)]

This change will allow people to make personal copies of content they have bought. For example, it will allow an individual to copy their CDs on to an iPad. Many people already do this without realising it is illegal under copyright law. Most people think it is reasonable and should not be prevented by copyright. The Government agree and our new law will recognise this. This change will not allow people to obtain copies unlawfully, and British creators will continue to be rewarded when people buy copies of their works.

[Kerry McCarthy]

So far, the 22 EU member states that have introduced private copying exceptions have all introduced corresponding levy schemes on MP3 players and other copying devices to compensate artists for the loss of income. Why will the UK not do the same?

[Mr Willetts]

The reason is very simple: those European countries have introduced far wider exemptions than we are proposing. Many of them allow content borrowed from friends, families and libraries to be shared very widely. That damages creators, so they need to provide compensation, but our proposal is carefully targeted to protect what happens, as we all know, in almost every family in the country without doing damage to creators.

[Chris Bryant (Rhondda) (Lab)]

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

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

My Department plays a key role in supporting the rebalancing of the economy through business to deliver growth, while increasing skills and learning.

[Chris Bryant]

One of the biggest difficulties for all businesses in the country, whether a small retail outlet or a major manufacturer, is the cost of energy. The Secretary of State is a bit of a leftie. [Laughter.] I say that as a compliment, obviously, and he seems to be taking it that way, although the gentleman with the jumper on, the Minister for Skills and Enterprise, who is protecting everybody from the cold over there, seems to disagree. Does the Secretary of State agree with the Prime Minister, with the former Prime Minister or with us about what we should do about energy prices?

[Vince Cable]

I do not think that either the Leader of the Opposition or the former Prime Minister has quite got it right, but I have stressed that, for industry, which is our concern in this Department, the way forward is to ensure that energy-intensive industries are properly compensated and enabled to compete on a level playing field, and we are pursuing that.

[Sir Bob Russell (Colchester) (LD)]

T2. Can the Minister give the House a progress report on how the Government are dealing with the scourge of the payday loan companies?

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson)]

I thank my hon. Friend for that question. He rightly highlights the fact that there have been significant problems in the payday lending industry; thankfully, significant action is also being taken to match that. Twenty-five payday lenders have left the market since March as a result of strong action by the Office of Fair Trading, with the Competition Commission undertaking an investigation, and earlier this month the Financial Conduct Authority published a suite of new proposed rules, which will limit roll-overs, cap the number of times that a lender can use a continuous payment authority and introduce strict new rules on advertising to ensure that people do not get ripped off.

[Mr Chuka Umunna (Streatham) (Lab)]

The Secretary of State has said that growth must be better balanced and less reliant on rising house prices, but this week he has warned of dangerous and unsustainable house prices in London and extreme problems of affordability across the country on his Government’s watch. Does he therefore not agree that it would make sense to review how the second part of his Government’s Help to Buy scheme operates now, as opposed to in a year’s time, given the attendant risks posed to more balanced growth?

[Vince Cable]

I am delighted to see that the hon. Gentleman has progressed beyond his recent role as a share tipster and is now returning to more important and central concerns. The central point is that the growth we are experiencing is balanced. We are now beginning to see serious growth in manufacturing and the construction sector, and the next big step will be to see improvements in investment. As far as the housing market is concerned, the Chancellor has acknowledged that the Bank of England needs to watch the process very carefully.

[Mr Umunna]

But the right hon. Gentleman promised an export and investment-led recovery, yet as growth returned over the summer, exports fell, and the Office for National Statistics says that growth has been concentrated in household expenditure, rather than investment, which is £2 billion lower than it was a year ago. We all know that he is a keen dancer. In failing to prevail over the Treasury, is not the risk that, rather than marching to the tune of the makers, he is dancing to the Chancellor’s new song of house inflation?

[Vince Cable]

I am sure the hon. Gentleman would agree that there is no harm in the trend we are observing, which is that consumers are now more confident and are therefore spending and generating demand—I think we have both agreed over the last three years that the generation of demand is a key part of recovery. As far as exports are concerned, there is rapid growth in British exports to the big emerging markets, such as Russia, China, India and Brazil—indeed, I am going to Russia next week to pursue this course.

[Christopher Pincher (Tamworth) (Con)]

T3. Tamworth borough council is doing its bit to back small business Saturday by promoting “created in Tamworth” and offering free market stalls to business people and free parking to customers. Do the Government agree that local authorities have a hugely important role in helping rather than hindering small business growth, not least by offering more free parking?

[The Minister for Skills and Enterprise (Matthew Hancock)]

We in Government are huge and enthusiastic supporters of small business Saturday, which has cross-party support. I encourage local authorities of all political persuasions to follow the lead of Tamworth and introduce policies that can help to support small businesses across the board, and especially on Saturday 7 December, small business Saturday.

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

T5. I was disappointed by the Minister’s response to the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith) earlier and surprised at his lack of basic geography, so I am going to give him another opportunity. I understand that we are all just “the desolate north-east” to Government Members, but I remind the Minister that Northumberland college is indeed in south-east Northumberland and up to 50 miles away from parts of north Northumberland. Once again, what will the Minister do to meet the basic needs of young people in north Northumberland?

[Matthew Hancock]

I know the geography well, not least because I have visited Northumberland college in the last few months—[Interruption.] Hold on. Transport issues are important. If the hon. Lady is saying that we need to ensure that we get basic skills provision into all areas, including rural areas, I entirely agree with her, but if she is saying that the best thing to do is to ignore large rural areas, I disagree. I would have thought that we could work together on this sort of thing.

[Jessica Lee (Erewash) (Con)]

T4. Will my hon. Friend join me in congratulating engineering and manufacturing firms in Erewash, including F. C. Laser and TecQuipment, which are continuing to grow and to recruit apprentices? In addition, F. C. Laser has recently won the D2N2 award for the most promising business in 2013, proving that the entrepreneurial spirit is alive and well in Erewash and creating many jobs.

[Matthew Hancock]

I commend my hon. Friend’s work in supporting small businesses and jobs in Erewash, through supporting enterprise. This is all about ensuring that companies can start up and grow and that they can employ people as easily as possible. I hope that our employment allowance, which comes in next April and which will give every company that employs people a £2,000 tax break, will help to take that a step further.

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

T6. Small businesses in my constituency have been flagging up the importance of local enterprise partnerships focusing more on skills training and apprenticeships, and on the fact that that could be better promoted if all LEP boards included at least one specialist education representative. What does the Minister think of that idea, and will he consider making it a prerequisite for LEPs receiving Government funding?

[Matthew Hancock]

Unusually, I agree with both the suggestions that the hon. Lady has made. I look forward to working with her to support skills and small businesses through the LEP in Brighton.

[Mr Marcus Jones (Nuneaton) (Con)]

T7. Manufacturing in the midlands is going through a renaissance, but the challenge is to create the skills necessary to meet future needs. Will the Minister join me in welcoming Tomorrow’s Engineers week, and tell the House what more can be done to enthuse young people, particularly young women, about engineering?

[Matthew Hancock]

Yes, I am an enthusiastic supporter of Tomorrow’s Engineers, and the Government are backing that project in every way that we can. Tomorrow’s Engineers is about demonstrating that engineering is part of the future of our economy, and that it is an exciting career for someone to get into, whether they are a man or a woman. It is where the future of our economy is going, and providing the necessary skills is a vital part of what we are doing.

[Julie Hilling (Bolton West) (Lab)]

The Secretary of State has spoken proudly about the new businesses that have started up, but can he tell us how many businesses closed last year, and how many jobs were lost as a result of those closures?

[The Minister of State, Department for Business, Innovation and Skills (Michael Fallon)]

I shall be happy to write to the hon. Lady with the number of deregistrations, but overall there are more businesses being created than are being closed. We have, I think, 400,000 more new businesses than we started with two and half years ago.

[Fiona Bruce (Congleton) (Con)]

T8. What steps are the Government taking to address skills gaps, create jobs and increase productivity by improving the information given in schools about vocational job opportunities, particularly local ones?

[Matthew Hancock]

We are making the skills system more rigorous and responsive to need, but schools have a duty to secure careers advice. I want that advice to be inspirational and impartial, and to include more mentoring, especially from people who have real jobs, so that we can help each child to reach their potential.

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

Last week, I attended the Hounslow enterprise showcase, organised by Dawn Edwards and Isabel King from the Real Business Club, which was run with the support of the local jobcentre and Hounslow chamber of commerce. I spoke to three women from my constituency who were looking for advice on how to start or grow their businesses. Does the Secretary of State think that we need to do more to support women-led businesses, particularly as research shows that the UK has a higher gender gap in entrepreneurship than many of the OECD countries?

[Vince Cable]

Yes, we acknowledge the importance of women in business. Indeed, one of the initiatives that we are leading involves ensuring that women are properly represented on the boards of our leading companies, thereby creating role models for people starting their own companies. I agree that there is a gender gap and I agree that we need to do a lot more about it.

[Mr Mark Prisk (Hertford and Stortford) (Con)]

In the past three years, the UK car industry has gone from strength to strength, but there is always more to do. Will the Secretary of State tell the House what further work is planned, in conjunction with the Automotive Council, particularly with regard to new engine and powertrain technologies?

[Michael Fallon]

Let me first pay tribute to my hon. Friend, who had responsibility for this industry in the Department for three years. The automotive strategy, published earlier this summer, included a focus on the new automotive investment organisation to attract more suppliers into the UK, work to tackle the skills base by recruiting nearly 2,000 additional graduates into engineering, and further work to strengthen the supply chain throughout the industry.

[Paul Blomfield (Sheffield Central) (Lab)]

The Secretary of State will know that there is serious concern among our universities about many of the provisions of the Immigration Bill and their impact on international student recruitment. What discussions has he had with universities on the issue and what representations has he made to the Home Office?

[The Minister for Universities and Science (Mr David Willetts)]

What we are seeing is a continuing increase in the number of overseas students applying to come to study in Britain. We all make it clear whenever we visit overseas markets that there is no cap on the number of legitimate overseas students coming to Britain; they are very warmly welcome.

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

I understand that in 2014-15 the local LEP is going to have a sizeable budget to distribute for infrastructure. Will the relevant Minister explain how we can access that budget and what the criteria will be?

[Michael Fallon]

Local enterprise partnerships have been invited to submit their growth plans not simply for the first year of devolved budgets, which is 2015-16, but for the expenditure of structural funds—both regional funds and social funds—from July next year for the next seven-year period. We will examine each of the local growth funds and work with individual LEPs on particular growth deals to suit each area.

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

What assessment has the Secretary of State made of the impact of the funding for lending scheme on investment in small businesses?

[Vince Cable]

The funding for lending scheme has had a very significant impact on the mortgage market. It has had a much lesser impact on small business, but it has recently been adapted, and I believe it has been used by some of the new competitor banks such as the Aldermore. We certainly welcome that.

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

Yesterday evening, I had the pleasure of attending the formal launch of the transport systems catapult, which is going to be based in Milton Keynes. Does my right hon. Friend agree that this will be an important innovation to reaffirm the UK’s leading role in transport technology development?

[Mr Willetts]

This is a very important event—investment in our transport infrastructure to make it smart and innovative. It is backed with £50 billion of BIS money, with support from the Department for Transport—and, most importantly, with substantial business support as well.

[Steve Rotheram (Liverpool, Walton) (Lab)]

The Secretary of State will be aware of my concern about the legal requirements when a company goes into administration. Will he look at making it a mandatory requirement for administrators to prioritise the wider social consequences of the sale of a company rather than allowing asset strippers to destroy jobs and local communities?

[Jo Swinson]

The hon. Gentleman rightly outlines the devastating impact on communities that can happen when companies go into administration. Those involved in dealing with the administration of a company have a variety of different issues to prioritise. We are making sure that the problem is looked at in a range of ways. We are simplifying insolvency processes and considering some of the issues rightly raised by Members—about pre-packs, for example, with an ongoing review. We are looking at fees, too, which have sometimes meant that people cannot get as much of their money back as they should in these unfortunate circumstances. The Government are taking forward all those issues.

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

This week marks the 50th anniversary of the groundbreaking Robbins report. Will the Minister for Universities and Science confirm that this Conservative-led Government will continue the spirit of Robbins and ensure that higher education is open to all?

[Mr Willetts]

My hon. Friend is absolutely right; indeed, today is the day, 50 years ago, when the then Conservative Government accepted the Robbins report. We are marking the 50th anniversary with more funding going into universities, with more students and with more applications from students from disadvantaged backgrounds than ever before, so we can be proud of our record on higher education.

[Kerry McCarthy (Bristol East) (Lab)]

A report published today by the 1994 Group of universities shows that, although the overall figures for post-graduate study in the United Kingdom look healthy, that is mainly due to a 90% increase in the number of overseas students. What are the Government doing to support British post-graduate students?

[Mr Willetts]

That is an issue, which is why the Higher Education Funding Council for England has provided an extra £25 million of support for next year’s post-graduate students. We will increase that amount to £75 million for the following year, because we do not wish to see people who could benefit from post-graduate education missing out.

[Ian Swales (Redcar) (LD)]

As the chemical industry is Britain’s leading exporter, I warmly welcome this week’s launch of the chemicals growth partnership. Will the partnership convene specially to discuss the issues presented by Grangemouth?

[Michael Fallon]

Despite the serious news about Grangemouth, the sector as a whole remains optimistic about, in particular, the potential for future growth. The launch this week focused on energy costs, innovation and supply-chain development, and the partnership has published an action plan, which I know my hon. Friend has seen.

Business of the House

Thursday 24th October 2013 Commons Chamber

10:30

[Ms Angela Eagle (Wallasey) (Lab)]

Will the Deputy Leader of the House give us the business for next week?

[The Deputy Leader of the House of Commons (Tom Brake)]

My right hon. Friend the Leader of the House is sorry to be absent again this week. He is recovering well at home following his back operation last week, and is confident that he will be in his place and carrying out his duties in the House next week.

The business for next week will be as follows.

Monday 28 October—I expect my right hon. Friend the Prime Minister to update the House following the European Council. That will be followed by the Second Reading of the Local Audit and Accountability Bill [Lords], which will be followed by a motion to approve an instruction relating to the Local Audit and Accountability Bill [Lords].

Tuesday 29 October—Remaining stages of the Pensions Bill, followed by a motion to approve a European document relating to reform of Eurojust and the European Public Prosecutor’s Office, followed by a motion to approve a Ways and Means resolution relating to the Citizenship (Armed Forces) Bill.

Wednesday 30 October—Opposition Day (9th allotted day). There will be a debate on education, followed by a debate on the future of the probation service. Both debates will arise on an Opposition motion.

Thursday 31 October—Remaining stages of the High Speed Rail (Preparation) Bill.

Friday 1 November—Private Members’ Bills.

The provisional business for the week commencing 4 November will include the following.

Monday 4 November—Second Reading of the National Insurance Contributions Bill.

Tuesday 5 November—Second Reading of the Gambling (Licensing and Advertising) Bill, followed by business to be nominated by the Backbench Business Committee.

Wednesday 6 November—Opposition Day (10th allotted day). There will be a debate on an Opposition motion; subject to be announced.

Thursday 7 November—Business to be nominated by the Backbench Business Committee, followed by a general debate relating to the commemoration of the first world war.

Friday 8 November—Private Members’ Bills.

Colleagues will also wish to know that, subject to the progress of business, the House will adjourn on the following dates during 2014.

The House will rise for the February recess at close of play on Thursday 13 February, and will return on Monday 24 February.



The House will rise for the Easter recess at close of play on Thursday 10 April, and will return on Monday 28 April.

The House will not sit on Monday 5 May.

The House will rise for the Whitsun recess on Thursday 22 May, and will return on Monday 2 June.

The House will rise for the summer recess on Tuesday 22 July, and will return on Monday 1 September.

The House will rise for the conference recess on Friday 12 September, subject to its agreeing future sitting dates for private Members’ Bills, and will return on Monday 13 October.

The House will rise for the November recess on Tuesday 11 November, and will return on Monday 17 November.

The House will rise for the Christmas recess on Thursday 18 December, and return on Monday 5 November 2015. [Laughter.] I mean Monday 5 January 2015.

[Ms Eagle]

I thought for a minute there that time had reversed and was going backwards, but the Deputy Leader of the House has put us straight. May I again pass on my best wishes for the speedy recovery of the Leader of the House? We hope to see him back in his place next week—no discourtesy is intended to the Deputy Leader of the House, who has filled in entirely, as we would have expected him to, with great aplomb.

May I thank the Deputy Leader of the House for giving us next week’s business and also next year’s recess dates, especially around the conference recess? I understand why the Scottish referendum has disrupted the usual arrangements but it does seem a bit strange that we have had to make changes to accommodate the 2014 Liberal Democrats conference. At the rate they are losing members, next year they could hold it in a telephone box over the weekend.

This business statement once again shows we are kicking our legislative heels in the Commons while the other place is yet again stuffed full of legislation. The Government still have to find time for us to discuss the Offender Rehabilitation Bill even though it completed its Lords stages months ago. It has now taken Labour to announce an Opposition day debate for the Government’s underhand privatisation of the probation service to be discussed at all. This is now the third time I have had to ask: can the Deputy Leader of the House confirm when this Bill will return to the Commons?

The Chancellor’s inadequate Financial Services (Banking Reform) Bill has been substantially changed by last-minute amendments in the Lords, making it a very different and much longer Bill from the one we debated here originally. Given the importance of banking regulation to everybody’s living standards, will the Deputy Leader of the House now give us an assurance that sufficient time will be allocated to debate what will be essentially a very different piece of legislation when it finally returns to this place?

In the last two weeks, three of the big six energy firms have announced price rises of around 10%. To stand up to this abuse of market power, Labour will freeze prices until 2017, but the Government’s energy policy is in chaos. In opposition, the Prime Minister hugged huskies and pretended to be green, and only last year he was boasting that his green levies were bigger than ours, but last week his Back-Bench climate change deniers were agitating to abolish them, reducing bills by hitting the poorest hardest and abandoning energy efficiency altogether, and yesterday, in a blind panic, the Prime Minister announced that he had given in to them. The Deputy Prime Minister looked like he had swallowed a wasp, and Lib Dem spinners dismissed it as a “panicky U-turn” which will not be allowed to “dictate Government policy.” So I think we now know what the new Tory policy is, but can the Deputy Leader of the House tell us what the Government’s policy is?

Two weeks ago, the Prime Minister said we were living in

“some sort of Marxist universe” —[Official Report, 9 October 2013; Vol. 568, c. 152.]

for suggesting a 20-month energy price freeze, and he said it was not possible to intervene in a market to set prices. This week, his Government signed a nuclear deal with the Chinese which sets prices not for 20 months, but for 35 years. On Tuesday Sir John Major announced his conversion to a windfall energy tax and worried about the silent have-nots who have to choose between heating and eating this winter. Meanwhile, No. 10’s advice to those who are cold was to wear a jumper. It speaks volumes when the Tory ex-Prime Minister responsible for the creation of the big six energy companies sounds more in touch than the current Prime Minister. So will the Deputy Leader of the House arrange for an urgent statement to clarify Government policy on energy, and can we have a statement from the Prime Minister on whether he thinks Sir John Major is living in a Marxist universe too?

The Conservative party in the 1992 Parliament is remembered for being one of the most disloyal in its history, but I have been looking at the numbers and it turns out that the current crop of Government MPs are three times worse than they were then, and I think the Patronage Secretary’s expression says it all, because he has to deal with them. It sounds like the Prime Minister needs to listen to his predecessor not only on energy prices, but also on how to control his rebellious Back Benchers. While Sir John told them to put up or shut up, the current Prime Minister just caves in.

We know that for 39 out of the 40 months since the election prices have grown faster than wages. Will the Deputy Leader of the House now admit what we all know: that it was the Chancellor’s city bonus tax dodge that accounted for the surge in earnings in that one isolated month? So while living standards are falling bonuses are soaring, and the Chancellor creates a bonus tax loophole for his mates. Will the Leader of the House therefore arrange for a statement from the Chancellor about why he prioritises his millionaire friends over tackling our cost of living crisis?

Last week, I asked the Deputy Leader of the House why he is campaigning against the closure of his local hospital, despite being in the Government responsible for it. Today, the Deputy Prime Minister will criticise the free schools policy, despite being in the Government responsible for it. I know that it was the final of “The Great British Bake Off” this week, but when will the Liberal Democrats realise that they cannot have their cake and eat it?

[Tom Brake]

Last week, the shadow Leader of the House asked what I am thinking when I am sitting alongside the Leader of the House. I must ask her today what the hon. Member for Penistone and Stocksbridge (Angela Smith) might be thinking as she sits alongside the shadow Leader of the House—she may be wondering whether it is vanity that has prevented the shadow Leader of the House from letting the hon. Lady who shadows me speak in questions, or perhaps the shadow Leader of the House was worried that her hon. Friend might outshine her at the Dispatch Box.

I am pleased that the shadow Leader of the House referred to the 2014 Liberal Democrat conference. I recommend that she attends, because I am sure that she would welcome the very open policy debates we have. She alleged that the Government were kicking their heels on legislation. As I read out, we are to debate pensions, high-speed rail and national insurance contributions—if she thinks those are minor issues, she needs to think again. She referred to the Offender Rehabilitation Bill and of course there will be an opportunity for it to be debated on the Opposition day she has provided. I reassure her that the Bill will be brought forward as soon as possible: as soon as parliamentary time allows.

The shadow Leader of the House referred again to Labour’s price freeze con. We all know that bills would go up before it, that the Leader of the Opposition has said that he could not guarantee things during the freeze if global prices went up and that the prices would go up afterwards. So we all know where that would lead. We had the nuclear statement at the beginning of the week, and I hope that she would have welcomed the fact that, finally, we are getting some investment in our energy industry. She may not be aware that over the next 10 to 15 years about 60% of our energy generation is going to be switched off as plants come to their end, so there was a need for the Government to take urgent action to address that. I would have thought that she would have welcomed that action.

Clearly we want to help families with the cost of living. The Government have introduced a number of measures that will do that: 25 million basic rate taxpayers are going to be £700 better off next year; we have capped rail fare rises; 3 million people will be taken out of paying income tax altogether; we stopped the 13p fuel duty rise that would have occurred under Labour; and we have capped the council tax. So this Government have a very proud record of tackling cost of living issues.

Finally, I would like to thank the shadow Leader of the House for again giving me the chance to mention at the Dispatch Box the save St Helier hospital campaign, which I am leading.

[Sir Greg Knight (East Yorkshire) (Con)]

May we have a debate on making better use of natural resources, particularly daylight? Is the Deputy Leader of the House aware that this weekend we are to undertake the flawed ritual of putting our clocks back by one hour, thereby plunging the UK into darkness by mid-afternoon? May we have the opportunity to examine the case for changing to British summer time and double summer time—putting our clocks forward an hour? That would make the afternoons lighter, it would reduce the number of road accidents and it would boost tourism.

[Tom Brake]

Clearly, we are all in favour of making better use of daylight. I know that the House has considered the issue on a number of occasions, and I am well aware of the arguments that my right hon. Friend is putting forward about the benefit that would be derived, particularly for the tourism industry and road safety. He may wish to consider raising the matter in a Westminster Hall Adjournment debate.

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

Would the acting Leader of the House agree that if we had a debate in the Chamber on the orchestrated campaign of intimidation against The Guardian, that would be an opportunity for some of us to point out that if it had not been for the Snowden disclosures, the monitoring of the German Chancellor’s mobile phone by US intelligence would not have been known? Surely the message about Snowden should be, “Let’s have more disclosures.” What The Guardian is publishing is undoubtedly in the national interest.

[Tom Brake]

Clearly, I do not agree that there is an orchestrated campaign against The Guardian. Clearly, there is a need for the issues of public interest that The Guardian wants to highlight to be balanced with the security implications of any material it puts into the public domain.

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

During the summer recess, I met Stuart Wyatt, a constituent who suffers from multiple sclerosis. He told me that he and many others would like to use cannabis for medical reasons. Although I do not think that we should legalise cannabis at all, I do recognise that the pain of some who suffer from MS and other neurological conditions could be relieved by it. May we have a statement from the Secretary of State for Health on the role of cannabis in relieving pain and how it could be given on prescription?

[Tom Brake]

I thank my hon. Friend for that question, which he has put in measured terms. I understand why he has put it on behalf of his constituent. He may be aware of Sativex, a cannabis-derived mouth spray licensed in the UK in 2010 as an additional treatment for moderate to severe spasticity in multiple sclerosis. He may also be aware that the National Institute for Health and Care Excellence is updating its clinical guideline on the management of MS in primary and secondary care. Sativex is one of the new interventions that NICE has identified for inclusion in its updated guidelines, which it expects to publish in October 2014.

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

May I support the call made by the shadow Leader of the House for a debate on energy, so that the Government can clarify whether they are in favour of the warm homes programme, the renewable energy programme, Labour’s cap or John Major’s windfall tax? Those points need to be clarified. May we have that debate?

[Tom Brake]

Obviously, the Labour party has Opposition days that it could use to secure such a debate. Earlier there was a statement about the nuclear industry and in the course of a number of exchanges, including Prime Minister’s questions and Business, Innovation and Skills questions earlier today, we have made clear the Government’s position on energy and why we do not believe that what the Leader of the Opposition proposes is a sensible or feasible approach.

[Mr Mark Williams (Ceredigion) (LD)]

It is a year since Paul Silk made recommendations for further fiscal devolution to the National Assembly for Wales. Why are we still waiting for the Government’s response to those recommendations? May we have a statement about the Government’s intentions and, better still, legislation?

[Tom Brake]

I know why my hon. Friend is pursuing the matter vigorously; it is clearly of great interest to him and his constituents. The matter is still under discussion in Government. The most sensible thing for me to do is ensure that we write to him setting out the current position.

[Mr John Spellar (Warley) (Lab)]

On 26 May 2011, the then Health Secretary, whom we wish a speedy recovery, wrote to me about a decision by West Midlands strategic health authority to reduce nurse training. He replied that it believed that

“a reduction in commissions is necessary to avoid a significant oversupply in the nursing workforce.”

Last week it was revealed by Nursing Times that a massive one in three hospitals is going abroad actively to recruit new nurses. May we have an early statement so that the new Health Secretary can override his incompetent bureaucrats and expand nurse training opportunities for our desperate and deserving youngsters?

[Tom Brake]

I thank the right hon. Gentleman for that question, and I will certainly draw the matter to the attention of the Leader of the House when he returns, as he may want to consider it further. The right hon. Gentleman will be aware that the Government have provided an extra £12.7 billion of investment in the NHS. He may also be aware that 4,000 more clinical staff have gone into the NHS and that there are 23,000 fewer administrative staff. Specifically on the west midlands, however, I will ensure that the Health Secretary responds to him.

[John Glen (Salisbury) (Con)]

Last Saturday presidential elections were once again postponed in the Maldives when President Waheed and his puppet interim Government of the previous elected President refused to step aside. Will the Deputy Leader of the House make time for a debate so that MPs on both sides of the House can voice their support for free and fair elections in that country?

[Tom Brake]

The annulment of the first round of Maldivian elections held on 7 September, and the continued delay in holding new elections, are of concern to the Government and to the Foreign Secretary, as he made clear in a statement last week. It is important that elections take place to a timing specified by the Maldives elections commission and in accordance with the Maldives constitution. Ministers and officials are in touch with candidates and are strongly encouraging them to engage in a process that will deliver inclusive, free and fair elections, and a smooth transition of power. My hon. Friend may be aware that we have Foreign and Commonwealth Office questions on Tuesday when he could raise the matter again.

[Kelvin Hopkins (Luton North) (Lab)]

Britain has an enormous and ongoing trade deficit with the rest of the European Union, including a goods deficit of more than £1 billion a week, mainly with Germany. That is equivalent to 1 million exported jobs. The situation is conclusive evidence of a substantially misaligned exchange rate, so will the Deputy Leader of the House make Government time available for a full debate on the exchange rate?

[Tom Brake]

I am afraid that I cannot provide the hon. Gentleman with an opportunity to discuss that in Government time, but he might want to make representations to his party’s leadership about whether it could be the subject of an Opposition day debate. I know that he has strong views on the European Union, and I wonder whether he feels that coming out of the EU would help or hinder the trade deficit.

[Steve Baker (Wycombe) (Con)]

In January 2012, my right hon. Friend the Prime Minister made a wonderful speech about how to reconstruct an inclusive, just and popular capitalism. He called for a new co-operatives Bill, but that has not yet appeared. I cannot imagine that the Liberal Democrats are opposing it, but I cannot think of any other explanation, as the Secretary of State for Education and Cabinet Office Ministers have supported such a Bill. Will the Deputy Leader of the House see to it that time is provided to bring forward that important new Bill on co-operatives?

[Tom Brake]

I do not know whether the hon. Gentleman had an opportunity to raise that issue during today’s Business, Innovation and Skills questions, as that would have been a good opportunity to flag it up. However, I will ensure that he gets a written response to his very specific question.

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

My constituents are getting angry and frustrated about the rocketing cost of High Speed 2. At a time when we are expecting winter weather and more flooding, may we have a statement from the Secretary of State for Transport on what he is doing to ensure that the line between Penzance and London is resilient in the face of floods and can be kept open beyond Exeter?

[Tom Brake]

I assure the hon. Lady that the cost controls around HS2 are very firm. This substantial and important project is going to provide the biggest boost to our rail network since the Victorian era. On the specific issue about her locality, the Government have set aside substantial investment to ensure that other projects around the country are delivered. She may wish to raise the matter at Transport questions on 7 November.

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

Could time be found for a debate on human rights in Russia, given that tomorrow marks the 10th anniversary of the imprisonment of Amnesty prisoner of conscience Mikhail Khodorkovsky, who was imprisoned in a gulag in the Arctic circle for having the temerity to disagree with the President?

[Tom Brake]

The hon. Gentleman may be aware that the Minister for Europe issued a statement marking the 10-year anniversary of Mikhail Khodorkovsky’s arrest and met his son on 10 October to discuss the situation. The Government have significant concerns about the processes used to convict Khodorkovsky and continue to call for him to be released on schedule next August. The promotion and protection of human rights is a key priority in our bilateral relationship with Russia and we regularly raise it at all levels.

It may be appropriate to add that, since I announced the business statement, I have been informed of further business. On Thursday 31 October, there will be a debate in Westminster Hall on the oversight of the intelligence and security services.

[Keith Vaz (Leicester East) (Lab)]

The Foreign Secretary is very good at updating the House about the situation in the middle east. Yesterday, 300 al-Qaeda-affiliated prisoners organised an attempted break-out from the main prison in Sana’a in Yemen. When can we have a statement on what assistance we are giving to the Yemeni Government?

[Tom Brake]

I thank the right hon. Gentleman for that pertinent and timely question. I cannot guarantee that there will be time for a debate or a statement, but I will ensure that the Foreign Secretary hears his concerns and responds directly to him. He will also have an opportunity to raise the issue directly with the Foreign Secretary during Question Time next Tuesday.

[Andrew Griffiths (Burton) (Con)]

May we have a debate on charging by general practitioners? Vulnerable people in my constituency are being charged up to £130 by their GPs to provide medical information that is needed for Atos assessments. That is money they can sorely afford to spend and this important issue is affecting some of the most vulnerable in society, so may we please debate it?

[Tom Brake]

Clearly that is a significant issue that I am sure presents a real financial challenge to some people. I would like to think that GPs would be careful about levying such charges when it is clear that the person might not be able to afford them.

[Clive Efford (Eltham) (Lab)]

May I challenge the Deputy Leader of the House to come back to the House some time in the near future and explain exactly how the Government are devising policy? Yesterday’s announcement by the Prime Minister on green measures and fuel prices caught everyone unawares. Today the Deputy Minister is making a speech about education and suggesting that we should regulate with regard to qualified teachers in our schools, but only last week the Minister for Schools signed off on cuts that could deregulate the oversight of qualified teachers. The Government’s approach, and not least that of the Liberal Democrats, seems to be inconsistent, so could we have an explanation of exactly what is going on?

[Tom Brake]

I will give the hon. Gentleman an explanation immediately. The Deputy Prime Minister has said that parents want and expect their children to be taught a core body of knowledge by good, qualified teachers or teachers seeking qualification—the quality of their teaching is checked by Ofsted—and to get a healthy meal every day. The Government believe that every child should have access to a good choice of excellent local schools. The hon. Gentleman may know that three quarters of free schools provide good or outstanding education, compared with just 64% in the public sector.

[Stuart Andrew (Pudsey) (Con)]

I recently met my constituent Angela Lavelle, who suffered from breast cancer. She told me how chemotherapy affects eyesight, leading to a greater risk of cataracts, and the teeth, leading to problems of rapid decay, which results in the need for more frequent check-ups. Unless patients are in receipt of benefits or on a low income, they have to meet those extra costs. May we have a debate to discuss what help we can give these cancer sufferers?

[Tom Brake]

I am sure the hon. Gentleman and everyone in the House will welcome the extra funding the Government have put into cancer treatment. I will ensure that the Health Secretary responds to him on the specific issue of the extra costs that his constituent has to meet.

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

On energy prices, may we have a debate or a statement in which we may raise the concerns of households that are off the gas grid and heavily dependant on home heating oil? That is a particular problem in rural areas and regions such as Northern Ireland, where 70% of households are dependent on home heating oil. The costs are extremely high and people are suffering in fuel poverty. Such a debate or statement would allow us to explore the help that is available for those households.

[Tom Brake]

I thank the right hon. Gentleman for highlighting the significant issue of the additional fuel costs that are faced by those who are off the grid. Although I cannot assure him that there will be an opportunity to debate the matter, I will ensure that what he has said is passed on to the Secretary of State for Energy and Climate Change so that my right hon. Friend can set out how we are helping those who are in the most difficult financial position of all.

[Mark Pritchard (The Wrekin) (Con)]

May we have a debate on reforming the Official Secrets Act? Breaches of the Act over the past decade in the Royal Navy and the Secret Intelligence Service have attracted only light custodial sentences. Is it not about time the Act was reformed to ensure that there is sufficient deterrent against treason in this country?

[Tom Brake]

I am not aware of any opportunities that there will be to raise that matter shortly, but the hon. Gentleman could apply for an Adjournment debate on the subject. If he feels that there is cross-party concern about the issue, he could also seek a debate from the Backbench Business Committee.

[David Wright (Telford) (Lab)]

May we have a comprehensive statement to the House about the health service in Shropshire? There is a debate about A and E services between Telford and Shrewsbury, which nobody in the county wants, and there is an emerging crisis in the ambulance service, particularly with regard to response times. May we have a comprehensive statement from the Government about those health services, because they are very important to people in Shropshire and particularly to those in Telford and Wrekin?

[Tom Brake]

The hon. Gentleman is right to highlight his concerns about his local health service. He mentioned A and E and the ambulance service, and I am sure that he will welcome the fact that the Government are investing £250 million in each of the next two years to support those A and E departments that are under the most pressure. He may also welcome the fact that, for the first time, the Government have put in place measures to examine waiting times. I will ensure that a response is sent to him about the specific issues that he has raised about the health service in Shropshire.

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

Last week, when I gently asked the Deputy Leader of the House about the forthcoming announcement on nuclear, he said that I would have to wait for the announcement. The announcement has now been made, so I will ask my question again. Bridgwater college is training the top engineers who will be needed to fulfil our promises not only, as somebody put it, to the Chinese and the French, but to the United Kingdom. Sedgemoor district council in my constituency must have a major part of the inward investment that the country needs to ensure that the supply chain for this enormous project is fulfilled. May we have time to discuss training, skills and inward investment for the United Kingdom in relation to the biggest infrastructure project that we have seen for a generation?

[Tom Brake]

The UK is determined to become a low-carbon economy, which is why our energy policy requires a mix of renewable, clean coal, gas and nuclear energy. As a result of the announcement on Monday, I am sure that the Government will want to work with employers and training providers to ensure that UK plc derives the maximum possible benefit. We believe that the nuclear industry is cost-competitive with other generation technologies. However, as the hon. Gentleman identified, we must ensure that we derive the maximum benefit from the project so that we can use those skills as the industry develops around the world.

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

On 18 April, I raised the issue of a fake internet jobs scam that was exposed by BBC Radio Humberside. Today, Radio Humberside has reported on another racket in which jobseekers are tricked into calling an expensive 070 phone number and completing a long questionnaire for a fake company called SB Millers, which is run by Sean Dixon of 33 Epsom road in London. Please may we have a debate on how we can stop these rackets that exploit desperate people who are looking for work and prosecute the criminals behind them?

[Tom Brake]

The hon. Lady rightly highlights that problem in the Chamber today and I hope that it will receive publicity to ensure that people are more widely aware of that scam. I am sure that she has raised the matter with her local trading standards officers to see what action they can take. Thanks to her, we are all aware of the potential problem, and I am sure we will all want to keep an eye out to ensure that our constituents are not affected in the way that hers have been.

[Mr Peter Bone (Wellingborough) (Con)]

There has been an outrageous slur from the Opposition that Liberal Democrat Ministers are not supporting the Prime Minister. If we closed our eyes today, we could hear the Deputy Leader of the House sounding exactly like a Tory Minister. Just to ensure that there is no doubt, will he arrange for the Deputy Prime Minister to make a statement next week that he fully supports the Prime Minister’s desire to roll back green energy regulations?

[Tom Brake]

I am not sure whether the hon. Gentleman had an opportunity to listen to the Deputy Prime Minister on LBC, but he might have found clarification on that point. Perhaps Mrs Bone had an opportunity to listen to that interview and will be able to report back to him. The coalition Government have made it clear that we are committed to being the greenest Government ever, and we will not do that at the expense of the environment or of jobs in the emerging industries. At the same time, however, we are aware of the pressures that people face due to their energy bills. That is why we have legislated, for instance, to ensure that people are offered the lowest tariff, and it is why we have measures in place to address the winter peak in fuel costs, with £135 available to 2 million people.

[Wayne David (Caerphilly) (Lab)]

As the Deputy Leader of the House has demonstrated, creative inventiveness has its place in parliamentary debate, but there is a time and place for everything, and it can be taken too far. In light of that, will it be possible to have a debate on the errors—inadvertent, of course—the misrepresentations, inadvertent, and the all-too-frequent inaccuracies, inadvertent, of the Prime Minister in his attempts to answer PMQs?

[Tom Brake]

I am sorry to disappoint the hon. Gentleman, but there is clearly not such an opportunity beyond the Prime Minister’s weekly attendance at the Dispatch Box, when he puts across the Government’s position on matters of all natures forcefully and effectively. Of course, the Prime Minister is a more regular attendee at the House to make oral statements than his predecessor.

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

May we have a debate on how we can continue to build on the legacy of the amazing London 2012? This Saturday, the next major international sporting tournament in this country, the rugby league world cup, will begin with Australia against England and Wales against Italy. Will the Government give it their full support? As a London MP, will the Deputy Leader of the House be going to the semi-final double header at Wembley on 23 November?

[Tom Brake]

I am not sure whether my hon. Friend was offering me tickets for the game on the 23rd; if so, we can discuss it later. He is right about the rugby league world cup, which could well be the best attended ever. He is also right to highlight the importance of sport, which can tackle some of the health issues that we face and may be used to work with young people to help to build their leadership and team skills, as it is by Cricket for Change, an organisation in my constituency.

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

Does the Deputy Leader of the House agree that Parliament and the parliamentary estate should be open to people of all backgrounds and to all our constituents, and that that should not depend on how wealthy or influential they are? Is he aware that the proposed massive increase in the cost of using rooms in the House and on the parliamentary estate will put many charities, third sector groups and small organisations off coming here to hold events? May we have an early debate on the chaotic management and running of this place?

[Tom Brake]

I thank the hon. Gentleman for that question and I think that he is sufficiently experienced to know that that is perhaps not a matter on which I can respond. We can both agree that we want the parliamentary estate to be as open as possible to anybody, but he will also be aware that at the same time Parliament is under a lot of pressure to ensure that it covers its costs. The commercial implications of such matters must therefore also be considered.

[Martin Vickers (Cleethorpes) (Con)]

Last Saturday night and into Sunday morning, I went out on patrol with Humberside police officers, the excellent police and crime commissioner for Humberside, Matthew Grove, and the magnificent street angels into the streets of Cleethorpes to view the night-time economy. It became evident that a review of the current licensing laws is necessary. Will the Deputy Leader of the House find Government time for a debate on such matters?

[Tom Brake]

I am afraid that I am not in a position to announce time for such a debate. The hon. Gentleman might want to try to secure an Adjournment debate. I am sure that colleagues on both sides of the House will have strong views about their own nightlife and the impact of licensing laws on it. He rightly highlighted the work done by the street angels on his patch, and I want to take this opportunity to congratulate the street pastors in Sutton, who play a similar role.

[Julie Hilling (Bolton West) (Lab)]

Tomorrow is wear it pink day in aid of the Breast Cancer Campaign. LivinginBL, one of the excellent local newspapers in Bolton West, is organising many activities to raise money and awareness. Will the Deputy Leader of the House join me and many thousands of people throughout the country and wear it pink tomorrow?

[Tom Brake]

I hope to be able to help the hon. Lady. When I go home this evening, I will have to check what pink items there are in my wardrobe, and subject to there being a suitable pink tie, pink shirt or, indeed, pink wig, I might well be able to join her tomorrow. It is a fantastic campaign and I am sure that many MPs will have taken advantage of the photo opportunity provided, wearing pink glasses, pink wigs or other pink items. It is an effective way of drawing attention to an effective campaign.

[Julian Sturdy (York Outer) (Con)]

In the light of a recent conviction in my constituency for the mistreatment of horses, and alongside the Welsh Assembly’s recent proposals on the issue, may we have a debate on tackling fly grazing and the abandonment of horses, which sadly happen all too often in my constituency and across England and Wales?

[Tom Brake]

I thank the hon. Gentleman for that question. He will be aware that that is an issue not just in rural areas but in urban and suburban areas such as mine, where horses are often left on local playing fields. I am afraid that I cannot provide any time immediately for that matter to be debated and I will have to refer him to the opportunities provided in Westminster Hall. If there is a greater appetite for such a debate, he could perhaps refer the matter to the Backbench Business Committee through cross-party representation.

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

May we have a debate or statement on the Government’s discretionary housing payment policy? Since April, 1,307 households across the public and private rental sectors have applied to Redcar and Cleveland borough council for the discretionary housing payment. Only 358 households have been awarded it, not because eligibility criteria have not been met but because the fund is exhausted, which means that nearly three quarters of households will not receive anything. May we have a statement or debate on the policy, as families in my constituency are in dire straits as a result of this Government’s bedroom tax and other cost-of-living measures?

[Tom Brake]

The hon. Gentleman will be aware that in response to concerns expressed by local authorities the Government made additional moneys available for the discretionary housing payment. I am sorry that on his patch the funds are, he says, exhausted, but I am aware that a number of other local authorities did not fully access the money made available to them. He will understand the reasons why the Government have proceeded with the changes to the spare room subsidy, and if he has concerns about the policy, we need to hear whether the Labour party would provide additional funding or simply deliver the same as the Government’s programme.

[Philip Davies (Shipley) (Con)]

We recently had the intolerable situation where a triple killer, who murdered his last victim while he was on the run from prison, was not given a whole-life tariff by the judge, because the judge said that that would breach a European Court of Human Rights ruling. I know the Deputy Leader of the House is on the wishy-washy wing of the coalition Government—quite a crowded wing—but will he arrange for a debate and a vote in this House, so that the House can make it clear that we expect judges to impose whole-life tariffs where they see fit, and ignore the views of the pseudo-sham judges at the European Court of Human Rights?

[Tom Brake]

I thank my hon. Friend for that, but I do not think I would describe myself as wishy-washy in any shape or form. I hope he will acknowledge that there is separation on this issue, and that Members of Parliament and the Government generally should be a little reluctant to interfere in decisions taken by judges.

[Steve Rotheram (Liverpool, Walton) (Lab)]

In contrast to the previous question, will the Deputy Leader of the House allow a debate on the state of prisons in England? He is probably aware that many inmates have completed their tariffs but cannot be released until they complete an offender behaviour programme, but waiting lists are currently more than five years long. Does he agree that it makes no economic or moral sense to keep people locked up who are eligible for release and incarcerated only because of a paucity of suitable courses?

[Tom Brake]

I thank the hon. Gentleman for that sensible question and for highlighting the state of prisons in England. That matter was raised during questions last week, and the Government rightly set out that the priority is safety and security in prisons. I agree, however, that if there are people who are in a position to be released but have no access to an offender behaviour programme, the matter needs to be addressed. I will ensure that the Ministry of Justice writes to the hon. Gentleman on that subject.

[George Freeman (Mid Norfolk) (Con)]

One in six men in the country, and in this Chamber, will be diagnosed with prostate cancer during their lives—it is the single biggest killer of middle-aged men. With November looming, will the Deputy Leader of the House join me in expressing support for the Movember campaign? Movember was started by two patients, and has now raised more than £200 million and become the world’s biggest charity in the field. Will the Deputy Leader of the House signal his support and consider becoming a fellow Mo Bro, and can we have a debate in the House on the importance of male health awareness and the involvement of patients in research?

[Tom Brake]

The hon. Gentleman may be alarmed to hear that I took part in Movember three years ago, but the general view of my trucker-style moustache was that it was best never seen again, and I am afraid that this year I will not be participating. I do not know whether the hon. Gentleman intends to sport a dramatic moustache—a Mexican moustache perhaps—during November, but I agree that Movember is a fantastic campaign that has caught people’s imagination. Men are not very comfortable talking about prostate cancer and their health in general, and the campaign has highlighted an issue that men of my age—and the hon. Gentleman’s age—need to be aware of and concerned about.

[Robert Halfon (Harlow) (Con)]

May we have a debate on reducing VAT on energy bills? Every 1% reduction in VAT means £300 million saved for hard-pressed householders. Will my right hon. Friend lobby the Prime Minister to ensure that regaining control of our VAT rates is the No. 1 part of renegotiation on our relationship with the European Union?

[Tom Brake]

I am sure my hon. Friend is aware that under the EU directive covering VAT it would not currently be possible for VAT on gas and electricity supplies to be reduced below 5%. We know that rising energy prices are hitting many households hard at a difficult time, which is why in response to an earlier question I set out exactly what the Government are doing about the issue. The Government’s view is that the best way to keep everyone’s bills down is to help people save energy, and to ensure there are fair tariffs and to encourage competition, which is exactly what they are doing. If the Government were to pursue the approach that the hon. Gentleman suggests, they would also have to say where the extra money would come from to make up for the loss in VAT.

[Mark Pawsey (Rugby) (Con)]

Has the Deputy Leader of the House seen the recent European Parliament ruling on e-cigarettes, which determines that an e-cigarette is not—I repeat not—a medicinal product? Given that the Government remain committed to increasing regulation in the UK, may we have a Department of Health statement on what action it will take to enable smokers who are looking to reduce their dependency on tobacco to continue to use e-cigarettes?

[Tom Brake]

The hon. Gentleman is right to ask the Government to set out our position. We were disappointed that the European Commission’s proposal to regulate products including e-cigarettes as medicines was not supported by the European Parliament. The Government believe they need to be regulated as medicines. As he is aware, in the meantime licensed nicotine replacement therapies are available to help to reduce the harm of smoking to smokers and those around them, as recommended by the National Institute for Health and Care Excellence.

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

The Care Quality Commission has raised concerns about maternity services in my local Medway hospital. May we have an urgent statement from the Secretary of State for Health on Government policy on maternity services and what is being done to get more midwives into our hospitals?

[Tom Brake]

I thank the hon. Gentleman for flagging up his concerns about his local hospital in Medway. He will be aware that the Government are taking action on midwives. He might also be aware that there is a record number of midwives in training. There will be 1,300 or so additional qualified midwives by the middle of this academic year in comparison with the beginning of the Parliament.

[Andrew Jones (Harrogate and Knaresborough) (Con)]

Earlier this month, the OECD published a report showing that young adults in England have among the lowest results in the industrialised world in international literacy and numeracy tests. The report showed that this is the only country in the survey in which results are going backwards, with higher numbers in the elder cohort than in the younger cohort. May we therefore have a debate on standards in schools, focusing on why such a high proportion of academies and free schools are classed as outstanding?

[Tom Brake]

Like the hon. Gentleman, I was quite depressed at what the report said on the progress young people are making. Clearly, literacy and numeracy are the foundations on which all further achievement in education depend, and are critical for work and everyday life. We need to do more work to raise the quality of English and maths throughout the country. Our reforms to schools and further education will improve the quality of the teaching work force, reward the best providers and ensure that learners are stretched to achieve the best they can. He might have heard the Minister for Schools set out in his statement last week exactly what we are doing to ensure that standards in all schools are improved.

[Mr Philip Hollobone (Kettering) (Con)]

Like most of my constituents in Kettering, I believe that if a foreign national commits a crime they should be sent back to their country of origin and banned from re-entering the UK. That very sensible policy platform is outlined in my Foreign National Offenders (Exclusion from the United Kingdom) Bill, which is scheduled for debate tomorrow. Are the Deputy Leader of the House and Her Majesty’s Government inclined to support that sensible policy?

[Tom Brake]

I am aware of the hon. Gentleman’s Bill and his concern about foreign nationals who commit crimes. We will listen to the debate on his Bill, but I cannot reassure him today from the Dispatch Box that the Government will support it.

[Mr Speaker]

I call finally Mr Christopher Pincher.

[Christopher Pincher (Tamworth) (Con)]

Thank you, Mr Speaker. I know my place; regrettably, you appear to know it, too. Be that as it may, may we have a debate on entrepreneurship? Tomorrow, I am meeting Tom Robinson, who at the age of 22 is one of Tamworth’s youngest entrepreneurs. He began by selling T-shirts from a market stall and is graduating to selling them from his first shop in the town centre. A debate would allow hon. Members to discuss what help we give and what more help we could give to young entrepreneurs such as Tom to help them to get their businesses off the ground.

[Tom Brake]

Clearly, we left the best question till last. I congratulate the hon. Gentleman’s constituent, Tom Robinson, on the effective entrepreneurship he is deploying to promote his business. From small things grow much larger businesses. The Government are clearly committed to helping entrepreneurs. We have made significant funds available—loans-wise—to young people who are setting up businesses. We are growing jobs in the private sector and have the largest number of businesses registered, and business confidence, construction, manufacturing and exports are all up. We are beginning to see the economy as a whole moving in the right direction.

Points of Order

Thursday 24th October 2013 Commons Chamber

11:25

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

On a point of order, Mr Speaker. I would like to raise the issue of access to the House at busy times. Even on a day like today, when we are about to debate interest rate swap derivatives, there is a lot of interest among angry constituents. Have you noticed that recently the queues to get into the House for meetings with Members of Parliament have sometimes been an hour and a half to two hours long? That is new. Will you get someone to look into why these queues are so long? I am told it is not a matter of security, but something else. The House should be more accessible.

[Mr Speaker]

I certainly shall, and I shall revert to the hon. Gentleman and, as necessary, to the House. I am not sure with what frequency queues are lasting that long, but if it is a regular phenomenon as opposed to an exceptional one that is very unsatisfactory. The hon. Gentleman is nodding to suggest that it is a regular phenomenon. If that is so, it is disturbing. I will look into it and I will come to back to him and, if necessary, to the House.

[Ian Murray (Edinburgh South) (Lab)]

On a point of order, Mr Speaker. Newspaper reports today say that the New Zealand Government have agreed to reduce their universal service obligation for post from six days to three, following heavy lobbying from New Zealand Post on the unsustainability of the USO. The Minister with responsibility for Royal Mail told the House in Business, Innovation and Skills questions last month that changing the USO in this country required primary legislation. That was later changed in a letter to my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop), but the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson) refused to correct the record during BIS questions this month. Is there any mechanism by which we may have the Minister clarify the position in the House on how the USO can be changed?

[Mr Speaker]

I cannot say that I am familiar with the minutiae of public policy in New Zealand; nor is that a matter properly for the Chair. Ministers, in common with all other Members, are responsible for the accuracy of the statements they make to the House. If a Member thinks that an error has been made, there are opportunities outside the Chamber and through the Order Paper to pursue such a matter. Meanwhile, the Government Chief Whip and other members of the Government are on the Treasury Bench and I trust they will have heard the hon. Gentleman’s point of order.

Backbench Business

Thursday 24th October 2013 Commons Chamber

Interest Rate Swap Derivatives

Thursday 24th October 2013 Commons Chamber

11:27

[Guto Bebb (Aberconwy) (Con)]

I beg to move,

That this House considers the lack of progress made by banks and the Financial Conduct Authority on the redress scheme adopted as a result of the mis-selling of complex interest rate derivatives to small and medium businesses to be unacceptable; and notes that this lack of progress is costly and has caused further undue distress to the businesses involved.

I am surprised to be back here 15 months after the first debate on this important issue. I appreciate the Backbench Business Committee—the Chair is in her place—once again offering time to debate it. The first debate made a significant difference. Prior to that debate, the Financial Conduct Authority and the banking sector were refusing to acknowledge that there was an issue that needed to be dealt with. A few days after the first debate, that changed and a pilot scheme was announced.

Members who have followed this issue carefully are aware that the pilot scheme found that approximately 91% of cases investigated between July 2012 and January 2013 had a technical mis-selling, so the process has highlighted the mis-selling of these products. The House should take some comfort in knowing that securing the second debate has also resulted in a significant concession from the banking sector. Members of the all-party group on interest rate mis-selling have argued long and hard that the redress scheme had a central flaw, which is that the technical redress for the mis-selling of interest rate swap derivatives and the consequential losses were linked within the redress scheme. That gave the banks in question a significant advantage, because small businesses facing heavy cash-flow problems were inclined perhaps, under the scheme as it stood, to accept an offer of technical redress without fighting hard over consequential losses, simply because they were desperate for the cash.

As a result of the announcement of this debate last week, HSBC said on Tuesday that it was separating the technical redress from the consequential losses, and other banks have followed. My first call today, therefore, is for the rest of the banks involved in the redress scheme to follow HSBC’s and RBS’s lead. It is several months too late, perhaps, but it is the right decision, and we want to see the other banks following.

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

Does the hon. Gentleman agree that the FCA is still dragging its feet and that this has gone on for far too long? I am helping Ged Fitzpatrick, who has a care home in north Wales and who recently suffered a heart attack. I am sure that that had something to do with the stress of this process, which has gone on for far too long.

[Guto Bebb]

Bully-Banks surveyed its members and found that the health impact on them had been significant. I accept that the FCA still has ground to make up, but despite its stating in September that linking both payments was the right thing to do, I am pleased that yesterday it welcomed the decision to separate them. I would rather see a sinner repent, even late in the day, than no changes whatsoever.

[Mr Jack Straw (Blackburn) (Lab)]

I wish to express my gratitude to the hon. Gentleman for his leadership on this issue. Hon. Members on both sides of the House are very grateful. Like so many colleagues, I have a firm in my constituency—it does not want to be named—that has been in this situation. I was able to get the redress payment paid and was about to get compensation in hand, when the FCA intervened to say, “Oh well, the 8% simple interest paid for the redress payment is sufficient compensation for the consequential losses.” Does he accept what must be blindingly obvious—that no bank seeking redress for a loss that it had unfairly suffered and then seeking compensation for consequential losses would dream of ever seeing the two rolled up together? What is sauce for the goose must be sauce for the gander.

[Mr Speaker]

We all look forward to the publication of the right hon. Gentleman’s thesis on this subject, but in fact I think we have just heard it.

[Guto Bebb]

I accept the right hon. Gentleman’s point. This is clearly an important step forward, however, and we should take comfort from the fact that this place can influence the behaviour of the banking sector. I will be discussing consequential losses later in my speech.

It is fair to say that the 91% finding in the pilot scheme has been replicated in the work done within the redress scheme. The figures released by the FCA in August and September on the individual performance of banks—something for which the all-party group called—have clearly shown that 93% of cases in the redress scheme involved actual mis-selling. So again we have proved that there is an issue that needs to be dealt with.

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

I echo the praise from the right hon. Member for Blackburn (Mr Straw) for my hon. Friend. Does he have sympathy, as I do, for companies with more than 50 employees that are not financially sophisticated and which were mis-sold these products, often as a condition of loans to do business, but which now find themselves described as the sort of people who should have been able to see through the sophistry and misrepresentation of the salesmen of these products?

[Guto Bebb]

My hon. Friend mentions the sophistication test, and I will be coming to that; it is indeed something that concerns me and the all-party group.

We have found consistently that banks are admitting a mis-sale in about 93% of cases. Had we found, in the consumer mortgage market, that 93% of mortgages had been mis-sold, would we have allowed nine months to pass between those findings and the situation we now face? We have to ask the question: is it right that these businesses should be treated differently because they are small businesses, when we have found that there has clearly been mis-selling?

[Steve Brine (Winchester) (Con)]

I have many constituents, some of whom are outside this place today, whose businesses are in limbo while they wait for this interminable delay to be sorted. They are unable to press on and employ the people they want to, to grow their businesses, pay their taxes and help to grow the economy, which is what we all need to happen. That is the bigger point in this debate: the impact on the wider economy.

[Guto Bebb]

My hon. Friend makes an important point, which those on the Front Bench need to take seriously. These businesses have been unable to invest because they simply do not know whether they are financially feasible. Time and again, I have heard stories of people with investment plans who, rather than implementing them and growing their businesses, have been closing elements of their businesses, making staff redundant and just trying to survive.

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

The hon. Gentleman mentioned the situation facing small businesses. Does he agree that some small companies are afraid to challenge their banks because their loans could be cancelled?

[Guto Bebb]

That concern has certainly been raised, but I keep receiving assurances from the banks that that is not the case. I want to take those assurances at face value and would still recommend that anybody who has been sold one of these products should undoubtedly go and talk to their banks. If the banks are unsympathetic, they should come and talk to their MPs, because we can and should intervene.

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

Will my hon. Friend give way?

[Guto Bebb]

I will take one quick intervention, but then I will have to make some progress.

[Stephen Mosley]

Is it not the case that some customers do not know that they have been sold swap agreements? Some people have been sold hidden swaps and do not know about it. Does my hon. Friend not think that the banks have a duty to inform customers themselves if they sign people up to such agreements?

[Guto Bebb]

I am grateful for that intervention. I will come to hidden swaps later—“embedded swaps” is the technical term; “hidden swaps” is a fairer way of describing them—because they are a big issue and we need to address them.

The setting up of the redress scheme was the reason why we called this debate. It has taken months to reach an agreement to ensure consistency across the 11 banks involved. Originally we were told that Christmas was the deadline for completion. However, at this point in time there are 30,000 businesses in the cohort—I think that that figure is an underestimate, because of embedded swaps, for example, and the way the sophistication test works—so frankly the Christmas target will not be met.

[Kelvin Hopkins (Luton North) (Lab)]

rose—

[Guto Bebb]

Before I take any further interventions, it is worth making this point. I was recently involved in a mediation meeting with one of the banks and one customer, whom I cannot name, even with parliamentary privilege, apparently. The bank in question made it clear that it could not promise a date for paying redress before 2015. As such, although the intention of achieving consistency is correct, we have to put pressure on the FCA to ensure that we move at a faster pace.

One of the big frustrations felt by the businesses affected and the APPG is that since the pilot scheme was completed, the banks involved have spent upwards of £300 million on the administration of the scheme and recruited up to 3,000 people to deal with it, yet by the end of September only 32 businesses had been offered redress, to the total value of £2 million. I understand the complexity of getting this right, but it is simply not good enough for the banks to be spending that much money and for the businesses that need redress not to be getting it.

[Mr Mark Prisk (Hertford and Stortford) (Con)]

I am grateful to my hon. Friend for giving way; he is doing a fantastic job. It is becoming clear to businesses in my constituency that, in the absence of any penalty after the current agreement—which, of course, is voluntary—the banks are just playing for time.

[Guto Bebb]

That is an important point—that the banks are possibly playing for time—which I think will be touched on in other speeches in this debate. As for the ability of businesses to try to get compensation through litigation, it is important that they take action to protect their positions. The redress scheme is a step forward. It is not working perfectly, but I would still advise businesses to protect their position from a legal point of view.

[Mr David Heath (Somerton and Frome) (LD)]

Will the hon. Gentleman give way?

[Guto Bebb]

I will take a final intervention for the time being.

[Mr Heath]

I thank the hon. Gentleman for giving way and for his work. He said earlier that he could not name his constituents or the bank involved, but I will certainly name Chris and Angela Hays, whom I am trying to help, and the Royal Bank of Scotland. Is it not the case that we have seen a double whammy? We have seen a big bank using a scam on its customers and then using every device to prevaricate and procrastinate to avoid paying the money that those businesses need to survive.

[Hon. Members]

Hear, hear.

[Guto Bebb]

Hon. Members have made their feelings about that intervention very clear; we all share that frustration.

The FCA and the banks have made it clear that the suspension of swap payments is a concession that has been offered, but as yet only 1,000 businesses have been offered the opportunity to suspend payments. A key message that this debate needs to send out is that if a business wants to request a suspension, it has to be in financial distress. Some banks are stating that a business requesting a suspension is admitting to being distressed and therefore needs to go into special measures. Any small business would be loth to find itself dependent on a team of specialists from its bank’s restructuring department. We need to ensure that a suspension of payment can be offered without the need for a business to go into special measures with its bank.

The delays are the reason that we called this debate, but I also want to highlight other concerns that have been expressed about the redress scheme. I have touched on some of them in response to interventions. A key issue is the sophistication test. I acknowledge the need for such a test. Huge businesses can derive benefits from these products, and they will have the sophistication and expertise to understand what they are being sold. However, there is concern about the decision to introduce a sophistication test as part of the redress scheme.

Anyone who takes out a swap in excess of £10 million will be excluded from the scheme because they will be deemed to be sophisticated. The FCA has found that a key aspect of mis-selling involves banks over-hedging loans taken out by businesses. In other words, a business might have a loan facility of £5 million but a hedge in excess of £10 million. In such a situation, the fact that the bank was guilty of mis-selling would provide it with protection within the redress scheme. That is unacceptable. We need a greater degree of flexibility on the issue of sophistication.

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

Would my hon. Friend also accept that the banks have made these processes unduly complex, which has resulted in delays in addressing the issues? In the case of one company in my constituency, it has taken the bank 16 months just to recognise the fact that the company was unsophisticated, to use my hon. Friend’s language. That is clearly unacceptable.

[Guto Bebb]

I agree that 16 months is a very long time. Even when cases are accepted into the redress scheme, they seem to be taking a long time. The banks would argue that businesses need to engage with them, but I believe we still need to look carefully at this matter. The sophistication test should be more flexible, and the discrepancies that I have described need to be acknowledged.

Another discrepancy involves the asset value. A business could be excluded from the scheme because of the asset value that it holds. In effect, it could be argued that a business that had been lucky enough to invest in property at the right time should be excluded from the redress scheme because of that piece of luck. If the asset value had increased to a certain level, that could result in the company being excluded from the scheme.

There is also a lack of consistency. In some cases, the banks are ignoring the sophistication test because they believe that a customer would fail it and therefore be eligible for the redress scheme. Instead, they are moving the customer straight into the assessment of redress. If they can ignore the sophistication test in some cases, where is the consistency? A member of the all-party parliamentary group argued strongly on behalf of a constituent who had a £12 million swap and, lo and behold, the constituent was subsequently allowed to become part of the redress scheme. That was an excellent result for that business, but again, where is the consistency? The FCA needs to look carefully at the sophistication test.

My final point on the sophistication test is that, if a business spends six months waiting to be assessed, those six months will be lost in regard to the statute of limitations for taking legal action. The FCA needs to recognise that, because it is potentially dangerous for the businesses concerned.

A further concern relates to the alternative products on offer. It has been said time and again that if these complex products are unsuitable, it cannot be right to introduce a redress scheme in which a swap can be substituted by a slightly less complicated swap. It is also important to note that a business will be offered an alternative product only if it has failed the sophistication test—that is, if it has been deemed to be unsophisticated. I find it difficult to understand how any alternative product other than a cap could possibly be suitable.

Another reason why the cap is the obvious alternative product is that if businesses had been told clearly of the cost of the products they were taking on board back in 2006-07, they would have seen that a cap would have offered them significantly better value for money. Why was the cap not offered? Probably because of the financial imperative of the banks to sell something more complex and more rewarding. It is thus important to highlight the fact that having a complex derivative rather than a cap as alternative product is a real concern. If businesses have been classified as unsophisticated, that issue should be recognised and we should try to ensure that we provide a cap as the only acceptable alternative product.

[Richard Fuller (Bedford) (Con)]

My hon. Friend mentions the omission of information from the sales process; does he also accept that the information needed was introduced late and that only opinions were offered? What was really going on was a sophisticated sales process to dupe people who may have been financially unsophisticated for the financial benefit of the banks. Does he believe that that should mean that the people in charge of that process should face criminal sanction, not just financial redress for their customers?

[Guto Bebb]

That is certainly a call that some of the organisations campaigning on this issue have made, and I am sure that other hon. Members and members of the all-party group will expand on that theme in their speeches.

We thus need to look carefully at the alternative product issues. It is fair to argue that businesses might have been looking for interest rate protection, but it is difficult to argue that they would have been tempted by an expensive product in 2006-07, when a cap offered such good value for money at that time. I am unpersuaded of the arguments for a complex derivative.

[Richard Benyon (Newbury) (Con)]

rose—

[Guto Bebb]

I will take my hon. Friend’s intervention, but this will be the last because I am conscious of the time.

[Richard Benyon]

I am grateful to my hon. Friend. Many of these products were sold on the basis of a projection for interest rates to go up. There is a slam dunk case against some of these companies for showing a graph of projected interest rate rises when, of course, the opposite happened. Surely that should be a factor when it comes to whether or not firms’ were sophisticated about the product that was eventually sold.

[Guto Bebb]

I could not agree more with my hon. Friend. The expectations back in 2007 were that interest rates would go down, yet there were numerous examples of bank sales teams informing businesses that they needed to protect themselves against a rising interest rate scenario—contrary to the information that the banks themselves had.

Another key call is why there is no appeal process within the redress scheme. There would be much more confidence in that scheme if there were an appeals process. I understand that the Financial Ombudsman Service offered to provide an appeals service, but the offer was rejected by the FCA. It would give some comfort without complicating issues too much if, for example, assessors working for one bank in the redress scheme were able to provide an appeals process for another bank in it. That may not be perfect, but it would help to avoid over-complicating what is already a complicated redress process and it would give businesses the confidence that there is an appeal process and that they can turn to somebody else to argue their case. We should be very concerned about having a redress scheme without any appeal process, as it goes against the principle of natural justice, while opening up the door to litigation, when the whole point of the redress scheme was supposed to be to avoid litigation.

Embedded or hidden swaps, which are currently excluded from the redress scheme, are another key issue to highlight and a matter of huge concern. If we think about it, a hidden swap is quite possibly worse because businesses were not even aware that they were also taking out with their fixed-rate loan an interest rate derivative product. The American author, James Riley once said:

“If it walks like a duck, and swims like a duck and quacks like a duck, then it must be a duck.”

The same point needs to be made about these hedging products. If the impact of an embedded swap is the same as the impact of a separate hedging product taken out with it, it is difficult to argue that the small businesses that were sold those products should be excluded because of a technicality relating to whether they are subject to the FCA regulations. I ask the Minister to respond on that specific issue.

A publican from Aberystwyth, Mansel Beechey, was sold one of these embedded products. I know Mansel very well because when I was a student in Aberystwyth, I was financially illiterate and used to cash cheques in the pub. I used to do that on a Wednesday evening and pay 50p for the privilege. On a Saturday evening, I would want to cash a cheque again, and Mansel would say, “Well, make it one for £30, and I will give you back what you gave me on Wednesday, only charging you the 50p once.” Mansel Beechey thus showed me more respect and consideration, in behaving properly towards me, than the bank that sold him the hidden swap showed to him. That business had been built up over a long period. If Mansel Beechey could show to me a degree of responsibility that had not been shown to him, there is clearly something wrong with our banking sector.

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

Will the hon. Gentleman give way?

[Guto Bebb]

I am afraid that I cannot take another intervention.

The issue of hidden swaps is important and needs to be addressed. We need to know why businesses to which they were mis-sold have been excluded from the redress scheme. Thousands of businesses have been mis-sold these products, banks have admitted that the products were mis-sold, and yet the redress scheme is not, as yet, performing as it should. I am not looking for a new scheme, but I am looking for changes, and much greater speed, in the scheme that we currently have; and I think that we need to address some of the exclusions, which are clearly unfair.

I became involved in this issue when a constituent of mine, Mr Colin Jones, came to see me. He claimed that he had been sold a complex product and that, as a result, his business had gone under. The last news I heard of Mr Jones was that he was homeless and living with his mother. He has lost absolutely everything, and because his business was a limited company, it is highly unlikely that even if the redress scheme highlights the fact that he was mis-sold the product and is in need of compensation, he will not benefit from that compensation personally. I think it wholly wrong for someone to lose his business not because he was a poor business man, not because he made a mistake, but because he was taken advantage of by his bank. Having listened to the trade calls, I am quite happy to say that publicly.

I am delighted to note the interest in the issue that is being expressed in the Chamber today, because I believe that businesses all over the country are looking to us to give a lead. I hope that the FCA and the banks will listen to what is being said, and I sincerely hope that the redress scheme will start to perform in the way in which it was expected to perform in January, rather than in the slow and bureaucratic way in which it has performed so far.

[Several hon. Members]

rose—

[Mr Speaker]

Order. More than 20 Members are seeking to catch my eye. We have also to hear, very properly, from the Minister and the shadow Minister, and I envisage the debate finishing at approximately 2.30 pm, at which point we shall need to move to the next debate. In recognition of all those considerations, I am imposing a limit of six minutes on Back-Bench speeches, with immediate effect.

11:52

[Natascha Engel (North East Derbyshire) (Lab)]

It is a pleasure to follow the hon. Member for Aberconwy (Guto Bebb), and it was a pleasure to see him before the Backbench Business Committee again, although we had hoped that the position would be resolved on the first occasion when he appeared before us. It was also a pleasure—here I echo the sentiments of other Members—to be a member of his all-party parliamentary group on interest rate mis-selling. The group has demonstrated the power and effectiveness that all-party parliamentary groups can display when they are organised around a single issue, particularly when the issue is an injustice of this kind. The Committee was delighted to be able to schedule today’s debate, and I hope that we shall have as much effect today as we did all those months ago.

I want to focus on just a couple of issues raised by the hon. Member for Aberconwy—in particular, the idea of a moratorium, but also the terrible way in which this issue has been allowed to drag on and on. It is not just the banks that are involved; the Treasury is involved as well, and we should also consider the role of the Financial Conduct Authority. When, many months ago, members of the FCA appeared before the all-party parliamentary group, many of us were unimpressed by their lack of a sense of urgency. Everyone recognised that they wanted the redress scheme to be drawn up properly, but they certainly did not show the sense of urgency that they had shown when signing people up to the mis-sold schemes when it came to the question of redress.

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

I do not know whether the hon. Lady has experienced the problem experienced by certain other Members. When the hon. Member for Harrogate and Knaresborough (Andrew Jones) and I wrote to the Financial Standards Authority about a shared case, the FSA replied that it did not deal with individual cases. We then wrote to the Minister, who told us to raise the matter with the FSA. We are going around in circles. Do we not need a different body—possibly even the National Crime Agency—to get a grip on the issue?

[Natascha Engel]

That is a very good point. We have had any number of cases where they have been passed from pillar to post. One of the terrible aspects of all this is that the individuals affected do not know where they can go to get justice, and they certainly do not have very much time to do that, because their businesses are going bust while they are waiting for justice.

[Kelvin Hopkins]

This very morning I have been speaking to a constituent who has been driven to the edge of bankruptcy by what the banks have done, and I have helped him to some extent. My hon. Friend is making a point about the lack of force behind the action that has been taken so far. Is there not a case for strong Government action now and, indeed, as the hon. Member for Bedford (Richard Fuller) mentioned, for criminal sanctions?

[Natascha Engel]

Indeed, and I am going to finish on both those points.

One way to make sure the banks cannot drag their feet in the way that they have is to impose a moratorium on the payments. That would really focus their minds. If the money is not coming in, I am sure they would try to settle this matter once and for all much more quickly. The number of suspensions of payments—and only in those cases where people are suffering significant hardship—is an absolute scandal. The fact that 30,000 businesses or individuals are waiting for some kind of redress and only 32 have had redress is also an absolute scandal. Something must be done.

[Clive Efford (Eltham) (Lab)]

My constituency also has a business that has been affected by this. When we wrote to the Financial Conduct Authority, the response was really an apology for the banks, as though this is just some sort of error that has been made. Does that not underline the fact that there has been a lack of urgency by the regulators, on whom we rely to act on behalf of our constituents when they are wronged in this way? We need more urgency from the regulators; they must get on with their job.

[Natascha Engel]

That is right and this whole scandal has shown how it has been possible to pass the blame between banks, the FCA and the Treasury, and nobody will take any responsibility for what has been an absolute scandal.

I have seen this in my casework. Mr and Mrs Chadwick buy and sell homes and their business has been very successful. These small and medium-sized companies are not just viable; they are successful. It is only because of this mis-selling scandal that they are going bust. I cannot understand the logic of this: what interest does a bank have in a business going bust and losing all its money? The logic of that is beyond me.

I am also concerned about banks that have taxpayer funding, such as RBS, which has a lot of these cases. We must look much more carefully at the link between the regulator, the banks and the Treasury.

I agree that proper criminal penalties must be imposed on those banks, individuals and organisations that have been proven to have been part of this injustice, and I also agree with the call for a moratorium.

[Steve Brine]

The issue of suspensions and the length of time this has all taken was raised with me at a business breakfast in Winchester last week. This has generated so much anger. While it was understandable that there were no suspensions while things were supposed to be done on a shorter time scale, it has now taken 16 months in some cases. That is why it is causing real hardship and anger, and I hope that point comes across loud and clear to the FCA, which I know is listening to every single word this morning.

[Natascha Engel]

I could not agree more. I do not know whether other Members have received a letter from Barclays today outlining, in not very easy-to-understand English, what it is doing and proudly proclaiming how “tightly controlled” and “heavily scrutinised” the review is

“whereby all the banks involved are required to develop a detailed methodology for agreement”,

blah, blah, blah. It goes on and on and on. If this is phrased in anything like the same way as the products individuals were sold, I am not surprised they did not understand what was going on.

[Mark Tami]

My hon. Friend talks about sanctions. A lot of these people were tricked at the last minute, whereby they were about to sign the loan and this clause was put in. They were told, “Oh no, it is an added safety for you.” Nothing was explained the other way and these people are now paying the price, but the real people who should pay the price are the banks that tricked them in the first place.

[Natascha Engel]

Not only was this a trick, but some individuals were not able to take loans unless they bought these products—that was the real scandal. The other tragedy has been: the many individuals who have taken their lives; those whose lives have been ruined; those whose marriages have broken up; and those individuals whose businesses have gone bust. What happens to them under any redress scheme? Those are the sorts of individuals that Bully-Banks has done a very big job to support, and I hope that today’s debate will mean that if the FCA is listening and if the banks are listening, they will do something about these people, and quickly.

12:00

[Mark Garnier (Wyre Forest) (Con)]

May I start by adding my congratulations to my hon. Friend the Member for Aberconwy (Guto Bebb), who has not only been brave in what he has done on this matter, but has shown outstanding leadership in a technical, complex issue?

I wish to develop a couple of points, the first of which has started to resolve itself. I am talking about the big question of the linking of consequential loss to the technical redress. Clearly, the technical redress is people’s money—that is an agreed thing, and it is only right that it should be paid as soon as possible. The consequential loss was always a separate issue, and to have linked it was completely the wrong thing to have done. HSBC has broken ranks and RBS is following suit, and Martin Wheatley is now coming on board, saying that there should be no conditionality between the technical redress and the consequential losses claims. That is a good thing; it is excellent progress, and we can thank my hon. Friend for his work on that.

[Peter Luff (Mid Worcestershire) (Con)]

May I add my thanks to my hon. Friend the Member for Wyre Forest (Mark Garnier) for the leadership that he, too, is showing on this issue? Is it his experience, as a fellow Worcestershire MP, that this scandal, although apparently technical, is affecting well run, long-established and deeply respected real businesses across a wide range of sectors, and that the delay is going to kill businesses that our constituents value very deeply indeed?

[Mark Garnier]

My hon. Friend is absolutely right in what he says. The banks made an incredibly cynical effort to persuade people to enter into these contracts where, in many instances, they should not have done so. Sometimes it was the right thing to do, and I think that many businesses will agree that they just got it wrong, but we need to look after the smaller businesses that were simply mis-sold these products.

[Mark Lazarowicz]

Do not the banks, or at least some of them, also have to be much more proactive in identifying the people who been the business victims of this practice? As we all know, whenever we have a debate such as this, more people come forward who were frightened to come forward before or who did not even realise that they were victims of these schemes. It is up to the banks to be much more proactive in identifying the cases and then trying to resolve them.

[Mark Garnier]

That is absolutely right. Part of the problem, however, is that the banks have an incentive not to get in touch with people, for obvious reasons. That relates to the second point I wish to develop. It is a technical point, but it is incredibly important in terms of why it is incentivising banks to delay technical redress for as long as they can, and it has implications for the financial stability of the banks.

We should not think of these things as stand-alone products, but should recognise them for what they are. They are not stand-alone products; there is another side of this trade. They are swaps for a reason, and it is important to understand what a swap is. Any one of our victims will have been persuaded to take out a contract with the bank that has the beneficial effect of capping interest rate payments at a certain level. That is a virtuous thing and we are all familiar with the financial planning behind the thought process, through things such as fixed-rate mortgages. But these are not fixed-rate mortgages; they are stand-alone products that relate to a loan, but are not part of that loan. Importantly, many people have paid off the loan but still have the outstanding liability on the swap. The quid pro quo of having a fixed cap on interest payments is the collar that has caused so many problems for our victims, whereby they have to pay a relatively high rate of interest in today’s terms. What is not fully understood is that this is not a simple contract with the bank, as it first appears. The bank is not taking a naked bet with its customers that, in the environment of falling interest rates, it has won. It is not receiving as profit the penalty in the increased premiums being paid in interest rates by the victim, because for a swap to actually be a swap, there is a matching trade with a third party on the other side. What the banks receive in higher interest rate payments they are paying to an opposing and third-party counterpart on the other side.

I shall now go into a bit more detail. Businesses may want to make sure that they do not pay too high an interest rate; that is why they are persuaded, rightly or wrongly, to take the swaps. However, an organisation such as a pension fund needs to guarantee its income should a severe drop in interest rates, such as we have seen, occur. It would want to take a position opposite that of the businesses, which are the victims.

The pension fund will forgo a rise in rates while winning the guaranteed floor rate that it will receive. For a business to have a rate cap at, say, 7%, it will guarantee to pay no less than 5%. For a pension fund to be guaranteed to receive a minimum payment of 5%, it would agree to receive no more than 7%. In that way, the business’s and pension fund’s interests are perfectly aligned in opposition.

As both the pension fund and business are clients of the bank, the bank does two simultaneous trades—one with the business, to cap and collar the rate payments, and the other with the pension fund, to collar and cap the interest rate receipts. The bank makes a small margin, but essentially its liability, if everything stands up, is perfectly and oppositely aligned. That is the symmetry of liability and the basis of the swap market.

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

I thank my hon. Friend for his understandable explanation of the product. I will be honest—I am new to this issue, which constituents have brought to my attention. Is it possible to explain the issue to an individual in a phone call lasting one minute and 20 seconds? That, apparently, constitutes the contract between the bank and the client.

[Mark Garnier]

I will try to explain the issue as simply as I can now.

Imagine a second-hand-car dealer. He may buy a dodgy motor on his own books and try to make as big a turn as he can, but he risks not getting his money back. Now imagine a car dealer with a valuable vintage car who aligns a seller and buyer at exactly the same time. He takes a turn with no risk at all, and that is how a swap behaves. Now imagine that, having lined up that trade, he takes the money from the buyer, so has a contractual agreement with them, and agrees a sale with the seller. However, on the way to deliver the car, he writes it off in a crash and is not insured. He still has liabilities on both sides—he still has to deliver a car to the buyer and has to pay the seller. That is the mess that the banks are in. They have caused themselves a massive car crash and have to look after the other side of the trade.

We are fully aware of the losses to the banks on the financial redress scheme—plus, obviously, the consequential loss scheme as well. We have heard about how much has been put aside, and there will be debate about whether that is the right amount or not. However, we have heard nothing yet about the value of the liability on the other side of the swap—the liability to institutions, most likely to be pension funds, that still needs to be honoured. That has implications for the stability of the banks and shows why it is important for banks to keep the redress scheme running for as long as possible.

[Richard Fuller]

rose—

[Mark Garnier]

I see that my hon. Friend wants to intervene, but may I develop my point?

The financial redress scheme has a specific value, based on a number of factors—including, crucially, interest rates and time. Similarly, time to run is a key component of the value of the other side of the swap. With interest rates so low, the longer the time to run, the higher its value to the customer and the higher the liability to the bank. As a result, we get a built in incentive for the banks to delay settlement for as long as possible. With each day that goes by, the liability on the other side of the swap is reducing.

Harry Wilson, of The Daily Telegraph, has put in freedom of information requests to the Financial Conduct Authority to find out exactly what the loss on the other side of the trade will be. Amazingly, nobody seems to have the answer. It seems inconceivable that the banks would not have the information. Any derivatives trading room team, especially on a swaps desk, will have detailed information on the extent of the liabilities; they have to know that. Even if the swaps team does not, the risk or treasury department should know it—loads of people should know it. It is extraordinary that nobody is coming forward with the information.

The issue has been dragging on for far too long. Too many businesses have failed as a result of it and it is likely that too many more have fallen into that twilight zone of bad forbearance by banks, which sometimes keep otherwise dead institutions alive simply because it is in their interests.

I spent the best part of the last year on the Banking Commission considering the matter. It is worth noting that this crisis happened before the Banking Commission, the financial crisis and the rest of it. However, today the banks have to prove that they have moved on, that they should now be allowed to come into polite society and will do the right thing by the consumer.

12:09

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

I pay tribute to the hon. Member for Aberconwy (Guto Bebb) and all the supporters of this debate on raising an important issue. I also pay tribute to my Treasury Committee colleague, the hon. Member for Wyre Forest (Mark Garnier) for his detailed explanation of a complex aspect of this subject that probably not everyone understands.

This is the latest in a series of issues that has corroded, damaged and sometimes destroyed trust between banks and their customers following the payment protection insurance scandal. We should pause and consider a couple of features of the PPI scandal. It was characterised, first, by a refusal to admit that there was a problem; secondly, by a refusal to take responsibility for that problem; and finally, by a huge bill for the banks because it had taken too long to face up to those things. I wonder whether any of those lessons have really been learned given the way that this issue is being dealt with.

Like the hon. Member for Wyre Forest, I spent much of the past year serving on the Parliamentary Commission on Banking Standards chaired by the hon. Member for Chichester (Mr Tyrie), where we looked into the standards and culture of the banks more widely. We found a sales culture, backed by the bonus systems, going right down to branch level. The banks pushed products like this, often allied with a product that the customer wanted, namely a loan, yet sometimes the customer was not even aware that a product was being sold to them or, if they were, whether it was a voluntary agreement or something they had to accept as a condition of the loan.

[Stephen Lloyd (Eastbourne) (LD)]

The right hon. Gentleman has hit on something really important, which is that the banks’ whole modus operandi was to sell products that individuals wanted and slip in the interest rate swaps underneath. I am glad that he has reminded us of that. Does he agree that it is important for these businesses to know that it has been agreed on the Floor of the House, and it is recorded in Hansard, that they will be offered compensation that aims to put them back in the position in which they would have been if there had not been a mis-sale, plus interest rates of about 8% a year?

[Mr McFadden]

I do agree, but there is also the question of who gets that redress and who does not.

Underneath this sales culture, we found that instead of a culture of a duty of care to the customer there was—characterised by the combining of products, often a simple product with a complex one—a culture of “buyer beware” that put the responsibility for fully understanding and being aware of all this in the customer’s lap, with, in many cases, the bank showing a lack of responsibility.

[Mr Straw]

I entirely endorse what my right hon. Friend has said. Does he accept that what made the banks’ behaviour even less acceptable is that such was the complexity of the swap products that often—and to my certain knowledge in a case that I have dealt with—the person providing the loan from the bank had no proper understanding of how the hedge product was going to work?

[Mr McFadden]

That is a really important point. Having heard the speech by the hon. Member for Wyre Forest, I wonder how many of the people selling these products would have been in a position to explain the consequences to their customers. I think we know the answer.

Products were being sold, allied to another product, that may or may not have been suitable for the person buying them. The customer may or may not have fully understood what they were buying, but they were left fully with the consequences of having bought it, to the extent that we had the situations highlighted in this debate whereby the banks pursued customers to such a degree that they were put out of business. We should recognise that hedging is not always wrong, and trying to insure against risks is not always wrong, but a degree of understanding is important. People have to understand what they are buying and the product has to be suitable for them. When the lifetime of the hedging product is completely different from that of the loan, there is a serious problem about that product’s suitability.

This issue provides a really important test of the standards and culture in the banks after everything that has happened. They have to show whether they have learned the lessons of previous mis-selling scandals or whether there has been a repeat of the pattern of behaviour that we saw before in which there was first a refusal to face up to responsibility. That was followed by increasing anger among the customer base and the destruction of trust, followed by a redress scheme that might have ended up being more expensive than the one that might have been put in place earlier.

This is also a test of the FCA. We are in the early stages of a new regulatory system, as the FCA has been in existence for only about six months. The system of redress that it has proposed is an important test of whether it is going to be able to do its job in restoring trust between banks and consumers in the face of sometimes increasingly complex financial products;

[Mr Heath]

The right hon. Gentleman is absolutely right to say that restoring trust between customers and banks is a crucial element. Businesses must not only get redress for what they have lost but be put back into the position that they would have been in and that includes the relationship with the bank, credit lines, and everything else that makes small businesses work.

[Mr McFadden]

The hon. Gentleman makes a good point. Culturally, we should be trying to get to a situation in which the banks have a duty of care to their customers instead of marketing and developing products that are driven by a sales and bonus culture that, in effect, says “Buyer beware” and puts all the onus on to the customer.

The proposed system of redress is based heavily on the sophistication test. That leaves a lot to be desired, because unless it is very carefully designed it cannot take account of the wide variety of types of business. Size and sophistication are not the same thing. It cannot take account of the wide variety of circumstances in which these products were sold or the wide variety of difficulties that businesses find themselves in.

Previous mis-selling scandals have been characterised by years of unnecessary delay that have caused incredible grief to those subject to them. If there is one further lesson that should be learned about interest rate swaps, it is that this process should not drag on for years. We need a system of redress that learns the lessons of the past and is implemented as quickly as possible.

12:17

[Steve Baker (Wycombe) (Con)]

I, too, pay tribute to my hon. Friend the Member for Aberconwy (Guto Bebb), who has led this cause absolutely heroically. I am sure that Members across the House will wish to join me in saying to my hon. Friend the Member for Wyre Forest (Mark Garnier) that I wish I could say that he had anticipated my remarks. I feel sure that his speech will stand as a landmark in terms of making this debate and these products easy to understand.

The system of money and bank credit ought to be the lifeblood of a free economy and a prosperous society, but as we have heard in this debate, and from across our constituencies, the banking system is not the servant of a free economy but has become its master, and a tyrannical master at that. Businesses in our constituencies such as Stewart Linford, furniture makers in High Wycombe, have found themselves treated utterly appallingly.

I hope that my hon. Friend the Financial Secretary will not stay his hand when he criticises the financial system for what it has done. Too often, Government Members treat the banking system gently as if to criticise it were to criticise a free-market system. It is not a free-market system. It is heavily regulated, heavily directed by the state, and awash with implicit and explicit guarantees that produce moral hazard and perverse incentives. Apart from anything else, interest rates have been unexpectedly low because of the interventions of central banks. When Andy Haldane, the executive director of financial stability at the Bank of England, went before the Treasury Committee and explained that the bond market bubble was the biggest threat to financial stability, he clearly stated that the Bank had deliberately inflated it. The fact is that the system of money and banking is state directed.

[Stephen Lloyd]

Given the behaviour of some of the banks, does my hon. Friend agree that the Financial Secretary and the Government should consider adding a further penalty if repayments are not made within a certain time frame?

[Steve Baker]

I am grateful to the hon. Gentleman for his intervention. I want to make the case that I think that, in this regard, the banking system may have crossed from mis-selling into fraud.

This morning I was shown a transaction by its author that was part of a system in which a bailed-out bank hid losses of £1 billion on a £10 billion loan portfolio. It was done lawfully and it was enabled by the accounting standard of the international financial reporting standards. The way in which the IFRS accounting standard treats derivatives allows people to up-front unrealised cash flows as profit and then pay bonuses out of them. That is probably why so many of these products have been sold.

The right hon. Member for Wolverhampton South East (Mr McFadden) spoke eloquently about the bonus system and the incentives it creates. The Government should look extremely carefully at what has been done with regard to the use of IFRS accounting, the incentives it creates and what that means for people who sell products and take bonuses. They should also look at whether the IFRS complies with UK company law.

[Richard Fuller]

My hon. Friend is a defender of a system of true free-market principles. He has identified the twin problem mentioned by my hon. Friend the Member for Wyre Forest, which is that, in addition to the unfunded liability cause, we have now booked the profits and paid the bankers for going through the process that duped the people. Those involved should face criminal sanction.

[Steve Baker]

My hon. Friend makes an interesting point. I want to live in a free society with a free and commercially successful banking system, but we have to ask ourselves whether the current system has incentivised behaviour that is fraudulent under the law as it stands. The last thing we must do is allow ourselves, in a frenzy of condemnation, to start criticising a system on which our civilisation depends, when that criticism is unjustified. We should be looking at the law as it stands and checking—carefully investigating—whether individuals have broken the law. I am particularly concerned about IFRS. I do not think it complies with UK company law and think it has incentivised behaviour that is probably fraudulent.

Banking ought to be simple. It ought to be about connecting depositors with those who wish to borrow in order to invest for productive purposes, such as buying a house or even going on holiday, but predominantly it should be about investing to create real resources and real wealth, and to increase productive capacity and the balance of capital invested per head, so that real wages increase and the cost of living goes down. Instead, we have ended up with a system in which poor state intervention from one end to the other has created so much moral hazard and so many perverse incentives that it has become abundantly clear that a small number of individuals—far fewer than 1% of the population—have captured the state in order to turn implicit and explicit taxpayer guarantees, or bail-out funds, into personal remuneration. It is a disgrace.

The banking system needs to be made honest, and quickly, and part of that is a system of compensation for people who have been treated extremely badly.

12:23

[Nia Griffith (Llanelli) (Lab)]

Thank you, Madam Deputy Speaker, for allowing me the opportunity to speak in this very important debate. I congratulate the hon. Member for Aberconwy (Guto Bebb) on the work he has done over the years and on bringing the matter to the House’s attention through this debate.

This issue affected successful businesses that were trying to expand and help create more jobs in the local economy. Some of the businesses that have visited me were successful and had excellent plans for expansion. The really sad thing is that during their negotiations to change or expand their loans, it was often the case, as my hon. Friend the Member for Alyn and Deeside (Mark Tami) has said, that they were told right at the very last minute that, unless they accepted this clause, the whole thing would be shelved and they would lose all the transactions and work they were about to undertake. That was significant for them, because it meant having to say yes or no to a very important loan.

I think that such businesses are intrinsically fearful of going to the banks, which is a real problem. The terms and conditions for small businesses have changed so much over the past few years that they are fearful that, if they explain their difficulties to a bank, they will suddenly be told that their terms and conditions for a loan will be changed again. That is a real disincentive. The key thing to remember is that these are people who genuinely are trying to do the right thing, but who are fearful—perhaps ashamed—because they did not know exactly what was going on in the first place, even though, as my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) has said, the people who sold them the scheme were incentivised to do so in an underhand way. Often they would not make it at all clear to the businesses exactly what they were entering into. We need to redouble our efforts and look in particular at why there are so many delays, because every delay means businesses raking up yet more debt.

[Mr McFadden]

On the sales culture, what does my hon. Friend have to say about the evidence that the Parliamentary Commission on Banking Standards received from the trade unions representing bank staff that said that, sometimes, if branch staff did not meet their sales targets, they would be taken aside, given special management and pressurised to sell more products over the next month or two in order to meet the targets on which their bonuses were based?

[Nia Griffith]

My right hon. Friend makes a valid point. I have met people who were put in that situation and who ended up leaving the bank because they found it so difficult and uncomfortable working in that sort of culture. That does not help small businesses, which want a decent banking system from which they can get decent advice and the loans they need.

The worry is that the Financial Conduct Authority and the banks are not doing things as speedily as they might and that there will be a distinct delay. We are all aware that the agreement was that an independent reviewer would look at each case and that that process would be overseen by the FSA. My hon. Friends the Members for Nottingham East (Chris Leslie) and for Chesterfield (Toby Perkins) wrote to the Chancellor over a year ago outlining what we wanted to happen. When the Financial Secretary sums up, will he tell us what progress has been made?

We want a clear message that there will be no adverse effect for people if they tell their bank that they think they may have been victims of this particular mis-selling. We also want a moratorium on the foreclosure of affected businesses by their banks. People are really worried that, if they start looking at the issue in detail and open the box, they might be forced to reschedule their loans in an unmanageable way and that they eventually might be foreclosed on by their banks. The Chancellor and the Business Secretary need to send a much stronger message to the FCA about how we want the banks to work.

As many Members have said, we want the quickest resolution possible, but time limits also need to be looked at. The problem is that businesses that signed up to these agreements back in 2006 and 2007 are now reaching the six-year limit, and they will find themselves in considerable difficulties if they do not get redress through the scheme and end up going to court. We need to look at the way in which complaints are handled and the time limit that is being allowed. Perhaps there could be movement on that issue.

In summary, this issue needs urgent attention. We need a much speedier resolution and people need to be treated properly and courteously by their banks. They should not have to be fearful of loans being rescheduled or of being thrown out of the frying pan into the fire, which is their real worry. Speed is of the essence, because these businesses provide jobs in our communities and if they go under, it could mean not one lost job, but many job losses. I urge the Financial Secretary to say what more the Government can do to put pressure on the FCA and the banks to ensure a speedy resolution.

12:29

[Mr Mark Williams (Ceredigion) (LD)]

It is a privilege to follow the hon. Member for Llanelli (Nia Griffith). Like many hon. Members, I pay tribute to my hon. Friend the Member for Aberconwy (Guto Bebb), who has shown immense leadership and tenacity on this case—not just in this debate, but more generally.

If any of us had thought that the constituency surgery meetings that we have held on this issue were unique, the turnout for the debate has illustrated the enormity of the problem. We should repeat, repeat and repeat again the point made by the hon. Member for North East Derbyshire (Natascha Engel): of the 30,000 cases, only 32 have been redressed.

I was going to talk about the inadequacies of the redress scheme, welcome though was its initiation and the progress that has been made, but time will limit what I can say about that. However, I will talk later about the fundamental omission of tailored business loans, which was alluded to by my hon. Friend the Member for Aberconwy.

My hon. Friend mentioned a constituent of mine, Mr Mansel Beechey of the Llew Du hostelry in Aberystwyth. I think that my hon. Friend has spent a bit more time in that particular pub than I have over the years. Mansel Beechey and many small business owners like him have been the backbone of the Ceredigion economy, but there have been times when I have thought that we were being targeted. The number of tourism and agricultural businesses that have come to me about these issues has been frightening. Bully-Banks helped us by putting an advert in the local newspaper about the scandal and many more cases came to light.

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

Does my hon. Friend share my concern that there are yet more small businesses out there who are ashamed to come forward and say that they have entered into such products because they think that it is their fault, rather than that of the banks?

[Mr Mark Williams]

We need to knock that on the head immediately, because there has been a concerted effort by the banks to target certain businesses. There is no need for people to be ashamed, and my hon. Friend is right that many more cases are coming to light.

Huw and Jackie Roberts of Minhafan Estates, a property development business in Aberystwyth, are in the midst of the review. They went through the “fact find” interview stage of the review six months ago and are still waiting to hear from the bank or the FCA.

I want to talk about the inadequacy and even dishonesty of the subject access requests. A sheep farmer who came to see me obtained his subject access request from Barclays, but it included presentation documents that he was alleged to have been shown at the time of sale, which he had never seen before. History can be rewritten. The fear is that, in some of these cases, history is being rewritten by the banks.

Why is the FCA advising customers that the scheme

“can deliver fair and reasonable redress without them needing to hire lawyers”?

Many of my constituents are on the brink and cannot afford to hire a lawyer, but why is the FCA saying that?

Like my hon. Friend the Member for Aberconwy, I want to talk about alternative products. What is wrong with this form of so-called redress is that the banks get to propose what would have happened if they had behaved better. Despite the banks admitting that they have breached regulatory requirements, they are being given a second chance through the promotion of alternative products, so they have a second bite of the proverbial cherry.

Yesterday, my hon. Friend the Member for Aberconwy said that the cost of the review was £200 million, and he then told us that it had gone up to £450 million. Despite it costing £450 million to set up the review, only £2 million has been paid out in redress.

[Nia Griffith]

Does the hon. Gentleman agree that, in certain agricultural communities, there is a huge capital intensive cost, which takes a long time to repay? That is a particular problem for some of our constituents.

[Mr Williams]

That is a particular problem. The hon. Lady does not need to be reminded how perilous the farming industry is these days; some businesses barely have the capacity to survive.

People who have been sold tailored business loans have no protection because of a mere technicality. They have no guarantee of fair treatment from the banks. Most of my constituents who have been affected by hedge mis-selling have been sold TBLs, although I hesitate to say that they were sold them, because some of them were not aware that they were being sold them. Most of my constituents who are affected are out in the cold, so I return to the question that I have asked Treasury Ministers and the FCA, although I have received inadequate responses. I question how the FCA decides to interpret its principle-based regulation. I am talking specifically about TBLs from the Clydesdale and Yorkshire banks.

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

My hon. Friend is making a powerful case and I concur with what he says about tailored business loans. One of my constituents, who is here in the Gallery, has been affected on a large scale and is paying £33,000 per month as a consequence of swaps. He needs to be brought into the scheme. In addition, he has a tailored business loan, and I concur that those need to be brought into the framework urgently.

[Mr Williams]

I concur with my hon. Friend. Many of us have cases like the one that she raises that suggest that TBLs need to be brought into this review or another review of some kind.

The FSA famously stated in “Interest Rate Hedging Products—Pilot Findings” that

“poor disclosure of break costs”

was one of

“the most significant issues in assessing the compliance of a sale”.

How is it possible that poor disclosure of break costs can constitute a mis-sale when the customer is buying a stand-alone product, with all that that implies, and yet there is no mis-sale if the bank buys the interest rate swap allowance, conceals it from the customer and then holds the customer liable for its terms and conditions? That is unjust nonsense. If a feature is worthy of regulation when it is contained in one product, why is it not worthy of regulation when it is contained and concealed in another product?

[Martin Horwood (Cheltenham) (LD)]

My hon. Friend is right to highlight break costs, which have been a serious issue for some of my constituents. Is he aware of court evidence given by a former bank employee who said:

“When pitching to a customer the most the…Sales Team would try to say on the subject was that there could be break costs if the swap is broken early. Providing the customer didn’t ask, we never went into any detail as to the likely level of these costs.”

Does not that underline how much of this debate is not about complexity or understanding, but about straightforward mis-selling?

[Mr Williams]

That goes to the heart of the argument. The banks and the ironically named relationship managers were trusted by our constituents, and that trust has been breached.

I have asked the FCA for its legal advice that supports the view that it should not regulate fixed-rate commercial loans. The response stated that it is not normal for the FCA to disclose its legal advice because, by so doing, it could be said to have waived its legal privilege more generally, making it difficult to resist broader disclosure, and thereby setting a precedent that would make it harder for it to resist disclosure in other cases. I am sure that that is crystal clear to everyone in the House—so much for the commitment to transparency.

The interest rate swap scandal has cost many businesses dear. I recently drove down one of the approach roads to Aberystwyth, the largest town in my constituency, to see another boarded up shop. That shop was not boarded up three weeks ago; it is boarded up now because of the issues that we are discussing. Many people had no concept of the product that they were pressured to buy. That applies as much to embedded swaps as to stand-alone products. I implore the Minister to reflect and to put pressure on the FCA to consider tailored business loans as part of the review. They are an enormous problem.

12:38

[Ian Murray (Edinburgh South) (Lab)]

It is a great pleasure to follow the hon. Member for Ceredigion (Mr Williams). The cross-party consensus in the Chamber shows how important this issue is, and it has to be dealt with as quickly as possible.

May I add my congratulations to the hon. Member for Aberconwy (Guto Bebb) on securing this debate? I would have been delighted with his custom in my previous life as a publican. He mentioned a £30 cheque for two nights out, but that must have been at least 15 or 20 years ago if he was a student—[Interruption.] I am sorry; 25 or 30 years ago. Those must have been some parties if he was cashing £30 cheques for a night out so long ago.

We have to put this debate in context. There have been many financial scandals—not only since 2008, but even before that. This is the latest scandal in the financial services sector. We had the payment protection insurance mis-selling scandal, the manipulation of LIBOR rates by banking institutions, which has been highlighted today, and the global financial meltdown, which was caused partly by financial institutions gambling on the financial market with other people’s money. Now we have the mis-selling of interest rate swaps. It is right for the FCA to look into that, but hon. Members have rightly made the criticism that not enough is happening. The hon. Member for Ceredigion was right to highlight the fact that only 32 of the 30,000 cases have been dealt with so far.

Interest rate swaps are hugely complicated. I had a briefing from an expert on them about eight months ago, and the complex nature of how they are put together makes them impossible to understand. He was an expert, but he found it difficult to explain some of the more complex points about them.

It is worth highlighting that the banks were able to cancel the instruments in question when interest rates were going down, but the customer was unable to cancel them when interest rates were rising. Not only were sellers incentivised to sell them without much knowledge, but the financial institutions made the vast majority of the money out of them on day one, when they were sold. They sold them to the customer and made money out of the derivative part of the product, and then sold them on to a third party, who subsequently sold them on to other parties further down the tree.

[Mike Thornton (Eastleigh) (LD)]

Does the hon. Gentleman agree that one reason for the appalling mess was the unfair and incredibly pressurised target culture that senior managers at banks imposed on their staff, to the extent that people had to use unethical means to keep their job? I have particular experience of that culture.

[Ian Murray]

I am grateful for that intervention, because not only the FCA but the Government have to change the culture in the banking sector. My right hon. Friend the Member for Wolverhampton South East (Mr McFadden), who was part of the Parliamentary Commission on Banking Standards, has talked about the culture in banks and the pressure to sell complicated products. If a customer buys a product that is not properly explained, that is surely mis-selling and there should be redress.

Customers have been unable to seek redress, or to negotiate with their bank, because the banks were able to sell on the products at great profit on day one. The relationship between the customer and the bank therefore broke down, because when a customer wanted to renegotiate the contract, they were told that they would have to compensate the bank for not only the interest rate lost, but the proportion of profit that it had gained by selling the product on to a third party. The break costs were impossibly high for many people even to contemplate buying their way out of swap products. That breakdown in the relationship has got us to the position we are in today.

Many constituents have come to see me about the matter, such as Mr Dixon, who has highlighted today’s debate and the all-party group that has been set up to examine the matter. One customer of the Clydesdale Bank who contacted me after he had been mis-sold a product was in the process of losing his house. My hon. Friend the Member for North East Derbyshire (Natascha Engel) was right to talk about the impact on not just businesses, but people’s lives. There are life and death issues in some instances, because some business owners have lost their homes, livelihoods and businesses.

There has not been a proper response from banks—not just to their customers, but to Members of Parliament. I have written to banks to see whether they can assist customers in dealing with mis-selling, but I have been batted away. There has been some table tennis between the FCA, the Government, the Financial Ombudsman Service and the banks about who should take responsibility, and I hope that the Financial Secretary will put it firmly on record that the FCA should deal with the matter. It should be the point of contact for businesses, Members and banks.

Members have talked about whether the selling culture of banks made the problem worse, which I believe it did. The mis-selling also went against the policy of treating customers fairly, which most of our banks have trotted out. When customers go to meet their business development manager or anyone else in the banking sector, they are told that their problems will be dealt with and that everything possible will be done to resolve them. However, in many of the cases that my constituents have brought to me, they have not been able to seek proper redress through that relationship, and that is why we have ended up in this situation.

The House should take a stand and say that the scandal was completely and utterly unacceptable. We should encourage the banks and the FCA to resolve the problems as quickly as possible to ensure that small businesses affected by the mis-selling scandal can have redress and a proper appeals process, so that we can get them back on their feet. If small businesses are falling because of a mis-selling scandal, it is up to the House to take a stand to support them.

12:45

[Mr Robert Syms (Poole) (Con)]

I, too, pay tribute to my hon. Friend the Member for Aberconwy (Guto Bebb) for his leadership of the all-party group on interest rate swap mis-selling. The issue is important for all Members, which is why the Chamber is so full.

We all know of a number of cases in which people were switching banks or wanted loans for a project, and one of the last products slid across the table to them was an interest rate swap. Many felt that they did not have much choice but to take it. The British economy is showing welcome signs of starting to recover, and the Bank of England is pushing cheap credit into it to get the banks to lend, which is having an impact. However, we should all reflect on the fact that 30,000 to 40,000 businesses run by serial entrepreneurs could well go out of business before the process that we are discussing is finished, which would have a cataclysmic effect on the businesses with which they deal, the people who work for them and many of our local economies. The issue is not just mis-selling but whether we maintain stable economic growth and create jobs and prosperity in future.

[Richard Fuller]

Does not my hon. Friend find it sadly ironic that the victims of mis-selling were people who had shepherded their money and built their businesses carefully over many years, while the people who benefited were those who were in it for a fast buck?

[Mr Syms]

I do, and many of the people who have been affected have a lifetime’s work in their business—more than one lifetime in the case of many family businesses, which are the bedrock of our constituencies. Those people have been key members of the community and employed many people. Today’s debate is therefore important, as we need to give the FCA and the Government a strong message that the authorities must get the banks to get on with it. Things are going too slowly. As we heard earlier, the banks have put forward some billions of pounds for compensation, but they have dealt with only 0.2% of cases. Of the £3 billion that is potentially available for redress, only £2 million has been paid out to 32 businesses, which shows that we need to speed things up.

In many cases, first the capital was sucked out of businesses and then the break clauses were such that many people could not afford to get out of the contracts. With most normal capitalist activity, if someone felt they could not make a go of it, they would sell their business on. However, nobody will buy a business that has the poison pill of an interest rate hedging product because they know that it is a major drag on the business. It is not free enterprise as we know it, and I rather agree with Members who have suggested that the banking system has not done itself any favours.

What is so tragic about the products in question is that people have no way out. We need to get on with achieving compensation. Members have made some good contributions today, and behind every story they have told is tragedy and worry. People cannot sleep at night because they are not sure how to deal with the problem. I say to Ministers and the FCA that we need to get some speed up and get compensation paid. We need to deal with people fairly, and to support and cherish serial entrepreneurs, who should be playing a major role in the economy’s recovery, rather than being put in a position of not knowing what will happen in a week, six months or a year. We need to give them our support.

12:49

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

I pay tribute to the sterling work of my hon. Friend the Member for Aberconwy (Guto Bebb) who secured this debate, and I thank the Backbench Business Committee for granting it time to take place.

The sale of interest rate hedging products to small and medium-sized businesses that simply wanted a loan from one of our high street banks is nothing less than a national scandal. Let me say straight away that I know there are many hard-working, decent and honest people involved in our banking industry, who will be as horrified as everyone else at what happened with the sale of these products. With the sale of interest rate hedging products, however, banks allowed their desire to make a profit to override the need to be open and transparent with their customers. The sellers of those financial instruments blinded customers with a snowstorm of financial gobbledegook. They presented a complex and risky financial product as something that, if people signed up to it, would be to their benefit. In reality, nothing could be further from the truth.

Small companies in my Bury North constituency have been affected, and I want to outline briefly one particular case—understandably, and for obvious reasons, many constituents are reluctant to allow their cases to be made public. Lavender Hotels owns and runs a small chain of hotels in north-west England. In January 2007, it took out a loan from Barclays to finance the purchase of another hotel. A couple of months later, the bank—which Lavender Hotels had banked with for more than two decades—suggested that it fix its interest rates on the grounds that no one could predict where interest rates were heading.

The bank mentioned rate fixing, collars and caps, and stressed that those were not a profit earner for the bank but merely designed to give the customer protection. The bank told the customer that the agreement could be transferred to another bank, and that it would not create any obstacle to changing banks. Although the term “rate swap” was initially used, it was quickly replaced by the term “fixing”, suggesting that the bank was fixing the interest rate, rather like a fixed-rate mortgage. The term “fixing” certainly suggests certainty, not risk, which I submit was misleading.

That initial meeting with the relationship manager was followed by a further meeting with a salesman—although he was never described as such—who amplified the fears of rising interest rates. At no point was any explanation given of the penalties that would be payable if the customer wanted to terminate the agreement. The bank did say, however, that to fix a cap or collar an upfront fee would have to be paid, which could be as much as £20,000. Since most customers thought that such charges were excessive, they decided to go with an interest rate swap agreement that meant that if interest rates went up, no charges would be paid at all. The salesman never explained that he would be earning commission on the deal. Indeed, it was stressed that it was just a service that Barclays was providing for the benefit of its customers.

The managing director of the company agreed to fix—as he thought—the interest rate of around 40% of the company’s total loans. When interest rates started to reduce, what should have been good news turned into a nightmare and the amount that had to be paid back to Barclays rose dramatically. When the company sought a loan to purchase another hotel the following year, it was forced to enter into a 10-year rate swap. The managing director said:

“I was put in no doubt that had I not agreed the rate swap I would not have been granted the loan.”

By 2010 the customer had discovered that the interest rate swap agreement did indeed create a problem if they wanted to change banks, and the company was told it would cost over £95,000 to exit the agreement. The company had no alternative but to agree to its loans being re-priced. It had been misled into being tied unnecessarily to Barclays by a financial product that was inappropriate and that I believe had been mis-sold.

The managing director told me:

“Since the publicity surrounding the mis-selling of rate swaps, and my further investigation into the practice, I feel cheated. What has angered me the most is that my trusted manager, with whom I had developed such a strong relationship, lied in respect of the potential profitability of these rate swap deals to Barclays.”

As a result of those agreements, my constituents have lost hundreds of thousands of pounds, but despite the problems caused by interest rate swap agreements, Lavender Hotels is surviving and progressing well. The company is ahead of target and continues to trade profitably. It would, of course, be doing even better had it been able to trust its bank, and not been penalised by it because of a totally unsuitable financial product.

These companies are suffering and need help now. The redress scheme is progressing too slowly and must be speeded up. Livelihoods are at stake; those companies need action and they need it now.

12:55

[Martin Vickers (Cleethorpes) (Con)]

I, too, praise my hon. Friend the Member for Aberconwy (Guto Bebb) for securing this debate and leading the campaign, and like the previous speaker, my hon. Friend the Member for Bury North (Mr Nuttall), I wish to highlight one or two particular cases that constituents have brought to my attention. So often in this place we discuss issues that are difficult for individuals to relate to, but on this occasion I—like many other Members—have constituents in the Gallery whose businesses have been practically destroyed by the actions of the banks they trusted.

I have received only three complaints from individual constituents about this scandal, but it is fair to assume that since there are tens of thousands of such cases across the country, many are perhaps suffering in silence. I suspect that just as in the cases brought to my attention, people trusted their banks and regarded them as one of their financial advisers, who would advise on the best course of action for their business. People were not so naive as to assume that the bank was not benefiting in some way, but it is fair to say that they assumed that, irrespective of any commissions paid, they were at least being sold a product that would be advantageous to their business.

I will quote from the statement of one specific case:

“We are just two working class families…we trusted our bank, and thought they were looking after our business interests. We, like other small SMEs were misled and lied to by the bank. The bank basically cornered us into taking out swaps, we didn’t have a choice, and as we trusted them, we took the products. The swaps were not properly explained to us, we were not told how they fully worked and were not told about the huge exit costs….We should never have been sold these products, they were not appropriate to our business...Financially this has crippled our business, and the knock on effect is we can’t employ…people like we used to...Several times we tried to talk to the bank about these products, but each time they shut the door in our face…We are in the redress scheme, but…the banks are playing a game and dragging their heels.”

That certainly seems to be the story we are hearing from other colleagues in the debate.

My constituents go on to say that they moved banks because the bank

“wanted to sell us their life policy cover (at £550 per person, per month), which we insisted we did not need…We were confident now that we had a great knowledgeable team working with us”.

They are referring to their solicitor, accountant and banker, whom they trusted as they assumed that the bank had the best interests of their business at heart. The statement continued:

“Our banking relationship manager…discussed with us a hedging product that the bank said we needed…We trusted the bank, and decided we had no choice but to continue and enter into hedging arrangements. We were not looking for any different type of lending, we have always borrowed money on standard terms…The only reason we entered into the swaps was because our bank manager said it was a condition to any future lending, that we must have these swaps…We do feel betrayed by the Bank, we had trusted them and worked with them for a number of years…We have kept our commitments…the bank does not realise what we have had to do to honour our payments. It’s been very, very tough….We just need the bank to do the right thing now.”

I hope that when the Minister sums up he is able to give some assurance to my constituents that he will do everything possible to ensure that the redress scheme is dealt with and pays out as quickly as possible. Understandably, people are writing to me and to other Members to ask how much longer they will have to wait. We hear many stories of banks crippling and ruining companies, and we cannot go on like this. We have regulators, yet we have another scandal that should have been prevented. Were the regulators asleep on the job? Those caught up in this and other scandals trusted their banks. Trust in the relationship between banks and their customers is a prerequisite. Clearly, there has been no trust in this case. Many constituents have been let down and we must not let it happen again.

13:00

[Mr Gary Streeter (South West Devon) (Con)]

I had a very interesting meeting two weeks ago with senior regional managers of HSBC, who told me that the bank is transforming its culture by removing from individual managers any sales targets: no more pressure from on high and no more commission on individual products sold to a customer. If that is right, then that is significant news. That is how it was when I started my illustrious legal career in 1978: bank managers could be trusted and they were on our side.

Last night, a few colleagues and I met senior figures from the Royal Bank of Scotland in the west country, as well as the managing director of RBS corporate for the UK, Chris Sullivan. They were at pains to tell us how RBS is changing its culture, removing from managers the pressure to sell products to customers and instead offering a service to help customers succeed and grow.

[Mr David Burrowes (Enfield, Southgate) (Con)]

While progress is welcome, not least just before a parliamentary debate, does my hon. Friend recognise that people have been the victims of dishonest and probably fraudulent sales, and are now victims of a process that is characterised by delay and inaction by the Financial Conduct Authority? It is also far too dependent on parliamentary pressure. Can we look forward to reassurance from the Minister that there will be leadership and a timetabled delivery of compensation before it is too late?

[Mr Streeter]

I completely agree with my hon. Friend. I am expecting robust leadership from those on the Front Bench at the end of the debate, because our constituents have waited far too long.

The shift in culture is to be welcomed, but the point I made last night and make again today is that if the banks want to decontaminate their brand—that is what they are really talking about—it is not enough to change the way they do business today; they have to deal with the past. They have to put right the wrongs of the past and compensate those who have been hurt by wholesale mis-selling of products before 2009.

The realisation by the banks—or some of them—that they need to change their culture is fundamental to our debate today on interest rates swaps. The banks not doing what was right for customers and not being on their side—instead selling them products they did not request, could not understand and were not in their interest simply to rack up commission for the bank and its managers—is the cause of the problems we are discussing today. A shift in culture is welcome, but the banks must deal with the problems of the past.

That was certainly the case for my constituents, Mike and Di Hockin, erstwhile owners of London and Westcountry Estates Ltd, a company owning several business parks across the south-west, which is now, after a lifetime’s work and through no fault of their own, in administration. In July 2008, RBS insisted that if the company wished to have its borrowing facility renewed it must enter into a swap arrangement on the alleged imminent threat of rising interest rates. My constituents are experts in property, not finance. They were given no alternative by RBS, so they signed up to a three-year loan and a 10-year swap arrangement. How does that work? It turns out that they had been persuaded to enter into a swap arrangement for 10 years at a rate of 6.4%. Although they had been told that the deal contained a break clause after three years, it transpired that this would enable the bank only to withdraw, not the customer. They later learned that breaking the swap arrangement would incur a penalty that seemed to fluctuate on a daily basis, but would be millions of pounds. None of this was known to them at the time of signing the agreement. I submit that this is a clear case of mis-selling.

It got worse. The loan was bundled up with a number of other troubled loans and sold on by RBS to a new company, Isabel Assetco Ltd, which was 25% owned by a US venture capital company called Blackstone and 75% owned by RBS. This £1.36 billion deal was made at a 30% discount and funded with £550 million from RBS. A bank owned by the taxpayer transferred my constituents’ company’s debt at a discount to a third party company, lending it taxpayers’ money to do so, so the new company could set about dismantling the business that my taxpaying constituents had spent years building up. That is an absolute disgrace.

None of this would have happened but for the mis-sold swap. That the company was put into administration unnecessarily needs to be investigated. Several of my hon. Friends have talked about criminal sanctions for the bankers who make such decisions. I add my support to that call. The people who knowingly make such decisions deserve to be investigated and penalised. I have no doubt that RBS is liable in law to compensate my constituents for their losses. However, because of the administration involved, that will be a complex journey. I intend to help them to succeed, no matter how long it takes.

Talk from bank bosses is cheap. Anthony Jenkins, the new chief executive of Barclays, says that it has learnt its lesson and will put things right. However, in another constituency case, involving a company established in south Devon in 1925, the financial ombudsman determined seven weeks ago that Barclays had mis-sold a swap to the company and ordered it to put the company back in the same position it would have been in if the swap had never been sold. Imagine the disappointment on the part of my constituents when Barclays responded just yesterday by indicating that it accepts only a tiny part of the judgment and intends to fight the rest—so much for the fine words from the chief executive of Barclays. Has Barclays really listened, learned and changed? It does not seem so.

I welcome the fact that there seems to be a cultural shift on the ground in some of our leading banks. This will eventually lead to public confidence being restored, which is very important. Dealing with customers differently today, however, is not enough. The banks have to deal with the past and only then can their reputations be fully restored, as we all want them to be. The UK needs a vibrant and trusted banking sector. Chris Sullivan, the RBS UK corporate managing director, insisted last night that this was his intention. He assured me that every case of mis-selling, including that of London and Westcountry Estates Ltd, is being investigated, and that if mis-selling is established it will compensate. I want to say on the record that I am prepared to take him at his word, but need to see the process speeded up.

As a taxpayer, I hope we will be able to sell off RBS one day, but I ask the Minister to make it clear to RBS that it cannot go forward with any flotation until it has compensated properly all the small and medium-sized enterprises it has dragged down through mis-selling. The message is clear: the banks have done wrong. Let them deal with the past and compensate their customers rapidly and fairly. Then, and only then, can we welcome a new dawn of helpful banking.

13:08

[Bill Wiggin (North Herefordshire) (Con)]

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

We have a problem at the moment with the Financial Conduct Authority. It has been given the remit to act and the banks have set aside the money, but not enough has been done, or is being done, to ease the burden on British business. I have been contacted by many of my constituents about the FCA, the banks and the progress being made. Last night, that progress was slammed by none other than the chief executive of the FCA. Giving a speech at the Mansion House, Martin Wheatley said that

“the industry is deceiving itself if it imagines that a total of 32 offers accepted, totalling £2 million, is adequate progress.”

That is an admission, by the head of the FCA, that progress has been pathetic. With that quote, Mr Wheatley appears to be passing the burden squarely on to the shoulders of the banks. It is as if the FCA, and its predecessor the Financial Services Authority, had not been involved in the delays that have led to such inadequate progress. The FCA has the remit and the authority to speed up that progress. It is inextricably linked to that progress and the entire situation. As one of my constituents put it to me, it appears from the outside as if the

“FCA is unwilling to discuss anything with a bank customer, the British Bankers Association represents only the bankers, and the Financial Ombudsman Service remains buried in PPI cases.”

One mis-selling case in my constituency concerns a residential home. Thankfully, the business is still operating, but two of its owner’s other businesses have not been so lucky. The owner was mis-sold an interest rate swap agreement—in this case a “vanilla swap”—but the FCA scheme has been too slow in offering redress. Another constituent came to me today because he felt he was targeted by HSBC and sold an interest rate product that was wholly wrong for him and his business, but very profitable for HSBC.

The campaign group Bully-Banks, which I am sure has contacted many Members here today, highlights the precarious financial situation of the many businesses affected. People are up at night worrying about their bank and whether they will receive redress. As Mr Wheatley admitted, only 32 businesses have agreed redress out of the many thousands of businesses affected. That is not good enough. The country and the Government are focused on business for our economic recovery. We all know that more businesses mean more people in work, but with the FCA redress scheme operating at a snail’s pace, there are many thousands of businesses that will not be making those investments that we want them to; they will not be expanding or hiring more staff, until they receive redress and these matters are finally concluded.

The FCA’s chief executive contends that the banks are to blame for the speed at which redress is being offered to affected companies. According to several ongoing cases in my constituency, the banks are also to blame for a lot more. One business run by a constituent has already ended up in administration. It changed banks from HSBC to Lloyds TSB and was then badly advised. It seems that these two banks feature in practically all of my casework. My constituent was advised to set up a factoring account, which then disrupted his business, drove away his customers and caused problems with his cash flow. This was a high street bank once again showing a serious error of judgment. It poorly advised a business owner in my constituency, which led to that business being driven into administration. In this case, the Financial Ombudsman Service protected the bank after an investigation owing to a lack of documentation.

In yet another case of a bank not operating as it should, constituents of mine, attempting to grow their free-range egg and cider business, in the face of weak product prices and rising expenditure, received a support loan from their bank, Lloyds. Despite my constituents’ winning several high-profile contracts, however, Lloyds started to put what has been labelled as “unrelenting pressure” on the business. The bank gave my constituents a deadline to repay their loan and advised them to find an alternative bank. It then refused to release the ownership documents that would have allowed my constituents to sell a parcel of land, which would have repaid their debt to Lloyds and allowed them to move banks.

The Connaught Income Fund might be familiar to the House. I know that a number of parliamentary colleagues are involved in this matter. It is yet another case where the FCA and its predecessor, the FSA, have failed to take appropriate action. The fund was originally promoted, based on an information memorandum, as being of low risk. That memorandum now appears fraudulent, but was the FSA negligent to allow the fund to continue to operate, particularly when it became apparent that the memorandum was fraudulent? Several investors in the fund have gone even further, claiming that the FSA deliberately withheld information from the police and downplayed the serious nature of the fraud.

I am sure that the Minister will want to send a clear message from the Government to the FCA. We need the FCA actively to work to sort out these messes and to speed up its efforts. We need it to listen to the complaints and take serious action backed by meaningful compensation or fines. If this is not possible, perhaps he will confirm what changes in the law are needed to make it so. Finance is complicated, but the FCA is supposed to be sufficiently expert to appreciate what is going on and then have the teeth and nerve to act. Any bank must prefer to follow the FCA instructions—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. I apologise to the hon. Gentleman. I am listening so intently to every Member’s contribution that I forgot to look at the clock.

13:14

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

I congratulate my hon. Friend the Member for Aberconwy (Guto Bebb) on his tireless work to bring this matter to our attention, on having secured this second debate and ensuring that so many colleagues are here today, and on his enormous hard work as chair of the all-party group on interest rate swap mis-selling.

The last time we debated this subject, I was aware of only three constituents affected by interest rate swap agreements and described it then as a niche problem. Since then, however, the number of constituents affected—that I am aware of—has doubled to six. While the problem affects only a small number of constituents, the figures involved are eye watering—for two of my constituents, the sums run into several million pounds—but what has struck me is the features they all have in common: they are all small business people working hard to build up and expand their businesses. Whether in student lets, the leisure industry or farm diversification, they have all sought, ostensibly with the help of their banks, to grow their business, provide more employment and greater opportunity in the local area and, of course, help our economy. Some have quite impressive premises; others are literally run out of a garden shed or a room above the garage, but until they were unwittingly sold a product quite unsuitable for their circumstances, they had all enjoyed good relationships with their banks—those frankly are now in tatters.

Over the last few days, undoubtedly like other Members, I have suddenly started receiving updates from the banks about the progress they are making, setting out how they are compensating customers mis-sold these products and in my view trying to gloss over what have to date been quite unacceptable delays. I cannot repeat what the managing director of the Landish Group, which operates in my constituency and the constituencies of other hon. Members, said to me about the update I forwarded him from his own bank. The language was quite unparliamentary, so I will not repeat his words, but I can understand his frustration.

As we have heard, the banks have collectively spent more than £500 million on their own administrative costs, but in nearly 16 months they have delivered only a handful of decisions; and only 32 businesses have received any payments at all. It strikes me that a number of key issues must be addressed. First, on the speed of redress, I would like to reiterate what my hon. Friend the Member for North Herefordshire (Bill Wiggin) said about the snail’s pace of payments. It is painfully slow, but it was notable that as this debate drew close, there was a flurry of updates and self-congratulatory crowing from some of the banks about how they had made contact with 96% of their customers. Well done! How about paying back some of the money?

Secondly, we need to separate direct and consequential losses. One of my constituents had his decision from Barclays on 8 July. The bank admitted that he had been mis-sold and said that the swap would be torn up and exchanged for a simple cap at a cost of £29,000 and that, allowing for the cost of the cap, his direct costs—£1.35 million—would be returned, but four months on, he has seen no sign of that money. He placed a consequential loss claim at the beginning of August, which has not yet been accepted, declined or even discussed, and Barclays will not return the £1.35 million that it acknowledges it owes him until it has agreed the consequential losses, which it will not even talk about. I entirely endorse the call from my hon. Friend the Member for Aberconwy for the direct and consequential losses to be separated, so that the banks can crack on and refund some of the money owed, allowing businesses to invest, employ people and carry out redevelopment that might best take place at this time of year.

Thirdly, there is the thorny problem of what constitutes a sophisticated customer. Two of my constituents were judged to be sophisticated and so, along with 10,000 others, were excluded from the FCA redress scheme. One was deemed to be sophisticated despite his having no finance director; having never heard of a swap before he was sold one; doing his own accounts on a spreadsheet; having no in-house accountant; not being a limited company or even registered for VAT; and literally running his business out of a garden shed. I do not think it could get much less sophisticated if it tried.

[Bill Wiggin]

I am most grateful to my hon. Friend for giving way. I hope she needs the extra minute. Does she agree that an arbitrary limit on the number of employees is no way to determine sophistication in relation to financial products?

[Caroline Nokes]

I certainly agree with my hon. Friend about that.

All my constituent is asking for is the chance for what happened to his business to be reviewed, because of the situation he now faces—owing to the swap product, the fees, the charges and the circumstances of the product, an initial £3 million loan has spiralled to a massive debt of £9 million in just five years. The product far exceeds the term of the loan, time-wise. He has found himself having to work to the limit every day, seven days a week, just to make sure that he can make the repayments on the loan.

I was somewhat relieved today that my constituent did not turn up wearing a snail suit, which he was threatening to do—sadly, it was unavailable—but I am conscious that Bully-Banks is organising some sort of snail racing today. I have no idea whether it has taken place yet, but I can well understand why the snail has become the emblem of the campaign. I sincerely hope that the Financial Secretary will act to help these small businesses—which are, after all, the lifeblood of our economy, but have found themselves caught up in this nightmare—and make sure they are given swift and fair redress after all this time.

13:19

[Chris Heaton-Harris (Daventry) (Con)]

I echo everyone else’s congratulations to my hon. Friend the Member for Aberconwy (Guto Bebb) on driving the campaign forward in such a passionate way. I also thank my hon. Friend the Member for Wyre Forest (Mark Garnier) for explaining to me something that I thought I understood and for proving that I did not in fact understand it—indeed, I am now worse off in my understanding of swaps than I was before he started speaking.

I am here because I want to talk about two constituency cases. Many Members have raised individual points, and each case seems slightly nuanced in different ways. My constituents simply went to their banks for a loan and came away with a product that they did not expect to come away with—a loan and a swap, or just a straightforward swap. In the first debate we had on this subject, I mentioned a constituency case involving a gentleman called Philip Derbyshire of Spirit Motors. He banks with Lloyds and was sold a product not just as a loan or a swap, but as a protection for his business—if he had subsequently sold his business or passed away, the product would have become an asset for him.

A number of people have talked about not understanding the product that was sold to them—that was well disclosed previously—but many were also unaware of the magnitude of the break cost or mark-to-market, as it is called. Banks said when the product was sold that they were unable to provide indicative figures for breakage costs, but it is absolutely obvious that this was not the case. The banks simply chose not to provide a scenario at that time. In the cases I have dealt with, my constituents took bank advice on what were very complicated products.

Mr Derbyshire has had an interesting time of late. He has been dealing with the lawyers from Lloyds, because he, like many others, had an interesting waiver—a disclaimer—in the hedge confirmation letters he received. Lloyds’s lawyers have denied all liability and hidden behind the waiver, which has a cash value in his contract of about £5,000, against a claim of well over £1 million. Slater and Gordon, Mr Derbyshire’s solicitors, have described the case of mis-selling by Lloyds as unbelievably shocking. Lloyds’s lawyers’ comments in response to Mr Derbyshire’s claim were quite interesting. They said that the account of the meeting at Mr Derbyshire’s home with a Lloyds representative was inaccurate and that he had “put a gloss on it”, vehemently denying that it had been asked whether Mr Derbyshire’s company was likely to breach any of the bank covenants at the end of the financial year, which ended on 30 November 2009. Mr Derbyshire completely contests this. He remembers the question with complete clarity—and I believe him completely—and his response to it. Indeed, in the end, Mr Derbyshire did not breach the terms of the covenants, but by then the damage from the waiver in the contract was done.

According to the Bully-Banks survey, 30% of Lloyds customers are classed as “sophisticated”, as my hon. Friend the Member for Romsey and Southampton North (Caroline Nokes) described. Mr Derbyshire has told me his level of education. He is a fantastic businessman; he might not have been the world’s most educated man. As such, he is ineligible, because he is “sophisticated” in financial matters for the purposes of the FCA review—obviously that is a matter of judgment on the part of his bank and himself. Mr Derbyshire has been a pressing individual. He wrote a personal letter, putting his case directly to the Lloyds chief executive—and of course, no one ever gets a reply to such a letter. Mr Derbyshire believes he has been treated with utter contempt by his bank—a bank that he used to have a huge amount of respect for and with which he had dealings for a long time.

The second case involves my constituent Mr Solanki, who owns Ashdown House residential care home, a small home that serves the aged local community with a specialised and dedicated dementia unit. Back in early 2006, he was approached by the manager of his bank, Barclays, who convinced him that, as interest rates were more than likely to rise, he should buy a 20-year interest rate hedging product to protect the business. The product was way beyond Mr Solanki’s technical understanding and abilities, so he was referred to an “expert” at BarCap, who convinced him that rates would rise significantly and that the product would protect him. Neither the BarCap salesman nor the bank manager explained the risks of the product; however, Mr Solanki was advised that it was transportable and easy to exit. Mr Solanki and the adviser never physically met—everything was done over the phone—which must in some way be non-compliant.

Soon after Mr Solanki had taken out the product, interest rates fell sharply, and we all know what happened from there. Because of the cost he was paying for the product, which ended up being more than the mortgage he had taken out on the business in the first place, he was unable to maintain the level and standard of the home. As occupancy fell, the company was forced to lay off staff and carry out patchwork repairs wherever possible. Much has happened since 2009, but essentially he is in a terrible place because of these awful products. Redress needs to happen; it needs to happen quickly.

13:26

[Andrew Jones (Harrogate and Knaresborough) (Con)]

I congratulate my hon. Friend the Member for Aberconwy (Guto Bebb) on securing today’s debate and on his excellent work in leading the all-party group, of which I am a member. He has done much to progress this issue.

In recent months, I have met many companies in my constituency on this issue. I have been struck by the sheer scale of the problems that they have detailed to me. I will not name any of the businesses, but I can see some of them in the Gallery and I am grateful to them for the—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. Lots of hon. Gentlemen keep referring to the Gallery, and they need to be reminded that doing so is a procedural motion that causes a Division. Perhaps I could help them by suggesting that they say that their constituents are following the debate “closely”, “intently” or “not far from the House”, so that we can avoid any confusion about any unfortunate procedural vote that might be triggered.

[Andrew Jones]

Thank you, Madam Deputy Speaker. We do not want any procedural confusions—I am always lost by the procedures here anyway—but I am quite sure that this debate is being followed closely from somewhere very near to where we are.

The companies in my constituency have provided me with much detail. They have been frank in explaining some of their personal commercial circumstances and providing me with access to some of the supporting papers, so that I could see the whole thing—the background and implications for their companies. I have heard of the challenges that companies have faced with cash-flow problems; of companies having to sell assets simply to generate enough cash to pay their banks; of companies having to delay investment; of companies having to make people redundant simply to take cost out of the business and raise cash to pay their banks; and of company managers enduring sleepless nights and desperate worries. I have even had a case where a company was put into administration. In that case, the business owner believes it was done by the bank purely to avoid its mis-selling liabilities.

Overall, this issue has had a detrimental impact on many businesses. However, as we have heard from colleagues from across the country, it is not a local issue; rather, it affects people up and down the country. The collective effect is a detrimental impact on the entire economy.

I know that the problem has been recognised and that the redress scheme has been created, but I do not think that that is good enough. More needs to happen. The speed with which the scheme is proceeding needs to get a lot faster, because we need a swift resolution to this issue. Businesses are haemorrhaging cash, and they are still facing the problems that I have outlined. In the vast majority of cases, resolution will result in a judgment of mis-selling. It will also bring clarity and, consequently, an ability to plan for the future. Businesses are in a state of near-suspended animation until they get that clarity.

The one way to deliver that speed is to bring an end to all payments during the resolution process. That would help companies with cash flow, and provide an incentive for the financial institutions to get on with it. Progress has simply been too slow. The FCA is at least now publishing some data, which is a help. As of 27 September, the review population stood at 27,989 companies, some classed as sophisticated, some not. Of that number, 16,236 have been classed as non-sophisticated, of which 438 have gone all the way through the process and had an additional redress outcome communicated to them. That represents a hopeless rate of 2.7%, after months and months of work, and it involves only a communication, not a conclusion.

I have been told by the FCA and by the banks of the number of people recruited to deal with the issue and of the importance that they attach to it. I am sure that people have been recruited, but that is simply a measure of input. A process is designed to achieve an outcome, and the outcome is not having a process. The process is not working. I want us to send a message from this place that the impact on UK business is being recognised, that the pace of the process is unacceptable, that the financial institutions and the regulators will work to improve that, that we in this place will be watching their progress and that the Government will apply appropriate pressure. This issue needs to be resolved very quickly.

13:31

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

I, too, pay tribute to my hon. Friend the Member for Aberconwy (Guto Bebb) for the work and energy that he has put into this matter. The businesses in my constituency would certainly like to thank him for giving them hope of a successful resolution to some of their problems.

The banks seem to have adopted a herd mentality. When one of them discovers a profitable financial product, all the others have to pile in as well. It makes me wonder what work the banks actually did, before interest rate swaps started to be sold, to set out the risks to their customers. They might well have done some work on their risks themselves, although taking a turn on both sides of a swap and putting none of their own resources at risk probably involved very little risk to them. There might be more risk now that they are to be held to account and might have to pay for consequential loss. I am sure that there are many people in the banks who do the important work of horizon scanning. It would be interesting to know whether they examined the scenario of how very low interest rates would affect their clients.

I also want to pay tribute to Bully-Banks. It is a self-help group that has brought people together and given them more confidence to take on the banks and pursue their rights. I attended a Bully-Banks meeting in south Wales, which gave me an indication of the scope and scale of the problem, and of the different businesses involved. It became clear that a particular class of business that seemed more likely to be targeted by the banks was the well-established business with a fair degree of security, often in the form of property. That description certainly applies to a constituent of mine, Mr Evans from Ystradgynlais. He is seeing his way through this process at the moment, and his business is now secure, but he is still desperate to ensure that Barclays, which he believes has treated him very badly, puts his business back into the same condition that it was in before.

Mr Evans managed to get a facility with Barclays, and he was just about to sign it off when a salesman appeared. His name was Mr Shafto—never has a man been more appropriately named. Mr Shafto, who was very active in south Wales and the west of England, told Mr Evans that he had better sign up quickly because there were lots of victims—he probably used the word “customers”—who were desperate to see him, and he needed to get on a train to go and see some more. Mr Evans signed off on that agreement after only a short discussion. Surprisingly, he did not have to make use of the facility, so he ended up with the swap without having used the facility. We have seen instances of these swaps being mis-sold in the past.

Mr Evans runs a highly successful packaging business that deals with many of the pharmaceutical companies in this country. He has often had offers to buy the business, but he has resisted because he sees it as a family business that has given him security and that will give his family security in the future. Little did he know that the biggest danger of him losing his business would be created by the bank with which he had such a good relationship in the past.

If there is a bit of good news to come out of this debate it is that HSBC has announced that it will separate the technical redress from the consequential loss. I hope that all the other banks will come together and agree to do that as well. Mr Evans has been reluctant to accept an offer of technical redress because he thinks that it might compromise his consequential loss. He might now be in a position to take that money, however, and pursue his consequential loss at some point in the future. I shall finish by quoting a few words from the end of an e-mail from Mr Evans. He said:

“The mis-selling was a scandal. The resolution is an even bigger scandal.”

13:37

[Sir Gerald Howarth (Aldershot) (Con)]

I join everyone else in congratulating my hon. Friend the Member for Aberconwy (Guto Bebb)—and also my hon. Friend the Member for Wyre Forest (Mark Garnier), whose banking career was much more distinguished than my own—on initiating this debate. I hope that the message will go out to the British people, and particularly to small businesses, that Parliament understands their grievances and is prepared to be robust in addressing them. We look to the Government to be equally robust in their response to the debate.

I want to raise the specific case of Pacer Marine, a boat business that provides chandlery services and sells day boats, rigid inflatable boats and the like. It is located just 10 minutes from junction 4 of the M3, so if any of my right hon. and hon. Friends would like to take advantage of that business, they should please do so. The principals of the business, Dennis Davis and his son Kevin, are constituents of the Secretary of State for Health, my right hon. Friend the Member for South West Surrey (Mr Hunt), but their business is located in my constituency. My right hon. Friend is as concerned about this matter as I am.

Pacer Marine moved in 2005. Mr Davis and his son had previously been renting premises, but they found a place to buy in Aldershot. They went to their bank for a normal commercial 25-year mortgage, but that was not available. Dennis Davis has described his discussions with NatWest:

“The bank were fairly aggressive from the start. Our 2 corporate managers came along to see us, then told us about the hedging/rate swap, and that they would only give us a ten year fixed mortgage with a further 5 years. We wanted a 20/25 year term. They charged us a greater rate than normal although we challenged them on it. The main reason for the hedge/swap was because, in their words, they said rates never go down. Well, as we all know now, they did. They then at another meeting introduced a third person who did the deed. Because of the position we were in we agreed to it, but we had always felt that we had been mugged.”

I have done an interest rate swap deal, so I know that they are extremely complex. One wonders what on earth the Royal Bank of Scotland was doing trying to present this sort of opportunity to a very small business.

The documentation provided by RBS is interesting. Part of the background it gave included this statement:

“Loan serviceability is tight…so there is a ‘condition of sanction’ that an interest rate management tool be put in place to protect you from variable base rate”.

Protecting interest rate liability is a perfectly sensible issue to discuss, but we should note that this was a condition of sanction. In a market update, the bank interestingly pointed to all the reasons why interest rates were unlikely to go down and more likely to go up, yet the memo acknowledged:

“There were mixed views from you on base: you saw the possibility of cuts of between half to 1%”.

The bank was recognising the concerns of the customer, but actually trying to make the case that the customer was likely to be wrong and that interest rates were more likely to go up so that the hedging proposal could be put to him.

The person involved was an employee of another part of RBS, so his interest was to make the most money for his unit by exploiting the uninitiated customer and flogging him business that he did not understand. I asked Mr Davis, “Why did you go into this? Did you consult a lawyer.” He responded by saying:

“We trusted the bank. Our business is boat chandlery, not financial wizardry. We thought we were getting the best advice from them. We never thought we would have to go to Peckham Market and deal with a bunch of Del Boys.”

That was how the people in the business felt about it.

Both my right hon. Friend the Member for South West Surrey and I raised this issue with Stephen Hester in June 2012. Needless to say, we got some sort of reply from something called “Group Executive Office”, whoever those people are, but the matter remains unresolved to this day, notwithstanding the fact that when I visited my constituent at the end of August or the beginning of September, they were due to have a meeting with RBS to go through the process which, as many right hon. and hon. Members have mentioned, moves at a snail’s pace. Two months on, we are no further forward. This is an absolute disgrace. We have to be clear that although the banking system and the banking business are important to the prosperity of the United Kingdom, the banks have a lot to answer for.

[Bob Stewart (Beckenham) (Con)]

I was really taken by what my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones) said: perhaps the FCA should stop all repayments to banks until these problems are sorted out, certainly in specific cases. That might help the constituent of my hon. Friend the Member for Aldershot (Sir Gerald Howarth).

[Sir Gerald Howarth]

Several measures have been suggested during the debate and I hope that the Government will respond to them. I hope, too, that the FCA will respond more robustly than it has up to now.

My hon. Friend the Member for South West Devon (Mr Streeter) mentioned a meeting with Mr Chris Sullivan. Interestingly, he wrote to my right hon. Friend the Member for South West Surrey:

“As a Group, we are committed to the fair and timely treatment of our customers”—

what a fantastic and admirable sentiment!

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

Will my hon. Friend give way?

[Sir Gerald Howarth]

If my hon. Friend will forgive me, I will not, as other hon. Members wish to speak.

We have Mr Chris Sullivan, the chief executive of the corporate banking division—a very big wig in the Royal Bank of Scotland—saying that he is committed to the “fair and timely treatment” of the bank’s customers. I say, “Thank you very much,” to Mr Sullivan, because his letter was dated 3 August 2012 and yet my constituent has still seen no action. It is high time that the banks understood the gravity of the situation and the concern felt by the public. It is high time that they understood the risks they pose to businesses and the fact that they are damaging the United Kingdom by failing to address these concerns. They must do so forthwith, and the Government must give them every help so to do. I hope that eventually—indeed, soon—our constituents who have put their money on the line to try to generate wealth for our country and improve the economy will be given a better deal.

13:44

[George Freeman (Mid Norfolk) (Con)]

I am grateful for the opportunity to speak in this important debate, and I want to add my name to those of other colleagues in paying tribute to my hon. Friend the Member for Aberconwy (Guto Bebb) for his leadership and to the Bully-Banks campaign. I commend my hon. Friend the Member for Wyre Forest (Mark Garnier) for enlightening us all on how these mechanisms work, and I am grateful for the work of the all-party group, of which I am happy to be a member.

I want to speak about the context in which we need to view this issue, based on my own experience. I believe that this is the end of a banking boom-and-bust and bail-out, which speaks volumes about the role of banking in the economic crisis that we face. On the basis of my previous career in small businesses in East Anglia, it seems to me that the big bang, along with all the many good things, triggered a major cultural and financial neglect of the real bread and butter economy on the ground. Over the last 15 or 20 years, Norfolk has certainly seen a wave of bank closures, a “computer says no” culture, and a neglect and undermining of what was traditionally viewed as the backbone of our local economy, but what became in recent years, particularly under the last Government, rather unfashionable and, dare I say it, boring for the bankers of today.

Norfolk now sits on the cusp of a major economic renaissance—in life sciences, in engineering and in energy. I thank the Government for investing in the infrastructure but in that sector the banks have largely been irrelevant, in my experience, to such early-stage companies because they are too risky. Those companies usually rely on venture finance from angels, and corporate venturing from customers.

We thus need to ask ourselves some big questions about the banks’ role as our economy goes forward. Of course the banks play a crucial part. America has 20,000 banks and a new one is started nearly every week, and I believe that our banking sector and our financial services sector is one of our greatest and most innovative sectors. We sometimes talk about the City as if it comprised just four or five big banks; in fact, it is a fabulous crucible of financial innovation that should be celebrated and encouraged. The problem lies with the few big banks at the top that were bailed out by the last Government in such a way as to see them sitting on too many real businesses in the real economy that we need to grow and support.

I am going to speak about three of my constituents who have suffered as a result of the problem we are debating. Mr Andy Keats is a local entrepreneur who built up a number of companies—in this case, a successful 13-year-old company with 30 local employees, which is about to be sold for £3.5 million. When Mr Keats decided that he wanted to move his banking from RBS to Barclays, RBS stopped passing on the sales income from credit and debit card sales in the business. The business went insolvent within six weeks, and for the last four years, he has had to deal with RBS and NatWest and has had to face a series of major issues and challenges, to which I have been party. I have seen at first hand banks not responding and when they do, ignoring previous communications, and passing on debts to debt collection companies.

[Andrew Bridgen]

Does my hon. Friend agree that one explanation for the banks’ lack of enthusiasm to get on and pay out compensation is that if businesses that have gone bankrupt have no access to the redress scheme, there is no incentive for the banks to grasp this nettle, so the Government need to do something to force their hand?

[George Freeman]

My hon. Friend makes an excellent point for which I am very grateful.

Mr Keats has also pointed out that the solicitors acting on behalf of the bank sometimes take court action without serving necessary notice.

I cannot name the second constituent because, like so many in these circumstances, he wishes to remain anonymous. He is a leading local business man and something of a pillar of the community. His business was pushed into accepting interest rate derivative products by unscrupulous bank salesmen. He has filed legal action against his bank so that the statute of limitations does not time out on his claim, which is a very real threat.

The third constituent is Paul Adcock, the managing director of Adcock’s of Watton, a great family business on the high street of a great Norfolk town. He was one of the first campaigners to make a complaint and a key leading light in the Bully-Banks campaign. I want to pass on my thanks, on behalf of my constituent, to my hon. Friend the Member for Aberconwy because the campaign has been a huge help to him. Adcock’s, a major local business and a pillar of the local establishment, racked up £175,000-worth of unscheduled charges. In September this year, Barclays finally settled. I want to put on record my constituent’s thanks for doing so.

This is not just a local issue. It is an enormous issue that runs across our economy. The numbers are eye-watering. The Bully-Banks campaign has estimated that this mis-selling scandal has cost small businesses more than 400,000 jobs in our economy, with £1.7 billion a year lost to the Treasury. It has led directly to the loss of 162,000 jobs, and to the inability of SMEs to create 251,000 jobs that they would have been able to create otherwise. More than 30,000 small businesses still face long delays, and fewer than 7% of claims being considered by Royal Bank of Scotland had reached the redress stage by the end of the month, while nearly five times as many—32%—had reached that stage at Barclays. Just 2% of those whose cases have been deemed eligible for review have accepted offers of redress. The banks have, I believe, set aside £3 billion for redress purposes, and less than £2 billion has been paid to just 32 businesses so far.

We need a speedy and fair process for redress and compensation. I urge the Minister to use all the mechanisms at his disposal to encourage the FCA to accelerate its handling of claims, to ensure that the banks are not allowed to kick them down the road, to separate direct and consequential losses, and to ensure that the settlements are fair. We must be careful not to define consequential losses in such a way as to undermine the potential for future SMEs to raise funds from the banks.

We are lucky enough to have a Minister with a glittering career in finance and small business behind him, and, I do not doubt, a glittering career in politics ahead of him. Our group could not have a more doughty and outspoken campaigner and supporter of our cause on the Front Bench. I urge him to bring to this issue the skill that he has brought to other issues with which he has dealt, and to ensure that it is viewed in the context of the wider banking crisis, whose resolution will enable our economy to recover properly.

13:51

[Ian Swales (Redcar) (LD)]

It is a great pleasure to speak for the first time with you in the Chair, Madam Deputy Speaker.

I, too, congratulate the hon. Member for Aberconwy (Guto Bebb), not only on securing the debate but on his fantastic leadership of the campaign and the comprehensive speech that he has made today. These debates show Parliament at its best, although it is a little worrying that the banking industry seems to move tortoise-like between them, and to take on the characteristics of the hare only during the few days before and after they take place. Perhaps we just need to have more of them.

As I spoke in our last debate on this subject, I shall not repeat everything that I said then, but I do want to say something about the question of advice. Small businesses typically have an accountant and a bank, and in the past have typically relied on both to be on their side. However, it is clear from the mis-selling scandal that they should have been given independent financial advice, because the banks were no longer on their side, and were now treating them as potential consumers of sophisticated products.

If the banks insist on not being on the side of small businesses and on treating them primarily as sales prospects, we should be thinking about the regulations. We should be thinking about what sort of advice the banks should be telling their clients to seek, about what disclosures of commission they should be making, and about other matters that would be the norm if the banks were selling to private individuals. After all, many of the businesses that we are discussing are not much bigger than the affairs of a private individual. I hope that the Minister will respond to that point.

Some of my constituents, like those of other Members, are following today’s debate closely. Theirs is a very familiar story. Stephen Lilley wanted a loan, and stated explicitly that he wanted to pay it down as quickly as possible. However, he found himself locked into a long-term fixed deal involving a fixed amount of money. Roy Myers turned up to sign the papers for a fairly large loan, only to find that clauses were being inserted at the point of signing. He had no time to consider what was happening.

A point that I do not think has emerged clearly today is that the businesses that are involved in such arrangements are effectively locked into their existing banks, and cannot get out. There has been some predatory behaviour on the part of banks in those circumstances. A business in my constituency which, partly because of the banking arrangements, was in heavy weather financially, found itself having to pay an extra £500 a month for a “special relationship manager” who did not actually do anything. That was merely a way of extracting yet more money from the business. In another case—we heard of a similar example earlier—a life insurance policy was forced on a constituent who did not need it. People have very little room for manoeuvre when they are locked into their existing banks.

I welcomed last year’s decision by the FCA, but progress has been painfully slow. I was present when Barclays turned up at the all-party parliamentary group, many months ago, and convinced us that it was organising a great big operation and that things would move very swiftly from that point onwards—which, of course, they did not. Meanwhile, the lives of more and more businesses and individuals are moving on, and things are happening to them. A couple of months ago, one of my constituents who is a member of a support group was speaking to a woman who was ill at the time, and who has subsequently died. That is another person to whom the banks are no longer having to talk.

A great many businesses have gone bankrupt. The hon. Member for Harrogate and Knaresborough (Andrew Jones) raised a point that had not occurred to me before. If it is true that the banks will not have to compensate those behind bankrupt businesses, they have a financial incentive to bankrupt businesses. I have been around long enough to know that whatever banks have a financial incentive to do, we can pretty much count on their doing.

[Andrew Bridgen]

Does my hon. Friend agree that not only is this situation awful for the SMEs that have been caught up in the mis-selling scandal, but it sends a strong negative message to anyone who is thinking of going into business in this country? Does it not send them the message that the banks cannot be trusted, and provide them with a big incentive not to go into business at all?

[Ian Swales]

Absolutely. Earlier, the hon. Member for South West Devon (Mr Streeter) referred to the reputation of the banks. I think that they will have an enormous job to do to recover their reputation, and to rebuild the trust that new business people should expect.

I hope that the Minister will say something about the question of what happens when businesses have gone bankrupt, or their proprietors are deceased. Do they simply drop off the banks’ lists? If that is the case, I think that we should be very concerned about what the banks are doing and what they are incentivised to do.

There has been good news this week about the separation of compensation from consequential loss. Both the constituents of mine who are following this debate particularly closely have received money in the last few weeks. Why, Members may ask, should they be at the front of the queue? The two of them have been prepared to go very public—they have even appeared on television—and, amazingly, the banks appear to have moved them to the front. Cynic I may be, but I would guess this was part of a process of dealing with the most vocal people first, and of course it should not be like that.

The question has been raised of whether criminal activity has taken place. I think that there is a whole spectrum ranging from relatively innocent bank employees, selling something that they have been told to sell, to clear misrepresentation, lies and so forth. I think that Bully-Banks is finding that the same names recur in some cases, and I think that when what is clearly criminal activity has taken place, those involved should be prosecuted.

We have all talked about the need for extra pace. I hope that the Minister will put maximum pressure on the banks and the FCA to speed up the process, and will show that the Government are on the side of small businesses and our constituents.

13:58

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

It is a great pleasure to see you in the Chair, Madam Deputy Speaker. I congratulate you. I also congratulate my hon. Friend the Member for Aberconwy (Guto Bebb) on opening the debate, and congratulate him and his Committee on all the work they have done.

In mythology, David felled Goliath. [Hon. Members: “It is in the Bible!”] It is in the Bible, but it is also slightly mythological. [Hon. Members: “It happened!”] If Members have absolute proof, that is fine. Anyway, I want to make a serious point. We have seen a banking sector that has used corporate lawyers and all its muscle and might to ensure that it can take on small businesses.

This is what small business is up against. People can call me cynical if they like, but much of this selling of swaps was going on in 2006 and 2007, when interest rates were 5.5%, but by 2009 they had dropped to 0.5%, and I believe that many of those banks knew that interest rates were going to fall. Why were they so keen to go out and get everybody tied up in these swaps? Under the terms of the swaps, the higher interest rate could probably be capped at around 6.9%, but if they started to fall below 4% or 3%, people immediately got clobbered for huge amounts of money. It was therefore very much in the banks’ interests to get people into these schemes. That is where I do actually say that what went on was criminal. That is why we expect our great Minister, along with the FCA, to do something about this. The fact that only 32 or 33 cases in the whole country have been dealt with is an absolute scandal.

[Bob Stewart]

My hon. Friend referred to the Bible. Does he agree that this would be called usury or robbery in the Bible?

[Neil Parish]

I certainly do, and there is another word for it: theft. That is exactly what it is, because people entered into these agreements in good faith, and that brings me to another point I want to make. Throughout my business and farming career, I had a good relationship with my bank. I trusted my bank manager, and when I spoke to him or her, I expected them to give me good advice. That trust in our banks has been broken by this affair. If people in small businesses and in business generally cannot trust their bank when they want to raise finance to build up their company and employ more people, where on earth are we going to build a recovery? We are building a recovery, of course, but we could build it so much better if we could restore that trust. The FCA must do much more, so businesses can recover from this.

I have many affected businesses in my constituency, and two businesses in particular, both of which are with the Clydesdale bank. One of them is a large successful farm and the other is a hotel. They have all been put under enormous pressure and have paid enormous amounts of money, and this is stopping them expanding. One of the businesses was not given much choice about whether to take out the deal. Basically, it was told, “You either take the money with a swap, or you don’t have the money at all.” That is the kind of coercion that went on. We need to deal with this issue, because we need these businesses to prosper.

Some companies who have been sold a swap and have therefore come under enormous financial pressure have been driven into liquidation, and I suspect that, because of the wonderful financial institutions we have in this country—I am being sarcastic here—they will be snapped up at rock-bottom prices. That is all wrong, because we are talking about businesses that have worked hard for years and family businesses that have been established for generations being destroyed by this system.

It is great that we have got this second debate, and, in respect of the banks, it is great that the snail is beginning to turn into a hare, but I suspect, if we are not careful, that as soon as this debate is over it will transform back into a snail. That is why I say to the Minister that it is absolutely essential that he, along with the FCA, gets hold of the banks and makes them compensate people for what they have mis-sold and what they have done. Until that is done—until we have rectified the situation and compensated these businesses—we will not restore confidence in the banking system, which we badly need to be restored in this country. We must ensure that we move forward at an even quicker pace so that people have confidence to invest and know that if they approach their bank, they will be sold a good deal, not a pup, which is exactly what people were sold in this instance.

I look forward to hearing the Minister’s comments because I have great confidence in him and he has great experience in this sector. I have had more pain from banks than anything else. If we do not get the banking sector right, we will not get the economy right.

14:05

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

I congratulate all the Members who secured this debate, and I also thank the Backbench Business Committee for giving further time for this important issue to be discussed on the Floor of the House. I also want to put on record my recognition of the tremendous work done by the all-party group on interest rate swap mis-selling. Its efforts in campaigning on this issue since it first came to light last year have made sure it remains at the top of the political agenda. I should mention in particular the hon. Member for Aberconwy (Guto Bebb) for his leadership of that group and his willingness to run with this issue. He opened the debate with a powerful speech touching on all the different elements of the redress scheme, which have been causing problems to small businesses throughout the country. He reminded the House that the banks were telling us they cannot promise that the date for full redress will be much before 2015, despite having spent £300 million and recruited around 3,000 staff to deal with this problem. The number of claims settled to date is pitifully small. The record on that is nothing to write home about and it needs to be dealt with urgently.

The Chair of the Backbench Business Committee, my hon. Friend the Member for North East Derbyshire (Natascha Engel), made a fine speech. She reminded the House that the imposition of a blanket moratorium on payments would concentrate the minds of the banks and press them towards resolving the claims businesses have made more swiftly. She also made the important point that much of the language the banks are using in their correspondence with businesses and Members of Parliament on this issue is not easy language, and that means there is a danger of the same kind of confusion arising as that which led to this scandal in the first place.

The hon. Members for Wyre Forest (Mark Garnier) and for Aberconwy reminded the House that in the last 48 hours some banks have moved to decouple the issue of consequential losses from technical redress, and I will return to that point.

My right hon. Friend the Member for Wolverhampton South East (Mr McFadden) reminded the House that this scandal has further corroded and damaged trust between banks and their customers and drew a parallel with previous scandals, including the PPI scandal, which certainly should concentrate minds. He also reminded us that hedging and insuring against risks is not in and of itself wrong, and he is certainly right about that, but there has to be full understanding as to what these arrangements involve, and we must make sure that when they are entered into, it is done in a way that is suitable for both the companies getting involved and the banks.

My hon. Friend the Member for Llanelli (Nia Griffith) told us about the tragedy of good and very successful businesses who have been caught up in this scandal and the real fear felt by small businesses in seeking redress and how that can act as a barrier to them exercising their full rights under the redress scheme. They worry about admitting something has gone wrong because of what that might mean for their future relationship with their bank. That was an important point to put on the record.

My hon. Friend the Member for Edinburgh South (Ian Murray) reminded us again of the link between this scandal and the corrosion of people’s trust in the banks and how that has followed on from the PPI scandal and the manipulation of LIBOR. He also said that this all feeds into a sense that the banks, who are supposed to be on the side of small businesses—and who clearly need small businesses as much as small businesses need them—have not appeared to be behaving in that way and that needs to be dealt with forthwith.

Many Government Members, including the hon. Members for Poole (Mr Syms), for Bury North (Mr Nuttall), for South West Devon (Mr Streeter) and for Romsey and Southampton North (Caroline Nokes), made points about the snail’s pace of this scheme, which I will return to in a few moments. Those points were well made, and I hope they are being heard. On the speech by the hon. Member for Tiverton and Honiton (Neil Parish), I will not get into whether David felling Goliath is mythological, biblical or something else, but the analogy was well made and the symbolism of it will resonate outside this House.

It is clear from today’s contributions that the businesses caught up in this scandal, including businesses in my constituency that are following this debate closely from a place not very far away, have suffered terribly; we have heard distressing stories of injustice, bankruptcies, job losses, marriage breakdown, homelessness and, in some cases, death. Today’s contributions have rightly reminded the House that for all the debate about process—that is incredibly important and we have to get it right—there is a human cost, which should not be forgotten.

This scandal has highlighted shocking abuse of small and medium-sized enterprises; banks saw an opportunity in firms wanting to take out loans and they attached complex hedging products to them, in many cases giving the impression that this was a requirement of the loan itself. When interest rates plummeted, businesses were forced to pick up the punitive downside of the hedges. We know that in many cases banks had the option to cancel the loan. So, presumably, at any stage when interest rates might have gone up and the business would have benefited from having the hedge, the bank could cancel, but in the reverse situation the business could not exit the hedge when it became unfavourable to it without incurring punitive costs and charges. Not only was that an extremely unfair set of terms and conditions, but that behaviour violated the important relationship of trust between the banks and our small business community. Well run, long-established small businesses, which are the engine of our economy, have paid the price.

I will not rehearse the history of how we have got to the redress process that is in place, but suffice it to say that many concerns with this scheme require urgent action. I hope the Minister has heard all those points today and will take them away with him. I hope also that the FCA and the banks have been listening carefully to today’s debate. The biggest issue, about which we have heard a great deal today, is the time that this is all taking to resolve. Time is of the essence for the businesses concerned, yet figures show that banks paid out just £1.5 million in compensation in September, with 22 offers being accepted. That brings the grand total to a mere £2 million having been paid out, with 32 settled claims. In September, the chairman of the Federation of Small Businesses said:

“We are quickly losing confidence in the banks and the regulator as this scheme remains unbelievably slow.”

The initial target indicated for the redress scheme was six months. That time scale has already been missed, and it now looks as if it will be missed by a very large margin.

One of biggest issues with the redress scheme is the complete lack of a deadline for the process. Last month, my hon. Friends the Members for Nottingham East (Chris Leslie) and for Chesterfield (Toby Perkins) wrote to the chief executive of the FCA about the delay in compensation payments and requested that a strict deadline for settlement be imposed on the banks taking part in the scheme. Unfortunately, the imposition of a deadline has been resisted by the FCA. That is deeply disappointing, given the necessity of achieving a faster rate of progress for businesses that are in financial difficulty and the fact that the Federation of Small Businesses has indicated that some reviews of the interest rate swap products could be completed in as little as four to six weeks. I am sure the Minister will agree that firms that are due redress must receive it as quickly as possible if they are to survive; they need certainty and clarity so that they can plan for the future. Does he agree that a deadline would help matters? I hope he will respond to that point. Will he outline for us what he might do to bring that about?

We have seen some movement in the past 48 hours on the issue of consequential losses, which is very welcome. However, it is important that all the banks that have not signed up to the decoupling arrangement in respect of consequential loss and technical redress do so as quickly as possible. As this is now an evolving element of the redress scheme, will the Minister confirm that he will follow it closely to ensure that the evolving process will still allow for a fair assessment of consequential losses and that there is no risk that businesses will opt to forgo money they are owed in order to obtain compensation for their direct losses more quickly?

We also heard a lot about the suspension of payments, an issue about which many hon. Members have been writing to banks in our capacity as constituency Members of Parliament. Clearly, there is some inconsistency in the way in which the suspension of payments is being applied. Will the Minister undertake to do whatever he can to ensure that the suspension of payments applies wherever it is necessary? Will he consider the threshold? Will he eliminate the requirement for the business to go into special measures, as that is clearly holding some people back?

A huge amount of data have been published by the FCA on its website, which is helping Members of this House to assess the progress of this scheme. However, I wonder whether there is scope for some of those datasets to be expanded, particularly to give Members more information about what is happening to businesses in financial distress and businesses in administration, so that there is no incentive for banks not to bother dealing with them, as we have heard discussed today.

Small businesses are the lifeblood of our economy; they account for about half of private sector turnover, employ millions of people and make up 99% of UK enterprises. They deserve to be treated better by our financial institutions, and to be supported and protected more effectively by both the regulators and the Government. I hope that the Minister can provide some much-needed assurance, and that the FCA and the banks take on board all the points made by hon. Members today.

14:16

[The Financial Secretary to the Treasury (Sajid Javid)]

First, let me take this opportunity to welcome you to your new Chair, Madam Deputy Speaker. It is a great pleasure to see you in your place. I also welcome the hon. Member for Birmingham, Ladywood (Shabana Mahmood) to her new role and wish her luck with it.

I start by thanking all the hon. Members who secured this debate and by congratulating everyone on presenting their case well. Special thanks must go to my hon. Friend the Member for Aberconwy (Guto Bebb) for the time, energy and passion that he has put into this issue and for the leadership he has shown. We can see from this debate that this issue is very serious; 17 of my hon. Friends and four other hon. Members have spoken today. I am sure that everyone in this Chamber, like all those others watching in the Public Gallery, at home and elsewhere, including the hundreds watching in the Central Methodist hall from the many businesses that have been affected, is keen to see a quick conclusion to the FCA review and to see that those businesses that were mis-sold financial products are compensated accordingly.

When I was growing up, my father ran a small family business in Bristol, so I was made aware from a young age about the importance of cash flow and the dangers of unexpected costs. As such, I sympathise wholeheartedly with the small businesses that have been affected by this mis-selling scandal and have put such energy into lobbying on this issue. This Government have made it clear from the beginning that the mis-selling of financial products is totally unacceptable. We take extremely seriously the abuse that has taken place, and we are determined that any wrongs that have been inflicted on businesses should be righted.

I share the disappointment of fellow hon. Members about the progress made under the FCA review to date. I stood up in a Westminster Hall debate about four and a half months ago to discuss this very issue, and the fact that the FCA has not made any significant progress since that debate is, frankly, not good enough. As we have heard today, the FCA said in January this year that the full review process would begin, but it has since confirmed that the full process did not start until May this year. That delay has been disappointing, and the FCA should have been much clearer about exactly when this full review actually started. However, the review is now up and running, with the large majority of cases being looked at. I understand from the FCA that it believes that about 85% of cases are now under review, but hon. Members are absolutely right to say that it is time for the banks and the FCA to do more to speed up the process and get redress out the door. As such, the Government will continue to push the banks and the FCA to complete the process as quickly as possible. As the motion says, the redress scheme’s progress has been too slow. That is costly and has caused further undue distress to the businesses involved. The FCA and banks need to get on with the job.

[Mr McFadden]

Before the Minister leaves the issue of the FCA, will he say what he thinks of the FCA’s reply to some businesses in distress—that it will not consider individual cases?

[Sajid Javid]

The FCA has set out a clear process and is publishing more and more information on it. It is important that the FCA and the banks should stick to that. Equally, however, Martin Wheatley, the head of the FCA, has not ruled out any further action, including taking enforcement action if he deems that the redress process has not worked as intended.

A number of Members have mentioned redress payments. Of course we need to be confident that the scheme provides the correct level of redress for affected businesses. I understand why concerns have been raised about the FCA’s decision to allow the banks to settle with customers for a single redress offer, covering both basic redress and consequential losses.

It is right that the FCA, as an independent regulator, should decide such details. However, I agree that it is sensible for the initial payment for basic redress to be made to provide much-needed relief to the businesses. That is why I welcome the announcement this week, from HSBC and RBS so far, that they will now make an initial redress payment to businesses and then discuss consequential losses separately. Back Benchers should take credit for that move. Under the leadership of my hon. Friend the Member for Aberconwy (Guto Bebb), they have put pressure on the banks and we have seen the results already.

However, I want things to go further—I would like all the other banks to join the move announced by HSBC and RBS, and I shall be watching closely to see whether they do. That should help prevent any further undue distress for the businesses and give them much-needed cash-flow relief.

[Ian Swales]

I well understand that consequential loss calculations are probably unique to each business. However, the redress payments surely form a pattern, given that they are all based on similar products. Does the Minister believe that the banks should be able to move very quickly with the redress part of the compensation?

[Sajid Javid]

I agree. The banks should move much faster. Today’s announcement from the two banks is welcome, but other banks should take a serious attitude to not only the amounts but the timing of redress payments.

Hon. Members have also voiced concerns about the large number of businesses that have been assessed as sophisticated and so fall outside the scheme. My understanding is that the FCA used as a starting point the criteria for non-sophisticated customers set out in the Companies Act 2006. As such, the test reflects the fact that larger businesses would have greater resources to seek advice on the products in question, both at the time of sale and subsequently. Moreover, I understand that the FCA then amended the sophistication test in January to ensure that certain companies, which were classified as sophisticated under the Companies Act test but which might reasonably be considered to be non-sophisticated, were also brought into the scope of the review.

Throughout this debate, the Government have been clear that when a business lacked the necessary skills and knowledge to understand fully the risks of the products, it should receive the appropriate redress. We do not agree that all businesses should have access to the FCA review; there needs to be a defined cut-off point beyond which more sophisticated businesses take responsibility for understanding the products that they entered into. I am confident that the FCA has found the right balance to ensure that all non-sophisticated businesses fall inside the scheme.

I will not be able in the time available to address all the questions raised, but I might be able to help with a couple in particular. Some Members asked whether insolvency could be a reason for banks to try to delay the redress process. I assure the House that that could not be a reason. No one wants businesses to go insolvent, but if, sadly, they do, they will still be part of the review process. If mis-selling is found to have happened, banks will still be liable and on the hook—they will gain no advantage from the insolvency of a company.

Hon. Members, including the shadow Minister, asked whether the FCA could consider setting a deadline. There is a good case for the FCA to consider that, but it would have to be its independent decision. Due regard must be taken of the fact that it might take longer to sort out the most complex products, but it would be good for the FCA to consider whether setting a deadline would help to speed up the process.

[Steve Brine]

A number of colleagues have mentioned this. Does the Minister have a view on a truly independent appeals process? Given that 93% of the cases looked at thus far have been non-compliant, the number involved would not be massive.

[Sajid Javid]

As my hon. Friend will know, there is a necessary degree of independence in the process. However, he raises a good point, which, as he said, has been raised by others today. It is important to make sure that there is confidence in the process. If confidence does not come about in the coming months, the FCA may have to review things and the process that my hon. Friend suggests could be taken forward.

I end by reiterating that the Government take extremely seriously the abuse that has taken place in very many cases. I sympathise wholeheartedly with campaigners in the Chamber and beyond. I am determined that any wrongs inflicted on businesses should be put right and want a quick solution to the mis-selling of interest rate hedging products.

Small businesses are the backbone of our economy and they should be allowed to draw a line under this issue and get back to what they do best—working hard, creating jobs and creating growth for the UK economy. Once again, I thank hon. Members, particularly my hon. Friend the Member for Aberconwy, for bringing the issue to the attention of the House. I assure them that I will make sure that the issue continues to receive the highest level of attention from the Government.

14:27

[Guto Bebb]

With the leave of the House, I should like to make a few concluding remarks. This has been a positive and necessary debate, and we have seen significant progress as a result of it. Members from across the House have made it clear that they want a step change in the progress made by the FCA review process. That is necessary; we need a significant increase in the number of businesses offered redress. There are real concerns about an expansion of the scheme. Speeches have highlighted the issue of embedded swaps and the concerns about the sophistication test, which I would like to discuss in further detail with the Minister in due course if I can.

The other pretty obvious thing from this debate is that we need the banks to provide support for the businesses while they wait to be reviewed. We want the banks to show forbearance and to understand that the difficulties faced by many businesses were created by the banks’ own mis-selling. No further businesses should be lost to the UK economy as a result of the mis-selling of these products, which were inappropriate in the vast majority of cases. This has been a positive debate, but we still need to see the proof of the pudding in the way in which the scheme delivers from now on.

[Sajid Javid]

May I tell my hon. Friend that I would be more than happy to meet him and other stakeholders to discuss this further?

[Madam Deputy Speaker (Mrs Laing)]

If the Minister has finished his intervention, the hon. Gentleman may conclude his speech.

[Guto Bebb]

I appreciate that offer very much, Madam Deputy Speaker.

Question put and agreed to.

Resolved,

That this House considers the lack of progress made by banks and the Financial Conduct Authority on the redress scheme adopted as a result of the mis-selling of complex interest rate derivatives to small and medium businesses to be unacceptable; and notes that this lack of progress is costly and has caused further undue distress to the businesses involved.

Aviation Strategy

Thursday 24th October 2013 Commons Chamber

[Relevant documents: First Report from the Transport Committee, on Aviation strategy, HC 78, and the Government response, HC 596.]

14:29

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

I beg to move,

That this House has considered aviation strategy.

May I congratulate you on your new role, Madam Deputy Speaker?

I am pleased to have the opportunity to debate aviation strategy in the UK, which was the subject of a Transport Committee report published in May. A decision on capacity in the south-east has been in the “too difficult” box for too long. The independent Davies commission set up by the Government has been asked to submit its final report after the next general election, but the Transport Committee felt that this was too important an issue to ignore in this Parliament. I therefore thank the Backbench Business Committee for this opportunity to debate our findings.

Our main focus was inevitably on the controversial subject of runway capacity in the south-east. We concluded that the expansion of Heathrow was the best option, because that recognises the importance of aviation to the UK’s economy and the need for more hub capacity to maintain international connectivity, and reflects consideration of the feasible options. The report considers future demand forecasts for aviation, the impact of aviation growth on the global and local environment, the importance of hub airports in securing connectivity, the role of airports outside the south-east, and aviation taxation, especially air passenger duty, and I will refer to all those issues during the debate.

It is vital to recognise the importance of aviation to the economy. In 2011, the UK’s aviation sector had a turnover of some £53 billion and generated about £18 billion of economic output. It employs more than 220,000 workers directly, and it has been estimated that the total number of jobs supported could be as high as 921,000. Aviation is also important for the lives of many citizens by providing transport, and trade and leisure, links to the rest of the world. Demand for aviation links is growing. In 2012, UK airports handled 221 million passengers, which was 1.4 million more than in 2011. The latest passenger forecasts predict that demand at UK airports is set to grow. Unconstrained forecasts—those in which there are no airspace constraints or capacity limitations—show that passenger numbers will grow to 320 million a year by 2030 and 480 million a year by 2050. It is likely that there will also be greater demand for air connections to new destinations.

The UK has direct air links to more than 360 international locations. There are, however, serious and growing concerns about poor connectivity between the UK and some of the world’s emerging markets, such as the BRIC group of Brazil, Russia, India and China. There are particular concerns about the absence of links to China’s manufacturing centres. The lack of capacity at Heathrow, the UK’s only hub airport, is reducing the UK’s connectivity to important destinations. For many years, Heathrow has operated with two runways at full capacity while competitor hubs such as Paris, Frankfurt and Schiphol have benefited from four to six runways each. The growth of large hubs in the middle east, such as Dubai, has also threatened the UK’s position as an international hub. If the necessary hub capacity is not available in the UK, airlines use competitor hubs to places such as Schiphol, Frankfurt and Madrid, and if no action is taken, the UK will continue to lose out.

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

What weight would the hon. Lady give to the warning from Michael O’Leary of Ryanair, who says that the UK’s current approach to airport expansion will mean that another runway will be built at Heathrow and at Gatwick some day, but it will be done in an incredible hurry, will not be well planned, and will be the usual sticking-plaster solution?

[Mrs Ellman]

It is undeniable that additional capacity is needed, so we need to make decisions now. We may well need to make more in the future and I will refer to them in due course.

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

I congratulate the hon. Lady and her Committee on their excellent work. On capacity, does she agree that there are more cost-effective options that could better meet the need for capacity than proposals to build a £70 billion new estuary airport? I declare an interest, because it would be located near my constituency.

[Mrs Ellman]

I am about to address that very point. The situation could be dealt with in three ways: build an entirely new hub airport; link existing airports through high-speed rail to form a split hub; or expand one or more existing airports.

Many of the proposals for a new hub airport would locate it to the east of London in the Thames estuary area. There are significant challenges associated with building such an airport, including the difficulty of designing airspace in an already crowded environment, and the need to mitigate bird strike and to deal with environmental challenges such as future sea-level rises and the risk of flooding. Noise would also become an issue for the many people who inevitably would move into the area.

We commissioned specific research into the options and it became clear that, in addition to the factors I have mentioned, the first option would inevitably lead to the closure of Heathrow, threatening more than 100,000 jobs, which would be devastating. It would also require a significant public subsidy of up to £30 billion towards surface infrastructure and compensation for the closure of Heathrow, which would be on top of the tens of billions of pounds that it would cost to build the new airport itself.

The second option is to link existing airports through high-speed rail to form a split hub, perhaps involving Gatwick and Heathrow—Heathwick. That was rejected because of uncompetitive connection times for transferring passengers, especially compared with the transfer times of competitor hubs overseas. The third option is to expand one or more of our existing airports. We looked in detail at the possibility of expanding Gatwick and/or Stansted as alternatives to the expansion of Heathrow, but new runways alone, distributed across a number of airports, will not provide a long-term solution to the specific problem of hub capacity. We concluded that expansion of Heathrow with a third runway would be the best way forward, and that was also the solution that British business throughout the country overwhelmingly favoured.

[Mr Andy Slaughter (Hammersmith) (Lab)]

I appreciate the work the Committee has done, but I wonder whether it has been somewhat bamboozled by the public relations operation that is Heathrow. The fact is that it has been the only game in town for a number of years. To dismiss the option of expanding other south-east airports as a split hub, rather than viewing them as a network serving the whole of the huge city of London and the south-east, is somewhat too glib.

[Mrs Ellman]

I thank my hon. Friend for his comments. Our report looks specifically at his suggestions, but we came to the very clear conclusion that the expansion of Heathrow was the only realistic option. We recognise that there might be a case for additional runways at Gatwick and perhaps Stansted, but that is not an alternative to additional hub capacity at Heathrow.

We acknowledged the need to address the very real environmental objections that may arise. In particular, noise in excess of 55 dB is a major problem for more than 700,000 people in the airport’s vicinity. We have suggested a number of steps that could be taken to mitigate that serious issue. Planes are getting quieter, but aircraft manufacturers must continue to develop quieter aircraft. To facilitate that, we recommend that the Government, through their involvement with the International Civil Aviation Organisation, try to influence global noise standards. Airports themselves should encourage airlines to take older, noisier aircraft out of service at the earliest opportunity, and people living under the flight path who are affected by excessive noise should be adequately compensated. We have called on the Government to develop a comprehensive, nationwide approach to noise compensation. The Civil Aviation Authority should review existing flight paths and landing approach angles to reduce noise pollution.

Local air quality is also important, and the Government should draw up plans to ensure that the EU limits on air pollutants are met. We were especially concerned about unnecessary emissions that are generated due to the stacking of aircraft over London. We recommended that NATS, the air traffic controllers, should carry out modelling work to identify the extent to which stacking might be reduced if an additional runway was built at Heathrow. Ultimately, any plans for increased aviation capacity must take account of progress on global initiatives to deal with emissions.

It is vital to remember that a hub airport is about serving the national interest, meaning that 63 million people in the UK are affected. Local problems must be addressed, but that must be done in the context of considering the needs of the UK as a whole.

Our report looked at the important role that is played by airports outside the south-east. We hope that increased capacity at Heathrow would improve connectivity to other UK regions as more slots became available. The Government should do more to reduce the barriers that are faced by airports when trying to secure new routes, such as through better marketing or the introduction of an unrestricted open skies policy outside the south-east. The introduction of an air passenger duty holiday, which we have recommended, would also encourage the development of new routes.

In the course of our inquiry, we heard numerous concerns about the high rate of air passenger duty, which is damaging to UK plc and puts UK aviation at a disadvantage compared with our European competitors. We were disappointed that the Government rejected our recommendation to reduce significantly or abolish air passenger duty and we are concerned that they show no willingness to undertake a full review of its economic impact.

Parliament has shied away from deciding whether and where to permit additional aviation capacity in the south-east. That is a prime example of a failure to recognise our infrastructure needs. The Davies commission will produce an interim report at the end of this year with recommendations for immediate action to improve the use of existing runway capacity over the next five years, as well as a short list of options to address capacity over the longer term, but the commission’s final report will not be published until after the general election in 2015.

We must act decisively on this issue before we lose our competitive edge as a global hub for aviation. The commission must provide a robust and independent evidence base for future decisions, as well as recommendations for action. The failure to take a decision has consequences for the UK because it puts our competitiveness and economic success at risk. When the Davies commission reports, it will be time to decide, and that will be the challenge for the 2015 Parliament. I hope that today’s debate assists the House in identifying the key issues so that a conclusion that is in the interests of the UK can be reached.

14:43

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

It is a pleasure to address you in the Chair, Madam Deputy Speaker. It is a reversal of roles that happens very rarely in this House.

[Mr Bernard Jenkin (Harwich and North Essex) (Con)]

Will my right hon. Friend give way on that point?

[Sir Alan Haselhurst]

I was about to welcome the Under-Secretary of State for Transport, my hon. Friend the Member for Scarborough and Whitby (Mr Goodwill) to his new duties, but I give way to my hon. Friend.

[Mr Jenkin]

I merely remark that my right hon. Friend used to play Caesar to Caesar’s wife and now he plays Mark Antony to Cleopatra.

[Sir Alan Haselhurst]

I am grateful to my hon. Friend for that erudition, of which I was not capable.

I must declare an interest because Stansted airport is in my constituency. However, the views that I hold on airports policy were formed when I had the honour to be the Member for Middleton and Prestwich in Greater Manchester. I took the view then, in the wake of the study by the Roskill commission, the last great body to study airports policy, that none of the inland sites, whether Cublington, Nuthampstead, Stansted, Willingale or any other, should be developed, and that if we were to have a proper airport system for London, it should be offshore. My view was that it would be a mistake to urbanise a large part of the countryside in any of the home counties. I never dreamed that, due to the sad early death of Sir Peter Kirk, a vacancy would occur in the Saffron Walden constituency, which I was chosen to fill. I am therefore not simply saying “Not in my back yard”—I have tried to have a wider perspective on the matter.

The subject of the debate is aviation strategy, but looking back, it is difficult to espy that there has ever been a real strategy. The evolution of our policy has been part deception, part confusion and part cowardice. Why? Because as soon as we begin to formulate a strategy, all the opposition from different parts of the country is combined, and Governments tend to run away from that. It is easier, perhaps, to pick off particular parts of the policy and have a bit-by-bit approach, which is what has led us to the current wholly unsatisfactory situation.

If I dare mention it, we got nearest to a policy when Geoff Hoon was Secretary of State for Transport. Certain difficulties arose in the House, and the hon. Member for Hayes and Harlington (John McDonnell), in defence of interests around Heathrow, got to the Mace quicker than I could have, as I was occupying the Chair. I therefore recognise the passion to which the subject gives rise.

I contend, as many other Members have, that it was probably a mistake initially to choose Heathrow for London’s principal aerodrome, as it was then called. I do not think anyone foresaw the increase in civil aviation that would take place. I can remember when the facilities on the north side at Heathrow were in tents, and when it was decided that aviation was going to be a more serious factor in our post-war world, I found it astonishing that the permanent buildings were put between the two runways, so that they had to be reached by a tunnel—what a brilliant way of developing the airport.

[Mr MacNeil]

Does the right hon. Gentleman also feel that the subsequent post-war behaviour in conducting international bilateral air agreements, which for decades stipulated that the London airports should be used for access to the UK, was a mistake, particularly given the bleating and screaming that is now happening in the south-east of England and around London?

[Sir Alan Haselhurst]

The hon. Gentleman anticipates me. I will come to that point, but I am starting with Heathrow, the design of which has been a complete disaster. After three terminals were put in the middle of the runways, more were needed, so terminal 4 had to be on the south side. It was sworn that there would be no further expansion, and BAA consistently said that the idea of moving the Perry Oaks sludge works was out of the question—that it was impractical and that those of us who suggested it did not know what we were talking about—but that is where terminal 5 now stands. Had an intelligent approach been taken to the development of Heathrow, that would have been where all the terminals were put. It was not to be.

Giving BAA control of the three London airports was a huge mistake, and it was extraordinary that the person who had to pilot that proposal through the House was the late Nicholas Ridley, who I do not think believed in that type of monopoly being created. With the passage of time, I think very few hon. Members believe that it was the right policy, and it is now being dismantled.

[Steve Baker (Wycombe) (Con)]

My right hon. Friend has just mentioned a good free market Conservative and he spent some time eloquently setting out the degree of capital investment in Heathrow. Will he join me in recognising that if we use the power to tax and direct to throw away that capital investment and force scarce capital into a loss-making project in the estuary, this country will become poorer?

[Sir Alan Haselhurst]

I am coming to that. The problem is that the design of Heathrow is not good and expanding it further—although I recognise that that might happen because in some people’s eyes it is the easiest option, what business most wants and so on—runs the risk of compounding the problem.

The next airport to come on to the horizon was Gatwick. A previous Minister of Civil Aviation said in this House in answer to a question that Gatwick would not be a second London airport but would merely be a diversionary airport for Heathrow. Eventually, of course, the truth came out that it was to be the second London airport.

BAA—I have no time for it—then decided to enter into a pact with West Sussex council not to build a second runway at Gatwick for 40 years, which was the equivalent of the Molotov–Ribbentrop treaty as far as I was concerned. That pact expires in 2019. Having done that, BAA was still anxious to go and find a third airport so it must bear a heavy responsibility for the split situation. Had there been competition between those three airports, we might be in a slightly different place—and this is certainly not the best place.

I agree with the hon. Member for Liverpool, Riverside (Mrs Ellman), the Chairperson of the Transport Committee, that we need a hub airport for our major city. There has been much talk of late of that being old hat, as everything is now point-to-point. Everything is not point-to-point. Point-to-point becomes increasingly possible when traffic increases and routes become, in the language of the trade, thick routes, meaning that so many flights a day can be justified between those points. That is fine and that will go on, but it will be a long time before there is a daily flight between Denver, Colorado and, say, Naples. There will be a need for passengers to interline at an airport and it would be to our advantage commercially, not just for the businesses in London but for the airlines, if British Airways, Virgin or any other British carrier had part of that business. The argument for the split hub, suggesting that interlining is not important, overlooks the fact that many passengers are now not coming through London. They are going to airports in Europe where interlining is more conveniently executed.

I believe that there needs to be a hub in London and I accept that it is perhaps inevitable that that will be Heathrow, but to build a third runway, possibly a fourth runway and a sixth and seventh terminal for that airport will not make it anything like the new airport in Hong Kong, or Changi in Singapore, or the airport in Beijing. It will still be a confusing mass airport. I do not think that that serves London best, but it might be the best that can be achieved in the circumstances.

I absolutely understand why London deserves a decent airport. Our engineers and architects have designed some of the other airports in the rest of the world, so it is a great shame that we cannot give them the chance to build a decent airport for our city.

I am also concerned, as I have a northern history, about balancing this country. I saw the effect of deciding to develop Stansted. One can still walk around the towns and villages of north-west Essex and find a variety of regional UK accents, as people were drawn down to the area. That is all part of a problem that post-war Governments have contested, unsuccessful by and large—that is, the drift from the north to the south. I think that is a great shame.

I was close to Manchester for a time, and I saw the potential for the development of Manchester airport. It has two runways, so why can that potential not be seen? Why not promote that as at least one other gateway into the country? Most air traffic has to do with leisure, and from Manchester not only can the business community be served in that part of the country—going both west to Liverpool and east to Leeds—but there is access to north Wales, the Derbyshire peak district, the Yorkshire dales, Yorkshire moors, the lake district and so on. We ought to encourage those who visit this country to see parts of it other than just London and the home counties. That would take some of the pressure off London, without—of course—excusing the need for a proper hub. I tell my constituents who occasionally ask, “Should we be spending all this money on HS2?” that when I hear that HS2 would bring Birmingham airport within 36 minutes of London, my eyes water because it is an average of 47 minutes from Stansted airport into London.

That brings me to a point about infrastructure. Over the years, our one consistent failing—there have been many—is that we have not been prepared to back airport development with suitable infrastructure for people to get there. So what happens? Well, I can speak for Stansted with some passion. On the back of an airport that we were unhappy to see develop, we did not get the compensation of a good railway system. In fact, we got one that is worse because priority was given on a two-track railway to the Stansted Express. I am all in favour of a good service to Stansted airport, but that must not be at the expense of all the commuters whom Government policies over the years have encouraged to live in the M11 corridor. They get the worst of both worlds and that is wrong.

On compensation, we have been niggardly over the years in the amount of money we are prepared to give to people—it is all spent on long public inquiries, fighting the case and so on, instead of being paid to those people who might feel most affected by the project. We should provide those people with at least some compensation so that if it is necessary in the national interest to bring about a major project, they will at least get some advantage from that. We must do more on that if we are to get people to settle for whatever strategy—if we actually succeed in getting one at the end of all the further deliberation through the Davies commission.

In the late 1960s and during the period of the Heath Government, it was decided, in the name of the environment, to go for an estuarial solution. That was my wish and that would still be the ideal. I do not believe the most pessimistic forecasts about the time and expense it would take. We lack imagination in this country. We struggled over the channel tunnel; we struggled over the rail link to the channel tunnel—we were going to build half of it at one point, and it would be difficult to imagine anything more crazy. Finally, however, we got there. It took us an awfully long time to think about Crossrail before we began building it. Why cannot we realise that London deserves a good airport? The whole country deserves a better deal, and to level up the north.

[Mr MacNeil]

Will the right hon. Gentleman give way?

[Sir Alan Haselhurst]

I am about to come to an end and I have given way once already to the hon. Gentleman. The whole country needs to get some benefit from the people whom we encourage to travel to our country for business or pleasure. We need imagination—that is what I appeal for—and a solution that is worthy of our main city and our country as a whole.

14:59

[Graham Stringer (Blackley and Broughton) (Lab)]

It is a pleasure to follow the extremely erudite and knowledgeable speech by the right hon. Member for Saffron Walden (Sir Alan Haselhurst). I learned most of what I know about aviation and Stansted during the air inquiry in the run-up to the 1985 White Paper on aviation. At that time, as leader of Manchester city council, I was a director of Manchester airport. We put together solid arguments against the expansion of Stansted airport, which we believed would contribute to a continuing imbalance in the country’s economy. I should tell him that I have not shifted far from those views, although some of my then colleagues, who could not have envisaged that Manchester airport would end up owning Stansted, have shifted quite a long way from their views. That is for a more detailed future debate.

I agree with the right hon. Gentleman—I shall put it in slightly different words—that this country has been hopeless, not only in aviation infrastructure, but all infrastructure. We have the lowest motorway density in what used to be called western Europe; we have one small high-speed line, which, symbolically, goes out of the country; we have built one new runway—at Manchester airport—in the whole UK since the second world war; and we have poor broadband speeds. We have been very poor indeed at infrastructure.

I believe that the recession was caused by bankers and the euro—Government Members might have a different perspective—but, nevertheless, productivity has fallen, and if we are to earn our living in the world, it must increase. One way in which the Government can support industry and jobs, and the country’s competitiveness, is by ensuring that we have good infrastructure.

That brings me to the main point in the Transport Committee’s aviation strategy report. We have been through some of the arguments, but there is no shortage of runway capacity in this country. Figures in the written submissions to the report show that, at the main airports, only a third of runway capacity is used, and that, throughout the UK, we have 21 times the runway capacity we need. However, we are extraordinarily short of hub capacity. Heathrow is full, and what happens there cannot easily be replicated directly at Gatwick, Stansted, Birmingham or, unfortunately, Manchester.

The example given by Heathrow—we are not falling for its public relations—was the Seattle service. There are insufficient passengers in London to provide a daily service to Seattle from London. The British Airways Seattle service flies daily because of transfer passengers. Approximately a third of passengers at Heathrow are transfer passengers. I have chosen the Seattle example, but there are many others. Heathrow enables routes to connect London and the UK to the rest of the world.

The constraints on the hub capacity come in because, when we consider the number of serious destinations served, we realise that it is not just a numbers game. At the time of the report, Heathrow served 128 destinations, although there might be fewer now because it is declining all the time. At the same time, Amsterdam served 131 destinations; Frankfurt served 149; and Paris served 155. It is not good for the business of this country if our European competitors are connected to more parts of the world.

In the emerging economies, it is not the cities to which London and the UK are connected that stands out, but the fact that we are not connected to places such as Jakarta and Manila. We are not connected to huge mega-cities in China, such as Nanjing, Hangzhou, Chengdu, Guangzhou and Xiamen. One thousand more flights go from Frankfurt to China per year than from this country, excluding flights to Hong Kong. That cannot be good for the business of the UK.

On the alternatives, I think “mad” was the word that some professionals used to describe spending £30 billion on an airport in east London, with all the environmental problems that that would cause. It is said that fewer people would be affected by noise, and that would be true to start with. However, once an airport is built out there with all the jobs that would be created, people would, as the right hon. Member for Saffron Walden said, go to live near where they work and be affected by the noise. An estuarial airport costing at least £30 billion is therefore not an alternative.

Another alternative, which I think has been dealt with, is joining up airports. That has been tried in Toronto, Tokyo and Glasgow and it simply has not worked—people want to transfer within one airport.

There is no alternative but to expand Heathrow, otherwise this country will lose out. When the Roskill commission sat the figures would have been different, but all the arguments about having a major hub airport in London were before them. We are now in the commission’s future and we still have not dealt with the problem. We need to deal with it as quickly as possible.

Yesterday, there was a debate—I do not intend to repeat it—on air passenger duty. The Economic Secretary said that she did not accept the figures in the PricewaterhouseCoopers report, which indicated that if air passenger duty was abolished completely the Treasury would collect more finance and 60,000 extra jobs would be created. I accept that in any report consultants know who they are working for and include assumptions that are often helpful to the conclusion. The Minister said that she did not accept the assumptions, which is fair, but she needs to explain why, and that was not part of the debate. I hope that the Minister responding to this debate will explain why the assumptions are not acceptable, because it is difficult to understand why a report that states that more jobs could be created with less tax—an attractive proposition to Conservatives—is being rejected.

A report by York Aviation has also been mentioned, and I would be interested in a response from the Minister. The report did not look into the current situation, but it did study how many more passengers could be attracted to airline travel in long-haul, interregional, non-congested airports if there was an APD holiday. For Manchester—there are similar cases for other regional airports, such as Birmingham and Bristol—routes to Bangkok, Hong Kong, Delhi, Mumbai and Beijing would become viable if there was an APD holiday for two or three years. There would be no loss to the Treasury, just gain when people arrived in this country and spent money, because the routes do not currently exist. Will the Minister respond to the detail of that report, either now or at a future meeting, because that should also be an attractive proposition for a Conservative Government.

During the passage of the Civil Aviation Act 2012, I regularly questioned the then Transport Minister, now the Secretary of State for Northern Ireland, the right hon. Member for Chipping Barnet (Mrs Villiers), about why so many extra costs and regulations—in terms of security and extra red tape—were being imposed on airports. She said that they were not being imposed, but when the Civil Aviation Authority came before the Select Committee, it admitted that the costs had gone up, and now we find they have risen again. Will the Minister look at why these costs and burdens on airports have almost quadrupled since the Bill became an Act, contrary to the assurances from the then Minister?

Finally, many people make an environmental argument against aviation. We have heard about the perverse situation of air passenger duty, which is huge for people travelling from China and for those on other long intercontinental routes, forcing people into Paris and thus losing us business, but it also forces people to multi-ticket. For a long journey, it is much cheaper for someone to take a plane from Stansted, Gatwick, Heathrow, Manchester or Birmingham to a major European hub and then to fly on. By doing that, a family can save hundreds of pounds, but it leads to a 5% to 16% increase in carbon dioxide output and an increase in NOx gases, most of which are produced on take-off and landing. If someone changes in the middle east—increasingly a major competitor to Heathrow, alongside the European hubs—on their way to the far east, the result is a 37% increase in fuel usage. The case, therefore, for constraining airport capacity to improve the environment is actually having a perverse effect.

I should, at the beginning of my speech, have congratulated the Minister on his appointment. We worked together on the Transport Select Committee at one time, and I wish him well and look forward to his responses. I know he cares about aviation, which is not a well-understood part of the transport industry, but I genuinely believe that the Government’s policies are severely restricting what could be a genuine growth industry that could create many jobs in the country.

[Several hon. Members]

rose—

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. Before I call the next speaker, I must tell the House that there is considerable demand from Members, but very little time left to fill. After the next speaker, therefore, I will have to impose a seven-minute time limit on speeches from the Back Benches.

15:13

[Sir Roger Gale (North Thanet) (Con)]

I am delighted to see you in the Chair this afternoon, Madam Deputy Speaker. I am grateful to the hon. Member for Liverpool, Riverside (Mrs Ellman) for generating the opportunity for us to debate something of absolute national importance. Finally, I am pleased to see my hon. Friend the Minister on the Front Bench and welcome him to his new job. I look forward to welcoming him to Kent in the not-too-distant future—he does not know that, but it is going to happen.

I do not want to rerun yesterday’s debate either, but during the debate on air passenger duty, the hon. Member for Blackley and Broughton (Graham Stringer) referred to the loss of business to Schiphol and Charles de Gaulle—he might have added Frankfurt—and several other locations in Europe. This is crucial for the economy of the UK. We cannot gainsay the fact that the economic hub of the nation is in London. There is much good business in Manchester, Birmingham and Scotland, but the place that people have got used to interlining through, and therefore also doing business in, is London.

Frequently people just change planes, but equally frequently they stop over. Because they are coming through London, they take the opportunity to take in a show or do business in the City of London. It is not just the thousands of jobs at Heathrow or Gatwick that are at stake and which we could lose to mainland Europe; this is about all the other, ancillary jobs, and the tourism and business that go with them. The cost to the country from the loss of aviation business in the south-east to mainland Europe is almost inestimable.

A long time ago, I upset my right hon. Friend the Member for Saffron Walden (Sir Alan Haselhurst) when I championed the cause of the airport at Stansted. I remember saying then, “It’s not Heathrow or Stansted; it’s Stansted or Schiphol.” That is even truer today than it was then. If I need to underscore that point, KLM Royal Dutch Airlines and Air France are now flying from Manston, in Kent, twice daily to Schiphol, as they are from a number of other regional airports. They are not doing that for fun; they are doing it because they can see there is business to be taken, from the south-east of England in particular, to Schiphol to interline and to go on to all the other places in the world—literally, anywhere that it is possible to fly to from Schiphol. We cannot afford to sacrifice that business.

This debate is about aviation strategy, but my worry is that there is no aviation strategy. There is a commission, and Sir Howard Davies will do his job and report by 2015. Then there will be a debate and more discussion, and there will not be another strip of tarmac or another building, or a Boris island, for 20 years. That is how long it will take. We are losing business today—not tomorrow, in a year’s time or in five years’ time, but today. As we speak, business is transferring from the United Kingdom to the mainland European airports. We cannot afford to sustain that loss.

On the doorstep of London there is a place called Manston, in Kent. It has the fourth longest runway in the country—it has taken Concorde and wide-body jets—and it is available now. I am not suggesting for one moment that Manston could or should be another London airport, but I believe it could have a major role to play. In, I think, 2005—I stand to be corrected—the right hon. Member for Edinburgh South West (Mr Darling) published his White Paper on the future of aviation in the south-east, but since then nothing at all has happened in any meaningful or constructive form, apart from perhaps another terminal at Heathrow. I put it to him at the time that Manston was available, and I was told, “No, it’s too far from London”—76 miles.

Let us think about that. Manston is quite a long way—it is further than Gatwick and Heathrow. Actually, it is not, at least not in time. I hope we will eventually finish High Speed 1—my hon. Friend the Minister might have a hand in that. Indeed, I have travelled on the existing line, with old rolling stock, in under an hour from central London to Manston, and if that was possible then, with High Speed 1, it is even more possible today. We can get the journey time down to about 50 minutes. It takes more than 50 minutes to get from central London to Heathrow and almost as long to get to Gatwick. Therefore, in terms of time rather than distance, which is what matters to the traveller, Manston is viable.

So what do we have? We have an airport sitting in Kent, out on the peninsular, relatively out of harm’s way in terms of overflying, available today and under new ownership—Manston was sold and bought last week. Its future was in a bit of doubt because it was on the market, but it has now been bought, so it is secure, at least for the foreseeable future. Manston is there and I say to my hon. Friend the Minister and the House that we have to buy time if we are not going to lose more jobs. Manston is never going to be another London airport. What Manston can do is take traffic from Gatwick to release capacity, allow Gatwick to take traffic from Heathrow and free up the capacity there, which is what we need in the short term while the Government take long-term decisions. Manston is a national asset—not a regional or local asset—and we need to use it now. This country cannot afford to waste it.

15:20

[Mr Nick Raynsford (Greenwich and Woolwich) (Lab)]

I am delighted to welcome you to the Chair, Madam Deputy Speaker, and to welcome the Under-Secretary of State for Transport, the hon. Member for Scarborough and Whitby (Mr Goodwill) to his post. I am pleased to be able to participate in the debate.

I agree with the Select Committee on two of the three main themes in its report. First, it is completely right to recognise the need for increased runway capacity and increased scope for aviation in the national interest—a point made forcefully by my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman). Secondly, I agree with the vital importance of a hub and the inadequacy of the other options, which do not provide a hub solution.

I am afraid, however, that the Committee has made a mistake in opting for Heathrow as the location of Britain’s future hub. I fear that it has not learned the lessons of history. The right hon. Member for Saffron Walden (Sir Alan Haselhurst) gave us a certain amount of that history, and I shall now amplify it a bit more. I suspect that I am almost as old as he is, and I recall the Roskill committee. Like him, I was attracted to the concept of an estuary airport at the time, and I was disappointed when the project initiated by the Heath Government was cancelled by the incoming Labour Government in 1974 as an austerity measure. There are echoes of recent history there, too. Cublington was the wrong solution—I entirely agree with the right hon. Gentleman that the idea of an inland airport was wrong—but the crucial point is that Heathrow is in the wrong location. It might have been right in 1947, when we were looking for a new airport immediately after the war, but by the 1970s it was clear that, because of its location in an area of dense population, it was not the right location for the long term.

The subsequent history of all the inquiries into airport expansion included the Layfield inquiry into terminal 4 and the Vandermeer inquiry into terminal 5, as well as the sad history of the third runway proposal in the 2000s. Every one of those projects was bitterly opposed, which produced dishonest responses from the airport operators, in saying that that was as far as they would go. I remember BAA stating emphatically at the time of the terminal 5 inquiry that that was it, and that if approval were granted, it would not seek any further expansion. Public confidence and trust in the airport operators was totally destroyed, and people were further infuriated, when it came back seeking further expansion only a few years later. That history has undermined public confidence in the veracity of the people responsible for planning our airports.

We need to get this right. We need to have a strategy, rather than just continuing to make do and mend, and adding a bit more in an unsatisfactory and inappropriate location at Heathrow. It is inappropriate because around 700,000 people are seriously affected by the noise it creates. My constituency is a huge distance from Heathrow, yet I get more complaints about the noise from aircraft approaching Heathrow than I do about the aircraft using City airport, which is just across the river from me. My constituency is far outside the 55 dB contour—let alone the 57db one—yet there are still people there who are deeply affected by aircraft noise.

[Mr Jenkin]

The aircraft noise that we get in North Essex comes from early morning flights coming into Heathrow, and on a quiet morning it can be disturbing. We would get no disturbance from a Thames estuary airport.

[Mr Raynsford]

The hon. Gentleman is absolutely right; I am with him on that.

It is notable that 25% of all the people in the European Union who are seriously affected by airport noise are to be found around Heathrow. The airport cannot operate 24 hours a day, and any attempts to relax the restrictions on night flights are strongly contested. That, too, has an impact on the efficacy of the airport and makes it impossible to operate as a proper international hub that can receive aircraft at all times of the day and night. Furthermore, the approach path to Heathrow over central London is potentially hazardous. The incident involving an aircraft coming down short of the runway two or three years ago was a timely reminder of the serious risks associated with having an airport in a densely populated area.

There is also the issue of air quality. I remind the Chair of the Select Committee, my hon. Friend the Member for Liverpool, Riverside, of what her Committee’s report says on that issue. She quotes the Environment Agency, which gave evidence about Heathrow to the effect that

“concentrations of nitrogen dioxide were expected to continue to exceed the EU air quality limit for the foreseeable future.”

Because of the heavy volume of vehicle and industry, there are already serious problems with air contamination in the surrounding area, so the airport is simply adding to them.

If we are going to have extra capacity and a hub to allow expansion to, say, 150 million passengers a year, it is in my view inconceivable that this can be done at Heathrow. It should obviously be done in an appropriate location. I believe that the estuary is the right location: it has the capacity for a four-runway hub airport; it would allow 24-hour operation; and it would dramatically reduce the number of people affected.

[Rehman Chishti]

With regard to the issue of safety, which the right hon. Gentleman mentioned earlier, along with the capacity of an estuary airport, has he taken into consideration the fact that if the proposed estuary airport goes ahead, it will be 12 times more likely to be subject to bird strike than any other major airport in the United Kingdom? Does not safety in that respect also need to be taken into consideration as well as the fact that an airport is in London?

[Mr Raynsford]

The hon. Gentleman makes an important point about bird strike, but it occurs at Heathrow. A number of aircraft are affected by bird strike at Heathrow—and, indeed, at other airports internationally, including Hong Kong, which is in a waterside location—so these problems have to be addressed and are addressed by airlines at the moment. It is not at all inconceivable—indeed, it is absolutely feasible—to take appropriate measures to provide safeguards against that particular hazard and some of the other hazards that might be encountered—instances of fog in the estuary, for example. Although evidence suggests that there is no greater incidence of fog in the estuary than there is at Heathrow, it is an issue that needs to be taken into account. Practical issues certainly need to be addressed, but I do not accept that this problem is a showstopper, which prevents us from considering the option.

Other hugely important issues for future planning include the way in which people get to an airport. Heathrow’s problem is that is located very close to the M4-M25 junction, which is already a heavy generator of air pollution and traffic congestion. The modal split in respect of access to Heathrow is heavily dominated by the motor car. One of the great advantages of the estuary airport, which I am afraid the Select Committee did not recognise in its report, is that it would effect a very considerable modal shift by having a far greater proportion of passengers—estimated at 60% by advocates of the Foster-Halcrow scheme on the Isle of Grain—coming by rail.

Looking at the Select Committee report, it was a little disappointing to see an access map based on drive times being used to argue the case that access to the estuary site would be more difficult and slower than at Heathrow. Surely we should be doing our best to try to discourage driving to airports and to encourage the modal shift, which will also help to reduce air-quality problems.

[Mrs Ellman]

Is my right hon. Friend concerned about the £30 billion cost of an estuary airport and the impact of the closure of Heathrow, with the massive numbers of jobs involved there?

[Mr Raynsford]

The £30 billion cost is, of course, entirely conjectural. I understand that the Select Committee took evidence from Oxera, but as its report says:

“Oxera has used the following assumptions, based on recent proposals, although Oxera has not tested the validity of these estimates.”

I have to say that the figures showed a cost for a third runway at Heathrow of £8 billion to £9 billion, whereas we now see from the latest Heathrow proposals that it is likely to cost a minimum of £18 billion. I therefore do not think that the figures in the report necessarily support my hon. Friend’s case.

15:29

[Mr Bernard Jenkin (Harwich and North Essex) (Con)]

May I join others in congratulating you on your election to your new office, Madam Deputy Speaker? It is a great pleasure to be speaking in one of your debates for the first time. I also congratulate the Under-Secretary of State for Transport, my hon. Friend the Member for Scarborough and Whitby (Mr Goodwill), on his appointment as the Minister responsible for aviation. Welcome to the hot seat!

I commend the hon. Member for Liverpool, Riverside (Mrs Ellman) and her Committee for tackling this important issue at a time when it is very topical. As a fellow Select Committee Chairman, I can vouch for the fact that policy inquiries such as this are the most difficult in which to engage. Certainly the evidence is the most difficult to assess. However, while I agree with the right hon. Member for Greenwich and Woolwich (Mr Raynsford) that the hon. Lady has got some things right, I think that some of her Committee’s decisions were wrong.

I congratulate the hon. Lady on recognising that London will not survive as a global city unless we maintain its connectivity. Being a city is about being connected. If we want London to remain the world’s global financial centre—the premier international city—we must have international connectivity. Aviation services are the new rivers of our generation. Along with the airwaves and the internet, aviation is what connects cities nowadays, and if we cut ourselves off by persevering with a patch-and-mend aviation policy in London and the south-east, we shall see an end to London’s global status in our lifetimes.

The hon. Lady is right about “Heathwick”—it just would not work—and she is entirely right about hubs. However, she is wrong about Heathrow. As the right hon. Member for Greenwich and Woolwich pointed out, experience and the political reality tell us that there will simply not be any new runways at Heathrow. Have we not learnt from the fact that, although every member of the last Government was absolutely committed to getting that proposal through, it did not go through? That was due to the sheer scale of opposition from west London constituencies. Far more marginal constituencies would be affected by the development of Heathrow than would be affected by the choice of any other possible site for an airport. It is simply not possible to generate enough political support for development at Heathrow—one party or another will always oppose it.

Which mayoral candidate will stand, and be elected, on a pro-Heathrow policy? That will never happen. Ken Livingstone was against development at Heathrow, Boris Johnson is against it, and I guarantee that all three members of the main political parties who stand in the mayoral election will be against it. It is never going to happen.

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

The hon. Gentleman is making an interesting point, to which I hope to return if I am lucky enough to be called to speak. Given that the Conservative party went into the 2010 general election as the only party that was totally opposed to the third runway at Heathrow, why did it not win that sweep of west London marginals?

[Mr Jenkin]

I can tell the hon. Gentleman that we would have won even fewer seats in London had we supported the Heathrow case. There is no doubt about that. Why does he think that my hon. Friend the Member for Richmond Park (Zac Goldsmith) is so strongly opposed to a new runway at Heathrow?

[Alok Sharma (Reading West) (Con)]

Is my hon. Friend suggesting that Heathrow is not the right hub airport, and does he support the proposal for an estuary airport? If so—and I suspect that that is the argument that he is about to advance—does he believe that Heathrow should close, which would lead to the loss of many, many jobs?

[Mr Jenkin]

If my hon. Friend will forgive me, I will develop my argument further before dealing with that point.

The Davies commission has a hugely difficult task to perform. It must take a strategic view, and that means taking a long-term view. I think that the Select Committee has inevitably fallen victim to the pile of evidence shunted in its direction by business. Yes, we should listen to business, but business does not tend to take a view that covers more than about seven to 10 years—perhaps a maximum of 15. We need the Davies commission to take a 50-year view. The chief of Ryanair—bless his cotton socks—and, indeed, the chief of British Airways are not taking a 50-year view; they are taking a much shorter-term view than that.

The Davies commission needs to recognise that taking a 50-year view means stepping outside many of the immediate short-term controversies. It is significant that the Select Committee has not come up with a long-term solution to our airports question, but has merely suggested, rather tentatively, that there should be one more runway at Heathrow, and then probably another. If the Committee wants a four-runway hub airport at Heathrow, why did it not just spell that out? I think that it has been diverted by short-term commercial interests and has not taken that 50-year view.

[Mrs Ellman]

The hon. Gentleman is wrong. The Committee looked at the future and the possibility of high-speed rail links between London and Birmingham, and it says that that would produce a different situation.

[Mr Jenkin]

I perfectly accept that, but we are committed to a hub. We need a hub, and we need a decision to build a four-runway hub now. Once we have reached that conclusion, all the logic drives us towards having a Thames estuary airport.

Not a single objection has been raised to a Thames estuary airport—not cost, not bird strikes, not sea level rise—that is a showstopper; and then there are the advantages of a Thames estuary airport: it is achievable, and achievable within a predictable time frame; and its connectivity is better than that of any other possible site for a four-runway hub, and that almost includes Heathrow. Because it is already almost on the HS1 route, it has better rail connections to European onward destinations than any other possible site. It is also closer to the City of London by rail time than Heathrow. As the right hon. Member for Greenwich and Woolwich said, its connectivity by non-road is better than any other possible site, so that puts it firmly on the agenda, as does the fact that east of London is where we need regeneration and investment.

This is the visionary approach that should be adopted by the Davies commission. The estuary airport is the best environmental option because a bird habitat that would be affected can be replicated and replaced—or even doubled—elsewhere, and the Ramsar sites can be moved. It is the best safety option, because there would be no more flying over populated areas, and it is the best noise option, too. Some 750,000 people live under the 50 dB-plus noise footprint of Heathrow, which is why a decision there is impossible. Almost no people will be living under such a noise level around the Thames estuary airport, which is why this is a no-brainer.

[Alok Sharma]

rose—

[Mr Jenkin]

I am sorry, but I am not going to give way again as I do not have much time.

I just want to deal with the point about the closure of Heathrow. It would be a very big decision, but not a catastrophe—it is an opportunity.

[Mr David Lammy (Tottenham) (Lab)]

rose—

[Mr Jenkin]

I am not giving way.

It is an opportunity to create 250,000 new homes west of London—a new hi-tech city that has all the infrastructure already in place. It is a huge opportunity to solve the shortage of housing problem in London, and to drive growth west of London, not to close it down. I am afraid that we can come to a slightly myopic view if we do no more than talk to people who work at Heathrow. We will get the view that somehow this change is bad. All change is difficult, but this is a change that needs to be made.

In this age, nobody in their right mind would choose to put London’s hub airport where Heathrow is located. There only needs to be one accident, and we nearly had that a few years ago when the airliner with frozen fuel came down on the edge of the runway. If it had come down half a mile short of that spot, it would have landed on a densely populated area and people would be crying out for the airport to be closed on safety grounds.

Big airports have been moved before: notably British engineers and British planning in Hong Kong moved Hong Kong international airport—an airport of comparable size—to a new island site. As that has been done before, it can be done again, and this is the vision the Davies commission needs to have to deliver on its remit. It must not get sucked back into a shorter-term view and propose a patch-and-mend solution—a runway here and a runway there. I believe that Manston will have a big role to play, particularly in the interim, because it will take time to build a four-runway airport in the Thames estuary. We have to solve this problem once and for all and to take the really big strategic decision that will ensure that London and the south-east remain a globally connected part of the world, and that London remains the global city it deserves to be.

15:40

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

I am pleased to congratulate you on your election, Madam Deputy Speaker; this is my first opportunity to do so formally. I am delighted to follow the hon. Member for Harwich and North Essex (Mr Jenkin). He rightly said that this is a crucial issue for UK plc, but after that I stopped agreeing with him as he went on to develop his support for the estuary airport and the proposal of Mayor Boris Johnson, which is very much the wrong one. His suggestion of closing Heathrow would be an economic disaster for London, certainly for west London.

I also welcome the Minister to the Chamber. When he was my shadow in 2007-08, he coveted my office and told me that he would have it one day. He has now got it, and I hope he enjoys it—of course, it was not my office, but that of the Under-Secretary of State for Transport. I would be surprised if he does not enjoy his time there. May I also welcome my hon. Friend the Member for Blackpool South (Mr Marsden) to the shadow Front-Bench position? We have already had one or two discussions, and I wish them both well in developing the aviation strategy that has been suggested by the Transport Committee.

I congratulate my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman), the Chair of the Committee, and commend the Committee’s report to the House. I agree with the vast majority of its conclusions. Recommendation 34 is the most important, and that is what I shall be seeking reassurances from the Minister and the shadow Minister about in due course.

Colleagues will know that I was the aviation Minister in the previous Labour Government between 2007 and 2009, during which time I argued for the third runway, both in the House and outside, and that I was shadow aviation Minister until the Syria debate a couple of months ago. I have therefore spent a lot of time looking at this issue. The Select Committee’s examination is timely and its recommendations are food for thought for the Government, so account ought to be taken of them.

I will not repeat all the statistics that my hon. Friend the Member for Liverpool, Riverside set out, but I will say that aviation is responsible for a turnover of £28 billion and 120,000 directly employed jobs, and that it raises £9 billion in tax and duty. In addition, most of the £18 billion achieved through tourism is raised from air passengers. All that demonstrates the importance of aviation to the UK economy and UK plc. It has been clear that the vast majority of the speakers in the debate have underscored the importance of a hub airport in that regard. However, there are also key concerns to address—noise and the big problem of emissions—and recently we have seen the noise health study and the report on impacts on human health. Both the 2003 aviation White Paper and the third runway proposal addressed those issues, as does the Select Committee. It is important that they are addressed—they cannot be ignored—so that residents under flight paths and near airports are reassured.

The 2003 White Paper pointed the way forward, and the 2007 proposal for a third runway was hotly contested. The Conservative party made that a party political issue in the run-up to the 2010 general election. That was political opportunism. I am not criticising that; I suspect that we probably would have done the same thing if we had been on the other side. I would hope that we would not have done, but we did not have the opportunity to demonstrate that opportunism, whereas the Conservatives did. A clutch of west London marginals did not fall because Heathrow has underlying, solid support in west London, however.

Naturally, the Lib Dems are in complete denial on aviation—at least they have been consistent on that. One of the red lines of the coalition agreement was, “No aviation capacity whatsoever.”

[Mr MacNeil]

I am a bit stunned. Has the hon. Gentleman put his finger on something that the Lib Dems have been consistent about over the past few years, both in opposition and in government? That must be some sort of record; I congratulate him on his observation.

[Jim Fitzpatrick]

I am grateful to the hon. Gentleman for pointing out that, as we all know, the Lib Dems are not consistent in opposition and in government. He rightly says, however, that this is one issue on which they have been consistent—consistently in denial.

When we look at the international competition from Schiphol, Charles de Gaulle and Frankfurt, and from the new airports that have been built or are being built in Dubai, Abu Dhabi, Berlin and Istanbul, we see the importance of aviation and having a aviation hub. We are falling behind the times. However, when the Prime Minister indicated that the Government were appointing the Davies commission, we saw the beginning of one of the longest U-turns in recent British politics. The moving of the right hon. Members for Putney (Justine Greening) and for Chipping Barnet (Mrs Villiers) to other Departments and the appointment of the current Secretary of State for Transport clearly indicated that, after three years, Conservative Back Benchers who had been arguing the case—as did the CBI, the British Chambers of Commerce, London First, the TUC and others—had gone to the Government and said, “This issue is too important. We’ve got it wrong and we need additional capacity.”

I think that the Conservative manifesto for 2015 will have a commitment to the Davies commission’s conclusions, although I want to hear what the Minister says about that because he has history on this issue, given his support for the village opposed to the third runway at Heathrow. When the right hon. Ladies were moved and the new Ministers were brought in, that was a sign of encouragement for the aviation industry and those who support additional capacity. However, when the Under-Secretary of State for Transport, the hon. Member for Scarborough and Whitby (Mr Goodwill), and Baroness Kramer, the predecessor of the hon. Member for Richmond Park (Zac Goldsmith), were appointed, it was almost as if the Government were going back to where they were before the last reshuffle. I would like reassurance from the Minister about what that means.

For me, the Transport Committee’s key recommendation is No. 34. Whether we support the Heathrow plan, the estuary plan or point to point, there is general agreement that capacity is an issue, as well as about the importance of aviation to UK plc and the significance of a hub airport. The Davies commission at least gives us a chance of a fresh start and an opportunity to try to build consensus so that there is not the party political squabbling of the past 10, 20 or 30 years and the piecemeal approach to aviation that was cited by the right hon. Member for Saffron Walden (Sir Alan Haselhurst).

[Mr Jenkin]

Will the hon. Gentleman reflect that if Davies comes down in favour of some cobbled together compromise on Heathrow, we will go straight back into that kind of paralysing debate? If he comes down in favour of a Thames estuary airport, that will be decisive and a way forward. There will be far more consensus around a long-term solution than around a patch-and-mend, short-term one.

[Jim Fitzpatrick]

I am grateful to the hon. Gentleman for making the point. He said that there was no showstopper for the estuary option, but for me the showstopper is the £50 billion to £70 billion—depending on the estimate—of public sector money that it would cost. The options for Heathrow, Gatwick, Stansted and elsewhere involve private sector money, which is a whole different ball game.

If the Davies commission says that Heathrow is the answer, some people will oppose that—the Lib Dems, my hon. Friend the Member for Hayes and Harlington (John McDonnell) and, I suspect, my hon. Friend the Member for Hammersmith (Mr Slaughter). Some have been consistently against aviation or Heathrow, but I hope that the general consensus will be, “Davies has been given three years to do the job. We have wasted 20 years already—we can’t waste another decade.”

[Rehman Chishti]

I support a lot of what the hon. Gentleman has said about the estuary airport. Does he agree that my hon. Friend the Member for Harwich and North Essex (Mr Jenkin) has to explain which public services he would cut to fund the £50 billion to £70 billion needed to build the airport, which is completely unviable?

[Jim Fitzpatrick]

I agree, and I am sure that the hon. Gentleman will have the opportunity to develop those points.

My conclusion is that everybody in the Chamber agrees that we need an aviation strategy. The Davies commission provides a new opportunity. Whatever its conclusions, they will be controversial and opposed by some. However, we need a strategy—of that there is no doubt—and hopefully the Davies commission will give us the chance to have one.

15:48

[Mike Thornton (Eastleigh) (LD)]

I was going to join colleagues in congratulating our new Deputy Speaker, but unfortunately she has left the Chamber. I congratulate the Minister and his shadow on their appointments.

On consistency, perhaps I should ask Labour Members about the previous Government’s consistency on maintaining a balanced budget, the 10p income tax band, tax allowances and so on. Inconsistency has been rife on their side of the Chamber.

As an MP with a thriving and well-run airport in my constituency, I am well aware of the importance of civil aviation to the economy of my constituency and that of the United Kingdom as a whole. We are proud of the part that Eastleigh aerodrome, as it was then, played in the defence of this country in world war two, because it was there that Reginald Mitchell designed and built the Spitfire. We are still very proud, although it has now unfortunately become Southampton international airport.

Growth in demand for air travel is inevitable, and responding to that growth through infrastructure and policy takes time. Although it is Liberal Democrat policy to oppose a third runway at Heathrow and the Mayor of London’s proposal to build a brand new island in the Thames estuary, we fully accept that we need to address the forecast lack of capacity. That can partly be done by redirecting some air travel on to rail, better use of airports away from London and the south-east, and more efficient use of existing resources. While Heathrow may be full in terms of flights, there are still too many flights that are not full and too many planes that are too small. We must remember that four other airports besides Heathrow serve London.

The economic needs of the country must also take into account our obligation and moral duty to take a lead in combating the increase in carbon dioxide in the atmosphere. One can argue about the speed and effects of this, but the fact that a carbon atom reflects back heat is as much a law of physics as the fact that if I dropped my glasses they would fall to the ground. A build-up of CO₂ acts like an overcoat. Yesterday, the hon. Member for South Antrim (Dr McCrea), who is not in the Chamber today, made clear, in advocating the abolition of air passenger duty, his scepticism about the human contribution to global warming. However, if he went out in the sun and then put his overcoat on, I think he would soon find that he got a lot warmer than just by standing in the sun.

[Mr MacNeil]

In the debate on APD on 18 April, Scottish National party Members made repeated attempts to tease out from the hon. Member for Argyll and Bute (Mr Reid), who is also not here today, the Liberal Democrat position on APD. Has that become apparent to the hon. Gentleman since his arrival in this House?

[Mike Thornton]

I thank the hon. Gentleman for alluding to my rival. Obviously our position was that a per-plane passenger duty was far more sensible than an individual, per-passenger payment. Unfortunately, international regulations and laws do not allow for that possibility at the moment. It would be good if we could seek to change that and use a far more efficient per-plane tax system that encourages full aeroplanes.

It is not possible to solve this capacity problem within one or even two Parliaments. Consequently, there is a real danger that political differences, whether genuine or contrived, could prevent a proper, long-term strategy. These are complex matters. We therefore welcome the setting up of the independent commission on aviation chaired by Sir Howard Davies, which is considering the UK’s airport capacity needs and how to address them. As the hon. Member for Liverpool, Riverside (Mrs Ellman) said, the commission will publish an interim report expected before the end of this year and a final report in 2015. It seems to me that there is little point in establishing such a commission if we do not wait to pay attention to its findings. I am sure that the whole House recognises the need for a long-term, consistent strategy. Liberal Democrat Members look forward to Sir Howard Davies’ interim report, which is due shortly.

[Zac Goldsmith (Richmond Park) (Con)]

My understanding is that the Liberal Democrats have ruled out Heathrow expansion completely, whatever happens under the next Government or any Government after that. In that case, why did they sanction the inclusion of Heathrow expansion in the terms of reference for the Howard Davies commission? Surely that means either that they have absolutely no intention of forming any part of the next Government or that they have wasted an enormous amount of time and money, and, I suspect, have been playing a few games at the same time?

[Mike Thornton]

The point is that when one sets up an independent report one has to allow it to report.

[Zac Goldsmith]

So why have you ruled Heathrow out already?

[Mike Thornton]

We will have to wait for the report to see the answer to that. [Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I think we will work through the Chair. Have you finished?

[Mike Thornton]

Yes, Mr Deputy Speaker.

[Mr Deputy Speaker]

No problem. I call David Lammy.

15:54

[Mr David Lammy (Tottenham) (Lab)]

It is now 10 years since a Government White Paper highlighted the need for action on London’s airport capacity—10 years of dithering and hand-wringing, of refusing to make difficult decisions about aviation and of inaction—so I welcome this debate as an opportunity to highlight the urgency with which this issue must now be addressed.

In the time that successive Governments have pushed this problem into the long grass, London and Britain have lost out. The number of destinations served by Heathrow has dropped by a fifth in the past 20 years and it now has connections to just half the number of cities served by Amsterdam Schiphol. We have been overtaken by our rivals—that is for sure. Schiphol, Charles de Gaulle and Frankfurt all now outrun us. Delays to flights landing at Heathrow are now the highest of any major airport in Europe. This simply cannot continue.

I want to be clear: it is beyond doubt that London and the south-east vitally need increased air capacity. I am pleased that the Davies commission has also reached that conclusion, as, of course, has the Transport Committee. Our capital and the surrounding area face an air-capacity shortfall of £16 million by 2030 and £57 million by 2040. The Department for Transport forecasts that demand for UK airports will double by 2050—an increase of more than 100 million passengers.

There are no easy choices in tackling this problem, but not tackling it is simply out of the question. Last year, Germany overtook the UK for new investments, which is hardly surprising given that it has significantly more connections to developing markets in China, India and Latin America. In fact, London has fewer weekly flights than its European rivals to most of the emerging market economies. Heathrow has nearly half as many flights as Frankfurt to China’s airports, despite the fact that Britain’s trade always increases 20 times over when we have direct flights to that country. That is why, if London is to have a next chapter in its ever-evolving success story, measures must be introduced to increase its airport capacity.

I support the Government’s decision to set up the Davies commission to investigate all options and make a comprehensive recommendation on the best way forward, but I see no need at all for Davies to take three years to make a recommendation. Why does this commission need three years to report on something that the Transport Committee managed to report on in a matter of months? Yes, it is crucial that we get the right decision, that a recommendation is not made hastily and that we should properly examine all of the options, but let us be honest: that will not take three years.

[Mr Slaughter]

I think everybody now knows that the reason why the commission will not report until after the next election is that the Conservative party does not want to lose marginal seats in west London before it comes out in favour of a third runway at Heathrow, which it undoubtedly will if it is in power after the next election.

[Mr Lammy]

My hon. Friend makes the point that I was about to make. He is absolutely right.

We have to be bold, honest and ambitious about what this country needs. Every week delayed is a week in which London and our country lose and our competitors gain. Every week lost is a week in which British industry loses potential business to its international rivals.

[Zac Goldsmith]

I am yet to meet a single person other than those who occupy the Government Front Bench who supports the deadline falling after the next general election. I do not think that anyone on our Back Benches believes that that is a credible deadline, so in real terms this is probably in the hands of the Labour party. If it wants to force the agenda, I suspect that would be very easy to achieve. Perhaps the right hon. Gentleman could put some pressure on his own Front Benchers.

[Mr Lammy]

I think the pressure I am able to put on my Front Benchers is about exactly the same as the pressure the hon. Gentleman is able to put on his, he makes a very good point.

I hope that the Davies interim report due at the end of the year will show that real progress has been made in coming to a conclusion. It would be disappointing if the interim report consists merely of a long list of all the options we already know are on the table, many of which have been discussed today. The commission was set up over a year ago. We must begin to get some concrete early results. I would like to see a shortlist of two or three of the best options for increasing Britain’s airport capacity. That would provide a much clearer idea of the way forward and focus the debate on aviation, which is very much needed.

I am especially clear on one thing: one of London’s biggest success stories must not simply be wiped off the map. Heathrow airport is the busiest airport in the world on the basis of passenger numbers. It directly or indirectly employs 230,000 people. The contribution of the western wedge of London and the home counties accounts for 10% of the country’s GDP. The percentage of GDP that is contributed by London, at 21.9%, is the highest that it has been since 1911. We therefore ought to be very careful in talking about the idea that Heathrow could somehow be shut overnight with no problem.

It was right that the last proposal for a third runway at Heathrow was rejected, but that was largely because it took no account of the population in the wider west London area. The recent proposals contain more consideration of how to minimise noise levels and disruption to residents. It is obvious that the expansion of Heathrow is one of the main options that the Davies commission must consider.

This debate must be based on the assumption that airport capacity will be increased in addition to the continued success of Heathrow, not at its expense. Let us be clear: any strategy that results in closing one of Britain’s most successful and important infrastructure locations should be avoided like the plague. We should rule out right now any option that would close Heathrow airport because it would be a disaster for London and for the country.

That includes the idea of a new hub airport in the Thames estuary. It is clear that building a new hub airport in the east of London would require Heathrow to be closed. That would decimate the west London economy and end all the wider benefits that Heathrow brings to the city. If that option ever was on the table, it should be taken off the table right now. Not only is it economically and technically unfeasible; it would mean closing Britain’s best and most successful airport. Thankfully, there is only one person in this country who genuinely seems to believe that the answer to Britain’s airport problem lies in building a new £65-billion airport in the middle of a river. Unfortunately, that person happens to be the Mayor of London.

[Mr Jenkin]

Will the right hon. Gentleman give way?

[Mr Lammy]

I suspect that there is a second person. I give way.

[Mr Jenkin]

Moving a major airport is a dramatic idea, but it would happen over a period of time and would be an evolution. If Heathrow ceased to be an airport, there would not just be a big hole. There would be a massive opportunity to fill the space with new industries, homes and economic activity. That would be a huge opportunity for the whole of west London.

[Mr Lammy]

Ministers often talk about the country’s finances. We must be absolutely clear about the staggering cost of that proposal.

I will end by saying that it is important that we recognise the contribution of Stansted—an airport that is below capacity as we speak. It is ridiculous that the journey from London to Stansted takes so long and is so unpredictable. We need to deal with the infrastructure on the West Anglia line. It needs to be upgraded so that Stansted is more viable.

[Mr Jenkin]

What about the cost?

[Mr Lammy]

That is a cost that would benefit Stratford, London and the airport.

16:03

[Alok Sharma (Reading West) (Con)]

I congratulate the Under-Secretary of State for Transport, my hon. Friend the Member for Scarborough and Whitby (Mr Goodwill). He is not just a decent man, but hugely competent, and I am sure that he will do brilliantly in his new role.

I will start by giving some figures on the airports that are being built in China. The Mayor of London has been to that country recently, as has the Chancellor. Between 2005 and 2010, 33 new airports were constructed, taking the total number to 175. By 2015, there will be more than 230 airports in China. If my maths is correct—I am an accountant by training, so I think it is—there will have been 55 new airports over five years, an average of 11 a year. I know that it is a developing nation, that is much larger than us and has the advantage of a different form of government, but if we compare and contrast that with what we have had in this country, it makes us think that we have not got to grips with the need for more airport capacity.

The Transport Committee made the point, as a number of Members have today, that it has been a decade since the last White Paper on the subject, and at that time it was 20 years since the previous one. We are back to the future, because now the Davies commission has said that there is a need for more airport capacity in the south-east, but we still have not concluded where it should be.

As Members have said, there are two problems with the fact that we have not reached a decision and that the pace has been slow. The first is that the lack of certainty is bad for business and investment. I know that my hon. Friend the Member for Harwich and North Essex (Mr Jenkin) will agree with that, although we may not agree about the solution. The other problem is that others are getting ahead. A number of Members have made the point that Frankfurt, Schiphol and Charles de Gaulle are all getting ahead in the global race that we want to win. I was at a meeting this week at which somebody who knows the airport industry well made the point that people at Schiphol talk about their airport being Heathrow’s third runway, which says something.

Another sobering fact that I have found in considering the matter is that more flights leave Frankfurt for cities in China in a week than leave Heathrow for the whole world in a weekend. That must tell us something. Figures from the International Air Transport Association show that due to the lack of capacity at Heathrow, between 2005 and 2011 there was a 49% growth in the number of passengers flying from UK regional airports to transfer at overseas hubs such as Schiphol and Charles de Gaulle. That represents a loss of business and jobs to the UK that we should do everything we can to retain.

I note the Transport Committee’s recommendation of a third runway at Heathrow, and I commend it on the urgency of its deliberations. It has come to a conclusion a lot faster than the Davies commission, which will release its interim report at the end of this year. There has been discussion of the costs, which I am sure will continue, but the proposed expansion of Heathrow would have much less of an impact on public expenditure and the Exchequer than a Thames estuary airport.

The other innovative proposal that I have found interesting to learn about is the Heathrow hub, proposed by the Centre for Policy Studies. It talks about doubling capacity from two to four runways and suggests that that can be done at no cost to the public purse.

[Zac Goldsmith]

Is my hon. Friend not slightly alarmed that that study takes no account at all of the extra impact of congestion? Just a third runway would lead to an extra 25 million road passenger journeys a year, and a fourth would presumably have more or less the same effect. Can he explain how our roads would be able to handle 50 million extra road passenger journeys a year to and from Heathrow? Does he share my concern that the costs simply do not exist in the report that he cited?

[Alok Sharma]

Clearly, that is exactly what the Davies commission should come up with. I am not suggesting that the CPS’s proposal is the only one in town, I am just highlighting it as a particularly interesting one.

We have waited a long time for a conclusion, so we might as well see what the Davies commission comes up with, but the one thing I would find disturbing in any final recommendation would be a solution that ultimately led to the closure of Heathrow. That would be bad news for business and jobs. I do not agree with the right hon. Member for Tottenham (Mr Lammy), who is no longer in his place, about everything, but I do agree with his points about the impact that it would have not just in London but in the western wedge, which covers areas such as the Thames valley and Reading, which I represent. As he said, a report commissioned by a range of local enterprise partnerships covering the Thames valley, Buckinghamshire, west London and Oxfordshire concluded that £1 in every £10 of UK economic output is generated in the western wedge area around Heathrow, and that aviation and related activity at Heathrow supports about 120,000 jobs there. If a new hub airport was to be built to the east of London and Heathrow was to be closed by 2030, because I do not think anybody is suggesting that we are going to end up with two hub airports—

[Adam Afriyie (Windsor) (Con)]

My conclusion differs slightly from that of my hon. Friend. I am the Member of Parliament for Windsor, where we are very much affected by our noisy but welcome neighbour at Heathrow, and there is certainly a scenario in which Heathrow could continue to operate as a hub airport if the estuary airport were to take over. This scaremongering about hundreds of thousands of jobs disappearing is not necessarily entirely helpful.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

I do not want to scaremonger, but the hon. Gentleman is hoping to catch my eye later and we are running out of time. If we have more interventions, I will have to drop the time limit.

[Alok Sharma]

I note the point my hon. Friend is making, but the idea that we would have two hub airports operating—

[Adam Afriyie]

Regional.

[Alok Sharma]

Well, let us see what the Davies commission comes up with, but I personally think that it is unlikely that we could operate a system with two hub airports.

The report goes on to say that the closure of Heathrow would put at risk another 170,000 jobs in the western wedge area. We can have a discussion about the number of jobs at risk and about the fact that, if there was going to be an estuary airport, things would not just change overnight. There is no doubt, however, that there would be a huge economic impact in a region that is the powerhouse of Britain in driving the economy forward.

The Davies commission must clearly take into account the economic benefit of any of the recommendations it makes and, of course, the environmental impact. We have to take into account what business wants and what airlines want. If we build another airport, will airlines come? Will British Airways move to a new hub airport? Ultimately, it comes down to the cost to the public purse resulting from any new expansion.

Those who have been in this place for many years will see this debate as another groundhog day in the life of Parliament’s debates on aviation policy. I suspect we will see a lot more groundhog days. Of course, the question is very difficult, but once the commission makes its final recommendation what we want is politicians who will show a bit of backbone and implement the recommendations on expanding airport capacity in the south-east, whatever those recommendations might be. To duck the question for another electoral cycle will do a huge disservice to Britain’s hopes of succeeding in the global race.

16:12

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

I agree with the hon. Member for Reading West (Alok Sharma): this is like the annual reunion of the Heathrow debate. The Transport Committee always comes out with a report in favour of expansion. I have a lot of respect and affection for my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman), but it is the same recommendation every time it reports. We then have a discussion and we usually put the decision off. As the right hon. Member for Saffron Walden (Sir Alan Haselhurst) said, we also put off having a discussion on aviation strategy more generally, including coming to a conclusion.

I agree that we should not put off any decisions from here on in. The Davies commission is a fudge to get everyone past the next general election without having to come to any conclusion so that the electorate cannot know what any political party stands for on this political issue. That is not good enough. It is not good enough for parliamentary democracy and it is not good enough for my constituents.

I agree with the hon. Member for—is it Putney?

[Zac Goldsmith]

Richmond Park.

[John McDonnell]

Richmond Park. That posh area of London, anyway.

I agree with the hon. Member for Richmond Park (Zac Goldsmith). All of us with sound common sense should band together on a cross-party basis and insist that the Front Benchers agree that the Davies commission should report in full before the general election, so that we can come to some conclusion. We should be able to go into the next general election with a clear view from each political party about their position on future aviation strategy.

I cannot see any political party going in to the next election in favour of expansion at Heathrow. Before the last general election, the Prime Minister made it very clear that as part of his greening of the Conservative party it would come out against the third runway at Heathrow. The Lib Dems, to give them their due, have consistently opposed it—the one thing on which they have been consistent throughout. The current leader of the Labour party opposed the expansion of Heathrow and has made that clear publicly. That might be why—together with his position on Syria—my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) is on the Back Benches, I do not know. The politics of this is that there is no consensus in favour of expansion at Heathrow, and so far there is no consensus in favour of a new airport in the estuary. The arguments put forward have been about cost, and I cannot see anyone grasping that nettle.

[Mr Jenkin]

There is no knockout blow in the report about cost. The cost is reckoned by the consortium to be about £23 billion, and it agrees that any airport will need infrastructure that is funded by the taxpayer.

[John McDonnell]

I think that anything that gets past £40 billion frightens the horses of any future Government—I apologise for allowing the intervention, Mr Deputy Speaker. I will press on.

In recent months, the debate has changed significantly as people have become more aware of the environmental and health consequences of what is already happening at Heathrow. A series of reports from Imperial College London and Harvard have demonstrated that, as a result of air and noise pollution, the area has low birth weights. Children’s growth patterns are affected even as they grow older, and there has been some growth delay as a result. In addition, a huge study over 12 boroughs has demonstrated an increased risk of heart attack and stroke as a result of aviation noise. If anyone comes forward at this stage in favour of further expansion at Heathrow, there will not be protests like last time and the Camp for Climate Action—I was there—or anything on that scale; the protest will be multiplied tenfold. It will be the largest environmental battle that the country has seen, and I will be part of it.

If there is a fudge at the next general election, and then a decision is made to expand Heathrow, people will feel that they have been conned and betrayed. That will motivate them even more into saying that democracy in this country has been undermined, and there will be more direct action as a result. It is important to convince the leaders of the different political parties that they need to bring forward the Davies commission to before the next election, so that we can have a proper debate and be honest with the electorate about its conclusions.

I enjoy a good joke, so I saw the submission by Heathrow Airport Ltd to the Davies commission—I do not know whether Members have seen it. It does not just want one more runway, it wants three; it wants to obliterate not only my constituency, but two others as well. The hon. Member for Spelthorne (Kwasi Kwarteng) is not in his place, but he is a prime advocate for expansion at Heathrow. Now he has been taken at his word—they want to expand into his constituency. His councillors have met and said, “We’re still in favour of expansion at Heathrow, as long as it is to the north”—a breathtaking act of nimbyism if ever I saw one.

The proposals by Heathrow Airport Ltd—now owned by Ferrovial, the Chinese sovereign state fund, and Qatar—looks at an expansion that will take 20,000 people from their homes and expand air pollution, possibly to about 100,000 people. We are already beyond EU limits; children in my constituency are already going into classrooms and handing over their puffers to their teachers. The proposals would increase such things, perhaps tenfold. It will destroy whole communities, but I do not think people will sit back and allow that to happen. I think they will mobilise.

A new campaign has been launched called Back Heathrow. It has basically come together and said, “We are in favour of ensuring that we maintain the airport.” I contacted it and said, “This is a wonderful initiative.” I fully support that because we want to keep jobs in the area, and we can improve the quality of Heathrow and look at how we expand to meet challenges, for example that of China. Routes between China and Heathrow have been limited because we have been refused access in some areas, but that is now opening up. There is capacity at Heathrow to do that because if we took out the short-haul flights—25% of flights at Heathrow are short-haul or point-to-point—we could accommodate those direct flights to China.

I was in favour of the Back Heathrow campaign, but then I discovered that it backs Heathrow only in favour of the airport’s recommendation to expand, and that it is actually funded by the airport itself. What a surprise.

[Zac Goldsmith]

I had something from Back Heathrow through my door as well. It calls itself, “The voice of the silent majority of west London residents in favour of Heathrow expansion”. Does the hon. Gentleman agree that it is a very, very silent majority in west London?

[John McDonnell]

The silent majority is in an office by Heathrow airport and solely funded by Heathrow airport. I cannot find a community group or a resident in favour of the expansion. Let us expose that campaign for what it is on the Floor of the House and ensure that people are aware that it is a con of that nature.

We want a sensible debate on aviation strategy. We need to recognise that, realistically, London has seven airports and eight runways serving it. We move more passengers than any capital city in the world. Paris is fifth behind London—nowhere near us. People make the argument of business connectivity, but we come top of every poll on business connectivity. The answer to the need for further capacity at Heathrow is to ensure that it is not bigger, but better, which is exactly what the Conservatives said at the last election. We should manage it better by moving the short-haul and point-to-point flights elsewhere. I do not accept the argument that we cannot have a collective hub. We can have one as long as we ensure connectivity between the airports.

We need that rational debate to take place. I welcome the report as part of the debate—it is rubbish, but it at least stimulates debate. I urge Members not to allow the deal that is going on between the political leaderships to put the debate off until after the election. Let us have the Davies report before the election, and come to conclusions with which we can then go to the electorate.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I am sorry but we have to introduce a time limit of four minutes—[Interruption.] Well, I do not think you have been helping with that, Mr MacNeil.

16:19

[Martin Vickers (Cleethorpes) (Con)]

I suppose it was inevitable that the debate would be dominated by London and the south-east, but I remind the House that the northern economy is very dependent on improved communications, including better air services. I shall concentrate on the role of regional airports and, from a constituency point of view, Humberside airport, in economic regeneration and development locally.

First, as a member of the Transport Committee, I should put my cards on the table about Heathrow. I was not a member when the Committee conducted the inquiry prior to the report, but I broadly agree with its recommendations. The Chair of the Committee might be somewhat reassured by that.

The Humberside area has been designated and recognised by the Government as a potential area for major economic development. To give a couple of examples, they have shown their support for the area by halving Humber bridge tolls and creating the largest enterprise zone in the country. Only a month ago, the Prime Minister highlighted the area in his party conference speech.

We need better services in the area. Whatever happens in London and the south-east, getting them will be a long job. All hon. Members recognise that, and Governments make a habit of kicking it into touch. That point has been made clearly. Regional airports have a role to play in that respect. The Minister has been to Humberside more than once, and will know that Humberside airport would be ideally located if only there were better connectivity between the various modes of transport. A railway line runs within a quarter of a mile of the airport terminal, but there is no air-train connection. That is worthy of consideration—I have made that point regularly to the local enterprise partnership, local authorities and the like.

In the minute I have left, I should like to talk about the impact of air passenger duty, which is particularly relevant to regional airports. I have a note from Paul Litten, the commercial director at Humberside airport. He recognises that the tax is required, but says that

“it would be better to encourage airlines to move to smaller regional airports and take advantage of space, flexibility and customer demand but having a much lower APD amount for”

such airports. He says that

“if you use the logic of the congestion charge in London, then where there is a large demand, you should continue to tax; but apply a lower rate to those areas that need development.”

In other words, he says we need a smaller tax for regional airports. Finally, he says:

“Let me know if this makes sense.”

It makes sense to me, so perhaps the Minister could tell us in his reply to the debate whether it makes sense to the Government.

16:24

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

I will try to charge through what I have to say and if any political enemies or friends wish to intervene to give me another minute or two, they would be most welcome.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

You could try to intervene on yourself.

[Mr MacNeil]

I can always try, Mr Deputy Speaker.

I know the importance of aviation. I fly probably more than any other MP—at least four times a week and sometimes six times a week. At least, I did until flights in my constituency were vandalised by the local council, which axed 60% of inter-island flights between Stornoway and Benbecula and Barra and 100% of flights to the most vulnerable island community. That was all the more strange given that they were public service obligation routes. While the council can make arguments about rurality and peripherality in Edinburgh, London or Brussels, the arguments hold no weight it seems once it secured the money within its own corridors of power. Indeed, flights used by people going for cancer treatment have been described by the council leader as 10-minute tourist flights, which is very disappointing. The flight was not 10 minutes and the councillors he dragooned into voting to axe flights to these communities have not been to visit them since their election. The upshot of this transportation vandalism is that travel from one end of the Outer Hebrides to Edinburgh, London or Brussels is faster for most of the week than going to the other end of the Outer Hebrides.

Why do I mention this? The debate has concentrated on the south-east of England and Heathrow, about which there seems to be a love-hate relationship. London has tremendous connectivity, with 360 destinations—almost one for every day of the year—which I think is more than Paris, Frankfurt and Amsterdam enjoy, although the individual airports are better.

[Jim Fitzpatrick]

The hon. Gentleman will be aware that when I was Minister with responsibility for aviation, I heard repeated requests by Members from the regions for access to Heathrow. That clearly was not possible, as my hon. Friend the Member for Hayes and Harlington (John McDonnell) said, because short-haul routes were taken out so that there could be flights to international destinations.

[Mr MacNeil]

The building of Heathrow has been brought about through general UK taxation. Scots have on average paid more tax than the rest of the UK in each of the last 30 years. We have contributed to Heathrow, as have other areas of the UK, and our investment should be protected. There are 360 other areas that have contributed and are arguing for the benefits of Heathrow. The hon. Gentleman makes a good point.

Heathrow is a disappointing airport. If one travels to it by train, one straightaway meets a glass wall between the train and the lifts. That is indicative of rest of Heathrow and terminal 5, where passengers seem to be reversing into each other constantly. Gatwick is no better—a veritable rabbit warren that makes London City airport almost look like bliss. The Heathrow Express, Heathrow airport and the airlines seem unable to talk to each other when there is a train delay—an example of component efficiency rather than network efficiency that is sadly all too typical around UK airports.

There is doublethink at the heart of the relationship with Heathrow. Recommendation 9 of the Select Committee report states:

“It is imperative that the UK maintains its status as an international aviation hub.”

That seems to be about a badge of prestige rather than transporting people, as the hon. Member for North Thanet (Sir Roger Gale) said. I have mentioned, yesterday and today, that decades of bilateral agreements have favoured London airports to the detriment of Scotland and other places. This has now come back to bite the south-east of England. One solution could be co-operation with the Dutch and the French. Schiphol and Paris are not that far away, and increased and improved surface transport could bring them closer. As the hon. Member for North Thanet said, it is time, not distance, that matters to the passenger. A global mega-region encompassing either side of the Channel would benefit passengers globally. There is an economic benefit to linking hubs, an argument I would make for the central belt of Scotland, too.

What happened to the south-east of England when the London docklands lost its pre-eminence to Rotterdam will happen in aviation. Schiphol will win and Heathrow will lose out, as the right hon. Member for Saffron Walden (Sir Alan Haselhurst) said, because of the UK’s piecemeal approach.

The right hon. Member for Tottenham (Mr Lammy) pointed out that with direct air links trade improves twenty-fold. As a result of the imbalance in the UK, Scotland has definitely lost out; we have paid in, but we are not getting the benefits. It is disappointing that this high-tax Government are not interested in reviewing APD at any point. Their “see no evil, hear no evil” approach continues. In the meantime, Spain is getting rid of it and Barcelona has seen 37 new routes in the last year. APD is a demand-management tool for Heathrow and it comes at a tremendous price for other areas of the UK, particularly Scotland. With independence, I am hopeful that we can sort that one out.

16:30

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

An estuary airport strategy would be binary and lumpy. The proposal is for one massive new airport opening at a single point in the future, but it would run the risk of being half-empty when it opened, and in the meantime we would have none of the capacity we need now.

It is ridiculous to suggest, as the Mayor of London did, that we could build such an airport in the same time it would take to add one runway to an existing airport. And all the while, the economy is suffering. The Stalinist command-and-control-economy assumption that we could move hundreds of thousands of jobs to the Thames estuary at the stroke of a Mayor’s or even a Government’s pen is preposterous: many of these jobs would not move, many would move to Europe and many others would no longer be economical, because the capital and investment on which they depended would be destroyed. The assumption that all the hotel and business infrastructure around Heathrow could be rebuilt, cost-free, in the estuary airport is wrong. If people had to pay twice for that, many fewer jobs would survive.

We hear from the Mayor of London that Heathrow could become like Kensington and Chelsea or Canary Wharf, yet he has just been to the old airport in Hong Kong, which, 15 years on, is still a shell, with next to no development, in one of the fastest-growing economies in the world. Boris told me that if he proposed this seriously, he would come down to look at the Thames estuary and the Hoo peninsula, in my constituency, where he wants to build it, but he has not come, so I can only assume that he is not serious. The Davies commission, which did come, was absolutely astonished. It thought, having listened to Boris, that it was like a blank sheet of paper, but there are more than 23,000 people living there, nine villages and some of the most important energy infrastructure in the country.

I am pleased at least that Transport for London has recognised that we could not use HS1 to access that new airport—it would not have the capacity and there is no where to put the trains at St Pancras—yet, like Fosters and Partners, which is in the clouds as much as my hon. Friend the Member for Harwich and North Essex (Mr Jenkin), it is saying that there could be three other substantial railway projects, including a parallel new high-speed line. Even those three projects would not provide the local access to work for the people coming into that airport, which would require further tunnelling under the Medway towns to get those people across the two river pinch points.

Crucially, given the level of environmental protection in this area, legislation states that there must be an “absence of alternative solutions” even before we can consider building such an airport. It cannot be a credible option, therefore, if it has already been determined, as the Davies commission must, that there are other credible options.

I heard that the scheme would cost £80 billion, but the Deutsch Bank aviation analyst tells me it would be £120 billion. Of that, up to £30 billion would be public money. It is absolutely extraordinary. It is incredible. I do not think any Government would fund that. What about the private money? Ignoring all the new investment, we would still be looking at about another £50 on every ticket for anyone who used that airport. What a blow to business that would be!

As to its operational viability, National Grid said that

“the proposals being put forward for a Thames Hub Airport on the Grain peninsula are incompatible with the energy infrastructure”.

The fog is three times what it is at Heathrow and the risk of bird strikes is twelve times as high. The delivery risks are absolutely enormous.

We have heard a lot about Heathrow, but what about Stansted, which we have also heard about? It needs better train service connections. Perhaps even our Lib Dem friends would support those extra train connections to allow the half-empty runway to be better used. Gatwick should be strongly considered, too, because it has the money. It would only cost £5 billion to £9 billion —about one tenth of the Thames estuary airport—and with the improved train connections, particularly the Thameslink service to London Bridge and, crucially, to Farringdon, it would be a credible option and provide competition.

16:34

[Mr Andy Slaughter (Hammersmith) (Lab)]

“Aviation Strategy” is a great title for a debate; what we are actually having is the “Is Heathrow going to get away with it yet again?” debate yet again. I fear that those at Heathrow might get away with it, as those of us in west London who have debated these issues with them over 30 years and seen how they operate think they might, because of political cowardice and the way in which politicians of all parties have given in to the airport lobby over that time.

Although we have had some excellent speeches today, I am somewhat surprised by that, because at the moment we have very little of substance to say that is new. The reason for that is partly the vacuum caused by the Airports Commission not reporting until after 2015, for no reason whatever other than political convenience. That has created a vacuum into which has floated the Mayor of London, with his frankly ludicrous suggestion of an estuary airport.

[Rehman Chishti]

Will the hon. Gentleman give way?

[Mr Slaughter]

I do not think I should.

Not only is the idea of an estuary airport distraction politics of the worst kind; it is now affecting Stansted as well. Because the Mayor has virtually abandoned the idea of an airport actually in the river, he is now looking at the four-runway option at Stansted as a fallback position, which has mesmerised those at Stansted, who cannot get on with their ordinary work.

The fact that we had three London airports in the same ownership for so long has constrained the debate and let BAA, as it was then, keep control of the argument. I still do not understand why so many politicians—this includes the last Labour Government—are mesmerised by the airports and airline industry, which are simply looking after their commercial advantage. That has happened to such an extent that the Conservatives in opposition were saying that HS2 should go via Heathrow. That was another mad suggestion, which slowed down high-speed rail, but it has now been abandoned.

We have been ill served by the debate so far—that goes not just for my constituents, but for the general public. Because Heathrow has been making the weather on this issue and because the other airports in the south-east have been so far behind the curve, it has been left to organisations such as HACAN—the Heathrow Association for the Control of Aircraft Noise, led by John Stewart—and community groups to provide the rationale and the arguments, which they have done admirably.

We are now faced with the prospect of two options. I do not have the time to go into this, but I am pleased that other colleagues have talked about the horrendous effects that Heathrow expansion would have, and not just on noise—the fact that 25% of those in the EU who are bothered by serious noise nuisance are from around Heathrow should rule out expansion alone. However, there is also the congestion and pollution, as well health and safety issues. Expansion is therefore simply unthinkable, but so is an estuary airport. Not only would an estuary airport be in the wrong place—hon. Members should see what the chambers of commerce have said about the prospect of that much public money going into such a white elephant; it is a ludicrous suggestion—but it would close Heathrow, as the Mayor of London, its chief cheerleader, says it would, or Heathrow would otherwise be reduced to the size of City airport.

That is not sustainable for either the west London or the UK economy, so why are we so hung up on this idea of a hub airport? In advocating expansion, I am not expert enough to say exactly how it would occur and where it would be possible in a city and a region that has five airports, but Gatwick, which is now making some money, Stansted and Heathrow should all get together and look at that proposal. Failing that, our politicians from all parties should get together, show leadership and put forward a proposal that can deliver short-term gains for public transport and free up the existing capacity and, in the longer term, deliver a network to serve the great capital city, rather than going for an expansion of Heathrow.

16:38

[Adam Afriyie (Windsor) (Con)]

We are debating aviation strategy today, but a lot of the comments I have heard—particularly about the sticking-plaster solutions for Heathrow and all sorts of other complicated, detailed, short-term fixes—do not deal with the strategy we need for the nation. We used to be a great island global trading nation in the 1700 and 1800s, and we had a fantastic period even in the early 1900s. If we are talking about strategy, we should be talking about a long-term vision for where we want our country to be, and having a new offshore airport is a very good idea for the long-term economic growth of our country.

A short runway at Heathrow would not do it, while an extra runway at Gatwick would not deal with the hub issue. All those small fixes for the short term would just lead us straight back to where we were: putting off the long-term decision again, as my right hon. Friend the Member for Saffron Walden (Sir Alan Haselhurst) described. I very much welcome the Davies commission. I differ somewhat with the timetable for the reporting and the decisions, but it is right that someone is going to take a calm, long-term view of the situation.

There have been a lot of scare stories saying that, if a new hub airport were to be built over a period of 20 or 30 years, Heathrow would somehow cease to exist. However, we already have regional airports, and Heathrow could continue in that capacity and gradually evolve over time. I must declare an interest, in that I live under the flight path in my Windsor constituency. The biggest challenge is to ensure that, with 480,000 air traffic movements a year, the number of flights does not increase. A second concern relates to night flights. I was involved with the recent Civil Aviation Bill. Thankfully, Heathrow has only 16 night flights at the moment, but with an extra runway, that number would increase massively. I will certainly continue to go on marches and to work with hon. Members across the House to ensure that a third runway does not become a reality.

We need to step back and look at the interests of the nation over the next 50 to 100 years, then make this decision in a cool, calm and collected fashion without focusing on short-term, sticking-plaster solutions. I hope that, when the Davies commission reports, it will have taken a long-term, mature look at the matter. I believe that an offshore airport would solve all the problems, despite the short-term challenges involved in getting it built.

16:39

[Mr Gordon Marsden (Blackpool South) (Lab)]

We have had an extremely good debate. I do not have time to dwell on all the contributions, but I shall simply say that the Chair of the Select Committee, my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman), has performed a singularly important task on behalf of us all in putting forward her views so strongly and eloquently. The right hon. Member for Saffron Walden (Sir Alan Haselhurst) made an imaginative pitch for diversification. My hon. Friend the Member for Blackley and Broughton (Graham Stringer) made some thoughtful comments about hub connectivity, which were echoed by many other hon. Members, and my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) brought all his experience and distinguished service to his comments. My hon. Friend the Member for Hayes and Harlington (John McDonnell) spoke with passion, as always, on behalf of his constituents.

I come to this new brief to listen and to learn, as well as to speak, but I do have Blackpool airport just down the road from my office. It handles 250,000 passengers a year, and 750,000 RAF staff trained there during world war two. Flights have been taking off from there since 1909. As today’s debate has shown, the aviation sector has enormous strengths and strategic importance. It encompasses skills in manufacturing, in leisure and tourism, in professional standards and in logistics. The sector serves a huge variety of customers and passengers, balancing business and leisure.

I believe that the aviation sector has a major contribution to make, not least because we have BAE Systems just down the road from Blackpool, supplying good jobs and apprenticeships to my constituents. There are huge opportunities for the sector to contribute to local economies, and I know that Heathrow has done some really innovative stuff with the schools and colleges in its area. The future brings great challenges, not least that of how to satisfy those under the planes as well as those on them, and how to strengthen the sense of a community of interest between them.

We agree with the Government that the aviation sector needs to grow, but we believe that that should be subject to concerns about sustainability criteria being met. The UK scores fifth in the International Air Transport Association connectivity index, and we must maintain and strengthen that position. The industry is vital to the UK economy. The aviation policy framework that was published earlier this year showed that aviation adds some £18 billion to our gross domestic product, although the Airport Operators Association puts the figure at nearly £50 billion. The Minister might like to think about whether the significance of aviation jobs, the supply chain and tourism ought to be included in that assessment. The Government’s role is to be an active and intelligent provider of connectivity for those expanding export businesses.

I broadly agree with the Chair of the Select Committee that expansion in the regions will not provide a magic bullet to deal with all our capacity problems and that there are national infrastructure issues that urgently need to be addressed. The question of whether to locate in London and the south, or in the areas beyond, is not an either/or—we have to do both. Similarly, the question of whether to opt for point to point or hub expansion is not an either/or—both are necessary. Addressing the question of the hub, and the spokes that might come from it, is critical to connectivity and consumer experience, and we must remember that that cannot simply be measured or satisfied by the number of shopping malls that might accompany the development.

Howard Davies confirmed to the Airport Operators Association conference on Tuesday that any major response to hub capacity would not become operational until 2023. In that case, there must be a particular and minute focus on short-term capacity solutions. As Davies himself has said:

“A number of airports have proposed that there are ways in which you can make existing airports more appealing and provide some additional headroom.”

I agree, and I also agree with the chief executive of AOA, who says:

“To deliver the UK’s future air connectivity we need both vibrant point-to-point airports and sufficient world class hub capacity”.

That view is echoed by the British Chambers of Commerce, although it makes the point that that strategy should not focus only on the south-east, but

“should also involve the strengthening of regional airports throughout the UK.”

There are some splendid examples of such airports in my region, quite apart from my airport at Blackpool. There is Manchester airport—we have heard wonderful illustrations of its importance—which has great strengths in local connectivity. All the 10 councils of Greater Manchester were involved with the exercise from the ’80s, and this is an £800 million airport city. Liverpool airport is increasingly widening travel options for huge swathes of people across the north-west, Wales and beyond. Elsewhere, Birmingham has put forward to the airports commission, as part of its bid for a second runway, some innovative and interesting ideas on future flight patterns and its future involvement in them.

To the extent that it is relevant to the area, I welcome the language of the aviation policy framework, which sets out the Government’s objectives and principles to guide the making of plans and decisions at local and regional levels, but if we will the ends, we also have to will the means, which means real localism on the ground from government. We believe in active empowered government, and if we are to achieve these objectives, we need local economic partnerships, local authorities and other sub-regional stakeholders to collaborate with airports.

There is particular potential for boosting tourist economies in popular destinations about the UK, in which regard the APF refers to the strategy of the Department for Culture, Media and Sport. Transport Ministers must not allow aviation to remain in a silo in one branch of the Department or elsewhere. Engagement is needed with other aspects of departmental responsibilities, not least the rail network, and they need to be a force for innovation and collaboration.

Airports are key players in their communities and, as the APF recognises, airports should be encouraged to strengthen these relationships with communities. To build and maximise such initiatives, we need to link rail policy with airport policy. I did not agree when the Government responded to the Select Committee by saying:

“The Government does not agree with the Committee’s view that surface access to major airports in the south east is poor.”

That shows a very complacent attitude, and we should be using the Davies gap to look actively at other ways of expanding. It is crazy that current rail services to airports are not directly considered in the aviation policy framework, and that is why we support building the new western rail link to Heathrow.

[Mr Jenkin]

Will the hon. Gentleman give way?

[Mr Marsden]

I will not; I do not have the time.

That was also why I supported my right hon. Friend the Member for Tottenham (Mr Lammy) when he expressed his concerns about Stansted.

We will not prejudge the conclusions of the Davies commission, which has been tasked with producing independent recommendations on the strategy. It must be left to produce its initial report in December and subsequent recommendations, but we echo the calls of the Select Committee to the effect that, given the protracted timetable, the time available must be used to ensure that the research is comprehensive and robust.

[Mr Jenkin]

Will the hon. Gentleman give way on that specific point?

[Mr Marsden]

No, I will not; I am trying to keep to my time.

The Government must also address consumers’ ongoing concerns about air passenger duty. As we said in yesterday’s Opposition day debate, the Government need to undertake a real review of the effects of that tax. In straitened times, we need to keep a clear line of sight over costs and charges, ensuring that consumers are not at the centre of any resolution between airports and airlines that disbenefits them. We also have to make sure that new or improved public transport links remain affordable to consumers because otherwise unfair burdens will be imposed on them.

Of course, we have to deal with noise, which was raised by several hon. Members, not least my hon. Friend the Member for Hayes and Harlington. We will continue to oppose any increase in night flights and to listen to arguments for tighter restrictions. We will urge the Government and industry to look further at noise mitigation measures.

These are difficult times and the decisions are difficult to make, but the strategy is not a choice between economic growth, and social and community cohesion and contentment. Those factors have to be reconciled, and the Government will have to play a key part in that process.

16:49

[The Parliamentary Under-Secretary of State for Transport (Mr Robert Goodwill)]

I welcome the opportunity to respond to what has been a timely and generally good-natured debate. I also welcome the hon. Member for Blackpool South (Mr Marsden) to his new post. He represents Lancashire’s premier resort; I represent the United Kingdom’s premier resort.

I thank the hon. Member for Liverpool, Riverside (Mrs Ellman) for seeking the debate, the Backbench Business Committee for arranging it, and Members on both sides of the House for taking part in it. The hon. Lady is the sole survivor of the Transport Committee on which I served, and I remember my days there with great affection. She is continuing the assiduous work of her predecessor, Gwyneth Dunwoody, even if not in quite the same pugnacious style.

The Government are determined that the whole country will continue to gain the economic benefits of a vibrant aviation sector. The sector employs some 120,000 people directly, and many more indirectly. Today’s debate stems from the Transport Committee’s report on aviation strategy. As part of the Committee’s investigation, my right hon. Friend the Secretary of State gave evidence before it on 11 February this year, and the Government responded to the report in July.

Let me update the House on some significant aviation policies before dealing with a number of points that were raised. We appear to be in broad agreement about the importance of maintaining the United Kingdom’s position as a leading global aviation hub for the UK economy. Freight volume and terminal passenger numbers were higher in 2012 than in the previous year. We have the third largest aviation network in the world, after the United States and China. The five airports serving London offer direct services at least weekly to more than 360 destinations worldwide, which is more than Paris, Frankfurt or Amsterdam. We are determined to take the necessary action to maintain the UK’s position as Europe’s most important aviation hub.

Aviation capacity is important for the economic growth of the UK, and that vital issue requires long-term thinking and consensus-building. The UK continues to have excellent aviation connectivity, both on a point-to-point basis and through the London hub, but our major airports face a capacity and connectivity challenge in the medium and longer term. Heathrow is operating to capacity today, Gatwick is expected to be full in the 2020s, and Stansted, which currently has considerable spare capacity, is expected to be full by the early 2030s.

The Government accept that aviation capacity, especially in the south-east, has been a controversial and difficult issue for many years. The only way in which we can end the years of indecision and inaction is by taking the approach that we have adopted, which I hope establishes cross-party support and political consensus. That was an important factor in our decision to create the airports commission and to make it independent of the Government. Led by Sir Howard Davies, the commission is examining options, and it will make recommendations that will maintain the UK’s status as a leading global aviation hub in the long term.

[Mr Jenkin]

Given that we believe in democracy, openness and transparency, would it not be much more democratic to allow the Davies commission to report before the general election so that the debate at the time of the election can take place in the light of its findings?

[Mr Goodwill]

The commission will publish its interim report before the end of the year, and the Government will respond to it by the spring. There may be some action that we can take at that stage, perhaps in respect of surface connectivity, but I think it is important for the commission to have a chance to do its work properly, and that means giving it enough time. If we are going to do this, let us do it right.

I am pleased by the support for the commission’s work that Members have given today. The Government welcome the publication of its discussion papers on issues such as connectivity, climate change and noise, and we look forward to receiving its interim report by the end of this year. That report will outline the scale of the additional capacity that is needed, shortlist the places that the commission thinks can best provide that capacity, and make recommendations for the effective use of existing capacity in the short term. We have also asked the commission to consider the findings of the report on our trial of operational freedoms at Heathrow, so that, too, will be covered in the interim report.

The Government look forward to the interim report, and we will give it full consideration, but we shall not be in a position to comment on the scope or content of our response—which, as I have said, we intend to issue in the spring—until the report’s publication at the end of 2013. I hope that the hon. Members for Liverpool, Riverside and for Poplar and Limehouse (Jim Fitzpatrick) will understand the need for the work to be done thoroughly, and the time that that will take.

I am pleased to be able to tell my right hon. Friend the Member for Saffron Walden (Sir Alan Haselhurst) that I will visit Stansted soon, so I will learn about some of the issues there first hand. He said there has never been a strategy, but I hope that the Davies commission addresses that failing.

The hon. Member for Blackley and Broughton (Graham Stringer) has considerable experience of this subject through Manchester Airports Group, and I hope he welcomes the fact that I spent an Industry and Parliament Trust year with MAG, when I learned a lot about the operations of airports. He mentioned the vexed issue of APD, which the House had a good opportunity to discuss yesterday. Although I am new to the job, I am not so wet behind the ears that I would encroach on the Treasury’s territory, but I would make the point that there are other barriers to visitors coming to the UK, including the issue of visas for people from China, so I was pleased that my right hon. Friend the Chancellor addressed that on his recent visit there.

[Mr MacNeil]

I would hope that the Department for Transport would have a fairly robust view on this and that it would communicate its thoughts to the Treasury if it felt that APD was limiting the numbers of passengers, although we know it is—by about 2.1 million per annum in Scotland. Surely the Department for Transport will not sit back and let the Treasury take the lead.

[Mr Goodwill]

The Government are determined to stay on track with our deficit reduction plans, and it is important that the aviation sector continues to play its part. A number of Members in the House should shoulder some of the blame for the deficit that we are having to reduce.

On CAA costs, I assure the hon. Member for Blackley and Broughton that I intend to have regular meetings with its chair, Dame Deirdre Hutton. Indeed, one such meeting is already in my diary. Of course, under the Civil Aviation Act 2012, there is a requirement on the CAA to consult on charges.

The right hon. Member for Greenwich and Woolwich (Mr Raynsford) raised the issue of noise and air quality, as did the hon. Member for Hayes and Harlington (John McDonnell), whose views on this matter are well known. The right hon. Gentleman referred to recent research by Imperial college and others about heart attacks and strokes in areas affected by aircraft noise. We need to do further work on that because other factors may also be in play.

My hon. Friend the Member for Harwich and North Essex (Mr Jenkin) made the case for London to be better connected, so I look forward to his support next week as we push forward with plans for the High Speed 2 rail network, which will connect London with the north of England so effectively. The hon. Member for Poplar and Limehouse raised concerns about some of the initial press coverage following my appointment. May I assure him that he should not read too much into the meeting I had with the Scarborough Greenpeace people? Indeed, I was relieved that the coverage was not portrayed as the Chancellor having another of his chums in a Government Department watching his back. I assure the hon. Gentleman that I come to this with an open mind. Indeed, when the Secretary of State appointed me he said, “You’ll be just the person for aviation as you’re 250 miles away from the south-east of England.”

Looking outside London, the Government’s aviation policy framework, which was published earlier this year, supports the growth of regional airports, and we recognise the importance of regional air connectivity to London in supporting regional economies and contributing to national cohesion. In fact, domestic airport connectivity across the UK increased in 2012. We now have a flight from Leeds Bradford to Heathrow, which is becoming a boon to the Yorkshire economy.

Aviation is a challenging topic. Successive Governments have struggled with how best to continue to gain the economic benefits it brings while restraining its impact on local people. I hope that the House agrees that the Government have established the right foundations to move forward, gain consensus and secure the benefits aviation brings for the nation.

16:58

[Mrs Ellman]

I thank all Members who have participated in this very well-attended Backbench Business Committee debate. There is overwhelming support for additional hub capacity to support our economy. I hope that hon. Members’ contributions will assist the Davies commission to come to the correct conclusion. This issue will not go away; it is about the future of our country.

Question put and agreed to.

Resolved,

That this House has considered aviation strategy.

Share Capital (Businesses)

Thursday 24th October 2013 Commons Chamber

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

17:00

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

I am grateful to Mr Speaker for giving me the chance to raise the important issue of how we can raise share capital for our nation’s businesses. All hon. Members will be well aware that we do not have to spend long in either Treasury questions or business questions before Members from all parts of the House get up to talk about the difficulties that businesses have in gaining access to finance. Every time that has happened over the past couple of years when I have been in this Chamber the complaint raised by Members has been that the banks are not lending. Indeed, we still have a partially broken banking system, which is why the banks are not able to lend in the way that British business, large and small, would ideally like them to do.

Of course, loan finance is only one way in which businesses of all sizes—although I am thinking particularly about small and start-up, fast-growing businesses— can raise the capital they need. The other way is through equity or share capital. I find it odd that that type of capital—that way of helping businesses to start up, grow and expand—is a subject so rarely raised in this House, and I wish to remedy that this afternoon. So I stand here on behalf of the nation’s 4.5 million smaller businesses—the small and medium-sized enterprises that do so much to power our economy and grow the larger businesses of tomorrow—and on behalf of the men and women who work in the “small- cap” market sector of the City of London, who try to raise that much-needed and incredibly important share capital, or equity finance, for our nation’s businesses.

I wish to pay tribute to some of the people who work in that sector in the City and who took time out, at no remuneration to themselves, to write the Drury report. They are: Tony Drury, Roger Hardman, David Scott, Michael MacDougall, Simon Webber, Robin Stevens, Brian Hibbert CBE, Charity Walmsley, Laura Keeling, Teresa Quinlan and Paul Quade. I had the pleasure of working with them and helping them. Indeed, I took them all to meet the previous Financial Secretary to the Treasury, so that they could outline what was in their report.

This is not a new issue. The Macmillan committee report of 1931 identified what became known as the “funding gap” as far as British businesses were concerned. Our Government, in March 2012, commissioned the Breedon taskforce to write a report, “Boosting Finance Options for Business”, examining these very issues. In our relatively recent history, we have been quite successful in getting stock markets, large and small, to raise equity capital for small and growing businesses. Between 1998 and 2008, the Alternative Investment Market—AIM—and the PLUS market provided many hundreds of UK companies with early-stage equity finance. It is the belief of the Drury report that if the small-cap sector was rejuvenated in the way it suggests, a further 200,000 people could be found work as the businesses were helped to grow in the way that those behind the report believe they can.

I have to tell the Minister that, sadly, all is not well in the small-cap market in the UK. Between 2009 and 2012, there was de-listing of 722 companies on the AIM. Indeed, the amount raised on the AIM in 2012 was barely 17% of the £16 billion raised on that market in 2007. Let me quote one small paragraph from the Drury report. It states:

“For us the small-cap sector is ‘Middle England’: the millions of people trying to run and grow their businesses against all the odds. The sector is friendless, ignored by the banks, hounded by officialdom, bullied by bigger brothers and misunderstood by some politicians.”

I hope to rectify some of that misunderstanding today.

Many people are not even aware of all the markets that enable smaller businesses to raise funds. In addition to the AIM, we have the ISDX—the ICAP Securities & Derivatives Exchange—formerly known as PLUS markets. Currently, 112 companies are listed on it. That story is not happy either, I am afraid—there have been 35 de- listings from the ISDX since the ICAP relaunched the exchange in October last year, but only eight additions.

There is also the GXG, on which 106 companies are listed; again, that could be larger. At the moment, 859 UK companies are listed on the AIM, whereas in 2007, before the great recession, there were 1,347. Companies de-list for a number of reasons, one being the cost of being on a market; I will talk about that and regulatory issues, which we need to consider, in a moment.

Today I was given some stunning figures—they really jumped out at me—by the London stock exchange. In the United States of America, bank lending as a percentage of external, long-term funding is 19%—that is, under a fifth. In the European Union, however, the figure is 81%, or more than four fifths. Those figures are stunningly divergent. If the Minister and his officials take back only one set of figures from this debate, I ask them to consider why there is such a different financing model in the US and why so much more share capital and long-term investment are put into businesses there than here in the European Union.

The European Commission green paper on the long-term financing of the European economy has been published and the Government will respond to it. It has some sensible suggestions. The London stock exchange has urged a “think small first” approach and asked the Commission particularly to assess the regulatory impacts on access to capital for smaller companies, the costs of capital and the fiscal bias against equity, which I shall come to.

For the sake of completeness, I should say that there are three other, smaller equity markets: Sharemark, AltCapX and BritDAQ.

Clearly, there is a funding gap for British industry and many businesses. Banks are increasingly nervous of lending to businesses that do not have strong balance sheets. I am not setting up equity capital against loan finance; if a business has a strong balance sheet and a decent amount of share or equity capital, it is more attractive for a bank to lend to. The two issues go together.

As we know from recent research from smallbusiness. co.uk, one in six small businesses has had to resort to a payday loan and just one in 10 was able to secure a loan from its bank in the first year of trading. The Minister’s Department, the Department for Business, Innovation and Skills, has said that it estimates the current funding gap facing British industry up to 2017 at anywhere between £84 billion and £191 billion, of which between £26 billion and £59 billion relates to smaller businesses. Those are huge figures. It is clear why we need to consider how share capital can help bridge some of that gap. Many smaller businesses are simply unaware of even the possibility of raising share capital and how they would go about doing it. I shall come to that in a second.

It is worth putting on the record that the tax treatments of share capital and debt are very different. Debt interest payments are tax deductible, whereas share capital is taxed four times—on purchase, for stamp duty; when profits are declared, through corporation tax; when profits are paid out, through income tax on dividends; and when shares are finally sold, through capital gains tax.

Credit where credit is due—the Government have reduced stamp duty on AIM shares, which is excellent, and we are lowering corporation tax. The Government have already helped in some areas. However, the Minister will see that there is a significant difference between the tax treatments of share finance and loan finance.

The regulatory costs of raising share capital are significant, and the Government need to look at that issue very closely. I am delighted that we have here not only this Minister, who is an excellent Minister for whom I have the very highest respect, but a BIS Minister. I sometimes wonder who in Government is looking at this issue, not just from the investor’s point of view in making sure that every box is ticked as regards regulation, but in being the champion for these 4.5 million small businesses as regards their need to raise share capital. I would love the Minister, as well as dealing with the very many important tasks he has to deal with, to be that champion. I am throwing down the gauntlet to him and hoping that he will take up that challenge as part of his many important responsibilities.

Financial Conduct Authority costs are high in this regard. One broker who deals in the small-cap market in the City, in a relatively small firm, estimated that the regulatory costs are about £10,000 per member of staff. A company that has large volumes of business can cope with that, but for one with relatively small volumes of business the whole thing will border on being unviable. Yesterday morning, at a breakfast meeting, I put that point to Martin Wheatley, the chief executive of the FCA. He acknowledged that the costs of raising share capital for smaller businesses are high and that regulation is onerous. He did not disagree with me, but I am not sure that we quite worked out what we can do about it.

I am convinced that we need to have a proper campaign of education for businesses up and down the country about the advantages of raising share capital rather than just going to a bank for finance. I would like chambers of commerce, the Federation of Small Businesses, the Institute of Directors, the CBI, accountants, lawyers and other business advisers to work together in our communities explaining to businesses how they can raise share capital if they are having difficulty raising loan finance. They could explain that having outside shareholders in a company does not mean that it loses control. Many businesses think that if they have an outside shareholder they lose control of their business, but they do not; if they still own 51% of the equity, they retain control. Yes, their standards of corporate governance may need to improve a bit, and that is generally a good thing, but they retain control. That is often not understood, and changing that would further open up the possibility of raising share capital.

It is important to give praise where praise is due. I was delighted when stamp duty was removed from AIM shares earlier this year; indeed, I was one of the people who lobbied very hard for that. AIM shares can now be included in individual savings accounts. It is not generally understood that if someone is lucky enough to have an estate that might breach the inheritance tax threshold, any money they have in AIM shares is not counted towards that threshold. That is another good thing that will encourage vitally needed investment in this important and growing sector of the economy. Indeed, I understand that the Share Centre reported an increase of over 106% in AIM stock purchases on the day that the policy was introduced.

There are some tremendous success stories; I would not want the Minister to think everything was bad. Let me give him an example. Abcam plc is a business involved in cancer research that sells antibodies to researchers. It listed on the AIM in 2005 with a £58 million flotation. By the summer of 2012, it had grown to a market capitalisation of £770 million. Its revenue rose from £12 million to about £100 million, and the number of staff grew from 78 to 600. The company has significantly expanded, opening up offices abroad, and it is now looking to join the main stock market. That is a huge success story, and we want many other businesses to do the same.

I mentioned the European Commission. I was encouraged to see that posted on its website on 18 October, just six days ago, was information about its “Competitiveness of enterprises and SMEs” programme, known as COSME. Its remit includes improving SMEs’ access to capital markets, so that is good.

The London stock exchange is making representations to the European Union and has asked the Government to do so as well. On the markets in financial instruments directive II, it is pressing for the creation of an “SME growth market” classification in order to, again, make it easier, less expensive, quicker and less of a burden for our vital small and growing companies to raise the capital they need. It also wants to ensure that the implementation of the solvency II directive does not divert capital from equities, and it wants the Government to engage with the Commission’s green paper—I know they will—on long-term loan financing.

In conclusion, I think I am remedying this House’s failure to highlight the significance of share capital to small, fast-growing businesses in particular. I repeat my request to the Minister to be, among others, a champion for the needs of businesses large and small up and down the country to raise equity finance and to help them get the funding they need so that they can grow, prosper and create the jobs that our constituents need to help power our economy forward and pay off our deficit so that we can have a secure and prosperous future as a nation.

17:16

[The Minister for Skills and Enterprise (Matthew Hancock)]

It is a great pleasure to respond to this debate, because I agree with the central thrust that motivated my hon. Friend the Member for South West Bedfordshire (Andrew Selous) to call it, namely the importance of equity finance, especially for small and medium-sized businesses, and the fact that it is not discussed as often as it should be in this House.

It is telling, as my hon. Friend has pointed out, that during Treasury and Business, Innovation and Skills questions we tend to get more questions on access to finance than on any other subject. There is some evidence that access to finance is improving, although it is still not in a strong position. Thanks to the tough choices we have made since 2010, I think it is widely recognised that the economy is, broadly speaking, on the mend. It has not fully recovered by any means, but it is on the way back. That is reflected in the number of businesses, not only in my hon. Friend’s constituency, where businesses are creating jobs, but across the country. Companies House records show that there were 480,000 new incorporations in 2012-13, which is the highest figure on record. If I may correct one of my hon. Friend’s figures—I do so as gently as possible—yesterday’s figures show that the number of SMEs in this country is now 4.8 million, not 4.5 million. I hope he is not too disappointed by that minor correction.

I accept my hon. Friend’s challenge to be, along with the BIS team, a champion of smaller businesses in their quest to access finance. Our programme is vital. The Breedon report made a series of recommendations, many of which have been acted on, including the introduction of the business bank, which my right hon. Friend the Business Secretary announced in September.

We know that it has been much harder for businesses to access finance since the crisis. One of the lessons of the crisis was that the economy had become too reliant on one source of finance, namely bank finance from the four big banks. The business bank will help to solve that problem, but it is by no means the only solution, because we need to increase the supply and diversity of finance available, which brings me to the subject of equity finance.

I will take on board all the points my hon. Friend has made and if I miss any out I will read Hansard and make sure they are acted on. I would stress that when talking about equity finance, we need to be cognisant of the importance of the wider availability of both private equity finance and public equity finance. Although it is difficult to measure with precision, in recent times, the amount of private equity finance, whether through angel investing, venture capital investing or bigger private equity financing, has been greater than the amount of public equity finance. Both are important. It is important to have diverse forms of finance, not only so that if one form struggles, others can take up the slack, but because different forms of finance are right for different companies.

It is true that we have extended tax relief, not only by cutting corporation tax, removing stamp duty on AIM shares and allowing individual savings accounts to invest in AIM shares, which is a tax relief in a sense, but through the extension of the enterprise investment scheme and the introduction of the seed enterprise investment scheme, both of which are extremely popular schemes for investing in small and fast-growing companies for those who pay UK income tax. The encouragement of equity finance, in whatever form, through tax relief is an important part of our programme to solve the problems that my hon. Friend highlighted.

Tax treatment plus regulatory costs, whether in the public or private sphere, make up the gap between the equity that an investor can put in and the investment that a small business receives. I hope that drilling down on both will bring more liquidity and finance where they are needed, which is in growing companies that can make good use of them.

I was struck by the figures that my hon. Friend set out. In the United States, 19% of this kind of finance comes from the banks, compared with 81% in Europe. The UK is one of the more friendly destinations in the EU for non-bank finance, but the figures are striking. When I was in the United States last week, I was struck by the powerful fact that more venture capital is available in the skyscraper in which the British consulate in Boston is housed than is available across the whole of Europe. That shows the difference between the two continents not only in the amount of finance that is available, but in the number of people who have started and grown a business and are now reinvesting. The United States, whether on the east coast or the west, is a generation ahead of us. Part of our job is to catch up as fast as we can. That challenge is real; the good news is that the opportunity that it presents is great.

My hon. Friend spoke eloquently about the various small exchanges. I urge him to look also at peer-to-peer finance, whether equity or loan, because that is a small but growing part of the market that companies can look to when trying to access finance.

As well as bringing tax relief and bearing down on regulatory costs, the Government make direct interventions. In the business angel sector, the Angel CoFund makes equity investments of between £100,000 and £1 million in SMEs. It does that alongside syndicates of business angels. It encourages greater levels of angel investment and syndication, and provides companies with experience and expertise alongside the capital. I echo my hon. Friend’s remarks that when finance comes into a small business, it brings not only pure capital, but better governance and advice from people who have skin in the game and who therefore take care in the advice that they deliver.

In the Budget this year, we announced that another £50 million would go to the Angel CoFund, doubling its size. I hope that it will help to strengthen the whole business angels sector, because it invests only when appropriate due diligence has been undertaken and a deal is structured properly. The UK Business Angel Institute, founded by the UK Business Angels Association and AngelNews, is creating standards of professionalism in UK angel investing, which by its nature often involves investing early in quite high-risk companies. If we can have more quality in training courses for private investors, such as those that the UK Business Angels Association is delivering, that will strengthen investing skills in that important area of the market.

My hon. Friend made the point that equity is taxed four times whereas bank debt is tax-deductible. A number of non-tax factors have an impact on whether a business decides to use debt over equity financing, so tax is not the only issue. Different companies look to different forms of finance, and debt can be quicker to obtain and less complicated to use. Of course, there is the also the question of the amount of ownership that is given up in return for equity financing.

I turn to deductions for interest as a business expense. To protect the UK Exchequer, a number of rules limit how much interest a company can deduct from its tax liability. My hon. Friend made the point that dividends are paid out of a company’s tax profits. However, they are exempt from tax in the hands of the company receiving them. In the case of an individual shareholder in the income tax system, the combination of dividend tax credit and the lower rates of tax for dividends ensures that dividends are taxed at broadly the same level as other forms of income, even after corporation tax is taken into account. It is important to take into account not just the number of different taxes that apply to a piece of income but the rates of them, so that we can work out the relative rate on each form of finance. Having said that, it is clear that the Government are moving in the direction that he wants, for instance through abolishing stamp duty on AIM shares and other growth markets, making investments eligible for ISAs and so on.

I wish to mention one other area of tax, which is the entrepreneurs’ relief. That is a valuable incentive and reflects the fact that entrepreneurs take risks and are often the beating heart of growing businesses, which should be recognised in the tax system. We have increased the amount of relief that can be used and allowed it to be used in more situations, so that more businesses and entrepreneurs can benefit from the 10% capital gains tax rate rather than the normal 28% or 18% rates. Over a number of Budgets, there has also been an increase in the lifetime limit for entrepreneurs’ relief to £10 million, so shares acquired from the enterprise management incentive can qualify for a lower capital gains tax rate. There has been action on stamp duty, capital gains tax and corporation tax, three of the four taxes that my hon. Friend mentioned as part of the barrier. The direction of travel is clear, and his argument is strong.

The value of small businesses to our economy makes them absolutely vital, and helping small businesses create jobs and take people on has been one reason why we have had such strong growth in the number of people employed in the private sector in the past few years.

[Andrew Selous]

I am heartened by what the Minister has said and by the tone and general thrust of his reply. Will he reflect briefly on my points about the cost of regulation? Might he perhaps meet Martin Wheatley of the Financial Conduct Authority, who admitted to me yesterday morning that the costs of raising capital are high? With his business hat on, representing 4.8 million businesses, will he consider whether there is any way to lower the costs of raising capital through regulation, while keeping investors safe?

[Matthew Hancock]

My hon. Friend will be delighted to know that I am already arranging a meeting with Martin Wheatley to make the arguments that he has eloquently made today and broader arguments about ensuring that we can get good finance into our small and growing businesses.

Question put and agreed to.

17:29

House adjourned.

Ministerial Correction

Thursday 24th October 2013 Ministerial Corrections

Thursday 24 October 2013

Redundancy

Thursday 24th October 2013 Ministerial Corrections

[Jackie Doyle-Price]

To ask the Secretary of State for Foreign and Commonwealth Affairs how many staff in his Department were made redundant in (a) 2010-11, (b) 2011-12 and (c) 2012-13; and how many such staff received payments in lieu of notice.

[Official Report, 14 October 2013, Vol. 568, c. 546-47W.]

Letter of correction from Hugh Robertson:

An error has been identified in the written answer given to the hon. Member for Thurrock (Jackie Doyle-Price) on 14 October 2013.

The full answer given was as follows:

[Hugh Robertson]

In 2010-11, 131 staff left the Foreign and Commonwealth Office (FCO), at a cost of £15.3 million. 118 of these left under old exit schemes.

In 2011-12, 89 staff left the FCO, at a cost of £5.3 million.

In 2012-13, 55 staff left the FCO, at a cost of £4 million.

The correct answer should have been:

[Hugh Robertson]

The Foreign and Commonwealth Office made one member of staff redundant on compulsory terms in financial year 2011-12 (who received a compensation period in lieu of notice); there were no compulsory redundancies in 2010-11 or 2012-13, however, the Office has run several voluntary exit schemes over this period and the details of these are:

In 2010-11, 131 staff left the Foreign and Commonwealth Office (FCO), at a cost of £15.3 million. 118 of these left under old exit schemes.

In 2011-12, 89 staff left the FCO, at a cost of £5.3 million.

In 2012-13, 55 staff left the FCO, at a cost of £4 million.

Westminster Hall

Thursday 24th October 2013 Westminster Hall

Thursday 24 October 2013

[Mr Dai Havard in the Chair]

Backbench business

Thursday 24th October 2013 Westminster Hall

Planning and Housing Supply

Thursday 24th October 2013 Westminster Hall

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

13:30

[Mr Laurence Robertson (Tewkesbury) (Con)]

I thank the Backbench Business Committee for granting this debate, which has been supported by a large number of concerned Members. In particular, I thank my right hon. Friend the Member for Arundel and South Downs (Nick Herbert) and the hon. Member for St Albans (Mrs Main) for sponsoring it along with me. There is concern among hon. Members and local planning authorities about apparent confusion in the Government’s planning policies. I requested this debate because I want to consider planning, the countryside and housing projections, as well as related issues, such as the Government’s professed preference for localism, as these matters are all interconnected.

Protecting the countryside was one of my main motivations for entering Parliament in the first place. As I represent the constituency of Tewkesbury, I am more sensitive than most to the need to avoid developing on or near flood risk areas. The terrible 2007 floods in Tewkesbury will never be forgotten by anyone who lived through them. I spend a lot of time trying to attract businesses, visitors and people in general to Tewkesbury, so I believe that a balance can be struck between allowing appropriate development and protecting our green belt, green fields and important open spaces, but I am not sure that we are striking that balance at the moment.

What do I mean by confusion in policy? The Government have said frequently, for example, that their policy is to preserve green-belt land, yet my local planning authorities—my constituency covers three—are telling me that the Government are pressuring them to provide for so many houses in their local plans or joint core strategies that it will inevitably compromise the green belt, green fields and flood risk areas.

In a ministerial statement dated 6 September 2012, the Government said:

“The green belt is an important protection against urban sprawl, providing a ‘green lung’ around towns and cities. The coalition agreement commits the Government to safeguarding green belt and other environmental designations”.

That seems clear enough. However, the same statement goes on to say:

“As has always been the case, councils can review local designations to promote growth. We encourage councils to use the flexibilities set out in the national planning policy framework to tailor the extent of green belt land in their areas to reflect local circumstances.”—[Official Report, 6 September 2012; Vol. 549, c. 33-34WS.]

That is less clear. Indeed, it is confusing, perhaps even contradictory.

On the face of it, reaffirming councils’ right to re-designate the status of their land could be seen as promoting localism. However, the fact is that Government pressure to create high housing numbers is forcing such re-designations, which flies in the face of localism and contradicts the localism policy. The Government’s policies on the green belt and the wider countryside are confusing and contradictory; clearing up that confusion is one of the purposes of this debate. The Government’s insistence on high housing numbers is threatening the green belt, which leads me to question why the Government believe that we need so many houses in the first place. I wish to consider the question of housing projections.

I recognise and claim everyone’s right to a decent place to live. My job immediately before I was elected to Parliament involved working with homeless women in London. My responsibility was to raise money to build a hostel and day centre for them, to enable them to take the first steps back to normality. I learned that in almost all cases, homelessness is caused not by a property shortage but by other factors such as finances, family breakdown, drug or alcohol abuse, unemployment, refugee status or other social factors. It is not that there are not enough houses.

The Government’s own figures seem to confirm that there is no shortage of houses. In an answer to a recent parliamentary question that I tabled, the Government informed me that at the last count, there were 709,426 empty properties in England. Add to that the number of houses with planning permission that are not yet built and the figure for available properties in England comes close to 1 million.

Of course, there are in fact shortages of two kinds of housing: affordable homes, which are scarce in the village where I live, and privately rented properties, partly because it is hard and often undesirable to be a landlord. There are shortages in those two sectors for reasons other than a shortage of houses as such. For example, it is getting on for 2 o’clock, yet any one of us could go out into London or anywhere else and find houses to buy this afternoon. I question the Government’s assertion that so many houses need to be built that local authorities must re-designate green-belt land in order to meet the Government’s arbitrary and undefined housing targets.

Tewkesbury is an example of what I mean. There is no housing shortage in my area. In fact, there is planning permission for houses that have not yet been built, as well as empty properties. In the past 20 years, 7,536 houses have been completed in the borough of Tewkesbury, yet the Cambridge university econometric assessment, which is used by local councils and presumably approved of by the Government, suggests that 10,900 houses will be needed in the borough over the next 20 years—or, to be strictly accurate, over the next 18 years, as two years of the plan period have already passed. Why has Tewkesbury’s housing need for the next 20 years been assessed as 45% higher than for the last 20 years? It needs explaining.

It gets worse. Tewkesbury borough is involved in drawing up a joint core strategy with Cheltenham and Gloucester. The JCS allocation for Tewkesbury borough for the next 20 years is not the 10,900 I refer to, high though that is, but 18,800, which is 150% higher than for the last 20 years. Why? Partly because it is deemed that Cheltenham and Gloucester cannot find land for their housing growth needs, so the houses will be dumped in Tewkesbury borough, potentially causing housing stock in Tewkesbury to increase by 54% over the next 20 years and causing the councils to build on green-belt land and in other undesirable areas.

That raises the question of the duty to co-operate. Gloucestershire has six council areas, not just three, and the duty to co-operate goes beyond county boundaries. Why, then, will the houses that Cheltenham and Gloucester are deemed to need but cannot accommodate end up being built on green-belt land in Tewkesbury? That cannot be fair, and it demonstrates the paucity of the current planning guidance, which says that plans will be considered unsound if the councils concerned have not co-operated. However, it is the councils that are not involved in the plan, as well as those that are, that need to co-operate. How does that work?

I reiterate that if it were not for the Government’s apparent pressure on local authorities to plan for a greater number of houses, the problem would not arise. Such a top-down approach is arbitrary and undefined. I say so because that is basically what the Government indicated to me in reply to a parliamentary question. In a written answer dated 9 July, the Minister told me:

“While there is no standard methodology, councils’ assessments should be demonstrably objective.”—[Official Report, 9 July 2013; Vol. 568, c. 191W.]

What exactly does that mean? If there is no standard methodology for assessing future housing needs, how can Government assessments be right and the local authority’s previous housing figures wrong? That is another question that I want answered today.

That brings us to the issue of localism. In my view, the Government were right to scrap the regional spatial strategies. It was surely wrong for unelected, anonymous people to determine how many houses an area should build and where they should build them. It was therefore with great anticipation that I and many others looked forward to the new housing and planning strategy—only, so far, to be disappointed.

Local plans have always had to be sound, and developers have always had the right to appeal against decisions against them locally; there has also always been a presumption in favour of sustainable development. However, we now seem to have gone beyond that, and to be setting the bar far too high for local planning authorities, and that causes them to contradict another area of Government policy, which is the need to protect the green belt.

As I have said, in my area, Tewkesbury borough will, if the JCS is adopted, have to increase its housing stock by about 54% over the next 20 years. That massive increase will mean that the council has to grant permission for developers to build thousands of houses on land that is currently designated green belt. Such sites have already been identified.

[Sir Bob Russell (Colchester) (LD)]

I understand the point that the hon. Gentleman is making, but is it that Tewkesbury borough council is not engaging in a conversation with neighbouring authorities, or do those authorities want to foist some of their development on Tewkesbury, or on its borders?

[Mr Robertson]

The authorities are involved in the joint core strategy, which covers three councils, but there are six councils in the county, and others outside the county overlap with them, or are contiguous. Perhaps there has not been enough of an attempt to ensure that all councils join in, and there has been obstinacy on the part of some of those involved in the joint core strategy, but whatever the case, it is a really strange situation to have three councils getting together while others each have their own plans. The whole system is very confusing and difficult. As for Tewkesbury’s allocation, even if we accept the Cambridge assessment of 10,900 homes, we will not have that figure; we propose to have 18,800, even though we built only 7,500 in the previous 20 years. The situation is very confused.

I have mentioned that there are proposals to build on designated green-belt sites. If they are built on, it will bring the coalescence of Cheltenham and Gloucester nearer, but it was precisely to avoid that that the land in question was designated green belt in the first place, in line with the policy stated in the written ministerial statement that I read out. Surely that is not what this Conservative-led Government intend to happen?

As I have mentioned the Conservative party, may I say in the privacy of this room that our policies on planning are losing us many votes in many areas? I am sure that the leaders of my party do not intend that to happen. In some ways, I feel that the Government believe that recovery and growth in the economy can be kick-started by encouraging more house building. Perhaps that is why the Government are requiring such high numbers, rather than following assessments based on experience and fact.

[Mrs Anne Main (St Albans) (Con)]

I will be brief, because so many hon. Members want to speak. There are huge numbers of readily accessible plans in the system that no one is building for, so just granting more plans will not kick-start the economy; it will just provide more land-banking for developers.

[Mr Robertson]

I entirely agree. I do not believe that it is for the Government to engineer a recovery in such a way. Surely the market will determine in which areas there will or will not be growth, so why not leave local councils to determine how many houses they need over any given period and to make their plans accordingly? The Minister may reply that that is indeed happening, but it is not. The three council areas I cover have all told me that they have to make plans for a high number of houses, because the Government will reject plans as unsound if they do not plan for such large numbers. If that is wrong, I want the Minister to say so. I will then go back to those councils and tell them that their view is wrong. I do not, however, believe that that is the case.

There is certainly a feeling that developers’ ad hoc applications are granted too freely on appeal by the Secretary of State. I have examples of that in my area. Appeals have been granted that will allow the building of many houses at Bishop’s Cleeve and Winchcombe, against the wishes of local people. On the face of it, those appeals were allowed because the council has been deemed to have an insufficient five-year land supply. What is that assessment based on? Is it based on the number of houses built in the past, on some arbitrary and undefined calculation, or on figures in the regional spatial strategy? The strategy for the south-west was never signed off, and that whole policy has been scrapped in any case. Once again, this practice flies in the face of the localism concept that the Government are promoting.

Many hon. Members wish to speak, so I will summarise my main concerns. The Government’s policy on the green belt is confused and contradictory, and we need clarification today. Exactly how do the Government assess how many houses will be needed in the future? Why are they following the predict-provide approach? Why are estimates for future housing need so high, and why are they so much higher than what was needed for the last 20 years? As a slight aside, much of the population growth in the past 20 years has been caused by immigration. Given that the Government are intent on reducing net immigration and claim to have done so already, how can housing need be predicted to increase? Why is the localism agenda being ignored? Why is pressure being put on local councils, causing them to build on green-belt land? All those questions are being asked in the council areas that I represent and, most importantly, by the constituents I represent, and they would all like answers.

[Several hon. Members]

rose—

[Mr Dai Havard (in the Chair)]

Order. I thank hon. Members who have indicated that they wish to speak. I have a long list of 15 Members. Given the time constraints, I appeal to you to plan on having seven minutes each. That will give everyone a fair chance to speak, and allow for a proper response from the Minister, as Members will want him to give a comprehensive reply.

13:48

[Valerie Vaz (Walsall South) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Havard. I thank the hon. Members for Tewkesbury (Mr Robertson) and for St Albans (Mrs Main), and the right hon. Member for Arundel and South Downs (Nick Herbert) for calling the debate, which is very timely.

I declare an interest as a member of the National Trust—I am concerned about its announcement that the National Trust will allow fracking on its land, but perhaps it will consult its members—and in my previous life, I used to litigate on behalf of the Government on planning matters.

I want to focus on three main areas that have affected my constituency of Walsall South, which is an area of mixed housing, with 11 farms—planning and the green belt, land banking and permitted development.

The green belt was first proposed by Ebenezer Howard in 1898, in his book “Garden Cities of Tomorrow”. Hon. Members may not know that as well as writing that book, his day job was as a transcriber for Hansard in Parliament, so who knows what the transcribers get up to in their spare time? In 1935, the metropolitan green belt was proposed by the Greater London regional planning committee, under the leadership of Herbert Morrison, one of whose relatives is in the other place. In 1947, under the main Town and Country Planning Act, councils outside London became able to control the use of, and to develop, undeveloped land. In 1955, the green-belt policy was established, requiring local authorities to set out the green belt in their area.

Like the hon. Member for Tewkesbury, I still find that there is a misconception about the nature of the green belt, what planning in the green belt is and what “very special circumstances” means. We have a national planning policy framework in place. In old money, which is what I am used to, it was called planning policy guidance. There were lists of criteria of what could and could not be built on the green belt. Either way, whether we use the old money or the new framework, the green belt should be protected, and it is not.

In Walsall South, we fought against development on the site of the Three Crowns pub. Against the planning officer’s advice, permission was granted for 14 flats with three detached houses on the green belt. The development was clearly out of character for the area. Since then, nothing has happened, except for the development of a car wash. No building work has taken place. The only sign of creativity is graffiti on the building. Land and building have lain empty and unused for three years.

As we are debating this matter today, a decision will be made about the disused site of the Three Crowns school. It is green-belt land that was given to the community, so it is council land. Permission will be given—or perhaps not—for eight detached houses. Such development is not required in the area. Not only was the consultation carried out in the summer holidays when people were away, but the plans go beyond the footprint of the building.

There is need for housing in Darlaston, in another part of the constituency, and there is permission for 224 houses to be built on a former factory site. Permission was granted in 2007 and still the site remains derelict, without the sound of people coming in and out of their houses. The owners are a subsidiary of the Royal Bank of Scotland. The residents in the area say that they want housing, a community space and a place for young people. The owners, however, want a retail development on a site that is near the largest retail parks in the region; that is land banking at its worst.

My third area of contention is permitted development and its extension. We have the extraordinary situation in my constituency where a phone mast has been placed in a high street. The council rightly refused permission, but because it sent the rejection by second class post, the company was deemed not to have been given reliable and verifiable notice of the refusal. There was notice: Vodafone were informed of the result by phone and the refusal was on the council website. Residents will have to put up with this phone mast, as there has been no compromise from Vodafone. Indeed, Vodafone is planning to extend the height of the mast. There were many sites for the mast—I have been in discussions with Vodafone—but the company insists that it wants to keep it on the high street. It is an eyesore, and because of a simple mistake, my constituents are affected. Furthermore, with the new permitted development rights these phone masts can be extended up to 20 metres and widened by up to a third. The Phesay phone mast is on a pavement on the high street. Once again, other interests carry more weight than those of the people who have to live with the consequences of such decisions.

In conclusion, with cuts to local authority budgets, those with the skills to make coherent planning decisions are in short supply. Such people should be valued, as should the views of residents, with a tribunal attaching the appropriate weight to the views that are based on planning grounds, and not just on commercial interests. In that way, we will maintain the spirit of Octavia Hill and Beatrix Potter and balance the need for housing with a protection of the countryside preserved for future generations.

[Mr Dai Havard (in the Chair)]

I thank you for your time consideration. I now call the co-sponsor of the debate, Mrs Anne Main.

13:54

[Mrs Anne Main (St Albans) (Con)]

St Albans is ringed by green-belt land and green fields. We have good schools, very low unemployment, good links to London and a beautiful historic city. We are an aspirational living destination as well as an area in which people have firm roots. Once they are there, they do not usually wish to move; they want to bring up their families there, and their families want to stay.

It is no wonder that developers have us in their sights. We are in the proximity of London and house prices are high. I hope that local need and modest growth are not being confused with the ramped-up desire to market our area, as I regularly see local developments being actively marketed in London in terms of relocating for quality of life. For local councils, therefore, the “predict and provide” is hard, as we are trying to satisfy the appetite of developers. We want to ensure that we support the local economy, businesses and the need for the sort of development that our area can handle. I want to focus on the economic balance of an area.

Locally, it is hard to find a significant number of large brownfield sites, so any development tends to be a sensitive issue. We must make hard choices and my authority is up for that. We are actively undertaking a green-belt review, but we wish to have minimal impact on our green belt and coalescence. The need for local decision making in the planning system will be a strong theme in the debate, and Members from different areas will have their own issues and views in that regard. I trust local elected representatives to act like grown-ups, to listen to residents, to recognise the need to build and develop, and to plan and provide for their local area. No one wants a no-build or silo mentality, and in St Albans we are certainly not averse to having cross-border authority co-operation.

I welcomed the fact that in June my right hon. Friend the Minister urged local councils to encourage co-operation. I urge him now to listen to neighbouring authorities, which are being frustrated by the current developer-led system. They may wish for something in their area, but it will not happen because something is being imposed in a neighbouring area.

A case in my area proves that point. Hertfordshire is furiously resisting a rail freight interchange on 300 acres of green belt, slap bang in the middle of villages, accessed off village roads and with no direct motorway access. It is at a commuter pinch point on the line—commuters are very important to the economy of St Albans, and we do not have blue collar workers—and all in all, the villagers are up in arms about the interchange, which certainly was not included in the local emerging development plan. We believe that it is the wrong site in the wrong area and that it will have an injurious effect on our part of the countryside. Even the inspector in his first and second reports rejected the site, observing that

“there is not a large, available work force local to the Radlett site…The net result would inevitably be mass in-commuting, mostly by car, all of which is directly contrary to the Government’s policy. The irony of this is almost painful. The Government promotes SRFIs in order to advance the cause of sustainability—“

and the developer is promoting the proposed site—

“in a wholly unsustainable location.”

If we are to take seriously the protection of the green belt, surely we should be looking at relinquishing parts of it only when we absolutely have to and we should relinquish only those bits that would be least injurious to us. The inspector also said that there is no dispute that we enjoy very low levels of unemployment

“and several of those who spoke at the inquiry advised me that employers in the area were already experiencing difficulties in recruiting workers.”

He said that there would be no reason for that to change should we have this large commercial development on our green belt.

Members might be amazed to hear that only 15 miles north in a neighbouring authority—I know that we are supposed to co-operate with our neighbours—on exactly the same train line, well away from residential homes, unlike in my constituency where residents are directly backing on to this site, development is starting on a newly constructed motorway spur off the M1 costing £134 million. Also under development is a £2.5 million slow passing link, which would allow freight lorries to wait and heavy trains to let through the passenger services that are all part of the new £6 billion Thameslink commuter services. Moreover, there is a willing local work force who need the jobs.

I cannot say this strongly enough: the public will find that scenario completely puzzling. We are supposed to have a commitment to the green belt and to the policy of letting localism decide. We talk about having economic regeneration in areas that need it and about not over-heating the areas that do not need it. Here we have an area that waited to get the infrastructure in place. It now has it in place and the funding to facilitate it. The scheme is included in the local plan. The reason it wants it is to improve the economic regeneration of the whole area. In January, the site assessment was made in which the council said:

“Overall, it is considered that this site will be suitable for the development of a RFI and employment land and will make a significant contribution to the economic growth of the area.”

In its own assessment, it said:

“It will contribute to the economic delivery of the area by providing much needed employment opportunity to complement the growth of north Luton and Houghton Regis.”

This is where the public are puzzled; my hon. Friend the Member for Tewkesbury (Mr Robertson), who opened this debate, said exactly that. We must have a degree of sympathy and co-operation with areas that are near to us, and I really want that to happen, as people can imagine. However, I am puzzled why the Minister did not give this mutual gain and benefit to both areas. At the time of his minded-to decision—that is somewhat in the past, so I hope today he has a chance to reflect on it—he said that there was

“'little substantive evidence…to indicate that…site”

was “preferable”.

Perhaps today the Minister will reflect on those recent developments, which I believe are material planning considerations. First, Mid Bedfordshire has a firm commitment to this project; it has expressed the need for development. There is a massive motorway funding agreement now in place and going ahead. The rail infrastructure work has started; he can visit it and see it. It is in an area of green belt that is certainly not as sensitive as mine. What is more, I am not fighting an authority that is resisting it; we are looking at an authority that will welcome it with open arms.

My site will have 25 mph trains crossing a fast line. There will be an interruption to my commuter services, and those commuters are a part of the London economy. The St Albans economy is very much knowledge-based, and those workers support a lot of businesses in London. To have their fast Thameslink train commuter services interrupted by 25 mph freight trains will be a nightmare. I have written to the Secretary of State for Transport because we still do not have the pathings, and we still have not received the assurances we want.

I find it amazing that the planning process is still developer led. Developers pick the sites they want to build on and it seems they are delivering some Government aims, whether on housing totals or strategic rail freight. Surely we can start looking at this process in a more local fashion.

The latest jobs figures in St Albans, which are all part of the mix, confirm almost zero unemployment. Nothing alters; we are fortunate in St Albans. We have a blue collar worker deficit, and yet there are nearly 5,000 unemployed people in the Luton area, which is where the proposals show we would draw our work force from. Why are we still bussing—well, we are not using buses, but why are we allowing cars to circulate around our countryside to access inaccessible sites, when just up the road from us we have an area crying out for economic regeneration? The second inspector’s report said:

“Employment has never been a major problem in this part of Hertfordshire. A project such as this ought to be directed towards a regeneration zone.”

I agree with that.

Of course, a developer will always push his own site, whether it is for housing or—as in my case—for a major infrastructure project. Ironically, on a large infrastructure project such as this one, the developer is allowed to conduct his own alternative sites assessment and choose his own selective criteria by which to judge a site. So it is not surprising that—hey presto—you can demonstrate after all, Mr Havard, that after due consideration of everywhere else, your site is the best—not yours, Mr Havard, but the developer’s.

Is there any consideration within the Minister’s current thought processes about whether we can alter that situation? Why should the developer pick the criteria by which we will judge a site and then say, “Well, mine’s the best”? If we listen to local decision makers, the answer is different, as I have just demonstrated, but not surprisingly in my case I have two different developers, so each one wants to say that their site is the best; the difference is that one local economy believes theirs is the best.

[Mr Dai Havard (in the Chair)]

Can I ask you to—?

[Mrs Main]

I certainly can.

If we are to stand for anything, it is as a Government of empowerment and choice over planning and local decision making. That is what the residents expected when this Government came as a coalition. I cheered the abandonment of the regional planning targets. I sincerely hope that this Government will review its planning processes.

[Mr Dai Havard (in the Chair)]

Thank you very much. Well, Ms Vaz gave us a little bit of extra time and as you, Mrs Main, are a co-sponsor of the motion, it was probably helpful that you had a little extra time. May I remind everyone please to give others the opportunity to speak?

14:03

[Sir Bob Russell (Colchester) (LD)]

Thank you, Mr Havard, for calling me to speak. I thank you, the Minister, and the shadow Minister—the hon. Member for City of Durham (Roberta Blackman-Woods)—for understanding that I am not able to be here for the wind-ups.

The Minister will have noticed that there are 23 Government Back-Bench MPs here today, and it may well be that, at the end of three hours of debate, he will not have too many supporters. That is because the reality and the rhetoric of the Localism Act 2011 sadly are not the same, and while the intentions were clearly there, the reality is not.

I will be very parochial and talk about my constituency, which is supposed to be the fastest-growing town in the east of England. The Minister will know from questions that I have put to him and to his predecessors that I will be site-specific. I ask him and his officials whether it is appropriate that they will shortly make a determination on a development of 1,600 homes, even though the section 106 agreement fails to deliver the funds for the two schools that are required. It is not me saying that but Essex education authority. It says that there is no money to build the schools. How on earth can approval be given, particularly as the development is contrary to Government policy, which is that brownfield land, where available, should go ahead of greenfield land?

This particular site, which I have dubbed the fields of west Mile End, is adjacent to a former psychiatric hospital site that is on the market and zoned for housing; it has been for several years. The sale could be scuppered at the 11th hour if the development on the farm land goes ahead, because even though Colchester is the fastest-growing town in the east of England, there must come a point when there are too many houses and there is a glut. We already have a glut of flats—the “Prescott” flats. The last Labour Government insisted that the future was flats. We have a glut of empty flats in my town. What we want is family housing.

Do hon. Members remember an advert from a few years ago about a beer that reached the parts that other beers did not reach? Well, we have a local developer called Mersea Homes that is able to reach land that has never been lined up for development before. For example, the fields of west Mile End have always been land without notation—white land. It was never going to be built on, and no developer had a chance there. All of a sudden, under the radar, the land was lined up for development. The ward council did not know about it, or if it did—I am not sure what happened. It is the only part of my constituency with a community council—Myland community council—and it was late in the day when it found out what was going on.

This is a bad development, a bad plan, with 1,600 houses to be served by the longest cul-de-sac in Britain. All the cars will pour on to the already congested highway network around Colchester mainline station. Everybody knows it is wrong, and in a question that I put to the Department for Communities and Local Government, I said that developers and planners should be

“forced to live there for a minimum of five years”.—[Official Report, 4 February 2013; Vol. 558, c. 13W.]

They are creating problems for others to suffer that they will not suffer themselves, because they tend to live in big houses miles away; they do not have to put up with the consequences.

To the east of Colchester—this is why the hon. Members for Tewkesbury (Mr Robertson) and for St Albans (Mrs Main) are absolutely right—the next-door council, Tendring district council, wants to plonk houses on farm land that, astonishingly, nobody has ever thought should be built on, and on which, in 2010, Mersea Homes secured the best part of 800 acres. Having been lucky twice with farm land that had never been zoned for housing, Mersea Homes must know how to go about securing it. I will leave that hanging there.

Tendring district council has the North sea on one side. Clacton is 15 miles from Colchester, and the council is talking about a development of 3,000 houses adjacent to the borough boundary of Colchester. It will double the urban estates of Greenstead and Longridge Park. It will just be an urban sprawl going eastwards. The local authority—Tendring—should build its houses where its people want them. As for the idea that people living on this huge estate right up on the border of Colchester will look to Clacton—16 miles away, where they pay their council tax—rather than to Colchester, when many of the houses will be in sight of the town hall, that is not what the Localism Act 2011 was about.

What is worrying—I will end on this, Mr Havard—is that it is quite clear that this has all come in under the radar. Elected councillors in Colchester—virtually all of them—have not been engaged in the debate. Secrecy, or at least lack of involvement, is a serious issue here. There should be an inquiry into what the hell is going on.

[Mr Dai Havard (in the Chair)]

Thank you. I have had a missive from Mr Turner. Although special pleading is not allowed, it is his birthday today. I cannot accede to the request that we all sing him “Happy Birthday”, but he indicated to me that he has a pressing engagement, so I call Mr Turner.

14:10

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

Thank you, Mr Havard. It is a pleasure to serve under your chairmanship. I congratulate my hon. Friends the Members for Tewkesbury (Mr Robertson), and for St Albans (Mrs Main), and my right hon. Friend the Member for Arundel and South Downs (Nick Herbert), on securing this important debate on a issue that affects everybody in every constituency.

I have long been interested in planning and there are many points that I could raise, but I want to keep my remarks brief and will restrict them to an aberration in the planning rules. I shall also make an observation about local development plans.

The problem is that planning authorities can give themselves planning permission to develop sites that they own. I was a city councillor in Oxford for 17 years, until 1997, and during that time, on many occasions, the council gave itself planning permission, sometimes in preference to other applicants. I am certainly not suggesting that my colleagues at the time did anything wrong or even anything questionable. However, if people own a site and are responsible for giving themselves permission to develop it, it is hard to ensure that there is no appearance of impropriety. We all know that appearances are important. We need to make sure that people have faith in the planning system. I know that this issue troubles people across the country; indeed, a number of people have raised it with me on the Isle of Wight.

I am not sure what alternative procedure we could or should follow. Perhaps it would be appropriate for neighbouring authorities—if there are neighbouring authorities—or a totally separate body to take decisions about council-owned land, or in cases where the local authority would benefit in some way. I should be grateful if the Minister shared his thoughts on this issue and said whether he believes it to be a problem that the Government should address that a council may give planning permission for land that it owns, where it would benefit from doing so.

Local development plans were introduced in 2004, so they postdate my experience as a councillor. I do not claim to have any particular knowledge of or expertise about them. However, I know that writing them and getting them approved can be a long-drawn-out process. Although they replaced a system that was seen to be inflexible, the intention being that they could more easily be amended, having spoken to Bill Murphy, head of planning services at Isle of Wight council, I am not convinced that changes to the core strategy document can be made as quickly and easily as was envisaged when the plans were brought in. It seems to me that a Minister can change the rules much quicker than a local authority.

To provide an example of certain problems, on the Isle of Wight the core strategy document sets out that we should have 520 new dwellings every year. It is not a secret that I think that is far too many, but it was not a decision for me to make; it was made, quite properly, by an elected council. However, it is now clear that the existence of that target may make it more difficult for the Isle of Wight council effectively to oppose inappropriate developments, such as Pennyfeathers, a proposal to develop a 55-hectare greenfield site just outside Ryde. There are many problems with that proposal. Not least of them is that Monktonmead brook already floods. Also, there are a number of brownfield sites available in and around Ryde that should be developed before greenfield farm land. Putting between 800 and 1,400 additional houses on Pennyfeathers farm land is quite wrong. I sincerely hope that the council will find the grounds to reject this development; if it does, I will be pleased.

It should be much easier to amend the core strategy document to take account of changes, particularly political change. A Conservative council may be replaced by a Liberal council the following day. [Interruption.] Well, not a Liberal, but an independent one, perhaps. The council should be able to change the rules, because the people have voted. That also applies to changes in economic circumstances, changes in local authority control, changes in demographic trends, or even changes in response to proposals that are clearly against the wishes of local people, because if localism means anything, it must take account of what local people want. I shall not detain the Chamber any longer. I should like the Minister to make his views clear.

[Mr Dai Havard (in the Chair)]

Happy birthday, Mr Turner!

14:15

[Nick Herbert (Arundel and South Downs) (Con)]

I congratulate my hon. Friend the Member for Tewkesbury (Mr Robertson) on securing this debate, which I am delighted to co-sponsor.

Two years ago, we passed the Localism Act 2011 and promised local people that they would be given a greater say over matters that they care about, including development. It was part of a deliberate programme of devolution of power to people and communities. Ministers promised, and continue to promise, that power will transfer to local people in accordance with our manifesto and the coalition agreement. I fear that, two years on, people’s faith in that promise will be considerably undermined if we allow, by the back door, the re-entry of top-down decision making that effectively denies the localism that was promised.

Let us consider the first problem. Central to the Government’s new planning policy was the principle of sustainable development. Paragraph 14 of the national policy framework states that this is the

“golden thread”

that should run through

“both plan-making and decision-taking.”

There are two words in the phrase “sustainable development”; it is imperative that proper weight be attached to the first of them.

Many in communities in my constituency are concerned that inadequate consideration is given to the availability of infrastructure to support development proposals. We have congested roads, over-subscribed schools, serious flooding issues and countryside that is valued and in short supply. Half my constituency is protected landscape, forcing all development proposals into the other half that is not.

Under the new system, local authorities are required to make an assessment of housing need, but surely that cannot be the last word. If sustainable development means anything, local authorities must be free to decide how many houses can be built—not just how many are necessary—to match that need, otherwise we might as well return to the top-down targets. The Campaign to Protect Rural England’s Sussex Countryside Trust, in my constituency, makes the point well:

“The figures generated by the Strategic Market Housing Assessment are an assessment of need without constraints. These figures cannot simply be passported into an emerging local plan without an effective analysis of the limitation imposed by the supply of land for new development, historic underperformance of infrastructure or environmental constraints.”

Are local authorities free to make such an assessment and, regardless of the housing need that they assess, then decide how many houses can be delivered sustainably in their area? Or is an assessment of need the last word? The Government are driving hard at the demand to provide more housing. The “sustainable” part of sustainable development, promised in the Localism Act, is being put in the second rank.

A second issue is whether there is proper assessment of the available infrastructure. That issue was raised by me and many of my hon. Friends during consideration of the Growth and Infrastructure Act 2013 in December 2012. I moved an amendment stating that infrastructure needs should be taken into account when drawing up local plans. I was grateful to the Minister for what he said in response:

“I will look at making sure that the guidance that is provided in a much reduced set of planning guidance is very clear about the need to plan positively and specifically for infrastructure that is required to support the development and to ensure that it is brought on stream in good time for that development.”—[Official Report, 17 December 2012; Vol. 555, c. 605.]

That was a pledge that there will be very clear guidance on the need to plan positively for infrastructure, but when the guidance was published in beta form—it was a draft—on 28 August, I think I am right to say that there was no such reference to infrastructure. My second question to the Minister is whether he will in fact introduce that guidance on infrastructure, as he promised in the House last December.

Another key way in which faith in localism will be undermined is if we return to the bad old days of planning by appeal, and allow the Planning Inspectorate to overturn planning applications. That is happening time after time, and it is hugely undermining faith in localism in my constituency and elsewhere. It is undermining faith in the whole system that we have set up to encourage people to take responsible decisions on planning in their local area. That is not just my view. In a briefing today, the Local Government Association said that the Planning Inspectorate’s

“apparent disregard for sites identified in emerging local plans not only undermines the principles of a plan led system and local determination set out in the NPPF, but also seriously undermines local communities’ trust in the planning system. This results in resistance to further local development, general local resentment, and development that does not reflect the needs of local communities as set out in the draft published local plans.”

In a letter to me on 6 August, the Minister said that

“decision takers may give weight to relevant policies in emerging plans”—

that is, plans that have not yet been completed, which is important, because they are either district councils’ plans, or emerging neighbourhood plans, in which people have put a great deal of effort into deciding where development should go. If those plans were given no weight, speculative applications would be allowed, and we would get a system that was not plan-led, but developer-led, which would effectively amount to a free-for-all on our countryside. However, when the guidance was published, it actually stated that

“arguments that an application is premature are unlikely to justify a refusal of planning permission other than in exceptional circumstances”,

so will the Minister consider allowing more weight to be attached to emerging plans, so that an indication by local people of where they do, responsibly, want development, and also where they do not, is taken on board by the Planning Inspectorate? If that is not taken on board, again, we might as well return to the top-down system that we had before, which did not deliver the new housing that we needed, and we cannot justify promising to people that we are delivering localism.

I understand why the Government were concerned about the situation they inherited. There was a low level of housing starts, and we have to accommodate this country’s housing need. There are important generational arguments about the lack of opportunity for young people and their ability to get their foot on the housing ladder, but allowing top-down targets to return through the back door—indeed, even encouraging them—will not deliver the additional housing that is needed. It will merely deliver a great deal of pain—pain politically, as people see that the promise of localism was not in fact real, and pain because such top-down targets will not help people to get their foot on the property ladder and will not have a significant effect in reducing property prices.

House building is growing at the fastest rate for 10 years. A more radical reform will be required if we are to seek to close the gap between incomes and rapidly rising house prices, but I urge the Government to keep faith in the localism that was promised in our manifesto and in the Act that we passed, and not to return to the bad old days of top-down targets and of allowing the Planning Inspectorate to override local decision making, which merely set up conflicts and delivered nothing, in terms of the housing that we needed.

[Mr Dai Havard (in the Chair)]

We have now used the time won by Sir Bob and Mr Turner.

14:24

[Sir Tony Baldry (Banbury) (Con)]

I last raised concerns on planning and planning guidance in a debate I initiated in the House on 18 January, which can be found at Official Report column 1218. I will not repeat what I said in that debate, and I will put the full text of what I intend to say this afternoon on my website, www.tonybaldry.co.uk.

In January, I expressed concerns that developers were making opportunist planning applications in the hope of securing planning permission before the adoption and introduction of a new local plan, and I also observed that if localism and neighbourhood planning were to have any meaning, local communities must have the opportunity and a reasonable period of time in which to draw up neighbourhood plans. I drew the House’s attention to four specific planning applications in my constituency, all of which clearly ran counter to Cherwell district council’s local plan.

Following that debate, the Secretary of State for Communities and Local Government decided to call in all four planning appeals. As a former Planning Minister, I am well aware of how rarely Ministers call in planning applications, so I assumed that the Secretary of State had called in the applications because he wanted to give an indication on the weight that the Planning Inspectorate should give to draft and emerging local plans, a point raised by my right hon. Friend the Member for Arundel and South Downs (Nick Herbert).

I assumed that the Secretary of State would also want to give some indication on how the Planning Inspectorate should calculate the five-year housing supply and would take the opportunity to reinforce the Government’s belief in localism and commitment to neighbourhood planning. In the event, the Secretary of State did give a clear indication on the weight that should be given to the draft local plan: absolutely no weight whatsoever, according to the decisions in all those appeals. By allowing all four appeals, the Secretary of State also made it clear that no weight or consideration should be given to localism or neighbourhood planning.

Given that those appeals all ran so clearly counter to the provisions in Cherwell district council’s draft local plan, they not surprisingly provoked a good deal of anger from local residents, local councillors and indeed myself, and given that all the decisions were made by the Secretary of State, they not surprisingly attracted press coverage. In response to journalists’ questions on why the appeals had been allowed, in one article the press spokesperson of the Department for Communities and Local Government observed that the appeals had been allowed because Cherwell had not made

“sufficient progress with their Local Plan”.

I will examine that proposition. A draft local plan is not something that can be whistled up overnight on the back of an envelope; it requires consideration and full and proper consultation with local people and house builders. If the local planning authority gets the local plan wrong, it is liable to judicial review.

One of my many frustrations with the Secretary of State’s decisions is that Cherwell, after careful, widespread and considered consultation, had managed to produce a draft local plan to which there is practically no opposition among local people. I would have understood the Secretary of State’s decision to allow all four recent planning appeals if there was a scintilla of a suggestion that my constituents or Cherwell district council were in any way wanting to frustrate local housing development. The reality is quite the contrary.

Over the past 25 years, Banbury and Bicester have been two of the fastest growing towns in Oxfordshire and everyone accepts and recognises that Banbury and Bicester will continue to develop with new housing growth over the next 20 years. Indeed, I can only assume that Ministers in the Department for Communities and Local Government simply do not talk to each other. That may be a consequence of the fact that, unlike in my day, when Housing Ministers—as the Chief Whip, the right hon. Member for North West Hampshire (Sir George Young), who was here briefly, and I were—were also Planning Ministers, those roles now seem to have been separated.

If Planning Ministers had spoken to Housing Ministers, they would have learnt that Housing Ministers had made numerous visits to my constituency over the past couple of years to support and encourage the numerous housing initiatives in north Oxfordshire, including: one of only two eco-town projects left and being developed, which in due course will deliver approximately 5,000 houses; probably the fastest turnaround to grant planning permission for new housing on a major Government surplus brownfield site on former Ministry of Defence land at Bicester, granting planning permission for 1,900 houses; and one of the largest, if not the largest, proposed self-build housing projects anywhere in the country. Indeed, the Minister’s Department and the Homes and Communities Agency tell me that what we are proposing at Bicester will be the largest self-build scheme by a long way anywhere in the country and will deliver up to 1,900 houses. Cherwell district council is so keen to get house building going in north Oxfordshire that it has offered to buy the surplus MOD land from the Government, so that it can ensure that new house building takes place there as speedily as possible.

This very Monday, Cherwell district council agreed its local plan for submission to the Secretary of State at a meeting of the full council, which endorsed it with a unanimous vote. No responsible local authority could have produced a local plan more quickly. The agreed plan makes robust provision for housing until 2031 and envisages 16,750 new houses being built in Cherwell district during the survey period up to 2021. That is in a robust and deliverable local plan that has been adopted unanimously and without any significant local opposition. Moreover, the House might be interested to know that more than 50% of the planned houses are already being built or are subject to planning applications under active consideration by the district council. Cherwell not only has an agreed local plan, but is doing all that it can to deliver on the provisions of that plan.

The whole point of local plans, however, is to enable local councils and local communities to decide where new housing provision should go. Cherwell’s local plan focuses development growth on the towns of Banbury and Bicester, while avoiding coalescence with villages by introducing new green buffers around the towns. That seems to be a wholly commendable policy aspiration on the part of district councillors.

One of the recent planning appeals decided by the Secretary of State, however, drove a complete coach and horses through that policy aspiration of developing green buffers, by allowing development in an area that the district council had allocated as a green buffer in the local plan. In effect, the Secretary of State has allowed a policy of first come, first served, with planning permission being given to whichever house builders or developers happen to get their planning applications in earliest. This is not plan-led development; this is not central planning policy—this is planning anarchy.

My hon. Friend the Minister will say that the Secretary of State, having granted planning permission, now has no locus on those decisions. In law, that is correct, although Cherwell district council is not surprisingly considering with leading counsel whether there are good grounds to take the Secretary of State to the High Court for judicial review of his decisions. Ministers may no longer be legally accountable for their decisions, but they are politically accountable.

Ministers say that one reason for allowing the appeals was because, at the time the planning applications were made, the district did not have adequate five-year housing supply. One of the main reasons why the district did not have adequate supply, however, was because, on a number of significant sites where developers had been granted planning permission, they had simply not started building work. Local authorities and local people, having granted permission on significant sites, are not to blame if the house builders decide not to build until some time in the future, for whatever commercial reasons of their own.

From what the Secretary of State decided in the four appeals, it appears that the local plan will have no weight until it is actually adopted. It cannot be adopted, however, until after the process of examination in public. District councils such as Cherwell are in no way in control of when the Planning Inspectorate will undertake and complete the continuous improvement plan. Until then, we are all vulnerable to continuing opportunist planning applications by developers who strongly suspect that they will be allowed by the Planning Inspectorate or by the Secretary of State on appeal.

14:33

[Martin Horwood (Cheltenham) (LD)]

I apologise to you, Mr Havard, and to my neighbour, the hon. Member for Tewkesbury (Mr Robertson), for missing the opening speech. I congratulate the hon. Members who secured the debate, which is enormously important.

The issue is enormously important politically for both coalition parties, because we both made profound promises in opposition. The Conservative party’s policy document, “Open Source Planning”, states:

“Our emphasis on local control will allow local planning authorities to determine exactly how much development they want, of what kind and where”—

not how much an econometric model tells them they need, or how much demand has to be met, but how much development they want.

The Liberal Democrats produced a document called “Our Natural Heritage”, which states that

“our quality of life is dependant on the quality of our environment. We will not only work to maintain and enhance it but will give people more access to and influence over it.”

One of the ways in which we suggested doing that was a new designation, the local green space designation. I helped to author that policy, and I was proud when it made its way into the coalition agreement, and from there into the “Natural Environment White Paper” and then the national planning policy framework. As the Prime Minister said to the director of the National Trust, I think, it would be a tool that local people could use to protect not vast tracts of countryside, but those local spaces that were not necessarily the most beautiful or the most rich in great crested newts, but the ones valued by communities.

Instinctively, all of us know which those areas are—we can all think of that local area that people have been campaigning to protect, sometimes for decades, as in the case of Leckhampton in my constituency. I thought, “At last, we have a Government committed to localism, which I am proud to be part of and a supporter of”—Conservative colleagues were equally proud—and that the Government were actually going to deliver on such promises, rejecting the very unpopular, top-down regional spatial strategies that seemed to be imposing numbers from above. The regional spatial strategy in the south-west had 35,000 objections—but the situation around my constituency in Cheltenham is every bit as bad now.

In practice, we are facing the loss of vast areas of green fields. The local paper converted the amount into that popular measure of area, football pitches—about 2,000 football pitches of green fields are about to be lost, if the plan being formulated in the joint core strategy goes through. Almost everything in the plan is greenfield sites, and almost all those sites are in the green belt—there is a Kafkaesque process whereby the green belt boundary is redesignated, so that the bits taken out of the green belt can be built on, while claiming that the green belt is not being built on.

Equally badly, another area at Leckhampton had a sustainability assessment and a green belt review, which talked about its value in biodiversity, public access, the enjoyment that it brings, its rural character, and such things—all of which were recognised by inspectors in the past—but again that is included simply because the econometric model dictates a certain number. That number for around Cheltenham is at least 10,000 houses, which is a 20% increase in the size of the town. That is not sustainable.

As the right hon. Member for Arundel and South Downs (Nick Herbert) rightly said, it is as if the rest of the national planning policy framework, which we celebrated at the time of its second draft, did not really exist. There were elements that discussed balancing economic growth with environmental and social factors, and things such as the local green space designation to protect what people really cared about; among the core planning principles were meant to be respect for the environment and sustainability, and prioritisation of open spaces and, if possible, brownfield over greenfield development. In practice, however, at local level all of that appears to count for absolutely nothing. We are told that the objectively assessed housing need dictated by the econometric model must be observed absolutely—that the developers must get absolutely everything that they are demanding, because otherwise unelected inspectors will declare the whole plan unsound.

There is a nice coalition balance of local councillors in Gloucestershire. In the constituency of my neighbour the hon. Member for Tewkesbury and in Gloucester city, we have Conservative councillors who felt obliged to vote for the thing, while the Liberal Democrats very much enjoyed opposing them. In Cheltenham, it was rather the other way around—many Liberal Democrats and some Conservatives voted for it, while others voted against. The result was that councillors were put between a rock and a hard place. They were told that if they voted things down and did not move on at least to the next stage of consultation, the plan was likely to be declared unsound, it would all fall apart and we would end up with a developers’ free-for-all.

I have to tell the Minister that local people see very little distinction between what is emerging from some local plans and a developers’ free-for-all. Despite all our promises in opposition, despite the national planning policy framework and despite all the grand words in it about balancing environmental and economic factors and respecting open space and sustainability, we are in a position that is every bit as bad as the regional spatial strategies. That is simply not acceptable—

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

Will my hon. Friend give way?

[Martin Horwood]

I suspect that I shall be out of time shortly, so I fear that I had better not.

I think we will end up in a situation that is just as bad as under the regional spatial strategies. I want to go back to my local councillors and constituents to say that the coalition Government have delivered on their promises, but I have to tell the Minister that that is not what is happening now.

14:39

[Rebecca Harris (Castle Point) (Con)]

Earlier speakers have said many of the things that I wanted to say, but possibly more elegantly.

I thank the Minister for declining a developer’s appeal in my constituency. That was warmly received, but we are on notice that developers may keep pushing, and they will.

I think all hon. Members here greatly welcomed the abolition of the previous housing regime and everything in the new national planning policy, including abolition of the regional spatial strategy housing targets. However, I see all around, particularly in my area, that it is pretty much business as usual for planning departments, for the Planning Inspectorate and certainly for developers. Some key aspects of the current regime seem very similar to the old regime and are being interpreted and treated similarly—for example, the requirement to find the local need. It is not a target, but it must be established based on complicated methodology. Consultants in my area have come up with four or five different scenarios, all wildly different, about local housing need. It is supposed to be objective, but councillors will have to choose the figure that they believe is most likely to be accepted by the Planning Inspectorate. That does not strike me as wholly objective.

We must put together a local plan that specifies deliverable land over a certain number of years and then developable land. There must be objective evidence of whether it really is deliverable, and I understand that. We cannot have local councils saying they want to build all their houses on what is currently a lake because that would be a good way to get around having building done. In the world of planning, however, what is deliverable is entirely down to argument. The big unit developers may see the four or five attractive green fields that are left in a borough, and argue that they could put their bulldozers on there tomorrow, that the development would be in single ownership and that that would be a good deal with a percentage going to the farmer. No one could argue otherwise—it is clearly developable tomorrow.

What happened in practice over the last decade and during the previous Government’s regime is that land was banked and there was not enough work done or pressure put on the little brownfield sites in multiple ownership, which is what we should be doing now. Those are the sites our communities would prefer to be developed, not the fields that they see and appreciate.

I urge the Minister to put as much pressure as he can on councils when interpreting and putting together their plans. In the national planning policy framework and the recent guidance, which I greatly welcome, it is clear that our councils have the power to do something about small sites, which may be in multiple ownership with some planning constraints. They can knock heads together and encourage local people to suggest such sites. That would save us from losing the fields that we all love and appreciate. However, that is a big ask for a constrained planning department. Everyone is feeling the pinch at the moment, and the planning inspector is breathing down councils’ necks to get the local plan completed. It is a lot more work and takes a lot more time, but it can be done. For example, if we want to build houses, we are much more likely to get small local sites up and running. If we told the local scrap metal dealer, who has gone bust because we have changed the law and he cannot take cash, that he could build five or six starter homes on his land tomorrow, he would not do what the big unit developers do and wait until the time is right or build only one or two homes because he does not want to flood the market; he would sell straight away and houses would be built there.

We should change what we are doing and target smaller and less popular sites that have local owners, who will use local builders and local estate agents. We would then have a much more popular local plan for residents, and we would not have the big household-name developers acquiring 600-unit sites where, if they got around to building houses on them, it would not be in the time frame we want, and would market them out of town and in London. Local estate agents would not get a look-in, and the houses would not go to local people.

That is the problem with the current planning regime, and we desperately need the Department to tell councils that it expects them to plan positively. Planning positively under the national planning policy framework does not mean more green-belt sites with many houses on them. It means they should find out where they want houses, and make that happen. We must get that message across, because it is in the national planning policy framework and it is good stuff, but out there on the ground it does not seem to be working.

I plead with the Minister to ensure that he directs councils to use their powers of compulsory purchase and to find owners of sites that people would like to be developed, instead of what happens at the moment with the big boys turning up, driving round the area, seeing the half a dozen local fields that everyone loves and appreciates, putting in a planning application, and arguing time and again that that is more deliverable.

[Mr Dai Havard (in the Chair)]

We now move from south-east England to Mr Stuart Andrew who will give us a view from the north.

14:45

[Stuart Andrew (Pudsey) (Con)]

I welcome this debate and congratulate my hon. Friends on securing it. I have been interested in the subject for a long time, not just because I represent a heavily affected ward, but because I am a member of a plans panel on Leeds city council.

My constituency has seen many significant changes over the past 20 years. It was renowned for its cloth and woollen mills, and other industries, but as those industries declined, their sites became redundant and places such as Pudsey, Farsley and Guiseley saw those employment sites turned into residential areas. During the first decade of the this century, we were inundated with application after application to build even more houses, and consequently our roads are congested beyond belief at weekends and during weekdays and evenings. Our surgeries have more and more patients and our schools are so busy that children living just across the road from their local school may struggle to get into them. Most of all, people were exasperated and frustrated that the planning system was something that happened to them, and that they had little say in it. Sometimes, even when the council said no and that enough was enough, an appeal was allowed. I cannot express strongly enough the anger and resentment that that created.

When the Government talked about planning reform, I thought “Hallelujah”. Many of the changes have been welcome and in the right direction. Reducing the plethora of guidance and advice to a more manageable document is making life a lot less complex and the system more understandable. The ability to create neighbourhood forums to offer real engagement is hugely welcome.

I pay tribute to the Minister for taking time to visit so many constituencies around the country. I was pleased to welcome him to mine, where he heard the concerns of local councillors and others, and saw for himself the significant development that has taken place. That was appreciated. I have noticed that when hon. Members list a number of positives in this place, a “but” invariably follows, and here it comes. Despite the Government’s work, a problem threatens the intentions of localism and people’s trust that we will have a real bottom-up approach to planning.

Localism is about local communities deciding what, where and when development should take place. There has been a real appetite and interest in my constituency in being involved in the planning process. Groups such as Wharfedale and Airedale Review Development and Aireborough Civic Society have campaigned long and hard on the issue. In addition, residents have turned up in their hundreds at public meetings when these issues were discussed. Organisations such as Horsforth town council. Rawdon parish council and Aireborough Neighbourhood Forum have all worked incredibly hard to engage with the whole community, bringing residents, schools and businesses together to develop a vision of future development that is sustainable, realistic and seeks to preserve our natural surroundings.

I am talking not just about building houses but about creating places that people want to live in, work in and play in: real place-making. Something is jeopardising all that work, and is still seen by my constituents as a top-down major influence: the housing targets that we have heard so much about today. We all know that the original regional spatial strategy placed huge burdens on local authorities, but despite abolition of the RSS, little has changed with the targets. In my constituency, the core strategy of the city council is being examined. It includes a plan to build 74,000 homes over the next 14 years, and it arrived at that figure with a host of scenarios ranging from 27,500 to 92,000. That means that the council has gone for the high end because it believes that the Government expect it to be far more ambitious than can reliably be achieved. I, local councillors, and all the groups I have mentioned have argued, ever since the document came out in draft form, that the figures are far too high. Despite our logical arguments, the council has kept the target, fearing that the inspector will force it to go even higher. The problem is that the council is far too ambitious.

What is the consequence? The council then has to prove that it has the land to supply such high targets. Even with the existing permissions of 20,000 dwellings, there is still not enough land, so the council is now looking at greenfield and green belt, meaning that in my constituency up to 80% of all new homes will be built on green-belt or greenfield sites. The precious places that are the lungs of our communities, the natural barriers between the towns and villages, and the green borders between the cities of Leeds and Bradford, will all be gone. They are now all under threat and my constituents are clearly not happy. Even in the best of the boom years, we never managed to build so many houses, and developers want to go even higher, saying that the brownfield sites in the city centre are not viable. That is because they are lazy and do not want to be ambitious about creating places where people want to live in our city centres.

The other day, I asked my hon. Friend the Minister what happens if the inspector, in the process of looking at these figures, agrees to such a high amount. If it is approved, I fear that the brownfield sites in city centres will be abandoned, that the developers will cherry-pick the green belt, and that residents will be stuck between the Government saying that local councils can set high targets and the council saying that the Government expect high targets.

I know that the Minister will say that the target needs to be objectively assessed, but what happens if those figures are approved? Is there any appeal process for my constituents to present their case? They are doing so brilliantly at the hearing, but if we are saddled with those housing targets, our green belt will be ravaged, and future residents will not be able to do anything, because the period will already have been set in stone. Worst of all, however, it will send a message that some already believe: localism goes only so far, but not far enough where it matters.

[Mr Dai Havard (in the Chair)]

In my spatial planning, we now move to Cheshire and Ms Fiona Bruce.

14:52

[Fiona Bruce (Congleton) (Con)]

I am here as a voice for my constituents, who feel grievously let down by the lack of clarity of the planning policy, practices and procedures of local and national Government. Only one thing is clear: despite more than 20 action groups representing thousands of people across my constituency, despite many public meetings, the most recent of which was held last night in Congleton town hall, despite my bringing successive leaders of Cheshire East council to meet Ministers for clarity on these issues, and despite countless letters having been sent to Ministers on behalf of constituents, we still have developer-led development in our area and unsustainable, unplanned development. It ignores town plans, places no weight on the emerging local plan and makes a mockery of localism.

The national planning policy framework, with its presumption of sustainable development, contains an inadequate definition of that—in fact, it is barely a definition at all—which certainly does not equate with my constituents’ definition. Sustainability means there being enough schools, roads, medical centres and facilities for local people, and there simply will not be enough if the rate of development continues in our towns.

In Alsager alone, which is a town of some 5,500 houses, applications are in the pipeline for 3,000 dwellings. This is a town recently described by the chief planning officer of Cheshire East council as “currently unsustainable”. In Sandbach, which is a town of 8,000, some 6,000 applications have been granted or are in the pipeline. Just last week, two consents for Sandbach were granted, in Abbeyfields and Congleton road. That makes the consents already granted for Sandbach sufficient to cover one third of its 20-year supply. And those are on greenfield sites. This is countryside. This is prime agricultural land. The mayor of Sandbach is in the Chamber today, having come directly from 10 Downing street, where he presented a petition objecting to the Government’s policies.

There is then the unclear procedure surrounding the requirement for a five-year supply of housing. That is simply unjust. The primary reason for the two appeals granted last week was that Cheshire East apparently is unable to demonstrate a five-year housing supply, and yet the council told residents months ago that it had developed a robust strategic housing land availability assessment, which would satisfy requirements for a five-year housing supply.

Who is right—national Government, through the inspectorate, or local government? How was it that Cheshire East could say that it had demonstrated a five-year supply if clearly it had not? Is there no means by which such statements can be validated with central Government before they are made? Surely the only way cannot be for the strength of such a supply statement to be tested on appeal, because it adds insult to injury for thousands of pounds of local taxpayers’ money to be spent on such appeals, when it could be spent on meeting local people’s needs. There is so much confusion regarding the requirements that injustice is being introduced into our communities, particularly because there are other sites—brownfield and non-brownfield, including in Sandbach—that the local community have already said that they will accept for development.

That brings me to my next point. It is wholly wrong that people in the towns of Alsager, Congleton, Middlewich and Sandbach in my constituency were offered the opportunity and funding under the Government’s neighbourhood plan front-runner schemes to develop neighbourhood plans, only to find that those town plans count for absolutely nothing, in terms of the Planning Inspectorate’s decisions regarding appeals against developments.

The situation is also producing inconsistent decision making. Just last week, when two developers’ applications were accepted for Sandbach, we had a refusal for a site at Sandbach road north in Alsager. That was despite the inspectorate acknowledging the lack of a demonstrable five-year supply of deliverable housing in Cheshire East, and apparently, according to my interpretation, giving weight to the draft Cheshire East local plan, which other decisions refused to do. It stated:

“It would seem wise in this part of the borough not to proceed with development which would go beyond the draft strategy at this stage.”

The inspectorate also rejected the developer’s appeal on the grounds that it is in open countryside, and that harm to it would be significant and demonstrable. But so it would be to Abbeyfields, Congleton road and Hind Heath in Sandbach, which have already been granted. We really need clarity on these issues. How long should a local plan realistically take to develop? We pride ourselves in this country on clear and speedy delivery of justice. We say that justice delayed is justice denied. We talk about the rule of law. And yet, in planning, we could not have murkier, muddier waters. That is simply unfair.

Our local authority has been working for three years on a local plan. What has gone wrong? Why does the draft plan that was prepared last year, which was the subject of a six-week public consultation, now have to be radically altered and be the subject of a further public consultation, while all the time, developers rub their hands with glee and take advantage of that void? Will the Minister provide whatever assistance is required for Cheshire East council from a senior planning adviser to ensure that there are no further delays or confusion regarding what is required to get our local plan through? My constituents have had enough.

I also ask the Minister to ensure that we have clarity on our five-year housing supply numbers, and that a clear message is sent to the people of my constituency, as I have sought to provide for three years, giving them every and any necessary and available means of help to resolve those issues. My constituents simply cannot understand the situation. They feel angry, in despair, ignored, impotent as regards the plans for development of their own communities, and without any democratic recourse, as one has said to me, except the ballot box.

On behalf of the Under-Secretary of State for Education, my hon. Friend the Member for Crewe and Nantwich (Mr Timpson), I confirm that he, too, has been working tirelessly with planning action groups in his constituency, which is adjacent to mine, and also in Cheshire East. He recently arranged for the Planning Minister to speak to those groups so that they could hear the advice that the Department had for Cheshire East council on resolving the adoption of the local plan and housing supply. I would appreciate that advice and clarity being given today in the Minister’s response.

[Mr Dai Havard (in the Chair)]

Thank you. Mr Brady will take over from me shortly. I ask you to temper your enthusiasm with the pessimism of the intellect, and look more towards six minutes than seven for your future contributions. We now move back to the west midlands and Mr White.

14:59

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

It is a pleasure to follow my hon. Friend the Member for Congleton (Fiona Bruce), who gave a passionate speech. I also start by thanking my hon. Friends the Members for Tewkesbury (Mr Robertson) and for St Albans (Mrs Main) and my right hon. Friend the Member for Arundel and South Downs (Nick Herbert) for securing this important debate. As we can see from the speeches that we have heard so far from around the country, this is an issue that affects so many of our constituencies.

During the past two years, Warwick district council has been seeking to create a new local plan that will guide the development of our community for the next 18 years. That is a hugely important document, but it has been mired in controversy and opposition since it was put forward. That highlights some of the problems in the current planning system. The local plan has been controversial because of the number of homes that have been proposed by the council, as well as their concentration and location. First, the scale of the proposed housing development is enormous. The local plan outlines the building, during the next 16 years, of more than 12,000 homes, in addition to the 6,000 that we built between 2001 and 2011. That would increase the number of dwellings in Warwick district by about 20% during the next two decades.

[Mr Graham Brady in the Chair]

The “Strategic Housing Land Availability Assessment” compiled by the council has indicated that the total capacity of the district is about 13,000 dwellings between 2014 and 2029, so the proposed local plan would use up 91.8% of the total capacity. Planning is something that we must consider over the long term. Once homes are built, we cannot turn back the clock to change the mistakes that we have made, so we must consider the long-term sustainability of our planning decisions as a whole. How can it be sustainable to build so many new homes and to use up so much capacity?

The concentration of development is also a deep concern and raises questions of fairness. The majority of the new properties will be in the area south of Warwick, Leamington and Whitnash, with 70% of the new homes being placed in that part of the district. That is despite the fact that there has been, and continues to be, a considerable amount of housing development in that part of the district and there are already concerns about the impact that the proposals will have on local infrastructure. I do not believe it is fair that such a concentration is allowed in that part of the district. Residents of those areas are rightly angry about the sacrifices that they are being asked to make in order to allow the development of so many new homes.

I shall take this opportunity to urge Warwick district council, once again, to pause the local plan process and start discussions with local residents so that we can build a consensus on creating a sustainable future for our community. During the process, in the lead-up to the preferred options being outlined by the district council, it was clear that residents did not want to have that number of homes and that they wanted development to take place primarily on brownfield land, rather than greenfield land as is proposed. That will have an impact on the wonderful Warwickshire countryside. Our area has a large percentage of green belt, and I do not believe that we should develop on green-belt land. However, that does not give the local authority an excuse to concentrate developments on non-protected greenfield sites. If our district was 95% green belt rather than 80%, would that mean that all development would be concentrated in the unprotected 5%? Surely it would make sense to adjust the scale and ambitions of the development, rather than to ram through such large developments, which take no account of this situation.

However, the views to which I have referred have not been consistently accepted by the council to date. As a result, public confidence in it has been damaged, and that will undermine future efforts by the council to undertake consultations on new developments or infrastructure. I appreciate that councils have an obligation to ensure that there is enough housing to meet demand in the future, but I also think that we need to ensure that that obligation is met in the right way. I do not believe that Warwick district council has so far acted in the right spirit during this planning process.

I believe that the Government have done the right thing through the Localism Act 2011 to try to ensure that communities have greater control over planning matters. However, we also need to ensure that the process is carried out in the right way, in empathy with such localism, that councils do not ride roughshod over the desires of local people, and that the principles of localism are delivered on the ground.

The best way forward would be for the Government to get each local authority to sign up to a national planning compact that outlines how councils are expected to carry out their consultations on planning matters; the role that local communities should have in co-producing proposals such as the local plan; and best practice in terms of planning processes that have been carried forward and that have brought communities with them. Having such a compact would ensure that each local authority was taking a long, hard look at how it was developing its local plan.

We must have a system whereby people feel that they have ownership of the planning process and whereby they can have confidence in the decisions that are reached. That will ensure that we create plans that have the support of residents, are in the long-term interests of our community, will address real housing needs and will almost certainly create local economies that grow and prosper.

15:05

[Julian Sturdy (York Outer) (Con)]

It is a pleasure to serve under your chairmanship, Mr Brady, and to speak in this very important debate. I congratulate my right hon. and hon. Friends on securing it. Like many other Members, I would like to highlight some of the concerns in my constituency.

York, like so many other towns and cities across the country, is surrounded by green-belt land, which is vital in preserving and enhancing its character and setting. It is as important to the identity of our great city as the Gothic minster, the Roman walls and the National Railway Museum. To my mind, it is an essential part of York’s DNA.

However, the very fabric of what makes York such a great and beautiful city is under threat from the misguided plans of the local authority. The City of York council published its draft local plan in April of this year and, to the utter dismay of many of my constituents, the plan proposes to take 1,400 acres out of York’s green belt and build 16,000 new homes on that land during the 15-year life of the plan. As if that was not enough to satisfy the council’s appetite for green-belt land, a further 1,000 acres will be removed from the green belt and safeguarded for future development. Sadly, the plan does not stop there. The council has also proposed more than 80 additional Traveller and showpeople pitches, all in inappropriate locations, on green-belt land, in quiet rural communities such as Dunnington, Knapton and Huntington in my constituency.

The icing on the cake is that the council is also pursuing its plans to destroy the open countryside that surrounds our great city with 40

“areas of search for renewable electricity generation”,

covering vast swathes of green-belt land in my constituency. It was, until recently, pursuing those sites as potential wind farms. However, due to the unsurprising lack of sufficient wind speed in the Vale of York—something that was obvious to most local people, but that the council and the local taxpayer-funded studies failed to pick up—I have now been given the impression from the council that it is considering solar farms on the sites as an alternative.

I am therefore speaking on behalf of my constituents in welcoming the recent announcements from the Minister of State, Department of Energy and Climate Change, my right hon. Friend the Member for Bexhill and Battle (Gregory Barker), about the Government’s determination to crack down on inappropriately sited solar farms in the countryside by introducing the solar road map. I urge the City of York council to consider very carefully what the Minister has been saying on the matter and not to ignore the views of local residents.

Turning to the important issue of housing supply, I want to make it clear that, like many right hon. and hon. Members here today, I fully support the decision to scrap the rigid, top-down housing targets in the regional spatial strategies. The Government should be congratulated on doing that. However, three years on, there remains confusion among some local authorities about what housing targets are appropriate.

Some local authorities surrounding York are reducing their targets from the levels that they were at in the now redundant regional spatial strategy. Meanwhile, York, which is currently controlled by Labour, is proposing to increase its old housing targets by more than 40%. In doing so, the council is placing itself completely at odds with the guiding principle behind the modern planning framework—that development should always be sustainable.

York is an historic city in which the local infrastructure is already under strain. Adding tens of thousands of new homes will mean tens of thousands more cars on an already congested road network and thousands more pupils trying to gain entry to our excellent but already oversubscribed schools. That is not to mention the drainage and the strain on existing health care facilities.

With approximately two thirds of the council’s overall housing projections to be allocated to York’s established green belt, I am deeply concerned that the plan will push our already creaking local infrastructure to breaking point. The council has provided no guarantees that it will help secure the investment we need in our local infrastructure. It clearly believes the local plan will result in economic growth for York, but having investigated the issue, I fear that putting the cart before the horse and failing to guarantee the infrastructure investment York already needs will lead many of the city’s leading employers to question in the long term whether York is still a suitable base for their businesses.

In its current form, the plan has the potential to end in disaster for York on the economic stage. That is why I entirely agree with my right hon. Friend the Member for Arundel and South Downs (Nick Herbert) that the requirement for infrastructure must be considered when granting planning consent—something that, to be frank, is blindingly obvious. I was reassured by the pledge from the former Minister of State at the Department, the right hon. Member for Tunbridge Wells (Greg Clark), that the requirement would form part of the planning guidance. I hope, therefore, that the omission will be rectified, as York’s future viability as a centre of commerce and enterprise could depend on it.

Local authorities that press ahead with unsustainable housing plans must be stopped and compelled to consider whether they have the necessary infrastructure in place; if not, they should change their plans accordingly. Equally, we must ensure that the important principles of sustainability and green-belt protection remain central to the national planning policy framework and that our local authorities understand that that is the case. Otherwise, I fear that the towns and cities we are proud to represent will change out of all recognition.

In summary, the tension between our local planning authorities and the planning inspector is twofold. Where councils produce reasonable, appropriate and sustainable local plans, we face the problem of planning inspectors overstepping the mark and making unreasonable demands. In areas such as York, however, we appear to face the opposite problem, because the local authorities propose to decimate our open countryside and change it out of all recognition. I therefore reiterate that it is vital that we have a strong and fair Planning Inspectorate to protect our communities and countryside from unsustainable development. That means that infrastructure must be at the heart of any considerations.

15:12

[Harriett Baldwin (West Worcestershire) (Con)]

I, too, congratulate my right hon. Friend the Member for Arundel and South Downs (Nick Herbert) and my hon. Friends the Members for Tewkesbury (Mr Robertson) and for St Albans (Mrs Main) on securing the debate.

The issue of planning also fills my postbag. I represent the thriving, beautiful constituency of West Worcestershire, which has one of the highest ratios in the west midlands of house prices to average earnings. It is also the birthplace of Elgar, and its countryside inspired much of his music.

Despite all the valid concerns colleagues have raised, I think we are in a much better place on planning than we were under the Stalinist diktats of the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), and I agree with colleagues who have welcomed the abolition of the regional spatial strategy.

Shifting local planning decisions to councils, which makes so much democratic sense, has raised a range of issues. I particularly welcome the Government’s introduction of neighbourhood planning. In the Malvern Hills district, the parishes of Kempsey, Clifton upon Teme, Leigh and Bransford, Alfrick and Lulsley, Martley, and Knightwick and Doddenham have all had their neighbourhood areas approved.

When we discuss planning, however, one thing that strikes me is that the beautiful villages we all love—in my area, I have the villages around Bredon Hill, the town of Pershore and the towns and villages of the Malvern Hills district—all grew up without our current planning regulations. Ironically, however, we would not be able to build those communities under today’s planning rules. Their growth tended to be more organic and more bottom up; people built their own homes on their own land, which they had bought for that purpose. When the Victorians became concerned that Great Malvern was encroaching far too much on the Malvern hills, they established the world’s first conservation area by Act of Parliament in 1884. Since then, the hills have been owned for the common good by the Malvern Hills Conservators charity. That organic approach has worked well for this country for the thousands of years there have been settlements in Worcestershire and elsewhere. That is why I am so supportive of the recent changes to the planning system, which move us back in the direction of the village and the neighbourhood, while embodying the countryside protections pioneered by the Malvern Hills Conservators.

In south Worcestershire, we may be a bit further ahead on our local plan than other colleagues are on theirs. Our three local councils—Worcester City, Malvern Hills and Wychavon, which my hon. Friend the Minister visited recently—have been working in partnership for many years to develop an ambitious and sound local plan. After the 2010 election, they presciently commissioned expert projections of population growth and perhaps got a head start on some other council areas. Their evidence base is now more up to date and fresher than those in some other parts of the country.

All three local councils democratically agreed the plan last December. I can assure hon. Members that that was not without a great deal of controversy, but one factor that encouraged councillors to vote in favour of the plan was that it would allow them to be in control. The south Worcestershire development plan has much more up-to-date and adequate five-year land supply numbers and such ambitious plans for employment land that we are getting complaints from Birmingham councils.

When I say the plan was democratically agreed last December, people complain that a bit of whipping was involved. Well, I hate to tell my local councillors this, but Whips are often involved in democracy here in Westminster. However, despite the vote last December, it took a further five months to send the plan to the inspector for the examination in public and another few months for him to decide on his inspection plan and timetable. The inspection has just got under way, and I would not be surprised if it took the inspector well into 2014 before he recommends adoption.

I want this period of uncertainty to be over, so that we can move forward with the construction, growth and jobs embodied in the plan. A delay of 18 months to two years is too long, and it undermines the local democracy of the vote in December. As the Minister knows, I and the leader of the council in my area have written to him. I have also written to the local planning inspector urging him to respect the local plan unless there are actual factual inaccuracies in it. The inspector has written a helpful reply, assuring me that he will seek to complete his inspection as soon as possible, subject to the legal requirements on him. The Minister has also responded constructively.

Here is my wish list of four things I would like to ask the Minister for. First, as he finalises his latest national planning practice guidance, which will set out the exceptional circumstances in which a refusal may be justified on the grounds of prematurity, will he try to ensure that the democratically agreed plans that have emerged will get almost full weight in any decision making, allowing the fresh evidence base and the numbers in the plan to be used, unless the inspector sees actual errors of fact, rather than just a divergence of opinion? Surely the future of the area should be entrusted to south Worcestershire councillors, rather than shaped by contesting opinions—they will only be opinions—from Birmingham and elsewhere?

Secondly, may I ask the Minister for his thoughts on how we as MPs can best support emerging neighbourhood plans? I love neighbourhood planning, which is an excellent way of giving power to local people and bringing back an organic approach to planning, reducing the need for vast swathes of land to be swallowed up by urban extensions. Thirdly, can we reassure villages that, once they have agreed their neighbourhood plan and won a vote on it in a referendum, it will take precedence over the local plan, even if that has been adopted?

Finally, what can the Minister say to the octogenarian farmer in my local area who lives in a draughty five-bedroom home and who wants nothing more than to build a bungalow in the field next door for the final years of his life? Under today’s rules, such building is prohibited in open countryside. If there is a neighbourhood plan, will my farmer have any hope that he can build his bungalow?

Once again, I congratulate my right hon. and hon. Friends on securing the debate, and I thank you, Mr Brady, for allowing me to pass on the concerns of my constituents in the glorious area of West Worcestershire.

15:19

[David Rutley (Macclesfield) (Con)]

It is a pleasure to serve under your chairmanship, Mr Brady. I am grateful to the Backbench Business Committee for securing the debate, and I congratulate my hon. Friends the Members for Tewkesbury (Mr Robertson) and for St Albans (Mrs Main) and my right hon. Friend the Member for Arundel and South Downs (Nick Herbert) on making sure that we have a debate on such an important subject. The fact that there are so many of us here shows that there is a need for a debate, and I am sure that the Minister is taking copious notes.

As others have said, the debate is a critical one. It is about balance: getting the housing supply right—we have a growing population, so that is an important priority—and protecting the countryside at the same time. We need to provide more houses, but also to protect our natural assets—and they are assets. Our countryside helps to define our communities, making them distinctive. It provides agricultural land and draws in visitors, which boosts tourism in towns and villages. Those things are valuable assets and need to be protected. It is important to underline the point that the debate is not about quaint rural traditions threatening to block housing development; it is about economic effects on the macro-economy and on communities, businesses and residents. That is why it is important to make the right decisions.

In east Cheshire we understand that it is a critical matter to get the local plan in place. The move to become a unitary authority, and the time taken to integrate services previously provided by other local authorities, initially slowed progress, but we got back on track quickly and a huge amount of work has now been done to shape the plan. Successive rounds of public consultation have been undertaken, at pace. Like my hon. Friend the Member for Congleton (Fiona Bruce) and the Under-Secretary of State for Education, my hon. Friend the Member for Crewe and Nantwich (Mr Timpson), I have attended many public meetings and met many community groups, so that I could understand their concerns better and help to shape and refine the plan.

I am pleased to say that the residents of Macclesfield are not shy about coming forward with their concerns. That is a good thing, and means that there has been rigorous and challenging debate. I commend those who have taken part in campaigns about south-west Macclesfield, Fence Avenue and Lark Hall, to name a few, for the way in which they engaged elected representatives and clearly expressed their views. I know that the final local plan will be much better for that. We recognise in Cheshire East, and in Macclesfield in particular, that the local plan urgently needs to be signed off to stop unwanted speculative housing developments, as my neighbour, my hon. Friend the Member for Congleton, so clearly articulated. At the moment they are a particular challenge in the south of the borough. In Congleton and Crewe work is going on tirelessly with Cheshire East council and residents to stop them, and I fully support that work.

We need to get the local plan set up, and are working hard, but we need the Minister’s support and advice to get the right plan signed off. I am, like other hon. Members, grateful for the Minister’s efforts to understand the issues on the ground better. I am pleased that he recently went to Cheshire to speak to residents. I am also pleased and grateful for his meetings with me and colleagues to hear about our concerns and challenges. As he knows, one key issue is defining what housing is required in our five-year housing supply. At the moment that is holding us back. As my hon. Friend the Member for Congleton pointed out, sites have been identified in our draft plan that can be developed. There is a difference of opinion between the councils and the inspector as to what the figure should be; that is what needs to be unblocked so we can move forward. I urge the Minister to use his good offices to help resolve the situation and clarify what the target should be, so that the plan can be concluded and unwanted, speculative house building can be stopped in the borough. That is a vital priority, as I think the Minister knows.

For all the hard work that has been done to shape the plan, there are other questions that urgently need an answer. Like many Macclesfield residents I understood that we were close to finalising the plan and that its focus was on housing developments to 2030. I think that the Minister may be a little surprised to know that I found out a few months ago that Cheshire East council officers were now under the impression that they had to work towards a planning horizon not of 2030—which by most people’s standards is, I think, quite a long time horizon—but 2050. That has completely slowed down the process. How can we have a view and a sense of purpose in relation to a time horizon of not 17 but 37 years?

The new requirements have major implications, particularly for the northern part of the borough. In communities such as Macclesfield and Poynton, which I am proud to represent, the news led the council to highlight green-belt land as supposedly “safeguarded for development”—not to be confused with safeguarding it from development, which is very different. The designation could be applied to large areas such as south-west Macclesfield, where up to 3,000 houses could be developed.

We have all worked hard to ensure that the green belt around Macclesfield and nearby communities is protected in the 2030 local plan. The green belt exists to protect the communities from urban sprawl from Manchester, and it is important for it to be kept that way. The Minister will understand the strong local concern—including mine—at the proposal to safeguard green belt “for development” to achieve housing targets for not 2030 but 2050. That situation is made even worse by the fact that there are no exceptional or compelling circumstances, which are a clear requirement in the national planning policy framework.

Will the Minister take this opportunity to set the record straight and tell the House whether showing how housing targets for 2050 will be achieved is a requirement for approval of a local plan? If it is not, will he also confirm that it will not be necessary to safeguard land for development, particularly in the green belt, beyond 2030? Macclesfield residents will be grateful for his views on those issues. They will affect green-belt areas that are vital to the fabric of the community, and will address the concerns of hundreds of residents who could become victims of a planning blight that I believe and hope is completely unnecessary.

15:26

[Damian Hinds (East Hampshire) (Con)]

It is a great pleasure to see you in the Chair, Mr Brady, and to follow my hon. Friend the Member for Macclesfield (David Rutley). I congratulate my hon. Friends the Members for Tewkesbury (Mr Robertson), and for St Albans (Mrs Main), and my right hon. Friend the Member for Arundel and South Downs (Nick Herbert), on securing this important debate, which is particularly important to residents of East Hampshire—especially, at present, residents of Four Marks, the parish of Medstead, Liphook, Alton, Petersfield and the area in and around Bordon and Whitehill. I want to focus on two aspects of the issue that my right hon. Friend the Member for Arundel and South Downs set out clearly and convincingly: the need for recognition of in-progress plans; and the insistence on accompanying infrastructure where permissions are granted.

Like those of many other areas, our plan was stopped in its tracks. In our case it was stopped at the stage of the joint core strategy between East Hampshire district council and the South Downs national park authority, and we now find ourselves in the void period that many hon. Members have spoken about, which can last a long time. The concern is that in that long time, until things are finalised, there is a risk—we already see the signs—of a flood of speculative applications.

I should say that East Hampshire district council is not anti-development, and nor am I. There is concern that the average first-time buyer in East Hampshire is 40 years old, and that the average home costs £321,000. We also recognise the need for market towns and villages to have vibrant, diverse communities. If we want to save what is left of our village pubs and shops, we need people to work in them, and our small primary schools need young families with children to go to them. The council also supports a substantial development on former Ministry of Defence land at Whitehill and Bordon; my hon. Friend the Member for Banbury (Sir Tony Baldry) spoke about his area’s eco-town, and this is ours. In the case of Bordon, the development will add 2,700 homes. East Hampshire also has a very ambitious self-set target for affordable homes.

In its interim housing statement, in this void period, East Hampshire reflects the revised strategic housing market assessment, or SHMA—I think I am the first speaker this afternoon to say that, although I know that my hon. Friend the Member for Congleton (Fiona Bruce) mentioned the SHLAA—the strategic housing land availability assessment. The SHMA called for between 500 and 650 homes per annum, and East Hampshire is working towards the figure of 582, which is of course in the top half of that range.

In some places, the speculative applications and pre-application interest shown already exceed the targets in the areas and villages concerned for the period until 2028, and in my constituency that is especially true in Four Marks, the parish of Medstead, Alton and Liphook. There has also been significant interest in Petersfield, where a neighbourhood plan is in development; we expect the referendum on that next year. I suggest to the Minister that where a council is making proactive efforts, once the number of houses called for in the interim housing statement—in our case—has been reached in a particular area, it ought to be possible to say, “No more.”

A complication is that part of my constituency is in a national park—the relatively newly formed South Downs national park—and other parts have special protection area status, which leaves people who are in neither feeling somewhat exposed. We need a balance of development and a balance of community throughout the area. I strongly suggest that the elected local council is best placed to determine how the balance should be struck, and the interim housing statement seems to be a good way to express that. In general, residents’ concerns are twofold: first, they are concerned about the general scale of development and its implications for the character of an area; and secondly, they are concerned about the infrastructure deficit. Already, certain parts have seen significant infrastructure deficit. Four Marks has experienced a great deal of development, and needs commensurate infrastructure to ensure safety on the main road—the A31—sufficient primary places, and so on.

The approach is meant to be plan-led, so Ministers rightly say that the best thing that everybody can do is get on and make their plans. That is of course correct, but the plan process seems to take an inordinate amount of time, from beginning to end, and there must be ways to accelerate elements of it. We must recognise that many councils are not at the end of the process and find themselves in this void period. A large proportion of plan submissions in the first year of the national planning policy framework were found to be not sound. I therefore join strongly in the calls to make it explicit that infrastructure requirements should be met if permission is to be granted, the calls for emerging plans to be recognised, and the calls to find ways to speed up the whole process.

I shall strike a slightly different tone on the overall need for housing. I recognise that we need housing—the Office for National Statistics figure is 232,000 homes per year—but what is not necessarily well understood is that that is not all, or even nearly all, about immigration. If we strip out future net migration, the projected requirement is still 149,000: people are living longer; households are smaller, for all sorts of wider social reasons; kids live away at university and have a place at home; hardly anyone has a lodger anymore; and so on. There are lots of pressures, and they will not go away. The south-east will over-index on that pressure, and we must accommodate it but also mitigate it.

I encourage the Minister to work with councillors on how, on a relatively small scale in our local areas, we can do more about the conversion of redundant agricultural buildings; make granny flat conversions easier; work on empty properties, as my hon. Friend the Member for Tewkesbury said; and take up small-site opportunities, as my hon. Friend the Member for Castle Point (Rebecca Harris) said clearly. An interesting point in the Portas report was about the opportunity to concentrate town centres. That has the benefit of freeing-up space on the relative periphery for residential development. On a bigger scale, there are new towns, but perhaps the biggest opportunity of all is the one touched on by my hon. Friend the Member for Pudsey (Stuart Andrew): we should not only build higher-density, in-town living, but make it attractive. Some of the most sought after areas of the country are high-density, which proves that it can, in principle, be done. I see that I am out of time, Mr Brady, so I will stop there.

15:34

[Andrew Bingham (High Peak) (Con)]

I congratulate my hon. Friends on securing this debate. We can tell by the attendance today, and from our postbags, that the subject is of great importance to Members and our constituents. It follows on from a 30-minute debate held in Westminster Hall some time ago, in which, because of sheer weight of numbers, the time limit was very restrictive. Today we have been given double that limit— six minutes.

I spent 12 years on the local council, and planning exercised my residents more than anything else, and as an MP, I find a similar situation. The creation of the NPPF has simplified the planning laws, which had become complicated and burdensome. Like many others here today, I supported sending the power to rule on applications down to local authorities. As a councillor on the planning committee, I felt many times that we were rubber-stamping central Government policies on development. That was frustrating to me and my residents, because they believed, as I did when first elected, that the local authority was the sole arbiter on applications.

As previous speakers have said, I look forward to a brave new world under the new NPPF and local plans, where locally elected representatives make the decisions that impact so much on local people, but I, too, am concerned about recent events. My constituency, High Peak, is the most beautiful in the country, though I am biased. I am sure that others will disagree. As I said in the previous debate, there has been a proliferation of significant applications for development on greenfield sites. They have been refused by the local authority’s planning committee on perfectly legitimate grounds. This is not a case of nimbyism at all. The decisions were met with great approval, and in some cases relief, by local residents, who felt that their views had been represented by the people for whom they had voted.

I want to be clear: the High Peak is a great place to live. I am lucky, as are my constituents. We know that many people would love to live in the High Peak. We are not of the mind that says, “We have our housing and we’re going to pull the ladder up. We’re all right, Jack.” We acknowledge that there is a need for some housing. My constituents have young children and teenagers. There are people in their early 20s who want to stay and live in the High Peak. There is a housing need, which I touched on in my Adjournment debate last week on the challenges facing rural businesses. We need houses for people to live in, so that they can work in the High Peak. No one I have spoken to disputes that there is a need for housing. My constituents would accept development, provided it was proportionate.

Recent decisions by local councillors, who, I remind everyone, are elected by local people, have been overturned by the Planning Inspectorate, which is not. That flies in the face of everything that we believe about localism. I have spoken to many residents, who are seeing more applications coming forward, with the threat of ever larger developments. In my previous speech on the subject, I highlighted the area of Harpur Hill and the concerns of its residents’ association. I will not repeat the statistics, because time is short and they are in Hansard, but as I said in my previous speech, the problems facing Harpur Hill are mirrored in other areas of my constituency. As the Minister knows, Chapel-en-le-Frith parish council now objects to every significant planning application, after several applications have already been given the nod. If all of them were built, the size of that small village, where I live, would increase significantly, beyond what many believe the infrastructure could cope with.

I could run through a list of applications in different parts of my constituency, but we are not at a planning meeting today. My constituents are asking questions about the applications and the method of approval. Are they powerless to prevent approvals? Can they at least ensure that there is some sense of proportion? Proportion is what they are asking for. I am sure that the Minister will respond that local plans should be drawn up, and planning policy should be defined in documents and properly evaluated. My local council has yet to product its local plan; indeed, it has delayed its anticipated completion. In 2011, the controlling Labour group rejected proposals from the Conservative group to use some underspend to bring forward brownfield sites. It has now belatedly allocated some extra resources to that. Delaying the local plan has created a window of opportunity for developers. I could easily turn my contribution into a tirade against the Labour group and its management of the local authority. I have met the executive member to discuss the situation; he has his views and I have mine.

I want to deal with the harsh realities of the here and now. No local plan has been completed, and developers are submitting speculative applications time after time—applications that may have been refused in the past. They see from previous examples, which I highlighted today, that the Planning Inspectorate appears to be unmoved by local representations. I repeat that this is not nimbyism; my constituents and I are not against development. It is about proportion. A well-constructed local plan should bring in proportion, but at the moment the Planning Inspectorate does not listen to our views.

I am pleased that the Minister has agreed to visit the High Peak. I promise him a warm welcome in the hillsides. We can have an interesting day. There has been a dearth of houses built in the past few years, and that has created the shortage facing us today, but I am concerned that in our eagerness to deal with that, we are being too hasty, and will be left to repent at leisure. I have asked the Minister this question previously, and I will repeat it today: will he not seek to give more weight to emerging plans? I know that that may amount to making up for the shortcomings of the council, but I am looking to assist my constituents.

I am looking at the clock; time is short, and I could go on to several other issues. A consultation on the latitude in permitted development rights for agricultural buildings closed recently. The Peak District national park covers a large chunk of my constituency. I value that national park greatly, as I know the Minister does—he has gone on record on this. People are concerned about that proposal. There was also a consultation on catching up on housing deficits, and having to reduce them in the first two or three years. That will cause huge problems to local authorities if we are not careful.

I plead with the Minister: listen to what we have all said today. We are all on a common theme: we need houses. We know that under the previous Government, the numbers were woefully low, but let us get some proportion. The essence of localism is local decisions made by local people. That is not happening in the High Peak, and, from what we have heard today, it does not appear to be happening in other areas of the country. I would therefore like some assurance from the Minister that something can be done for my constituents. Harold Wilson once said to Hugh Scanlon,

“get your tanks off my lawn”;

the people of High Peak are saying to developers, “Get your bulldozers off our fields.”

I look forward to welcoming the Minister to High Peak. My residents are eager to see him. I hope that he will come soon. It is very cold and high where I live, and we will get a lot of snow soon, so I recommend that he comes as soon as possible.

[Mr Graham Brady (in the Chair)]

Hon. Members have all been so disciplined in their time-keeping that we have lots of time for Front Benchers’ responses. However, I am keen to reserve at least a couple of minutes at the end for the hon. Member for Tewkesbury (Mr Robertson) to respond, if he wishes.

15:41

[Roberta Blackman-Woods (City of Durham) (Lab)]

It is a pleasure to serve under your chairmanship again, Mr Brady. This debate is primarily for Back Benchers, so I had intended to keep my remarks fairly short. I think I should do that and give the Minister lots of time. I congratulate the hon. Members for Tewkesbury (Mr Robertson) and for St Albans (Mrs Main) and the right hon. Member for Arundel and South Downs (Nick Herbert) on securing a lively debate on what is clearly a serious issue, given the large number of Members present.

I hope that hon. Members will forgive me if I do not go through their contributions individually, because that would take up a great deal of time. They spoke passionately about their own areas. There clearly is a major issue across the country. I was pleased that a number of their remarks were not based on just being anti-housing. There was a sound recognition that we need more housing, but concern was expressed about the sites that have been identified for building houses. I was pleased to see a commitment to plan-making and place-shaping, because they are an important part of the solution to some of the issues that have been raised today. Hon. Members also produced a wish list. I am probably going to add to that a little bit, but I hope not too much.

We know that we need more housing, including in rural areas. In order to secure a typical mortgage, a rural resident needs to earn £66,000. With the average rural income standing at just over £20,000, there clearly is a problem with affordability. That exists partly as a result of insufficient supply. The situation in rural areas is part of a wider problem. For decades, under successive Governments, house building has stayed low relative to demand. I will hold my hands up to say that the previous Labour Government did not see enough houses built, but neither did the previous Conservative Government. Private house building completions in England have been relatively static for more than 30 years, averaging about 130,000 per annum. That is below the peak average of 180,000 per annum in the 1960s, and well below potential.

[Mrs Main]

The hon. Lady just said that the number of houses being built has been low or static. What about the number of permissions? I have not seen anything that shows that the number of permissions has been low or static. It is just the amount of development that developers are prepared to get under way.

[Roberta Blackman-Woods]

The hon. Lady makes a valid point. We know that a number of sites with planning permission never end up being developed. The point I am trying to make is that we must look seriously at the housing numbers that we need, particularly as we have a shortage, partly because we were not building enough in the past.

Private completions increased from 2003, with a steady improvement to 154,000 in 2007. However, they fell with the economic crash to 89,000 in 2012. In contrast, new affordable homes produced by local councils and housing associations, which averaged more than 130,000 per annum in the 1950s and ’60s, have seen a steep downward trend since the 1970s. Production has averaged fewer than 30,000 per annum since the mid-1980s, falling to 13,000 in 2003. There has been some improvement since then, with new completions at 27,000 in 2009 and a similar number in 2012, due to the housing stimulus put in place by the previous Labour Government following the crash. However, the numbers produced are too low.

There is an ever-growing gap between supply and demand, which means that millions of hard-working people are increasingly priced out of buying their own home. Home ownership has declined from its peak in 2001—69%—to 64% in 2011. The average house price is now nine times larger than the average wage. The average low-to-middle income household would now have to save for 22 years to accumulate a deposit for the typical first home, compared with just three years in 1997. So-called second steppers are also being affected, with the average age for a second purchase rising to 41, despite 40% of families saying that their first home is too small for a growing family.

More than 1.1 million families with children, and 8 million people in all, are now part of what we are calling generation rent. They are paying private rents that are rising faster than wages and contributing towards a cost of living crisis. They face rip-off letting agent fees, instability and uncertainty as a result of short-term tenures, and sometimes poor standards and service. Many want to buy their own home but have little hope of being able to do so.

We must address the housing shortage. I absolutely agree with all the Members who have contributed this afternoon that development sites need to be identified by local communities, with a stronger emphasis on neighbourhood planning and putting consent at the heart of the planning system. I think that can be helped in a number of ways. I have often paid tribute to the Minister and his predecessors for introducing neighbourhood planning. We think that is probably the key in the medium and longer term to delivering the sorts of neighbourhood that we all want.

The issue is not just about housing. I think we will partly get consent when we stop referring only to housing numbers when talking about the issue. People want to see employment, proper infrastructure and leisure, and they want to keep their open spaces. The issue is about building communities, and we have to talk more about that.

We also need to do something about quality. I know from my constituency that people often get upset about the houses proposed, because they simply look awful: they are too small, or have various features not in keeping with the local neighbourhood. We need to get better at improving the quality of our housing stock. That is especially important in rural areas, national parks, areas of special scientific interest and so on. I am a bit concerned that the Growth and Infrastructure Act 2013 reduced some of the existing protections in areas of outstanding natural beauty and national parks. That is not a good thing; it is a step in the wrong direction. [Interruption.] I think that hon. Members might think that the clock is set for 4 o’clock, but we actually have until 4.30.

Will the Minister consider the Woodland Trust briefing sent to all of us about giving better protection to ancient woodlands and planting many more trees? Does he intend to monitor the relaxation of permitted development rights and use-class order changes to see what happens to the quality of buildings in rural areas as well as on our high streets? High streets are not part of this debate, but rural town centres would be relevant as well.

I am looking forward to hearing what the Minister has to say about the over-reliance on appeals that seems to have emerged as a result—probably a temporary one—of the national planning policy framework having been put in place before local plans were adopted. I am interested to know whether he has thought about that, or considered speeding up plan-making to reduce the reliance on decisions made by inspectors. Does he plan to strengthen the brownfield first policy, which the NPPF weakened, and does he intend to reform land acquisition and assembly in accordance with some of the helpful suggestions made in this debate about opening up the land supply market for competition by a larger number of people?

[Mr Graham Brady (in the Chair)]

The shadow Minister is quite right: it is possible, though not mandatory, for the debate to continue until 4.30.

15:52

[The Parliamentary Under-Secretary of State for Communities and Local Government (Nick Boles)]

It is a pleasure to serve under your chairmanship again, Mr Brady. In your other role as the chairman of the 1922 committee, I am sure that you are delighted to see so many of your flock here. I wish I could pretend that I thought so many of my hon. Friends were here because I am so popular in the party or because I am a compelling orator, but I recognise that the reason is the level of concern in the communities that they represent and the lack of comprehension in those communities about some of the decisions being made on nearby developments that matter to them. Those decisions seem to be visited on them from on high without explanation.

Many hon. Members have asked specific questions. I could probably take up all the time until the end of the debate just answering them, although I do not intend to do so. Instead, if it is acceptable to you, Mr Brady, and to my hon. Friends and other hon. Members, I will try to address all the issues and see whether I can answer specific questions in doing so. If, by the time we start edging towards the close of the debate, there are burning questions that I have missed answering, I will be happy to take interventions to answer them. However, I hope that I will be able to cover most of them.

I need not start by underlining the scale of the housing crisis faced by this country, the extent of the need for housing or the grief and hardship that the crisis is visiting on millions of our fellow citizens. My hon. Friend the Member for East Hampshire (Damian Hinds) described it eloquently when discussing the average age of the first-time buyer and the average house price in his constituency, and others have referred to the situation in their constituencies. The hon. Member for City of Durham (Roberta Blackman-Woods) set out clearly the roots of the crisis and the fact that Governments of all stripes share responsibility for it. I hope that we can take that as a premise that everybody agrees on.

[Mr Laurence Robertson]

The Minister used the word “crisis”, but that is not a situation that I recognise. I would be grateful if he went into it in a little more detail.

[Nick Boles]

I will just recap some of the figures mentioned by the hon. Member for City of Durham and others. In the past year, the percentage of first-time buyers in England who were able to buy a home without their parents’ help fell to its lowest level ever, under one third. Two thirds of all first-time buyers in England last year required a subsidy from their parents. By definition, that means that they came from a relatively narrow social group—those from relatively well-off families. Until we introduced the Help to Buy policy, the opportunity to become a first-time buyer had been denied to a large number of our fellow citizens.

Another key fact also mentioned by the hon. Member for City of Durham is that the average age of first-time buyers has crept up and up, and is now nudging 40 in many parts of the country, although of course there are parts of the country where the crisis is not so acute. It is intense within the south-east and the south, but there are also pockets in parts of Yorkshire, and it is just as intense elsewhere, around certain big cities.

[Mrs Main]

rose—

[Martin Horwood]

rose—

[Nick Boles]

If I may finish, we also know that the size of the homes in which families are forced to live has fallen steadily for several decades. The number of overcrowded families has risen and the amount of space in which young people must grow up has fallen for several decades for a simple reason: our population has grown and we have not built enough houses to keep pace with it.

That growth in population has had two main sources. One, which is contentious in the House and elsewhere, is immigration, which was uncontrolled for a long time. We as a party rightly criticised that, and are now doing something to control it. However, it is important to remember that the majority—about two thirds—of the growth in population and in the number of households in the country has resulted not from immigration but from ageing. One way that I ask people to think about it is by considering how many people now are part of families in which four generations are alive. Quite a lot of them are. It used to be rare to have a great-grandparent or great-grandchild in a family; it is now common, because people are living longer, and they do not all want to live in the same house. I could go on, but I know that time is limited.

[Several hon. Members]

rose—

[Nick Boles]

I would like not to take interventions on the argument, as I have heard the argument from hon. Members. I will take interventions later if I have not answered the specific questions raised.

[Martin Horwood]

Will the Minister give way on that point?

[Nick Boles]

No, I will not take interventions on the argument; I will take them on the specific questions asked. I have sat here for two hours listening to the arguments from the Opposition, and I would like a brief moment to develop my argument.

Housing need is intense. I accept that my hon. Friend the Member for Tewkesbury (Mr Robertson) does not share my view, but many hon. Members do, and there are a lot of statistics to prove it. How are we going to solve the problem? My hon. Friend, whom I congratulate on securing this debate, referred to the country having 700,000 empty homes, which, he said, should be a priority for meeting the intense need for housing. Although I agree with the sentiment, unfortunately his figure does not give a true picture. The figure of 700,000 homes captures every home that is empty right now, including every home that is between buyer and seller and every home in probate.

I will, therefore, give him the true figure for homes that have been empty for more than six months, which I think we can all agree is probably the right figure for an empty home that could meet somebody’s housing need in the long term. That number is 260,000 for the whole of England. It has fallen by 41,000 since this Government came into office in 2010. We are spending a great deal of money, and we and local authorities are working hard, to bring those empty homes back into use. It is important to recognise that many—not all, by any means, but many—of those 260,000 are in parts of the country where demand for housing is not as strong as it once was, not in parts of the country where demand for housing is great. I do not believe that a Government can tell people to go and live somewhere with no jobs and no future, just because houses have been built there. Empty homes can make a contribution and are doing so under this Government, but in the scale of need explained so vividly by so many, they are a small contributor.

We need to move to the question of brownfield sites. If it were possible, everybody in this country would prefer every new house to be built on a brownfield site. We would all love not to develop a single scrap of greenfield land if we did not need to. Therefore, the question is whether there is enough brownfield land to do that. The Campaign to Protect Rural England often bandies about the statistic that 1.5 million homes could be built on the available brownfield land. I am afraid that that figure is not entirely a fair representation, because more than half of that brownfield land is already occupied for another use—for example, with a house or factory on it. In theory, it might make good sense to use it for converted housing, but the people currently occupying and using it for another purpose would, by and large, have a view on that: if they own or use the property, they will probably not want to give it up immediately, and if they did give it up, where would they be employed? Having taken all that out, a large number of the remaining brownfield sites are in places where demand for new housing is not so intense. In many areas of most intense demand, the number of brownfield sites that have not been developed is relatively small.

I reassure hon. Members that nearly 70% of new houses in 2010, the last year for which figures are available, were built on brownfield land. We are still building more houses on brownfield land than on greenfield land. We are approaching the point at which the number of brownfield sites that are in the right part of the country and are vacant and available for housing development is too small to supply more than a small, although significant proportion—nearly 70%, but not more—of our need.

Another subject raised here and elsewhere by many hon. Members, including my hon. Friend the Member for St Albans (Mrs Main), is the amount of land banking in the country. We all know individual examples of sites that have been bought and for which planning permission has been given, but on which development has not happened. The question we have to ask is: why has that happened, what is the scale of that problem and what contribution would fixing that problem make to solving our intense need?

We must first recognise that that is true of many sites because developers bought them before the financial crash, secured planning permission in anticipation of the economic environment pertaining at the time and, frankly, could not raise the money to build out the site or, even if they raised the money to do so, could not find people to buy the houses. Ultimately, developers are businesses. Certainly in my party, which so many hon. Members here represent, we believe that businesses need to be free to make investments and bring forward projects, but should be forced to complete such projects only if they have a reasonable prospect of getting their money back and perhaps gaining a small return. That problem grew during the recession not because of developers’ greedy behaviour, but simply because they do not want to build houses if there is nobody to buy them.

That situation led to an expansion in the scale of land banking, but let me tell hon. Members about the current position, because it has been reduced by the recovery in house building. The latest estimate is that the total number of units of housing in land banks throughout England is 500,000, but only half of that is on sites where building has not begun. From our constituencies, we all know that most housing developments of a scale greater than a dozen houses are not built out in one year, but sometimes in three or five years, because it is natural to do so. If all the houses were built in one place in one year, it would result in a strange development in which half the houses were sitting empty. That is how the house building industry works, and unless any hon. Member in the Chamber wants to nationalise house building, we have to live with that system.

Only 250,000 units are on sites that have not been started. That is a significant number, but the point is that it covers the whole country, including some places where demand is not sufficient to pull through supply. The Labour party has proposed to confiscate that land from developers, but will such compulsion really solve our housing crisis or lead developers to build more places where we want those houses? I am sure that that might make a contribution, as empty homes may, but I do not believe that it could solve the problem on its own.

On the whole question of local plans and the process that local authorities are asked to go through in putting them together, the fundamental basis of the national planning policy framework, about which many hon. Friends and other hon. Members have been generous, is that local authorities are in control because they have put in place a local plan. Doing the work of producing a local plan puts the local council, as the representative of the community, in control. The local plan has a very simple concept that is very difficult to deliver, which is that the authority has to provide a five-year land supply of immediately developable and deliverable sites to meet its objectively assessed housing need.

I understand that there are concerns. My hon. Friend the Member for Cheltenham (Martin Horwood) referred to an econometric model, and other hon. Members have spoken about the various methodologies. It is not unreasonable, however, for the Government to tell an authority, which is representing the people and has a duty to serve them, “Work out what’s needed, and make plans to provide it.” That is what we do with schools. We do not tell local authorities, “You can provide as many school places as you feel like”; we say, “Provide as many school places as are needed.” We do not tell the NHS, “Provide as many GPs as you feel you can afford right now”; we say, “Work out how many GPs are needed.” The same is true of housing sites: we tell local authorities, “Work out how many houses will be needed in your area over the next 15 years, and then make plans to provide them.”

[Stuart Andrew]

rose—

[Martin Horwood]

rose—

[Nick Boles]

I am happy to give way to my hon. Friend the Member for Cheltenham.

[Martin Horwood]

My constituents in places such as Leckhampton and Hatherley do not understand this: the econometric model is based not so much on need as on demand, which in areas such as mine—and St Albans and many other constituencies—is practically insatiable, so we will still have high house prices that are unaffordable for many first-time buyers in places such as Cheltenham, because we have good schools and shops, as well as a good local environment and good employment levels. If such areas are simply consigned to endless development, we will lose something very precious to local people and to the environment.

The problem with the Minister’s scenario is that the issue is not about trying to stop all development—nobody has said that—but about wanting local people to be able to make some difference and have some say. The economic model for the assessed housing need or demand—

[Mr Graham Brady (in the Chair)]

Order. I remind the hon. Gentleman that interventions should be short.

[Martin Horwood]

Sorry, Mr Brady. The model or whatever dictates that number should not be a be-all and end-all that nobody can influence.

[Nick Boles]

I want to reassure my hon. Friend that the process is not based simply on a measure of demand. It is not a matter of sending out a survey to ask people whether they fancy living in West Worcestershire. That is not how it is done; it is done on projections of population, of the number of households in which ageing is taking place and of the historical record and, therefore, the likely future trend of inward migration. That is the definition. The immigration figures are based on the past record. They are not just plucked out of the air as the number of people in the whole world who would quite like to live in Cheltenham. The model is based on an understanding of the pressure of demand from people who actually want to come to Cheltenham. They might want to move to Cheltenham to be near a job, go to college, or be close to their mum who is growing old on her own in a flat.

[Martin Horwood]

indicated dissent.

[Nick Boles]

My hon. Friend shakes his head. I am happy for him to go through the modelling that is the basis on which this is done. I simply say to him that if he added up all the projections of housing need of all the local plans in the country, he would find that it would add up to a figure that is too low to meet the overall population growth of England. It is not, therefore, the case that there are these hugely inflated demand figures being put into local plans, which add up to something way in excess of what we need; they are too low to meet our universal needs as a nation. Somehow, somewhere, we are not overestimating the need.

[Stuart Andrew]

In 2001, the population of Leeds was 715,000, and in the census of 2011, it was 751,000, but the estimate of the Office for National Statistics said that it would be 788,000, which is 37,000 more than actually happened. If we go on the same figures, Leeds will yet again be overcompensating for a population increase that will not exist, but it will have to have the five-year land supply, and to do that, it will have to go into the green belt. How does my hon. Friend marry up that problem that we and our communities face?

[Nick Boles]

My hon. Friend makes a good argument, and he has made a good argument generally, which he will have every opportunity to make in the examination in public. He will be able to say why he thinks that the projections done by his local authority are way out of line with any realistic possibility and to challenge those projections. He will be able to require the local council to demonstrate to the inspector the reasons it needs to supply those numbers, which cannot be that it is ambitious or that it is going for growth. If it has no good arguments or good evidence, there will be every reason for him to say that it is a plan to meet not need but ambition and dreams, which is a great and lovely thing but not what plans are meant to do.

A great many of my hon. Friends are concerned because they see that, in the absence of a local plan that has been fully adopted after an examination in public by an inspector, many decisions are being made that local people are not content with and their local authorities have opposed. It will be of no reassurance to them, but it is interesting that there is not a single person who has spoken in this debate who is from an area that has a recently adopted local plan. There is a reason for that: once there is a recently adopted local plan, the authority is then in the driving seat. It may well have gone through a process, as my hon. Friends the Members for Cheltenham, for Tewkesbury and for West Worcestershire (Harriett Baldwin) have—[Interruption.] No, let me finish my sentence. It may well have gone through the process of putting together that plan, which would be painful because it requires someone to carry out the contentious job of identifying the sites. Once the plan is in place, that is the point at which local authority decisions—[Interruption.] I hear lots of rumblings. If I could just finish the argument, I promise to take some more interventions. At that point, the authority will find that appeals are not going against it. I accept that there is a certain amount of scepticism about the figures, but I am giving Members the facts. In 2012-13, the number of planning appeals in which the inspector backed the local council and rejected the appeal was 67%. In 2011-12, it was 68%, and so far this year it has been 67%. In two thirds of all appeals, the inspector is backing local decisions, because the council has made local plans that meet the requirements, so it can be trusted to make its decisions.

[Sir Tony Baldry]

The Minister knows that, for historic reasons, almost half of all local planning authorities in England do not have an up-to-date local plan. They started to get that going with the introduction of the national planning policy framework. I suggest that most of them are doing so with all due speed, as is evidenced by my local authority, which adopted its local plan on Monday. My concern, and the concern of many Members, is that the Minister and the Government are not giving any protection or taking any notice whatever of emerging local plans. As a consequence, they are not giving any consideration to the efforts by local communities and local councillors to ensure that they have robust local plans.

[Nick Boles]

I thank my hon. Friend for that. I understand what he is saying. It is difficult and painful, especially in an area of high demand, to produce that local plan. Many local authorities have been making excellent progress, which is why the number of local plans has risen from about 30% when the national planning policy framework was passed to more than 50% now, and many more will be adopted over the next few months. The difficulty is that there are cases—I am afraid that some of those cases are represented in the Chamber—in which the local plan, despite what the local authority might have said, does not meet the requirements of the Localism Act 2011 and of the national planning policy framework, and does not provide a five-year land supply.

In some cases, that is because local authorities put too many eggs in one basket. They identify one big site to which they attach a lot of hope value, and which might make a fantastic development, but which, in reality, has no immediate prospect of being developed. It therefore cannot count as a site in a local plan. Sometimes, they make estimates that a site will build out over two years, when it clearly will not do so in less than five. It is not surprising, therefore, that the inspector sometimes says, “I’m sorry, but that is not a robust plan, because the sites you have identified will not deliver what you say they will deliver in the established time frame.” Then he asks the local authority to go back and revise the plan. That is happening in many local authorities represented in this Chamber, and is causing some of the frustration.

[Harriett Baldwin]

What, in the Minister’s view, is the appropriate time between a council democratically agreeing a local plan and the plan finally becoming set in stone, as there is a very protracted period of inspection by a scarce national supply of inspectors?

[Nick Boles]

In general—I cannot comment on any particular case—one would hope that that would happen in about nine months. If it could be six, that would be great. It certainly should not be more than 12. In some cases—I am not suggesting that it is happening in West Worcestershire—the inspector, rather than saying that the plan will not meet the requirements, says that the authority needs to do a bit more work on it and then suspends the plan. That can be a good thing, because we do not want to see a lot of good work thrown away because one part of the plan has not been properly completed. That is sometimes what causes it to be delayed beyond the time frame. If everything is in order, it should be done within six to nine months.

[Mrs Main]

rose—

[Nick Boles]

There are many questions that I have not yet answered, and there are only so many minutes left. I want to come on to the point of prematurity that some Members have raised. There is a difficult balance to be struck. One extreme would be to say that it does not matter how early stage a local plan is; as soon as an authority has started on a local plan, the draft policies, which have not yet been examined, consulted on or tested, should determine decisions. That is at one end. I understand that no one is suggesting that it should be at that extreme end. At the other end, we say that no weight should be accorded to a plan until it has absolutely finished the process.

The balance that we have put out in the draft guidance is that once a local plan has been submitted for examination—not completed or passed—it should carry significant weight if there are no substantial unresolved objections to parts of it. A neighbourhood plan has to pass a referendum, which is a big moment at which it might fail, and it starts to acquire weight when it has been presented to the local authority for what is called the local authority publicity period. I accept that both those stages are towards the end of the process. However, the difficulty if we try to move them earlier in the process is that—I promise you—developers will go to court, they will seek the judge’s interpretation and they will say, “This plan hasn’t even been consulted on. It hasn’t even been tested by examination. How can it be the basis for a decision, when in every other way this proposed development meets all of the policies in the national planning policy framework?” That is the argument that they will make, and indeed it is the argument they are making in cases right now.

Therefore, it is not simply in the gift of Ministers to move that decision point through guidance; we cannot do that. We have to put it at a point that the courts will find reasonable as an interpretation of the requirements for a plan to be sound and robust. We have set it where we have because we think that is the most reasonable position, but I am very happy to invite colleagues here in Westminster Hall today to meet my officials to discuss whether there is a way of finding another time frame that would stand up in court. However, I would simply share with them the view that the bar that would stand up in court is a very high one, and I have concluded that the position that we have outlined in the guidance is the one that will not only stand up in court but provide some protection for those plans that have reached an advanced stage of development.

[David Rutley]

Notwithstanding the point that the Minister is making, can he confirm that the planning horizon currently is to 2030 and any talk of moving to 2050 is for the birds, to use a technical term? Would he also use his good offices, given that there is good will—particularly in Cheshire East—to conclude local plans, to bring the requisite expertise to enable us to get over this hurdle as quickly as possible?

[Nick Boles]

I am very grateful to my hon. Friend for reminding me of two very important specific questions, to which it is a great pleasure—and a rare one—to be able to give an answer that I hope is satisfactory. The answer to the first question is that there is nothing in the Localism Act 2011, in the NPPF or in any aspect of Government planning policy that requires someone to plan beyond 15 years. So, anybody who is suggesting that there is any requirement to safeguard land or wrap it up in wrapping paper and ribbons for the future development between 2030 and 2050 is getting it wrong. There is no reason for it and my hon. Friend can knock that suggestion straight back to wherever it came from.

Regarding help for authorities, I will make an offer to everyone here in Westminster Hall who has an authority that is having difficulty resolving the final objections to a plan that is still in draft form. It is that I am very happy to ask officials in my Department and—perhaps even more usefully—the recently retired chief inspector and another recently retired very senior inspector to meet those authorities to help them, in a sense, to understand what are the practical things they have to do to get the plan to a point where it can pass examination.

I fully understand that there is a frustration, namely that people cannot negotiate with an inspector, because an inspector is basically like a judge; it would be like someone negotiating with a judge in court as to whether they will be found guilty or not. The inspectors cannot negotiate, but that is why we have created a resource within the Department that is able to provide that practical support, and I am very happy to offer it to Cheshire East and to other boroughs where it would be necessary.

[Several hon. Members]

rose—

[Nick Boles]

I will move on to the infrastructure point; I am happy to take more interventions after that. That is because my right hon. Friend the Member for Arundel and South Downs (Nick Herbert), who spoke so passionately and so persuasively, as he has done so many times before, on this subject, raised a particular point about a commitment to make a clearer reference to the need for infrastructure to be planned in planning guidance.

When my right hon. Friend raised that point with me before this debate, I was very concerned that I had failed to deliver on a commitment made on the Floor of the House, and that that was something I needed to correct. I will not suggest to him that it is impossible to improve on what we have done, but I would like to reassure him that my officials—being marvellous officials—put in something that addressed the concern that he raised and the commitment that I made; it just may not be something that he considers to be sufficient. I will quote from the new draft planning guidance, because it is important that we all understand it. It says:

“Local Plans set out a vision and a framework for the future development of the area, addressing needs and opportunities in relation to housing, the economy, community facilities and infrastructure”.

That is the introductory phase. Then it says specifically:

“The Local Plan should aim to meet the objectively assessed…infrastructure needs of the area”.

Then it says something even more specifically, which directly addresses the point of whether it is possible to ensure that a development only goes ahead once the necessary infrastructure has been put in place, and only after that necessary infrastructure has been put in place. We have made direct provision

“that a condition”—

that is, a planning condition—

“may be used to prohibit ‘development authorised by the planning permission or other aspects linked to the planning permission...until a specified action has been taken (such as the provision of supporting infrastructure).’.”

That is the element where we have attempted to make it clear that planning authorities can very reasonably say, “Yes, we’ll pass this planning application, yes, we will consent, but it can only go ahead and be built out once that infrastructure has been put in place.” I believe that the use of conditions is the right way to do it, as well as the plan making that makes the broader plans for infrastructure. However, I am very happy to invite my right hon. Friend to meet my officials and to come up with a better solution if one can be found that addresses his concerns.

[Nick Herbert]

I am grateful to my hon. Friend the Minister and I will have a look at the specific provisions that he says address the concern that we raised last December, and that he committed to bring forward; I thank him for that. Can he assure me that the proposals in the guidance in relation to infrastructure will enable a local authority, in drawing up a plan, to adjust the housing number that it sets, such that the number may be lower than the strategic housing market assessment provides, because of infrastructure considerations?

[Mr Graham Brady (in the Chair)]

Before the Minister replies, I remind him that we only have three and a half minutes left, and I am keen to allow the Member responsible for securing the debate—the hon. Member for Tewkesbury (Mr Robertson)—to reply as well.

[Nick Boles]

If you will forgive me a very scrappy finish, Mr Brady, I will answer the question, and then I will sit down to allow my hon. Friend the Member for Tewkesbury to speak.

Very specifically, development must be sustainable, and sustainable in many ways. Infrastructure is one of the ways in which it needs to be sustainable. However—the however is quite important—to say that the current infrastructure is insufficient to support a level of development that otherwise would be “sustainable” in other senses of the word is not quite enough, because someone has to be able to say that it is incapable of being made sufficient to support that level of development; in other words, that the local authority either could not bring the financial resources together or could not physically and geographically make arrangements to make that development sustainable. Just to say, “The road is too narrow; we can’t do anything more there,” is not quite enough. To say, “The road is too narrow and can never be widened, because it’s between two ancient forests that have the highest status,” could be sufficient and that tends to be where the debates take place. However, as I say, I am very happy to invite my right hon. Friend to meet officials to explore this issue further.

I will conclude. I am sorry if I have not answered everybody’s questions.

16:27

[Mr Laurence Robertson]

Thank you for calling me to speak, Mr Brady. It is a pleasure to serve under your chairmanship, and to have served under that of Mr Havard earlier.

I thank all the Members who have attended Westminster Hall today and contributed to this very lively debate. I thank the Minister for his attendance and his answers. I am not completely satisfied, as he would imagine, by some of the answers he has given, particularly about this so-called “housing crisis”. He said that we are an ageing population. Of course we will age during the next 20 years, but we aged during the past 20 years as well, so I am not convinced that the projections should jump up so much because of that single factor. Of course, families go their own separate ways and people unfortunately have divorced, but again I am not aware that the projection will go up in the way that it would need to in order to justify the additional housing figures that are being talked about.

The Minister was perhaps talking about people being unable to buy houses, and ignoring the financial constraints. In my experience, it is not necessarily that the houses are not there. We went through a situation where some lenders were lending 125% of the house price, which had the effect of inflating those house prices. Now we have the opposite, where there is a very tight lending policy, and that is making it difficult for people to borrow. I accept the philosophy of price elasticity, of course—demand and supply—but there is more to it than that, so I am a little concerned that the Government are still clinging to the “housing crisis” phrase.

I will rattle through one or two final points. I am very much in favour of neighbourhood plans, of course, but they have to be in conformity with the local plan, so they are not actually that valuable.

My final point is the one raised by my right hon. Friend the Member for Arundel and South Downs (Nick Herbert) about infrastructure. Does that mean that numbers can be reduced? What about the green belt? What about flood risk areas? All these provide great difficulties, certainly in my constituency, to coming up with the sort of numbers that are being proposed by the Government—

[Mr Graham Brady (in the Chair)]

Order.

16:30

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

Written Statements

Thursday 24th October 2013 Written Statements

Thursday 24 October 2013

Balance of Competences (Review)

Thursday 24th October 2013 Written Statements

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

I wish to inform the House that, further to the Foreign Secretary’s oral statement launching the review of the balance of competences in July 2012 and the written statements on the progress of the review in October 2012, and May 2013, the Department of Energy and Climate Change has today published its call for evidence for the energy report.

This report, which will be completed by the summer 2014, will focus on the application and effect of the EU’s competence in relation to energy. It will include the internal energy market and its contribution to the single market and growth; security of energy supply, indigenous resources and energy infrastructure development; sustainability and energy efficiency measures, renewables and carbon capture and storage; the EU external energy dimension; and nuclear and Euratom.

The report will not include climate change aspects of the Department’s work, international climate change negotiations, the reduction of collective EU member state greenhouse gas emissions via burden-sharing arrangements and the EU emissions trading system. These issues will be covered in the Environment and Climate Change report due to be published this winter.

The energy call for evidence period will be open for 12 weeks and close on 15 January 2014. My Department will draw together the evidence and policy analysis into a first draft which will subsequently go through a process of scrutiny before publication next summer.

We will take a rigorous approach to the collection and analysis of evidence. The call for evidence sets out the scope of the report and includes a series of broad questions on which contributors are asked to focus. The evidence received (subject to the provisions of the Data Protection Act) will be published alongside the final report and will be available on: www.gov.uk/review-of-the-balance-of-competences. We will pursue an active engagement process, consulting with departmental Select Committees, the devolved Administrations, businesses and civil society in order to obtain evidence to contribute to our analysis of the issues. Our EU partners and the EU institutions will also be invited to contribute evidence to the review.

The resulting report is intended to be a comprehensive, thorough and detailed analysis of EU competence for environment and climate change and what this means for the UK. It will aid our understanding of the nature of our EU membership and will provide a constructive and serious contribution to the wider European debate about modernising, reforming and improving the EU. The report will not produce specific policy recommendations.

I am placing this document and the call for evidence in the Libraries of both Houses. The call for evidence will also be available at: www.gov.uk/review-of-the-balance- of-competences.

Agriculture and Fisheries Council

Thursday 24th October 2013 Written Statements

[The Secretary of State for Environment, Food and Rural Affairs (Mr Owen Paterson)]

The Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Camborne and Redruth (George Eustice) represented the UK at the Agriculture and Fisheries Council on 17 October in Luxembourg. Richard Lochhead MSP also attended.

The Council reached an agreement on fishing opportunities in the Baltic region for 2014. The Commission praised the Baltic member states as both providing a good example of regionalisation and sustainable management of stocks, in line with the spirit of the reformed common fisheries policy.

There was an exchange of views on the European Union-Norway annual fisheries agreement. This agreement is of vital importance to the UK fleet and the UK Government pressed for a 2014 North sea cod total allowable catch (TAC) which was in line with the science, maintaining current effort levels (the number of days fishermen are allowed to spend at sea) and for developing and expanding our discard-free catch quota schemes in the North sea.

In an exchange of views on the EU’s priorities for the annual meeting of the International Commission for the Conservation of Atlantic Tunas (ICCAT) next month, the UK supported continued protection of bluefin tuna stocks and argued for increasing the protection of vulnerable shark species. The Commission agreed with the UK point that, ICCAT was improving its performance and that this was finally bringing results. They promised to redouble their efforts to protect vulnerable sharks and to secure a ban on shark finning.

Under AOB Ireland raised the north-east Atlantic mackerel management and coastal state negotiations. The UK argued that new scientific advice could provide an opportunity to achieve a breakthrough in the long-running dispute with Iceland. However, a deal should not be at any cost, should not contain new access concessions and Norway must be a full and equal partner in any agreement. There was widespread support for the Commissioner’s approach of moving towards a fair and equitable solution that must involve Norway.

National DNA Database Ethics Group

Thursday 24th October 2013 Written Statements

[The Parliamentary Under-Secretary of State for the Home Department (James Brokenshire)]

My noble Friend the Minister for Criminal Information, Lord Taylor of Holbeach, has today made the following written ministerial statement:

I am pleased to announce the publication of the sixth annual report of the National DNA Database Ethics Group on 24 October 2013. The group was established on 25 July 2007 to provide Ministers with independent ethical advice on the operation and practice of the national DNA database (NDNAD).

I welcome the points raised in the report about the implementation of the Protection of Freedoms Act, and the consideration given in the report to a number of important issues around the ethical operation of the NDANAD.

The ethics group’s annual report can be viewed on the website of the independent forensic science regulator and I am arranging for a copy to be placed in the Library of the House.

DNA and Fingerprint Databases

Thursday 24th October 2013 Written Statements

[The Parliamentary Under-Secretary of State for the Home Department (James Brokenshire)]

My hon. Friend the Minister for Criminal Information, Lord Taylor of Holbeach, has today made the following written ministerial statement:

The Government have now delivered their commitment to reform the retention of DNA and fingerprint records by removing innocent people from the databases, and adding the guilty.

1,766,000 DNA profiles taken from innocent adults and children have been deleted from the national DNA database. 1,672,000 fingerprint records taken from innocent adults and children have been deleted from the national fingerprint database. 7,753,000 DNA samples containing sensitive personal biological material, no longer needed as a DNA profile has been obtained, have been destroyed. 480,000 of the DNA profiles removed as part of this programme were taken from children.

At the same time, 6,800 convicted murderers and sex offenders, not on the database under the previous Government, have had their DNA taken and added to the database. These records will be kept permanently, as will those of every convicted adult on the database, to ensure our databases remain a powerful tool for fighting crime.

Now that our DNA and fingerprint databases meet the requirements set out in part 1, chapter 1 of the Protection of Freedoms Act 2012, these provisions will be commenced on 31 October.

The national DNA database (NDNAD) annual report for 2012-13 was today published on the Home Office website, providing information for the public on the routine operation and effectiveness of the database, and on the programme to delete innocent people in preparation for the Protection of Freedoms Act. This report is an important part of the Government’s aim for transparency and public confidence in the use of DNA.

The figures in the first part of the report show the size of the NDNAD to 31 March 2013, part way through work to delete DNA profiles in line with the Protection of Freedoms Act. Following the deletions described above, the NDNAD will now be considerably smaller. Part 2 of the report provides more detailed information on these deletions.

The report is available from:

www.gov.uk/government/organisations/home-office/series/dna-database-documents.

A copy will be placed in the Library of the House.

HS2

Thursday 24th October 2013 Written Statements

[The Parliamentary Under-Secretary of State for Transport (Mr Robert Goodwill)]

Today I am publishing the Command Paper “The Government Response to the Design Refinement Consultation: Decisions and Safeguarding Directions for Northolt and Bromford”. This document sets out the decisions to tunnel the HS2 phase 1 route at Northolt and Bromford, in light of the responses to the May 2013 design refinement consultation, and the decision to reissue safeguarding directions for the phase 1 route to reflect these additional tunnels.

In July 2013, following consultation, the Secretary of State for Transport issued safeguarding directions to local planning authorities (LPAs) along most of the route of phase 1 of HS2, between London and the West Midlands. Safeguarding directions protect the route of HS2 from conflicting development. At that time we were consulting separately on fourteen design refinements on the phase 1 route. In particular, the Secretary of State proposed that there should be bored tunnels rather than a surface route at both Northolt and Bromford. As the nature of safeguarding in these areas would be very different depending on the option chosen it was decided to delay safeguarding these areas until the Secretary of State had reached the final decisions on the tunnel proposals following consultation.

Following careful consideration of the responses to the consultation, I can confirm the proposed changes to replace the surface sections of track at Northolt and Bromford with bored tunnels. In these locations tunnels are appropriate on the basis of cost, risk and environmental effects.

We are taking these decisions now in order to provide certainty to property owners in these areas as soon as practicable. Decisions on the remaining 12 refinements to the route will be published soon.

The purpose of safeguarding is not to prevent development along the route of HS2, but to ensure that any development that does take place is consistent with our plans for the railway. LPAs to whom safeguarding directions apply are required to consult HS2 Ltd on new planning applications in respect of land that is within the safeguarded area.

Safeguarding is also a trigger for statutory blight procedures under the Town and Country Planning Act 1990. We do not expect that many properties within the newly safeguarded area will be required for construction of the railway because the route will be in tunnel. However, some land on the surface is affected, particularly for construction purposes, and owners of this land may be able to take advantage of the statutory blight provisions.

The command paper “The Government Response to the Design Refinement Consultation: Decisions and Safeguarding Directions for Northolt and Bromford” is available at:

https://www.gov.uk/government/consultations/hs2-design-refinement-consultation.

Copies of the Command Paper are available in the House Library.

Haulage: Road Tank Vehicle Compliance

Thursday 24th October 2013 Written Statements

[The Parliamentary Under-Secretary of State for Transport (Mr Robert Goodwill)]

The Department for Transport is working with the Health and Safety Executive (HSE), the Department for Energy and Climate Change (DECC) and industry to resolve an issue around the incorrect certification of a particular model of fuel tanker in operation in the UK.

The tankers, manufactured in South Africa, and certified as meeting international standards by Bureau Veritas (SA), were first imported into the UK in 2006. Regrettably, they are not in full compliance with internationally-agreed regulations—the European agreement concerning the international carriage of dangerous goods by road— “ADR”) and remedial action is being taken to resolve the issue.

The Department has an ongoing dialogue with industry to discuss proposals to replace or modify the tankers according to a schedule that ensures security of fuel supply while maintaining safety. Around 230 of the tankers are in operation in Great Britain and account for around 12% of the fleet of vehicles delivering road fuel. Some of these tankers have been on the road for over seven years and collectively they have travelled millions of miles without a serious incident. We are not complacent about the risks and it is important that this remedial work is carried out as soon as is practical. This would involve tankers over six years old being taken out of service first, with modifications on newer models to allow a staged withdrawal of these vehicles over subsequent months. Some haulage firms have already placed, in total, orders for about 100 new tankers.

Grand Committee

Thursday 24th October 2013 Grand Committee

Thursday, 24 October 2013.

13:00

[The Deputy Chairman of Committees (Lord Bichard) (CB)]

Welcome to this meeting of the Grand Committee. I remind Members speaking in the first debate that except for the noble Lords, Lord Higgins and Lord Wallace of Saltaire, all speeches are limited to four minutes.

House of Lords: Membership

Thursday 24th October 2013 Grand Committee

Question for Short Debate

13:00

Asked by

[Lord Higgins]

To ask Her Majesty’s Government what assessment they have made of the memorandum by the Clerk of the Parliaments on Membership of the House of Lords, placed in the Library of the House in December 2012.

[Lord Higgins (Con)]

My Lords, I am very glad to have this opportunity to raise this matter. Unlike many of our debates, which are concerned with specific issues, it is more fundamental; it relates to the way in which this House, in carrying out its duties with regard to legislation and holding the Government to account, actually does its work. Therefore, it is a different sort of issue from those that are more often debated.

I will start by putting the memorandum in context. It was produced after the Government had dropped their House of Lords Reform Bill. It was evolved in consultation with a number of groups in the House, including the Campaign for an Effective Second Chamber, and puts forward a number of very important suggestions and analyses them. We do not know what will happen as far as the wider issue is concerned. My own feeling is that it would be very unwise for parties to put the issue of an elected Chamber in their manifesto because I think the House of Commons has realised the dangers that would present to its position at Westminster and the position of individual Members in their constituencies. In any event, it is essential now that we do everything we can to improve the way in which the House works.

I was worried in the immediate aftermath of the other business that there would be resistance by the Government to any progress on this at all. It appears that is not now so. I am glad to see that a Bill embodying what I think we are still calling Steel Mark 2 has been taken up by Mr Dan Byles in the Commons and is apparently being given a favourable wind. I hope that is also true of the proposal made by the noble Baroness, Lady Hayman, who I am very glad to see in her place today.

This memorandum also needs to be put in context in relation to the report made by the noble Lord, Lord Hunt of Wirral, to the Leader of the House on Members leaving the House, and the House of Commons Political and Constitutional Reform Committee, which has reported in just the past few days on these very issues.

The danger now is that we will not make sufficient progress. Yet it is absolutely clear that the main danger we are facing is the ever increasing size of the House, which the Hunt committee pointed out very clearly as having the effect of, first, risking the reputation of the House; secondly, the difficulty of conducting business effectively; and thirdly, the effect of the additional Members on the resources of the House and their ability to do their job. Therefore, we need to take urgent action and the proposals in the report by the Clerk give us an opportunity to make real progress.

The surprising thing is that many of the proposals the Clerk makes—indeed, most of them—can be done without legislation. At this stage in a Parliament, the Government would certainly be resistant to anything that involves further legislation. But he points out very clearly that a lot can be done without legislation.

I want to concentrate on two particular points: first, the suggestion by the Clerk that the voluntary retirement scheme should be strengthened, which he does in paragraphs 19 to 21. He suggests that the scheme that exists at the moment could be strengthened, particularly with regard to taking action if people are not really acting as a full Member of the House. This, too, he says, could be done without legislation.

My particular concern is the proposal that he makes in paragraphs 36 to 38 of his report, and in appendix A, for a scheme for voluntary retirement. As has been pointed out time and time again—I think in all the reports that I have mentioned—the trouble with voluntary retirement is that there is no incentive for Members to retire voluntarily. The Hunt report suggested that the Government should look at the possibility of some form of retirement package, which it is hoped would result in a number of people agreeing to retire voluntarily.

I will make one quick point in parenthesis about a view that I believe is held by the Leader of the House. What is proposed would not affect the situation with regard to the Writ of Summons, which is regarded by some in a sort of mystical sense as something that it is important to preserve.

My concern is that of a former Treasury Minister—and once a Treasury Minister, always a Treasury Minister. The Clerk’s memorandum makes it absolutely clear that this proposal will be likely to reduce public expenditure. The key policy of the Government is to reduce public expenditure. Therefore, I am sorry that it is not a Treasury Minister who will reply to the debate this afternoon. I do not suggest that the proposal will result in a massive reduction in the deficit. None the less, it is a move in the right direction, and if we do nothing at all with more and more Members being appointed, there will be an increase in public expenditure, which is clearly incompatible with the fundamental economic policy of the present Government.

The Clerk of the Parliaments has helpfully pointed out, in fairly concrete mathematical terms, what the savings might be. They are not insignificant, and this points the way forward. I hope very much that the Government will, as the Hunt committee recommended, take a serious look at the issue. Perhaps, as the Clerk suggests, we should set up a committee to look at all the possibilities.

One particular point needs to be borne in mind. It is the question of party balance. Clearly, if all the volunteers were from one part of the House, that would give a certain amount of concern to the Whips. We will need to take that into account. Therefore, in organising this, the Whips will need to be involved. None the less, we can make significant progress. I do not believe that it is something which is impossible to sell to the public at large. The argument that we will reduce public expenditure is very strong indeed.

I am rapidly running out of time. There are a number of other proposals in the Clerk’s report that are worthy of consideration. All of them, I think, are treated in the Hunt committee report. However, the central issue on which I will focus—although by no means exclusively—is to bring to the attention of the House the possibilities of improving our procedures. All of us are only too well aware of the way in which it is becoming more difficult for the House to work in an effective way as the numbers go on getting bigger and bigger.

13:09

[Lord Lea of Crondall (Lab)]

My Lords, as the noble Lord, Lord Higgins, indicated—and I congratulate him on his timeliness; this is an ingenious way of tabling a debate—the central issue behind the dreadful mess that we are in is the irresponsibility of people increasing the size of the House, on this pretext or that. The connection between that and the memorandum of the Clerk of the Parliaments is palpable. You cannot go through these paragraphs without seeing that this problem would not be so acute or even here at all if we were in a sensible constitutional position. In this country we seem to have been able to make up a constitution through a so-called coalition agreement for Government, but when I lecture on behalf of the Westminster Foundation for Democracy in Mozambique, the one thing I tell them they cannot do is invent constitutions as they go along according to short-term political considerations. That is what we are doing in this country and it is shameful.

To be even-handed, I blame all the three major political parties, but perhaps some more than others. I will just run through the charge sheet because it has a bearing on what we can do about it. The first mea culpa is for the Labour Party, but as my noble friend Lord Hunt of Kings Heath will confirm, in response to an invitation from Tony Blair some six or seven years ago, the Labour Party wrote a memorandum, which I helped to draft, on the future of the House of Lords. It included all the elements that were subsequently picked up by the noble Lord, Lord Norton of Louth, and sold to the noble Lords, Lord Cormack and Lord Steel. It largely became the Steel Bill. There were people in all three political parties with an answer; they were not just whingeing about it.

Now we have this absurdity, and I shall come on to the Liberal Democrats. We stopped kicking the ball in the right direction when there was a change of Prime Minister on the Labour side, but the most absurd formula, of course, is the one written as a holy writ in the coalition agreement. It says that the pattern of this House should reflect the voting in the last general election. What an absurdity; what a shameful absurdity in constitutional terms. Yet Mr Clegg and his followers, with a straight face, express the belief that it is fair. We do not need much of a crystal ball to speculate about what might happen after the next election. If, as I hope, Labour gets in with an overall majority and we were to apply that formula, what would the Liberal Democrats be supposed to do? Half of them would commit hari kari. It would be painful to watch, but that is the logical result of their position.

Finally, the Clerk of the Parliaments is someone who can look at this position dispassionately and for the long term. When he wrote the first draft of this memorandum, which a lot of people saw, it had in it a suggestion that the three party leaders ought to get together and agree a formula on this very question, but then he was nobbled. I do not think that the Clerk of the Parliaments should be nobbled by the party leaders, but the first draft had that suggestion in it, and now it is not there. It was the final paragraph, and it has now gone. I think that this is a case of the politicians getting above their station in this matter. We ought to allow the Clerk of the Parliaments to speak for the constitutional requirements that lie behind debates of this kind.

13:13

[Lord Steel of Aikwood (LD)]

My Lords, my noble friend Lord Higgins has done the House a great service in tabling this debate and I thank him warmly for it. I want to limit my remarks directly to the paper which has been tabled by the Clerk, but of course it originated in the report of the Leader’s Group entitled Members Leaving the House, which was published way back in January 2011. The group was chaired by the other Lord Hunt, my noble friend Lord Hunt of Wirral. Paragraph 47 states:

“We recommend that a reduction in the number of members of the House should result in an overall saving to the taxpayer. We recommend that the possibility of offering a modest pension, or payment on retirement, to those who have played an active part in the work of the House over a number of years, should be investigated in detail, though on condition that this should come from within the existing budget for the House and should incur no additional public expenditure”.

I think we all agree on that, but we do not want to see ourselves pilloried in print for increasing public expenditure. The object of this exercise is to reduce it, as the noble Lord, Lord Higgins, made clear.

The Hunt committee went on to say, in paragraph 67:

“Whilst we cannot recommend that there should be a moratorium on new appointments to the House … we do urge that restraint should be exercised by all concerned in the recommendation of new appointments to the House, until such time as debate over the size of membership is conclusively determined”.

That, of course, has been cheerfully ignored. As we know, not only are the numbers going up but the cost to the public purse is going up. That will continue until we deal with the issue that the Clerk has very kindly put forward in the paper that has been put in the Library.

A couple of weeks ago, the Bill already passed by this House was taken up by Mr Dan Byles in the Commons. It got its Second Reading, and a pedantic Motion to put the Bill on the Floor of the House was defeated, so it has, properly, gone into Committee. We must hope that we will get that Bill back here. As we have already approved it, it should not be a problem to put it through the House. The important point is that the Bill simply confers the statutory authority that the Hunt committee said that it believed was necessary for the House to decide on what sort of retirement scheme should come into effect. The present so-called retirement scheme is nothing of the kind—it is simply an extended leave of absence. All those who think that they have retired from the House will find that, after the next election, they still get the Writ of Summons, because there is no capacity to create a retirement scheme at the moment. That is why we need the statutory provision and why I hope that the Byles Bill will succeed.

In an appendix to the Clerk’s paper, the finance director estimates that even if a voluntary retirement option was taken up by only 50% of those eligible in year 1, although it would cost £4.7 million, it would save £5.2 million. If the scheme kicked off at age 80, it would cost £3.9 million in year 1 and save £4.4 million. Whichever way you look at it, and however low or high the take-up, there would be a saving to public expenditure. We must, as a group, commend the Clerk’s report to the House as a whole and thank the noble Lord, Lord Higgins, for bringing it to our attention.

13:17

[Baroness Hayman (CB)]

My Lords, I echo the remarks that have already been made about the noble Lord, Lord Higgins, and the value he has provided for today in allowing us to debate this subject. As the noble Lord, Lord Steel, has already reminded noble Lords, the size of the House was already a problem when the Hunt committee reported. Far from seeing a reduction in numbers, as was proposed, we have seen a substantial increase, with all the difficulties that have been referred to today, including the effects on the reputation and, indeed, the workings of the House.

I want to take up the theme of party-political balance in the House. We have no agreement about what the relative strengths of parties in the House should be. However, we do have agreement, I think, that much legislation that comes to this House is badly drafted, inadequately scrutinised or not scrutinised at all, because of timetabling in the other place. Given those circumstances, I ask the Government to think very carefully about increasing by large numbers the proportion of party-political Peers in the House. Second Chambers exist to ask first Chambers to have second thoughts. We need to do our job of pressure-testing legislation, both for policy and for drafting, and to ask the Commons to think again when appropriate. The joy of our present system, and the reason why many of us oppose an elected House of Lords, is because democratic power, accountability and legitimacy lie with the Commons, which always in the end gets its way.

I have been a Minister in this place and I know that it is very disobliging and disrupting to lose votes, but in terms of the quality of the legislation that emerges I suggest that it is counterproductive for the Government deliberately to diminish the number of times they are asked to think again in the House of Commons. That can rebound politically, as those who were involved in the poll tax legislation understand very well.

As regards the proposals for not just not increasing the size of the House through new appointments but reducing its size through offering opportunities for retirement and resignation, I echo what has been said about Dan Byles’s Bill because I have always believed that having a statutory basis on which to build in a voluntary manner is tremendously important.

The other development that I think is important is the recently published report of the Political and Constitutional Reform Committee. Many of the proposals in the Clerk of the Parliament’s memorandum are supported in that report and there are specific requests, not just from the Government but from the parties in this House, for the leadership to take those proposals on board and to respond to both the committee and the House as a whole. I hope that the Minister will indicate that the Government are willing to respond to that.

13:21

[Lord Cormack (Con)]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Hayman, and I agree with everything that she said. I, too, thank my noble friend Lord Higgins for initiating this very useful and helpful debate. However, I gently take him to task on one thing: that is, these are not proposals from the Clerk. The Clerk cannot make proposals; he merely set out some alternatives which Members of the House can consider. We ought to put that on the record to defend the total impartiality of the Clerk. In fact, this paper came about as a result of an approach from the Campaign for an Effective Second Chamber, which was formed by my noble friend Lord Norton and I more than 11 years ago. I went to see the Clerk in the wake of the timely defeat of the very ridiculous Clegg Bill and asked him whether he could produce a paper which we could consider. He agreed but on the condition that it must be made available to all Members of the House. Naturally, we readily agreed to that, and that is why it is before us.

This is a debate in which we are rightly limited to a very short speaking time and I want to make just one or two very brief points. The Byles Bill is the filleted version of the large Steel Bill on which my noble friends Lord Steel of Aikwood and Lord Norton of Louth and I worked something like eight years ago. It is a modest proposal but it will help, above all by providing a statutory framework for retirement. However, that is not the end of the matter. Of course, many of these things would have been dealt with had that large section of the Constitutional Reform and Governance Bill, attached as an appendix to this paper, not been dropped in the wash-up prior to the 2010 election. Therefore, we should gently remind the leaders of both parties that they were, indeed, more or less signed up to that three years ago. What they must now do is to exercise restraint. This is crucial for the reputation of the House, which stands high in the public esteem. There was a very good leader in the Times the day after our latest colleagues’ appointments were announced way back in late July or August, which said that this was a great institution but was in danger of being overinflated, or words to that effect. It is crucial that we heed that warning. The noble Baroness, Lady Hayman, was so right to say that party balance should not matter here.

The one disappointment I have had since I came to this House—I greatly cherish my membership of it—is that I think on occasion the whipping is too severe. I say that in the presence of at least one Whip.

We should be here to exercise our judgment because, at the end of the day, we cannot overthrow what the elected House has decided upon, but we can, and we should, say, “Think again”. That is the point and purpose of this place. This is not the overriding legislative assembly. Indeed, as my noble friend Lord Norton has argued on many occasions, we are merely contributing to the legislative process.

I very much hope that following this brief debate the Government will look at the various alternatives proposed in the Clerk’s paper and consider that there is real concern in this House. We welcome our new colleagues and hope that they will be as happy here as we are, but we cannot go on increasing in this way. There has to be provision for reducing over a period the size of the House. We have to look at all sorts of retirement schemes and other things. There is not time to expand now, but I hope there will be in the near future.

13:25

[Lord Foulkes of Cumnock (Lab)]

My Lords, I join in the congratulations to the noble Lord, Lord Higgins, on raising this issue. With respect to the Clerk, who was here earlier, his note is just tinkering with the issue when the reality of what is happening is making a mockery of it. This House is being packed. We now hear that there is going to be a second list. As my noble friend Lord Lea asked, what is the purpose of this? Is it to reflect the vote at the general election or the balance of the House of Commons? Why? This is a revising Chamber. We are supposed to look at and revise the legislation, not rubberstamp what happened down the Corridor, which is what would happen if we reflected the Commons.

What is behind the Government? I can assume only that it is some kind of Marxist or Leninist theory that they want to make us look so ridiculous that the revolution will happen and we will be either directly elected or abolished. That is what they seem to be up to.

I agree that the structure of this House and the way it is constituted needs reform—I do not think there is anyone who disagrees with that—but it needs to be looked at in the long and short terms. In the long term, it needs to be looked at in the context of what else is happening in this country in constitutional terms, particularly with devolution. I favour a federal structure, which the Liberal Democrats have been arguing for. We could be a federal House representing the regions of England, Scotland, Wales and Northern Ireland. That would be a great step forward. That kind of indirect election should be looked at.

We need to set up some kind of UK constitutional commission to look at that and to come up with a long-term solution. In the mean time, we need to look at something more radical than the tinkering that the Clerk has put forward, some kind of retirement scheme, either through age or participation in the House, so that we can encourage people who are not taking part or who are of a certain age to move towards retirement. We need to get a House that is smaller than the House of Commons, not larger. That is outrageous. We are the second-largest legislative Chamber in the world. The only larger one is China, which has billions of people.

We need to look long term and short term. With no disrespect to the Clerk of the Parliaments, the ideas have to come from us, from our groups, from the political groups and from the Cross-Benchers. I hope I am not giving away a secret—especially with my noble friends Lord Hunt and Lady McIntosh here—but the Labour group is looking at this in the short and long terms, and we will be coming forward with some quite sensible, radical proposals. I hope they will be given serious consideration by the Cross-Benchers and by the other political groups. I hope we can use what I hope the Labour group will propose as the basis for some kind of sensible reform so that we can stop the revolution of abolition or direct election, which seems to be the only way that we are moving with the astonishing direction that the coalition Government are moving at the moment.

13:29

[The Earl of Sandwich (CB)]

My Lords, I have joined the noble Lord, Lord Higgins, in this debate because I am another who believes in the modest reforms in the original Steel Bill, unfilleted. The noble Lord, Lord Hattersley, made a few comments in Dublin last month before the Irish people sensibly threw out the Taoiseach’s proposal to abolish the Senate. He said, quite fairly, that you cannot have a modern democracy in which one House of Parliament is appointed by the Prime Minister. We know that already, and we know the Lords is slowly moving away from Downing Street by means of the Independent Appointment Committee. Most people see that committee as the way out of patronage. We would like it to have statutory powers extending to party-nominated Peers and to have a better control of numbers.

The noble Lord, Lord Hattersley, has kept up our interest in Lords reform. I believe that the coalition is beginning to see the sense of incremental change. Today we are concerned only with housekeeping, with whether we can better organise our numbers and be more effective. The Clerk’s paper makes sensible suggestions, and I would like to discuss the more personal side of retirement.

This House has developed quite a range of services to Members, the sort of things you would expect from any modern corporation or institution. There is one service not offered to Members, although it is given to staff, and that is in human resources. You can talk to your party leader or convenor, you can get comfort in the Clerk of the Parliament’s office or chat to colleagues, but there is no one, apart from these offices, with whom you can discuss your future in the House.

I have worked in a number of businesses and charities, large and small. I have even been in a multinational. I have come to appreciate the role of human-resources managers in offices. I am not talking of career advice, because it might be impertinent to give career advice to a Peer, although some of the under-50s might appreciate it. Opening a small, comfortable office in an upstairs room would, I am sure, give Members a chance of opening up that they might not have elsewhere.

I tried to persuade the noble Lord, Lord Walton, to join this debate. He is unavailable today, but he knows that I am mentioning him as someone seriously contemplating retirement. He is an obvious candidate for human resources. I have spoken to others in the same situation, in which we will all be at some future date. I therefore propose that serious thought be given to the establishment of a human-resources officer, with an assistant, for Peers—not a department—who can talk to Members at any time of their parliamentary life.

This might be a suitable job for an existing Member of the House, someone of a sympathetic nature, who has been in the House for some time and already knows most of the characters. It could even be job-shared. There should not be a formal retirement age, but, like the noble Lord, Lord Higgins, I have for some time thought that the House should be able to afford a modest incentive out of internal funds. I remain in favour of the equivalent of one or, at the most, two years’ expenses. This would cost nothing because the Peer would remain for that extra year or two, and it might save the expenses of subsequent years. The Treasury does not need convincing of that mathematics. Nor does the Daily Telegraph.

I am not in favour of the enforced-attendance proposals in the Clerk’s paper, echoed in Dan Byles’s latest Bill, because it would dislodge one of the cornerstones of the House to discourage part-time attendance, especially among Cross-Benchers, among whom there are individuals with experience to offer, who can come in only occasionally. I believe part-time attendance also helps to keep down those extra numbers which come from the good concept of working Peers.

I thank the noble Lord, Lord Higgins, for helping the House to go into some of these apparently minor, but important, reforms.

13:33

[Lord Norton of Louth (Con)]

My Lords, I, too, congratulate my noble friend Lord Higgins on raising this important and timely question. For reasons of time, I turn to the memorandum by the Clerk of the Parliament, which provides some innovative suggestions, some more innovative than others. I commend the suggested amendment of Standing Order 22 as a helpful way of addressing the problem of those who do not attend. I will focus on a proposal designed to address the problem of those who do and place a strain on resources.

As we have heard, the Leader’s Group, chaired by my noble friend Lord Hunt of Wirral, raised the prospect of some Members being offered a modest payment upon retirement. The Clerk’s memorandum examines ways in which such a payment may be made, following the comments of the Leader’s Group, as we have heard, in a way that is compatible with a saving to the taxpayer. The memorandum is thorough in identifying how this may be achieved.



Since the memorandum was first published, the Leader of the House has stated that the Government, and other parties, do not support the idea. Speaking earlier this year, he said:

“I should make clear, as I have done before, that the Government do not support making taxpayers’ money available to Members of the House to encourage them to retire. That would be wrong, and it would be seen to be wrong. I am glad to hear that my view on this is shared by all groups and all parties.”.—[Official Report, 28/2/13; col. 81.]

I have two questions for the Minister based on this statement. First, if it is wrong for taxpayers’ money to encourage Members of this House to retire, why is it not considered wrong to use taxpayers’ money to encourage Members of the other House to retire? It used to be the case that some MPs sat well beyond retirement age because they could not afford to retire. The Government introduced financial packages that, for all intents and purposes, were designed to enable MPs to retire gracefully. Not only is there now a pension, but for the past 22 years there has also been a resettlement grant. Why is this use of public money deemed right, but something similar for this House is wrong?

Secondly, why do the Government find it wrong to use taxpayers’ money to facilitate Members leaving the House, but have no difficulty using taxpayers’ money to enable new Peers to be created? I have seen estimates of how much it will cost the public purse if the latest tranche of new Peers prove reasonably assiduous in attendance. The scheme embodied in the memorandum of the Clerk of the Parliaments is designed to save money in the long term, and help to reduce the size of the House, whereas the current practice of the Government in creating new Peers achieves precisely the opposite. I look forward to the Minister justifying this state of affairs.

The Government appear to have no qualms about creating more Peers, adding to the burden on the public purse, while making no real effort to address the problem of the size of the House. I see no principled reason for the stance taken by the Leader of the House. The Clerk’s suggested scheme is a valuable contribution to the debate, and if it is not to be pursued, we need a much more considered response from Ministers.

13:36

[Lord Hunt of Kings Heath (Lab)]

I, too, thank the noble Lord, Lord Higgins. It has been an excellent debate. I have to say to my noble friend Lord Lea that I plead guilty as charged, although I hope that the Minister will also plead guilty. I notice that he left the Conservative Party office charge sheet, which rather disappointed me, but perhaps he just felt short of a bit of time.

I thought that the Clerk of the Parliament’s report was excellent, particularly paragraphs 36 and 37 in relation to a strengthened leave of absence scheme, including minimum levels of attendance and enforced leave of absence. Will the Minister state clearly what the Government actually intend to do to progress this? As noble Lords have said, the Leader of the House has already indicated that he is not in favour of it, but I think the House and the Committee are entitled to a proper explanation of why this should not be taken forward.

I also ask the Minister about the statement made by the noble Baroness, Lady Northover, at Question Time this morning. She made what seemed to me to be a new statement of government policy in relation to the balance between the parties. I would be grateful if he would expand on what the Minister said in the Chamber.

Thirdly, I come to the point raised by my noble friend Lady Hayman. We have what I think is a ludicrous coalition agreement policy of saying that in one Parliament the membership of the House should reflect the votes cast at the last election; clearly, we have seen lists of new Peers being announced in order to make progress towards that. Our estimate is that the Government will shortly have a political majority in the Chamber of more than 100. What is the point of it? We are a revising Chamber; if the Government cannot be defeated, revisions cannot take place. In my own experience as a Minister, as my noble friend Lady Hayman will know—

[Baroness Hayman]

The noble Lord is definitely my friend, but in procedural terms in this House he is not my noble friend.

[Lord Hunt of Kings Heath]

My Lords, I am duly dealt with on that. The noble Baroness was also a health Minister. I would have expected to lose five or six votes on any health Bill that I took through, and I took through rather a lot. This does not happen any more, and I want to ask the Government whether they expect to win every vote. Is this the intention? If it is the intention, frankly, I do not see the point of your Lordships’ House. If the Government are not defeated on a fairly regular basis, we cannot send matters back to the House of Commons and there is no point to us. I am increasingly of the view that in that scenario the only way out is to get rid of the House. I do not think that the Government realise the significance of this. We cannot revise unless the Government are defeated a healthy number of times.

We should look at other reports, as well as the Clerk’s. My noble friend Lord Foulkes has given the game away, in the sense that there is a Labour group looking at some of these issues. The House of Commons Political and Constitutional Reform Committee has produced a very interesting report, with a number of suggestions as to how we might deal with these issues. We may not agree with all of them, but I particularly draw your Lordships’ attention to recommendation 10, on determining the relative numerical strengths of party groups in the House of Lords. In the end, surely we need to have sensible discussions and reach an agreement which will enable us to get a proper balance, allow the House to do its proper job in revising, and keep the numbers at a reasonable level.

13:40

[Lord Wallace of Saltaire (LD)]

My Lords, this debate raises a large number of questions. Let me try to answer as many as I can. I start by saying that the Government remain committed to thorough reform and the creation of an elected House. This is part of the reason why we resist proposals to end by-elections of hereditary Peers. I was here when that particular concession was made by the then leader of the Conservative Peers, now the Marquess of Salisbury, on the basis that it would remain until thorough reform took place.

The Government are committed to thorough reform. However, we now have a number of proposals which I have heard described as housekeeping proposals, which are on an interim basis. We recognise that there will not be another attempt at House of Lords reform until well after the next election, when I look forward to seeing a commitment to an elected second Chamber appearing once again in all of the party manifestos. Having said that, we have to recognise that there are some real problems in the House.

The noble Lord, Lord Foulkes, disappointed me enormously in his speech. I looked forward to him saying that we must tackle the question of retirement age, a topic on which I thought he was intervening the other day. I recognise that at the core of much of this are the difficulty of a retirement age or of encouraging retirement, and the balance of the groups within the House.

When I joined the House, now some 17 years ago, I was told that by entering the House of Lords I was raising my life expectancy by a further two years. It is such an interesting place and it keeps us lively and fit. As I sat listening today I reflected that, if I decide that I really ought to take permanent leave of absence when I am 95, I have only 23 more years of service to go. I will then have served in the House for 40 years. We recognise the problem of keeping the House lively and renewing membership.

Incidentally, there is also the problem of different age balances among the different party groups. The Conservatives are the oldest group in terms of appointments, because many of them were appointed in the Thatcher years. Particularly when I talk to some of the older Labour Peers, I am conscious that the reluctance to retire of those on both the Labour and the Conservative Benches is sometimes expressed in terms of, “I would be letting my side down if I retired but some of them didn’t. We would alter the age balance against us”. Anything we talk about in relation to retirements feeds back into the question of party balance. I remind the noble Lord, Lord Hunt, that it is not just the party groups who vote in this House. We have a very active group of Cross- Benchers. I will check on the incidence of votes lost in this Parliament compared to votes lost in the last Parliament. I was not aware that there was a substantial difference in the number of votes lost. In the Bills that I have dealt with, the concessions which one must make in order to avoid votes being lost, and the number of votes lost, are certainly important matters. I give way.

[Lord Cormack]

My Lords, I am sorry to intervene, but does my noble friend really believe that the House of Lords should have a significant majority on the government Benches?

[Lord Wallace of Saltaire]

My Lords, this is for the first time a coalition Government and part of the issue is whether you count the entire coalition of both parties as one or as two. The Government do not have an overall majority in this House because we have a large number of Cross-Benchers. If I may say so, one of the first things I learnt when I entered this House was that if you want to defeat the Government, what you need is a speaker from each of the four main groups, because at that point the Government will recognise that they are about to lose. The noble Lord, Lord Cormack, is occasionally very good at being part of those groups which challenge his own Government. That is the way the House of Lords behaves.

[Lord Hunt of Kings Heath]

With respect, my Lords, there is one Government and the numbers are clearly added together in your Lordships’ House. I should like to put a question to the Minister. What would happen in 2015 if the Labour Party were to win the general election with a majority? It would be faced with a majority of 100 Conservative and Lib Dem Peers over the Labour group in your Lordships’ House. There would then be a dissolution list, to which I assume both Mr Cameron and Mr Clegg would contribute. What advice would the noble Lord give to a Labour Government about the number of Peers they should appoint?

[Lord Wallace of Saltaire]

My Lords, we are getting into very difficult constitutional questions here. Again, I have heard discussions about this among some of my noble friends. A Labour Party that wins a majority of seats in the House of Commons on perhaps 35% of the vote and a 60% turnout raises the question of whether that is really a majority or not.

[Lord Lea of Crondall]

I am sorry to press the point, but is that not precisely the doctrine of the coalition agreement—the formula should reflect the results of the last general election—or is it only to suit this particular Government at this particular moment in time?

[Lord Wallace of Saltaire]

My Lords, it is that in new appointments, one should head in that direction. I speak for a party which received no nominations to this House for several years under Mrs Thatcher’s Conservative Government. Let me say—

[Lord Foulkes of Cumnock]

You are making up for it.

[Lord Wallace of Saltaire]

We need some quiet discussions among the parties and I am glad to hear people suggesting that what we need is another committee. I am sure that the noble Lord, Lord Hunt, would love to serve on another committee looking at some aspects of Lords reform; he has a great appetite for it.

[Lord Hunt of Kings Heath]

My Lords, nothing would give me greater pleasure.

[Lord Wallace of Saltaire]

What we are talking about is not just the size of the House; we also have to recognise the issue of attendance at the House. It is the rise in the number of those who expect that appointment means regular attendance, and in some cases we have made a rod for our own back by making appointments, particularly of Cross-Benchers, who are asked whether they will be regular attenders. Our percentage of attenders among the Members has been steadily rising and continues to do so.

[Lord Foulkes of Cumnock]

I thank the Minister for giving way again. That brings us back to our exchange on the Floor of the House the other day. All of these new Members are going to be working Peers. They will attend regularly. They will receive their attendance allowance and they will need offices and all the other facilities. That, we are told by the Clerk of the Parliaments and others, has to be done within a no-growth budget. How is that possible?

[Lord Wallace of Saltaire]

My Lords, the question of the overall size of the House brings me to my next point, which is that of retirement.

[Lord Foulkes of Cumnock]

The noble Lord is not answering my question. How is it possible for this to be done within a no-growth budget? We are getting another 60 extra Peers.

[Lord Wallace of Saltaire]

My Lords, retirement is essential to this because unless we are going to have a House that grows older gracefully and has very little renewal, we have to have a scheme that encourages retirement. The House has been getting older. After 17 years I have just passed the average age of the House. We need good new Members because we do not entirely want to be a House that represents the wisdom of 25 years ago, and therefore we need to address the question of retirement. I have had one or two conversations with older Peers who have suggested that a more dignified retirement arrangement, in which the House recognises the service of those Members who are retiring, would be of very considerable assistance to them. I am willing to take that back and, indeed, I have already discussed it with the Leader of the House. I think that it is something which we should all attempt to progress as best we can.

On a financial leaving package, let me simply say to the noble Lord, Lord Norton, that we receive allowances in this House; we are not paid. Most of us, the noble Lord, Lord Norton, and me included, have pensions. I think that I can guess what the size of his academic pension will be when he retires. I had a discussion with an older Labour Peer who said that I did not understand how working-class people like him would survive without their allowances. I reminded him sharply that I knew roughly what his academic pension was, and that if he could not survive on a professorial pension there was a real problem.

[Lord Norton of Louth]

My point had nothing to do with pensions because there is no salary, so it was not premised on that—that was the analogy that I was drawing with House of Commons. The resettlement grant has absolutely nothing to do with pensions.

[Lord Wallace of Saltaire]

My Lords, let me simply say, because time is short, that service in this House is a privilege which we should not expect to have to be bought out of. That is the view which I and a number of others hold. The Government remain unconvinced that we should attempt to buy older Peers out. I recognise that there is a substantial problem which older Peers think about in terms of party balance. I think that it is also the recognition issue that we are concerned about and very much want to continue.

The noble Baroness, Lady Hayman, asked whether the Government would respond to the PCRC’s proposals for all-party talks. We will certainly respond to that report.

[Lord Norton of Louth]

Before my noble friend leaves his previous point, is he saying that service in the House of Commons is not a privilege?

[Lord Wallace of Saltaire]

My Lords, Members of the House of Commons earn their keep and are much more often in the prime of life. Most of us who come here have earned our salaries elsewhere and have pensions from elsewhere. That is part of the distinction that I am making.

[Baroness Hayman]

Not the women.

[Lord Wallace of Saltaire]

My Lords, the noble Earl, Lord Sandwich, asked about human resources. My noble friend Lord Gardiner remarked that that is partly because Cross-Benchers do not have Whips. Whips in this House see themselves not as enforcers but as very much a human resources department for their own party groups.

[Noble Lords]

Hear, hear!

[Lord Wallace of Saltaire]

I take that response as a deep vote of confidence in the consultative role and psychological support which Whips provide.

We will of course take back all the points made in this Committee. The Government are willing to give a fair wind to the Dan Byles Bill, which I hope will come to this House in good time and provide for some of the housekeeping measures which noble Lords are calling for. We hope that that will assist. We will take further the question of providing dignified recognition for those who wish to take permanent leave of absence for the service which they have given to this House—and some of them, earlier than that, to the other House. However, I am very sorry that I cannot entirely provide the reassurance that some noble Lords are looking for in terms of a financial retirement scheme.

13:53

Sitting suspended.

Iran

Thursday 24th October 2013 Grand Committee

Question for Short Debate

14:00

Asked by

[Baroness Afshar]

To ask Her Majesty’s Government, in the light of the recent elections in Iran, what steps they are taking to facilitate closer commercial and educational ties with that country.

[Baroness Afshar (CB)]

My Lords, I am grateful for this opportunity to speak about the country where I was born, and I thank noble Lords who are participating in this debate and speaking. I would like to raise a few points before the negotiations between the countries start again, in the hope that they might be used as relevant points by the negotiators.

Negotiations between Iran and the six powers in Geneva seem to have been very optimistically received. The noble Baroness, Lady Ashton, the EU’s top foreign policy official, has described them as “substantive and forward-looking”. Iran’s top nuclear negotiator, Mohammad Javad Zarif, has spoken of the possibility of achieving a satisfactory outcome in the next six months. I add my voice to those of the educationalists and economists in the UK who have also welcomed this rapprochement. The UK in general, and the education sector in particular, would benefit from the easing of sanctions. This could be a win-win for all concerned, provided that there is understanding and appreciation of the difficulties on the way.

Education is one of the most effective means of building long-term trust among nations and individuals. It is hardly surprising that it is Ayatollah Rouhani, a graduate of Glasgow Caledonian University, who started the negotiations and secured a level of agreement from the spiritual leader of Iran. Students make a significant contribution economically, academically and intellectually, in terms of building understanding across divides that sometimes prove difficult to cross otherwise.

However, there is a real problem in the banking system as it stands and as it has operated in the decades since the imposition of sanctions. It has been a serious impediment. Students who have been offered places—who are more than willing to pay the fees and health taxes that might be imposed in the future and have the money ready—cannot find a bank in the UK willing to open an account for them. I know of students who have lived in Canada for more than 10 years but who, because they are Iranian, cannot even transmit money from Canada to the UK to start discussions. That seems to result in universities saying that their hands are tied because they cannot proceed with the processes. The University of Sheffield, for example, has been working in Iran and has offices there offering scholarships to Iranian students with exceptional academic potential. Many Iranians, particularly women, have such potential aplenty.

The difficulty is not only that the students cannot open accounts; a further problem is when those students who are already in this country and have accounts here go on fieldwork trips and come back, they find that they have to reopen the same accounts and provide the same information all over again. In the case of one of my students, who made two field trips, this had to be done twice.

These kinds of obstacles make students less willing to apply to British universities. The measures are highly counterproductive and the Government should come to the rescue of these students because, as we all know, most if not all British universities are heavily dependent on foreign student fees in order to bridge the gap created by the cuts. Last year, banking restrictions also resulted in Iran abandoning its conversion rate for foreign students, which gave favourable rates to students studying abroad, particularly in the UK. Now, it is much more expensive for Iranian students to raise the same fees in Iran.

Banking restrictions have also resulted in very serious medical problems in Iran because pharmaceutical companies cannot import the necessary ingredients for producing medication at affordable prices. This has resulted in the deaths of hundreds of people. Political prisoners have even written an open letter asking for the lifting of sanctions. They point out what I have pointed out in the House before: namely, that sanctions only make the rich richer and the poor poorer. It is not the rich who suffer from the sanctions—they get their medication, they come abroad for treatment—but those who are living in Iran. The situation is dire, which is another reason that Iranians are extremely keen to enter negotiations and for them to be successful.

The prospect of detente has already resulted in the freeing of a number of political prisoners: 11 were freed a month ago. They included Nasrin Sotoudeh, the campaigning human rights lawyer and winner of the European Parliament’s 2012 Sakharov Prize for Freedom of Thought, and the reformist politician Mohsen Aminzadeh. A week later, on the eve of President Rouhani’s visit to the USA, 80 more political prisoners were freed, some of whom had been jailed after the mass protests triggered by the fraud- tainted re-election of former President Ahmadinejad in 2009. Last week, more political prisoners were pardoned. The hope is that this process will continue and accelerate.

A rapprochement would be extremely beneficial to the UK. The Iranian economy has not died during this period. In fact, many projects have been set up, including mining, construction, chemical production, car manufacturing and packaging, and are thriving. But the sanctions have resulted in trade relations moving towards Russia and the East, rather than the West. In 2010 China became Iran’s largest trading partner. In 2011 trade between Dubai and Iran was valued at $13.6 billion. Last year Iran’s largest car maker agreed to send 10,000 cars per annum to Russia.

To circumvent the banking restriction, trading partners use hawala, a system of exchanging money without the money ever leaving the country. It is a system completely dependent on trust, in which the bank uses a country that trades favourably with both trading partners. The current favourite is Japan. The Iranian bank leaves money in a bank in Iran and Japan uses its debts to Iran to provide money in any currency to a trading partner on the other side. So trade has continued; it has not diminished. This could be a profit that the UK is missing.

I shall end by mentioning nuclear power and chemical weapons. I am no expert in these matters, but the facts that the Iranians are offering to keep only two nuclear programmes in Natanz and argue that they have no chemical weapons are worth considering. Iran was attacked with chemical weapons. The havoc that caused means that no Iranian would allow them to be used against anyone, not even their enemy.

14:10

[Lord Lamont of Lerwick (Con)]

My Lords, I refer to my entry in the Register of Members’ Interests. I am the unpaid chairman of the British Iranian Chamber of Commerce and some years ago I was a director of companies that did business with Iran. I assure the Committee that I have no direct commercial or financial interests in Iran, although I work for a company whose main shareholder has interests in Iran.

For the avoidance of doubt, I will say that I absolutely condemn the abuses of human rights in Iran and recognise the concern over them. Only this week, Dr Shaheed, the UN monitor of human rights in Iran, highlighted and condemned the continued detention of human rights activists, journalists and the leaders of the green movement. However, as the noble Baroness, Lady Afshar said, 500 Iranian intellectuals wrote an open letter. Eighty of them were or had been in prison. They said that the election of President Rouhani had produced a significant change in the climate, that things were changing and that they felt the offer Rouhani had made ought to be responded to by the West. That was the way they put it.

I congratulate the noble Baroness, Lady Afshar, on initiating this debate. I entirely agree with what she said about cultural exchanges. I am also involved in the Iran Heritage Foundation, which exists to do precisely what she described. For example, it was involved in helping set up two major exhibitions in the British Museum and in taking the scroll of Cyrus back to Iran. The Foreign Office advised that it would be stolen by the Iranians, but we went ahead and did it, and it was returned on time and generated a lot of good will.

I believe that the election of President Rouhani was a significant event to which we should pay great attention. In that election, the economic needs of Iran and foreign policy became one issue. People were very dissatisfied with the state of the Iranian economy and wanted relations with the West to improve.

Despite Prime Minister Netanyahu saying that it is the same old thing with a smile, I do not believe for one minute that President Rouhani could have said the sort of things he said with eloquence in the television debates without meaning them and without intending to try to bring change to Iran. His spoke about the use of social media and greater freedom for individuals, and just 48 hours ago made a speech about freedom in universities. Above all in his comments, he spoke about transparency in the nuclear programme.

There are some people who say that sanctions have brought this about, and therefore that we should continue with them, not relax them. That would be a huge error. People wanted change, but polls show that there is considerable public support for the nuclear programme and that people blame the absence of medicines—something that was highlighted by the UN human rights monitor at the UN this week—on sanctions and foreign powers.

Israel has made it quite clear that it does not want an agreement between the West and Iran. I suspect that it would prefer a country which is beyond the pale. It does not want a large country in the Middle East that has normal or near-normal relations with the United States. Other Gulf states have voiced their anxiety, and although they are our good friends—they invest here, they lend us money—I hope that people will realise that they, too, have their own domestic political reasons for promoting the image of Iran as a threat to them, and that religious prejudice is not always in one direction only. I do not believe that Iran has any territorial designs on any country; I do believe that it has its own security concerns.

People often try to read the mind of Mr Khamenei. I think you need to know only one thing about Mr Khamenei. Before he became the Supreme Leader he was President for two terms. During that entire time he was a president at war—a war in which 500,000 people either lost their lives or were seriously wounded. People do not recognise that Iran is, militarily, a very weak country. I think it was General Petraeus who pointed out the other day that the entire air force of Iran could probably be wiped out in 24 hours by that of the UAE, although we continue to sell arms to the UAE for reasons I sometimes find difficult to understand.

Is a deal possible? There are a number of points that need to be considered. First, obviously, we need the maximum transparency and rigorous inspection. The additional protocol has to be signed by Iran, meaning that inspectors can request to go anywhere in the country. Then there is the big issue of the timescale. The Iranians want a quick deal. They talk of six months. Of course, they want quick relief from sanctions. However, quick relief from sanctions does not mean that there could not be an extended period, perhaps lasting five years or so, in which the suspension of sanctions was conditional or dependent on Iran continuing to honour the undertakings that it made with regard to its nuclear programme.

Then you have the issue of the size of Iran’s enrichment programme. The Israelis say that it should be dismantled completely. I think it is clear that that is unacceptable to the Iranians. I do not pretend to have any nuclear expertise but I have spent quite a bit of time talking to people who have. I believe that by taking measures to deal with capacity, output and the type of centrifuges involved, it would be possible to define the breakout period. The breakout period is what concerns Israel: that is, the time it would take to break out from a civilian programme to manufacture a weapon. That period has to be long enough so that the West can identify and respond to it. I believe that that could be identified.

I do not believe that Iran will accept that there should be an end to all enrichment in that country. That would be very difficult for it to accept politically, and very difficult for it to justify after all the suffering from sanctions and all the billions that have been spent on it. However, its programme should be related to what its need for nuclear electricity is likely to be. We threw away opportunities in the past: in 2003 and 2005. Even the Israeli Defence Minister said yesterday that he believed Iran was genuine in wanting a deal. Israel may be opposed to it, but he said that Iran was genuine in that belief and aspiration. I hope that we will not repeat the mistakes we made when President Khatami was in power.

[Lord Ahmad of Wimbledon (Con)]

Just before the noble Baroness gets to her feet, I would like to remind all speakers that this is a time-limited debate. When the Clock shows seven minutes, remarks should be concluded.

14:19

[Baroness Williams of Crosby (LD)]

My Lords, I very much agree with what has already been said by the noble Baroness, Lady Afshar, and I congratulate her on calling this timely debate. I also strongly support what was said by my noble friend Lord Lamont, who was absolutely right in suggesting that it is perfectly possible to now open negotiations with Iran on a serious basis. I add only one thing to what he said about that, which is that Iran has already suggested that it could move away from the 20% refinement figure across the front, where it started moving in that direction, and back to the 5% which is compatible with civilian uses of nuclear power. That should be carefully tested, investigated and discussed so that we can find out how much credence there is in what has already been said.

The only other point that I will make is that it is difficult to look at a country like Iran and not recognise that it has profound reasons to be frightened of being attacked. We tend to forget in this country that the Iran-Iraq war brought, as my noble friend said, 500,000 casualties. That is a rather modest figure; my understanding is that it was probably more like 800,000, of which the larger proportion was Iranian casualties. Why? Because only Iraq used chemical weapons; Iran never resorted to them. Iraq used both sarin and mustard gas, which are long-standing and extremely agonising forms of chemical weaponry. It can fairly be said that there is not a single country in the world, not even Syria, which has suffered as much from the use of chemical weapons as Iran. Despite that, Iran has never attempted to build up chemical weapons. Compared to the huge reserves of 10,000 tonnes that we know Syria has, the core of the matter is that Iran has never moved in that direction. It has repeatedly said that it regards chemical weapons as totally unacceptable.

On a more general note, I understand that up until now, the United Nations has not sent an invitation to Iran to take part in the Geneva II negotiations which are likely to happen later this year or, at the very latest, early next spring. I find that puzzling given that Iran is the second-greatest regional power in the whole area, and also given that it is seen as an ally by Syria. Assad has not said himself that he will go to any Geneva II negotiations, but there is surely reason to believe that if his closest ally, Iran, is there, he is much more likely to go than if it is not there. Perhaps my noble friend Lady Warsi will tell us something about the prospects for Geneva II including Iran as one of the countries sitting round the table. It is vital because, like it or not, Iran is seen by the whole of the Shia group of Muslims throughout the world as being the lead country. Therefore, its non-presence would almost certainly undermine the value of those negotiations.

I will say two other things before turning to one or two practical ideas that could be used to create a much closer and mutually constructive relationship with Iran. I fully share what has already been said by the noble Baroness, Lady Afshar, and the noble Lord, Lord Lamont, on the subject of issues that can be taken up and used in this respect. The first thing I will say is that there is a colossal misunderstanding about Iran in the West. I will take just one example, as a woman Member of the House of Lords. It is widely believed in large parts of the United States that Iran is rather like Saudi Arabia: that women walk around fully veiled, are not allowed to drive cars, have no education and are deeply and profoundly suppressed. Not so. Some 55% of undergraduates in Iran at the present time are women, and there are large numbers of women at the very top of both the legal and medical professions.

I completely share what was said by both previous speakers about human rights. We absolutely need to insist that Iran lives up to the highest standards of human rights and that it releases more—indeed, ultimately all—its prisoners who have not been tried. It is vital that we better understand that this great civilisation is not the same as some of the excesses that one sees in other countries. Incidentally, the widely held belief that Iran is Arab is also completely misleading. The fact that it is multifaceted in religious terms is an important point to make. There are still active members of the Zoroastrian community in Iran, which is an ancient civilisation.

Practically, what can we do? I suggest that there are three areas where we could create much better relations with Iran without damaging in any way the serious considerations that have to be brought to bear on such things as nuclear weapons and so forth. First, the noble Baroness, Lady Afshar, mentioned the possibility of much closer relations with universities. My noble friend Lord Phillips of Sudbury recently went to the University of Isfahan, which is a very famous and ancient university, and also to the University of Tehran. In both cases he was told very strongly that they would welcome a much closer relationship with a matching United Kingdom university. They did not specify which ones, but they made it clear that they would be wide open to such proposals.

There is another serious issue which involves the universities. That is, as some noble Lords in the Room already know, that there is a very serious incidence of drug-related tuberculosis in Zahedan, in the south-eastern part of Iran. I will spell it for Hansard. I am not sure I have pronounced it right. The important point is that drug-related TB is not a respecter of borders. It crosses them very happily. We know from our own experience of drug-related tuberculosis among some migrants to Britain how crucial it is to try to deal with this at the source. Iran comes second only to India in the incidence of drug-related TB. We have in Britain university departments that are highly instructed about and knowledgeable about drug-related TB. This is, again, an obvious win-win example of what can be done.

Secondly—and I now look firmly at the right reverend Prelate the Bishop of Ripon and Leeds, who will be surprised that I address him—I strongly believe that a group of religious leaders from Britain would be very welcome in Iran and would do a great deal to bridge the gap between us and this strange country, which is rather like the Holy Roman Empire, in that it is at once both a religious and a political entity. I have always been puzzled why the great advantage that the Church of England has in this respect, as a state-based religion, could not be used to create much closer relations with Iran.

My final point is very important. We have in this Room—I invited him as a guest—Professor Lightfoot, who is the leader of the co-ordinating organisation of international research into disease surveillance. He has set up, all over the world, networks of people looking at surveillance of a disease and how it moves across the world. He has just been approached by Iran, Armenia, Georgia, and other countries with a view to setting up a regional network. I can think of nothing better—less objectionable, politically speaking—than to set up such a—

[Lord Ahmad of Wimbledon]

I must ask my noble friend to conclude.

[Baroness Williams of Crosby]

I will be finished in a moment. There could be nothing better than to set up an international network of this kind and to support Iran’s being part of it. I commend the idea to the Minister.

14:27

[The Lord Bishop of Ripon and Leeds]

My Lords, I am very grateful to the noble Baroness, Lady Afshar, for initiating this debate and for introducing it so comprehensively. I am aware, through contacts, of Iranian students in Leeds and of some of the difficulties of which noble Lords have been speaking in terms of their education and the way that that has developed, and of the struggle to keep them at Leeds University.

Like others, I have been heartened by the change of political rhetoric following the elections in Iran, and share the high expectations that a more pragmatic stance from Tehran will see progress made on a range of issues, not least the nuclear issues. In view of the speed of recent diplomatic developments and the ambitious timetable set at this month’s talks in Geneva—the six to nine months to which a number of noble Lords have already referred—it would be helpful to have some idea from the Minister as to what she understands to be the end game. What would a normalisation of relations look like? What might be the trade-offs that each party might be required to make? That seems to be at the heart of the question that the noble Baroness has put before us today.

I will take up the references that have been made to issues of human rights in Iran. I want to see progress on the nuclear issue, but I am conscious that in any trade-off we could see a weakening of the Government’s commitment to secure progress on other fronts, particularly that of human rights. Iran appears to be preparing a receptive response to inquiries from international oil and gas companies, in the expectation of the lifting of EU sanctions. That may well be right, and it may well be the direction in which we ought to go. However, it seems premature until we have more in the way of assurances and evidence that human rights will be more respected in Iran than they have been.

I am not yet convinced that a change in Iran’s human rights agenda will come with the Rouhani presidency, because critical decisions continue to be made by the Supreme National Security Council. This remains populated by a cohort of people who spent much of their careers in the military and security services. I listened hard to the arguments, both in this debate and earlier, that Iran has no regional ambitions, and about its place in the funding of rejectionist Palestinian entities. I am not yet convinced by these arguments. For me, there needs to be much clearer evidence of a new Iranian policy in the whole area, as well as new developments at home.

Has the Minister seen any change in the vulnerability experienced by religious and ethnic minorities in Iran, whether by Kurds in Iranian Kurdistan and in Iran, or by people of minority religions? From my own contacts with Iranians in Leeds, particularly those who have fled from Iran, I know that they certainly remain highly on edge as to exactly what the future will hold, for their families back in Iran as well as for themselves.

I am also concerned about the continued fate of the members of the Iranian resistance at Camp Ashraf and the misnamed Camp Liberty in Iraq. What evidence is there of any concern from the Iranian Government for those refugees? Whatever we make of responsibility for last month’s massacre at Camp Ashraf, what are the Government doing to provide for the safety and security of the women, men and children in those camps, whether by means of UN forces or otherwise?

I was grateful to the noble Baroness, Lady Williams, for her challenge on the relationships between the Christian churches here—perhaps the Church of England in particular—and Iranian religious leaders. I will take that back and see how we can develop some of those relationships. I absolutely agree with her that it is in discussions, and in deepening religious as well as academic and educational links, that we shall come to understand one another better. We would then be able to move in the sorts of directions that we have been talking about this afternoon.

I hope that the Government will give us a clearer idea of their strategy for balancing the range of competing concerns, so that we can make progress on the nuclear issue without losing sight of the wider picture. I look forward to developments as the discussions go on, especially in our concern for the upholding of human rights.

14:34

[Lord Hylton (CB)]

My Lords, I join in the thanks already expressed to the noble Baroness, Lady Afshar, for this debate. I start from the fact that the United States has had no diplomatic relations with Iran since 1979. This has moved me to argue for political détente. I will continue to do so, and I welcome of course the first small steps that Her Majesty’s Government have taken in this direction; for example, by exchanging non-resident chargés d’affaires and by the conversation between our Foreign Secretary and his Iranian counterpart in New York.

I hope that relations will continue to be improved step by step. There are two rather obvious reasons for doing so, the first being external and the other internal. Iran is in a position to be extremely helpful in other countries, particularly Syria, Lebanon, Iraq and Afghanistan. That is why, and as other speakers have mentioned, I would like to see Iran taking part at whatever level can be agreed in the second Geneva conference on Syria. I agree strongly with the noble Baroness, Lady Williams of Crosby, on that.

The internal reason is that Iran is a diverse country, by no means monolithic. It contains Azeris, Kurds, Arabs and Balochis—to name only a few of the subgroups. Politically, there are hardline and more moderate clerics, just as there are Revolutionary Guards and pretty extreme politicians. The new president and his Government are somewhat different from the previous Administration. It is therefore important to give as much encouragement as possible to those who hold reasonable views and who care for the common good of the whole population. This has, we know, been much damaged by sanctions, a depreciating currency and rising prices. It is in our interest that the present Government should not be marginalised by their opponents.

Iran has some 75 million people and is therefore of a similar size to Egypt, recognised as the largest Arab country. The noble Baroness, Lady Afshar, is therefore quite right to ask for closer education links. My late mother’s cousin, Nancy Lambton, was for many years professor of Persian at London University. She and others created links which should be developed.

On commerce and trade, Iran could become an important market for our goods, services and expertise. Iranians whom I met just a few years ago in Isfahan were keen supporters of our football teams. We therefore have some goodwill on which to build. I acknowledge of course that major trade links may have to wait until progress has been made on the nuclear issue. I look forward to the Government’s thoughts on the possible means for achieving improved relations and greater détente—some of which, again, were outlined by the noble Baroness, Lady Williams.

14:38

[Lord Triesman (Lab)]

My Lords, this debate is happening at an important moment. I share President Obama’s assessment, echoed by my noble friend Lady Ashton on behalf of the EU, that President Hassan Rouhani is indeed reaching out. The recent exchanges on the nuclear programme, the exchanges of letters and the interface with our own Foreign Secretary are hopeful signs, but so far they are only signs. I therefore join others in thanking the noble Baroness, Lady Afshar, for hitting such a helpful moment to have this debate.

Anyone who knows the Iranian people or who has visited the country will be impressed by the energy and intellectual curiosity, particularly of young Iranians. Anyone who has ever taught Iranian students, as I have had the good fortune to do, will know exactly what I mean, and the noble Baroness, Lady Williams, made key points about the role of women in higher education which I wholly endorse. Iranians are inquiring, modern and hungry to engage with others; they are protective of their country, although that does not mean that they embrace theocratic rule or want to live in a social order resembling a caliphate—that is not true about them. Some are very brave. They faced repression, even if there are now limited changes.

It makes great sense to look at the two outward-facing windows that this debate suggests we look at which offer perhaps the best opportunities to build, for ordinary people, on the process of reaching out. Commercial links have understandably been impacted by economic sanctions. Sanctions were and, in my view, are essential until there is compliance with all United Nations decisions. They have had an impact and have had a much better effect than the alternative forms of intervention which some have advocated. It is easy to understand that the Iranians want them eased. The country is struggling under the current sanctions, not least because of the two-thirds decline in its oil exports, which account for some 50% of government expenditure.

The noble Lord, Lord Lamont, put the case about the economy very strongly, and I can only echo him. In exchange for diplomatic concessions, there is already promising talk about easing sanctions imposed by the UN and the West. Starting from such a low point, almost any commercial link is bound to be an improvement. On 19 October, the United States released $12 billion-worth of sanctions and the EU released $35 billion-worth of sanctions. These are good steps. I know of business opportunities, including some for Iranian state pension providers, many of whose beneficiaries are British. Opportunity is there, so there will be progress, but only if there is progress in the other areas that concern us, not least uranium enrichment and security for the missions of countries, including ours, that have suffered in the recent past. We do not yet know with certainty that this progress is sustainable, and I will return to the strategic judgment we have to make. It should be the core issue of this debate that we look at this issue, and ask the same fundamental questions as the right reverend Prelate the Bishop of Ripon and Leeds. I share his call for clarity.

Education links are invaluable for the future. They reach a new generation of Iranians whom we need to reach. UNESCO tells us that almost 99% of Iranians aged between 15 and 24 are literate and, as a percentage, as many people go to tertiary education as in this country. Support for educational and cultural exchanges between our two countries will form stronger bonds and more mutual comprehension. We have promoted this through the British Council and Chevening scholarships.

Other countries have also recognised the problems in this arena. UNESCO reported interventions—I will not go though all the kinds of courses because of the time—from Germany, France, the Czech Republic, Malaysia, Korea and the United States, and I am sure there are a great many others. Aside from the Chevening scholarships, I am aware of initiatives taken by a number of British universities. There are scholarships at Cambridge, East Anglia, Westminster and Nottingham, and the noble Lord, Lord Hylton, kindly reminded us of a longer and deeper historic link with the universities as well.

All this is positive, but it does not address the key strategic issue. I know how hard negotiating with Iran can be as I conducted the negotiations for the release of our sailors and marines who were seized in the Persian Gulf by the Revolutionary Guard. Everyone is entitled to look for signs of hope—we would feel hopeless if we did not do that—but we will all weigh the changes in top personnel, even if we do not yet know much about them, and the positive words, which are to be welcomed and given weight, while we recognise that the intention of diplomats who utter them is that they should be given weight. The art is to be optimistic, but not to put unsustainable weight on pronouncements or on preliminary stages of a dialogue. These are processes where cautious advance is critical, working out with consummate care what is to be given in exchange for real changes, and for nothing less.

I ask noble Lords not to misunderstand my point. I want hope and positive advance no less than anybody else. I do not want to miss any window of opportunity, but I know that no sophisticated nation or alliance builds a credible foreign policy on the basis of hope alone. It is built in calibrated steps by all parties. It is circumspect and usually involves turning around a huge tanker that is loaded with history, poor experiences and disappointments. To do so as fast as the evidence suggests is, of course, right, but it has to be as fast as the evidence suggests.

I hope that when we hear in a few moments from the noble Baroness, Lady Warsi, what the Government’s current assessment is, the lessons to take away will be that we must move in a timely way; that we should not be star-struck with hope without proof of good intention; and that we should have carefully designed milestones by which to measure proposals. That is the approach I would advocate, and I do not believe that it moves an inch against the direction of doing so with a hopeful spirit.

14:45

[The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi) (Con)]

My Lords, I start by thanking the noble Baroness, Lady Afshar, for calling this incredibly timely debate. It is particularly timely because nuclear talks with Iran resumed last week in Geneva, and for the first time in a decade we are seeing serious exchanges between the E3+3 and Iran on the nuclear issue. On the bilateral side, we have agreed with Iran that we will both appoint non-resident chargé d’affaires, which marks a first step towards improving diplomatic relations. As my right honourable friend the Foreign Secretary said on 8 October:

“It is clear that the new President and Ministers in Iran are presenting themselves and their country in a more positive way”.—[Official Report, Commons, 8/10/13; col. 27.]

That is, of course, welcome. However, the noble Lord, Lord Triesman, is right to say that we must advance cautiously. So far, the contact has been thus. On 5 August 2013 the Prime Minister wrote to President Rouhani, and on 23 September the Foreign Secretary met the Iranian Foreign Minister, Mohammad Zarif, in the margins of the UN General Assembly in New York. He spoke to him again on 7 October. The FCO’s political director met the Iranian deputy foreign Minister on 25 September, and again in Geneva on 16 October. However, we remain concerned about a number of Iran’s policies, including regional activity, particularly in Syria, and human rights. We want to see a change in actions, not just a change in words, from Iran.

Iran’s nuclear programme remains our overarching priority. Iran has thus far failed to reassure the international community that its nuclear programme is for purely peaceful purposes and it is therefore right at this stage that the UN and the EU have imposed sanctions on Iran. Given the current sanctions regime, the British Government do not encourage trade with Iran and do not support companies who wish to export to Iran or have a presence within the country. However, trade does continue in humanitarian goods such as medicine and foodstuffs, which are exempt from sanctions.

[Lord Lamont of Lerwick]

Has the noble Baroness noticed the report of the UN monitor of human rights who specifically said that the relief from sanctions for medicines and humanitarian purposes for poorer people in Iran is ineffective because the banking sanctions remain?

[Baroness Warsi]

I take the point made by my noble friend. So far as the UK is concerned, we have tried to issue export licenses for these products as a priority, but I understand the challenges that are presented by the banking sanctions. I shall certainly take back the comments that have been made in the debate today, including those referring to CORDS, the organisation that is in attendance here. It is the ambition of the UK Government to resolve the impasse in the nuclear issue peacefully. We therefore hope that President Rouhani’s Government will engage constructively and reach a negotiated settlement with the international community.

I can assure noble Lords, and specifically in response to the comments made by my noble friend Lord Lamont, that we have been open with Iran. We have said clearly that reaching a comprehensive agreement on the nuclear issue would mean the normalisation of political and economic relations with the international community and the end of all nuclear sanctions. Iran’s nuclear programme would be treated in the same manner as that of any other non-nuclear weapon state party to the non-proliferation treaty. A solution to the nuclear problem would mean that normal commercial ties with Iran could resume. It is therefore in all our interests for this matter to be resolved and for us to proceed to the next stage. The E3+3 accepts and respects Iran’s right to use nuclear energy for peaceful purposes. But this remains impossible if Iran continues to expand its nuclear programme in violation of UN Security Council resolutions and multiple resolutions of the IAEA Board of Governors.

Iran’s recent activities go far beyond what is required for a civil nuclear programme. Iran needs to take concrete steps to address international concerns and comply with international resolutions. We therefore welcome the more positive approach taken by the Iranian Government in nuclear talks between Iran and the E3+3 in Geneva last week. Foreign Minister Zarif presented a basis for negotiations and for the first time diplomats have begun more substantive discussions with Iran on issues of concern. We hope that negotiations will lead soon to some tangible results. There is a great deal of hard work ahead and further talks will take place on 7 and 8 November in Geneva. It is important that we maintain the positive momentum of the negotiations while at all times keeping a clear focus on Iran’s continuing efforts to develop its nuclear programme.

The noble Lord, Lord Hylton, and other noble Lords raised the issue of educational ties. We deeply regret that one implication of the lack of progress on the nuclear issue and a consequence of the closure of our embassy in Tehran has been to make it harder for Iranians to apply for visas to travel here as students, and for other visas. While there has been a noticeable drop in the number of students applying for visas, the UK remains committed to fostering educational links and has issued nearly 1,500 student visas via our diplomatic missions in Istanbul and Abu Dhabi. We also continue to run the Chevening Scholarships programme for Iranian students. This scheme is part-funded by the Foreign Office and will enable six outstanding scholars from Iran to study a one-year postgraduate course at a university in the UK.

The British Council suspended operations in Iran in 2009 but, noting President Rouhani’s positive comments regarding engagement with the international community, is now looking again at strengthening cultural and educational links between the UK and Iran. In the mean time, the British Council has supported English language teacher training through the development of digital resources and face-to-face training events outside Iran.

[Baroness Williams of Crosby]

I apologise for interrupting the Minister and thank her for giving way. Just before we move away from the visa issue, will she consider looking at visas specifically for scientific and medical purposes? I mentioned drug-resistant TB. There is a great deal of expertise in this country and in Iran. That is the kind of area where perhaps a more generous approach can be made.

[Baroness Warsi]

I will certainly look at that specific issue, and will continue to press for the overall normalisation of relations, which will impact positively on all visa applications.

In May this year, the British Council also hosted a meeting across the Persian Gulf in Dubai, which brought together senior non-governmental stakeholders from the Iranian education sector to discuss language and education in Iran. Such dialogues are continuing; for instance, with a round-table discussion next month, which will explore the role of cultural relations in developing UK-Iran engagement.

The noble Baroness, Lady Afshar, and my noble friend Lord Lamont spoke about banking restrictions. It is regrettable that a number of banks have taken the position that they have. It is not the intention of sanctions for that to have happened. The impact of sanctions on student bank accounts has been as a result of some banks imposing their own restrictions in addition to the sanctions. The FCO has held some initial discussions with the Treasury on how to resolve this issue, and these discussions are currently ongoing.

As my right honourable friend the Foreign Secretary has said, progress in our bilateral relationship with Iran must be on a step-by-step and reciprocal basis. We are open to more direct contact and further improvements in our relationship. It is with this in mind that we are appointing the chargés d’affaires, who will be tasked with rebuilding our relations and dialogue on many issues.

My noble friend Lady Williams is right: one issue where Iran can, and must, play a constructive role is Syria. The new Iranian Government have said that they want to see a peaceful solution to the Syrian conflict. No decision has been made on Iran’s participation in Geneva II. We call on President Rouhani’s Government to match their words with actions and publicly endorse the G8-backed Geneva communiqué, which calls for a negotiation between the Assad regime and the Opposition on a new transitional authority for Syria. Iran has so far failed to endorse that communiqué. Iran’s actions must not prolong the conflict and must not contravene UN Security Council Resolution 1747. However, by supporting the Syrian regime with weapons and financial assistance, unfortunately Iran’s actions continue to do that at this stage.

Finally, as this Committee is well aware, the human rights situation in Iran continues to be a matter of serious concern. We regularly receive reports of serious violations by the Iranian regime against its own citizens and have condemned these. While I accept the comments of my noble friend Lady Williams, Iran does differ in many positive ways on the issue of human rights, women’s rights in particular, but there are still challenges. Women continue to suffer discrimination under Iranian law with a draft Islamic penal code continuing to legitimise disparity between the sexes. We saw a further erosion of women’s rights in Iran in August 2012—

[Lord Lamont of Lerwick]

I entirely accept what my noble friend is saying, but does she make the same representations equally unequivocally to Saudi Arabia?

[Baroness Warsi]

I am not the Minister with responsibility for Saudi Arabia, but I can assure my noble friend that when I last met with the Saudi Justice Minister I was incredibly forthright and frank in the discussions on the issue of women’s rights in Saudi Arabia.

We have made many public statements about women’s rights in Iran, too. The death penalty remains to be used excessively, and Iran has one of the world’s highest per capita execution rates. Discrimination and persecution of religious and ethnic minorities continues, as does torture and intimidation. I would be supportive of anything that the right reverend Prelate the Bishop of Ripon and Leeds could encourage the Church of England to do to help foster understanding.

The noble Baroness, Lady Afshar, noted some positive moves, including the release of Nasrin Sotoudeh. This is, of course, a welcome step, but more needs to be done to ensure all Iranians enjoy the rights and freedoms to which they are entitled. I can assure the right reverend Prelate that the issue of human rights concerns is as important to us as nuclear concerns. We have designated more than 80 Iranians responsible for human rights violations under EU sanctions and have helped to establish a UN special rapporteur on Iran human rights. We supported Iran-focused human rights resolutions at this year’s UN General Assembly. In relation to Mujahideen-e Khalq and Camp Ashraf, we have called for a timely Iraqi investigation and for those responsible for these terrible attacks to be held to account. I have answered questions on these matters on many occasions before the House.

In conclusion, we sincerely hope that the marked change in Iran’s public statements is accompanied by concrete actions on issues of concern, not least the adoption of a viable approach to nuclear negotiations. If it is, the UK stands ready to work with Iran. We do not underestimate the difficulties ahead, but must take full advantage of any opportunities. If Iran matches its words with genuine steps to address the concerns that have been outlined in today’s debate, the Government believe that there is a rare and significant opportunity for progress to be made, and for our commercial and educational links to be strengthened as a result. This can only be to the benefit of Iran, Britain and the rest of the international community.

14:57

Sitting suspended.

Housebuilding

Thursday 24th October 2013 Grand Committee

Question for Short Debate

15:00

Asked by

[Lord Stoneham of Droxford]

To ask Her Majesty’s Government what progress they expect to make in increasing housebuilding by May 2015.

[Lord Stoneham of Droxford (LD)]

My Lords, I start by declaring my interest in the register as chair of Housing 21, a housing association. I thank my noble friends Lord Borwick and Lord Oakeshott for taking part in this debate and also the noble Lord, Lord McKenzie, and my noble friend Lady Stowell. I hope what we lack in quantity we will make up in the quality of the debate. I also congratulate my noble friend Lady Stowell on her appointment as Parliamentary Under-Secretary of State for Communities and Local Government and apologise for putting her on the spot so soon after that appointment.

I tabled this debate six months ago. My main motivation was to assess the progress on housebuilding in this Parliament and to monitor the progress on the government strategy as outlined in Laying the Foundations: A Housing Strategy for England. The document was hailed by the Prime Minister and Deputy Prime Minister as a perfect example of the approach of the coalition, which took decisions that were right for the long term and not for the headlines. In the foreword, they committed that the Government,

“will unlock the housing market, get Britain building again, and give many more people the satisfaction and security that comes from stepping over their own threshold. These plans are ambitious—but we are determined to deliver on them”.

It is nearly two years since that housing strategy document was published, and it has to be said that the first year, in terms of the number of houses built, was disappointing. In 2012-13, only 108,000 houses were completed. We have to face the fact that, after the 2008 economic meltdown, which had an overheated speculative housing boom and bust at its epicentre, restoring confidence and getting finance flowing again was never going to be a quick fix. There was also the adjustment of a new social housing programme, which has taken time to bed in and get under way.

However, there are signs of life now in the housing market. The number of new homes completed in the last quarter was up 25%, housing starts were up by a third and stamp duty revenues were up. That is clearly a change from a year ago. Housing was then very much seen, certainly by those who thought we should give greater priority to it, as the best possible kick-start to the economy. Now, with signs of recovery, our main concern must be that demand does not outstrip supply. We have to refocus on the shortfall between the number of houses built and the formation of new households, which requires houses to be built at double the rate we are building them at the moment. I hope the Minister will be able to tell us what the Government’s latest forecast is for new homes this year and whether they are confident that they can build the projected 170,000 affordable homes by 2015 that they set out in their housing strategy. That will represent significant progress on the number built in the last five years of the previous Government.

With signs of recovery, and some initial concerns about house prices rising in the south-east and London, housing strategy requires a long-term focus. We must avoid the quick fix that ends in another burst housing bubble and which will only compromise the chances of more people owning their own home or renting one at an affordable rent. We must not forget the many lessons of past housing cycles, which have occurred under Governments of all persuasions, but particularly under the previous one in the so-called good times between 1999 and 2007. The number of new houses built annually during that period rose by something like 30%, from 120,000 a year to 160,000 at the peak. But prices rose by 173% and mortgage loans increased by 182%. The central problem is that housing is a cyclical industry where price inflation has been the driver of profitability in the short term and land asset appreciation has been endemic to a business model that eventually hits the buffers.

Each boom and bust has not only shaken financial confidence but has sapped capacity in the sector. Each cycle has made the inelasticities of the supply chain even less subtle. Housebuilders are rightly going to be cautious following the experience of the bust times. They are initially going to be motivated to make marginal additions on their most profitable sites. They will even have some interest in allowing prices to rise rather than in providing volume to counter the higher prices. There has been a huge reduction in capacity in the sector, and skilled workers and developers have left the scene. Already there are signs that building costs are moving up with the initial recovery.

I suggest three guidelines for the Government. First, given the very dysfunctional housing market, they will need to intervene more than they want to. Particularly as recovery takes hold, they will have to work on opening up land supply and making sure that our technical colleges provide the new skills that are going to be needed to fill the capacity shortages. They will have to monitor competition in the market with the smaller number of developers in play.

Secondly, they will have to watch like a hawk their demand-led initiatives, such as Help to Buy, to make sure that they do not simply lead to price inflation. Thirdly, although 75% of new build is in the private sector by developers, they need to balance their attention with initiatives for social and council houses and for self-build to develop the full potential of new capacity and affordable housing. Doubling building capacity must be our objective, and it will probably take another full Parliament to get there.

What is needed with these guidelines? It is all there in the housing strategy document, but the strategy now has to concentrate on easing the supply constraints in the sector. Let us look first at the private sector. Planning flexibilities have to show through to release more land to be used. We have to make sure that the new homes bonus for local authorities provides an incentive to release development land. New players have got to be encouraged into the market. The Government were right to give more support to encourage self-build, which has been a weak component of the private sector after the destructive impact of stop-go cycles. Price stability has to be an important objective for living standards. Energy bills pall into insignificance compared with the cost of housing.

We have been very lucky to have low interest rates, but we do not want people fooled into thinking that they can continue. The greatest concern is that Help to Buy will stoke up prices in the south-east, although it will probably still have a role to play in other parts of the country. Will the Government consider reverting to a regionally focused Help to Buy scheme if house prices get out of hand in London and the south-east? Will the Minister update us on the progress the Government have been making with build now, pay later, the Growing Places fund and initiatives to stimulate self-build? Is the announcement on the much needed larger developments for the new generation of garden cities now imminent?

In the social housing sector, there is still uncertainty about future funding. If it delivers the Government’s target of 170,000 affordable homes, it would demonstrate its capacity potential. The Government’s proposal to develop a guaranteed bond scheme linked to potential institutional investment has the potential to fund a further 60,000 homes. What impact on extra housing supply can now be expected from the guaranteed loans for social and private rented landlords provided in the Government’s strategy?

In the council housing sector, now that councils have control of their housing revenue accounts, is the improving economic situation not a good time to review whether council investment in housing should be included in the public borrowing limit? We need to put councils on an equal footing with housing associations. No other European country has as strict accountancy arrangements as we do. Frankly, if we want to tackle some of the problems of our own council estates, they need development, regeneration and investment. Is this not a good time for the Government to review the anomaly that exists between councils and housing associations with regard to the treatment of their investment in the public accounts? If they did, it could be a source of new funding.

Finally, with so much to do and deliver, we must question whether the Department for Communities and Local Government has the resources and leadership to do all this. The Labour Government had nine Ministers for Housing. The coalition is now on its third. Yet the position of Minister of State for housing has disappeared. Can the Minister tell us how, in the face of the many challenges and the need for the housing sector to be galvanised to increase housebuilding, we can manage without a Heseltine or a Macmillan figure to meet the strategic housing needs of the country?

Housing is not just key to improving the social fabric of the nation; it has often been at the heart of the health and the crises of the economy. Never has there been such a requirement for a strong strategic focus aimed at long-term stability. The Government have made a start but they need to prove their grasp in the next 18 months, and we need to show that we take decisions that are right for the long term and not for the headlines.

15:11

[Lord Borwick (Con)]

My Lords, first, I declare my interests as shown in the register, particularly the directorships and shareholdings in two housing development companies—one developing up to 2,500 new houses in Bicester and another with plans for 10,000 houses in Sussex—and ownership of a farm in Scotland that may eventually be developed for houses and rail-related warehouses.

The history of our site in Bicester may be helpful in understanding the problems that beset our planning system. Planning for this non-controversial site, supported by the local authority, took only seven years from preparation of the first application to the grant of conditions and to the ability to start on site. This planning process cost us about £4 million. If the scheme was unusual, even revolutionary, it would probably have taken longer. It certainly suggests that any ambition to build on wholly new sites before May 2015 is impossible, and pretty doubtful before 2020.

In its report dated this month, An Analysis of Unimplemented Planning Permissions for Residential Dwellings 2013, the LGA suggests that the number of unimplemented planning permissions is about 400,000. However, I believe that there are serious flaws in the analysis. At present, our site in Bicester has permission for 1,585 houses, of which roughly 200 are built and occupied. Under the LGA analysis, I understand that the site is counted correctly as unfinished, but also as totally unimplemented, when the truth is that it is partly implemented.

The LGA figure of 400,000 unimplemented planning permissions is indeed scandalous—if true, which I doubt—but it is scandalously low, not high. The NPPF requires that councils should identify five years of housing land supply, of which at least the next three should be deliverable. Five years’ supply at the normal rate of housing production would imply a figure of 1 million houses, not 400,000.

My noble friend Lord Taylor of Goss Moor has been working hard, with tremendous success, to reduce 7,000 pages of planning guidance by 90%. But the problem is that the system does not really want to change. Any shortcut or acceleration of an ancient process is a risk without a reward. The risk is that a mistake will be taken to expensive appeal or judicial review, while the reward cannot be seen. There seems to be no advantage to a town or a council in becoming bigger. The established view is that new residents produce new problems and new costs. Property taxes that would galvanise an American town to growth are seen as irrelevant in the UK.

We all know that the costs of running the Government will require growth in the economy if we are to afford them. Furthermore, there is a shortage of cheap houses for the next generation, and our whole economy is distorted by the high value of houses in the south-east.

The admirable concept of localism has been taken by many as the right to do what they want—that is, nothing—rather than to influence what is really needed. What can be done about it? Perhaps I can make a few suggestions to the Minister. If we are to achieve growth in the production of social houses—and growth in commercial house numbers, too—councils must feel that there is an advantage to their organisation and their community in passing planning permissions.

The new homes bonus is a good scheme but perhaps too small to work. It seems from the figures that the number of planning approvals has gone up, but I am always worried about whether the same definitions are being used. I suggest that the best figures are for houses built and occupied, as there is no advantage to the country in having permissions granted but not used. What would happen if the new homes bonus was trebled, but for one-third of the time of the original scheme—that is, for two years rather than six—and the bonus paid only for new homes built and occupied? Moreover, it should be free to be used by the council, not top-sliced to pay for LEPs.

Will the Minister consider urging her colleagues in the Treasury to do something about stamp duty? Many noble Lords and the Government have been urging the country to build new homes, which is great. Well, how can a tax on new homes, such as stamp duty, help that process? A possible way to slow down something is to tax it. Can we please try the reverse? A route to be studied would be to ensure that stamp duty on residential houses was paid to the local planning authority rather than to the Treasury. That would further incentivise the authority to get houses built and sold. When the Treasury became used to not receiving the income from stamp duty, perhaps after three years, then the tax could be abolished entirely. Would that not be a marvellous development?

00:00

[Lord Oakeshott of Seagrove Bay (LD)]

My Lords, it is a pleasure to follow the noble Lord, Lord Borwick, and to welcome him to this House. He has a distinguished business career in manufacturing but clearly speaks with great knowledge and expertise about the housing market. Abolishing stamp duty is a nice idea, but I do not know where the money is coming from. Perhaps I can say to him that the best way to raise a significant amount of money without stopping housing supply is to have the Liberal Democrat mansion tax, which goes on existing property and so does not affect supply.

I should declare my interests in the register, as did the noble Lord, particularly the fact that I am chairman of OLIM Property Ltd, which is a commercial property investment management company. I have bought about £100 million-worth of property during the past year all over the country, from Belfast to Ipswich, Preston to Leeds and Peterhead to Exeter. Although I am not operating in the housing market, I am obviously pretty close to what is happening in the local economies in those areas.

There is a simple and very serious problem that house prices are horribly and unaffordably high in this country. I go beyond the people who argue for stability, and say that prices are too high and need to come down. There are two simple reasons for this. We have built far too few houses for many years and we have also, in terms of affordability, sold off so much of the social housing stock. Two million houses were sold since Mrs Thatcher introduced the policy in 1979, of which three-quarters of a million—no less—were sold under Blair and Brown.

Under both Governments we had a failure to build, and a failure even to use what houses we have to best advantage. We are therefore left today with £23 billion of housing benefit being poured down the drain. Much of it is actually spent on the same council houses which were sold off, but the rent now goes to private landlords.

The result of this long-term lack of supply can be seen today in the ratios of earnings to house prices, which is the key measure of affordability. You do not, if you are wise, take a mortgage on the basis of this week’s special mortgage offer. Mortgage rates go up and down, but obviously what matters long-term is how your earnings compare to what you pay for the house. If I were to advise someone to rush out and buy a house on very low mortgage rates today, to be honest I would be guilty of mortgage mis-selling.

Going back to 1997, when Labour came to power, English house prices were three and a half times median annual earnings. Ten years later mortgage lending had trebled but there had been no net increase at all in house building, with the same number being built. The cost of housing index had doubled to a ratio of 7.2 at the peak of the 2007 boom. On the latest official figures, which are for April 2012, 18 months ago, it had only slipped back to 6.7 times annual earnings.

It is very likely that, with house prices rising five times faster than average earnings, that ratio is right back up past the 2007 peak. As a very good map in the Guardian last Saturday showed, the ratio is already above that peak in very many local authorities. These are mainly, although not entirely, in the southern half of the country, all the way from Somerset to Suffolk, in Devon and even one or two in Lancashire. It is not just in the centre of London. For example, housing in Welwyn Hatfield, the constituency of former housing Minister Grant Shapps, is now unaffordable. There houses cost eight times local earnings, even higher than at the peak of the boom.

I have also done some work on auction results and the housing auction market. This is a real market where real volumes change hands. The numbers are quite large, about 5,000 houses a quarter. In the last quarter, July to September 2013, the average price of a house sold at auction across the country rose by 14%. It rose by 16% in London, but still actually by 10% in other parts of the country. That statistic is more up to date than the Government’s Land Registry figures, which are on completions, and it goes further back. House prices are rising fast, and I am afraid that that is accelerating.

My noble friend Lord Stoneham asked for a long-term focus on housing. I do not know if 40 years back is long enough, but I remember buying my first home in 1972. That was in rather similar conditions to today, during the Barber boom. There had been a great relaxation of credit, and house prices had already gone up 40% or so over the previous year. I had quite a struggle to buy a house priced at £8,500 with a £7,500 mortgage. Two years later I had to come to London to be a special adviser in the 1974 Government, and mortgage rates had then gone up to 14%. Having saved up on my own to be a first-time buyer, I then had to be a second stepper with the bank of mum and dad behind me to have any chance at all.

We have had many, many experiences in this country of wild fluctuations in interest rates. Rates may be a little more stable today, but there is clearly a great deal of concern about the way they are going. That is being expressed by commentators from all sorts of backgrounds. I have here the HSBC chief UK economist’s research from last week, which argues that house price inflation will not help the UK rebalance and points out the problems of supply.

To return to what the noble Lord, Lord Borwick, was talking about regarding resistance to development, I am not personally against a bit of nimbyism, “not in my back yard”. After all, that is local democracy and people are able to argue that. What we must fight against is the attitude there often seems to be of BANANAism. I do not know if your Lordships’ know about BANANAism, but it means “build absolutely nothing anywhere near anyone”. I am afraid that that is the attitude of some people.

For a variety of reasons, we have had a serious shortage of housebuilding for many, many years. Lately, as my noble friend Lord Stoneham has said, it has been creeping up to 110,000 or 120,000 a year. It was down a couple of years ago to the lowest level in peacetime, since 1923, so, though it is picking up, supply is still far, far below what is needed even to keep house prices stable, given the growth in population, given the growth in household formation. The best estimates are that we need something like 250,000 completions every year just to keep up with increasing demand. To make any impact on the problem and keep house prices down or even make them a bit more affordable, we would clearly need to be up at 300,000 a year.

I very much hope and believe that the Liberal Democrat manifesto at the next election will have a commitment to that. However, a commitment is one thing—getting on with progress towards it now is quite another. There has been quite a bit of talk about Help to Buy and whether that—as I believe it is—is quite dangerous, given the way it has come in, with a limit of 25 times national average earnings, £600,000 a year. Like my noble friend Lord Stoneham, I think it should be limited to areas where the housing market is not so overheated as the south-east of England. It certainly does not need to be at anything like that high a level when you consider that across a lot of the country house prices, certainly for first-time buyers, are much more like £100,000 or £150,000.

We have another problem. There are two reasons house prices did not fall as much as one would have expected during the crash, and why they have gone up faster than they otherwise would have done. One is, of course, quantitative easing—£370 billion of credit pumped into the economy—which was necessary to avoid the economic patient dying of a heart attack at the time but has a lot of serious after-effects. The other is the Funding for Lending scheme. Just in passing, again, if you think this is wild left-wingery from me, the chief executive of Legal & General, no less, was describing quantitative easing as a policy devised by the rich for the rich. There is no doubt that it has helped push up prices of all sorts of assets, including housing.

The Funding for Lending scheme of the Bank of England has significantly failed to do what it is meant to do, which is to get cash to small businesses. Instead, it has led to a flood of cheap credit in the mortgage market, which is not its point. The Bank of England and the Treasury, I believe, must refocus Funding for Lending on its proper task, which is to rebuild desperately needed business job growth, not to get the house price merry-go-round going again.

When Grant Shapps was Housing Minister, he did make a sustained—and, I thought, quite logical—case for stable house prices, even though I would like to see them lower. I am afraid now that he is party chairman, he seems to be almost in denial. The Government, I am afraid—Conservative Ministers, anyway—seem to be washing their hands of the high-house-price crisis, because that is what it is, in a way reminiscent of Pontius Pilate. We cannot pump up house prices unless we are much more radical about supply. I am afraid Help to Buy without far more active help to build is a potty policy.

15:28

[Lord McKenzie of Luton (Lab)]

My Lords, I thank the noble Lord, Lord Stoneham, for initiating this short debate. When he introduced it he referred to the noble Baroness, Lady Stowell, and welcomed her to the Front Bench. She is now a veteran of housing debates. This must be the third in a couple of weeks, with one to come next week. I enjoyed the contribution of the noble Lord, Lord Borwick, although I did not agree with much of it. I have enjoyed the contribution of the noble Lord, Lord Oakeshott, whom I found myself closer to. I am interested that he bought his first house in 1972 with a mortgage of £7,500. So did we. I think we were both at that time members of the Labour Party, so our histories have diverged a bit.

We know that housing is moving up the political agenda, and for good reason. We have a growing housing crisis because we are building less than half the number of homes we need to keep up with demand. The truth, as others have said, is that we have not been producing enough homes under successive Governments for some time. In the past three years the number of homes built has reached its lowest level in peacetime, since the 1920s.

The recent upturn in activity is to be welcomed, but there is a long way to go. Homelessness and rough-sleeping are increasing, and the number of families in temporary accommodation is rising. People are struggling to get mortgages to get on the housing ladder and there is a rapidly growing private rented sector where too many lack security, have to pay ever increasing rates and suffer poor quality accommodation. There are nearly 5 million people on local authority waiting lists and this housing shortage is central to the cost of living crisis. It now takes the average family more than 20 years to save for a deposit, and house prices are, I think, eight times the average wage. It is no wonder that home ownership has fallen for the first time in a century, and that there are now some 8.5 million people in private rented accommodation, spending an average of 41% of their income on rent.

If home ownership is to be a realistic aspiration for working people and rents are to be affordable, we need a step change in the scale of house building in this country. This will not, of course, be achieved overnight, and on present policy certainly not by 2015. We have seen a plethora of initiatives by this Government, but they have not delivered anywhere near what is required. On home ownership we have seen First Buy, launched in 2011 and closed in March of this year, followed by Help to Buy equity loans, followed by the NewBuy Guarantee Scheme and now Help to Buy brought forward from January 2014.

However, there are real concerns about the latest Help to Buy scheme. If the Government simply increase housing demand but do not act to increase housing supply, all that will happen is that house prices will be pushed up and up. The end result is that the very people that the policy should be helping—first-time buyers—will find it even harder to get on the housing ladder. How in touch are this Government who introduce a scheme allowing taxpayer-backed mortgages for homes worth up to £600,000 when the average house price in the UK is £245,000 and the average price paid by a first-time buyer if less than £200,000?

We are not the only ones voicing concerns; the Treasury Select Committee has done so, and the IMF has warned about its impact on rising prices. These issues have particular resonance in London and we have heard from the Business Secretary, Vince Cable, about soaring house prices being dangerous and unsustainable. The new homes bonus was designed to incentivise local authorities to approve new housing developments, but has yet failed to deliver.

In its report in March this year, the NAO concluded that there is,

“little evidence that the Bonus has yet made significant changes to local authorities’ behaviour towards increasing housing supply”.

On coming to office, the Government cut the budget for new affordable housing by 60% and put the strain on increased rent levels to fund such provision. Even then its claim to deliver 170,000 new homes by 2015 includes those commissioned by the previous Administration. However, the programme has got off to a slow start, and anyway, some half of the programme is back-end loaded and is due to be delivered only in the final year.

We will doubtless hear from the Minister about the reduction in the number of affordable homes under the Labour Government; in fact, the figure usually quoted is a reduction in the number of homes rented from local authorities and housing associations over the period, and does not take account of the wider stock of affordable housing. The reduction is a direct consequence of the Right to Buy programme, touched upon by the noble Lord, Lord Oakeshott, which is a policy that this Government are seeking to make more generous. In fact, under the previous Labour Government, nearly 2 million more homes were built in England, including half a million affordable homes, with 256,000 in the last five years.

It is not difficult to conclude in all of this that the patchwork of current initiatives will simply not produce the step change in housing provision which is required. We have a job as the Opposition to criticise, challenge and support where necessary the Government of the day. However, we are now doing more so that in May 2015, given the chance, we will be in a position to start seriously to close the gap between the homes that are currently being built and the homes that we need.

Ed Miliband and Hilary Benn have asked Sir Michael Lyons, supported by a panel of experts, to lead a new housing commission whose task will be to set out a road map for how an incoming Government can help secure a big change in the number of homes being built. Some of the policy solutions to a step change must include tackling land banking and speculation by looking at giving local authorities proper compulsory purchase powers so that they can buy, assemble and grant planning permission on land that is being hoarded and is holding back development and giving councils the power to charge people escalating fees for sitting on land with planning permission.

There must be planning to establish new towns and garden cities. The UK has never delivered a large uplift in housebuilding without large-scale development such as the post-war new towns. This will entail the creation of new town development corporations as public/private bodies with the power to raise finance, undertake building and provide infrastructure. It would also necessitate financial incentives and freedoms for local authorities within the scheme and a fast-track planning process under the nationally significant infrastructure planning regime.

We know that at present some areas want to grow to meet local housing demand but do not have land within their local authority boundary to do so. Neighbouring authorities block the building of badly needed homes and the duty to co-operate has yet to prove effective. We want to establish a “right to grow” status with bids from local authorities assessed by the planning inspectorate. We also consider that there is scope to reform the housing revenue account system and we are not unsympathetic to the proposition to remove the cap. We want to give local authorities greater flexibility so that they can build more social homes. A number of local authorities are already beginning to build again within the constraints they have but we want the commission to look at the obstacles to overcome and the incentives needed to get councils and housing associations back into the business of building again. Despite various attempts to do that through Section 106, the community infrastructure levy and the new homes bonus, we consider that there remains a significant mismatch between the national and regional need for further housebuilding and the incentives which local communities have to accept new developments, especially developments such as new towns.

We need to find ways of ensuring that a larger share of windfall gains from planning permission goes to local communities. One thing is certain: if we carry on as we are, by 2020 there will be 2 million few homes in Britain. Our aspiration is to see 200,000 new homes delivered each year by the end of the next Parliament. That would be a significant improvement but there needs to be a long-term national effort to turn this around.

15:37

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Stowell of Beeston) (Con)]

My Lords, I am grateful to the noble Lord, Lord Stoneham, for introducing this debate. As the noble Lord, Lord McKenzie, has just said, far from putting me on the spot, this is my third housing debate in the past two weeks. However, I am far from expert in this area and I recognise and acknowledge the great expertise of noble Lords who have spoken today. I also welcome my noble friend Lord Borwick. I have not had the pleasure of participating in a debate with him until today.

Before getting to the substance and specifics of the points raised by noble Lords, of which there are quite a lot, I shall start by speaking in general terms and move on in due course. The most important point to make at the outset is that the Government are committed to delivering long-term economic stability and economic growth. Our purpose and objective in that area have not changed. Whereas the previous Administration oversaw a housing boom and bust, we have done extensive work since coming into office to pick up the pieces. We have introduced a series of initiatives to boost housing supply, increase the provision of affordable housing and support a healthy private rented sector, and by tackling the deficit we are helping to keep down both interest rates and the number of repossessions. However, we are only at the start of a return to recovery. The housing market has turned a corner, but mortgage lending and loan-to-value ratios on new mortgage lending remain below their historic averages, while, relative to earnings, median house prices across England are at around the same level as they were in 2005.

I was pleased to hear the noble Lord, Lord McKenzie, acknowledge in his contribution that his Government did not build enough homes when they were in power. The housing supply today is at its highest since the end of the housing boom in 2008, with 334,000 new homes built in the past three years. It is worth noting that the Chartered Institute of Purchasing and Supply has said that activity in housing construction has been increasing at its fastest pace for almost a decade, and, as my noble friend Lord Stoneham has already acknowledged, starts are up by a third on last year. Indeed, the Royal Institute of Chartered Surveyors reported this week that housebuilding was picking up across the country, which is an important point since it indicates that recovery is not confined to one particular area.

We believe that we are making progress because of the policies that we have introduced and the investment that we have been able to make, and that that investment has been able to attract private sector investment as well. In the current spending round, we have invested £11 billion in housing, which has leveraged a further £15 billion from the private sector in affordable housing. In the next spending round, government and private sector investment will be in excess of £23 billion in new affordable homes, which will be supported by government guarantees of £12 billion to support homebuyers.

In response to many of the points that have been raised in the debate, if housebuilders are to build, they need to know that people will buy. Since the launch of the Help to Buy equity loan scheme in April this year, more than 15,000 reservations have been made for new-build homes. In total, we have helped nearly 30,000 people to buy or reserve a new-build property through a range of government-backed home ownership schemes, including the most recent initiative that was launched earlier this month—the Help to Buy mortgage scheme. This is aimed at people who, unlike the noble Lord, Lord Oakeshott, do not have a bank of mum and dad to rely on but still have every right to aspire to get on to the housing ladder.

The noble Lord, Lord Oakeshott, and others asked whether some of these initiatives were having the effect of creating a housing bubble. In the course of his contribution, the noble Lord referred to different economists and other experts. He will not be surprised to learn that I am about to quote from others who offer a different view. There are plenty of people who very much endorse what the Government are doing in this area. For instance, Huw van Steenis and Charles Goodhart from Morgan Stanley said recently that Help to Buy could help to stimulate far more housebuilding than many believe, while Ernst & Young stated earlier this month:

“The Government’s well-timed initiatives to revive mortgage lending have borne fruit, with prices and transactions recovering from their recent very low levels, in turn supporting the wider economy. The housing revival has given rise to concerns that the government’s interventions—including bringing forward the Mortgage Guarantee Scheme—risk stoking up a housing bubble, especially in London. In our view these worries are overdone”.

I will not repeat some of the national figures that have already been covered in noble Lords’ contributions, but many areas outside London are seeing much lower average prices today than before the housing boom in 2008. For instance, in my home town of Nottingham, in August 2007 average house prices were £103,000; they are now £86,000, which is 17% lower. In the Isle of Wight, which I know the noble Lord, Lord Oakeshott, is familiar with, the average price is 16% lower than previously. Certainly, transactions around the UK as a whole are way below what they were before the crash.

While I am on Help to Buy, I will respond to the point made by the noble Lord, Lord Stoneham, about reverting to a regionally focused Help to Buy scheme if house prices get out of hand in London and the south-east. It is far too early for me to give any response to that but I emphasise that, as the noble Lord knows, we have a proper regime with the Bank of England to monitor these schemes and ensure that they do not have a perverse outcome.

I think we all agree that owning your own house is an important part of our culture. It is a symbol of security and success, which people understandably aspire to. But increasingly, some people are opting for different choices. There is evidence that renting as a long-term option is something that people want, so we have also been improving the private rented sector so that it offers a real, positive alternative. As has already been mentioned, we are kick-starting the building of more private rented homes through our £10 billion housing guarantee programme and the £1 billion Build to Rent Fund, which means that blocks of flats or new estates will be built with the sole purpose of being for rent. Under the Build to Rent Fund, 44 projects have been shortlisted and the first scheme has been agreed at Southampton Quay. The noble Lord, Lord Stoneham, asked about targets for this scheme. It is important to emphasise that this is a demand-led scheme, not one that we would start off with a target for. We want to see how demand for it develops.

Moving from the private rented sector back to affordable housing, the noble Lord, Lord Stoneham, was right to emphasise the importance of supplying social housing alongside new private sector homes. We are building more affordable housing. As the noble Lord, Lord McKenzie, predicted, I will remind your Lordships that the previous Administration saw a reduction in the stock of social rented homes of 420,000. I am glad not to have disappointed him. He questioned whether our Right to Buy scheme, which supports those in social housing who want to go on to purchase housing, is the right measure. I think that it is, because of the reasons I have just given about the importance to people of owning a home.

It is important that we continue to build new houses. In this spending review period alone, with £19.5 billion of public and private funding, our affordable homes programme is on track to deliver 170,000 new affordable homes between 2011 and 2015. The noble Lord, Lord Stoneham, asked for an update: half way through, 84,000 households have already moved into new affordable homes. In the next spending period, we are looking to build a further 165,000 such homes. So there is real effort and impetus in that area. We are also making a great effort to release public sector land so that it is available for new build.

Noble Lords raised questions about garden cities. Our approach is about supporting local areas to develop large-scale schemes while making sure that they are driven by local areas. We have a fund to support that and there is some evidence of action in that area, which I do not have time to offer in detail.

Noble Lords covered various matters to which I have not responded. However, there are points I would like to make because there is quite a lot of action that is worth sharing more widely. I will write to noble Lords and put a copy of that letter in the Library.

My noble friend Lord Borwick had two innovative ideas, including one of trebling the new homes bonus for a third of the scheme, which I will take back to colleagues at the department. As to his suggestions on stamp duty, I know I was promoted a couple of weeks ago but I did not get as far as becoming Chancellor of the Exchequer, so I hope he will forgive me if I do not comment on that proposal. However, I will of course make sure that my right honourable friend the Chancellor is aware of what he said today, and will follow up any further questions in writing.

15:51

Sitting suspended.

Natural Capital Committee

Thursday 24th October 2013 Grand Committee

Question for Short Debate

16:00

Asked by

[Baroness Miller of Chilthorne Domer]

To ask Her Majesty’s Government what changes they will make in resource allocation in the light of the assessments of the Natural Capital Committee.

[Baroness Miller of Chilthorne Domer (LD)]

My Lords, the Natural Capital Committee is clearly a bit like a bus. There has been no mention of it in either House for ages, and then suddenly this week two debates come along at once. I am delighted about that. We are privileged in this House to have the Defra Minister responsible for it, my noble friend Lord De Mauley, to respond to us.

Although the Natural Capital Committee deals with many Defra matters, it was commissioned by the Treasury and reports to the Economic Affairs Committee of the Cabinet, which is chaired by the Chancellor of the Exchequer. The NCC’s job is to advise the Government on the state of English natural capital. The establishment of the NCC is one of the rather quiet but very significant things that the coalition has done. It is part of a package. In 2011, the Government also introduced the natural environment White Paper The Natural Choice and the UK national ecosystem assessment which shockingly found that one-third of the UK’s ecosystem services was declining severely. If the UK’s ecosystems were protected and enhanced, they could add at least an extra £30 billion annually to the UK economy. By contrast, neglect and loss of ecosystem services can cost us as much as £20 billion a year.

The Government made these moves as part of a plan. Previously, successive Governments and the public have really thought about natural capital only in response to a crisis, some sort of wake-up call, whether floods, droughts or food prices. The coalition Government were certainly reminded early on of just how much the public value natural capital when they announced their plan to sell off UK forests. The coalition Government learnt that the public value natural capital, even if they do not consider all parts of it.

I was moved to bring this debate as a result of a conference on soils. Soils are perhaps the most vivid illustration of our natural capital. The development of soil takes between 500 years and perhaps 10,000 years. Even a centimetre of topsoil takes at least 200 years to develop. Soil is the basis of our food production, but it is much more than that. It is important for carbon storage, water absorption and water filtering, and is crucial as the first layer in the food chain. How have we treated this virtually irreplaceable resource? We have allowed it to be eroded, polluted, washed away and built over. People may own the land, but the timescale that soil takes to form puts it into the category of a real commons for the nation—or natural capital.

Let us take another part of our natural capital that has been the subject of debate in our Chamber recently: bees. Pollinators are—to mix my metaphor—perhaps the canary in the coal mine. We do not know why bee colonies have collapsed; there seem to be several possible contributory factors. Only recently have people begun to appreciate that, beyond the luxury of honey, the pollinator services of bees and their many pollinating relatives are critical to food production. The collapse of bee populations is mirrored by those of frogs and other amphibians. Could it be that the use of substances such as neonicotinoids is having a much wider effect, or is it the cocktail of pesticides that needs further examination? It has always seemed bizarre to me that a product is tested alone when in reality a cocktail is being used out there.

That brings me to the first question for my noble friend. The NCC rightly sees developing a research agenda on natural capital as a priority. The research agenda on the constituents of natural capital is badly in need of some major help and overhaul. I have seen plenty of evidence which suggests that attempts to ensure the future health of our natural capital might be undermined unless research priorities are better aligned to overall needs and move away from the quick buck producing areas. The determinants of innovation and factors that influence research choices, such as science policies, public-private partnerships and the career paths available, all combine to favour technological regimes that tend to suit very focused, reductionist approaches rather than the holistic ecological approach that is needed to address ecosystems and the sort of complex interactions that we get between, for example, soil and water. Can my noble friend confirm that the Government will ensure a move to a more appropriate balance of research?

I have referred to a few other elements of natural capital such as water, minerals, stone, gravel and energy sources, whether oil or gas. They are all part of the natural capital that is fundamental to our manmade economy and society. We could not have a manmade economy if it was not underpinned by all those elements. Our failure to adequately protect our natural capital could well be a fatal step towards an economy that diminishes severely over time.

One of the problems is that efforts to protect our natural capital have too often been made on the basis of the intrinsic or aesthetic value of, say, woodlands, uplands, clean streams or bird populations. I accept that we may succeed in better protection if we explicitly demonstrate the value that society places on our natural assets, thereby protecting and maybe even enhancing them for future generations. The Natural Capital Committee is part of that effort. The first annual report of the NCC earlier this year contained a number of important recommendations, and I wonder if my noble friend would be able to comment on one of them. The NCC stated that,

“the Government’s efforts to reform the Common Agricultural Policy be intensified, with a long-term view to phasing out Pillar one support and moving subsides towards Pillar two and the provision of public goods”,

and thereby,

“securing as much flexibility as possible in how funding can be allocated for the period 2014-2020”.

If my noble friend could tell us how that work is going, I would be grateful. Will he also encourage the NCC to consider who should be the innovators of these approaches? Clearly, there will need to be some pilot areas; the national parks are one obvious example, but what about the Crown Estate? It is also responsible to the Treasury, and there it is with swathes of our natural capital under its management. Surely it should be a cradle of innovation.

I have a few comments to make on the NCC itself. It held a useful open event at the Royal Society and its first annual report is quite readable. However, the minutes of the NCC are dry to the point of desiccation. This is important because it needs to be outward facing if it is to succeed in integrating the thinking that is being developed into the mainstream and make it the discussion of the day in boardrooms. It will also need to develop some work with institutions such as Cranfield because it is disappointing to read that the Committee concluded,

“that it is not currently possible to identify with any certainty precisely which natural capital assets are being used unsustainably, especially given the available data and knowledge about limits and thresholds”.

That seems to be under-ambitious, although the Committee does go on to say that the rate at which natural assets are being consumed is “unprecedented”.

In conclusion, I must say that there are plenty of cynics out there who think that the NCC is just a way to suggest that the Government are after some green credentials. Whether that is the case or not will be proven in whether policies start to shift in decision-making across all departments, and by the Treasury itself in the way it allocates resources. We need some startling, if welcome, decisions and some much more radical policies.

The next debate, which my noble friend is also going to answer, is on the Thames Tideway Tunnel. That is a good example of what I am talking about. Faced with the same sort of problem as London, the city of Philadelphia chose a radically different solution, avoided many costs, enhanced its environment amazingly and brought solutions down to a neighbourhood scale. The NCC is perhaps looking at such worldwide examples of practice that could help its deliberations, and I hope that the noble Lord, Lord Berkeley, may go into the Philadelphia example. The NCC is subject to review in 2014, and I certainly hope there will be no question but that it should continue. We really need its work.

16:10

[The Earl of Courtown (Con)]

My Lords, I thank my noble friend Lady Miller of Chilthorne Domer for initiating this debate. Her speech was very educational, and told me much about natural capital that I did not already know. I read the debate in the Commons earlier this week, and so far today I have learnt a little bit more about it. I look forward to hearing what the noble Lord, Lord Grantchester, and my noble friend the Minister have to say.

In the debate in the Commons on Monday, my right honourable friend the former Secretary of State at Defra, Mrs Spelman, made a very telling and—as expected—well informed speech which emphasised the importance of this subject. She stated:

“We had the lofty ambition … of being the first generation to leave the natural environment in a better state than we inherited”.— [Official Report, Commons, 21/10/13; col. 101.]

This sets the bar very high indeed, but so long as we work towards this aim it must be better for our environment and for the people who come after us.

The United Nations Environment Programme calculated that although overall wealth in the United Kingdom increased up to 2008, during the same period natural capital decreased by 30%. These are similar figures to those already quoted. Much work is required here. It will be interesting to hear my noble friend the Minister’s response to any foreseeable changes in policies relating to natural capital and its future.

As my noble friend said, the White Paper published some years ago also introduced the national ecosystem assessment. This was developed with the help of scientists as a measure of natural capital, which is not an easy job in itself. We must not forget that environmental legislation has done much good. For example, it has transformed watercourses, many of which were very badly polluted but which have now improved in many places throughout the country.

I give another example of how important infrastructure is to natural capital. I had some experience of this in an area of which my noble friend the Minister might be aware, in Priory Vale, north Swindon. There was an extensive development programme there, involving some of the biggest housebuilders in the United Kingdom. I was involved in the planting of native trees, shrubs and hedges, using the old hedge lines and retaining the old hedges and ancient oaks. There are green corridors throughout this development which are so important for the environment, and make it a much more pleasant place to live. There is a lot of benefit from that, which people have been trying to measure as well.

It is welcome to hear that the Natural Capital Committee may be chaired by Professor Dieter Helm. It is relevant to both the Treasury and Defra. The Natural Capital Committee information pack refers to its work programme and in particular to its annual report. It works with Defra, the Office for National Statistics, landowners, academics and the research councils.

I would be grateful if my noble friend the Minister could inform the Grand Committee how the NCC works with other departments. Perhaps he could draw to our attention—I refer to my example of Priory Vale—how the NCC works with planning regulations to ensure that where development does take place the land used is replaced as much as possible with other green areas.

My noble friend reminded me earlier, before we started this debate, about the previous time we were both speaking in this Room, when we were discussing a possible Severn barrage. It is absolutely frightening to think of the debit on the natural capital balance sheet if that project had gone ahead. I look forward to what the noble Lord, Lord Grantchester, and the Minister have to say.

16:15

[Lord Grantchester (Lab)]

I thank the noble Baroness, Lady Miller of Chilthorne Domer, for tabling this debate this afternoon. It gives the Committee the opportunity to debate the first report of the Natural Capital Committee, issued in April this year, following its establishment in May 2012. There has always been a debate around the relative merits of the environment when set against economic development and around how to translate this into public policy priorities. The debate initially focused on sustainability, with the thought that competing claims had to be balanced between two polarities. When English Nature was set up some 10 years ago, sustainability was likened to a stool with three legs: the first leg being the economy, the second the environment and the third, in equal balance, being communities or society. At that time, debates contested whether it was possible to balance these competing aims and whether economic benefit would take precedence or the environment should be given an overriding veto.

The difficulties in settling this debate can be readily appreciated when there is no clear and independent assessment of value. When the environment, or elements in it, can be described, in the classical sense, as a free good, how can it be assigned a value? Meanwhile, the degradation of our environment here in the UK and internationally could not be denied. The effects of waste and pollution in one country are often visited on its neighbours. Nature and the environment cannot simply be seen as isolated elements or units in a biodiversity action plan, such as one to increase songbirds. Instead, the natural environment needs to be assessed and valued as an ecosystem. No longer can this be seen as an either/or debate; instead it must now be recognised that nature and the environment represent a complicated, interrelated system. A properly functioning natural environment is the foundation of sustained economic growth and prospering communities. It bears repeating that we need to create a green economy, where economic growth and the integrity of natural resources sustain each other and the consequences of actions and decisions better reflect the importance of the environment.

Although some may find it reprehensible to try to assign value to natural capital, nevertheless the widening recognition of other assets, such as intellectual property and brand values, perhaps points to natural capital accounting as the best way forward, especially across continents, cultures and national governance divergences. In advising the Government on the state of natural capital in England, the Natural Capital Committee set out to do three main things: first, provide advice on when, where and how natural assets may be being used unsustainably; secondly, advise the Government on how they should prioritise action to protect and improve natural capital and the environment through its methodology; and, thirdly, advise on research priorities to improve future advice and decisions on enhancing natural resources and natural capital.

In reporting directly to the Cabinet’s Economic Affairs Committee, it must work across government and have an interdepartmental profile. It will not be lost on many that this is where it is most needed—under the nose of the Chancellor of the Exchequer. The committee could be seen to have already had an effect on resource allocation and decision-making through its advice on accounting for forest assets in response to the recommendations of the Independent Panel on Forestry, which was set up following the disastrous disregard for woodland assets in the early days of the coalition.

The committee has produced an interesting and thought-provoking first report. The Woodland Trust urged the Government to adopt the committee’s recommendations, stating that the extent to which the NCC informs policy will be a key test of the natural environment White Paper and its ability to achieve a paradigm shift in how nature is valued. With the disastrous lack of border controls and risk analysis of tree diseases in the UK, better protection of our natural assets means, to the Woodland Trust, stronger and better enforced planning protection and robust action on tree diseases. The UK’s woodlands are vulnerable to the effect of historical fragmentation and a continual drift towards decreasing diversity.

The report made reference to trends in UK fisheries but made no reference in its recommendations to the marine environment. This is perhaps a glaring omission that the committee should correct as soon as possible. In the four years since the Marine and Coastal Access Act 2009 was passed, the designation of the first tranche of up to 31 marine conservation zones is still awaited. These sites represent less than a quarter of the sites proposed to achieve an ecologically coherent network, known as an ECN in the jargon. The designation of a network of marine conservation zones is vital to stemming the degradation of the marine environment. Does the noble Lord agree that this is perhaps one of the most pressing issues that his department should be tackling? Will he put the marine environment at the heart of the debate on the EU fisheries policy? Will he ask the Natural Capital Committee to undertake some work on this for inclusion in any report it might produce in 2014?

The committee made 13 recommendations in its report. Will the Government be making a more comprehensive reply beyond the succinct, one-and-a-half-page letter dated 22 May 2013? I believe that the committee deserves better. It is interesting that the committee wishes to develop a framework to define and measure natural capital by drawing on data across departments. If it follows the UN’s global standard known as the System of Environmental-Economic Accounting, will that fall foul of the UK’s data protection laws? It will be interesting to hear the accountancy profession’s assessment of this, as well as of the Prince of Wales’s Accounting for Sustainability project.

The accounting profession will be very familiar with the notion of a risk register as set out in the second recommendation made by the committee. The risk register will identify a range of risks and make assessments against the size of the impact and against the likelihood of occurrences. Will the Minister comment on whether the Government see this as a useful tool to inform practical applications in policy and decision-making? While some may find it difficult to identify the practical usefulness of natural capital accounts, risk registers throughout government applicable to ecosystems and regions could develop into a useful policy assessment tool. Are the Government actively considering this recommendation?

In the thesis undertaken by Mr Christopher Baldock of Imperial College London, Opportunities for Development, he states that the main reasons given for the lack of use and integration of natural capital accounts in decision-making were identified as the lack of a recognised framework of evaluation methodologies, too many ad hoc initiatives hampering development and the lack of recognised uses and application of accounts. Have the Government considered how this could be tackled and improved? How will they identify and embed best practice in the uptake of methodologies across the public estate?

The report identifies the United Nations Statistical Commission of the System for Environmental-Economic Accounts as a major step forward and, importantly, that this system uses the same accounting conventions as the UN system of natural accounts. The report sees UK environmental accounts as limited to a number of physical flows and natural resource assets accounts that include only partial aspects of natural capital. They are not currently aligned with ecosystem accounting and do not provide a fully integrated account of the stocks, flows and changes over time. Can the Minister update us on whether his department has asked the Office for National Statistics to prioritise activity on this?

Will the Government press for an international natural capital accounts body to co-ordinate efforts and collaboration between states and between corporate and international bodies? There is a need to link up and demonstrate the importance and usefulness of accounts if natural capital accountancy is not to fade slowly away from being central to the green economy.

Much debate could be had on each of the other recommendations of the report, not least its comments on agriculture and the natural capital of the countryside in relation to bees and other pollinators, a subject that I know is most dear to the Minister. It must be borne in mind that agriculture exists in a food chain, and that the actions of all in that chain, not least of food retailers in setting the price of food that the consumer pays, have a bearing on agriculture’s ability to respond. These are important matters in the redesigning of the common agricultural policy. The five lines on this in recommendation 13 are incredibly flippant and risk alienating one of the most important communities whose good will is vital in maintaining the nation’s natural capital—the farming community.

I end with one or two remarks on offsetting. The report has merely one sentence on this, which states:

“Offsetting and other forms of compensation are explored after a clear set of principles and a policy framework have been developed”.

Quite simply, offsetting means that if a developer is going to build something that will damage or destroy a habitat of conservation value, it must buy a biocredit to compensate for that loss elsewhere. I find this incredibly dangerous because it sends the mixed message that it is somehow all right to denigrate our natural assets in exchange for making a payment to a good cause. It is the equivalent of having an environmental swear box. Disconcertingly, this was picked up and referred to in the Secretary of State’s page-and-a-half letter to the committee, which stated that the Treasury was particularly engaged in exploring this potential. While the Government may warmly welcome the committee’s ongoing input, I urge them to dismiss this as a very retrograde and dangerous activity to promote.

That said, the committee’s first report is very provocative. The state of natural capital in the UK is at a critical point. Recognition of the committee’s work from the Government who set it up must amount to more than lip service. With the debates over decarbonisation targets and climate change at the forefront of public policy, the Minister’s department should respond more constructively to the committee’s recommendations. I look forward to the review of the Natural Capital Committee in 2014.

16:27

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord De Mauley) (Con)]

I start by thanking my noble friend Lady Miller of Chilthorne Domer for raising this important issue today. I welcome the chance to discuss the vital topic of England’s natural capital. As my noble friend set out, our natural capital provides a range of essential services to society. We all rely on the benefits of natural capital for our clean air, water, food, energy and well-being.

The contents of my noble friend’s speech and, indeed, that of the noble Lord, Lord Grantchester, draw me to make a couple of declarations of interest. I have a farm with a river running through it and some trees growing on it, so I hope noble Lords will appreciate that I come to this with an interest in, and a limited amount of knowledge of, some of the issues.

[Lord Grantchester]

The Minister’s comments remind me that I omitted to declare my interests in the farming field.

[Lord De Mauley]

My Lords, natural capital therefore underpins two of the Government’s key priorities: encouraging economic growth and enhancing the natural environment. These two agendas are not mutually exclusive. In fact, the sensible use of our natural assets is an essential precondition of our prosperity.

In its first report, The State of Natural Capital, published in April this year, the Natural Capital Committee made just this compelling argument: that long-term economic growth will be undermined if we continue to erode our natural capital. The Government agree: long-term prosperity is possible only if we preserve the foundations on which our economy and well-being are based.

It is therefore crucial that we measure, value and protect our stocks of natural capital. Indeed, this is why the Government set up the independent Natural Capital Committee in 2012, the first of its kind in the world. The committee has been asked to provide expert, independent advice to government on the state of England’s natural capital assets. In the past, the benefits that flow from our natural capital have too often been taken for granted, and as a result our assets have become eroded.

The job of the Natural Capital Committee is to highlight where we are not on a sustainable path and advise the Government on how they should prioritise action to protect and improve natural capital. This will help us deliver on the White Paper commitment to leave the natural environment in a better state than that in which it was inherited.

I read with great interest the Natural Capital Committee’s first report earlier this year, which set out its views on why valuing, maintaining and restoring natural capital is important. It also presented initial evidence of the benefits of incorporating natural capital into decision-making at all levels.

As my right honourable friend Owen Paterson’s and the Economic Secretary to the Treasury’s official response to The State of Natural Capital makes clear, the Government welcome and fully support the analysis offered in it. However, the specific issue of what resources have been reallocated in light of the Natural Capital Committee’s assessments is as yet difficult to address. I shall discuss that a little more in a moment.

The committee’s first major publication was a framework-setting document that principally set out what it was going to do to inform its next annual report. It contained no substantive recommendations to the Government that required an immediate change in resource allocation. Rather, the majority of the recommendations referred to work that the NCC is undertaking. For example, one of the key recommendations was to develop metrics to value and measure changes to natural capital. This is a job that the committee is undertaking. It is currently doing excellent work to advance our understanding of England’s natural capital assets. This will be reported on in the second state of natural capital report.

As we have yet to be advised to take specific substantive action, it is not yet possible to attempt meaningfully to hold government to account on the Natural Capital Committee’s recommendations. One potential exception to this is the Government’s work to develop national natural capital accounts.

The Natural Capital Committee recommended that work led by the Office for National Statistics to produce UK environmental accounts should be,

“given the greatest possible support by Government”.

I can confirm that that is the case and, despite the scale of the challenge involved, work is progressing well. My department and the Office for National Statistics are working closely with the Natural Capital Committee to ensure that the accounts are completed on target by 2020. Resource had already been allocated to this work.

The noble Lord, Lord Grantchester, asked whether we will produce a full response to the committee’s next report. We are very much looking forward to it. We will respond appropriately once we have seen what the report contains and have had chance to consider it.

Another area where resources are being committed to the important subject of natural capital is research—my noble friend Lady Miller referred to that. Following discussions with the committee, the Natural Environment Research Council recently announced that it was contributing £5 million to a programme that will deliver on the research priorities of the NCC and its aim to improve understanding of how the state of the natural environment affects the performance of the economy and individual well-being. This is good news and another sign of how seriously the work of the committee is being taken.

In addition to the Natural Environment Research Council’s important contribution, the Natural Capital Committee is undertaking some research of its own to enhance our understanding of natural capital, which it will advise on in its second state of natural capital report. We are very much looking forward to reading that report, the development of which is under way. It will be submitted to the Economic Affairs Committee in early 2014.

It is, of course, too early to speculate what resource implications this may have for the Government, but we will consider them at the appropriate time. I appreciate that there is eagerness to push forward with the natural capital agenda, and that eagerness is shared by Defra and the rest of government.

My noble friend Lady Miller highlighted the importance of soils, and I echo her enthusiasm for them. We recognise that soils are an essential part of our natural resources and support food production, carbon storage, water filtration, biodiversity and wildlife. I can find little to disagree with in what she said about them.

She also spoke about bees and pollinators. The noble Lord, Lord Grantchester, also mentioned them. Noble Lords may like to know that today we are holding a workshop of interested NGOs and other parties on the national pollinator strategy. We are working towards the publication of a document at the end of the year which will go for consultation with a view to finalising it in spring 2014. I am excited about that.

My noble friend asked about the common agricultural policy and the extent to which we are moving in what one might describe as away from subsidising production towards paying for environmental benefit. The United Kingdom has always made clear that we would like to move away from subsidies in the long run. We support a greener cap with the emphasis on Pillar 2, recognising that there is scope for using taxpayers’ money to pay farmers for public goods that the market otherwise would not reward, such as protecting the natural environment and supporting biodiversity. We negotiated hard to secure a final outcome that was a significant improvement on the Commission’s original proposals, but it is very disappointing that we did not get as far as we would have liked. Securing the flexibility to transfer up to 15% from Pillar 1 to Pillar 2 was a good outcome of this set of negotiations. The Government have always made the case that transferring funding from Pillar 1, which is subsidy, to Pillar 2, which is in favour of the environment and the rural economy, represents the best use of taxpayers’ money while supporting farmers to deliver the valuable goods and services that the market left alone would not provide.

As part of our consultation on the implementation of the new cap in England, we would welcome the views of interested parties, including, of course, noble Lords, on how much that transfer should be. That consultation will commence shortly.

My noble friend also mentioned the Thames tunnel, but in the interests of economy of time, I hope she will forgive me if I leave that until the next debate.

My noble friend Lord Courtown mentioned work he has been doing in the north Swindon area, which I know well. He talked about retaining existing features—hedges, trees and so on—while conducting development between them. I congratulate him and thank him on that.

My noble friend asked about co-operation between Defra and other government departments on natural capital. The natural environment White Paper is a cross-government document. It contains a number of important cross-government commitments, and we have made good progress on them. We work closely with the Treasury and have produced new supplementary Green Book guidance for all government departments on valuing nature in policy appraisal. The Natural Capital Committee will report to the Chancellor’s Economic Affairs Committee. In the planning system, the new NPPF is a good outcome. I regularly meet Ministers from the Department for Communities and Local Government. There is also good work in the area of schools and health, so I can confirm to my noble friend that we work across government departments.

The noble Lord, Lord Grantchester, raised a number of issues. In forestry, he will know that we have accepted the vast majority of the recommendations of the independent panel led by the right reverend Prelate the Bishop of Liverpool, who we thank enormously for his work.

The noble Lord spoke about tree diseases and pests. He will know that since concerns about Chalara arose some 12 or 13 months ago, we have developed a risk register of pests and diseases, and we have progressed substantially with contingency planning. Both those elements were recommended in a report by the experts we convened.

He asked whether the Government will provide advice on marine conservation zones. The NCC’s terms of reference are very clear that the committee may not perform a watchdog or advocacy role with respect to government policy decisions or be policy prescriptive in its advice. However, the NCC is interested in all categories of natural capital and will provide advice on whether all assets are being used sustainably.

I am running out of time. If I have not answered all noble Lords’ questions, I will write to them. I ask your Lordships to accept that we have already shown international leadership in this field and no longer take our natural capital assets for granted. We recognise that natural capital is integral to delivering sustained, and sustainable, economic growth in England. As a result, the Government fully support the work of the Natural Capital Committee and are looking forward to its upcoming advice.

16:40

Sitting suspended.

Thames Tideway Tunnel

Thursday 24th October 2013 Grand Committee

Question for Short Debate

17:00

Asked by

[Lord Berkeley]

To ask Her Majesty’s Government what assessment they have made of the proposals for the Thames Tideway Tunnel.

[Lord Berkeley (Lab)]

My Lords, I am pleased to have the opportunity to debate this important project. It is not the most popular time in the House of Lords weekly calendar, but it is still good to have the opportunity. We have had a number of Questions in short debates over the months and years, but I think it is timely to put some markers down because the Tideway tunnel is at the IPPC for determination. There is a new report from the Environment Agency on SDS—it is interesting, the delay in publishing; I know it has been around for several months. Perhaps this debate has hastened its publication. There is a call by Thamesbank, the Environmental Law Foundation, supported by Sir Ian Byatt, the former director general of Ofwat, and many others for a review of the national policy statement for waste water. It seems a good time to have a debate.

I think the project of the Thames tunnel has become a kind of rollercoaster with its own momentum, but it is based on some seriously flawed and out-of-date data and the failure to properly consult or to consider alternatives which could put £70 to £80 a year on Thames Water’s customers’ bills for perhaps 100 years. It could also possibly incur a large amount of taxpayers’ money because Thames Water’s finances are in a pretty unhealthy state. Before the Government commit to such an expensive project, I believe it is essential that an independent and wide-ranging assessment be made of the alternatives using the latest data—and I mean the latest data. It should take into account the contribution that can be made by better sewer maintenance, the combinations of engineering solutions that can achieve the desired environmental objectives without involving excessive costs, the financial options available to pay for these solutions, the interaction between the choice of scheme and the method of financing, and of course the insertion of conditions that would prevent the recurrence of the payment of excessive dividends by Thames Water.

What are the issues? The first issue is that the data on which all these studies have been based are out of date, and I would suggest they are inaccurate. The baseline goes back to the Thames Tideway Strategic Study group, which worked between 2000 and 2005, when the chair was Professor Chris Binnie. On the basis of this information the Government in 2007 announced that they were going to promote this project and the national policy statement was based on the Thames Water 2010 needs report.

There are a number of serious errors in these reports. It is extraordinary that the Thames Tideway Tunnel website says there are going to be 39 million tonnes of untreated sewage flushed into the Thames in a typical year. Professor Binnie, in his latest report—which I think the Minister now has—points out that, after the various upgrades already in hand, and when the lead tunnel is complete, this will fall to 17 million tonnes. That is less than half. The problem has halved. So why is Thames Water still saying it is 39 million?

Mogden sewage works has been upgraded. It originally had about 110 CSO spills a year. It now has about nine. That is quite surprising because the European Commission has suggested a maximum of 20 spills a year as acceptable, so Mogden passes the test. Binnie also states that Thames Water assumes that sewer flows will increase by about 13% up to 2021. This of course depends on the water delivered to customers which then go to sewage flows, and there is the issue of leakage in the sewer systems. The Thames Water Resources Management Plan says that, despite the population rising in 2021, the water delivered—hence, the discharge to the sewers—will go down, as will the leakage and, presumably, the sewer infiltration. This is another 23% reduction.

Professor Binnie states:

“In my view … the sewer system model should be looked at again to see what would be needed to meet the EC criterion, particularly with the water delivered to households and non-households, and water pipe leakage reducing, and hence sewer flows, reducing in the years ahead. This would provide more sewer capacity available to cater for storm flows, hence spill frequency would reduce further”.

The problem is that Thames Water seems to be in denial about the volume of leakage and the effect of meter installation. It is also failing to maintain the sewers properly to maintain the necessary storage capacity. I recently met Dr Jean Venables, former president of the Institute of Civil Engineers, who commented about the Kingston “fatberg”—noble Lords might like to know was made of wrongly flushed festering food fat mixed with wet wipes—which reduced the capacity of the sewer to 5%. Is Kingston special or is this a common occurrence? We do not know but perhaps we should.

I am convinced that Thames Water and the Government have failed to look at alternatives. The only study of alternatives relied upon was the SuDS Evaluation for Example Areas by Professor Richard Ashley, which is included in the planning application but is not for comment. Professor Ashley recently stated very clearly that the terms of reference were too narrow and the time and resources dedicated to it were inadequate. I could go through the terms of reference but I think that in the time available I should not. He said they were really too narrow and the results could not be relied upon.

Now we have this Environment Agency report, published just yesterday. It needs careful study, but it appears to repeat many of the errors that have made since 2005. Most importantly, it presents SuDS as the only solution. I do not think anybody has really said that SuDS is the only solution; it is a contribution to the solution but there are other things, some of which I have mentioned and some of which Professor Binnie has mentioned, which could also be used. The report does not really help in either way. Before embarking on a £4 billion-plus project, there should be an obligation on government to provide up-to-date and independently verified data, along with an objective comparison with alternatives. We do not have that at the moment.

So what is to be done? I have outlined the strongly expressed views of a number of experts who believe that the problem is much smaller than was originally believed. It is possible to start SuDS in a way that would work in this country. It is a pity that the Environment Agency did not talk to the people in the US—maybe it did but it is not in the report—about the successes in Philadelphia: technical, engineering, and of course the legal and property issues as well. I have talked to the Americans and I think it could be done in this country. Thames Water could lead, fund and organise it, overseen by Ofwat, using separate arrangements for domestic properties, commercial properties and local authorities, with incentives built in through their sewerage charges. I suspect that Thames Water would be highly unenthusiastic about this but it is a regulated industry.

This leads to me to Thames Water the company, and what Ofwat is doing to ensure that the company is fit for purpose. We have discussed its financial situation in this House several times before, but it is odd that there is a problem over who will actually do the work, who will fund it and what the risks are. Martin Blaiklock, an independent consultant who has worked on this, believes that the Government and Ofwat will face an uphill task in financing such an expensive and long drawn-out project with a very high construction/completion risk. Of course, there is also the revenue risk and one has to ask: who is the customer? How much will the tunnel be used? Where is the revenue stream? Should there be a separate tunnel company? If so, what should be its relationship with Thames Water? What happens if the customers do not pay?

I think there is a question of whether such claimants, if they did or did not happen, would be seen as a contingent liability for Thames Water? That could have an indirect negative impact on its financial strength and threaten its investment grade status. Mr Blaiklock even suggests that because the tunnel option is a Thames Water concept derived out of its licence, many will say that the liabilities for this, as an independent company, should reside with Thames anyway. Any proposed structure as set out above may have echoes of Enron economics, which I am sure we do not want to see.

Perhaps it is not surprising that the Government, Thames Water, Ofwat and the others are taking so long to decide how this should be done. Martin Blaiklock concludes that given the alternatives to the tunnel option, which are gaining reality daily, for example SUDS variants, a prudent Government should forget the tunnel and choose the course of lowest financial risk and cost to Thames' customers and the taxpayer. I cannot but agree with him. It really is time for a wide-ranging study of the alternatives.

17:11

[Lord Stoddart of Swindon (Ind Lab)]

My Lords, I support the noble Lord, Lord Berkeley, who has been one of the parliamentary leaders against this particular tideway scheme, and indeed the sole leader of the campaign in the House of Lords. He needs to be thanked for his efforts, so I have come along, not as an expert in any way and not as a Londoner, but to give him moral support. I represented Swindon in the House of Commons and I live in Reading. Although I have no interest as a Londoner, I have some interest as the former representative of the people of Swindon and as a resident in Reading who will be expected to pay an extra £80 to £90 in perpetuity for a scheme which will only benefit Londoners. That might sound parochial, and of course it is, but nevertheless people living outside London have an interest and really need to have their position considered.

I know a little about the water industry because I was elected to Reading Borough Council and served there for 18 years. One of the first committees I served on was the water committee. In those days the water industry was largely owned by the local authorities and they made a reasonable success of it. I was later the chairman of the land and works committee of the Thames Valley water board. We produced a very efficient and cheap water service for the people of the Thames Valley area and south Oxfordshire. My boast was always that we provided water at sixpence a ton. It is of course a lot more now but prices have gone up. Therefore I have a little knowledge of the water industry.

Talking about London, we had a quarrel with the Metropolitan Water Board. London is an important place and we understand that, but what they wanted to do, and what they did do through a parliamentary Bill, was to extract water from the Thames Valley area—our water, as we put it. It came along and stole it and put it into the Thames for the benefit of the people of London. It was not to the benefit of rivers in the Thames Valley area because a lot of them dried up. We have to careful about the needs and demands of London. However, that is just a little bit of history.

As has been explained, there are many aspects to this proposal. It involves people who live outside London having to pay for a project from which they will receive no benefit. All the benefits will go to London. They will be forced to pay the same increase in bills as Londoners, who will be the sole beneficiaries. The population of London is set to increase to more than 9 million over the next few years, so Thames Water will be receiving extra profitable revenue from all those people, part of which I believe should be used to finance this scheme. Also, when the shareholders bought the company, they knew that there was a problem of disposal in London. They knew exactly what the commitment might be and that it would be very expensive, yet they still bought the shares. Having acquired those shares, they should take responsibility for the proposals which, by buying the shares, they actually agreed to. I have said this before and I will repeat it now: this project should be largely paid for by the suspension of dividends for the shareholders. After all, a precedent has been set for this. Lloyds Bank shareholders, for example, have not received a dividend for three or four years because of the intervention by the Government in the bank’s management. I believe that the shareholders should pay.

The noble Lord, Lord Berkeley, has outlined some of the much cheaper and more effective alternatives. I believe that they should be examined more thoroughly than has been the case so far. He has also referred to the Government’s intervention into this privatised industry. It may be proposed that there is to be a government subsidy, but that would be intolerable. This is a privatised industry, and the Government have no business paying a subsidy. I have to tell the Committee that I disagreed profoundly with the privatisation of water, and I blame both parties for it. When the Labour Party had the opportunity to renationalise it and give it back to the local authorities where it properly belongs, it did not do so. It would therefore be outrageous if, having sold the water industry off in order to get rid of any debt and responsibility, they should now expect the public to subsidise a project which the shareholders knew about when they bought the shareholdings. I am completely at one with the noble Lord, Lord Berkeley, and I hope sincerely that the Government will not subsidise this project. It is not their business to do so. They should ensure that the cheaper alternatives are put in place and that if they are not put in place, the shareholders of Thames Water should pay the whole bill.

00:00

[Lord Grantchester (Lab)]

I am so glad that my noble friend Lord Berkeley has secured this debate today on the proposals for the Thames tideway tunnel. Coming as it does after our previous debate, it allows our discussion to transcend from the sublime to the slime. I pay tribute to my noble friend’s persistent challenges to the project, which have meant that it has been critically examined in all its aspects.

We are in familiar waters. To reiterate: London’s sewers carry both raw sewage and rain run-off. They were designed for a capacity of 4 million inhabitants, but London now has in excess of 8 million inhabitants. As much of London’s infrastructure dates back to horse-and-carriage days and therefore rainwater is included, there are 50 or 60 overflows each year straight into the Thames. In a typical year, 18 million tonnes of untreated sewage enter the river through the combined sewage overflows that the Thames tideway tunnel needs to intercept.

The tunnel will remove and treat a total of 39 million tonnes of untreated sewage from the tidal River Thames. These discharges breach the urban waste water treatment directive. Years of independent studies and assessments working up a solution cannot shield the UK and the taxpayer from the prospect of substantial fines if the proposed timetable does not proceed. Delays have already led to an increase in the cost estimate in excess of £4 billion.

Your Lordships’ House last examined the proposals during the passage of the Water Industry (Financial Assistance) Bill in March 2012, when the Government took enabling powers to provide contingent financial support for exceptional project risks, guaranteeing the project even though we still do not know who will finance and build a tunnel. Since then, my noble friend Lord Berkeley has updated the House through his continual questioning, to which the Minister has positively responded.

Labour supports this project. We remain unconvinced by alternative solutions to the problem of London’s sewage discharge. We have examined the Environment Agency’s An Assessment of Evidence on Sustainable Drainage Systems and the Thames Tideway Standards, published this month, which concludes that sustainable urban drainage systems—or SUDS—alone would not be enough to combat the sewage issues facing the Thames and meet the environmental standards for the Thames established by the Thames Tideway Strategic Study in 2006. In 2012, Sheffield University published a further independent study examining the potential to retrofit SUDS on the tideway catchment areas. It concluded that retrofitting SUDS, while technically possible, is not feasible due to the very high costs and disruption that would be likely to be involved. Retrofitting could well complement conventional sewage infrastructure and be instrumental over time in separating rainwater from sewage as development projects slowly rebuild and modernise buildings and areas throughout the capital. SUDS will also play a key role in ensuring that new developments extending London’s footprint do not add to existing problems.

Labour also recognises that the Government have designated the project a nationally significant infrastructure project and that Defra is now in the formal planning process. The Planning Inspectorate will review the plans before they come back to the two departments, Defra and DCLG, for their respective approvals. As the Minister has already had discussions in DCLG, perhaps I might tempt him to say whether he foresees any problems in this joint approval process that might amount to any sense of a battle or veto between the two departments.

Labour will continue to support the proposals for the Thames tideway tunnel, subject to some overall tests being met. Obviously, the plans must be effectual, the expected state of the Thames at the project’s completion must comply with all EU directives on water standards and the Government should select the most appropriate delivery vehicle. Most critically, we want to be able to substantiate that the scheme satisfies value-for-money tests and that costs are assiduously examined. We will continue to challenge the Government about customers’ bills being added to. Labour does not want customers being disproportionately penalised for cleaning up the river when balanced against prices, executive pay packages and dividends to shareholders—in this case, a largely private equity group.

There has been widespread concern that Thames Water has paid out more than £2 billion in dividends in the past six years—more than £650 million in the past two years alone—as well as £1 million in management fees. What discussions have the Government had with Thames Water on this issue? It is a matter of some concern that large amounts need to be set aside for the tideway tunnel.

The Minister has given clear explanations at the Dispatch Box about why the company has not paid any tax. All UK companies are allowed to claim capital allowances when they spend on capital investment programmes. That is understood, but can the Minister categorically confirm that in Thames Water’s case these allowances apply to past capital projects and state whether he has appreciated that it seems that Thames Water can add to customers’ bills? The consumer suffers, as we are now considering social tariffs, the taxpayer in the form of the Treasury will offset capital costs and have no receipts, yet profits continue to support private equity returns.

We will continue to press the Government for more innovative financial schemes that are more environmentally sensible. There was an interesting report in the press this week that Ofwat plans to block Thames Water’s request for a further price rise of up to 8% in customers’ bills next year to cover some of the costs it has picked up from bad debts and buying land for the tunnel—the so-called super sewer. Ofwat’s response was forthright and noted. It stated that this request was in addition to the already assured price hike of 1.5% above inflation for 2014-15. Water bills and the cost of living are critical issues. We will continue to monitor the situation closely and take a keen interest in the outcome regarding the Government’s guarantee for the project.

17:25

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord De Mauley) (Con)]

My Lords, this has been a most interesting and informative debate, with a good exchange of views on many aspects of the Thames tunnel project. I thank the noble Lord, Lord Berkeley, for his assiduousness in pressing the Government on this subject. I will try to address as many of the issues raised as I can, but before I do that, I also thank the noble Lord, Lord Stoddart, for his thoughtful contribution, but no one do I thank more than the noble Lord, Lord Grantchester, for confirming that the Opposition support the project.

I believe that there is widespread acceptance that it is unacceptable for a leading European city in the 21st century to have a major river flowing through it that is increasingly taking on some of the characteristics of an open sewer. However, this situation in London is not new. We have known about it for well over 10 years. In that time, there has been much consideration and study of possible solutions to the problem, from all angles by a range of experts.

The noble Lord, Lord Berkeley, asked what assessment the Government have made of the proposals for the Thames tideway tunnel. A tunnel-based solution first emerged from the Thames tideway strategic study. That group, which was established in 2001 and reported in 2005, comprised the Greater London Authority, Defra, Thames Water, the Environment Agency and Ofwat, in an observer capacity, with an independent chairman. The group considered a range of alternative solutions, drawing on the technical expertise of numerous bodies and professional advisers, before arriving at its conclusion that a full-length tunnel was the preferred solution for reducing the number of combined sewer overflow spills and meeting the environmental objectives for the river.

In 2007, the then Government published a regulatory impact assessment of sewage collection and treatment for London which examined these and a range of other proposed options. The overall conclusion was that only a full-length tunnel would provide a cost-effective solution that met the tideway environmental objectives for the river within a reasonable timescale. Accordingly, the then Government asked Thames Water to proceed with developing detailed proposals for a tunnel. Since then, Thames Water has refined its proposals and consulted extensively on them.

Defra officials are working closely with Ofwat and Thames Water to ensure that the costs are tightly controlled, so that customer bill increases over time to pay for the financing of the tunnel are kept as low as possible and provide value for money. In addition, in November 2011 Defra published an updated assessment of the proposed options to address sewage in the Thames and an updated cost-benefit assessment. These were entitled Creating a River Thames Fit for our Future—A Strategic and Economic Case for the Thames Tunnel and Costs and Benefits of the Thames Tunnel.

In 2012, Parliament considered and approved the Government’s National Policy Statement for Waste Water, with debates in both Houses. This set out the need for major wastewater infrastructure, compared the alternative solutions for the Thames, and concluded that a tunnel was the preferred solution. The National Policy Statement for Waste Water will be used by the Planning Inspectorate in considering Thames Water’s current application for a development consent order for the tunnel. In 2012, my department also published its Thames Tunnel evidence assessment, to ensure that due consideration had been given to the full range of evidence available on all the proposed options to address the problem of sewage pollution in the River Thames. This included an annex listing all 36 of the relevant supporting studies and reports.

Earlier this year, in view of representations being made by the noble Lord, Lord Berkeley, among others, that some US cities were implementing sustainable urban drainage systems, or SUDS, and green infrastructure to address their overflow problems, we asked the Environment Agency to carry out an assessment of the evidence on whether SUDS could deliver the environmental standards set for the River Thames. The review, published last week, concluded that all the available evidence, comprising more than 70 relevant studies, shows that SUDS alone could not achieve this.

The noble Lord, Lord Berkeley, referred to Philadelphia. If I may, I will dwell for a moment on what some major US cities are doing, because the US has federal standards which are not dissimilar to those set by EU law. Washington DC has just started boring a deep five-mile tunnel of similar dimensions to the Thames tideway tunnel. This is part of a 12-mile tunnel system that aims to reduce combined sewer overflows by 96%, a similar standard to that proposed for the Thames tideway tunnel.

Major storage and transplant tunnels are also a key feature of solutions put in place to tackle combined sewer overflows in Milwaukee and Wisconsin. Pittsburgh is attempting to achieve a similar standard through the 25-year implementation of sustainable drainage systems. In Portland, Oregon, SUDS have been used to remove approximately 8 million cubic metres of storm water a year. This is 35% of its total sewer overflow volume, but tunnels still prove necessary to meet the required levels of control. Philadelphia aims to tackle 85% of its sewer overflow discharges using SUDS over a 25-year period. The work has been going on for five years now, but a tunnel solution may still be necessary to meet the required environmental standards.

Unlike London, Philadelphia and Portland have a geology which is suitable for SUDS. The soils underlying the cities’ SUDS areas are more porous and more able to soak up excess rainwater. The main point is that each solution reflects the particular building density, geology, rainfall patterns and existing sewer system of that city.

There does not therefore appear to be any case to revisit the case for the tunnel as it is set out in the national policy statement. I have also seen compelling recent evidence of the scale of the problem with wastewater discharges into the Thames, and I am advised that the serious rainfall event last weekend resulted in more than 1 million tonnes of wastewater being discharged into the river over a very short period of time. A tunnel would have captured these discharges, and transferred them for treatment in time to handle any subsequent heavy rainfall events. I do not believe that supporters of SUDS as an alternative to the tunnel have demonstrated how they would handle events of this type.

The noble Lord, Lord Berkeley, also referred to the work of Professor Binnie. We believe that the environmental criteria set in 2007 remain robust, are not gold-plated, and should not be downgraded. Alternatives such as a shorter western tunnel combined with SUDS would not meet the environmental objectives for the Thames tideway in an acceptable timeframe or at lower cost than the full-length tunnel.

A further important factor is the 2012 European Court of Justice ruling that the UK was in breach of the urban waste water treatment directive in London, which means that there is an increased likelihood of very significant infraction fines if we do not comply within a reasonable period of time. The risk of fines has been reinforced by the very recent fines ruling against Belgium for not complying quickly enough with a previous adverse court judgment with regard to waste water collection and treatment.

The noble Lord, Lord Berkeley, asked what the tunnel solution will deliver. The Thames tideway tunnel would reduce the frequency of spills from the 34 combined sewer overflows in London intended to be caught by the proposed tunnel from around 50 to 60 to just three or four times a year during extreme rainfall events, with the estimated overflow volume falling from around 18 million to 2.5 million tonnes. That would improve water quality, with benefits for wildlife and river users. It will also ensure that we continue to meet the UK’s obligations under the urban waste water treatment directive and the water framework directive. We are clear that the overflow volume to be addressed by the tunnel is 18 million tonnes, not the 39 million stated by the noble Lord, Lord Berkeley, as quoted by Thames.

The noble Lord, Lord Berkeley, also asked about the financing of the project. The Government believe that the private sector can and should finance this project. Although the Government can provide financial assistance in any form in relation to the tunnel, we have stated that this will be contingent financial support for exceptional project risks, to help ensure the cost of financing the project is kept to a minimum and offers best value for money for customers and taxpayers. However, we will want to be assured, when offering this contingent support, that the taxpayer is appropriately protected by measures that minimise the likelihood of these exceptional risks materialising.

The noble Lord, Lord Stoddart, asked about customers outside London paying for the tunnel. It is worth saying that London customers have helped to finance major sewerage investments outside the capital that serve a much smaller population. When improvements are needed, for example, in rural Oxfordshire, the cost is spread among all customers of sewerage services, including those living in London. This approach, which is supported by Ofwat, is standard across England and Wales and is the fairest way of apportioning the costs of investment in water and sewerage services.

The noble Lord, Lord Stoddart, suggested that Thames Water should pay for the tunnel from existing funds. Paying for the project from any accumulated reserves would neither reduce the cost to customers nor remove the requirement for some type of government support. This is a major tunnelling project and has a risk profile significantly beyond that typically expected of a water and sewerage company. That is why the tunnel is expected to be financed and delivered by an independent infrastructure provider with its own licence from Ofwat and backed by some form of government support related to exceptional project risks.

The Government believe that the private sector can and should finance the project but accept that there are some risks that are not likely to be borne by the private sector at an acceptable cost. The Government are therefore willing, in principle, to provide contingent financial support for exceptional project risks where that offers best value for money for customers and taxpayers.

[Lord Berkeley]

Can the Minister explain what these exceptional risks are?

[Lord De Mauley]

My Lords, I am sure I will in a minute. We will want to be assured that when offering contingent support, taxpayers’ interests remain a top priority. The taxpayer must be appropriately protected by measures that minimise the likelihood of these exceptional risks. We are working on the detail with Ofwat, Infrastructure UK, Her Majesty’s Treasury and Thames Water to ensure that there is a minimal likelihood of contingent government support ever being called on.

The noble Lord, Lord Grantchester, asked about the status of planning. Given that Ministers have a quasi-judicial role in the planning process, I hope the noble Lord does not expect me to go into detail at the moment.

The noble Lord, Lord Stoddart, asked about bill increases. We have always made it clear that the estimate of £70 to £80 is, indeed, only an estimate and should not be used, as it was in a recent paper, to reverse engineer a notional investor return. If the project is delivered through an infrastructure provider, the actual figure that appears on Thames bills will be set following the competition for the financing of the project. That will ensure best value for money for customers and keep bill increases as small as possible.

The noble Lord, Lord Berkeley, asked just now what contingent financial support really means. The support will occur in the case of unlikely events such as severe debt market disruption, significant cost overruns due to extreme tunnelling conditions and any caps on commercially available insurance.

Over the past 10 years, the Government have undertaken lengthy and thorough assessments of the Thames tideway tunnel project and alternatives. They have concluded that the tunnel represents the most cost-effective, timely and comprehensive solution to the problem of sewage pollution in the River Thames in London.

Committee adjourned at 5.40 pm.

House of Lords

Thursday 24th October 2013 Lords Chamber

Thursday, 24 October 2013.

11:00

Prayers—read by the Lord Bishop of Ripon and Leeds.

Introduction: Lord Finkelstein

Thursday 24th October 2013 Lords Chamber

11:09

Daniel William Finkelstein, Esquire, OBE, having been created Baron Finkelstein, of Pinner in the County of Middlesex, was introduced and took the oath, supported by Lord Owen and Lord Coe, and signed an undertaking to abide by the Code of Conduct.

Introduction: Baroness Humphreys

Thursday 24th October 2013 Lords Chamber

11:14

Christine Mary Humphreys, having been created Baroness Humphreys, of Llanrwst in the County of Conwy, was introduced and took the oath, supported by Lord Roberts of Llandudno and Baroness Randerson, and signed an undertaking to abide by the Code of Conduct.

Leveson Inquiry

Thursday 24th October 2013 Lords Chamber

Question

11:20

Asked by

[Lord Soley]

To ask Her Majesty’s Government what progress they have made towards putting into effect the proposals made by Lord Justice Leveson in his report into the culture, practices and ethics of the British press.

[Lord Gardiner of Kimble (Con)]

My Lords, on 11 October, a final draft of the cross-party charter on self-regulation of the press was published following further discussions by the three main parties. These discussions helped to make the charter more workable. The cross-party charter will be on the agenda for a Privy Council meeting on 30 October.

[Lord Soley (Lab)]

I thank the Minister for that reply. After the 20th anniversary of my Private Member’s Bill in the House of Commons, now reborn as Leveson, this is like travelling at the speed of light, although not everyone would agree with that. What do the Government propose to do if the newspapers decide not to co-operate with the new body? What talks have they had with the newspaper industry about that possibility?

[Lord Gardiner of Kimble]

My Lords, the first thing I will say is that the noble Lord is indeed a patient Lord. However, our purpose is to seek a voluntary process, and we very much hope that the press will, through its independent, self-regulatory body, apply to the recognition panel so that what has happened before does not happen again and we have the right mechanism in place. I emphasise that it is voluntary for the press to apply to the recognition panel. However, as your Lordships know, Parliament has—following through from the Leveson report—made very clear, through the Crime and Courts Act, what the position would be for those who transgressed.

[Baroness Bonham-Carter of Yarnbury (LD)]

Did the Minister see the Guardian/ICM poll last week, which demonstrated that the public are solidly behind external regulation of the press, underpinned by an outside body? Does he agree that the newspaper publishers should listen to the public, as well as to the victims and Parliament, and support the cross-party charter?

[Lord Gardiner of Kimble]

My Lords, I very much agree with my noble friend. In the end, we have a duty to the public and to the victims in particular. We have a responsibility to try to set in place a position where this does not happen again and which gives confidence to the public. I am aware of the polls—polls can do a range of things. I hope the press will see that the cross-party charter is designed because of good will and that we wish to protect the freedom of the press while ensuring that people have proper redress.

[Lord Sugar (Lab)]

My Lords, throughout my business career I have always tried to view things through the eyes of the average man or the average consumer. With that in mind, the Leveson inquiry seems to have been a complete and utter waste of time. I see no change whatever in the attitude of the printed media, a view borne out by the recent behaviour of the Daily Mail—

[Noble Lords]

Question!

[Lord Sugar]

It is coming. The Daily Mail is a newspaper whose only true facts are the price and date on the front page. Does the Minister agree that Lord Justice Leveson should have recommended a proper regulator, the same as we have in the television industry? Self-regulation is not possible with the printed media.

[Lord Gardiner of Kimble]

My Lords, I do not think the noble Lord will be surprised if I say that Lord Justice Leveson did a very thorough job for the nation. There was great merit in what he was wrestling with because he was trying to balance the freedom of a responsible press—which we all cherish—with putting in place something that enshrines that but ensures that there is redress and gives confidence to the public. I am therefore afraid that I disagree with the spirit of what the noble Lord is suggesting.

[Lord Inglewood (Con)]

My Lords, regardless of one’s views about the merits or otherwise of any particular charter, does my noble friend not agree that the freedom of the press is a matter of the highest constitutional importance? Will he therefore consider an important request that this House be given the opportunity to debate the text of the charter that is now being finalised? Even if we cannot take part in the legislative aspects of it, there is a political aspect that ought to be debated on the Floor of the Chamber.

[Lord Gardiner of Kimble]

My Lords, I understand my noble friend’s position, particularly given that he chairs the Communications Committee. However, we have debated the cross-party charter and the Leveson report on many occasions, and I have been delighted to answer—or seek to answer—questions on them. I sense that the public are seeking some conclusion to this and that is why the cross-party charter is going before the Privy Council on 30 October. It is about trying to get some resolution so that we can move forward and set the structure in place.

[Lord Grocott (Lab)]

Does the Minister detect something that I have not yet detected? The Leveson inquiry came about in the first place as a result of the most appalling treatment by the print media of individual innocent members of the public. It was that outrage that led to the inquiry. In the kind of almost academic exchanges that are going on, I get no sense at all that the leaders of the print industry share or understand that outrage. Can the Minister simply report to the House and reassure me that the Government feel the same sense of outrage that the overwhelming majority of the British people feel?

[Lord Gardiner of Kimble]

I sense from our exchanges in your Lordships’ House that there is a very strong feeling here which reflects what the nation feels. This is why the Prime Minister was absolutely right to start on the path of asking Lord Justice Leveson to look into these matters, because they should not have happened and responsible people could not possibly justify them. I say to those who are very senior in the press: I see no demons in what is proposed by the cross-party charter. This is about trying to have two very important things in our nation’s life: a responsible free press that can scrutinise and look at all that we and our institutions do, but will also safeguard the rights of the citizen.

Young People: Democratic Participation

Thursday 24th October 2013 Lords Chamber

Question

11:27

Asked by

[Lord Storey]

To ask Her Majesty’s Government how they will ensure that young people acquire a practical understanding and awareness of how the United Kingdom is governed, its political systems, and how citizens may actively participate in its democratic systems of government.

[Baroness Northover (LD)]

My Lords, the new national curriculum for teaching from 2014 includes an improved programme of study for citizenship education at key stages 3 and 4. It is organised around core knowledge about democracy, government and how laws are made and upheld. Citizenship education seeks to equip students with the skills and knowledge to explore political and social issues, and to take their place in society as responsible citizens.

[Lord Storey (LD)]

I am grateful for my noble friend’s response. She may be aware that various youth democracy groups such as the British Youth Council, Operation Black Vote and Bite the Ballot are organising for next year’s National Voter Registration Day. How will the Government support and promote this initiative?

[Baroness Northover]

I thank my noble friend for his question. We are very supportive of that initiative. Citizenship education, too, should help to underpin students’ interest in how our democracy works.

[Lord Kennedy of Southwark (Lab)]

My Lords, with individual electoral registration rapidly coming down the tracks, what are the Government going to do today to ensure that people as young as 14 and 15 understand that it will be their responsibility, not their parents’, to register to vote in less than two and a half years’ time?

[Baroness Northover]

I hope that the noble Lord has had a look at the curriculum for citizenship study. He will, I assume, know that that will be compulsory for the age groups 11 to 14 and 14 to 16. Within that, there will of course be an emphasis on students’ right to register and later to vote in elections.

[Lord Geddes (Con)]

Is my noble friend aware—I am sure that she is—of the Lord Speaker’s excellent outreach programme, in which I am very pleased to participate, whereby Members of your Lordships’ House go out to schools in order to give them the information pertaining to this question?

[Baroness Northover]

Yes, I am well aware of that and I know that a number of noble Lords have taken part. They report back that there is great enthusiasm for discussing politics today. It is notable that the number of students who are then voting in elections thereafter seems to increase.

[The Earl of Clancarty (CB)]

My Lords, would the Minister agree that one of the traditional ways in which young people get actively interested in political matters is through joining campaigning organisations, not necessarily party political ones, and that the Government should actively encourage and not hinder their operation, particularly in the period leading up to an election, when young people’s interest in political issues will be most easily stimulated?

[Baroness Northover]

Yes, I am well aware of the fact that young people often get involved in all sorts of campaigns. One of the things which comes through in citizenship education is how the links can be made between those sorts of issues and how you effect change through voting. For example, if young people are encouraged by Comic Relief to be concerned about the plight of children of their own age in another country, actually voting and trying to ensure that there is a commitment to international development is part of how they take that forward.

[Lord Tomlinson (Lab)]

Does the noble Baroness agree that however good the curriculum is on citizenship, most young people will be singularly unimpressed by what they witness as the practice of government in Parliament? Yesterday’s Prime Minister’s questions in the House of Commons was a thorough disgrace, which most people who were watching will disapprove of, in which they saw a Prime Minister personally abusing the leader of the Opposition while trying to change policy half way through PMQs.

[Baroness Northover]

I am afraid that I did not see PMQs yesterday. However, when I go and listen in the Commons, I find myself grateful that I was never elected there—even though I tried several times—and that your Lordships’ House is a more tolerant place. There are more women in the House of Lords, and I think that also makes a difference.

[Lord Tyler (LD)]

My Lords, turning perhaps to safer territory, I return to the issue of the syllabus and the role of citizenship in it. Following concerns from all parts of the House, not least from my noble friend Lord Phillips and the noble Lord, Lord Roberts, on Thursday last week, is it not incredibly important to demonstrate to young people that this is not just theoretical, but that it leads on specifically to active citizenship? Is my noble friend aware that in Northern Ireland, where there was real concern about the transfer to individual electoral registration, it has become the habit in secondary schools to go right through the citizenship course with an end result of registration on the electoral register and for eventual voting?

[Baroness Northover]

Indeed, it has had a very positive effect in that regard. As I answered an earlier question, the link between what students will learn in their citizenship classes and their ability then to take that forward to register to vote and to vote is very important. I also note that within citizenship education students will be debating all sorts of political and social issues, and they will be encouraged to debate and make reasoned arguments and so on. I imagine that they are going to be very lively lessons.

[Lord Hannay of Chiswick (CB)]

My Lords, will the Minister and Secretary of State for Education accept my thanks for having acceded to the lobbying by a number of us to include the United Nations in the citizenship curriculum? Can she say whether the department and local authorities will welcome a non-governmental organisation like the United Nations Association, which promotes model UN debates up and down the country and can help the curriculum a good deal?

[Baroness Northover]

I thank the noble Lord and will pass on his tribute to my right honourable friend the Secretary of State. Indeed, looking at the curriculum, I was struck by how international it was. I am sure that the organisations that he referred to will be encouraged to play their part in trying to inform students; that would be extremely welcome. However, the curriculum reaches in all directions. Internationally, it deals with human rights and international law, and it also looks at the diverse national, regional, religious and ethnic identities within the United Kingdom. Therefore, it extends and it is deep.

[Lord Campbell-Savours (Lab)]

My Lords, when the Minister says to the House that she prefers to be in an unelected House, as against an elected House, does she think that she is sending out the right message to young people?

[Baroness Northover]

The noble Lord will be well aware that I belong to a party which is committed to election to the House of Lords, as I think is the case for everybody in this House who is a party member. He will also know that there is cross-party agreement that the effect of an electoral system for the House of Lords should be that no party is in overall control—

[Noble Lords]

Oh!

[Baroness Northover]

—as is the case at the moment, so that you then have negotiation, discussion and the kind of debate in the Lords to which the noble Lord’s colleague referred. Therefore, yes, there should be election but under a system which is proportional and ensures that all voices are heard: women’s as well as men’s.

Democratic Republic of Congo

Thursday 24th October 2013 Lords Chamber

Question

11:36

Asked by

[The Lord Bishop of Ripon and Leeds]

To ask Her Majesty’s Government on what evidence they consider the Democratic Republic of the Congo to be a safe country to which to return asylum seekers.

[The Lord Bishop of Ripon and Leeds]

Despite my unelected nature, I beg leave to ask the Question standing in my name on the Order Paper.

[The Parliamentary Under-Secretary of State, Home Office (Lord Taylor of Holbeach) (Con)]

My Lords, we observe our obligations under the refugee convention and the European Convention on Human Rights. Every asylum application is considered on its individual merits in the light of country information from a range of sources, including fellow European and asylum-intake countries. Returns are made only if it is safe to do so, and the courts have supported our position.

[The Lord Bishop of Ripon and Leeds]

I am very grateful to the Minister for that response. Following the Unsafe Return report of November 2011 and continued documented reports of ill treatment of those who return to the Democratic Republic of the Congo in the Unsafe Return 2 report of this month, will the Government use the evidence provided to challenge the DRC authorities and to set up a monitoring mechanism for those returned so that there is a minimal safety measure for them in this very dangerous country?

[Lord Taylor of Holbeach]

My Lords, the Home Office works very closely with FCO staff here in London and with embassy officials in Kinshasa. The embassy staff participated in the DRC fact-finding mission and stated that they were not aware of substantial evidence of any returnee being ill treated. However, I assure the right reverend Prelate that the Home Offices investigates specific allegations of mistreatment on return.

[Baroness Kinnock of Holyhead (Lab)]

My Lords, can the Minister explain how it can be safe to return at-risk people to a country which has the biggest UN peacekeeping force in the world, when that force has to spend most of its time protecting the local population and its own security forces, and when eastern Congo is known as the world’s capital of rape, which is routinely used as a weapon against vulnerable women? Surely this is a case of the Government having no understanding of the real threats and dangers faced by people in the DRC.

[Lord Taylor of Holbeach]

I know of the noble Baroness’s interests in this issue and the diligence with which she pursues them, but perhaps I can refute her suggestion that these matters are taken without proper due care and diligence by the Government. Perhaps I can illustrate that best by saying that in 2009 there were 98 enforced removals to that country; in 2012, the number was down to 14; in the first quarter of this year, it was one; and in the second quarter it was also one.

[Lord Avebury (LD)]

My Lords, does the noble Lord accept what the DRC ambassador told me—that,

“deportees are interrogated on arrival … to allow the Congolese justice system to clarify their situation”?

Does he therefore accept that although we do not routinely investigate or monitor the treatment of returnees, the evidence collected in the report that was mentioned by the right reverend Prelate—of the pattern of interrogation, arrest and ill treatment of refused asylum seekers—is strong enough to warrant an independent investigation of the treatment of these returnees? Can my noble friend say what it will take to get a country removed from the list of safe countries?

[Lord Taylor of Holbeach]

I thank my noble friend for making sure that I had seen a copy of Catherine Ramos’ report; in fact I had been briefed on the report, and the Home Office is taking it seriously. This report is being considered in detail, just as we considered the first one in the series. It was published at the beginning of this month. The initial view, considered against other evidence, including the information that we have from other European countries, is that it will not warrant a change in our returns policy.

[Baroness Smith of Basildon (Lab)]

My Lords, does the Minister understand the concerns about the quality of decision-making? Some 30% of appeals against initial asylum decisions were allowed, meaning that nearly one-third were wrong. In more than one in 10 cases reviewed by inspectors, selective information from the country of origin reports had been used to deny claims. We have to get this right because asylum should be granted only when it is genuinely needed, but there is now a serious fear that those at great risk of violence are being denied a safe haven.

[Lord Taylor of Holbeach]

I hope that the noble Baroness was impressed by the figures that I gave earlier and that she understands that this process is undertaken with proper deliberation. The current country case law from the immigration and asylum Upper Tribunal concludes that there is no evidence that failed asylum seekers involuntarily returned to the DRC face a real risk of persecution or ill treatment merely because of an unsuccessful asylum claim in the UK. This was a conclusion upheld by the Court of Appeal in 2008. In 2012 the Court of Appeal found that country guidance remains the law until it is set aside or superseded.

Scotland: Underoccupancy Charge

Thursday 24th October 2013 Lords Chamber

Question

11:43

Asked by

[Lord McAvoy]

To ask Her Majesty’s Government what assessment they have made of the report published by the Scottish Parliament about the effects of the under-occupancy charge in Scotland.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, the Scottish Parliament’s report is an interesting and reasoned discussion of the early months of this policy. It suggests that it is difficult to assess impact at this stage, a view that we share. That is why we are undertaking a two-year evaluation on the effects of the policy. Initial findings will be available in 2014, the final report published in late 2015.

[Lord McAvoy (Lab)]

My Lords, I thank the Minister for his Answer. However, the report indicates that 82,000 households in Scotland are affected by the bedroom tax, with an average cost to those households of £50 a month. Some 80% of those households include a disabled adult. Does the Minister still stand by his advice, as published in the Daily Record, that in order to cope with that cost, disabled people should take in a lodger?

[Lord Freud]

My Lords, there is a range of things that people can do, as I have said to the House on previous occasions. The best option will depend on the circumstances. The group of disabled people on higher-rate DLA is 17% of the total. We have provided a lot of discretionary housing payments—we topped them up—and it is interesting to read in the report that many councils are saying that they are managing with that figure at this stage but that it is too early to tell.

[Baroness Gardner of Parkes (Con)]

My Lords, is the Minister aware of the research reported in the press this week on this subject which said that one in 10 of the claimants affected by this policy has moved off benefits? Will he confirm or comment further on that?

[Lord Freud]

My Lords, I have seen the research to which my noble friend refers. Clearly, it is encouraging. I also note that the report by the Scottish Parliament states that in one area the case load has fallen already by 15%. As I said just now, we need to be cautious about early findings but this one clearly is positive.

[Baroness Hollis of Heigham (Lab)]

My Lords, the Minister has stated that the bedroom tax will release larger, underoccupied properties for the waiting list but 80% of those on the waiting list want the selfsame smaller properties as the underoccupiers who have priority. This report shows that it will take three years to rehouse underoccupiers. Will the Minister therefore accept that it is false to claim that the bedroom tax will help those on the waiting list? On the contrary, their waiting times will probably double.

[Lord Freud]

My Lords, I must make the point that while the party opposite likes to use the expression “bedroom tax”, it is deeply misleading. A tax is when you take away money that people earn. We are limiting the amount of money that the taxpayer pays to people. There are 1.4 million one-bedroom properties, which become available at the rate of roughly 100,000 a year. Quite a lot of people are likely to want to keep an extra bedroom because they have the resources and the desire to keep it. Therefore, there will be a period of adjustment, and we are going through it. We are spending the discretionary housing payment to allow that transition to happen in an orderly way.

[Lord Skelmersdale (Con)]

My Lords, will my noble friend confirm that housing benefit, first, is paid for private sector accommodation and, secondly, that under the previous Labour Government it was restricted to a certain number of rooms in those circumstances?

[Lord Freud]

My Lords, my noble friend is right that the private rented sector basis is the local housing allowance, which is paid on the shape of the family who occupies. It is paid on the basis of how many rooms are required. Until now, there has been an imbalance between the provision in the social rented sector and the private rented sector, which this policy corrects.

[Baroness Sherlock (Lab)]

My Lords, the evidence is mounting. On top of evidence from the University of York and the University of Cambridge, in the past week alone the Archbishop of Wales has slammed the effect on Wales and now we have concerns from the Scottish Government. Perhaps most telling of all is a report I read this week in the Spectator by Isabel Hardman in which she suggested that Ministers were now referring to the spare-room subsidy as “Lord Freud’s idea” in an attempt to distance themselves from it? Would the Minister like to take this opportunity to rebut that outrageous slur?

[Lord Freud]

My Lords, a good idea has many fathers. Clearly, everyone in this Government is responsible for the bedroom tax and I am one of them.

[Lord McFall of Alcluith (Lab)]

My Lords—

[The Chancellor of the Duchy of Lancaster (Lord Hill of Oareford) (Con)]

It is the turn of the Liberal Democrats.

[Lord Storey (LD)]

My Lords, I was shocked to discover that on Merseyside councils have left unused hundreds of thousands of pounds of discretionary housing payments. Will the Minister comment on that? Does he think that perhaps that money could be rolled over to future years or used in authorities where it would be used?

[Lord Freud]

My Lords, we are currently looking very hard at what the support should be in the next year and possibly beyond so that we will have a smooth transition for this policy. One interesting thing is that there is a real economic mismatch, which I have talked about, in what we are building for people: we have 60% of people requiring single bedrooms and we are building only 13% in any one year. There is an economic mismatch so the signals must be corrected and that is one thing that this policy does.

[Lord McFall of Alcluith]

My Lords—

[Baroness Anelay of St Johns (Con)]

My Lords, we have reached 30 minutes.

Arrangement of Business

Thursday 24th October 2013 Lords Chamber

Announcement of Recess Dates

11:52

[Baroness Anelay of St Johns (Con)]

My Lords, my right honourable friend the deputy leader of the House of Commons has made a Statement on the sittings of the other place up to January 2015 and it may therefore be for the convenience of this House if I do the same. To save any Members reaching for their diaries, a note of all the dates I am about to announce is available in the Printed Paper Office and will be circulated with the next edition of Forthcoming Business. I stress that I make this Statement with the usual and, as ever, very necessary caveat that each of these dates is subject to the progress of business: they are provisional dates. Since I am giving such a long forward look to January 2015, I am sure that that will be appreciated.

I have already announced the autumn long weekend and the Christmas Recess. I hope to provide for a short recess in February, rising on 12 February and returning on 24 February. We should rise for Easter at the end of business on 9 April and return on 28 April. For Whitsun, we rise at the end of business on 21 May, returning on 2 June. We will rise for the Summer Recess on 30 July and return on 7 October. For Christmas, we should rise at the end of business on Wednesday 17 December 2014 and return on Tuesday 6 January 2015.

I hope that the House will accept that this is a long-range forecast and I hope that it will be welcome. I know that noble Lords have been anxious to be able to plan their year next year, but, of course, everything is subject to the progress of business. I expect that the Queen will open a new Session of Parliament in State in the course of the spring but the dates of Prorogation and State Opening will be announced later in the usual way.

Business of the House

Thursday 24th October 2013 Lords Chamber

Timing of Debates

11:52

Moved by

[Lord Hill of Oareford]

That the debates on the Motions in the names of Lord Shipley and Lord Greaves set down for today shall each be limited to 2½ hours.

Motion agreed.

EU: UK Membership

Thursday 24th October 2013 Lords Chamber

Motion to Take Note

11:53

Moved by

[Lord Shipley]

That this House takes note of the economic impact of the United Kingdom’s membership of the European Union.

[Lord Shipley (LD)]

My Lords, I am very grateful for this opportunity to discuss the economic impact of our membership of the European Union and I thank all those Members of the House who will contribute to the debate, particularly my noble friend Lord Wrigglesworth, a colleague over many years, who will be making his maiden speech. I thank the Library for its excellent briefing and acknowledge the excellent set of essays launched this week by Regent’s University London which cover extremely well the issues we shall be discussing today.

I am conscious that we have had a number of debates on aspects of the EU in recent months but there are two reasons why I feel that a debate on the economic benefits is very important now. First, over the summer and early autumn a number of companies and professional bodies have been making their voices heard in support of our continued membership of the EU. Secondly, I have been very concerned that discussion in the media about the EU has tended to concentrate on issues other than economic benefit. Immigration, our net budget contribution, state benefits and health tourism, for example, all feature strongly. Each of these is clearly important but some, such as health tourism, are not just an EU matter. All these areas rightly reflect public concern and so they need to be constantly reviewed and debated but, I submit, we should do this as members of the EU, just as they do in the other countries of the EU, so that we understand better, for example, state benefit rules and how they should apply between countries, given the enormous differences that exist.

However, the issue of state benefits is not just a UK matter. I was interested to note reports earlier this week that in Germany more than 10,000 British people are receiving unemployment benefit—some 10% of the British population resident in Germany. That reflects the fact that we live in a world in which national borders have less meaning. Transport is easier and cheaper than it used to be and both employers and employees want mobility of labour across borders. This is a changing world and we cannot opt out of it.

I congratulate the Mayor of London on his leadership on this matter earlier this week and on several previous occasions in explaining London’s role as an international capital. However, perhaps the Government should think further about how they can invest more quickly in public services in areas where private sector employers recruit workers in significant numbers from elsewhere in the EU, because that can strain public services. I believe that that would build support for the EU.

I mentioned a moment ago our net budget contribution, but that is less than 1% of annual government expenditure. A number of other EU states are also net contributors, but the economic benefits of our membership matter a great deal more than how much we pay each year to belong. Of course we should examine closely what we pay and fight our corner, but it is not the central issue. We should never downgrade the overriding reason for our being members of the EU. That reason is economic, because the size of our economy, our growth prospects and the creation of new jobs in a fast-changing world depend fundamentally on our continued membership of the European Union.

I cut my political teeth in the referendum in 1975, in the all-party yes campaign in the north-east of England. The EU has since then proved to be hugely important to the exporting success of the north-east of England, which is the only part of the UK with a positive balance of trade, a high proportion of which is with the EU. For that reason, I want to draw attention to two firms which have committed themselves to the north-east of England as result of foreign direct investment, both of which have made recent public, unprompted statements about our membership of the EU.

First, Nissan has made it repeatedly clear—again, only a few days ago—that the UK continuing as a member of the EU is very important for the company. More than £125 million has been committed to the Sunderland factory. It is a wonderful success story, with more than 6,000 employees making vehicles which are exported into the EU and across the world. The second firm is Hitachi. The president of Hitachi recently confirmed that he met the Prime Minister last spring and said that if the UK pulled out of the EU, it could jeopardise £1 billion of funding for Britain’s railways and nuclear energy. In August, Hitachi Rail Europe said that its investment in an £82 million factory in Newton Aycliffe resulted from its strategic decision that the UK should be its gateway to the EU single market. I also understand that the Japanese Government have warned that UK jobs could be at risk if we leave the EU.

The Engineering Employers’ Federation, which is a trade body for UK manufacturing, recently reported that 85% of manufacturers say that Britain must stay in the EU, leading from within and not putting investment and jobs at risk. They want the single market to work better, but they do not want to exit from it. They say that the UK must remain part of the EU with “no ifs or buts”. They know that the UK’s relationship with Europe and the EU is vital to our economic success because the single market is our largest export market. The British Chambers of Commerce has reported that although businesses want more decisions made in the UK, most members think that withdrawal from the EU would be bad for Britain. A CBI survey published last month of more than 400 businesses showed that almost four out of five firms favoured staying in the EU, including 77% of small and medium-sized enterprises. Just 10% think it is in their interest for the UK to leave the EU; that is 11% of SMEs. The CBI says that despite frustrations over the current relationship and the burden of some regulations, particularly employment law, the survey shows that most businesses feel that the positives more than outweigh the negatives. Those negatives are primarily seen to be unnecessary regulations. The CBI wants to see rules implemented evenly across all member states, with an end to the gold-plating of EU legislation in the UK.

What then of financial services, which contribute £1 in £8 of our tax revenues? The City of London Corporation made it clear in a note this week that the financial sector based in the UK cannot be treated as distinct from Europe. The reason is that London’s role as a financial centre is international. The corporation points out that financial markets in the EU and the UK are intermeshed in a common regulatory structure. Non-European firms come to London because it is both international and within the single market at the same time. Crucially, and I quote directly from the note:

“The UK’s priority must be to oppose policies that could lead to the fragmentation of that Market. Fragmentation of the Single Market in financial services could drastically reduce the efficiency of the Single Market and European businesses’ access to capital. London’s position as the most prominent international financial centre in the world would be put at risk by an imperfect Single Market in financial services in which rules and access differed by level of membership of the EU. This could also damage the interest of euro-area headquartered firms”.

That is very clear advice. The key question we should ask those who believe that we should withdraw from the EU is this: what problem are you trying to solve? Put another way, is the UK being held back by the EU? A million extra jobs have been created here since 2010—inside the EU. The idea that leaving the EU would boost jobs more lacks evidence and credibility.

We hear it increasingly claimed that the future for Britain lies in the emerging economies; that these days, we should fly over Europe because more business can be done further away. But what those who pursue this line of reasoning fail to explain is why we cannot build trade with emerging economies as well as increasing trade within the EU.

Germany exports four times more to China by value than we do. Germany does it as a member of the EU. Norway is often cited as an exemplar for the UK inside the European Economic Area. Norway has no direct power in the EU, no seat at the table, no votes, but it still has to abide by directives and bills just as the full members do. Norway has to implement three-quarters of all EU legislation, including the working time directive, other employment laws, consumer protection, environmental policy and competition laws. It has to contribute to EU budgets. Norway’s per capita contribution is just over £100; the UK’s net per capita contribution is £128. If we joined the EEA there would be little saving.

Switzerland is often cited as another example we might emulate. But being outside the EEA, it has no right of access to the single market and has to negotiate each and every case separately. Even Switzerland contributes to EU budgets at £53 per capita.

What do other EU countries say about the EU and British concerns, particularly regulation? President Hollande said earlier this year that there might be a “differentiated” Europe. The Italian Prime Minister said in July that there might be treaty changes for a more flexible Europe in the interests of the UK but also in the interests of countries such as Italy. The Dutch Government have proposed defining subsidiarity as, “European where necessary, national where possible”. Chancellor Merkel said in May that it could be that some things “could be better done at a local level”.

All these confirm that the long history of flexible integration is alive and well in the EU today and we should build on it. Lots of people across Europe want us to do that and to show leadership in a reform programme. We should not forget that 3.5 million jobs in the UK are linked to our membership of the EU; or that 47.5% of our export of goods and services goes to other countries in the EU.

I am grateful to the French Chamber of Commerce in Great Britain for reminding me that there are 1,500 French subsidiaries in the UK employing 330,000 people, that the UK is at the top of the European foreign direct investment rankings and that the EU accounts for nearly half of foreign direct investment in the UK. With figures like that, the idea that it is somehow in our national interest to quit the EU defies belief.

There are several reasons why firms want to move into the UK, including the gateway to the single market, the English language, the quality of our legal system and our excellent workforce. For many, the single market is the most important. A single market of 500 million people means that they and we benefit from a common set of rules which enables businesses to generate wealth without having to comply with many different sets of regulations. We need to defend the single market and deepen it to drive up UK jobs and growth. We need a continuous process of reform, but completing the single market would further reduce internal barriers to trade, particularly in services, which our Government think could generate a 7% increase in GDP—a great deal higher than the 0.4% of GDP that goes to our net budget contribution. There are many discussions going on around regulation. Some of them may be justified and there are discussions that will be pursued in Brussels and elsewhere about this matter. However, we should note the success of the Government in tackling regulatory issues and their continuing work in that area. Some 1.4 million UK small businesses are now exempt from certain EU accounting rules, which demonstrates that the EU is willing to reduce red tape for small businesses and it is in the interests of all member states that this process should continue.

If we left the EU, we would probably operate within a “most favoured nation” status. That would mean that 90% of UK exports to the EU by value would face tariffs. As well as that, UK consumers would face higher prices on goods bought from the EU and from those countries with which the EU had trade agreements. These increased prices would be counterbalanced only slightly by lower food prices.

If we were in the EEA, trade would be tariff-free and, as with Norway, we would have to implement three-quarters of EU legislation in which we would have no say. We also need to be careful about the rules of origin. Goods imported into the EU via a full member of the EU can move freely once the relevant entry tariff has been paid, but those that come through an EEA country have to apply the rules of origin, a process that will take time and money.

This week we have seen a trade agreement signed with Canada after four years of negotiation. There are now 46 trade agreements in place, with a further 78 pending. If we left the EU, we would lose access to every EU trade agreement with a third party, and each would have to be renegotiated.

Exit would mean no extra funding for the poorer parts of the UK. Between 2014 and 2020, £6.2 billion will be committed in ERDF and ESF to the UK.

In conclusion, problems with the EU can be addressed. Problems related to the eurozone can also be addressed because it is not essential to be in a single currency to be part of a single market, as we have successfully demonstrated over many years.

In a recent speech at Chatham House, the Deputy Prime Minister said that,

“the idea that we can float off into the mid-Atlantic, bobbing around in a new network of relationships without a strong anchor in Europe, while countries around the world ... are working more and more in regional blocks, is clearly not a sound strategy in a fast-moving, fluid and insecure world”.

He is right. We must strengthen our economy, not weaken it, and we can do that only through continued membership of the EU, with the UK at the heart of EU decision-making. I beg to move.

12:08

[Baroness Noakes (Con)]

My Lords, I congratulate the noble Lord, Lord Shipley, on securing this debate. Like him, I am looking forward to the maiden speech of the noble Lord, Lord Wrigglesworth. The noble Lord, Lord Shipley, and I can at least agree that whether there are any economic benefits from the UK’s membership of the EU is an important issue, but there, I fear, we part company. In my six minutes I will not be able to answer all the points that the noble Lord has erroneously raised today.

I have a pretty clear view. There are no net economic benefits of the UK’s membership of the EU. That is, the economic costs of membership outweigh the benefits and I suspect that this has been the case from the very first day that we joined the EU. Successive Governments—including, I regret to say, the current Government—have refused to commission a proper economic cost-benefit analysis of our relationship with the EU. The dominant pro-European bias in Whitehall, which takes its lead from the Foreign Office, can almost certainly take the blame for this, but I have never understood why the Treasury, where economic reason should reign, has gone along with it.

The Library’s helpful note for today’s debate shows the difficulties in estimating the economic outcome from EU membership. The studies quoted in that note show a big range from plus 6% to minus 5% of GDP. However, the Library does not appear to have seen Professor Tim Congdon’s 2013 estimate of the costs of membership which has just come out. He finds that the cost of the UK’s membership is an astonishing 11% of GDP. That is, we are worse off by 11% of our GDP each and every year that we remain EU members.

The largest single element, amounting to over one-half of the total, comes from the cost of regulation: the Social Chapter, financial services regulation, the renewables’ agenda and a host of other regulations. The Prime Minister is in Brussels today, again attempting to restrain these intolerable burdens. I expect this effort to fail as all others before have failed. Regulation is the Commission’s weapon of choice for preserving its hold over member states.

The second largest element of the 11% is the cost of resource misallocation, which accounts for around 30% of the total. The common agricultural policy, with its protectionism and overt subsidy of uneconomic agriculture, has often been seen as the main villain when it comes to resource misallocation, but that is now only a small part of the overall picture. Much more important are the impacts on both basic and high-technology manufacturing from tariff and non-tariff barriers. In 2005, these were estimated by Patrick Minford and others to be of the order of 3% of GDP. Nothing has significantly changed in the intervening years to moderate that estimate.

Professor Congdon is clear that a withdrawal from the EU would not lead to an immediate boost to the UK’s economy of 11% because much of the damage has already been done in terms of killing business enterprise in the UK. It could take a decade or more to recover—but at least it would start to move in the right direction.

There is a lot of scaremongering about what would happen if we left the EU, but one thing that is completely untrue is that 3 million or more jobs associated with exports to the EU would be at risk. We are a net importer from the EU and so more EU jobs depend on trade with the UK than the other way round. If the 3 million figure is correct, we are probably talking about well over 4 million European jobs resting on trade with us. Therefore it is fanciful to think that the UK would not continue to trade with the EU—it is just that we would probably do so via free trade agreements. We would certainly not need to be tied into the unsatisfactory Norwegian and Swiss arrangements which have already been referred to. Just as now, a minority of our trade would be with the EU. The proportion of our exports going to the EU has been declining for several years and, once we eliminate the Rotterdam-Antwerp effect from the statistics, is probably now below 40%. That it is getting less is a good trend. We need to diversify away from dependence on markets which promise low or no growth.

The single market may have made it easier for UK businesses to do business with Europe but that has come at a huge cost, with UK businesses concentrating far too much on markets which have performed badly compared with the rest of the world. UK businesses would now be in a far better position if they had concentrated on the higher growth markets in the world, including the USA, which remains our largest single trade partner. I congratulate the Government on their emphasis on overseas trade and encourage them to do more to ensure that, in particular, our small and medium-sized enterprises get access to the support, finance and advice that they need to grow in markets outside the EU.

The lack of an economic case for membership of the EU is one reason why I support a referendum on our membership of it. I believe there is no economic case for our membership and that, even if we were to renegotiate its terms, that would remain the case. We would be crazy to remain in membership if the economic case were not made.

12:15

[Lord Watson of Invergowrie (Lab)]

My Lords, I, too, congratulate the noble Lord, Lord Shipley, on initiating this important debate. I am absolutely clear that membership of the EU is very much in the best interests of the UK—in economic and social terms, and in terms of the influence that the country can bring to bear both within the EU and globally. I would be very concerned about our isolation in relation to all of those aspects should we walk out on the family that is the European Union.

The EU and our place within it really are too important to be used as a means of dealing with a little local difficulty within the Conservative Party, which is what is happening with regard to the increasingly shrill voices that the PM eventually answered with his plan for a referendum by 2017. The Prime Minister claims that it will be to decide on changes that he hopes—somewhat fancifully, I suggest—to negotiate. However, if that fails to materialise then pressure from within his party would surely mean that we would be stuck with a “Should we stay or should we go?” vote. I would characterise that as the Clash option, for those of a certain age and musical tastes. It is also an uncertain road down which to travel. Fortunately, the Prime Minister first has to clear a certain hurdle in 2015, which gives us some hope of this vital matter being taken out of his hands.

When those of us who are in favour of retaining, and indeed strengthening, our place within the EU cite the dangers inherent in disengaging, we are characterised rather disparagingly as scaremongers, as the noble Baroness, Lady Noakes, has just done. If that is the case, it is a label that sits rather uneasily on some rather significant public figures. Sir Nigel Sheinwald spent five years as ambassador to Washington and three years as permanent representative in Brussels. He has said that a Britain on the sidelines is not in anyone’s interests, and that a Britain on the sidelines of Europe—and even more, out of Europe—would not be in the US interest or in the interests of our other major European partners. The noble Lord, Lord Browne, a former boss of BP, one of the most senior non-executive appointments by the coalition, has warned that years of uncertainty about whether the UK will remain part of the EU will put off investors, leading major companies to place major job-creating projects elsewhere in Europe.

Expanding on that last point, Sir Andrew Cahn, vice-chairman of Nomura, spelled out how a major company might react when considering a billion-dollar investment in Europe. Its advisers, he said, would tell the company that they,

“do not know if the UK will be in the single market in five years’ time and have no idea what their access terms will be”,

should the UK leave, as there would be no way of knowing whether the UK would find a sustainable relationship with the EU or find itself involved in fractious exchanges. He said that those advisers would say:

“Indeed, we have no idea what Britain’s EU strategy is”.

He then said that while the CEO of that company may well still be tempted by Britain, the balance would have shifted and he or she would now,

“examine the European alternatives more closely”.

Moreover, Martin Sorrell, chief executive of the global company WPP, has said:

“At the very best it”—

a referendum—

“will be neutral in impact; at the worst, negative”,

on foreign direct investment. As the noble Lord, Lord Shipley, said, the CBI has also said that it is essential that we stay at the table to bang the drum for businesses and defend our national interest.

These are not insignificant individuals and they are not bound in any way by party political interests. They unquestionably know what they are talking about. Those of us who are in favour need to start making the positive case for remaining within the EU. We should not just counter the negatives of the doomsayers; we need to talk the case up. Indeed, there is a good, solid case to be talked up.

The noble Lord, Lord Shipley, has already quoted the CBI/YouGov survey announced last month, which demonstrated that eight out of 10 firms say that the UK must stay in the EU. Surely that level of support cannot seriously be questioned. Furthermore, significant numbers of those surveyed believed that the current relationship had a positive impact on their own businesses on issues such as the ability to buy and sell products without taxes and tariffs on trade flows in the EU markets and, indeed, outside those markets as a result of trade deals. Having common product standards across the EU was also cited as being of considerable importance. That is hardly surprising because, of course, the EU single market is the world’s largest trading bloc, worth some £10 trillion a year. It is home to 500 million consumers and is the destination of half of the UK’s exports. Surely being part of this large single market makes our entire economy more competitive. Even firms that do not export face more domestic competition, which benefits consumers. In addition, EU membership gives access, through trade agreements, to 37 other economies around the world. If we were to leave the EU, we would have to negotiate each of these deals again, but this time as a country of 60 million people rather than a continent of half a billion people.

Surely the biggest challenge facing the UK today is not Europe; it is the economy, and the priority is to deliver jobs and growth. I repeat my opening remarks that the UK’s interests clearly lie in remaining at the heart of the EU and I believe that that view should be increasingly argued at every opportunity. At the moment in Scotland, we are involved in a campaign to, we hope, keep the UK together. Those in favour of that position are campaigning under the name Better Together. I suggest that that slogan should also be used in terms of the UK’s relationship with the EU.

12:21

[Lord Hannay of Chiswick (CB)]

My Lords, at a time when many are expressing doubts about or are ignorant of the benefits to Britain resulting from its membership of the EU, and others are campaigning with zeal and hyperbole for us to withdraw, it obviously makes good sense for this House to debate the economic impact of our membership even if the economic arguments can never be the whole story—as, indeed, they were not when the British people voted in an “in or out” referendum in 1975. In that context, I warmly welcome the initiative by the noble Lord, Lord Shipley—and, indeed, his introductory speech—to hold this debate and pay tribute to the way in which the Liberal Democrat party has consistently promoted and supported our membership.

Debates in your Lordships’ House provide neither the time nor the appropriate occasion to marshal the whole econometric case relating to the economic impact of our membership. Those in search of that could do worse than study the Regent’s University report on the costs, benefits and options for the UK in Europe, to which the noble Lord, Lord Shipley, also referred and which was launched earlier this week by Mr Peter Sutherland. Even that sort of detailed study of the subject matter of our debate today suffers from one major weakness: it is not actually possible to calculate with precision where Britain’s economy would stand today if we had not joined the European Community in 1973, and where it would be likely to stand were we to withdraw at some point in the future. That is why, personally, I treat with some scepticism the precisely quantified predictions of both supporters and opponents of membership as to its impact. These have to be qualitative judgment calls if they are not to be easily refuted.

Clearly, one has to start with trade. We saw the removal of myriad barriers that used to impede trade between this country and the rest of Europe before we joined the customs union, and then we took the lead in shaping the single market. Imperfect though that market may be, what we now have has led to a huge expansion in mutual trade to the benefit of our economic actors, in both the goods and services sectors, and of our consumers. Outside the European Union, many of those benefits would not have occurred or would be at risk if we were to leave, as we ceased to have any control over the shaping of the regulations governing our trade—the position in which Norway, which has a smaller and much less diversified economy than ours, now finds itself.

The impact on our trade outside Europe has also been important. As a member of the largest trading bloc in the world, which negotiates as a single unit on trade policy matters, we have benefited both from the protection that that provides against discriminatory treatment by third countries and the leverage that it gives in prising open the markets of others. If noble Lords doubt that, they should talk to the Scotch Whisky Association. Those who say that we would be better placed if we promoted our exports outside the European Union need to explain why the Germans, who have been in the Union for longer than us, have fared so much better in their trade with China than we have. The Mayor of London, trailing his Eurosceptic robe through Beijing, should provide some specifics about why he thinks we would do better if we had to negotiate trade policy with the Chinese on our own. Why is it that Canada, Japan, the US and India are all negotiating freer trade deals with the European Union? That is where the benefit lies for them, and where it lies for the members of the Union.

On investment, this country has often lagged behind, and still does, in the investment league tables among developed countries. However, where would we be if we had not consistently been either first or second among the economies that attract overseas investment into Europe? How much of that investment would come here—and would come in the future, if we were unwise enough to leave—if we were not able to provide a base within the European Union and a strong voice in its councils? A lot of British jobs rely on the answers to those questions, even if they cannot be precisely quantified.

In this country, the European budget is usually regarded as a clear minus in any calculation of economic impact. That is understandable, as we are and will remain a net contributor to the budget, albeit mitigated by the substantial rebate won by Lady Thatcher. However, the programmes funded by that budget in agriculture, in regional and sectional support, and in scientific and industrial research are of real value to important parts of our economy, and could not be easily or straightforwardly replaced by national spending. Try asking any of Britain’s leading research-based universities how they would fare if European budget-funded research was not available to them, and you would get a pretty clear answer.

Almost invariably, policymakers overlook the unintended consequences of their policy decisions. Occasionally those unintended consequences are benign, but more often they are negative, often seriously so. Given the degree of integration of the British economy with those of our European partners that has resulted from 40 years of membership, I suspect that any active withdrawal would fall fair and square into that latter category. Let us hope that debates such as the current one will at least put us on our guard as to the risks we would run if we were ever so foolish as to venture down that road.

12:27

[Lord Desai (Lab)]

My Lords, I thank the noble Lord for introducing this debate. He said that he cut his teeth on the 1975 referendum. Fifty years ago, when I was finishing my PhD, my first job offer was to inquire into the relative merits of the six nations that had joined themselves together under the treaty of Rome as against the seven who formed EFTA—so I have lived with this problem for much longer. The debate about whether we should be in or out of Europe will never be over, whichever way the referendum goes. The 1975 referendum did not settle any of these matters, and neither will the 2017 referendum, which will no doubt decide that we should stay in the EU.

I will talk in particular about the topic of economic impact, not about a referendum, because that is the topic before us. In light of what the noble Baroness, Lady Noakes, said, I will take up that question. As the noble Lord, Lord Hannay, said, one thing is certain—that there is no certainty about the economic impact of the United Kingdom’s membership of the European Union. The excellent document that the Library has produced shows the cost to range from between minus 6% to plus 8%; and as the noble Baroness said, the new UKIP document—written by Tim Congdon, for whom I have great respect—says that the figure will be minus 11%. So the figure ranges from between minus 11% to plus 8%. It is probably anybody’s choice. The problem is that each person answering the question grasps a different part of this elephant.

I want to say two things about the figure of 11% arrived at by Tim Congdon. There are two large items in his calculations. The cost of regulation is 5.5% of GDP, and the other major cost is resource misallocation, which is 3.25% of GDP. That comes to 8.75%, which, subtracted from 11%, leaves about 2%. So those two numbers are worth examining in more detail.

As for the larger item—the cost of regulation—let me just list the social directives that are supposed to be costly. They include the safety and heath at work directive, the works council directive, the parental leave directive, the race directive, the equal treatment directive, the working time directive and the gender equality directive. Let us suppose that we were not in the EU. Would we necessarily not have some of those directives? Would we not have the race directive? Would we actually say, “No, we want a racist society”? Would we not have a gender directive of some kind? Do we not already have health and safety legislation? Are we going to jettison that? A proper comparison would be: if we leave, what sort of regulation will we keep, and what is the differential effect of being inside the EU rather than outside the EU?

Similarly when Tim Congdon costs resource allocation, the one definite number he has is that the cost of the common agricultural policy—which I have long opposed—is about 0.5% of GDP. The rest of the cost is computed from a study of tariff and non-tariff barriers in the EU by Patrick Minford which is about eight years old. I have not had time to look at it in detail, nor do I have time to talk about it in detail, but I believe that some of those tariff barriers have disappeared. We ought again to calculate properly whether there are still such tariff barriers within EU trade, and if so, determine whether they are likely to be removed, or whether we will have to live with them. Also, if we leave the EU, what sort of tariff barriers would we face vis-à-vis the remaining EU?

I believe that on all these questions we ought first to calculate the impact costs, and then ask which bits we can remove, examine the counterfactual and allow for the uncertainty of all calculations. I think we will arrive at the conclusion that there is nothing definite to be said about this issue—but then, that is the nature of economics.

12:33

[Lord Wrigglesworth (LD)]

My Lords, it is a great honour and a great pleasure to address your Lordships’ House for the first time. I do so with some trepidation as it has quickly become apparent that I have a great deal to learn about the workings of your Lordships’ House, not to mention its myriad nooks and crannies. However, that learning process has been made easier and more pleasant by the warmth of welcome from the staff and from all sides of your Lordships’ House, particularly from so many old friends and colleagues, and also by the excellent induction programme provided by officers of the House and by my noble friends.

I am also grateful to my two sponsors for their support and encouragement. In one sense it was my noble friend Lord Rodgers who first got me into all of this. It was in his victorious by-election campaign in my home town of Stockton-on-Tees way back in 1962 that I cut my political teeth. That process was aided and abetted later in that decade by my noble friend and former student flatmate Lord McNally, with whom I was actively engaged in student politics, among other things. It was a great honour and pleasure later in my life to represent Stockton-on-Tees in the other place. I thought it might be wise, before speaking today, to look up the maiden speech that I made nearly 40 years ago. I have to tell noble Lords that the only thing it reminded me of was my age.

The north-east and its history have been responsible for moulding my politics and my attitudes from my earliest days. From up there, Leeds and Manchester are down south. The scourge of unemployment has left an indelible scar on me and many others over the generations, not least on the first noble Earl, Lord Stockton, who, as Harold Macmillan, served as the town’s MP between 1924 and 1945. The region has been transformed in the past few decades and has many vibrant new industries, but it is profoundly depressing that, after all these years, the unemployment rate still remains the highest in the United Kingdom. I have spent most of my life trying to do something about that, serving on bodies such as the Northern Development Company, the Northern Way, the NewcastleGateshead Initiative, as chairman of the Northern CBI and latterly as deputy chairman of the advisory panel for the Government’s regional growth fund. I am sure that if it had not been for these, and the work of many other bodies such as One North East and the new LEPs, things would have been worse than they are today.

When my electorate passed a vote no confidence in me in 1987, I started a new business career in London and the north-east. After a few years of working in industrial property, a partner and I launched UK Land Estates. It has become one of the biggest investors and developers of industrial and commercial property in the north-east with more than 2,000 businesses now as tenants. I declare an interest in that company and in my own business, the Durham Group. Until last year I also had the pleasure of chairing the Port of Tyne. It supports some 10,500 jobs in the region and contributes £0.5 billion to the region’s gross value added. During my time it has grown to become the largest trust port in the United Kingdom by turnover and profit, overtaking the likes of Dover some time ago. It is one of the major trading gateways of the United Kingdom, connecting United Kingdom businesses to five continents via the major European ports.

That brings me to the subject of today’s debate, introduced so ably by my noble friend and fellow Northumbrian Lord Shipley. The north-east region is the only United Kingdom region showing a balance of trade surplus. A large proportion of that surplus is in the £7 billion of exports handled by the Port of Tyne. Most significantly, it is the fourth largest import/export terminal in Europe. The main reason for that is that virtually all the vehicles exported by Nissan from the United Kingdom are shipped through the Tyne. As my noble friend said, the Nissan plant at Sunderland is the largest and most productive vehicle-manufacturing facility in the United Kingdom. It is now producing more than half a million cars a year, 80% of which are exported. It directly employs 6,400 people plus many more in the supply chain. Since it came to the United Kingdom in 1986 it has invested £3.5 billion in the plant and is investing more today. Its contribution to the north-east and to the national economy is massive. It is not surprising, therefore, that Nissan has said that Britain’s membership of the European Union is very important to it and that it wants to see the United Kingdom remain part of the single market, with its uniform standards and tariffs. I believe that its views very much reflect business sentiment across the United Kingdom. The most recent Chambers of Commerce survey showed that most businesses think that withdrawal from the EU would be bad for Britain, and CBI surveys reflect the same views.

All my business experience tells me that confidence is the most important ingredient in any investment or spending decision. I have worked in two banks, served on the boards of many companies—large, small, public, private and co-op—and I sometimes think that the political community does not understand the vital importance of confidence in business decisions. Nothing undermines confidence more than uncertainty, and there is uncertainty at the moment over our country’s future in the EU. If that uncertainty increases, confidence will be damaged, but the consequences will not be immediate plant closures; instead, decisions will be taken to build the next model in Spain and not in Swindon, Solihull, Halewood or Sunderland. That will lead to the plants gradually declining and the jobs decreasing; and who will suffer? The national economy, of course. But most directly it will be those 6,400 people at Nissan, and others like them. Even more tragically, it will be those without jobs, whose hopes will be dashed and whose families will continue to suffer. Talk of referenda and other issues in Westminster is all very well and may be unavoidable, but I hope that we will never forget the potential consequences for many vulnerable people.

12:41

[Lord Selsdon (Con)]

My Lords, I have the great pleasure and privilege to follow the noble Lord, Lord Wrigglesworth, and to thank him for his most interesting maiden speech. He would not know, and I had forgotten myself, that I began my own industrial activity in the north-east. There was the least business there; as a representative, you got commission in your sales, and there were no commissions to be had in the north-east, until we managed to win a contract at Blyth colliery, which was my introduction to the coal mining industry.

I have listened to the noble Lord, Lord Wrigglesworth, before. It is strange that those who come from the northern parts of the country always speak slightly more seriously, but there is something behind the words they say that pricks. I realised what it is today when the noble Baroness, Lady Northover, spoke, and referred to the balance of power within the House and the different departments. I suddenly concluded that it is probable by my calculations that the noble Lord, Lord Wrigglesworth, now holds the balance of power. I refer him to my great-grandfather, who served in the Lloyd George coalition. Coalitions are not necessarily a good idea, because you have that awful phrase coagulation.

Then you come to the referendums, and things like that. I got a phone call, because I found that I had to give up being in industry because I had been summoned to your Lordships’ House after my father died. I did not know that I did not have to come; I had no writ of summons—I had no knowledge of any of this. I had to change my job. A friend of my grandfather said, “You may not be bright, but you ought to be brighter. Why don’t you do some research in a research company?” I joined it, and one of our clients was JETRO, the Japan External Trade Organisation, which we visited regularly and took to London to encourage it to invest in the United Kingdom. We produced a very good report, but we forgot that the Japanese drove on the same side as we did and that therefore it was much cheaper for them to set up a manufacturer here.

One of the main points that I wish to make today is to ask why are going to have a referendum. I was at one time treasurer of the Conservative Group on Europe, and had a lot of problems trying to raise money for the referendum campaign. I remind your Lordships of some of the background to this. On 28 October 1971, there were votes in the Lords and Commons that,

“this House approves Her Majesty’s Government’s decision of principle to join the European Communities on the basis of the arrangements which have been negotiated”.

In the Lords, there were 88.6% in favour and in the Commons 59.3%—an overwhelming majority. That led on to 1975, when the new Labour Government held a referendum and we found once more to our surprise that in response to the question,

“Do you think that the United Kingdom should stay in the European Community (the Common Market)?”,

64.5% were in favour. So why are we now going to have another referendum? Is it necessary, or is it a matter of internal politics? I congratulate the noble Lord, Lord Wrigglesworth, on his speech. If he has the balance of power, we know which way things will go.

My noble friend Lady Noakes and I agree on so many things, but not necessarily on the things she says. Trade has been my lifeblood and fate. The European Union is our biggest trading partner by far, and it also represents our biggest deficit; with the exception of Ireland, with which we have a big surplus, we have a deficit with practically all the EU countries. Our biggest trading partner is still, just, the United States, followed by Germany. But it is not so much the EU that counts; it is the international development and activity that follows on a global basis.

We have managed to attract, in recent years, a sizeable volume of foreign investment in the United Kingdom, not just in manufacturing or in service industries but in pure investment. Our balance of payments deficit in general, without invisibles, would be very significant indeed. On all areas, we have a manufacturing deficit—but the growth areas, surprisingly enough, are those that used to be those of our Commonwealth partners, where the added value is created, in agriculture, minerals or semi-manufactures. At the same time, we have encouraged successful entrepreneurs from those countries to come and invest in the United Kingdom. It will not surprise your Lordships to learn that much of the investment that has come into the United Kingdom in recent years has come from what we would once have called the third world. We can look at the success of India and the development of China and south-east Asia, and even some of the African countries that are producing growth. Our future does not lie within the EU, but it is those markets that are the closest to us and those that foreign investment companies and manufacturers are looking to serve. When they invest, they are looking to invest not in the limited United Kingdom market but in the markets with which the United Kingdom has the greatest relationships.

It is sometimes a good idea to sit and think. I do not propose that we should have a referendum; it is a complete waste of time and money. If you were treasurer of the Conservative Group on Europe and you suddenly found one day that you had a bill for £323,000 and no money, because you could not raise any, you would feel how sensitive it is. I do not know how strong a campaign will be waged, but I wish that the Government would think again and that the noble Lord, Lord Wrigglesworth, with his balance of power, will make sure that we do not have a referendum. I thank him again sincerely for his contribution. I know that we will hear much from him in future.

12:47

[Baroness Donaghy (Lab)]

My Lords, I congratulate the noble Lord, Lord Shipley, on initiating this debate, and the noble Lord, Lord Wrigglesworth, on his maiden speech. He may not remember that we worked together at Hamilton House in the late 1960s, and it is very good to have the opportunity to work with him again now. I am also glad that we have more than three minutes to speak on this debate; noble Lords who took part in the debate on the Prime Minister’s speech on Europe will remember that we were all rather rushed.

Simply putting a case for the benefits of UK membership of the European Union will not convince many people. It is important to recognise the levers that we have and those that we face, and not to argue this in a vacuum. For instance, we will never have a mass-circulation press that loves Europe. It is a fact and—in the words of the noble Lord, Lord Adebowale, on Tuesday—we should “get over it”. The media are more balanced about Europe, but even that leads to hysterical reactions from some newspapers about pro-European bias in the media. We have also to accept that the UK will never love Europe. Except for Guernsey and Jersey, with huge consequences for those islands, we have not had foreign enemy troops tramping across our borders; we are an island, and proud of it. We can never appreciate the strong emotional element that applies to most of continental Europe about the need to bond on economic and social alliances.

That emotional commitment was palpable when I was a member of the European TUC for nearly 10 years. You have only to visit Jersey or Guernsey on Liberation Day—in Liberation Square, for example—to witness the effect that invasion has on people. We have to accept that our hearts will never be in the EU, and that we can live with that. However, if our hearts are not there, our heads are in Europe and I am sure that they will continue to be.

What are the levers which will effect this? One is the number of countries desperate for entry to the club, which will convince people that there must be perks. Another is the support for social Europe from those seeking to protect workers’ rights, which will win arguments. However, it is the support of significant sections of business which will win the day. Others have already mentioned last month’s CBI survey, in connection with YouGov, which indicated that 78% of companies—both small and large—favour staying in the EU. I will not elaborate on that except to say that the majority of companies believe the EU has a positive impact on their businesses without prohibitive taxes or tariffs, recruiting staff from across the EU and participating in EU supply chains. CBI companies were against attempts to create similar employment laws across the EU, working hours being the least popular. This is hardly surprising, since the UK has a higher proportion of overtime worked than most other countries, with employees working longer hours and all the social consequences we know about.

Businesses believe that the UK has influence on EU policies that affect them: 72% felt there was significant or some influence and 27% felt there was not very much or no influence. So support is not enthusiastic but it is absolutely solid. As I have been involved in negotiations most of my life, I realise that you cannot walk away from difficult problems and you cannot opt out when the going gets tough. As I have said before, the TUC and CBI meet as social partners at European level. They know about tackling difficult issues and, for a while, when some of the employment-related directives were being introduced belatedly into the UK, it might have looked as if the unions were making progress and the employers were not. Since then, the boot has been on the other foot. They will have differences on regulation of the market and workers’ rights but no one can afford to throw their teddy bear down just because a problem is difficult.

We can do some things now, without waiting for a referendum or fresh negotiations; I thank Richard Corbett for some of this information. First, there is already a requirement for EU proposals to go to national parliaments first, with eight weeks’ notice before they are dealt with in Brussels. We should implement this, so that Ministers appear before Parliament, or the specialist parliamentary committee, to explain the issues. Secondly, there is already a procedure to check on subsidiarity, to prevent the EU straying beyond its remit. National parliaments can object to European Commission proposals. Thirdly, the Government have a duty to maximise their impact in the European Parliament and are not doing so. Tory MEPs were trafficked onto the goonish fringes and this was an unworthy move.

We are all calling for more transparency in the EU, yet our own Government have failed to strengthen Commons scrutiny of Ministers and failed to publicise their proposals to safeguard the City of London. I could have mentioned the European arrest warrant or cross-border tax evasion, but there is insufficient time. We should not forget that tax fraud, tax evasion and tax avoidance are of such magnitude as to have an effect on government deficits. Acknowledging that employment protections are unpopular with employers, we cannot have a single market where workers’ rights are diminished in a race to the bottom. Unfairness leads to distrust in institutions and, as I have said before, employment protections have been in place for long enough to have become part of the workplace.

Finally, some have accused the Government of being asleep at the wheel on European issues and completely concentrating on the referendum. They are not, in fact, in danger of being asleep at the wheel but of jumping into the boot and closing the lid.

12:54

[Lord Maclennan of Rogart (LD)]

I begin by congratulating my noble friend Lord Wrigglesworth, who has been a colleague and a friend for many years. He has brought to the debate personal experience of great weight and knowledge from industry and from his part of the country where he has striven so hard to make that region more prosperous. I would also like to thank my noble friend Lord Shipley for procuring this important debate which will put on record opinions and facts which will be of great importance if the country is to make a balanced decision about the future of our relationship with the European Union.

Some of the remarks made in opposition to our membership, particularly by the noble Baroness, Lady Noakes, overlooked some facts that others have raised. In particular, the noble Baroness spoke a great deal about the burden of regulation. I recognise that it is difficult to measure the impact of this, but the OECD has produced tables—a little out of date—which show that the burden of regulation in the product market of selected countries puts the United Kingdom at the top of the list of those which are least restrictive. It was even ahead of the United States of America and way ahead of Australia, New Zealand, Poland and Greece.

Our access to trade is not belittled by our membership of the European Union, as I think the noble Baroness implied. The focus of our trade is, rightly, with the 500 million consumers—rich consumers, by and large —in the European Union. This is a highly competitive market which also improves the quality of our production. Access to other countries is greatly assisted by the work of the European Union in opening trade to no fewer than 37 economies around the world, including South Korea, Singapore, South Africa and Mexico. The recent green trade deal with Canada is likely to see British exports increase by an estimated 29%.

Our country could not expect to have such a high rating in attracting inward investment if we were not members of the European Union. I have seen figures which suggest that we are the third largest recipient of direct foreign investment after China and the United States of America and that the stock of inward investment is equal to half the United Kingdom’s GDP.

I have seen in a report from TheCityUK that 60% of decision-makers specifically cited access to EU markets as a core reason for choosing the United Kingdom over other financial centres. Japan in particular—already mentioned by a number of contributors to this debate—has invested huge amounts of money in this country and created 130,000 jobs. The Japanese Government have been very outspoken and clear about why they are doing this, and we would withdraw from Europe at our peril.

I have to say that the alternatives that have been alluded to, particularly in relation to Norway and Switzerland, would certainly not be attractive in that we would be without influence over decision-making and would have to observe regulations and rules. Switzerland does not even have direct access to the financial markets. The arguments for our remaining in the European Union for economic reasons are overwhelming and I hope that this message gets across to the wider electorate. The figures mentioned by the noble Baroness, Lady Donaghy, about the CBI’s views are telling. At the Glasgow conference the Institute of Directors produced figures showing that 80% of its members were also of the opinion that we should remain within the European Union. That did not mean, however, that there should not be changes and, no doubt, progressive Governments will seek change.

13:02

[Lord Giddens (Lab)]

My Lords, I join other noble Lords in congratulating the noble Lord, Lord Shipley, on having initiated this debate. I especially add my congratulations to the noble Lord, Lord Wrigglesworth, on his maiden speech, which was witty, meaty and suave. By “suave” I do not mean to criticise; I mean that his speech was very assured. When I gave my maiden speech, I was trembling all over and could hardly hold my papers. The noble Lord is a welcome addition to this House.

As this debate has shown, all debates in this country about the European Union now take place in the shadow of a future referendum on Britain’s membership. To me it is of the utmost importance that there should be a full and thorough public debate on this issue and I am worried that this might not happen—that is the burden of most of what I have to say. There is a real danger that Britain could sleepwalk towards exit, with many of the public simply being unaware of the seriousness and complexity of the issues involved.

I am a committed pro-European—indeed, something of a passionate one. My noble friend seemed to indicate that we do not exist. We do exist. Many people like me feel an emotional, not just pragmatic, commitment to the European Union and what it has accomplished for the continent over the past several decades. However, I am not one of those who hold that it would be economic suicide for Britain to quit the Union. There are scenarios in which the country could survive quite well, perhaps even prosper, although its influence in the wider world would be sharply and irretrievably reduced.

Leaving the EU would not be the marginal issue that many citizens appear to think. It would be the most consequential decision that the country had taken for 60 years and involve a protracted and wrenching adjustment. To me, leaving the EU would mean the reinvention of the country. The idea that the UK could simply leave the EU and become the same as it was in 1950, going back to having some kind of autonomy in the wider world, is simply ridiculous. An enormous process of reinvention of identity would have to occur. If it did, the country could in principle be successful, but such a course of action should not be contemplated without intensive and, above all, informed public discussion. I hope that this discussion in your Lordships’ House will be the first of many that will involve the wider citizenry, not just a proportion of people in this establishment.

The immediate economic problems to which Britain would have to respond if it left are easy to state but, as my noble friend Lord Desai said, not as easy to quantify as many on either side of the debate seem to think. I hesitate to disagree with a colleague from the LSE, especially an economist who admits to the fallibility of economics—that is something to behold—but I spent the past six months of my life studying the economic statistics of the EU and I know that some of the assertions that are made are robust and some are not. For example, we know that the single market has made a fundamental contribution to the overall wealth—the GDP—of the EU, including this country. The calculation of a 2.2% net addition as a result of the single market before the 2008 crisis is robust. What are not so robust are the employment statistics. We do not really know. Between 2 million and 3 million jobs here depend on the EU, but the counterfactuals are so difficult to state that no one can simply assert that bluntly. It has been demonstrated, however, that the financial services industry would inevitably suffer if the UK left the EU. One can forget the idea that Britain could become a sort of offshore banking centre like Singapore. London could perhaps do that if it seceded from the rest of the UK, but there is no chance of that happening. There is no doubt that leaving the EU would have a serious impact on the financial services industry.

I wish to make the more subtle argument that most of the important economic losses would stem from factors that are not wholly economic. Here I would reverse the conventional wisdom about Britain losing sovereignty as a result of its membership of the EU. It can be demonstrated that every member of the EU gains sovereignty from being a member and does so when acting alone—not just as a member. This can be done easily by reference to the proposal mentioned by the noble Lord, Lord Shipley, for the EU-US free trade agreement. That will be the single most important source of wealth and job generation for both sides that has ever been established. Could anyone think that Britain outside the EU, feebly knocking on the door and timidly asking to be let in, represents more sovereignty than if we were an active participant in the European Union when it negotiates such an agreement? That would be ridiculous.

I conclude with questions for the Minister that lie behind everything that I have been saying and to which I should like a response. What concretely will the Government do to ensure that the open and informed debate that the country needs will actually take place? What concrete measures will they take to make sure that citizens are directly involved?

13:09

[Lord Stoddart of Swindon (Ind Lab)]

My Lords, I join others in congratulating the noble Lord, Lord Shipley, on introducing this debate, and I must congratulate the noble Lord, Lord Wrigglesworth, on his excellent and telling maiden speech. In another place, when we were both members of the Labour Party, he and I used to spar about this issue in the Tea Room and elsewhere, but time is short, so I must carry on with the debate.

As some noble Lords will know, I never wanted to join the Common Market and I believe now that it would benefit this country if we left the European Union. Noble Lords will recall that when Harold Macmillan recommended that we join the then Common Market, or the EEC, he said that one of the major reasons was that Britain deserved to have the chill wind of competition. We have certainly had that. Our manufacturing industry, which in 1973 represented 32% of GDP, now represents only 10% of GDP.

The noble Lord, Lord Shipley, referred to a number of firms, the CBI and other organisations that desire at all costs to remain in the European Union and warn of the problems, difficulties and injury that will occur to this country if we left. When I was a Member for Swindon and fighting the referendum, Lord Stokes—he was then Sir Donald Stokes, the chairman of BLMC—wrote to all my constituents and said that if we left the Common Market they would all lose their jobs and the car industry in this country would be destroyed. We decided to remain in and, of course, the car industry was destroyed by our remaining in rather than the reverse. I might add that many of the people who have been quoted were the very people who recommended that we should join the euro. It is fortunate that we did not take their advice then. Perhaps we should not take their advice now.

I must quote some figures. We have heard a lot about the benefits of being a member of the EU, so let us now hear about some of the disbenefits. For a start, we pay a contribution of between £10 billion and £12 billion for the purpose of being a member of the EU. That represents £55 million per day and translates into £150 per person every year. In the case of a family, it is £500 per year per family. We are arguing about £100 on energy bills, yet every year each family pays £500 to belong to the European Union.

We have heard a lot about the trade figures, so let us look at some of them. In 2007, our exports to the European Union were £318 billion. In 2012, they were £278 billion. That means that, instead of becoming a better market for us, Europe is becoming a worse one. In 2007, exports to the rest of the world were £370 billion and in 2012 they were £394 billion, so our trade with Europe is declining but our trade with the rest of the world is going up. I think that we should take note of that. Furthermore, the current adverse balance of trade is going up—shooting up, in fact. In 2007, the deficit was £40.9 billion; in 2012 it was an enormous £83.2 million. So there are figures on the other side, of which we should take notice. The EU is a declining market.

Unfortunately, I do not have time to deal with more aspects, but I want to refer to the democratic deficit. Of course, I would like to see this reduced to nil and for us to get our own democracy and central government back. Unfortunately, that is not easy. As the President of the Commission, José Manuel Barroso, said, David Cameron’s attempt to renegotiate Britain’s relationship with the EU was doomed before it began. That really says everything about the centralised nature—almost dictatorship—of the EU.

13:15

[Lord Davies of Stamford (Lab)]

My Lords, I congratulate the noble Lord, Lord Wrigglesworth, on a very confident and able maiden speech. It is great to have someone of that experience and background in our House. We look forward to future contributions. I congratulate also the noble Lord, Lord Shipley, on managing to get time for us to debate this matter today—a lot of time, actually six minutes per person; a good deal better than we have ever had before.

It is almost unimaginable to me that any sane or responsible person would want to take his or her country on economic grounds out of the world’s largest trading bloc; a trading bloc which other countries are queuing up to join, which no one has ever wanted to leave and with which those who cannot join for geographical reasons are desperate to sign a free trade agreement—which is very much a second or third best. But so it is. We have people who are entirely sane and responsible—for example, the noble Lord, Lord Stoddart, and the noble Baroness, Lady Noakes—who have been taking that line today.

I believe it is sometimes useful for these debates to be responsive and reactive so I am going to spend all of my time addressing some of the points that they have made. First, the point of the noble Lord, Lord Stoddart, has already been answered. If this country were to remain as part of the single market in any form, it would, of course, continue to have to make budgetary contributions, so there would be no saving. The suggestion of the noble Lord, Lord Stoddart, that we do not have access to the single market, is a very dramatic suggestion and I think one that he might want to think through.

It is possible to talk all day about how many of the 3 million to 4 million jobs in this country which depend on the single market we would lose if we immediately left the single market. Obviously, there would be some and the number would tend to accumulate over time. We will never agree on what that number might be, but it would be a number, certainly. As the noble Lord, Lord Shipley, said, an even greater threat is the future loss of investment, which we would have if we stayed in the single market, which we would not have if we left the European Union. I think that would be quite dramatic. It would be dramatic in manufacturing. It is difficult to see how we would get any manufacturing at all, where manufacturing is generally producing for more than 50 million to 60 million people. People will want to put in a new facility at great expense only where they can address the single market. They would certainly not come here.

However, the loss is not merely to manufacturing. I want to read to the House briefly from the evidence given by JP Morgan and Goldman Sachs, the two biggest investment banks in the world, to the Parliamentary Commission on Banking Standards on this subject. They are quoted in the excellent note we have had from the Library as saying:

“We believe that a key risk to London’s retaining its status as a financial hub is an exit by the UK from the European Union. In common with financial institutions across the City our ability to provide services to clients and engage in investment activities throughout Europe is dependent on the passport that London-based firms enjoy to operate on a cross-border basis within the Union. If the UK leaves, it is likely that the passport will no longer be available, thereby forcing firms that wish to access EU markets to move their operations to within those markets”.

It could not have been put more clearly. It is also quite clear that what they are talking about is being a full member of the single market—a full member of the regulatory system or structure. That is what they want, otherwise business will move across the water to the continent. If we ignore such a warning, I think that we are being anything but sane or responsible.

How is it that intelligent people such as the noble Baroness, Lady Noakes, come to a different view? She is not one of those people whom one can dismiss as being driven by some sort of primitive emotion—the kind of people who get a kick out of waving flags and telling foreigners to go to hell. There are such people in our country but the noble Baroness is undoubtedly not one of them, so I shall try to address some of the points that she raised.

She made a number of very interesting points. Like many Eurosceptics, she is becoming a little more sophisticated. They are saying, “Maybe we wouldn’t go for a deal like Switzerland or Norway because clearly that would involve us becoming”—my phrase, not theirs—“a kind of satrapy of Brussels. We really would be ruled by Brussels then”. That is the rhetoric you get from the Daily Mail today, but that would be the reality because we would have no role whatever in the decision-making structure and no chance of making our views known and influencing events, yet we would have to implement the legislation that came from Brussels. That would not be an intelligent thing to do, and the noble Baroness, Lady Noakes, thinks that she could do better.

Indeed, a Eurosceptic friend of mine—a former Conservative Minister with whom I have been discussing Europe for 20 years—said to me the other day, “We could do better than Switzerland and Norway”. I asked how and he said something very similar to what the noble Baroness, Lady Noakes, has said. He replied, “We’ve got great power because we have a balance of payments deficit with the European continent—with the other members of the EU—so we could really put the pressure on them and cut off their exports to the UK”. I said, “So what you are actually planning is to declare war not merely on the EU but on the WTO—on the international trading system”. He did not really have an answer to that. I do not think that it is a practical possibility. It is extraordinary to think that we would leave the EU with all the risks involved to go into some uncertain future.

There is a fundamental error in what the noble Baroness, Lady Noakes, said about the rest of the world. She seemed to think that there is a trade-off in our trade with the rest of the world and the single market in the sense that, if you have more of the one, you have less of the other. In fact, there is a negative trade-off: if you have more of the one, you have more of the other. The whole point of the single market is that with a greater specialisation within that market, the greater competitiveness that emerges as a result of that specialisation, the economies of scale and the longer production runs, you are more competitive outside the EU. Therefore, far from the EU being an incubus for us in developing non-EU markets, our presence in it is actually a major gain. That is a very important point which should not be forgotten.

I have very little time left in which to speak but I want to say that it seems that we have a difficult and very risky decision to take. It would be extraordinarily irresponsible for us, as a country, to make a decision which could have enormous costs without being absolutely clear about what we were going forward into. Some of the things that have been said today about the Tim Congdon and Patrick Minford studies simply do not stand up to scrutiny. It is quite clear that we would continue to have some regulatory costs and that is not being taken into account.

I am getting signals from the Front Bench and so I shall wind up. Once again, I pay tribute to the noble Lord, Lord Shipley, for giving us the opportunity to have this debate.

13:23

[Lord Watson of Richmond (LD)]

My Lords, first, I join in thanking my noble friend Lord Shipley for introducing this debate, and I add my compliments on the maiden speech made by my noble friend Lord Wrigglesworth—an old friend. Whether he will actually achieve the holding of the balance of power in this House is open for later debate, but we certainly welcome the contribution that he is undoubtedly going to make. He will bring a sharpness in the sense of realism. He has, I believe, been described as “suave”. I do not know about that but he will make a difference, which is excellent.

I should declare two interests which are relevant to the subject. We have already heard about the impact of EU membership on the funding of university research in the United Kingdom. As High Steward of Cambridge University, I should like to say that the real dependence that Cambridge University, which in many ways is the leading science university in the United Kingdom, has on EU funding is immensely significant and would of course be threatened by an EU withdrawal. Secondly, I chair a number of companies, all of which are deeply dependent on trade within the European Union.

There are many individuals, companies and, increasingly, countries whose good will and decisions are going to be vital to Britain’s future and which have warned us of the consequences of withdrawal. That list is perhaps in some danger of becoming a kind of litany, recited by pro-Europeans such as myself; nevertheless, the list stands and it grows: the US State Department, the German Chancellor, Nissan cars and Hitachi. Earlier this month, a survey showed that one-third of British manufacturers said that they would be less likely to invest if we quit, and a further third said that they would have to make significant changes to their business model were we to do so.

However, in this debate on the economic impact of membership, I should like to focus not on that lengthening list and the current benefits which we might jeopardise but on the vast and new opportunities that we would forgo in world trade; namely—and it has been raised already—the momentum of the EU’s bilateral trade and investment agreements, signed, about to be signed and now being negotiated. Taken together, they represent an extraordinary new landscape of trade, and if we excluded ourselves, we would mar and impoverish our prospects as a trading nation for decades and maybe centuries to come.

The first of these new deals was with South Korea in July 2011. As tariffs have fallen with Korea, exports have soared, giving the EU, for the first time in 15 years, a trade surplus with Korea. On the 18th of this month came the comprehensive economic and trade agreement with Canada. It is actually the EU’s first free-trade agreement with a G8 country and it has removed 99% of tariffs. Let us remind ourselves that the EU is Canada’s largest trading partner after the United States.

Under negotiation is the agreement with Japan—the second biggest Asian trading partner of the EU—which could boost EU exports by a third, creating, it is calculated, up to 400,000 new jobs in Europe. The current round of talks this week in Brussels involves powerful EU pressure on Japanese non-tariff barriers, which is probably the key with Japan. Talks with India are under way, although at a much earlier stage, and then of course there is the really big one: the Transatlantic Trade and Investment Partnership, which was born of the EU-US high-level working group on jobs and growth, involving a great many top people from British multinational corporations. It could add £119 billion to the GDP of the EU. It is not going to be an easy thing to negotiate but it is an imperative for both sides. Let us remember: we focus a lot on Asia but the United States and the EU together represent 50% of global GDP and one-third of all world trade. If we withdrew from the EU, this would place us on the periphery of this new international trade landscape—vitally effective but marginalised. It would be an own goal of monumental consequences.

Finally, the balance that we should be looking at is not just an arithmetic calculation of present benefits and penalties. Underpinning all this is a recognition of change. I should like to end by saying that six years ago when I stepped down as the chairman of the British-German bilateral Königswinter conference, a member of the German Parliament got up and attacked Britain’s attitude towards the EU, saying that we lacked vision and commitment. I said in reply, “Look, we started this European journey from very different places. We started it as the bankrupt victor; you started it as a country which had been disgraced, divided and occupied. We began at a different place”. What matters is where we are now, and the place where we are now is a recognition of interdependence in a globalised economy. We must not jeopardise that.

13:29

[Lord Haskel (Lab)]

My Lords, last week I had the privilege of representing your Lordships’ European Sub-Committee B at the 15th European interplanetary space conference in Brussels. I was delighted to attend, as the space industry is one of the eight growth sectors identified by the Government for special support. Indeed, our contribution to the European Space Agency has recently been increased by 25%. How right we are.

The priority of the European Space Agency is not necessarily to encourage space travel to Mars. It is to encourage growth here on earth. This has been done by helping to create new marketplaces, more particularly in Europe, using the satellites and equipment in space —markets that provide improved services to EU citizens through new communications platforms for the internet, TV, telephone and radio; that help agriculture and fishing with better weather forecasting and better understanding of climate change; and that use observations from space in cities and the countryside for better management of road, rail and air.

You must be asking why I am telling you this. I put it to your Lordships that our membership of the European Space Agency is a microcosm—a miniature—of our membership of the European Union. The obvious economic benefits gained from our membership of the ESA reflect the economic benefits gained from our membership of the European Union. It illustrates the arguments put by the noble Lord, Lord Shipley, whom I congratulate on moving this debate. It also illustrates how wrong are the arguments of the noble Baroness, Lady Noakes, and the noble Lord, Lord Stoddart.

The European Union is not a new institution. Times and circumstances change and so do institutions if they are to remain fit for purpose, creative and beneficial. You do not achieve this change by walking away, or even threatening to walk away. That is how you paint yourself into a corner. Obviously it is now dawning on the Government that that is exactly what they are doing. You change by building on what has gone before. You complete the single market by reviewing the rules, bringing them up to date and making them smarter, not by walking away.

As many noble Lords have told us, including the noble Lord, Lord Wrigglesworth, in his maiden speech, this is not only the view of our large foreign investors in car-making, technology and nuclear industries, it is also the view of 85% of the EEF members, who said that they would vote to remain in the European Union if there were a referendum now. This is because people in business know that it takes months and years of hard work to build up the trust, confidence, connections and knowledge to sell and trade successfully in overseas markets. EEF members do not want to see their years of effort in Europe wasted by the incompetent and uncaring short-termism of some members of this Government. This is why, after listening to his members, the chief executive warned us not to gamble on our future in Europe. “The stakes are enormous”, he said,

“it is naive to think that we can simply pull up the drawbridge and carry on as normal”,

and do the business elsewhere. My noble friend Lord Giddens was also concerned about this.

China has been mentioned as an alternative. The noble Lord, Lord Hannay, asked why Germany has been so successful there. The fact is that their Chancellor has been there some 25 times since the open-door policy was announced in 1978, to emphasise their strengths and commitment. This is not as an alternative to Europe, but in addition to it—and so it should be for us.

It seems to me that, instead of surrendering our capability and strengths in the space industry for the sake of appeasing Eurosceptics, we too must take advantage of our strengths. Our companies, our people and our universities are full of new ideas and technologies for the space industry, as a result of our investment in the European Space Agency. We benefit from our participation and our membership fee. This is a model that works. I put it to the Minister that the same applies to our membership of the single market and the EU.

13:35

[Lord Stevens of Ludgate (Con Ind)]

My Lords, we are here today, thanks to the noble Lord, Lord Shipley, to debate the economic impact of being a member of the EU. I also congratulate the noble Lord, Lord Wrigglesworth, on an excellent maiden speech. In addition, contrary to some comments that have been made, I agree with practically everything that the noble Baroness, Lady Noakes, said. She summed the situation up brilliantly, which is why my speech will be somewhat shorter than usual.

No one could doubt that the impact has been of major importance. The European treaties are the UK’s supreme constitution, over and above our laws, as per the European Communities Act 1972. The UK’s cash contribution to the EU is second only to that of Germany. Since 1973, the UK has paid to the EU some £370 billion and received in return £180 billion—this to an organisation whose own auditors say that 90% of the EU’s entire budget has been materially affected in some way by fraud or unaccounted spending. If sending to the EU some £12 billion net in 2013 is perhaps not of major impact in relation to the total UK budget, the economic cost of regulation is. The European Commission itself puts the EU costs of regulation at £600 billion a year for all the members. Business for Britain, supported by more than 500 business leaders, has told us that since the 2010 general election, Brussels has handed down 3,600 new pieces of regulation or directives—some 13 million words—ranging from banning the union jack on packs of meat to changing the generic name of the tomato.

Let us pause for a moment and look at Open Europe’s report on EU regulations that came out last Monday. It says that the top 100 EU regulations cost the UK economy some £27 billion a year and that the costs of regulation outweigh the benefits in impact assessments of a quarter of the 100 cases. Of course, as has been stated, were the UK to leave the EU, some of these regulations would need to be retained.

The EU was sold to the British public as a free trade area. It has indeed brought trade barriers down, as has the WTO. Some 40% of our trade is with the EU—a declining proportion, partly because EU trade has slowed down since the 2008 collapse, but also because the share of the EU in global trade and outputs has been declining and will continue to do so, if for no other reason than the demographic problems of its ageing and declining population.

As has been stated, we have a trade deficit with the EU of more than £80 billion a year, larger than our surplus with the rest of the world. It needs us more than we need it. As far as economic influence is concerned, the euro members can outvote us in any matter not requiring a unanimous vote. As we all know, EU regulations apply to 100% of the UK economy, but our trade with the EU is less than 10% of the UK economy. Our trade with the rest of the world, in spite of these regulations, is growing much more rapidly than with the EU. How much more rapidly would it grow without EU regulation?

I have not commented on unlimited immigration, handouts to illegal immigrants, inflated agricultural prices and many other matters, because time inhibits it.

The original subject of this debate was “economic benefit”. That has changed to “economic impact”. It seems almost to have developed into a debate over “in” or “out”. We heard in Oral Questions today that the majority of the British public support some control of the press. I declare an interest as a former chairman of Express Newspapers. On this basis, the majority want a referendum on the UK’s membership of the EU: in or out. Is it not time that we had one?

13:39

[Lord Soley (Lab)]

My Lords, I welcome the noble Lord, Lord Wrigglesworth, whom I well remember as a Member of Parliament and his struggle as to whether he should stay in the Labour Party or leave. He chose to leave and I chose to stay, although, like a number of us at that time, we toyed with the idea of murder or suicide instead. However, we got through that phase, which I think was beneficial to everyone.

I particularly welcome the full, considered and convincing introduction to this debate made by the noble Lord, Lord Shipley. I shall not repeat all the arguments he made along economic lines but I should like to emphasise one that was picked up by the noble Lords, Lord Hannay and Lord Watson of Richmond, and my noble friend Lord Haskel. The amount of expenditure on science and technology beneficially made to us through the European Union is enormous, particularly in the university sector. We benefit far more than any other country in the European Union from that expenditure.

Science, research and development will drive growth. We will not achieve growth with a low-income economy. We cannot go down that road. If you are to maintain that level of research and development expenditure, and come out of the European Union, you have to answer the question that I think was asked by the noble Lord, Lord Stoddart, and the noble Baroness, Lady Noakes: where does that money come from? It will not be replaced by the private sector or the public sector in Britain. Inevitably, that would impact on us. My noble friend Lord Haskel gave the classic example of the space industry. Although I have said it on a number of occasions in the House, it is not well known that Britain still has the second-largest and second most-advanced aerospace industry in the world. There is hardly a satellite going around this planet that does not have British instruments on it. Often, they are of major importance. A lot of that expenditure on research and development has come from the money that we have received from the European Union. People have a responsibility to answer that point.

I also want to put this in a political context. I am very conscious that when people making economic decisions do not take into account the political circumstances, they often make mistakes. Politicians who make decisions without taking into account the economic world in which they operate can make very big mistakes. If you look back on Britain’s relationship with the evolving European Union, many people would say that we made very big mistakes in our political calculations. You can go back to the famous headline in the Daily Mail around 1908—I cannot remember exactly when—which said, “Fog in the Channel: Europe isolated”, or perhaps it was “Fog in the Channel: Continent isolated”. Either way, it said everything about a mindset.

I often ask the question: Why are the British so diffident about Europe? One of the reasons is that we are an island nation. Another reason, which was alluded to a few moments ago, is that we have never been defeated and occupied. We are almost alone among the European states and certainly alone among the major states. We have always been the victor. If you ask continental Europeans about the importance of the European Union, often they will put first that it has maintained the peace. The majority of British people do not see it in that way; it does not have the same weight here. That is a very important factor in people’s attitudes to Europe.

In the context of the balance between politics and economics, having had a view of ourselves as being separate and having won the two world wars, in the period after the Second World War we looked at where our market was going to be while the European Union was developing as the European Economic Community. Initially, we had the Commonwealth Party, which argued for the Commonwealth as the market, for which I had great support at the time. As an internationalist in that sense, I rather liked the idea. Having failed on that front, we turned to the European Free Trade Area, which we set up. Again, it did not work. People who are saying that we should come out of the European Union now should look at the long history of this issue and ask why we made those political judgments in the face of such dramatic political change.

Enormous political change is again taking place in the world now. The United States will no longer be the dominant world power as it was after the Second World War. That does not mean that it will decline in importance, fail economically or whatever. I do not think that that is happening but the US will not have the same dominance that it had previously. In many respects, it is rather like Britain in the early 20th century when we had lost our total dominance of the world. People used to say that 95% of goods travelling around the world were in British ships. Now we say that about 88% of the advanced technology of the internet is driven by the United States. However, that is changing rapidly. India, China, Brazil and the newly emerging countries—perhaps to a lesser extent, Russia—are eating away at this, which means that we must change too.

Finally, it is time for Britain to stop the half-in, half-out dance. We are doing ourselves enormous damage. My fear about the referendum—I do not support it and I am not a great fan of referendums at the best of times—is not that it will not be won. I am sure that it will be won, but my fear is that there will be a relatively low turnout. Those people who want to take Britain out will continue to fight on that front. There will be the same problem as there will be if we do not win the referendum convincingly in Scotland, although I hope that we will. People take heart, although often it is because people are not voting in the way that one hopes. I hope that the British people have the wit to see that the politics has changed dramatically and, along with it, the economics of the world. We had better face up to that and become a bit more wholehearted and less half-hearted. We are doing ourselves a lot of damage within the European community and in the wider world by appearing to be so negative.

13:39

[Baroness Falkner of Margravine (LD)]

My Lords, I, too, thank my noble friend Lord Shipley for having secured this debate. It is an important debate and it is an important time for our country to have these discussions. Before I move to the substance of my speech, I could not possibly not congratulate my noble friend Lord Wrigglesworth on his fabulous speech, which, as the noble Lord, Lord Giddens, said, was delivered with such verve and conviction. My acquaintanceship with my noble friend goes back to SDP days when he was one of the grandees and I was one of the workers. It is very nice to see him here on slightly more equal terms, which I have to say are to my benefit.

This debate is hugely significant in the sense that, while most speakers have spoken from more or less the same hymn sheet, some speakers have not. Of course, it is important to mention the contribution made by the noble Baroness, Lady Noakes, as well as that of the noble Lords, Lord Stevens of Ludgate and Lord Stoddart of Swindon. These debates on the other side of the fence to most of us will be hugely significant as we move forward to cross swords over the referendum campaign. I was not surprised to hear what the noble Baroness, Lady Noakes, said. She quoted Professor Congdon and Professor Minford who, distinguished as they are, are also known to be very long-standing critics of EU membership. In a sense, it might have been more fruitful if we had heard from more authoritative and more impartial sources on the other side of the camp. I regret that we did not get that. However, the noble Lord, Lord Desai, illustrated ably why their analysis needs further scrutiny and I am sure, particularly since the paper by Professor Congdon is relatively recent, that research institutes will analyse his findings very seriously.

The Department for Business, Innovation and Skills per capita calculation takes a longer-term look at those figures on the basis that:

“EU countries trade twice as much with each other as they would do in the absence of the single market programme”.

That of course was based on the OECD’s estimates.

The noble Baroness, Lady Noakes, also made a point about EU jobs that are engaged in trade from the EU to the United Kingdom. I think she used the figure of 4 million jobs, rather than the widely accepted figure in terms of UK jobs relating to trade with the United Kingdom. There was a difference of 1 million on her side. I would argue that while we are talking about 3 million jobs that may be lost if we disengage from the European Union, the noble Baroness says that there would be 4 million jobs and that therefore the European Union would be loath to disengage from us, which would give us the benefits of non-tariff barriers, free trade and so on. Of course, 4 million jobs spread across 27 states with a population of 420 million is a very much smaller impact than the impact that it would have on a single country—that of the United Kingdom.

I turn now to recent debates on the cost of welfare through inward immigration, because that has become the flavour of the time and it needs rebutting. There is clear evidence to show that EU migrants pay more in taxes than they receive in benefits and services here in the United Kingdom. The Department for Work and Pensions recently published figures for 2011. Of those receiving working-age benefits, it is true that 25% were from within the EU, but Poland, which had the highest figure of those receiving benefits, was in the seventh slot, behind Asia, Africa, the Middle East and several other countries. Of EU accession countries, only one figured in the top 20 of countries from which people claim benefits in the United Kingdom. That compares to the 10% of Britons who claim benefits in Germany alone, so it goes both ways and we must not allow this debate to run away. The idea that migrants from the accession countries and from the wider EU are coming here for some sort of benefit or health tourism needs to be looked at more carefully.

The free movement of peoples is also enormously significant in terms of its impact for us in the United Kingdom. The Centre for Economics and Business Research estimates that if we curbed EU migration—mostly young people, in terms of demographics, who are coming into an ageing society and who will ameliorate the impact of the demographic changes of ageing here in significant proportions—it would cost our economy something like £60 billion, or 2% of GDP, per year by 2050 and increase public borrowing by something like 0.5%. Moreover, we also benefit from inward tourism from the EU. Some 19 million visits were conducted by EU citizens in 2012 and some £7 billion was spent here.

To conclude, I come to the very important point made by the noble Lord, Lord Giddens, that this is not just a dry cost-benefit analysis, not just about how many pounds in and euros out. What matters to our trade and our economic position is not just money. What matters is the future of our young people, the status of our country internationally and the debt we owe succeeding generations if we do not take the right decisions in the forthcoming referendum.

13:53

[Lord Liddle (Lab)]

My Lords, first I add my congratulations on behalf of the Opposition Front Bench to the noble Lord, Lord Wrigglesworth, and welcome him to the House. I have known him for the best part of four decades, I am afraid to say. For me, he has always been a man of solid principle, unfailing good humour and boundless resilience and it is good to see that those qualities are still much in evidence. When he first got into the House of Commons he was at one stage known as Roy Jenkins’s seat warmer, so that the great man could continue to linger a little longer over lunch before he took his seat in the Commons. I would say, on the basis of his performance in this House today, that he is going to be a Lords crowd puller.

I also thank the noble Lord, Lord Shipley, for putting down this debate. He made a very comprehensive, well argued case for Europe, and I do not disagree with a word. We have heard many excellent speeches. It is a timely debate. No one has mentioned that today the Prime Minister is in Brussels at a European Council meeting which has, as one of its main purposes, the discussion of the digital economy, innovation and trade in services, so it is a very appropriate day to be debating the single market. I should like some assurance from the Government that they are taking this opportunity very seriously, because when one looks at the digital economy, economic estimates are that if we had a proper single market in digital this would add 4% to 5% to European GDP. Looking, for instance, at telephones, whereas the US and China have three or four major operators with a single set of rules for their whole economies, we still have hundreds of operators and 28 different rulebooks.

Similarly, when one looks at internet commerce, there is enormous scope for expansion but we have to have common rules on online content and online shopping. If we are going to have online shopping we have to have rules on privacy and data protection, we have to deal with customer worries—a lot of people will not use the internet for shopping because they worry about making payments and their details being disclosed—and we have to have a copyright system for the digital age. Where do the Government stand on all this? It is a legitimate question.

The Prime Minister has gone to Brussels today on another campaign to cut EU regulation. There is nothing wrong with trying to improve EU regulation, but surely what he should have been doing is emphasising the potential, for Britain and the rest of Europe, that real progress towards deepening the integration of the single market could make. Although it is always very nice to see the noble Lord, Lord Newby, on the Bench opposite, it would be so much better if we had a Conservative Minister there who could tell us where the Conservatives stand on the necessary sacrifices of sovereignty and the compromises that have to be made in the European Union if we are going to bring about that deepening of the single market. There is no point just saying, “Wouldn’t it be lovely if we had a digital single market?” Yes, it would be lovely if we had a digital single market, but we have to be prepared to compromise on sovereignty and negotiate. Are this Government really prepared to do that? In fact, what we get from Conservative Ministers is a skulking away from these issues as they try to sleepwalk out of the European Union.

In the package that the Prime Minister has taken to Brussels today there is a document called Cut EU Red Tape: Report from the Business Taskforce, put together by a very distinguished group of businesspeople with a lot of good ideas about improving regulation. We on this side of the House fully support improved regulation, but let us remember that it is much better to have one European rulebook if you are a business operating inside the European Union, rather than 28 separate rulebooks. It would be much more costly to have to deal with that situation.

The document also raises a lot of questions relevant to social Europe; the social side of the single market. It raises questions about the proposed pregnant workers directive, the posting of workers directive, makes claims about inflexible and unclear rules on working time, raises questions about the agency workers directive and the acquired rights directive—a long litany of complaints about social Europe.

I ask the noble Lord, Lord Newby directly: have the Liberal Democrats signed up for an assault on social Europe or have they not? Where do they stand on this list of amendments to social Europe proposed in the document that David Cameron is taking to Brussels today? Do we have another potential Beecroft here? Have Vince Cable and Nick Clegg agreed to these changes on social Europe? On this side of the House, we would like to know.

Of course, all European legislation needs modernisation, but can we hear from the Government that if we have a single market it has to have some social underpinning? In social terms, we are the most lightly regulated country in the OECD—more lightly regulated than the United States. No one who argues for the dismantling of social Europe explains why the Germans and the Swedes can so successfully compete in world markets, facing the same social burdens that we do. Why is our business uniquely sensitive to those questions? In my view, most good corporate practice supports a high level of social standards. A single market has to have social, environmental and consumer standards dimensions.

It is quite possible that the Prime Minister today will get himself into a silly spat with the French when he should be working out with the French how we can use the research money of the European Union to develop a proper industrial strategy for Europe.

The single market is a vital UK national interest, as many Members have said, but opponents like to think that we can have our cake and eat it, that we can somehow leave Europe but retain access to the single market, and that we have a strong bargaining position because they export more to us than we to them. That is almost certainly rubbish. For instance, take the car industry, which is one of our most successful export areas. We would face a tariff of 9.8% if we were not part of the single market. Still, more than 50% of the car production in the UK goes to Europe. I say to the noble Baroness, Lady Noakes, that the relevant point about bargaining power is that only 2.5% of European GDP is exported to Britain, whereas 14% of our GDP is exported to the rest of Europe, so it is not as she presented it.

The single market is essential. I welcome this debate. As the noble Lord, Lord Shipley, said, there can be no ifs or buts about it. As the noble Lord, Lord Giddens, said, our membership of the EU is the biggest issue that we have faced in this country since the Second World War. As the noble Lord, Lord Watson, said, we have to make the case very strongly that we are better off together.

14:03

[Lord Newby (LD)]

My Lords, I thank all noble Lords for their contributions to the debate today and, in particular, the noble Lord, Lord Shipley, for initiating it. It is a huge pleasure to be able to congratulate my noble friend Lord Wrigglesworth on his maiden speech. As his speech demonstrated, he speaks with great authority about the economy of the north-east, and with great authority more generally. The noble Lord, Lord Giddens, described his speech as witty, meaty and suave. It struck me that these are fitting epithets for him as a whole.

[Lord Giddens]

My Lords, I do not want to damage the life of the noble Lord in the House of Lords, because the word “suave” might chase him forever, but it was intended as a compliment, so perhaps that subject should be dropped—in a suave sort of way.

[Lord Newby]

I took it as a compliment.

I first met my noble friend 32 years ago, when I went to work in the Whips Office of the SDP. Like my noble friend Lady Falkner, I was one of the workers and he was a grandee. Therefore, it gives me particular pleasure now to be his Whip and to make sure that he is in every respect a model Member of your Lordships’ House—as I am sure he will be.

The Government are clear that membership of the EU is in the UK’s interest. The EU helps to advance UK national interests, influence and values. It provides freedom for British people to live, work, study and retire in Europe, and supports UK jobs, prosperity and growth through increased trade, both inside the single market and through free trade agreements.

The principal economic benefits of our membership of the European Union can be categorised under the headings of trade through our access to the single market, encouraging investment and promoting competition, thus driving down prices for British consumers. I shall deal with each of those three principal areas in turn.

The UK’s EU membership supports jobs, prosperity and growth in this country through increased trade. Our membership gives UK companies access to the world’s largest single market, with a GDP of about £11 trillion and 500 million consumers, without customs or tariffs. Free trade agreements through the EU lower trade barriers and increase access to markets. If the EU completed all trade deals currently under negotiation, EU GDP could be increased by about £275 billion. In particular, independent analysis commissioned by the Government has found that the net benefits to the UK of the EU-US free trade agreement currently under negotiation could add up to 0.35% to the UK’s economy. I absolutely agree with my noble friend Lord Watson that our ability to conclude such free trade agreements in a world where the WTO is a declining influence is immeasurably enhanced by being part of the EU. The idea that you can go into such negotiations with the same strength as a single country is surely completely mistaken.

Europe remains the main destination for UK exporters, with just over 50% of our goods exports destined for Europe in 2012. That has real benefits for UK businesses: 80% of businesses believe that the single market delivers concrete benefits to them and the Department for Business, Innovation and Skills forecasts that the EU will remain the UK’s most important market for at least the next 10 to 20 years. That strong trade relationship due to our membership delivers clear employment benefits, with one in 10 UK jobs to some degree dependent on trade with the EU.

The CBI study and others which have been quoted show truly remarkable levels of support for continuing EU membership. Underneath the fact that 80% of companies, broadly speaking, say that they wish us to remain in the EU, it is interesting that 47%—almost half—said that without EU membership, they believe that it would be more difficult to hire skilled workers. It is not just access to the market but access to workers.

I say two things about trading elsewhere to the noble Baroness, Lady Noakes. First, as several noble Lords have said, there is no trade-off between trading to the EU and to the rest of the world. The more a company trades in one part of the world, the more likely it is to be good at trading somewhere else. Secondly, we want many more companies to start trading, and the logical place for them to start, particularly if they are small, is with the EU. For a small company thinking about foreign trade, the prospect of doing it in Brazil, China and India is almost a bankrupting prospect. You do not have the time. You do not have the money. You do not have the knowledge to do it. The only logical place to start is the EU. That will continue to be the case.

Secondly, being part of the single market helps UK businesses to attract inward investment from both inside and outside Europe, enabling them to operate on a more efficient and global scale. The UK is the top destination in Europe for inward investment, attracting 21% of all foreign direct investment projects in Europe last year.

Our access to the single market is a key motivation for foreign investment in the UK economy, with half of all foreign investors in 2010 citing access to the single market, among other factors, as a key reason for investing in the UK. A number of noble Lords have dwelt on this point. The noble Lord, Lord Shipley, made the point that Nissan, which provides 6,000 jobs in his region, is there because of our EU membership. If we were to leave, the number of jobs would shrink.

The City of London Corporation, in the representation made to us which the noble Lord quoted from, said that many EU European banks locate in London to access the markets in which London has accrued specialities. Many non-UK EU firms choose to list on the London Stock Exchange in order to access the capital on offer there, directly channelling capital to European businesses from London. If we were not members of the EU, the idea that the City would be able to continue sailing serenely along with no threat from competitor centres in the EU seems implausible.

The single market also encourages competition and innovation across the EU, bringing down prices for consumers and increasing productivity in the UK. We are clear, however, that the EU could do better to become more competitive to deliver further economic benefits. That is in the interests not just of the UK but of all member states. The EU must become more competitive if we are to continue to improve the standard of living which Europeans currently enjoy, firstly by completing the single market in services, particularly in the digital and energy sectors. I give the noble Lord, Lord Liddle, an absolute assurance that the Government are committed to promoting the single market. It has been a centrepiece of our engagement with the EU. When my colleague in another place, Ed Davey, was at BIS he set up a group of like-minded countries, which eventually involved a majority of EU member states, to promote the single market in an effective way. It shows, incidentally, how the UK can take a lead in the EU even though we are not in the eurozone area. The completion of the single market is a central goal of the Government.

The second important role in making the EU more competitive revolves around agreeing the international trade agreements to which I have already referred. Finally, we are committed to cutting red tape to allow the engines of growth in the eurozone and across the EU the space that they need to flourish.

Completing the single market by removing all barriers to trade is estimated to increase UK GDP by about 7% and prices would fall by approximately 5% due to increased competition. In this tough economic climate, this would obviously provide a real boost if we could achieve it for UK businesses and consumers.

On the international free trade agreements with both advanced and emerging economies, progress continues to be made. The landmark deal reached between the EU and Canada, to which my noble friends Lord Maclennan and Lord Watson of Richmond referred, will benefit the UK economy and businesses by over £1.3 billion a year. As I have already said, the potential deal with the US would dwarf that.

Cutting red tape from the EU is crucial to allow small businesses to start up and then expand. Last week, six senior business leaders presented a report to the Prime Minister on reducing the burden of EU regulation; the noble Lord, Lord Liddle, referred to this. Their findings are based on research carried out across Europe. They have found that there is potential to save EU businesses billions of pounds by improving the regulatory environment. Their aim is not to abandon all regulation; they want to reduce the burden on small and medium-sized firms who create the vast majority of new jobs in Europe, and employ two-thirds of the workforce. The Government support their views, and are committed to ensuring that EU regulation does not hold UK businesses back.

The noble Lord, Lord Liddle, referred to a number of proposals in this report. The one which seems to be a classic of the kind of change we need, and which should be achievable, is the proposal to press for an urgent increase in the public procurement thresholds which significantly hold back small businesses in bidding for public sector work.

As the noble Lord, Lord Shipley, pointed out, these views are increasingly being accepted across the EU. The days when greater harmonisation was almost seen as an article of faith by member states are now over. We are in a strong position to take a lead in making EU regulation proportionate and growth promoting.

The noble Lord, Lord Liddle, asked whether the Government were speaking with one voice in terms of the single market and in terms of the report to which he and I have both referred. I can assure the noble Lord that the Government are speaking with one voice. He described the Government’s attitude as an assault on social Europe. This is a grotesque caricature of both the Government’s position and the proposals in the report. It does not reflect the Government’s attitude in any respect.

One question that is commonly asked or implied is whether the UK, given its semi-detached nature, is able to make progress with the kind of reform agenda to which I have been referring. We believe that we are and that we can. For example, we have secured the first ever exemption of micro-businesses from new EU proposals from the start of this year. We have also secured agreement on a single European patent after 23 years of EU negotiation, with the new patent court based in London for key pharmaceutical and life sciences sectors. This will be an important engine of growth for the UK’s R&D sector.

We have persuaded the European Commission to review the body of EU legislation to identify existing obligations from which micro-businesses could be exempted. Finally, we have delivered the first ever real-terms cut in the EU’s seven-year budget while protecting the UK’s rebate.

We had an interesting discussion, principally between the noble Baroness, Baroness Noakes, and the noble Lord, Lord Desai, about—

[Lord Hannay of Chiswick]

I know that time is short, but would the noble Lord not agree that the word “semi-detached” is an extremely unfortunate one to apply to the Government’s policy? We are talking about instances of variable geometry which have existed in the European Union since the 1980s and which are still continuing to develop. Would it not be better to expunge the word “semi-detached”?

[Lord Newby]

My Lords, I use the word “semi-detached” because that is in the common parlance. I do not believe that it is an accurate reflection of the approach that the Government are taking. It is only reasonable to deal with the criticism of the Government head on, by explaining that our current position enables us to exert influence and to make significant positive progress.

I was referring to the interchange between the noble Baroness, Lady Noakes, and the noble Lord, Lord Desai, about the quantitative costs of EU membership. The noble Lord, Lord Desai, sensibly in my view, suggested that this was an extremely difficult area, not least because it is impossible to state a compelling counterfactual. Many of the rules and regulations against which costs are attached would almost certainly be required in some form or another were we not members of the EU. To count potential costs of such regulations on the assumption that they would not exist if we were out seems, again, to be pretty implausible. Equally, as other noble Lords have said, the suggestion that we could get a better deal from Norway and Switzerland if we were out seems not to be borne out by any logic. Given the circumstances of a divorce, which would be almost certainly politically pretty unpleasant, it is difficult to see how we would find ourselves in such a better position.

The noble Baroness, Lady Donaghy, talked about the role of national parliaments and the importance of increasing that role. The Government strongly agree with that. We are working with EU partners to increase the role of national parliaments. We welcome moves by both Houses to use the tools that they currently have to hold EU decision-makers to account more effectively. We want to consider possibly extending the scope of the “yellow card” system by introducing a red card. We absolutely agree that getting greater national engagement with this Parliament is strongly to be recommended. In saying that, I of course commend the work that your Lordships’ House already does through its European Union Committee and its sub-committee.

The noble Lord, Lord Giddens, asked me a specific question about the debate on the EU and how to promote it within the UK. Apart from the normal business, as it were, of making major speeches on the subject, which both the Prime Minister and Deputy Prime Minister have done in recent months, the Government have initiated a balance of competences review that seeks to engage with a wide range of people—not just think tanks, academics, businesses and Parliament but also the public—to produce as far as we can an analysis of the effect and effectiveness of the current powers and competences of the EU, with a view to deepening the public understanding of the nature of EU membership and reform. This is a difficult business, as the noble Lord will be aware, because we are doing it against the background of a media that find it literally impossible to treat a story about the EU on its merits. Still, the balance of competences review is a significant process and I encourage all noble Lords with interests in some of these areas to engage with it.

A number of noble Lords, such as the noble Lord, Lord Haskel, mentioned the European Space Agency. This is, as it were, a classic example of where working together within the EU serves our interest, and where trying to do it on our own would almost certainly have ceased because we simply do not have the resources to do so. As we look across the piece, we find many similar examples, as many noble Lords have exemplified in their speeches today.

To conclude, the Government believe that membership of the European Union is in our national interest and that there are significant economic benefits of our membership, from the single market through to trade, investment and competition. We are advancing and protecting the UK’s national interest in the European Union and will continue to do so, ensuring that our voice is heard and our interests are protected in order to promote growth and prosperity, which is the Government’s central purpose.

14:22

[Lord Shipley]

My Lords, I am grateful to the Minister for his reply and to all those Members of the House who have spoken in the debate. Mention was made of Roy Jenkins. I am reminded that in 1975, when he was Home Secretary, Roy Jenkins announced when the referendum had been won that it had put the uncertainty behind us. It did for a while, but obviously there is still a debate to be had. On the balance of today’s contributions, those who are in support of continued membership of the EU have the day, but there will inevitably be a continuing debate on that. I thank noble Lords for their contributions.

Motion agreed.

High Speed 2

Thursday 24th October 2013 Lords Chamber

Motion to Take Note

14:24

Moved by

[Lord Greaves]

To move that this House takes note of the expected impact of High Speed 2.

[Lord Greaves (LD)]

My Lords, High Speed 2 is the proposal for a new fast mainline railway between London and Birmingham and onwards to the north of England, with a line to Manchester and the west coast main line, and another to South Yorkshire and West Yorkshire. In my view it is a sensible, necessary, long overdue and economically and socially beneficial proposal. It will herald a new era for railways in Britain, and it will form a vital part of bringing together the different parts of England and closing the regional divide. In moving this Motion, I am reaffirming the longstanding Liberal Democrat support for this new line.

Why is it needed? There has been a lot of talk about how fast people want to go, and it has been suggested that HS2 is really all to do with people wanting to go quicker. That is not the case. It is now becoming very clear that the reasons for the line are what are now being referred to, slightly opaquely, as “capacity” and “connectivity”. As far as capacity is concerned, everyone knows that the west coast main line in its present form is already virtually full. For example, it is proving very difficult, in fact almost impossible, to find paths for the proposed new services that Virgin wants to run between Blackpool and London. The east coast main line is perhaps in not quite so congested a state—although it seems pretty full to those of us who use it—but the combination of intercity traffic, commuter traffic, particularly at the southern end, local services and freight services means that the line is pretty full.

People keep saying, “Well, we can tweak the network a bit more and get a bit more capacity out of it; we can improve the situation at Peterborough and provide a freight diversionary line at Lincoln”, and so on, but there is a limit to how far that kind of tweaking can solve the problem. In particular, there is a huge freight potential on both the east and west coast main lines to move a lot more freight on to these main railway lines from the motorways of this country which is simply not possible to achieve at the moment. No doubt the noble Lord, Lord Berkeley, will talk more about this when he speaks.

Is HS2, as proposed, in the right place? I congratulate the Government, in a sense, on their bravery in putting it through the Chilterns, but I suppose that that was originally the decision of the previous Government. However, I want to take an overall view. The network that we have been bequeathed by the Victorian railway builders, particularly the east and west coast main lines, does not actually connect or even go through the main conurbations or the great regional centres. Birmingham is served by a very unsatisfactory loop, and anyone who goes on those services to Birmingham knows how they trundle when they go through the Black Country. Manchester is on a branch line. Derby, Leicester and Nottingham are served by neither the east or west coast main lines, and neither is Sheffield. Leeds is on a branch line. North of London, you have to go as far as Newcastle before you get to a major regional centre that is actually on either of the two main lines. They then of course go on to serve the major Scottish cities of Glasgow and Edinburgh.

HS2’s proposed routes serve all these major conurbations as far north as Lancashire and Yorkshire, and will allow through trains extending beyond HS2 to go on to Newcastle in the north-east, to go on to Preston in Lancashire and to go on to Scotland.

What are the alternatives? We are told by some of the opponents that we can upgrade the east and west coast main lines—but we have been there before. We know that the disruption that it would cause is enormous, and my noble friend Lord Bradshaw may talk further about that. The noble Lord, Lord Faulkner of Worcester, has an upcoming Oral Question asking the Government what their estimate is of the cost of upgrading those two routes. We might get an answer today or next week; I do not know. However, we do know that the previous west coast main line upgrade, which was partial, inadequate and incredibly disruptive, cost over £9 billion.

If we decided to look at a serious upgrade of the east and west coast main lines throughout England, perhaps even to Scotland—a sort of what in my part of the world might be called a “rack o’th’eye” estimate; I will translate that for Hansard later—it might come out at about £25 billion for the two. It is certainly not going to be less than that, and that is getting on for the present estimated costs of HS2.

Of course there have been lots of estimates for the cost of HS2. We have even had some thoroughly discredited and fairly disreputable estimates which have got a lot of publicity from a partisan press. The Institute of Economic Affairs suggested that it would cost £70 billion by including a lot of schemes that are already going to take place and some which, at the moment, are not on the drawing board at all. The government estimate of the cost at the moment is a little over £30 billion, plus £10 billion to £12 billion which has been added on at the Treasury’s insistence for contingencies. That might be a very sensible thing to do, but at the moment those are just contingencies. The estimated cost at the moment is £30 billion to £32 billion.

Then, we are told that we will have to add the cost of trains. Andrew Tyrie, chairman of the Treasury Select Committee, seems to have discovered that if you build a new railway line you have to have trains to run on it. That is an amazing revelation from his committee. However, if we are not just going to build HS2 but going to try and upgrade the two main lines to increase their capacity substantially, we will need more trains for those as well. So, on the point about adding on the cost of new trains, we are going to need the trains either way.

We can compare the estimated cost of HS2 with the cost of some schemes where we know the cost. Thameslink and Crossrail together have cost over £20 billion. The London Assembly transport committee has been looking at the proposals for Crossrail 2, and its proposals for Crossrail 2 would cost £12 billion. The Mayor of London wants a new Thames estuary airport in Kent. I suppose that it is a “rack o’th’eye” estimate at this moment but, nevertheless, it is suggested that that might cost £50 billion—the same as people say HS2 might cost with all its trains. It seems that these kinds of admittedly eye-watering sums are okay if they are about London and the immediate south-east, but if it is about the rest of the country—if it is about the north of the country and the East Midlands and the West Midlands—then we are told that it is unacceptable. I suggest that some of those who have what the Secretary of State, Patrick McLoughlin, describes as a London-centric view of these matters, should get out a bit more and come to the north of England and the Midlands and just find out why we need as much investment as comes in London and the south-east. We are not asking for as much as there is in London and the south-east in every other English region; we are saying, “Let’s share it all out, but at least let’s have it on the same basis as London”.

Then we are told that we cannot afford this new railway line in a time of austerity. This is often said by the people who are complaining that the whole process will take far too long. If we are still in a state of austerity in 10, 15 or 20 years’ time, “God help this country” is all I can say. Surely we are planning now for the sunlit uplands ahead. Maybe the Opposition do not agree that we are going to have sunlit uplands with the present Government, but perhaps they think that they will get in and we will have sunlit uplands of a different colour. That is fine, but surely we are not in austerity for the next 20 years.

Who are the opponents? They are people who are directly affected, and I do not blame them at all for campaigning about the effect it might have on their village or their property or where they live. That is fair enough. Then, we have the road lobby. They are not very prominent in the campaigns but they are behind it all, and they are behind a lot of the pressure groups that are campaigning. They do not want to spend less money. They just want it spent on roads instead of railways.

We have the right-wing economic pressure groups: the Institute of Economic Affairs and the Institute of Directors. Then we have the London-based vested interests. The IEA added on the cost of Crossrail 2 as part of the HS2 project—that is how it got to £70 billion. But then the Mayor of London says, “Don’t spend it on HS2, spend it on Crossrail 2 instead”. You can take either of those points of view but it seems to me that the two projects are quite separate.

We have the London-based media, which seem to have swallowed a lot of this nonsense which is talked, and we have what I consider to be the disgracefully partisan activities of the BBC on this particular issue. I say to the Conservative Party: many of the bodies that are campaigning against this are part of the conservative base of this country. I congratulate the Government, the Conservative Party, the Prime Minister and the Secretary of State on resisting this lobbying from people who would normally be much of their base, and long may they continue to do so.

Then we are told by people all over the country who are enviously eyeing what is a huge sum of money, “Let’s spend it instead on my pet little local scheme”. I even have one or two people in my part of the world saying, “Why can’t we build the Colne-Skipton railway line with a bit of it?”, and we have people in Skelmersdale saying, “We want a railway line and a station please. Why can’t we have a bit of it?”.

More significantly, there are people in places like the south-west who have to suffer a six-hour rail journey from London to Penzance, for example, and I think that they have a very serious point—that they are being missed out in rail investment in this country. I say to them, “If you think that scrapping HS2 will suddenly result in a transfer of all the money to that scheme and to all the other schemes, you are living in cloud cuckoo land”. We are talking here about national infrastructure between the major conurbations of this country and about a very important rebalancing of regional investment and regional economies.

The Independent Transport Commission has taken quite a balanced view of the proposals. It says that HS2 will act as a catalyst for regional development if it is accompanied by smaller schemes to improve local transport links. Those smaller schemes are needed anyway. Anybody who travels by train in Lancashire or Yorkshire knows that the amount of underinvestment simply cannot continue. The ITC also says that there is a need for the Government to explain these things, and to define what it calls the,

“spatial problems it is supposed to address”.

It is quite clear that so long as HS2 is seen as a comprehensive scheme for improving the transport infrastructure of this country, it can do the job.

We also have the KPMG report—I do not have the time to go into it in detail at all—which suggests that there is a £15 billion bonus for the economy. I never know how they work these things out. I have looked at the report and I still do not know how they have worked that out. I think there is a lot of voodoo when people make forecasts like this. However, it says that Cambridge will suffer because we are building HS2. I do not believe it. Even more, it says that Lancaster will suffer. Lancaster is going to get a better, faster rail service to the south and an hour off its journeys to London. How on earth can Lancaster suffer because of that?

Then we are told that the UK is too tiny for high-speed rail—and yet the distance between Paris and Brussels, which I think is the most heavily used high-speed line in Europe, is the same as the distance from London to Manchester and to Leeds. The distances between Paris and Strasbourg, and Madrid and Barcelona, are the same as the distances between London and Edinburgh and Glasgow. People will say that they are not going that far. I would say that the Government have got to be a bit bolder and start to say that HS2 has to be seen as the start. Perhaps it is past the lifetime of many of us here, but it has to be a vision for the future of a high-speed network throughout England and this island. Let the Government keep their nerve. Let us promote the vision, and let the Government accept my personal challenge that in my lifetime I can travel on a high-speed train from London to Leeds or to Manchester—and preferably in that direction.

14:39

[Lord Faulkner of Worcester (Lab)]

My Lords, we are all indebted to the noble Lord, Lord Greaves, for giving us the opportunity to debate this really important issue. I congratulate him on the way that he successfully corrected some of the more absurd misconceptions about High Speed 2 which its opponents are attempting to put about.

First, though, I should like to welcome the noble Baroness, Lady Kramer, to the Dispatch Box for her first debate in the Chamber. Hers is a promotion much deserved and we look forward to her speech greatly.

The case for High Speed 2 is not primarily about the length of time that it takes to travel from London to Birmingham, although it is obvious that if we build a new railway, it should be built to 21st-century standards using technology that is tried and tested throughout Europe and Asia, rather than that of the Victorian age, and that means high speeds and shorter journey times. No, this debate is about something much more important: it is about what sort of transport infrastructure we are to bequeath to our children and grandchildren. We could go back to the thinking of the 1960s, 1970s and 1980s, when it was assumed that private motoring and heavy lorries would reign supreme. The transport imperative then was to build motorways on a predict-and-provide basis to serve them. The railways at that time were expected to decline gracefully, with many more lines being closed and services replaced by buses, passengers being discouraged by ever higher fares, and the rail freight business being largely abolished except for heavy-haul bulk loads and some container traffic.

However, the British public were not prepared to see their railways decline and die, and by July 2001 the distinguished City correspondent Christopher Fildes was able to write in the Spectator:

“Railways are a growth industry. Their most sustained attempts to drive away their customers have not succeeded”.

Let us look at what has happened since then. In July this year, Network Rail published a report, Better Connections—Options for the Integration of High Speed. Let me quote one or two of its findings. First, it says:

“Over the last decade the number of journeys made by rail has increased by almost 50% … But demand is still increasing. By 2020 another 400 million rail journeys will be made every year”.

Indeed, there are a million more trains running each year, while the busiest stations individually handle more passengers than Heathrow Airport. Network Rail makes the point, as the noble Lord, Lord Greaves, did, that it has done its best to make the best use of its remaining capacity and squeezed every last incremental change out of what it has. To quote again from its report:

“As demand continues to grow, this becomes harder and in some places impossible ... parts of the existing network will be unable to accommodate the forecast demand leading to significant overcrowding; in the peak, passengers may not even be able to board a train on some routes. Further, there will be no opportunity to accommodate the expected levels of increased freight traffic on the network”.

There you have the essential case for building High Speed 2—not as a separate line, physically and operationally away from the current railway, but as a crucial part of a reshaped and improved national network.

Some of those opposed to High Speed 2 argue that the money it will cost would be better spent on upgrading the present network and in trying to add capacity piecemeal to the west coast and east coast main lines. To add to the point made by the noble Lord, Lord Greaves, let me remind those opponents that the last time we upgraded the west coast main line it was supposed to take six years, cost £2 billion and deliver 140 miles per hour trains. What actually happened was that it took nine years, cost almost £10 billion, and we still have 125 miles per hour trains, with unimaginable disruption of existing services in the process, with endless closures and bus substitutions at weekends, and sometimes longer. Does anyone believe that more than a fraction of the funds allocated to High Speed 2 would ever find their way to funding new investment on the existing network if High Speed 2 were to be abandoned?

Let us be clear: many of those arguing against High Speed 2 have no interest in growing the railway. The author of the Institute of Economic Affairs’ pathetic publication on HS2 makes clear his preference for an investment in roadbuilding—a transport policy which is 20 years out of date—and rubbishes the construction of the Jubilee Line and High Speed 1. It is inconceivable that London could function now without the Jubilee Line and the success of High Speed 1 is also clear. The economics consultancy Volterra produced a report in 2009 showing that the benefit to the UK economy of High Speed 1 over 60 years is estimated at £17.6 billion, plus a series of development, trading, housing and transport benefits.

I have no doubt that the benefits of High Speed 2 will be even greater. Looking just at the jobs which will be created in the life of the project, Albion Economics, working for Greengauge 21, estimates the total job years to be almost 890,000—the equivalent of creating 89,000 full-time jobs. We have to recognise that the future of inland transport in Britain belongs to high-speed rail and in having a world-class transport system that brings Scotland, north England, the Midlands and the south closer together; that drives opportunity and economic growth; and that makes sound environmental sense too. After the success of High Speed 1, it is time for the whole of Britain and for your Lordships to embrace High Speed 2.

14:46

[Lord Mandelson (Lab)]

My Lords, I strongly welcome this debate and congratulate the noble Lord, Lord Greaves. Like my noble friend who has just spoken, I have been an ardent pro-railway supporter all my adult life but it is precisely for that reason that I do not support HS2, because its sheer cost will suck the very lifeblood out of the rest of the country’s rail system.

Originally in government, I, along with my colleagues, took the default position in favour of anything with an engine at its beginning, a guard’s van at the back and a lot of sleek carriages planned in between. However, I think that the Labour Front Bench is now right to have become more sceptical of the project. I am not going to dwell on how we reached that decision as a government but, frankly, there was too much of the argument that if everyone else has a high-speed train we should have one too—regardless of need, costs or alternatives. As a party, to be frank, we did not feel like being trumped by the zeal of the then Opposition’s support for the high-speed train. If anything, we wanted to upstage them.

Since then, I have had a lot of time to think about this decision and to face the fact that no empirical case has been established for HS2, despite repeated attempts. The so- called business case, when the original justification for HS2 was all about speed, duly collapsed under scrutiny when it was discovered that in real life people actually work on trains, and sometimes even better than when they are in the office. Now the whole justification has shifted to assumptions about increased overall capacity, reduced crowding and the economic benefits to a handful of the nation’s cities—none of which assumptions, I might say, have been authoritatively quantified or verified, academically or otherwise. They all depend on forward projections of passenger loads which are uncertain, famously unreliable and greatly affected by the future price of tickets and elasticity of demand.

What has been forgotten in all this debate is that in 2006 the then Labour Government asked Rod Eddington to undertake one of the most comprehensive studies ever of transport in the UK. That study, after a great deal of very thorough examination, firmly rejected HS2. Eddington concluded that Britain’s transport infrastructure needs would be much better met by a wide range of incremental improvements rather than a few high-profile extravagances. He ended with one very important point of wisdom:

“The risk is that transport policy can become the pursuit of icons”.

I fear that HS2 has become precisely that—a political trophy project, justified, on flimsy evidence, as being about modernity and prosperity, with, I might say, a lot of pressure being put on those conducting the cost-benefit analysis to come up with the answer that Ministers want.

Even so, I would be prepared to put up with a lot of the uncertainties of the case if I thought that HS2 stood a reasonable chance of helping to rebalance the UK economy, lifting regional growth and creating jobs outside London and the south-east, but there is absolutely no conclusive evidence that any such things will happen. It might give some short-term boost to those cities on the line of the route but, equally, the easier you make it to get to London, the more people are likely to end up working and living in London. The readier the access to the facilities provided in the capital, the greater the likelihood that facilities in provincial cities will be undermined.

It is not surprising that KPMG, on a closer examination of its research—as the BBC did last week—found some very patchy results indeed for the benefits of HS2 for the regions. More places stand to lose than gain from HS2. That is hardly surprising. Indeed, £50 billion spent on HS2 is £50 billion—or anything like it, for that matter—that will not be spent on upgrading the east coast main line, which serves Humberside, Teesside and the north-east, and on lines to Bristol and the south-west or to East Anglia. Importantly, it will not be spent on the links between cities outside London. This is something on which we need to focus.

Having represented a constituency in the north, and now having the privilege to serve as the high steward of Kingston upon Hull, I know the difficulties that people have in using public transport not just between conurbations outside London but into and out of any northern city, and in particular in getting to a job within any extended travel-to-work area outside London when depending on public transport. There are literally dozens of rail and public transport projects urgently needed across the country that would make a significant economic and social impact. All these and more could be extracted for the price tag of HS2.

I will say one last word on the capacity arguments that, it is claimed, will be magically solved by HS2. Rail demand may increase substantially or it may not. However, we know that if HS2 goes ahead, the economic case put forward—

[Lord Lea of Crondall (Lab)]

My Lords—

[Lord Mandelson]

I would like to continue, but I will give way to the noble Lord.

[Lord Lea of Crondall]

My Lords, it is a question of clarification of what the noble Lord has just said. Does he think it a normal part of cost-benefit analysis on a project to say that you count against it? For example, can you say that if it does not go to Cambridge that is a cost to the project? Is that the noble Lord’s view on how cost-benefit analysis is normally done?

[Lord Mandelson]

Yes, of course it is part of it. However, my point is that the Government’s own economic case, if HS2 goes ahead, has made clear that this will involve nearly £8 billion-worth of cuts to existing intercity services. That means, for example, that Coventry’s services to London will be cut from three to two per hour, Stoke’s from two to one per hour and Stockport’s from three to one per hour. All Wilmslow’s intercity services to London will be axed, and journey times from Oxenholme, Penrith and Carlisle to London will be lengthened. So much for the capacity case for HS2. If it goes ahead, we will see a shrinking of the rail network in this country, and that should be the very last thing that pro-rail supporters in this House should want to see.

[Lord Popat (Con)]

My Lords, I remind the House that this is a time-limited debate of six minutes maximum without any interruptions.

14:55

[Lord Rodgers of Quarry Bank (LD)]

My Lords, I, too, welcome this debate, carefully chosen by my noble friend Lord Greaves. There has been too little serious and sustained discussion, pro and anti, in this House of the project launched in the House of Commons by the then Secretary of State for Transport, Geoff Hoon, nearly five years ago. At that time, on 15 January 2009, there was only one modest paragraph about High Speed 2 out of 25 in a Statement on transport policy. Within little more than a year, the noble Lord, Lord Adonis, seized the opportunity with enthusiasm to publish the White Paper High Speed Rail Cm 7827. However, I am not convinced about the priority of High Speed 2 within the railway system and I am sceptical about benefits. In this respect, I agree with the remarks made by the noble Lord, Lord Mandelson. I am, however, an agnostic, and many agnostics want to believe. I hope that my noble friend will be persuasive this afternoon.

With the initial momentum of the project, it was said—or so it seemed—that the chief merit was to reach Birmingham from London half an hour faster. Not everyone was sure that this was a recommendation, but, by definition, a high-speed train meant going faster and getting somewhere sooner. The relevant paragraph of the January 2009 Statement referred only to faster journeys, but by the publication of the March 2010 White Paper by Gordon Brown and Andrew Adonis, there had been a major shift of emphasis from glamorous speed to workaday capacity within the railway system; this has since become the dominant theme.

It is now approaching 40 years since I became Secretary of State for Transport. The 1970s was the most depressing era for the railways. It was often said that my civil servants were anti-railway, but that was not the case generally. Passenger miles had dropped steadily since 1945 and flattened out for a decade, which was bad for the morale of those who cared about the railways. November 1976 was also the time of the visitation of the IMF, from which followed deep cuts in public spending, including transport. There was no prospect of taking any new initiative. As far as I could, I continued to introduce the HST Intercity 125, which was then a high-speed train, to improve the existing urban network and to encourage light railways. I also saved the Tyneside Metro when the Treasury was about to axe it. Then, rather to my surprise, in the mid-1990s, the passenger miles began to grow, and this growth has continued. I recognise the trend, and it is right to provide additional capacity. I also recognise and welcome faster trains on the existing network—or, as we are now required to call it, the classic network.

In the latest Department for Transport glossy, one of the virtues is connectivity—a word I cannot find in my Oxford Dictionary. The boast is that HS2 will link eight of Britain’s 10 largest cities, as if there has been no such link since the days of the canals and the stagecoach.

I would like to believe—and this is now a central argument in the White Papers—that HS2 will be the engine of economic growth and help the deprived regions, but I cannot find secure evidence for this. It is claimed that HS2 will be a bridge from the north to the south, but the railways have been such a bridge since Victorian times.

An article in the Economist last week said that the worst urban decay is found not in big cities but in small ones. It mentions Hartlepool, which has grown far more slowly, as being typical of Britain’s rust belt. Can we really believe that HS2 will significantly help Hartlepool—or Barrow-in-Furness or Hull? We should not be deceived that it will wave a wand over deprived towns and villages.

Earlier this month, my noble friend Lady Scott of Needham Market opened a debate on the railways in East Anglia. Unlike the experience of much of the north-east, she said that this was a thriving region. However, she made a strong case for significant new investment, as there had been no modernisation of many parts of the railway network during the past half century. The route of HS2 is 100 miles or more from the heart of East Anglia. Are we to take seriously the fact that we can both finance HS2 and the different needs of East Anglia or, for that matter, the south-west of England or important parts of Wales?

The railway passenger, or the potential passenger, has an interest in several considerations. He or she wants good or better access to the places they wish to go, a reliable service, on time and without cancellations. He wants to travel in comfort and at a reasonable fare with an option at every hour of the day and on every day of the week. Above all there is the importance of safety. It is not axiomatic that travelling fast—faster than ever before—is a priority. It is time to scale down the hyperbole of the vision and to offer a more rigorous and sceptical analysis of the case for HS2.

15:02

[Lord Grocott (Lab)]

My Lords, I welcome not only the fact that the noble Lord, Lord Greaves, has introduced this debate, but also his splendid, comprehensive opening speech, which covered so many of the arguments. Inevitably, a debate such as this will be pretty polarised; you cannot be half way in favour of this, stopping it half way along the tracks somewhere—you are either for or against it, and I am unequivocally, unashamedly, massively for it. I hope that there is no uncertainty about that.

I thought it would be helpful to look at some of the objections—and of course we acknowledge that people who are directly affected by the route will be very concerned indeed. Whether you are for or against this proposition, you will acknowledge and recognise, as with other major developments, that there must be proper compensation and recognition for those who are directly affected.

It is worth taking a little trip down memory lane, because when the original proposal for a London to Birmingham railway was put forward in 1832, the House of Lords threw it out. We know, due to a splendid article by Nick Serpell, that many of the grounds for that were stunningly similar to the objections that are being presented today. The effect on wildlife was mentioned, as well as the demolition of rural communities and the big estates.

I would richly enjoy reading out all these quotes, but here is just one, from one of the contributors to the early part of the debate:

“You are proposing to cut up our estates in all directions … If this sort of thing be permitted to go on, you will in a very few years destroy the nobility”.

That is the kind of objection that was going around at the time. Most of the objections were very similar. Why do we want to go so fast? By the way, the first trains took five and a half hours. I am sure that whether you are in favour of HS2 or not, you will prefer the present service to one that would have taken five and a half hours. Thank heaven—I hope we can all agree on this—that the objections that were originally presented were overcome and that at least we had a railway from London to Birmingham. We did not require the people of the 19th century to get from here to Birmingham by canal or stagecoach; there was a mechanism other than that, which was terrific. So many of the objections proved to be false. The wildlife comes back amazingly soon after the cuttings and the embankments have been built. Of course, the investment has been repaid—I was going to say 100 times over— 1,000 times over. I could not begin to calculate the economic benefit of the original London to Birmingham railway.

I mentioned that it was a Victorian railway. Essentially, we rely, in the 21st century, on a Victorian railway. It is a marvellous railway; wonderful engineers built it, and phenomenal engineers kept it patched up over all the years and made improvements, keeping the trains running, by and large, while they did all that. However, a Victorian railway serves us today. There is one big exception—that it is not even as good as the Victorian railways because large chunks of the system have been closed down. Routes, railways and stations all over the place were closed. One railway in particular that was closed down was a fine north-south route between London, Leicester and Nottingham—the Great Central Railway—that was closed down in 1969. Therefore in proposing a new railway we are not revolutionary in adding to what has historically been available; we are trying to repair some of the damage that was done by the vandalism of the Beeching era, when so much damage was done. Therefore I say, “Thanks very much” to the Victorians, but that will not do for the 21st century.

I now come to the very common argument from the people who are opposed to this new line. I am sorry that there is no easy way. They say, “Let’s improve the existing railway. Let’s make some modifications to it so that trains can run through at greater capacity levels, with bigger trains”. We have been doing this for more than 80 years. We have kept on patching up, making do and mending, and amazingly, we have kept the trains running while we have done that. However, that is saturated. That argument has gone—there is no easy solution to that proposal. Interestingly, people do not ever say that about the motorways. I do not remember people saying, “We should not have built the M1 or the M5. We should have built loads of bypasses, strengthened the bridges and got more traffic running through on the old roads”. There comes a point when that proposal becomes ridiculous, and as far as the railway that we need for the 21st century is concerned, it is a ridiculous proposal.

If people are serious about massive improvements on the north-south routes in this country to be done on the existing system, please do not travel by train while it is being done. You have seen nothing yet of weekend closures, bus substitute services and holiday closures. You cannot rebuild a railway to 21st-century standards while you are trying to run the trains on the existing routes. There would be huge dislocation if that approach was adopted.

This is a visionary proposal. I salute my Government —the previous Labour Government—for introducing the proposal in the first place. I congratulate the coalition Government on sticking to their guns and acknowledging that this essential part of our country’s infrastructure has to come about. I salute the people involved: the former Secretary of State, the noble Lord, Lord Adonis, and the present Secretary of State, Patrick McLoughlin. It is not an easy thing to do, because the opposition is so widespread in so many ways, and so personal. However, I appeal: let us think for a moment of the astonishing vision and engineering skills of the Victorians who built our rail network, which, as I have said, miraculously serves us today. Our railway-engineering expertise was exported all over the world. They had that vision which we massively benefit from today; it is part of our responsibility to have a similar vision to ensure that future generations have a modern, 21st-century rail network.

15:09

[Lord Stevenson of Balmacara (Lab)]

My Lords, I thank the noble Lord, Lord Greaves, for securing this debate and I welcome the noble Baroness, Lady Kramer, to her new responsibilities. I declare an interest since I live in Little Missenden which is directly on the current route and therefore I qualify under a number of people’s acceptance to plead my special case. I will do that a bit, but the interesting thing about being a nimby is that because you spend a lot more time working out why these things are happening to you, you understand the overall picture a lot better than many others. It is for that reason that I want to speak today, not particularly because of the problems in Little Missenden, although there are many, not least the appalling compensation proposals which do not measure up to the rhetoric.

Like the noble Lord, Lord Faulkner, and others, I am a supporter of the case for investing in improving transport services in the UK and in particular of upgrading our rail capacity using the most appropriate technologies. However, as my noble friend Lord Mandelson says, the supporters of HS2 have to do better than rely on dodgy forecasts and puffed-up consultancy reports. This is not an icon; it is a major investment decision for the UK, so it is right that, at a capital cost of £50 billion with ongoing subsidies, everybody should be convinced by the case before it is approved. To achieve that, we must debate and agree a proper economic argument which explains convincingly not only what problem we are trying to solve and why HS2 is the answer but also why other cheaper solutions do not do the trick. The Government have caused a lot of confusion on this point. First it was green and then it was speed, or was it the other way round? Then it was the need to fuel economic growth in the regions, recently clarified as “some regions but not others”. Now it is capacity on the west coast main line and connectivity with HS1, albeit that that constitutes an embarrassingly large gap in the current plans.

This debate is on the economic case for HS2. On the facts so far available to us, there is no doubt that the economic case for HS2 is very weak. A project that costs £50 billion in capital needs a better case and value-for-money justification than we have seen so far. No wonder it has so many critics, ranging from the press to the Institute of Economic Affairs and the TaxPayers’ Alliance, from Alistair Darling to David Davis and many others, including the National Audit Office whose value-for-money report suggests a number of problems with the existing cost-benefit study and the Treasury Select Committee whose report published on the 2013 spending round concludes that only when HM Treasury has decided its own comprehensive economic case for supporting the decision should the Government formally reassess the project before deciding whether to proceed. In other words, there are very substantial blocks to moving forward on this proposal.

So far all we have seen from the Government is the KPMG report, which, as has been said, far from proving the Government’s case, suggests that there will be as many losers as winners in the regions. The problem is that HS2 has been designated solely as a point-to-point railway line, lacking any proper integration with the classic rail network, the UK’s only hub airport or HS1. As such, the project exemplifies the silo approach of UK transport planning where decisions on aviation, classic rail and high-speed rail are taken in isolation, let alone thinking about the implications for things such as high-speed broadband. Current HS2 proposals need to be improved to ensure that the route connects into more of the UK, integrating with other transport networks and co-ordinating with the work of the Airports Commission.

Surely we should not be considering in the early 21st century a transport solution which inflicts serious damage on our natural heritage. These may be old arguments but they are still real. The Woodland Trust has demonstrated that the Government’s preferred routes for both phases of the scheme will cause loss or damage to at least 67 irreplaceable ancient woods. The Chilterns AONB, which is where I live, is now the only AONB along the entire HS2 phase 1 and phase 2 route that would be adversely impacted by the proposed project. Actually, it would be destroyed. The draft environmental statement consultation published on 16 May accepts that a tunnel through the Chilterns AONB would perform better on environmental grounds compared with the current tunnel option. It would also reduce the operational noise impact and, for certain locations, would result in a reduced construction impact. It is feasible in engineering terms and I recommend it to the Minister.

15:13

[Lord Alton of Liverpool (CB)]

My Lords, as one of the sceptics, I congratulate the noble Lord, Lord Greaves, on giving the House the opportunity to have this important debate and for the way in which he introduced it. Since first arriving in Parliament in another place in 1979, I have been a regular user of the west coast main line from both Liverpool and Preston. Virgin provides a superb service and most journeys to London take just over two hours. It is specious to suggest that we need a faster rail link, which is no doubt why Patrick McLoughlin shrewdly sought over the summer to alter the terms of the debate away from the question of journey times to that of capacity.

If the raison d’être for HS2 is a moving target, so are the estimated costs. In 2008, it was estimated that the project would cost £17 billion. By 2010 the figure was £30 billion. By this year it had reached a staggering £42 billion, according to some estimates, and nearer £50 billion once the cost of the rolling stock has been added in. The Financial Times—hardly part of a disreputable conspiracy—reported a private Treasury calculation of £73 billion, and all of this before a single sleeper has been laid. Having said that he has been changing his mind about HS2, the former Chancellor Alistair Darling is right to warn that this is a project that could easily run out of control. He says the business case has been exaggerated and that there are better ways of encouraging growth outside London. That is the main reason why I share his view.

For the avoidance of doubt, I believe in public transport and have always supported the enhancement of our railway network, like the noble Lord, Lord Mandelson. I have supported capital projects that improve infrastructure, provide demonstrable economic benefits and create jobs. It is claimed that the region I live in will be a principal beneficiary of HS2. However, for reasons I will explain, and not simply because of the runaway costs, I have been opposed to this project in its present form from the outset.

For a fraction of the cost of HS2 we could enhance the capacity of our railway system, by upgrading stations and platforms, lengthening carriages, improving railway stock, using new technologies and through timetabling and the reintroduction of services such as overnight sleepers to northern cities and towns. We could make significant improvements to our railways. Think of the opportunity costs at stake. A far higher priority for railway improvements should be commuter services and town-to-town links. Travel times between northern cities and towns are diabolical. To travel from Preston to London takes just over two hours; from Liverpool to Preston takes one hour, and from Leeds to Liverpool takes one hour and 47 minutes. Liverpool to Sheffield takes one hour and 41 minutes, and Liverpool to Hull takes three hours and 13 minutes. Those cross-Pennine, east-west services, not north-south services, are impeding economic development in the north.

If we were really serious about the north of England, we would reopen passenger railway links in north Lancashire and link Manchester and Liverpool airports with express trains. I welcome the news, which the noble Baroness, Lady Kramer, whom I welcome to the Front Bench, gave me in a parliamentary written reply on 21 October, that there will be some improvements to those services. Perhaps she will tell us today how much money will be put into those projects compared with the investment in HS2.

Liverpool will be placed at a serious disadvantage by HS2, which is why some of the colleagues of the noble Lord, Lord Greaves, in that city recently tabled a motion to the city council pointing that out. The CPRE suggests that,

“it could risk Liverpool’s longer term regeneration”.

Why? Because, unlike Manchester, which will have a direct line to the city centre, Liverpool will not, and there will be a requirement to change trains to reach some important destinations. At the very minimum, reconsideration should be given to the decision to build a second HS2 station outside Manchester in the green belt.

I am also certain that, if these proposals go ahead, the magnetic appeal of London, with its fabled streets paved with gold, will suck people and businesses away from the north. KPMG’s report may point to overall benefits but, strikingly, it says that Greater London will be a £2.8 billion winner while 50 places in the UK, such as Aberdeen, Bristol and Cardiff, will be worse off. They estimate that Dundee and Angus could lose as much as 2% of GDP.

Many of us will have heard from some of those already affected by HS2. Tim Ellis, a Staffordshire farmer whose family have farmed there for three generations, wrote to describe how the project, just 145 metres away from his land, has already blighted their property and business. He wryly commented:

“What we really need is super-fast broadband—any broadband would be nice—not super-fast trains”.

I do not live in one of the 70 constituencies through which HS2 will pass. If I did, I would deeply resent being accused of nimbyism for questioning the effects of this project on some of our most beautiful countryside. Alison Munro, chief executive of HS2, is wrong to characterise opponents as “a noisy minority” and imply that anyone who questions this project is an antediluvian luddite. Taken with the Government’s road-building plans, which will impact on five national parks, I am glad that many are in open revolt and demanding protection for our landscapes and the tranquillity of the countryside. We are too obsessed with bigger, faster, better and more. There needs to be further reflection before HS2 is allowed to proceed. The CPRE is right when it says:

“Deliverability is trumping all other considerations”.

Attempts to push through enabling legislation by May 2015, without due process and adequate consultation, would be an abuse of Parliament, and should be fiercely resisted. I hope that today’s debate will serve notice on the Government of your Lordships’ determination to do precisely that.

15:20

[Lord Rooker (Lab Ind)]

My Lords, I, too, congratulate the noble Baroness, Lady Kramer, on her new appointment and look forward to the wind-up.

If we did not already have the motorways, canals and, I dare say, the railways, we would never be able to build them. We have no aircraft runways under construction, and no high-tech nuclear green power stations under construction—mainly because of a catastrophic energy White Paper in 2003. In the days of the great engineering projects, approved in private Bills by this Parliament, the likes of Brunel and Telford got on with their vision and won through in the end, and thank goodness they did. They would be ashamed and astonished to see us today, a scrimping nation getting by—or, at least, we think that we are. We pollute the overcrowded roads with congestion and cause the inefficient use of today’s very efficient car engines because of that congestion. We pollute the sky with internal flights. It will all come to a stop; there is not enough capacity on rail, so even more freight gets on to the roads. Then they clog—and it will end up as national gridlock.

Is HS2 the complete answer? Of course it is not. Is the planned route the best? I cannot say—although it appears fairly straight, which I assume is a key factor for high speed. Should it be built? Most certainly. However, success will require better leadership of the project and I am not clear who is in charge. Major infrastructure projects by definition reach across the Parliaments and, while I would not insist on 100% agreement, there has to be a degree of operating outside the tribe on these projects. I do not see that at present. It is a pity that one of the first acts of the coalition was to abolish the Infrastructure Planning Commission before it had a chance to get going.

In the recent HS2 publications, I am at a loss to understand why freight effects have not been considered. Is it because freight will not be on HS2 but, because of HS2, more of it will use the extra capacity on existing lines? That seems to me a major failure of communication on behalf of the project. I have been informed that HS2 could take 500,000 lorries off the roads.

I much look forward to seeing Sir David Higgins as the chair of HS2 in the new year. I declare that I briefly worked with him when I was Regeneration Minister a decade ago and he was the chief executive of English Partnerships. He is impressive and he delivers, as his record shows. I hope that he will review all aspects of HS2—and that has to include the board. The Opposition had better give him full support. The Labour Government started this project, and it would be inconceivable to withdraw support. I am getting cheesed off listening to ex-Ministers swanning around the political salons pouring cold water on the project. I agreed with every word of the Secretary of State’s 11 September speech at the Institution of Civil Engineers. As such, I urge the shadow Cabinet not to quit on the project but to fight for it, and I urge HS2 to make its communications and operations a bit more transparent. I also have some news for the BBC: I do not expect Land’s End, Great Yarmouth, Anglesey or John o’ Groats to benefit as much as the great city regions. I thought the way the BBC treated the KPMG material on last week’s “Newsnight” was a journalistic disgrace, but it should not have had to use an FoI request to get the figures explaining the map in the report.

HS2 is not about minutes off journey times. It is about capacity and not relying on lines laid over 100 years ago. It is about serving one in five of the UK’s population. It is about, not serving, but creating city regions on a par with our EU partners, because we have not got any at present. That is why there is a constant drift to London. According to Sir Albert Bore, leader of Birmingham City Council, the West Midlands could see a minimum of 20,000 extra jobs and 50,000 with the package of local transport connectivity. Phase two could deliver up to 70,000 jobs according to Sir Richard Leese, leader of Manchester City Council. Some 70% of the extra jobs will be outside London.

As for the line, it must end in Glasgow and Edinburgh. There is no question about that: there has to be a phase three. I hope we can then stop the environmentally wasteful, polluting internal aircraft flights. I would be happier if the Bill included the line to Manchester and Leeds. I would hope and expect construction to start in more than one location. England is not the wild west frontier that the great railways opened up in America. We should be able to start in London, Manchester and Birmingham and meet in the middle, as we did with the Channel Tunnel.

15:25

[Lord Bradshaw (LD)]

I congratulate the noble Lord, Lord Rooker, on his firm speech. I am speaking because I was responsible, at some time in my career, for the management of all the four main lines which go out of London to the north. They are now at least 85% full. When a system—a railway, water pipes, gas or anything—is at 85% capacity it is full, because just a small incident can spill over and cause havoc with punctuality or supply of service. So the capacity enhancement is urgently needed, but I am sorry that this thing ever got called High Speed 2 because it is not a high speed railway in international terms: they are not talking about going at about 250 mph.

The upgrading of existing routes is a hopeless proposition. I have just read that next year the west coast main line will be shut for 36 days for urgent engineering work at the London end, running through Watford. That will bring back the horrors but this time it will affect more people because more people are now using the railway. The London end of this project needs rethinking because the way it has been drawn up is wrong. I do not believe there is any need, at least in phase one, to demolish houses in the Camden area. I must cast doubt on the quality of leadership of the project because it has not gone for the most sensible option. We do not need to demolish lots of houses for phase one: we can do that quite easily by other means.

I was also responsible for the first stage of the HS1 extension. At the time people talked—in this House, I am sure, although I was not here—about the rape of the garden of England: it would never be the same again. However, a week or two ago I met a Labour MP from one of the constituencies affected. I asked him if he was getting a lot of trouble from HS1. He said, “No, none at all, but if you ask me about gay marriage I will bring you a few bags of letters”. That is the way in which the ill effects of this project have been grossly exaggerated by various opponents. There will be disruption while it is built but, as someone remarked, the wildlife and the birds come back. The railway does not have lots of service stations, garages and posters. It fits into the countryside and I am sure that noble Lords who travel around by train know many places where the significant Victorian railway buildings are not a blot on the landscape but blend beautifully into it.

The new line will free up a lot of existing capacity and the talk about Coventry, Rugby and Milton Keynes not having as good a service is just not true. This month the Desiro company, which has built many of the excellent suburban trains used between London and Birmingham, has been given permission to increase the line speed of these trains to 115 mph. They are more comfortable and will be nearly as fast as the Pendolinos, and I am sure that customers will like them better. I am certain that all the places affected will have a far better service than they have now.

I have a few requests for the Minister. Will she please facilitate the ongoing discussions about the London end? The Secretary of State knows about them and the noble Lord, Lord Berkeley, and I have been to see him. We believe that we can save a lot of money, not the odd million but the odd billion, by these proposals. Look again at the appraisal methodology that these people used. They used the old-fashioned cost-benefit analysis that was invented by the Standing Advisory Committee on Trunk Road Assessment in the 1960s and 1970s that compared the value of road schemes to see which was best. The process was never intended to value a project such as this. A recent publication by High Speed 1 has shown that the value of HS1 over 60 years is £17.6 billion. Will the Minister look again at the external benefits? This has been done by HS1, which looked at the effect on the value of property. Recently at Ealing Broadway it found that property prices are increasing sharply in anticipation of Crossrail. None of that value gets into the public purse but there is no doubt that it is of value, and it is time that the department looked at this issue to find a way to ensure that some of that value gets into public hands.

Finally, I ask the Minister to reiterate the commitment to the continuing expenditure on the rest of the network, such as the ongoing improvements at Reading and Birmingham New Street. They are a compliment to what our engineers can do but there is a limit to what can be done within the confines of the existing railway.

15:32

[Baroness Mallalieu (Lab)]

My Lords, like the noble Lord, Lord Stevenson, I must declare that I live in the Chilterns but not in an area affected by the proposed route. However, for most of my life I have known that stretch of countryside from where the line drops off the escarpment and cuts a swathe through Oxfordshire, Buckinghamshire, Northamptonshire and Warwickshire. It is not picture-book pretty. Unlike the Chilterns, it is not an area in which walkers such as the noble Lord, Lord Greaves, to whom we are indebted, come out in numbers at weekends or visit for its views. It is old England, big blackthorn hedges, pasture, beef cattle, hidden woods and coppices, and small villages and farms in which people have been born and lived all their lives. Through that countryside the route goes past Grendon Wood, in which Shakespeare is said to have been inspired to write “A Midsummer Night’s Dream”, and—this is for my noble friend Lord Grocott—Doddershall, a remote moated house built in 1520. The route also goes through 24 sites of special scientific interest and 67 irreplaceable ancient woodlands. It is proposed to drive HS2 through that, and for what? I will come to that.

The project was agreed by the Government in 2010 without any strategic environmental assessment having been carried out, probably quite deliberately because this is an act of sheer environmental vandalism. A judge has already described that as “an egregious breach” of the guidelines. Litigation is going on at the moment and there will, no doubt, be a Supreme Court judgment next month. For that tract of our countryside and its people the impact is quite devastating.

However, that was not the only flaw in the original decision-taking process. The business case was flawed, as is now generally accepted. The cost-benefit analysis, whether it should have been used or not, never supported the proposal. The budget was hopelessly understated, as has now become clear. I am aware that the lack of any proper consultation and the weakness of the economic case concerned a number of those at the heart of government at the time. I would like to pay tribute to the noble Lord, Lord Mandelson, and to Mr Alistair Darling in another place for having the courage to speak out about this. I am quite sure that others will follow.

The decision to support this project in the first place by both main parties was a political one, not an economic one. I do not for a moment dismiss the genuine passion for the project of some, including the noble Lord, Lord Adonis, for whom I have the greatest admiration, but it is a passion which I believe led to a very expensive mistake. Nor do I underestimate the pressure that was put on politicians of both sides to go ahead from others who stand to profit: mainly the rail and engineering firms and also from a number of local authorities on the direct route who stand to benefit. They make up a rich and powerful lobby, but they are not succeeding with the public and nor must they. To misallocate transport investment to a high-risk, low-return scheme such as this instead of putting the money to low-risk, high-return infrastructure investment with far greater economic benefits in the long run is sheer madness.

In the mean time, before the plug is pulled, the resources of the Department for Transport are being drained by efforts to try to create a new and better case and generate public support, while also delaying decisions on other necessary investment in our transport system. As we know, the original argument was speed—we will get you there quicker—but that failed, so the department is now trying the capacity argument in a desperate appeal to those standing in the corridors of our creaking infrastructure, where investment really is needed.

It will not work; nor will the unconvincing assurances about future cost, because the public simply do not believe it. They have seen the figure going up and up. I think the public will be astonished to know that the figure which we are currently being given, £42.6 billion, does not include trains, without which the railway cannot operate, nor, as I understand it, does it include the essential infrastructure to create links to the city centres where the station is on the outside. Estimates that I have seen go higher and higher. Even in the north, last year’s polling showed that only 32% of the public thought it was a good use of money. If the people who have to pay for it do not want it, do not do it.

This debate is about the expected impact of HS2. There will be some who benefit: the big rail and engineering companies and their employees and the towns and cities with stations on the direct route. But there are rather more places that believe they will lose out, and badly. The biggest losers of all are the poor souls who have to pay for it, who are the British public. What is more, HS2 is unlikely ever to generate enough income to cover its running costs. Construction has to be taxpayer funded, because it is unlikely ever to make a profit and no private money would touch it. The Public Accounts Committee in another place—its report is in the Printed Paper Office today—is utterly damning.

I would like to hope that the impact of this whole saga is that no major infrastructure project will be handled like this ever again, determined by political expediency and not sound economics. HS2 is not yet the dead duck that it ought to be, but it is looking terminally ill. A huge amount of money and energy, much of it paid for by the public, is being devoted to try to breathe some life into it again. It has been called a vanity project, a white elephant on wheels, and a high-speed gravy train. Will someone with political courage please come forward and put it out of its misery?

15:40

[Lord Lea of Crondall]

My Lords, this debate produces a most unfortunate degree of polarisation among people who are normally much more sober in their analysis. I am on the same track as my noble friend Lord Rooker. When we talk about £8 billion being a lot of money, we are not talking about a project that will last for only 10 or 20 years; HS2 is going to be there for 100 years. Does anyone think that the Channel Tunnel will not be around then? The Victorian railways are still in place and HS2 will still be there. It would be interesting if a few leading Victorians were around today to look at what has happened over the past 200 years.

Let us put this into some sort of context. First, what is our national income and how does it grow? At the moment, our national income is £1.5 trillion per annum, or £1,500 billion—so in 10 years’ time it will be £15 trillion and in 100 years it will obviously be £150 trillion; that is without any underlying rate of economic growth. Secondly, can the rate of return capture all the benefits? Of course it cannot. I hope that the noble Baroness, Lady Kramer—I, too, very much welcome her appointment—will take on board the comparison with Crossrail on this. We do not expect Transport for London to capture all the benefits that accrue at Farringdon or Tottenham Court Road. It would be nice if it could, but it cannot. The benefits for everybody in London are huge.

In my first job with the World Bank in Africa I was involved in transport infrastructure investment. I know that there are rules—cost-benefit analysis is just one of the ways of describing what is done—but there are private benefits and externality benefits. As Alastair Morton, the first co-chairman of Eurotunnel said, economies are created through transport infrastructure. Therefore, you cannot capture all this with just one figure, and I am not surprised if people come up with very different numbers. It is easier to demolish the figures than to be absolutely dogmatic about how the arithmetic should be done.

Although I am an economist, I do not have any difficulty in having an act of faith and saying that this project is a good idea. I know that capacity cannot be increased by building more motorways any more easily than it can by building more railways—it is far more difficult—but I ask the noble Baroness, Lady Mallalieu, to think about the alternatives. She may be a zero-growth person but I do not think that the rest of us are. We are 2% growth people around here, as you should be if you do not want unemployment and if you want to keep up the growth in technology and productivity. We are running out of capacity on the motorway system at a devastating speed. As well as road closures, we as a nation are facing a crisis from pollution on the motorways. A bit like Heathrow Airport, the railways need some new capacity.

All the points have been made about trying to further improve the west coast main line and so on, but why should you want the trains to go at 100 miles an hour when they can go at 200 miles an hour? That is absurd. It is said that this is a densely populated island. However, it is no more so than Belgium, and Belgium has four high-speed train services. It is precisely because we are a densely populated island that we need HS2, and it is not counterintuitive to say that. Many speakers for whom I have the most enormous respect, including the noble Lord, Lord Alton of Liverpool, talks as if we will not be improving journey times from Birmingham to Sheffield, but actually we will be.

No one is challenging the fact that the cluster of Midlands and northern cities—I come from Manchester originally and have lived in Nottingham—will be the area receiving the most remarkable improvements. As any transport economist would tell you, the most dramatic changes are in the 3-4 hour zone. If you halve travel times in the 3-4 hour zone, you can have a mega economic success story for the whole of the Midlands and the north, which is not possible with the motorway and railway systems that we have now. We shall see what happens in the next 30 years—only time will tell.

I hope that we can have something like an infrastructure commission where people can give evidence and make sure that the cost-benefit analysis is done in the correct way. However, it is difficult to argue that there is only one way to capture the externality benefits.

15:45

[The Earl of Glasgow (LD)]

My Lords, I have long been an enthusiast for high-speed rail and therefore I will be reinforcing some of the arguments that other enthusiasts of this House have already made. I am concerned that the growing opposition to it, some of which we have seen here, from a number of powerful pressure groups and some prominent politicians on both sides of the House may cause the Government to lose their nerve and fall back on a compromise.

The truth is that HS2 has been sold to the public very poorly. To begin with, much too much emphasis has been put on the high-speed element of the project. The faster speeds are one, but one of the less important, of the advantages of HS2. Why, ask our opponents, are we spending so much money merely to take 20 minutes off a journey time from Birmingham to London? Besides, they say, we need that extra time to work on the train. We then get into this argument about what people actually do on trains: work, read, look out of the window or go to sleep. Personally, whatever my original intention, I usually end up going to sleep.

However, the high-speed element only really becomes significant when the line gets as far north as Carlisle and Scotland. Regrettably, that will still be some considerable time in the future. What is significant is that we are planning to build a brand new railway line, the first major new line since Victorian times. The main reason it is needed is to relieve pressure on the existing network and to increase capacity. Our opponents ask how we can justify spending so much money on a brand new railway line. As many noble Lords have asked today, would it not be better spent on upgrading the existing network? However, this is not an either/or situation. The Government promise to spend money on upgrading the existing network at the same time. It is all part of the same process, the same overall plan.

The Government need to get across to the doubters and waverers that rail is the only practical, and potentially civilised, mode of transport in Britain for distances of more than 100 miles. More and more people are travelling by train now, and with the anticipated rise in population, there could be 20% more passengers by 2025. The fact is that there has been precious little capital investment in the railways for more than 100 years. With the regrettable exception of Beeching’s ruthless scrapping of so many of our branch lines in the 1950s, as the noble Lord, Lord Grocott, mentioned, Britain’s railway network is much the same as it was in 1910. At certain times of day, in many parts of Britain, it is already inadequate to accommodate the existing number of passengers. One can only imagine what it will be like in 15 years’ time if nothing is done.

Now, at last, something is happening; something is being done. The Government, with Labour Party support, have recognised the future importance of rail and that in order to free up capacity on our existing railway lines we need to build a brand new one, linking London with major cities in the Midlands and the north. As we need a new line, it surely makes sense to build the most advanced and up-to-date model available, which has been tried and tested on the continent. That model is high-speed rail.

Therefore HS2 is not a one-off, speculative gamble out on its own, as some of our opponents seem to suggest. It is an integral part of a long-term plan to modernise our whole railway network. That is the message that the Government have to get across to the public and to some of their Tory sceptics. Of course, there will be people, like some of the citizens of Camden Town, whose lives and outlooks will be considerably disturbed and disrupted by the construction of high-speed rail. It is right and essential that they should be generously compensated. However, I believe that fears of long-term damage to our countryside and wildlife are greatly exaggerated. Within 10 years, the scars will have healed, and the disturbed woods and farmland will have been reshaped and relandscaped.

The advantages of high-speed rail greatly outnumber the disadvantages of temporary disruption. Although HS2 is not exactly squeaky clean environmentally, it is considerably less polluting than the hundreds of aircraft from Heathrow, Gatwick or Stansted which fly overhead and whose internal flights, I hope, will eventually be made redundant by high-speed rail. Britain’s major cities will feel much closer together and Britain in general will feel less dependent on London. Of course, the construction of the line will provide much-needed employment in times of austerity.

I need assurance from the Government and the Minister that they will not get cold feet over high-speed rail and will not be tempted to compromise through fear of rising costs. The cost seems almost irrelevant when compared with the value and importance of the whole enterprise. We need a modern and efficient railway network. It is no longer an option; it is an essential. This is the most important and far-sighted transport project for more than a century. By the time it is completed most of us here will be dead but it will provide a greatly enhanced quality of life for our grandchildren. That is what we should be considering. Surely, the Government can better get that message across.

15:51

[Lord Watson of Invergowrie (Lab)]

My Lords, I am a long-time supporter of rail travel and hold to the belief that trains are so important that they should be seen as a public service. They are an essential part of any country’s infrastructure and, as such, should be run as a service and not for profit. If that requires nationalisation and/or government subsidy, so be it. Surely it ought to be seen as a wise investment in economic terms.

Is it not ironic that although none of the main political parties favours renationalisation of our railway infrastructure, none is opposed to our trains being owned and run by the state, just as long as it is not this state? The state-owned railway companies of France, Germany and the Netherlands regularly bid for our rail franchises, sometimes with success. I did not know this until I did some research, but the royal train is now operated by EWS, which is owned by Deutsche Bahn.

My support for railways is often sorely tested. There are 28 different train operators and too often, it seems, they do not speak to each other, at least not in the same language. Perhaps that harks back to the point that I have just made. For years I used commuter services between Edinburgh and Glasgow, and it was rarely a pleasant experience. I do not do that now and I rarely use the commuter trains that serve London. However, I feel that it is a failure of the service when I am forced to stand and cannot get a seat that I have paid for. Just last weekend that happened in Scotland on a journey that I made between Aberdeen and Edinburgh.

High-speed rail exists in all major EU countries—France, Germany, Italy, Spain and, of course, here—as has been referred to by many noble Lords today, so I am naturally inclined to support the concept of HS2. Yet there are two basic reasons why I have doubt in my mind. One is the spiralling cost. The figures I have seen suggest that when the project was first announced in 2008, the projected cost was £17 billion. By 2010, that had gone up to £30 billion. This year, it is at £42 billion plus £7.5 billion for rolling stock. The Financial Times has estimated that the final cost could be as much as £70 billion. I do not know the veracity of those figures but it seems that the projected costs are spiralling out of control.

I certainly agree with my noble friends Lord Faulkner and Lord Grocott that transferring some of the cash—certainly not all of the cash—to upgrade existing infrastructure is not the answer. But surely some form of guarantee has to be given to control costs, otherwise support will gradually wither and die.

In opening this debate the noble Lord, Lord Greaves, talked of the need to close the regional divide. I certainly support him in that. Anyone who looked at today’s Guardian will have seen figures on the front page showing that during the boom from 1997 to 2006, London and the south-east were responsible for 37% of the UK’s growth in output, and since the economic crash of 2007-08, London and the south-east were responsible for 48% of that growth. Every other region except Scotland has suffered relative decline over that period, which highlights the need to ensure that economic benefits are not concentrated, as they have all too often been, in London and the south-east. Regional benefits are the second reason I have doubts about HS2.

I thoroughly agree with my noble friend Lord Rooker on the need for HS2 to be extended eventually to Glasgow and Edinburgh, but I think it highly unlikely that that will happen, certainly in the lifetime of most noble Lords, because the numbers that would use it would be held not to justify the cost. It is for the same reason that the motorway network stopped at Carlisle for 20 years before it was extended to Glasgow. I wonder how many noble Lords are aware that not only is there no motorway between Newcastle and Edinburgh, two major cities in the UK, but that there is not even a dual carriageway for a considerable part of that journey, which is a disgrace.

The recent figures prised from the Government—and I use the term advisedly—through an FoI request on the question of the benefit of HS2 show that the coalition had attempted to withhold the bad news: the information in the KPMG report that, as the noble Lord, Lord Alton, rightly said, demonstrated that Aberdeen and Dundee would lose heavily when HS2 is in place, as, indeed, would other places such as Norfolk, Cambridge, Bristol and Essex, among others. That seems to stand to reason because there cannot be winners all the way. Not everybody can win from HS2. It is quite clear that there will be displacement of business and of travel, so to say that everything will be better with HS2 just does not stack up. I am prepared to accept that there will be considerable benefits, but certain parts of the country will undoubtedly lose as a result and that has to be faced by those who are particularly enthusiastic about HS2.

I am not as yet prepared to call for HS2 to be abandoned, but I do believe that we need much greater certainty on costs and detailed proposals as to how those areas likely to suffer financially would be compensated in other ways.

15:57

[Lord Snape (Lab)]

My Lords, like other noble Lords I, too, am grateful to the noble Lord, Lord Greaves, for allowing us the opportunity for this debate, and I congratulate him on what he said in opening the debate. It is the first time in the decade or so that I have been here—I do not know whether he will be pleased about this or not—that I have agreed with every word that he said. Perhaps he will not be, but it happens to be true.

There was one thing he did not say that he might have done. He talked about the west coast main line being full, as have other noble Lords on both sides. We ought to recognise that the west coast main line, particularly the southern section, is not just full, it is in a pretty poor condition too, despite all the money that has been spent on it. The recent £9 billion overhaul has held off some of the decay on that route, but the last stretch in particular, from Watford to Euston is in a pretty poor state, as was revealed earlier this year. A report was published in the railway industry’s in-house magazine, Rail News, about an inquiry led by Virgin Trains’ chief operating officer, Chris Gibb, who had been seconded to Network Rail, about the state of the track, particularly that stretch from Watford to London. Chris Gibb reported to a joint board chaired by Sir David Higgins, then chairman of Network Rail, about whom many complimentary comments have been made during the course of the debate. Mr Gibb’s report says that,

“trying to gain access to maintain and repair a railway built 175 years ago, largely through open countryside then but which now passes through many developed and densely-populated areas”,

is extremely difficult. Yet opponents of HS2 appear to believe that by declassifying a couple of coaches on Pendolino trains and adding a few more trains, a junction here and a flyover there, we can somehow cope with the projected increase in traffic which will take place on the west coast main line if HS2 is not built.

I fear that life is not like that. Chris Gibb’s final recommendation is that the line from Bushey, just south of Watford, into Euston should be closed every Saturday and Sunday night for between five and 10 years in order that all the infrastructure can be renewed. That is a pretty unlikely prospect, but I have to say to those who oppose the building of HS2 that we cannot go on, in David Higgins’s words, pounding the west coast main line. He said that by the time the first stage of HS2 is due to open in 2026 the route will be—his exact word—“trashed”.

We cannot go on pretending that we can increase the number of trains out of London to some of our major cities on the existing infrastructure network. I listened carefully to what my noble friend Lord Stevenson had to say. I must say that I was not too impressed by some of the people whom he prayed in aid in support of his opposition. I do not regard the Institute of Economic Affairs as a particularly credible organisation, nor, although I will be careful out of deference to some of my near neighbours, could I bring myself to be too complimentary about the Countryside Alliance. Both my noble friends might like to read a document produced by Centro, the passenger transport authority in the West Midlands, explaining why the West Midlands needs HS2. I will leave it on the board for both of them if they like; whether they find that any more credible than the two organisations they cited remains to be seen. The fact remains that Centro believes that 50,000 more jobs could be created in our part of the world and a £4 billion economic boost would be given to the West Midlands if the project goes ahead.

If HS2 does not go ahead, what happens to the growth in traffic forecast by all sectors to occur on our railway system? Presumably, it will go by road. My noble friend spoke emotively about the Chilterns. We are not talking about the four horsemen of the apocalypse going through the Chilterns, we are talking about a two-track railway. What happens to the M40 motorway? Do we extend and widen that to cater for the extra traffic which we all know will come? If the traffic does not travel by train, it travels by road.

Earlier in my undistinguished career, I served on no less than three committees on the Channel Tunnel: the first abortive Select Committee in the 1970s, the Select Committee that gave the go-ahead in the 1980s and the Standing Committee that prepared the legislation. All the arguments that we are hearing today about HS2 were used then about HS1. The garden of England was going to be destroyed. The phrase “cutting a swathe” was one I heard from many a high-paid lawyer as I sat on the committee when they were talking about what was likely to happen in Kent. As the noble Lord, Lord Bradshaw, said, Kent has not been destroyed. Indeed, many of the previously peripheral towns in Kent have been enormously boosted economically by HS1, and there is no reason to suppose that the same effect would not happen when HS2 is completed.

Fifty years ago, I was a signalman on the west coast main line, so I have some experience of what happened when trying to run trains when the line is being modernised. At least we had many alternatives in the 1960s. For example, Manchester trains ran from St Pancras to Manchester Central. The line from Matlock to Manchester Central was closed in their wisdom—by, I suspect, a Labour Government, I must say—in the 1960s. The noble Lord, Lord Alton, talked about trains to Liverpool. They went up the great western line from Paddington to Birkenhead. That is not available to us any more. As my noble friend Lord Grocott said, there was always the great central line, which ran to Leicester, Nottingham and on to Manchester, which could also be used as a diversion. None of those lines are available to us today. There are neither locomotives nor rolling stock. It must come as a surprise to my noble friend Lord Mandelson to find that loco hauled trains are very rare in most parts of the country and guards vans do not exist at all. He must have missed that during his sojourn in Brussels, but the railway has changed somewhat. Pendolino trains will not run anywhere else. If there is no 25 kilovolt overhead wire, they will not get out of the depot, so they are no alternative. It is not often that I pray in aid the late Baroness Thatcher, but there really is no alternative.

16:04

[Lord Truscott (Non-Afl)]

I thank the noble Lord, Lord Greaves, for initiating this debate. It is high time that this House had a full and lengthy debate on this very important but, in my view, flawed project. During the debate last February in your Lordships’ House, I said that I feared with HS2 we are in danger of developing a huge and costly white elephant; with an ill-thought-out business case, social disruption and a catastrophic environmental impact. Sadly, nothing I have heard or read over the subsequent months and nothing that has been said in today’s debate has changed my mind. In fact, it has hardened my opinion.

The noble Lords, Lord Stevenson and Lord Grocott, mentioned compensation. I can only guess the anguish of those affected by this scheme faced with the offer of wholly inadequate compensation or no compensation at all.

This debate is really about the supposed benefits or otherwise of HS2. We have a project that has split views more or less down the middle; it has its supporters and detractors. The ranks of the latter, however, are swelling while the cohorts of the former are visibly shrinking. Here we have a scheme whose costs seem to go ever upwards. As a number of noble Lords, have said, the Secretary of State for Transport has already increased the cost of HS2 from £33 billion to £42.6 billion, excluding the £7.5 billion for the rolling stock which has been mentioned. The Treasury predicts that this will rise to £73 billion. The noble Lord, Lord Snape, has told us that some of the people criticising HS2 are not credible. He mentioned the Institute of Economic Affairs giving a figure of £80 billion or above. I hope that the noble Lord thinks that the Treasury is a capable source, otherwise we are all in trouble. The noble Lord, Lord Greaves, earlier mixed up his millions and billions, but we are talking here about tens of billions. These are indeed serious matters. On the face of it, HS2 looks like heading the way of Blue Streak and the TSR 2 programmes, both abandoned by the Ministry of Defence in the 1960s because of their spiralling costs over a number of years.

Quite apart from the fact that cross-party support faces collapse if the costs rise above £50 billion—either now or around the time of the next general election—we have to ask whether this scheme provides value for money. The Department for Transport now seems to be moving away from the benefit-to-cost ratio analysis. Now we are told to look at the bigger picture. No wonder, as the BCR is currently one pound for every one pound spent on phase 1, and the latest figures will bring it below that.

The public subsidy currently required is £33 billion. In congratulating the Minister on her appointment, I pose a question. Do the Government have a limit to how much public subsidy they are prepared to allow for HS2?

Apart from the bogus arguments about increasing passenger capacity and claiming that no one works on the trains, only 2% of rail passengers travel on the west coast main line intercity trains—the only route to benefit from phase 1 of HS2. The rest of the national network will be largely ignored. That is the reality.

The other issue rarely mentioned, but raised by my noble friend Lord Mandelson, was that HS2 will require £7.7 billion in cuts to existing rail services. The reality will be that a number of towns will experience worse services, not improved ones.

KPMG, as mentioned, reported on behalf of HS2 Limited that the country would benefit to the tune of £15 billion. What HS2 suppressed, however, was the fact that KPMG’s report also showed that many areas of the UK, such as Aberdeen, Bristol and Cardiff, would significantly lose out to HS2. The noble Lord, Lord Alton, mentioned Liverpool missing out as well. It is obvious when you think about it.

In short, we have a scheme that, if built, will primarily benefit the capital city, not the north. My noble friend Lord Mandelson, outlined that point. This has been the experience of all other high-speed trains in Europe, if we look at the lines to the capital cities Paris or Madrid. The scheme will devastate parts of our irreplaceable environment—I emphasise the word “irreplaceable”—including 67 ancient woodlands, as referred to by the noble Baroness, Lady Mallalieu. The scheme will not even be the best use of the money to upgrade our rail infrastructure. Targeted, more widespread, upgrades would be more effective, and I say that as a regular rail user. Worse, it will make such upgrades unaffordable in the future.

Finally, can this country afford such monumental financial recklessness when there are other, greater national priorities, not only in terms of the rail network infrastructure but also such as developing airport capacity in the south-east?

I understand from the Minister—I thank her for her Answers to some of my Written Questions—that the forecast spend for HS2 for 2013-14 is already £378 million. For 2014-15, it will be another £442 million. These are huge levels of expenditure very early on in a programme whose costs are only going up and up. In conclusion, the Government need to think again before a penny more is wasted on this mother of all follies.

16:10

[Lord Berkeley (Lab)]

My Lords, I very much welcome this debate and I welcome the noble Baroness, Lady Kramer, to her new position. I am sure that we will have some interesting debates now and in the future. I declare an interest as chairman of the Rail Freight Group.

I shall start by discussing the issue of capacity. My noble friend Lord Rooker mentioned freight. I shall quote from a paper from the HS2 Action Alliance. With a name like that, I would have thought that they would have been supporting HS2, wanting to make it go faster, but, surprisingly, they do not. It says:

“Improving the existing West Coast Mainline is a more cost effective and risk-free way to meet future rail capacity needs”.

Where are they living? Many noble Lords have spoken about the problems on that line, and I will not repeat what they have said. One of the problems is that if you improve a line, you either dig it up and close it or you extend it sideways into people’s properties. That will have just as much opposition as building a new line—in fact, probably more—because people will want compensation, as they do. Yes, the line is going past their property and has been there a long time, but their property is very valuable. That idea just does not work.

The real problem that I want to mention with regard to capacity, though, is freight. Freight is different from passengers because it runs only if the customers and the train operators want it to and therefore, hopefully, it will make a bit of money. There is no subsidy. The industry has forecast a doubling of demand for rail freight on the west coast main line in 20 years. That is because the type of traffic that goes up that line is mainly containers from retailers. That is what retailers like—noble Lords will have seen some of the supermarkets giving green credentials on a packet of cheese, or whatever they are selling—so they have asked for this. Freight is growing by leaps and bounds; it might treble, for all I know. However, if you want a doubling of traffic in 20 years, that is the equivalent of an extra two trains an hour on the west coast main line. It is full already, as other noble Lords have said, and we are having discussions with Network Rail about how this can be accommodated, particularly when phase one is built and it stops near Tamworth. Still, it is a wonderful challenge to have.

What is the alternative? There are two options. One is that it could go by road. Let us have a motorway through Little Missenden; I am sure that my noble friend Lord Stevenson would not like that. I was brought up in Great Missenden, and I would not like to see a motorway go through there; there is a railway there already, and a horrible road. If freight is not going to go by rail, therefore, it will go by road—or, the other option, it does not go at all. Do we want it not to go at all? What would be the consequences for the economy if it did not?

I reflect that the latest route through the Chilterns is going to affect about 100 properties, whereas in Camden it will affect 2,700. That is why the noble Lord, Lord Bradshaw, and I have come up with our alternative route through Camden that will, we hope, significantly reduce the demand for demolition, perhaps down to nothing at all. I look at HS2 as adding two more tracks to the west coast main line, for reasons of capacity. It is pity that it did not start off being sold that way, but it is indeed for capacity. We need HS2, otherwise the traffic will not go, or we go by road.

I conclude by commenting a little more on my noble friend Lord Snape’s comments about HS1, which I was also involved in. There is a study by Volterra consultants about the economic benefits of HS1, which could therefore apply to HS2. Apart from generating extra rail and car park revenues of £3.4 billion, which we may or may not want, the transport benefits include more than £100 million of congestion relief, an increase in rail revenue of £3.4 billion, while earnings per annum across the study area—Kent—have increased by between £62 million and £360 million due to the commuting facilities. You may not want to commute but perhaps you do. Overall this is estimated at a very significant benefit to the UK of HS1 over 60 years—it is a long-term project—of £17.6 billion. I think this is worth having.

I support the way that this project is going forward. I welcomed it when it was launched by my noble friend Lord Adonis. I welcomed this Government taking it up, and I agree with my noble friend Lord Rooker that it would be unthinkable to cancel it. I would like to see it go to Scotland in some shape or form.

I shall support this project. I want to see the costs come down and I shall work towards that. I think there should be better leadership and communication and I welcome Sir David Higgins to that role. I see no alternative to creating the necessary additional capacity if we want our economy to grow.

16:16

[Lord Low of Dalston (CB)]

My Lords, I was not planning on speaking in this debate, which is why my name is not on the list; this is not really my issue. I crave your Lordships’ indulgence for just one minute to lob a single point into the gap which, to my knowledge, has not featured in the public discussion and certainly has not featured in the debate today. I feel that it needs to be addressed, if not by the Minister today then in due course by the department and the promoters of the HS2 project. I am referring to the question of the kind of technology to be used.

I have tended to lean towards being in favour of HS2 on the sort of grounds that the noble Lord, Lord Watson, was instancing: keeping up with, or catching up with, or limping rather lamely along behind our European equivalents who have had high-speed lines for 20, 30 or 40 years in some cases. It seemed to me that to turn our back on that kind of development was to hammer yet one more nail into the mounting number of nails in the coffin of UK plc. If we are to turn our back on that it is simply to unashamedly acquiesce even further to the long-term decline of Britain.

I had this discussion with my son recently. I asked him what his view of HS2 was. He said that he was against it. I said “Oh dear,” and advanced the argument to which I have just referred. He said, “Yes, but if you want to base your support for HS2 on embracing the latest word in modern railway engineering and technology, why on earth are you thinking of doing it on the basis of 50-year-old technology that has been adopted by old Europe? You should be looking to the East, to the way in which they are building their high-speed lines now—in China, for example, between Shanghai and Beijing. It is the maglev technology to which you ought to be looking to represent the future, if it is the future you want to embrace”. I have not heard that point raised in public debate and I genuinely think that the proponents of HS2 need to address it.

16:19

[Lord Davies of Oldham (Lab)]

My Lords, I express my gratitude to the noble Lord, Lord Greaves, and congratulate him on his opening speech. As my noble friend Lord Snape indicated, we have not always been in agreement with the noble Lord, but his opening remarks today set this debate off in a most constructive and interesting fashion.

The Opposition support HS2. We believe that a new north-south line is needed. The issue of speed or whether it is a trophy has nothing to do with it. We need the speed because it increases the capacity. It is not a trophy because we did not ask and are not asking the nation to embark on this major construction because we wanted some kind of trophy like the French or Germans had with their high-speed lines. That is not so: it is because there is a real need. The need, which is quite clear, is one of a dramatic requirement for additional rail capacity in this country. This is one clear, strategic way— in fact, it is the only clear, strategic way—in which we can increase that capacity.

Various figures have been cited in this debate. I am grateful to my noble friend Lord Faulkner who, in his usual hard-headed manner, indicated some crucial figures. The growth of rail has been double that of gross domestic product in the past 30 years. As the country has expanded over that time, rail has expanded much faster. Even in this past decade, when we all recognise the difficulties there have been in the economy, there has been a growth of 4% per year in the demand for rail services in terms of passenger numbers. This is not a passing fancy; it is a real need, to which we need to address the resources of the nation.

My noble friend Lord Faulkner, expressing it in his usual cool manner, and my noble friend Lord Grocott, in his rather more expansive way, compared to this project with the 19th century. It is the case that the Victorians faced great challenges to their infrastructure projects as well but we have to face up to that challenge, too. People might say that the Victorians had a head start and all sorts of obvious advantages. Even the Great Exhibition, which was one of their triumphs—although the Crystal Palace did not survive too long afterwards—has been surpassed by the success of the structure and organisation of the Olympic Games in 2012, so we can do it too.

The Games were an infrastructure project that was delivered on time and on budget. It had a contingency element in it, of course, as indeed this project has. What people often talk about as the enormous expansion of costs is a contingency of £14 billion, which may not be called upon. Of course, the pessimists will say, “Oh, but it will be”. They said that about the Olympic Games but the Games were delivered on budget. They were a much smaller project than this but we should not underestimate our capacity as a nation to rise to this challenge.

Nor should we underestimate the need, which is often expressed in terms of the enormous pressure of commuting. For the London conurbation, it is always expressed in these terms because we know about the vast numbers of people who commute into London. Anybody would think that Birmingham is a speck on the map, yet the West Midlands have a commuting problem as acute for the people involved in it as at London Euston and the other great terminals of London. The West Midlands have had massive growth in commuter traffic. The demands of rail passenger numbers have increased by 105% in the past five years. Let us not pretend that this is an issue solely for London and the south of England; the pressure is exerted elsewhere, too. That is why we need to address those issues, and this is the most obvious way to do it.

I also agree in every way with what my noble friend Lord Rooker indicated. On major infrastructure projects, which are bound to extend way beyond the lifetime of any one Parliament, there is no hope for this country unless we have a commitment across the parties and across Parliaments to deliver. Otherwise, we are trapped within a four or five-year perspective for the great needs of this nation. We will be selling everybody short if we fail on that.

We can deliver. Crossrail has been an infrastructure project for more than a decade. It is still some way off completion, but it has survived elections and changes of Government because the commitment is there to meet an obvious and clearly expressed need. Some doubting Thomases in the House may say that is because that expressed need is among the London and south-east community with their greater leverage. The important thing about High Speed 2 is that it recognises the leverage that is being exerted from the regions and the cities of the north. That is why, when my right honourable friend Ed Balls, with his usual judiciousness, examined the figures of this enormous and significant increase in the projected costs, settled down and said that he wanted to look at the figures very closely and intended to scrutinise them in the future, he was doing what we would expect any responsible shadow Chancellor to do, let alone a Chancellor.

Examining the figures and making sure that budgets are adhered to and that Governments are meeting the requirements of the projections is different from suggesting that there was any reneging on commitment to the project—far from it. From this Dispatch Box today—and I know that this will be done in a debate very shortly in the other place, too—we will reassert our commitment to HS2.

However, I have words of warning for the Government because, my goodness, they are skilled in the arts of delay. We saw this exercised with regard to the problems of airports in south-east England. We have delay built into that until after the next election, even for any definitive stance on the matter. I am concerned about the delay on the HS2 project. Do the Government realise that HS1 was in Committee for two years and one month on the hybrid Bill? Anyone who has been anywhere near a hybrid Bill, either at this end or at the other end with regard to issues, knows how difficult hybrid Bills are. On HS1, it took more than two years to get the Bill through. On Crossrail, it took more than three years—in fact, nearly three and a half years—to get the hybrid Bill through; and we have not seen the hybrid Bill yet because we have not even got the paving Bill through Parliament. Therefore, as this construction was meant to start in 2017, the Government are already taking great risks on the timetable. I hope that the Minister will be able to give some reassurance that he and the department appreciate this point.

This has been an absolutely fascinating debate, one of many that we are destined to undertake over the next few months and years. I very much welcome the noble Baroness, Lady Kramer, to the Dispatch Box, for the first time on an occasion where I have addressed these issues, and we all look forward to her response.

16:29

[The Minister of State, Department for Transport (Baroness Kramer) (LD)]

My Lords, I join noble Lords in thanking my noble friend Lord Greaves for obtaining this important and timely debate. However, before I begin, I pay particular tribute to the noble Earl, Lord Attlee, who is suddenly in his place—he did not know that I would say this. He managed transport business in this House with great knowledge and skill and I know that your Lordships will wish me to express our respect and our thanks.

[Noble Lords]

Hear, hear.

[Baroness Kramer]

I feel rather redundant. The case for HS2 has been made so powerfully by the noble Lords, Lord Greaves, Lord Faulkner—whose book, Holding the Line, which he modestly did not advertise, sits on my desk as a bible—Lord Bradshaw, Lord Grocott, Lord Rooker, Lord Lea of Crondall, Lord Snape, Lord Berkeley, the noble Earl, Lord Glasgow—what a list. Every one of them is an expert, respected by this House, and I know that this House will listen to them. I welcome the words of the noble Lord, Lord Davies of Oldham, who reaffirmed from the opposition Front Bench his party’s commitment to this project. He is right that this issue must stretch across the politics of these Houses—it concerns the long-term infrastructure of this country—and I thank him for his words. I will touch on three key issues and will then respond to some of the remaining challenges raised in this debate.

When I joined the board of Transport for London in 2000, London was running out of transport capacity. “Make do and mend” was no longer sufficient, and we had to commit to Crossrail. As I came to the department, therefore, it was with a sense of déjà vu that I saw that we face the same problem but on a national scale. Without HS2, key rail routes connecting London, the Midlands and the north will soon be overwhelmed. Demand for long-distance rail travel has doubled in the past 15 years to 125 million journeys a year. By the mid-2020s the west coast main line will be full. As any user of the line knows, the pressures are obvious now, as they are on the east coast main line.

We cannot simply run more trains. Each new service has to be planned around what runs already. It is nearly impossible to find new train paths, and there simply is not scope for future demand, even if we use the very modest forecast of 2.2% growth in demand every year. Already, in my first two weeks in the department I have had to take note of two turn-downs by the Office of the Rail Regulator, for routes from Shrewsbury to London and Blackpool to London, because it is simply not possible to find an adequate train path for those services. However, HS2 gives us the capacity we need. It doubles the number of seats between London and Birmingham; it is capable of carrying a number of passengers equivalent to the population of Nottingham every day; and it will run 18 trains an hour when we finish phase 2, each of which carries 1,100 passengers.

I will leave your Lordships with one set of numbers to remember. If we look at all the proposals for enhancing the existing rail network as an alternative to HS2, the most we can squeeze out of those enhancements is 53% new capacity from London to Birmingham—and as the noble Lord, Lord Snape, and other noble Lords have said, that is despite years of disruption to the routes on which that work will have to be done. We would gain 53% that way, but if we build HS2 we will add 143% more capacity, and that is the transformation we have to achieve.

Transferring long-distance passengers to HS2 frees up the west coast and east coast main lines to develop significant additional regional and commuter rail services. We very much need those for the future, but we could even use many of them now. Very importantly, as the noble Lords, Lord Berkeley and Lord Rooker, have underscored, it leaves room to move far more freight onto rail. The west coast main line is especially crucial as we anticipate growing freight demand as the economy expands. Frankly, the road network simply cannot cope so rail has to take its share and only with that transfer of long-distance passengers and the ability to use those main lines can we achieve it.

HS2 will be an engine for economic growth and jobs. The current estimates are that HS2 will contribute £60 billion to the economy. That is actually quite a narrow calculation and the wider effect could be much greater as we link key northern cities to each other and to the south. Incidentally, those who referred to the KPMG report must have misread some of the lines. It shows benefits to far more areas than those which suffer a relative disadvantage. It will help to rebuild our economy. The noble Lord, Lord Greaves, used that key phrase, “closing the regional divide”, because although London gains, the big winners are the northern cities like Sheffield, Wigan, York and Wakefield. I understand the demands to look at the case of Scotland. Scotland will benefit from phase 1 of HS2 and even more from phase 2, but there are ongoing discussions and we have all undertaken to examine this area.

HS2 will also be a catalyst for city-centre regeneration. We have seen that with Crossrail and Kings Cross. The HS2 growth taskforce led by the noble Lord, Lord Deighton, who I know is so widely respected in this House, is now working to make sure that we maximise all of those opportunities. Frankly, if the noble Lord, Lord Mandelson, doubts that the north is going to benefit, I recommend that he have a conversation with the leaders of Manchester, Birmingham and Leeds. They want this line sooner because they recognise the benefits that are coming. Of course the line does not serve every city and region and the boost is naturally greatest in the places it serves directly. That is the character of infrastructure. We were right to build Crossrail even though the main winner was London and not elsewhere.

HS2 is only one part of a much bigger investment programme which includes the electrification of the East Midlands, the west of England and Wales. There will be a £1 billion electrification of the Great Western main line to Cardiff and Swansea with intercity express trains from 2017. There will be a dualling of major road links in Cornwall and East Anglia. The noble Lord, Lord Alton, asked about the north. I have such a long list, I will read only some of it. We are electrifying the line between Liverpool, Manchester, Preston and Blackpool. We are also electrifying the trans-Pennine route from Manchester to York via Leeds. We are introducing electric trains between Manchester airport and Scotland. It is crucial that this House understands that the overall investment in transport infrastructure in the next Parliament is £73 billion and that of that, HS2 is only £17 billion. I can confirm that in response to a question from the noble Lord, Lord Bradshaw.

Lastly, let me make a couple of comments on actual delivery. The upper limit of the cost is £42.6 billion. As others have said, that includes a very considerable contingency of £14.4 billion, so we have genuine scope to bear down on that number. The cost of £7.5 billion for rolling stock also includes a contingency. Let me assure the noble Lords, Lord Watson and Lord Truscott, that we are much better today at understanding how to work out cost and how to manage and build, which is essential to the HS2 project.

The noble Lord, Lord Bradshaw, raised the question of using property uplift values as part of the way to pay for that. That is very interesting and we will look at that going forward. There is going to be a significant private-sector contribution because the stations, other than the operating part of the stations, undoubtedly can be provided by the private sector. We have seen the capacity to do that in places like Kings Cross. And after HS1 was completed, although it is a 100-year railway, a 30-year concession for that line was sold which paid for at least a third of the actual cost of construction. We have mechanisms in place to make sure that the cost is controlled and that we can turn to the private sector for significant parts of the financing. I intend to become very much more involved and look intensively at that issue.

The Government are also committed to fair compensation for those along the route who are impacted. I say to the noble Baroness, Lady Mallalieu, and the noble Lord, Lord Stevenson of Balmacara, that the consultation is under way now and that they should contribute to it, as it is crucially important that they do. The package—and the Government are committed to this—will go above and beyond what is required by law. This will be a fair and generous package. We are looking at issues, and part of that consultation includes things such as property bonds, voluntary purchase and rural support zones. I recommend that the noble Lord encourage his neighbours and others interested to participate, because we need that dialogue.

HS2 will also be built to the highest environmental standards, with, for example, some 70% of the surface lines between London and the West Midlands insulated by cuttings, landscaping and fencing. I say that again partly in response to questions raised by the noble Baroness, Lady Mallalieu, and the noble Lord, Lord Stevenson. I accept that when one builds a piece of infrastructure, there is an impact. It is impossible to do it without an impact, and it is difficult if it impacts on an area that you either live in or know and love. This project has made a real effort to minimise the impacts, but it must pay attention to costs, and the balance that we have struck is, frankly, the right one.

The noble Lord, Lord Low, brought up the issue of Maglev technology. In China, Maglev goes between Shanghai airport and the city of Shanghai. For the kind of long-distance services that we are looking at with HS2, the Chinese are using very similar technology to that which we are proposing. We are choosing it because it is safe and proven. I think that we would all think that that was an appropriate approach to take for that size of infrastructure project.

There are opportunities to build British capacity for business and to build jobs around this project. It is by far the largest infrastructure project in Europe. One focus that I and others in this Government will have is to look at how we can build the British supply chain to make sure that we reap benefits in gathering expertise and experience in business and then put those businesses in a position where we can export that kind of expertise to other projects across the globe. With all that come jobs for young people and highly skilled jobs; this is a fantastic job opportunity. To look back over the kinds of numbers that we have seen, the Core Cities Group alone predicts that HS2 will underpin the delivery of 400,000 jobs. Construction jobs, at their peak, will be in their thousands—50,000 at peak and probably 19,000 over the average of the project.

HS2 is simply the most significant transformation of our infrastructure in a generation. It will link eight of the 10 largest British cities, serving one in five of the UK population; two-thirds of the population of northern England will be within two hours of London. As others have said, there will be interconnectedness between those communities as an additional base for stimulus within the north itself. This is a time for ambition; make do and mend will not serve this country.

The noble Lord, Lord Mandelson, may have viewed the decision on HS2 as a vanity project, but he does not do justice to his colleagues when he says that. We have heard discussed again and again the requirement for capacity, and it is simply incontrovertible. We have to be able to move people in the modern era, and to move freight. To have a project that focuses on bringing prosperity to the north of England, so often forgotten in previous schemes, is critical and important. So although it is all right that the debate should continue, this Government remain—and I assure those who have asked—committed to this transformational project. I thank the noble Lord, Lord Greaves, and others for having this debate today.

16:45

[Lord Greaves]

My Lords, I thank my noble friend Lady Kramer for her excellent response to the debate and wish her every success in her new job. Not all government reshuffles are regarded by everybody in every party with great glee and joy but when my noble friend became the Transport Minister we were proud that she had taken the job and have complete confidence in her ability to do it really well in the remaining year and a half of this Government.

I also want to thank everybody who has taken part in this smashing debate. I congratulate everybody on both sides. “Both sides” tends to be a description of the Labour Party in this debate but I will not press that too far. I thank the two noble Lords who—for once—found themselves able to agree fully with my opening speech for their compliments. I particularly thank my noble friend Lord Bradshaw and the noble Lords, Lord Faulkner of Worcester and Lord Berkeley, for saying exactly what I thought they would say and fulfilling my forecast.

I cannot respond to the whole debate in the one or two minutes I have left. However, the noble Lord, Lord Mandelson, whose contribution I very much welcomed because it gave us a real debate, provoked me a little—not for the first time in my life—with one or two of his comments. He said that, “Its sheer cost will suck the lifeblood out of the rest of the country”. In my opening speech I mentioned a few of the infrastructure projects in London and the south-east where people do not come along to your Lordships’ House, or anywhere else, and complain they are sucking the lifeblood out the rest of the country. Crossrail, Crossrail 2, new railway lines—London seems to get a new railway line every few years—nobody says these are sucking the lifeblood out of the rest of the country.

We all agree that, as the capital city of the country, London has to have a brilliant public transport system and by and large it has got one—I am green with envy every time I come here—but that is no reason for not continuing to do a good job. I do not know how much London’s new runways or new airport—or whatever it will ultimately be—will cost, but it will be the same kind of eye-watering amounts that HS2 is costing. However, the proponents of it, the corporate interests and the right-wing pressure groups who are trying to get rid of HS2 will not be coming here and saying they do not want it because they are leading the calls for more airport capacity in London. So there is hypocrisy here.

The noble Lord then went on to refer to “a handful of the nation’s cities”. Are Birmingham, Manchester, Leeds, Sheffield, Derby and Nottingham a handful of the nation’s cities? They are the great regional powerhouse capitals in the West Midlands, the East Midlands and the north of England. I am sorry, it does not wash. These cities do not need to be served by HS2: they are the centres, the capitals, the hubs of the economy, commerce, finance and transport for those regions. That is why they are getting HS2.

As I said, I accept that the south-west and East Anglia need better links. However, I do not accept the point made by the noble Lord, Lord Alton of Liverpool, that Liverpool will miss out. In due course, Liverpool may get a spur off High Speed 2. This may be after our time, though who knows, some of us may live for ever. That is unlikely but we can try. Bordeaux, in France, is not on the TGV lines but you can get a TGV train from Paris to Bordeaux. It travels on TGV high-speed tracks as far as Poitou—or somewhere in the intermediate region on the edge of the Paris basin—and then on ordinary express lines as far as Bordeaux. Some of them go as far as Tarbes and end up on little trundly branch lines. That is exactly what will happen for Liverpool and Newcastle: there is absolutely no problem about this.

There is a lot of hot air being talked. I welcome all the people who spoke against HS2 because it exposes the paucity of their arguments and I have great pleasure in moving the Motion to note the impact of HS2. I do so because I believe it is very substantially positive.

Motion agreed.

Deaf People: Public Services

Thursday 24th October 2013 Lords Chamber

Question for Short Debate

16:50

Asked by

[Lord Hunt of Kings Heath]

To ask Her Majesty’s Government what action they will take to promote the needs of deaf people in the provision of public services.

[Lord Hunt of Kings Heath (Lab)]

My Lords, I am glad to institute this debate on public services for deaf people. I very much welcome the noble Baroness, Lady Jolly, who is going to respond for the Government. I am sure that I speak for the whole House in expressing our best wishes to the noble Earl, Lord Howe.

I am raising this matter because Parliament needs to put much greater focus on the issues facing deaf people and I hope that the debate will be the start of a much more considered engagement in thinking about what kind of services are most appropriate to support deaf people. I do not speak from any particular expertise but my father was a welfare officer for deaf people in Oxford. In fact, he worked for the late Baroness Faithfull when she was director of the first social services department created out of the merger of children’s and welfare services. We have now gone back to that split and I am not entirely convinced that that was a good thing.

My main concern is that the life outcomes for many deaf people are not as good as they ought to be. Public services are not sufficiently focused on deaf people and there is probably a lack of drive within government and an over-reliance on local government without it being given the means to deliver the kind of support that is required. Perhaps I may provide some statistics. It is reckoned that one in six people in the UK are affected by deafness and hearing difficulties; more than 45,000 deaf children live in the UK; and 25,000 deaf people in the UK use British Sign Language as their preferred language Deafness is of course not a learning disability but half of all deaf people have special needs compared to one quarter of non-deaf people; over 50% of deaf people have experienced some form of abuse as children; and one in four deaf people will experience a mental health problem at some point in their lives.

Of all the statistics that I could draw attention to, it is those on educational achievement that are the most important and worrying. In their GCSEs in 2012 just 37% of deaf children achieved five GCSEs at grades A* to C, including English and maths, compared to 69% of children with no identified special educational needs. The attainment of deaf children actually fell in 2012 from nearly 40% in 2011. That is not surprising because there is a direct connection between lack of educational achievement and lack of employment opportunities. Whereas 80% of the non-disabled population are in employment—it may be a bit less than that now—just over 50% of deaf people of working age are in work. An awful lot needs to be done to improve the support given to deaf people.

The National Deaf Children’s Society report Stolen Futures demonstrated the disproportionate effect of public spending cuts on the lives of deaf children. It identified reductions in services across education, health and social care, and said that inconsistent decisions by the Government are setting children up for failure. The society says that to achieve their potential deaf children are dependent on multiple smaller specialist public services such as teachers of the deaf. The children need consistent co-ordinated support from an early age through to adulthood across the public services. Yet in 2012-13 25% of councils said that they planned to reduce one or more of the education, social care and speech and language therapy services for deaf people. What do the Government intend to do about that and the squeeze on resources and support services for deaf people? Will the Minister consider asking Ofsted to inspect specialist educational services for deaf children? Unlike schools and early year providers, apparently these services are subject to no formal scrutiny, despite their vital importance. The Ofsted inspection of SEN services would surely help. What are the Government’s plans to improve the educational outcomes for deaf children?

There are similar issues when it comes to access to health services. This is a challenging problem. An Action on Hearing Loss survey in 2011 found that 35% of deaf and hard of hearing people experienced difficulty communicating with their GP or practice nurse and 24% said they missed appointments because of poor communication, such as not being able to hear staff calling their name. Have the Government thought of having national standards for access to healthcare for deaf and deafblind people? Are there any plans to provide all NHS staff and students with deaf and deafblind awareness training?

That brings me to the question of the British Sign Language and alternative communication methods. I am sure all noble Lords were delighted when, after many years, British Sign Language was officially recognised as a language in its own right. That was a very significant movement which received a lot of all-party support. However, there are only 800 registered sign interpreters in the UK and my understanding, coming back to the health service, is that 70% of British Sign Language users went without an interpreter during visits to A&E in 2010.

There are some solutions to the problems. We need to have more registered sign interpreters and support for family sign language classes. Clearly, if a child who is deaf is to communicate effectively with their parents and families, the whole family needs to have an understanding of sign language. Access to family sign language facilities becomes very much more important. I know that some organisations for the deaf think that having a named Minister responsible for driving a cross-government approach towards supporting British Sign Language would be a major advance. Will the Government consider how they could drive forward a number of initiatives to ensure that, following the decision to recognise British Sign Language, it will be put into practice in a very practical way? Will they make sure that it is used as much as possible, that public services recognise it and that there are enough people, both in family sign language facilities and among qualified interpreters, to provide the kind of support that people need when they come to embrace public services.

Deafness and partial hearing are issues that affect people throughout their lifespan. We need to recognise that many older people have hearing loss. We know that, if their hearing loss is managed effectively, there is a real chance of improving the quality of their lives. However, we know that diagnosis is currently opportunistic and ad hoc. If an adult hearing screening programme could be introduced for everyone over the age of 65, it would deliver long-term savings to the health and social care system. That would enable people to adjust to wearing and looking after hearing aids at a much earlier stage. Early identification and remediation would be much more effective than dealing with some of the issues that now arise from people who lack a diagnosis at the appropriate time.

Other noble Lords who will be speaking in this debate have far more expertise than I have in some of the issues that face deaf people. However, what unites us is an effort to raise in Parliament the question of services for deaf people and I hope that we will continue to do so in the future. I urge the Government to recognise that there is a need for a drive from the centre—from government—due to the diffuse nature of the services and the fact that people are spread around the country, which means that there may not be many people needing a particular service in a particular local authority area. I very much look forward to noble Lords’ contributions and to the noble Baroness’s response.

17:00

[Baroness Eaton (Con)]

My Lords, I thank the noble Lord, Lord Hunt, for bringing this important topic for debate to the House today. It is a matter that can too readily be defined as a health issue. However, as we have already heard, deafness has a profound effect on the life chances and well-being, and not just the health, of those suffering from the condition.

I speak from very limited experience but I now have a two year-old grand-daughter who has an as yet unknown level of impairment. As a family, we have seen some of the initial difficulties for her and are experiencing the challenges facing a family in understanding the issues and how we might learn to develop ways of helping her.

With almost one in six of our population living with such an impairment, I am pleased to see the Government taking action on the matter with the development of the national action plan on hearing loss. They are working with NHS England and Public Health England, and engaging with organisations that specialise in this to develop a pathway in this important and growing issue.

However, as a resident of Bradford and a member of the city council, it is deeply concerning to me that the rate of deafness among our children, at 2.3 per 1,000 children, is double the national average of one per 1,000 children. The number of active cases known to the service for deaf children in Bradford between 2012 and 2013 stands at 678, of whom 76 are classified as being profoundly deaf—that is, entirely deaf. Of the 678 children in Bradford who have a hearing impairment, 548 are in mainstream schools and an additional 89 are in schools with additionally resourced centres attached. A further 41 children are in specialist schools, not necessarily as a result of a hearing impairment.

Also of concern is the fact that this is a particular issue for our city’s Asian population. It is encouraging to see the steps being taken by our schools and authorities to allow our deaf children to benefit from a full and satisfying education.

Working with the University of Leeds, the teachers of the deaf service in Bradford are researching the development of language and literacy in multilingual and multicultural families. With a staff of more than 60 personnel, the service is able to provide specialist assistance to multilingual households with everything from full-time teaching to liaising with parents and providing speech and language therapy. It is worth noting that, of the families working with this service, 67 do not speak English but communicate with their children with hearing impairments by using sign language. Understanding the language barriers and working around them will be key to ensuring that these children have the best possible chance to advance just as other children do.

There is a protocol of transition from children’s social care to the sensory needs service in adults’ services. This will provide a specialist service to young people who are over 14 years old and are British Sign Language users. This service will routinely attend all the education reviews of these young people in order to provide advice and information. By doing so, it is hoped that the transition from children’s educational services to adult services will run more smoothly.

The noble Lord, Lord Hunt, has already mentioned the underachievement of deaf children. Certainly, the survey by the National Deaf Children’s Society showed that deaf children in Yorkshire suffered huge disadvantages in terms of GCSE grades. It is therefore concerning to note that among those qualified as specialist teachers for the deaf, the average age is now over 50, something that is sure to create a greater problem in years to come and to impact on the education of children with hearing impairment.

Responses to a DCMS seminar paper addressed the wishes of those within our society who are deaf, stating that it is far preferred that an inclusive manner in services and policies be adopted rather than an exception-based rule. This means that the mainstream should, indeed must, wherever possible, cater for the community as a whole and not simply the majority for whom hearing is not yet a problem.

An issue that frustrates those who are hearing-impaired is the general lack of knowledge, understanding and training around the issue. The Guardian newspaper published an article on 10 May highlighting the issues that deaf members of society face. In one case, a deaf patient at a hospital was unable to communicate with his doctors, nurses or those around him for 12 days because no sign language interpreter was provided.

Action on Hearing Loss published a policy statement entitled Access to Services for People with Hearing Loss in June 2012, directly addressing the issue of contacting services. They observed that people with hearing loss face very basic but fundamental hurdles when contacting organisations that only provide telephone numbers in their contact information and highlighted their awareness of the fact that staff simply hang up regularly on text relay telephone calls because the operator does not understand how to use the technology.

Further on the lack of the use of appropriate technology, the Lancet published an editorial in March 2012 highlighting the issue of deaf people physically having to go into GP surgeries in order to make an appointment, due to the lack of provision of e-mail and text software. This is something that may not be too much of a difficulty for a younger person, but for those who are ageing it becomes a real issue and something that could be solved very easily by implementation of basic technology and training of staff to understand what considerations or differences should be considered when assisting someone who does not have full hearing capacity. Aside from this, it is surely to be hoped, or rather expected, that those within our society who cannot communicate in the same ways as the majority of the population be afforded the same basic services. Access is one of the biggest barriers to deaf adults. This includes all areas of life where there is a need for communication.

In my own authority, Bradford, there has been a vast improvement in accessibility for deaf people. Deaf people now have representation on the Strategic Disability Partnership, providing a forum for full engagement, as representatives on this forum feed information from the deaf community into the partnership. There are BSL and subtitled theatre performances, opening up the world of entertainment to deaf people. Hearing loops are provided to give access to those who are hard of hearing. Representatives from the Deaf and Hard of Hearing Group sit on the Bradford theatres users’ group and have been influential in generating improvements to services. Our museums have BSL videos that provide detailed information about exhibits. Our libraries have full internet access, enabling deaf people to access online information. Excellent work has been done with the police service, which now provides much improved access to communication, particularly in areas such as hate crime. Adults’ services include statutory assessment and support services where staff work in inspirational ways to support service users. An example of this is an individual budget to purchase care where the worker can communicate in BSL and has an understanding of deaf culture and community. There is also a technical service, which provides flashing or loud doorbells so that older people are not put at risk by leaving the door open or not being able to hear when the home care worker calls.

While there have been great strides in improving access for the deaf to services in many areas, there is still much room for improvement. There is a high correlation between sight and hearing loss and learning disability, which needs much greater research and provision. Video-conferencing services enable deaf people to have BSL interpreting via a web link. Skype is being tested but the quality needs improving. Participation for deaf people in CCG user forums would greatly help the deaf.

Despite improved access to communication and information, social isolation and exclusion continue to be major factors for deaf and hard-of-hearing people. Work towards more integrated pathways, with transitions between education and children and adult services, is vital, and must be part of plans for service development. Local government, working with the local community and other appropriate organisations, often are best placed to develop services suited to the needs of service users who have special requirements. Legislation often can be too prescriptive and can prevent flexibility and creativity.

17:10

[Baroness Brinton (LD)]

My Lords, I congratulate the noble Lord, Lord Hunt, on securing this debate. I also have an interest in this topic. For 10 years, I was chair of governors of Mayfield primary school in Cambridge, which has the hearing impaired unit for the southern half of Cambridgeshire. My sister is a BSL interpreter at a university and I have deaf friends. I am proud to say that the Liberal Democrats passed some policy at a key debate at the recent conference in Glasgow. We are committed to the principle that deaf people are entitled to identify with their own language and to have this respected, regardless of minority or majority language status. We also want to see better awareness of information needs and services for BSL users, particularly in health, education and employment, as has been outlined by the two previous speakers.

In the time available, it is impossible to cover everything, so I shall focus specifically on education and family services. All children at Mayfield, whether they have hearing or are hearing impaired, learnt all songs for assembly both in sign language and singing. My adult daughter still remembers some of it. Children in the hearing-impaired unit were fully integrated into class with their hearing contemporaries, while also becoming fluent in British Sign Language and lip reading—but that is really for the second part of my speech, about the education of children with hearing impairment.

Research shows that early communication within the family is the strongest influence on language development at the age of two. However, if a deaf child needs to communicate in sign language, many hearing parents may struggle to communicate with their child because they have no knowledge of deafness or sign language. Many families who need to use sign language with their child are not getting the services that they need. Often, they are forced to pay hundreds of pounds just to learn to communicate with their own child. In several Scandinavian countries, that service is provided automatically and free of charge to all parents of deaf children.

It is good that the Department for Education is funding the I-Sign consortium to improve the availability of sign language courses to families. The work of the consortium has been recognised by even the Prime Minister as a success. One family commented:

“It is not always easy having a deaf child in the family and the opportunity like this course helps us to be positive about deafness and reflect on different ways of communication with a deaf child, this course has made a huge difference to the family”.

However, in 2011, a telephone survey by the National Deaf Children’s Society revealed that 56% of local authorities surveyed did not provide any support to families wanting to learn sign language, nor did they provide the society with any information. The support provided by other local authorities varied considerably and it is clear that not all families can rely on ready access to family-friendly sign language classes. What further steps will the Government take to ensure that families get the support that they need to promote early years communication for deaf children? Given how important that is, is there some scope for considering following the example of Scandinavia and placing a duty on local authorities to provide that support?

On education, many deaf children rely on support from their local education service. This support is often provided in the form of a teacher for the deaf who might support families in the home with early language and communication, visit deaf children in mainstream schools, support deaf children directly and/or advise mainstream teachers on how to adapt the curriculum and use technology effectively, or contribute to specialist assessments of deaf children and intervene to promote good outcomes. There is real concern that these services are being severely undermined by public spending cuts. The department repeatedly tells us that it has protected funding for the most vulnerable learners, but, as has already been mentioned, the NDCS’s Stolen Futures campaign has established, through a freedom of information request to all local authorities, that 29% of authorities plan to cut specialist education for deaf children this year. A further 28% are at risk of cutting services, or undertaking a review of them. These cuts are having a critical impact on deaf children.

The Government say that local communities should hold authorities to account and suggests that the Children and Families Bill will enable families to do this. Surely this is complacent. The NDCS has found that many local authorities do not disclose information nor involve parents in decisions about spending cuts. As currently drafted, the Bill will not directly improve accountability in this area, not least because it does not require local authorities to disclose expenditure on SEN support services as part of the local offer. How will the department ensure that its SEN reforms can be successfully implemented in the absence of any action to ensure SEN funding is adequate and not being squeezed out by other funding pressures?

I, too, am very concerned about a shortage of teachers for the deaf across the UK. Anecdotal evidence from services suggests that it is becoming increasingly difficult to recruit to vacant posts. Some of the detail has been outlined earlier, but I ask the Minister whether the department has carried out any assessment of the teacher for the deaf population. Is there a need for a national recruitment process? While I welcome the local offer outlined in the Children and Families Bill, I am concerned that it does not go far enough in recognising the importance of specialist education support for deaf children and other children with sensory impairments. The NDCS, RNIB and Sense are all calling on the department to make improvements to the Bill before Committee.

The key issues are also relevant to this debate. There is no explicit requirement to publish information about the local offer and neither is that offer published by type of need: local authorities only have to provide generic information about special educational needs. It is also not clear that the local offer will follow a set format. That can be difficult for parents trying to compare provision in different areas. The also local offer needs to be underpinned by a minimum provision. Too many children with a sensory impairment are being denied the support they need, at a considerable cost to families. The department argues that minimum standards would lead to a race to the bottom and stifle the development of local offers. Surely the opposite is true: in the absence of any expectation on minimum provision, local authorities with better provision will reduce it in line with poorer neighbouring provision. Can the Minister provide explicit reassurance that local authorities must include information about specialist support services for deaf children in their local offers? Will the department establish clear expectations for minimum provision to be included in the local offer, in line with a call for action on this from the Education Select Committee?

Finally, on an important note that I have not yet heard covered, outside the range of education, what are the Government doing to develop a vaccine against cytomegalovirus, one of the main causes of congenital deafness and blindness? Some 50% of the population are estimated to be carriers, but it is only dangerous if contracted in pregnancy and transferred to the foetus. The medical advice that a mother carrying the virus should not touch anything—including her other children—that might mean she contracts the virus is, frankly, ridiculous. If there were a vaccine for this virus, it would be targeted at a very specific group: mothers and women planning to be mothers. Surely, with such a small target group, it is worth doing in order to prevent the dreadful congenital deafness and blindness that some children have when they are born having suffered from this virus.

In conclusion, services for deaf children and their families have some strengths, but there are a number of worries that could affect these children, now and in their future lives.

17:19

[Baroness Howe of Idlicote (CB)]

My Lords, I, too, thank the noble Lord, Lord Hunt, for introducing this important mini-debate, and particularly commend his comment that the older you get, the more likely you are to have problems. As we all know, we are all getting older. Therefore, this is definitely an issue that has to be tackled.

In my case, my hardness of hearing began when I had children. I think that that was inherited, too. Over the years, it has got to the point where there is no further help other than good amplifiers, such as we have in this Chamber. Indeed, I was perhaps one of the victims of an early mistake, which in those days was called mobilisation of the stapes. That also happened to me, and that one is my really deaf ear.

Today, I should like to speak first about the importance of health services for deaf children and young people and, secondly, about support for their families with communication.

I start by highlighting the importance of the newborn hearing screening programme. Many regard that programme as one of the major health successes of the past decade. Prior to that programme, many children born deaf were not diagnosed until as late as three and four years old. Such late diagnosis does significant damage to the deaf child’s language and communication skills and, obviously, to their future prospects. Early diagnosis provides the opportunity to put in place a central support as soon as possible, so that deaf children can achieve their full potential. The National Deaf Children’s Society is clear that that has led to improved outcomes for deaf children already.

It is therefore important that we continue to maintain that programme at the highest possible level and standard. What steps has the Department of Health taken to monitor and protect that service in the context of the Health and Social Care Act and significant changes to health services? Is the department monitoring whether the programme continues to be adequately funded and whether, when their children have been diagnosed as deaf, parents continue to experience a joined-up service between public health and the NHS? Will the existing quality assurance programme continue to include both diagnosis and follow-up interventions in audiology services, the latter being as critical as the former? It is vital that we do not take our eyes off the ball and let the service wither away, so I would welcome the Minister’s assurance on that point. If the noble Baroness, Lady Jolly, cannot give us a response today, perhaps she will see that someone from the department writes to me.

I also highlight the need for health services to be more accessible to deaf young people. The National Deaf Children’s Society’s youth advisory board spent the past year working on a new campaign to improve deaf awareness in health professionals. I understand that it hopes to launch that campaign, called “My life, my health”, early next year. Deaf young people have provided NDCS with numerous examples of poor practice. We have heard of some already. One deaf girl had missed several appointments at her GP because she is unable to hear her name being called. She has now, ironically, been given a final warning not to miss any more appointments. Another deaf person aged 18 no longer wants to rely on her family to access information. She told NDCS:

“My family and friends are fed up with coming with me to help with my communication support”,

but until and unless action is taken to ensure that this information is given in an accessible way, she will continue to be unable to access appointments independently.

Many will be appalled by both of those examples and the continuing existence of poor practice in delivery of health services to deaf children and young people. Do the Government agree that action is needed to promote deaf awareness among health practitioners as well as the provision of accessible information? Maybe the noble Baroness, Lady Jolly, will urge the Government to support this campaign and its aims.

Finally, I would like to highlight the importance of communications support to families with deaf children. I have tabled an amendment to the Children and Families Bill that would require local authorities to ensure that there is sufficient provision of sign language courses to families with deaf children. There is widespread concern that the current provision is far from sufficient or adequate.

Children cannot develop effective language skills if their families cannot communicate with them. This communication support is vital for the social development as well as the educational development of deaf children. However, where sign language is the best option for the child, too many families are being forced to pay huge sums to learn sign language to be able to communicate at all with their own child.

I am aware that the Department for Education has funded various projects to address these concerns. This funding is certainly welcome and appreciated. Is this leading, however, to the step change in sign language provision that we need? I question whether local authorities truly appreciate and understand all the needs of deaf children.

There needs to be a much stronger expectation on local authorities that support on sign language will be provided to families if they need it. We would now regard it as unacceptable if local authorities did not provide short breaks for families with disabled children. Many believe that the Government need to act to make it equally unacceptable for local authorities not to provide support for families wishing to learn sign language.

I hope that the Government will give my amendment to the Children and Families Bill the strongest consideration when it comes for debate before the House. I look forward very much to hearing what the noble Baroness, Lady Jolly, says in her reply.

17:27

[Lord Rogan (UUP)]

My Lords, I, too, thank the noble Lord, Lord Hunt of Kings Heath, for initiating this important debate. In our modern society we excel when it comes to discussing rights, but my experience is that we are usually better at discussing them than doing anything about them.

In this media-driven era, there is a natural temptation and pressure upon government and its agencies to satisfy the rights of those who are most adept at securing air time, and media interest, rather than the rights of those who are most in need. Deafness is nothing new. It is clearly an issue which affects a significant number of people. In Northern Ireland alone, there are more than 200,000 people who are deaf or hard of hearing. That is 15% of people living in Northern Ireland; a significant proportion of the population—and no doubt a rising proportion, given the increasing numbers of people who are living well into old age. I find it perplexing, therefore, given the scale of the issue and society’s familiarity with it, that we seem to fail so miserably at even the basics of providing adequate access to public services, let alone equality of access.

Access to the health services is a special area of concern. As has been mentioned twice, it is particularly disappointing to note that deaf charities in Northern Ireland have raised instances of deaf people being left in the waiting room of audiology clinics because their name was called out. Their name was called out verbally, even after staff had been notified that they were deaf. It is daft.

In 2009 the British Deaf Association in Northern Ireland and the RNID contacted GP practices throughout the Province to ask them about hearing, blind or partially sighted issues. Some of the results were rather concerning. Half of the GP practices were yet to provide any training to staff about deaf, visual, or general disability awareness. Only 15% of GPs had had disability training. Half of all the responding practices also said that, although they had induction loops in their waiting rooms, only 16% had loops in consulting rooms.

Getting an appointment to get to the surgery, however, also seemed unnecessarily difficult, with a general lack of provision to make contact or arrange appointments by e-mail. Deaf people also complained that GP practices and hospitals often did not respond to calls to their minicom system or to faxes. Out-of-hours and emergency access seemed even more problematic, as did the ability to book interpreters. All these issues create a reliance on friends and family, which in turn undermines independence and leads to feelings of isolation and even despair.

The charities have suggested that this collectively points to a lack of general awareness, understanding and insight concerning the needs, circumstances and experiences of people with disabilities. It would also appear that there is an inadequate grasp of the legal obligations placed on public service providers by the Disability Discrimination Act. While access to health services is of most concern, the complaint applies across the board, from jobcentres, benefits offices and leisure facilities to issues such as interpreters for deaf parents at teacher/parent meetings, school correspondence, emergency telephones on the motorway, arts and cultural events—indeed, the entire spectrum of life in a modern welfare society

As the British Deaf Association in Northern Ireland put it, deaf people are currently not afforded access to public services on, or even near, a par with hearing people. Deaf people simply want to be included in everyday society and given the opportunity to make decisions and choices for themselves. Surely it is incumbent upon our Government to play their part to facilitate that process and to ensure that deaf awareness is given greater focus.

17:31

[Baroness Wilkins (Lab)]

My Lords, I congratulate my noble friend Lord Hunt of Kings Heath on securing today’s debate on the needs of deaf people in the provision of public services. Parliament is currently giving a flurry of attention to the needs of deaf people. Let us hope that this results in some strong, positive action and that it will achieve real gains. It is so vitally necessary. I am afraid it is inevitable that I will repeat many of the points that have already been made, largely as a result of the excellent briefing given to us by the National Deaf Children’s Society, but I hope that that will only serve to persuade the Minister to respond positively.

Last week Sir Malcolm Bruce, the right honourable Member for Gordon and chair of the All-Party Group on Deafness, led a debate in the other place asking for recognition of the importance of services for deaf children and young people. This followed a petition, signed by more than 50,000 people, calling on the Government to protect the funding for these vital services. Happily, his Motion was accepted, and I hope that this debate will send the same strong signal—that we should protect services for deaf children and young people.

Yesterday in this House we started the scrutiny in Grand Committee of Part 3 of the Children and Families Bill, which deals with special education. The needs of deaf children and young people will be highlighted by a number of the amendments that I and others have tabled. There needs to be considerable movement by the Government if the support for deaf children and young people is to improve. For instance, the Bill currently relies on parents to police the SEN system but does not provide them with any substantive new rights to hold local authorities to account.

It is on the services for deaf children and young people that I will be focusing today. As we have heard, it is of great concern to us that, according to government figures, only 37% of deaf children achieved five good GCSEs last year compared with 69% of children with no identified SEN. Thirty-seven per cent is a dismal and unacceptably low figure—it is shameful. I acknowledge that improvements have been made in this area over the past five years but, when we consider that deafness is not in itself a learning disability, it remains outrageous that the gap between deaf children and other children is still so wide. There is no reason why the majority of deaf children should not achieve the same as other children, provided that they get the right specialist support. But too many deaf children are not getting the specialist support they need.

Worse still, according to evidence collated by the National Deaf Children’s Society, that support is now being cut in many areas. As we have already heard, freedom of information requests to all the local authorities in England have established that 29% of them plan to cut specialist education services for deaf children this year. A further 25% are either at risk of cutting or undertaking a review of their service and these cuts are happening despite the commitment from the Department for Education that it has protected funding for vulnerable learners.

Surely there is more that the department can do to ensure that local authorities do deliver high-quality services and are held to account when they fail to do so. One such action would be to require Ofsted to begin inspecting these vital services for deaf children. When we consider how much scrutiny mainstream teachers and schools are subject to by Ofsted, it is shocking that teachers of the deaf in specialist support services are subject to virtually none. That can only send a signal that deaf education is less important.

When we consider all the competing pressures that local authorities face, it is hardly surprising that the lack of external scrutiny makes it even easier for local authorities to cut services. A sharper eye of scrutiny would also incentivise local authorities to improve services that are inadequate. I am very pleased to see that the noble Baroness, Lady Brinton, has tabled an amendment to the Children and Families Bill which will address this. I strongly support the amendment and I hope that the Government will give it their strongest possible consideration.

Separately, I am concerned that we need to do more about the recruitment of teachers of the deaf. Teachers of the deaf undergo two years of additional training to gain a mandatory qualification in teaching deaf children. Their important role has been recognised in the new draft SEN code of practice. However, we are recruiting far too few teachers of the deaf if deaf children in the future are to get the support they need. Evidence suggests that around 80% of these teachers are over the age of 50 and, in addition, the number of training departments appears to be reducing. There is also anecdotal evidence that in some areas services are already having to rely on teaching assistants to do the job that would otherwise be done by teachers of the deaf. What steps have the Government taken to assess how many teachers need to be trained as teachers of the deaf to meet future demand and what action is being taken to ensure that they are in place? Does the Minister agree that there needs to be a national recruitment programme?

In last week’s debate, the Children’s Minister referred to the national scholarship fund for teachers’ postgraduate training, which is available to people wishing to train as teachers of the deaf. That is a welcome first step. How many people are currently using this fund to train as teachers of the deaf? Can the Minister reassure me that this fund will be expanded to meet future needs? It is vital that we take action now to ensure that there is an adequate number of teachers of the deaf before it is too late.

I have discussed just two of the areas where action needs to be taken to improve public services for deaf children. I strongly support the points raised by other noble Lords and hope that the Minister will do all she can to persuade the Government to take urgent action. The needs of deaf people have been sidelined for far too long.

17:39

[Baroness Jolly (LD)]

My Lords, this has been an excellent debate. It has been wide-ranging and based on experience and expertise, with many recurring themes. I promise that I will be positive where I can be.

The Government recognise the scale of the issue. One in every 700 babies in England is born with some form of deafness and there are just under 10 million adults living with hearing loss. All these people will, at some point, be in contact with public services. In fact, we know that there are 35,000 children and 1.6 million adults with hearing loss being managed and supported across health and other public sector services. It is therefore absolutely vital that these public services are geared up to support their needs.

The public sector equality duty means that public bodies must have regard to the need to eliminate discrimination and to advance equality of opportunity when making policies and delivering services. Public bodies must make reasonable adjustments for disabled people to ensure that they can use a service that is as close as reasonably possible to the standard usually offered to everyone. I would like to take your Lordships through some detail on how different areas of the public sector are addressing this very important issue.

First, on health and social care, we know that there is a need to improve in the commissioning and integration of health and social care services for people with hearing loss, as well as in the provision of new and innovative models of care. This is why we are looking to develop a new action plan on hearing loss. The action plan will identify the key actions that will make a difference in improving health and social care outcomes for children, young people and adults with hearing loss. The Department of Health is currently engaging with a range of organisations, and aims to publish the action plan as soon as possible.

The new health and social care structures provide the framework to improve access to services and outcomes at a local level. The national adult social care, public health and NHS outcomes frameworks enable us to hold services to account for how they are tackling health inequalities and improving health and well-being. NHS England is developing an information standard around the provision of accessible information and communication support to disabled patients, carers and service users. It is intended to be finalised in late 2014, with organisations being required to comply in 2015. Once implemented, the standard will ensure that disabled patients, service users and carers receive information from NHS bodies and providers of NHS care in formats that they can understand, and that they receive appropriate support to enable them to communicate. All this should help people when they visit their GP. Certainly, at my GP practice, a name comes up: for example, “Jolly to go to room 4”. This is not rocket science. Plenty of practices do it.

The health service has already delivered considerable improvements in services, including reduced waits for the assessment and treatment of hearing problems in adults. Most patients on direct access audiology pathways are now treated within 18 weeks. There is greater choice of hearing aid services through independent high street providers and the new “any qualified provider” model, which offers even greater choice and convenience. We have rolled out a system of voluntary accreditation of hearing service providers to drive up service quality and introduced a payment-by-results tariff for hearing services, which should lead to service innovation.

The noble Lord, Lord Hunt, asked about plans to provide NHS staff with awareness training. What I have just outlined certainly covers that; NHS England will publish guidance on making reasonable adjustments to meet the communication needs of service users. That is expected next year. All NHS staff should have disability awareness training, and within that must come British Sign Language. The noble Lord also asked about annual screenings for over-65s on hearing loss. There are no plans at the moment to introduce such screening, but everyone in that age group should be invited for an annual health check that offers the opportunity to address such problems as hearing and vision, as well as other key health issues.

It is of course not just about assessing and treating deafness. My noble friend Lady Brinton asked what the Government are doing to develop a vaccine against cytomegalovirus. While there are currently no licensed vaccines, possible vaccinations are still being researched. She will appreciate the stringent safety checks that all new medicines and vaccines have to go through, so it will be several years before any vaccine becomes available.

In services for children and young people, we are taking forward measures to support children with sensory impairments, including giving parents in England the opportunity to have their babies’ hearing tested shortly after birth as part of the NHS newborn hearing screening programme. There will also be a more joined-up approach to assessments, which gives clarity on responsibility across the areas of education, health and social care services and a commitment from all of them to provide their services.

To answer the question asked by the noble Lord, Lord Hunt, new school inspection arrangements mean that inspections of schools with resourced provision or specialist units for pupils with sensory impairments are assessed by inspectors with the necessary specialist advice. We are committed to improving the training of teachers and school leaders to help them identify where pupils with hearing loss face barriers to learning and offer the appropriate support. The Department for Education is funding the development of an early support guide for parents of deaf children and giving money to support I-Sign, hosted by the National Deaf Children's Society. This should develop access to sign language for families and education professionals.

My noble friend Lady Brinton made the point about I-Sign not being consistently employed and asked whether we should place a duty on local authorities to provide this support, as they do in some Scandinavian countries. The Children and Families Bill already places duties on local authorities to identify, assess and secure special educational provision for all children and young people with special educational needs. This could include sign language support for those who need it.

My noble friend made a number of additional points on the issue of specialist education support services for deaf children being hit by cuts. We can confirm that we have protected the resources available for SEN provision, including support for deaf children. The Children and Families Bill will include a new duty on local authorities to require them, with their partners, to publish a local offer of services available to families of children with SEN and disabilities.

On the issue of whether we need a national recruitment campaign for qualified deaf teachers, or for teachers to qualify for teaching the deaf, the National Scholarship Fund is available through the Department for Education and provides funding of up to £3,500 for teachers’ postgraduate qualifications and their training, including specialist training for teachers of the deaf. Funding of £2,000 is available to support teaching assistants and support staff to improve their skills. Indeed, 600 teachers have achieved or are working towards a qualification related to special educational needs and a further 500 have applied for the current funding round.

To answer the point made by the noble Lord, Lord Hunt, about the attainment gap, we have ensured that funding is protected. In 2011-12, 71% of deaf children achieved five or more A to C grades in their GCSE, compared with 43% in 2007-08. Over this period, deaf pupils progressed at approximately twice the rate of their peers, closing the attainment gap significantly. This is not to say that we are complacent, but there has been progress. The Government recognise the importance of deaf people being supported and enabled to communicate through BSL where they wish to do so. Schools can offer BSL programmes to pupils with a range of vocationally related BSL and other signing media qualifications, from a simple awareness certificate up to more advanced levels, and there is work to develop a GCSE programme in BSL.

However, it is not just in the areas of health, social care and education where good work is going on. Work is going on across the Government to support the needs of deaf people. We have heard from my noble friend Lady Eaton about the sort of work that has been going on in Bradford.

We have had a few examples of where great progress is being made. Good work is being done to make services more accessible for people with hearing loss across the criminal justice system, welfare, higher education and many other parts of the public sector. I pay tribute to the work of the voluntary sector. We have heard today about organisations such as Action on Hearing Loss, Signature and the National Deaf Children’s Society, which campaign tirelessly to ensure that the needs of deaf people are not forgotten and, in many instances, work alongside the Government to help us develop our policies and ensure that those policies are put into practice.

I hope that in the time allowed I have provided reassurance of the Government’s continued commitment. I will write to noble Lords to answer those questions that have not been covered, and I am more than happy to meet noble Lords to discuss these issues and to see whether we can progress them further.

House adjourned at 5.50 pm.